Document:

SHARE EXCHANGE AND

                              ACQUISITION AGREEMENT

                                   DATED AS OF

                                  July 27, 2011

                                  BY AND among

                            GARNER INVESTMENTS, inc.

                                       AND

                        SOUTH UINTAH GAS PROPERTIES, INC.

                                       AND

                                ITS SHAREHOLDERS

<PAGE>

                              ACQUISITION AGREEMENT

     This AGREEMENT,  dated as of July 27, 2011 (the "Agreement"),  by and among
Garner Investments,  Inc., a Wyoming  Corporation,  ("GI"), and South Uintah Gas
Properties,  Inc. a Colorado  corporation  ("Acquiree")  and the shareholders of
Acquiree ("Shareholders" as listed on Exhibit A hereto).

         WHEREAS, the Board of Directors of GI and Acquiree,  respectively, have
each  approved,  as being in the best  interest of the  respective  entities and
their  stockholders,  the  Acquisition of Acquiree by GI, in accordance with the
applicable provisions of the Wyoming Business Corporation Laws;

         WHEREAS,   GI,   Shareholders  and  Acquiree  desire  to  make  certain
representations,  warranties,  covenants and  agreements in connection  with the
Acquisition and also to prescribe various conditions to the Exchange; and

         WHEREAS,   this   Agreement  is  intended  to  accomplish  a  tax  free
acquisition  pursuant  to Section  368 or 351 of the  Internal  Revenue  Code as
applicable for benefit of Acquiree shareholders.

         WHEREAS,  this  Agreement  is  intended to set for the terms upon which
Acquiree will be acquired by GI from Shareholders.

         NOW,  THEREFORE,  in  consideration of the foregoing and the respective
representations,  warranties, covenants and agreements set forth herein, and for
other good and  valuable  consideration  the receipt  and  adequacy of which are
hereby  acknowledged,  and intending to be legally bound hereby,  the parties do
hereby agree as follows:

<PAGE>

                                    ARTICLE I
                                THE CONSIDERATION

SECTION 1.01      Consideration; Effective Time

         The Acquisition  shall become  effective upon the delivery of the stock
certificates  in  Acquiree  duly  executed   representing   100%  of  Acquiree's
outstanding  shares of common and preferred stock and certain Notes and delivery
of the following consideration:

     a)   8,000,000  shares of  restricted  common  stock of GI, shall be issued
          pursuant  hereto to Acquiree's  shareholders  pro rata in exchange for
          100% of Acquiree's  outstanding  common stock and certain  warrants as
          set forth on Schedule 1.01 (a) and shares each of restricted Series A,
          B, and C  Preferred  stock of GI shall be issued on a when  authorized
          basis pursuant hereto as equivalent to Acquiree's Preferred Stock with
          Identical Rights and Privileges as shown on Schedule 1.01(a).

     b)   Convertible Promissory Notes in the aggregate amounts of $1,000,000 to
          replace certain notes of South Uintah Gas Properties,  Inc. as further
          described on Schedule 1.01(b) hereto.

     c)   Promissory Notes in the amount of $350,000 as described on 1.01(c).

SECTION 1.02      The Acquisition.

         At the  Effective  Time  and by  virtue  of  the  Exchange,  all of the
outstanding  Acquiree common and preferred  shares shall be conveyed to GI which
shall be the sole owning entity of the outstanding  and preferred  common shares
of stock of Acquiree,  and the Notes shall be issued by GI in  substitution  for
the Notes of the Acquiree.

SECTION 1.03      Conversion of Securities.

         As of  the  Effective  Time,  by  virtue  of the  Exchange:  All of the
outstanding  common and  preferred  shares,  warrants and all other  convertible
notes or other Notes of  Acquiree  that are issued and  outstanding  immediately
prior to the  Effective  Time,  shall be deemed  exchanged  for  common  shares,
substitute notes,  preferred shares, and warrants (on a when issued basis) of GI
pursuant to the Schedule 1.03. All such common and preferred  shares,  warrants,
and Notes of Acquiree  shall be conveyed to GI, and each holder of a certificate
representing such shares,  notes or warrants shall cease to have any rights with
respect  thereto,  except the right to receive  the number of GI Common  Shares,
Warrants to Purchase common shares,  and Preferred  Series A, B, and C Stock and
Convertible  Notes and other Notes to be issued in  consideration  therefore  in
accordance with Section 1.04.

<PAGE>

SECTION 1.04      Exchange Procedures.

(a) As soon as practicable  after the execution hereof, GI shall provide to each
Acquiree  shareholder  a letter  of  transmittal  and  Exchange  Agreement  with
representations for execution by shareholder,  warrantholder,  or noteholder and
instructions  for use in effecting  the surrender of  certificates  representing
shares or Notes of Acquiree outstanding  immediately prior to the Effective Time
(the  "Certificates")  in appropriate and customary form with such provisions as
the board of directors of GI after the Exchange  may  reasonably  specify.  Upon
surrender of a Certificate or Note for  cancellation  to GI,  together with such
letter  of  transmittal,   duly  and  properly  executed,  the  holder  of  such
Certificate  or Note  shall be  entitled  to  receive in  exchange  therefore  a
certificate  representing  an equal  number  of  shares  of GI  Common  Stock or
Preferred Stock as represented Acquiree's shares represented by the certificate,
and the  Certificates  so surrendered  shall be canceled.  Until  surrendered as
contemplated  by this Section 1.04,  each  Certificate  shall,  at and after the
Effective Time, be deemed to represent only the right to receive, upon surrender
of such  Certificate,  GI  Common or  Preferred  Stock as  contemplated  by this
Section 1.04,  together with any  dividends and other  distributions  payable as
provided in Section 1.05 hereof,  and the holders  thereof  shall have no rights
whatsoever as  stockholders of GI. Shares of GI Common or Preferred Stock issued
in the  Exchange  shall be issued,  and be deemed to be  outstanding,  as of the
Effective  Time. GI shall cause all such shares of GI Common or Preferred  Stock
issued pursuant to the Exchange to be duly  authorized,  validly  issued,  fully
paid and non-assessable and not subject to preemptive rights.

         Notes  or  Convertible  Notes  of  Acquiree  shall  be  exchanged  upon
surrender for identical Notes containing the same terms,  rights, and privileges
of GI.

(b) If any certificate representing shares of GI Common or Preferred Stock is to
be issued in a name  other  than that in which the  Certificate  surrendered  in
exchange therefore is registered,  it shall be a condition of such exchange that
the  Certificate  so  surrendered  shall be properly  endorsed and  otherwise in
proper form for transfer and that the person  requesting such exchange shall pay
any transfer or other taxes  required by reason of the issuance of  certificates
for such shares of GI Common or Preferred Stock in a name other than that of the
registered holder of the Certificate so surrendered.

(c)  Warrants  as shown on Schedule  1.01(c).  Warrants of GI shall be issued in
exchange and replacement for the Warrants of Acquiree.  Such Warrants containing
identical terms and conditions as Acquiree.

<PAGE>

SECTION 1.05.     Dividends and Distributions.

         No dividends or other distributions declared or made with respect to GI
Common Stock with a record date on or after the Effective  Time shall be paid to
the  holder of a  Certificate  entitled  by reason of the  Exchange  to  receive
certificates  representing  GI Common  Stock until such holder  surrenders  such
Certificate as provided in Section 1.05 hereof. Upon such surrender, there shall
be paid by GI to the person in whose name certificates representing shares of GI
Common Stock shall be issued  pursuant to the terms of this Article I (i) at the
time of the surrender of such Certificate, the amount of any dividends and other
distributions  theretofore  paid with  respect to that number of whole shares of
such GI Common Stock represented by such surrendered Certificate pursuant to the
terms of this  Article I, which  dividends or other  distributions  had a record
date on or after the Effective  Time and a payment date prior to such  surrender
and (ii) at the  appropriate  payment  date,  the amount of dividends  and other
distributions  payable  with respect to that number of whole shares of GI Common
Stock represented by such surrendered  Certificate pursuant to the terms of this
Article I, which dividends or other distributions have a record date on or after
the Effective Time and a payment date subsequent to such surrender.

                                   ARTICLE II
                                   THE CLOSING

SECTION 2.01      Closing.

         Unless this Agreement shall have been  terminated and the  transactions
herein  contemplated  shall have been  abandoned  pursuant to Article VIII,  and
subject to the satisfaction or waiver of the conditions set forth in Article VI,
the  closing  of the  Acquisition  (the  "Closing")  shall take place as soon as
reasonably  practicable  (but in no event on written notice of less than two (2)
business  days)  after  all  of the  conditions  set  forth  in  Article  VI are
satisfied,  but no later  than  August  31,  2011 or,  to the  extent  permitted
thereunder,  waived, or extended, at the offices of Michael A. Littman,  located
at 7609 Ralston Road, Arvada, CO 80002 or at such other time and place as may be
agreed to in writing  by the  parties  hereto  (the date of such  Closing  being
referred to herein as the "Closing Date").

                                  ARTICLE III
                      REPRESENTATIONS AND WARRANTIES OF GI

         Except  as  set  forth  in the  applicable  section  of the  disclosure
schedule  delivered by GI to Sellers  prior to the  execution of this  Agreement
(the "GI  Disclosure  Schedule"),  GI  represents  and  warrants  to  Sellers as
follows:

<PAGE>

SECTION 3.01      Organization of GI; Authority.

         GI is an Entity duly organized,  validly  existing and in good standing
under the laws of the State of Wyoming. GI has all requisite corporate power and
corporate  authority  to enter into the  transaction  documents to which it is a
party, to consummate the transactions  contemplated  hereby and thereby, to own,
lease and operate its  properties  and to conduct its  business.  Subject to the
receipt  of its  board of  director's  approval,  the  execution,  delivery  and
performance  by GI of the  Transaction  Documents to which it is a party and the
consummation of the transactions  contemplated hereby and thereby have been duly
authorized  by all  necessary  corporate  action  on the part of GI,  including,
without  limitation,  the  approval  of  the  board  of  directors  of  GI.  The
Transaction  Documents  have been duly executed and delivered by each of GI and,
assuming  that  the  Transaction   Documents  constitute  a  valid  and  binding
obligation  of the  other  parties  thereto,  constitute  a  valid  and  binding
obligation of GI,  enforceable  against GI in accordance  with its terms. GI has
heretofore  delivered or made available to Acquiree  complete and correct copies
of the  certificate  of  incorporation  and by-laws of GI, the minute  books and
stock transfer records of GI, as in effect as of the date of this Agreement.  GI
is not in violation of its organizational documents.

SECTION 3.02      Capitalization.

          The authorized capital stock of GI consists of 50,000,000 shares of GI
Common  Stock,  and  no  Preferred  Stock,  of  which  4,280,000  common  Shares
(approximately) are outstanding on the date hereof. No other shares of any other
class or series of GI Common  Stock or Preferred or  securities  exercisable  or
convertible  into  or  exchangeable  for  GI  Common  Stock  ("GI  Common  Stock
Equivalents") are authorized,  issued or outstanding.  The outstanding shares of
GI Common Stock have been duly  authorized and validly issued and are fully paid
and  non-assessable and were not issued in violation of, and are not subject to,
any preemptive,  subscription or similar rights. To GI's knowledge,  none of the
outstanding  shares of GI  Common  Stock was  issued  in  violation  of any Law,
including  without  limitation,  federal and state securities laws. There are no
outstanding  warrants,  options,   subscriptions,   calls,  rights,  agreements,
convertible or  exchangeable  securities or other  commitments  or  arrangements
relating to the issuance,  sale,  purchase,  return or redemption,  and, to GI's
knowledge,  voting or transfer of any shares,  whether issued or unissued, of GI
Common  Stock,  GI Common Stock  Equivalents  or other  securities of GI. On the
Closing  Date,  the shares of GI Common or  Preferred  Stock for which shares of
Sellers  Common  Stock  shall be issued in the  Acquisition  will have been duly
authorized  and, when issued and delivered in  accordance  with this  Agreement,
such shares of GI Common or Preferred Stock will be validly  issued,  fully paid
and non-assessable.

<PAGE>

SECTION 3.03      No Violation; Consents and Approvals.

         The execution and delivery by GI of the transaction documents does not,
and the  consummation of the  transactions  contemplated  hereby and thereby and
compliance  with the terms hereof and thereof will not,  conflict with or result
in any violation of or default (or an event which,  with notice or lapse of time
or both,  would  constitute a default)  under,  (a) the terms and  conditions or
provisions  of the  certificate  of  incorporation  or by-laws of GI (b) any Law
applicable  to GI or the property or assets of GI, or (c) give rise to any right
of termination, cancellation or acceleration under, or result in the creation of
any lien upon any of the  properties  of GI under any  contract to which GI is a
party or by which GI or any  assets of GI may be bound,  except,  in the case of
clauses (b) and (c), for such  conflicts,  violations or defaults  which are set
forth in Section 3.04 of the GI  Disclosure  Schedule and as to which  requisite
waivers  or  consents  will have been  obtained  prior to the  Closing or which,
individually  or in the aggregate,  would not have a material  adverse effect on
GI. No  Governmental  Approval  is  required  to be  obtained or made by or with
respect to GI in connection with the execution and delivery of this Agreement or
the consummation by GI of the transactions contemplated hereby.

SECTION 3.04      Litigation; Compliance with Laws.

(a) There are: (i) no claims,  actions,  suits,  investigations  or  proceedings
pending or, to the knowledge of GI, threatened against, relating to or affecting
GI, the business, the assets, or any employee,  officer, director,  stockholder,
or independent  contractor of GI in their capacities as such, and (ii) no orders
of any Governmental  Entity or arbitrator  outstanding against GI, the business,
the assets,  or any employee,  officer,  director,  stockholder,  or independent
contractor  of GI in their  capacities as such, or that could prevent or enjoin,
or delay in any respect, consummation of the transactions contemplated hereby.

(b) GI has complied and is in compliance in all material  respects with all laws
applicable  to GI, its business or its assets.  Neither GI has  received  notice
from any  Governmental  Entity or other Person of any material  violation of law
applicable to GI, its business or assets. GI has obtained and holds all required
Licenses  (all of which  are in full  force  and  effect)  from  all  Government
Entities  applicable to GI, its business or their assets.  No violations  are or
have been  recorded in respect of any such license and no proceeding is pending,
or, to the knowledge of GI, threatened to revoke or limit any such License.

                                   ARTICLE IV
                   REPRESENTATIONS AND WARRANTIES OF Acquiree

         Except  as  set  forth  in the  applicable  section  of the  disclosure
schedule  delivered by Acquiree to GI prior to the  execution of this  Agreement
(the "Acquiree Disclosure Schedule"),  Acquiree represents and warrants to GI as
follows:

<PAGE>

SECTION 4.01      Organization of Acquiree; Authority.

         Acquiree is a corporation duly organized,  validly existing and in good
standing under the laws of the State of Colorado and has all requisite corporate
power and  corporate  authority  to enter  into the  Transaction  Documents,  to
consummate the transactions  contemplated  hereby and thereby, to own, lease and
operate its  properties  and to conduct its business.  Subject to the receipt of
shares  holder  approval  by  Acquiree  holders,  the  execution,  delivery  and
performance by Acquiree of the Transaction Documents and the consummation of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate  action  on  the  part  of  Acquiree,   including,  without
limitation,  the approval of the board of directors of Acquiree. The Transaction
Documents  have been duly executed and delivered by Acquiree and,  assuming that
the  Transaction  Documents  constitute  a valid and binding  obligation  of GI,
constitute  a  valid  and  binding  obligation  of  Acquiree.  Acquiree  is duly
qualified  or  licensed  to do  business  as a  foreign  Entity  and are in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the  nature  of the  business  conducted  by it makes  such  qualification
necessary,  except  where the  failure to obtain such  qualification  or license
would not,  individually or in the aggregate,  have a Acquiree  Material Adverse
Effect on  Acquiree.  Acquiree has  herewith  delivered or made  available to GI
complete and correct copies of the articles of organization  and conversion to a
corporation and by-laws of Acquiree, the minute books and stock transfer records
of Acquiree,  as in effect as of the date of this Agreement.  Acquiree is not in
violation of its organizational documents.

SECTION 4.02      Capitalization.

         (a) The authorized and  outstanding  shares of Acquiree are 100,000,000
common  shares  and  25,000,000  preferred  shares of which  common  shares  and
preferred  shares as shown on Schedule  4.02(a) are  outstanding  are issued and
outstanding  (the  "Acquiree  shares").  All of the  outstanding  shares  of the
Acquiree  are  validly  issued,  fully paid and  non-assessable.  To  Acquiree's
knowledge,  none of the  outstanding  shares of Acquiree or other  securities of
Acquiree  was issued in  violation of any Law,  including,  without  limitation,
state and federal  securities laws. There are no Liens on or with respect to any
outstanding shares of Acquiree.

         (b)  Except  as shown in  Section  4.02  (a) of  Acquiree's  disclosure
schedule.  There  are  no  outstanding:   (i)  securities  convertible  into  or
exchangeable  for Acquiree  shares;  (ii)  options,  warrants or other rights to
purchase or subscribe  for Acquiree  shares;  or (iii)  contracts,  commitments,
agreements,  understandings or arrangements of any kind relating to the issuance
of any Acquiree shares,  any such convertible or exchangeable  securities or any
such options, warrants or rights. There is no outstanding right, option or other
agreement of any kind to purchase or otherwise to receive from Acquiree,  or any
stockholder  of Acquiree,  any  ownership  shares in  Acquiree,  and there is no
outstanding  right or  security  of any kind  convertible  into  such  ownership
shares. To Acquiree's  knowledge,  there are no voting trusts,  proxies or other
similar  agreements  or  understandings  with respect to the shares of Acquiree.
There are no  obligations,  contingent or otherwise,  of Acquiree to repurchase,
redeem or  otherwise  acquire any shares of  Acquiree or to provide  funds to or
make any investment (in the form of a loan,  capital  contribution or otherwise)
in any other Person.  There are no accrued and unpaid  dividends with respect to
any outstanding shares of Acquiree.

<PAGE>

SECTION 4.03      No Violation; Consents and Approvals.

         The  execution  and delivery by Acquiree of the  Transaction  Documents
does not,  and the  consummation  of the  transactions  contemplated  hereby and
thereby and compliance with the terms hereof and thereof will not conflict with,
or result in any  violation  of or default  (or an event  which,  with notice or
lapse of time or both,  would  constitute  a default)  under,  (a) the terms and
conditions  or  provisions  of the  articles  of  incorporation  or  by-laws  of
Acquiree,  (b) any Laws  applicable  to  Acquiree  or the  property or assets of
Acquiree,  or (c)  give  rise  to any  right  of  termination,  cancellation  or
acceleration  under,  or  result  in the  creation  of any Lien  upon any of the
properties of Acquiree  under,  any Contracts to which Acquiree is a party or by
which Acquiree or any of its assets may be bound, except, in the case of clauses
(b) and (c), for such  conflicts,  violations or defaults as to which  requisite
waivers  or  consents  will have been  obtained  prior to the  Closing or which,
individually or in the aggregate,  would not have an Acquiree  Material  Adverse
Effect.  No Governmental  Approval is required to be obtained or made by or with
respect to Acquiree or any Acquiree  Subsidiary in connection with the execution
and  delivery  of  this  Agreement  or  the  consummation  by  Acquiree  of  the
transactions  contemplated  hereby,  except  where the  failure  to obtain  such
Governmental  Approval  would  not,  individually  or in the  aggregate,  have a
Material Adverse Effect on Acquiree.

SECTION 4.04      Litigation; Compliance with Laws.

         (a) Except as would not have a  Material  Adverse  Effect on  Acquiree,
there are: (i) no claims, actions, suits,  investigations or proceedings pending
or, to the knowledge of Acquiree,  threatened against,  relating to or affecting
Acquiree,  its  business,  its  assets,  or  any  employee,  officer,  director,
stockholder,  or independent contractor of Acquiree in their capacities as such,
and (ii) no orders of any  Governmental  Entity or  arbitrator  are  outstanding
against Acquiree, its business, its assets, or any employee,  officer, director,
stockholder,  or independent contractor of Acquiree in their capacities as such,
or that could prevent or enjoin,  or delay in any respect,  consummation  of the
transactions  contemplated  hereby.  Section  4.04  of the  Acquiree  Disclosure
Schedule includes a description of all claims, actions, suits, investigations or
proceedings  involving  Acquiree,  its  business,  its assets,  or any employee,
officer,  director,  stockholder or independent  contractor of Acquiree in their
capacities as such.

         (b)  Except  as would not have an  Acquiree  Material  Adverse  Effect,
Acquiree has complied and is in  compliance  in all material  respects  with all
Laws  applicable  to  Acquiree,  its  business or its assets.  Acquiree  has not
received  notice from any  Governmental  Entity or other  Person of any material
violation  of Law  applicable  to it, its  business or its assets.  Acquiree has
obtained  and holds all  required  Licenses  (all of which are in full force and
effect)  from all  Government  Entities  applicable  to it, its  business or its
assets.  No violations  are or have been recorded in respect of any such License
and no  proceeding is pending,  or, to the  knowledge of Acquiree  threatened to
revoke or limit any such License.

<PAGE>

SECTION 4.05      Financial Statements.

         Acquiree  shall  have  provided,  prior to closing  hereunder,  audited
financial  statements in accordance with GAAP accounting  consistently  applied,
complete and true and accurate in all respects,  disclosing all liabilities, and
assets of Acquiree and shall provide all books and records necessary to complete
all filings in accordance with SEC Rules and Regulations.

                                    ARTICLE V
                        COVENANTS RELATING TO CONDUCT OF
                          BUSINESS PENDING THE EXCHANGE

SECTION 5.01      Conduct of the Business Pending the Exchange.

         (a) During the period from the date of this  Agreement  and  continuing
until the Effective Time, GI agrees as to itself and the GI  Subsidiaries,  that
GI shall not, and shall cause the GI Subsidiaries not to, engage in any business
whatsoever  other than in connection with the  consummation of the  transactions
contemplated by this Agreement, and shall use commercially reasonable efforts to
preserve  intact its business and assets,  maintain its assets in good operating
condition and repair  (ordinary wear and tear excepted),  retain the services of
its  officers,   employees  and  independent   contractors  and  use  reasonable
commercial  efforts  to keep in full force and effect  liability  insurance  and
bonds  comparable in amount and scope of coverage to that  currently  maintained
with respect to its business,  unless, in any case,  Acquiree consents otherwise
in writing.

         (b)During  the period from the date of this  Agreement  and  continuing
until the Effective Time,  Acquiree  agrees that,  other than in connection with
the consummation of the transactions  contemplated hereby, it shall carry on its
business only in the ordinary course of business  consistent with past practice,
use commercially  reasonable  efforts to preserve intact its business and assets
and use reasonable commercial efforts to keep in full force and effect liability
insurance and bonds comparable in amount and scope of coverage to that currently
maintained  with  respect to its  business,  unless,  in any case,  GI  consents
otherwise in writing; provided that Acquiree may take any and all of the actions
listed in Schedule  5.01(b) of the  Acquiree  Disclosure  Schedules  at any time
prior  to or  after  the  date of this  Agreement  without  the  consent  of GI.
Additionally,  during the period from the date of this  Agreement and continuing
until the Effective Time,  Acquiree  agrees that,  other than in connection with
the consummation of the transaction contemplated hereby, Acquiree shall carry on
its  business  only in the  ordinary  course of  business  consistent  with past
practice,  use commercially  reasonable  efforts to preserve intact its business
and  assets  and use  reasonable  commercial  efforts  to keep in full force and
effect liability  insurance and bonds comparable in amount and scope of coverage
to that currently maintained with respect to its business,  unless, in any case,
GI consents otherwise in writing; provided that Acquiree may take any and all of
the actions listed in Schedule  5.01(b) of the Acquiree  Disclosure  Schedule at
any time prior to or after the date of this Agreement without the consent of GI.
During the  period  from the date of this  Agreement  and  continuing  until the
Effective  Time,  Acquiree  and GI agrees as to itself and,  with respect to GI,
that  except as  expressly  contemplated  or  permitted  by this  Agreement,  as
disclosed in Section  5.01(c) of the  Acquiree's  Disclosure  Schedule or the GI
Disclosure Schedule, as applicable,  or to the extent that the other party shall
otherwise consent in writing:

<PAGE>

(1) It shall not amend or propose to amend its certificate of  incorporation  or
by-laws or equivalent  organizational  documents  except as contemplated in this
Agreement.

(2) It shall not, nor in the case of GI shall it permit the GI Subsidiaries  to,
issue, deliver, sell, redeem,  acquire,  authorize or propose to issue, deliver,
sell, redeem, acquire or authorize, any shares of its capital stock of any class
or any  securities  convertible  into,  or any  rights,  warrants  or options to
acquire, any such shares or convertible securities or other ownership of equity,
provided  that: (1) GI shall be permitted to issue the shares of GI Common Stock
to be issued to  Acquiree  Stockholders  hereunder,  and (2) each party shall be
permitted to issue shares of its common stock  pursuant to the exercise of stock
options,  warrants and other convertible  securities  outstanding as of the date
hereof and  listed on the  Acquiree  Disclosure  Schedule  or the GI  Disclosure
Schedule, as the case may be:

(3)  It  shall  not,  nor  in the  case  of GI  shall  it  permit  any of the GI
Subsidiaries  to, nor shall it propose to: (i) declare,  set aside,  make or pay
any  dividend  or other  distribution,  payable  in  cash,  stock,  property  or
otherwise,  with respect to any of its capital stock or (ii) except with respect
to the Reverse Stock Split,  reclassify,  combine,  split,  subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock.

(4) Other than  dispositions in the ordinary course of business  consistent with
past practice  which would not cause a GI Material  Adverse Effect or a Acquiree
Material Adverse Effect (as applicable), individually or in the aggregate, to it
and its subsidiaries, taken as a whole, it shall not, nor shall it permit any of
its subsidiaries to, sell, lease,  encumber or otherwise dispose of, or agree to
sell,  lease (whether such lease is an operating or capital lease),  encumber or
otherwise dispose of its assets.

(5) It shall promptly  advise the other party hereto in writing of any change in
the condition (financial or otherwise),  operations or properties, businesses or
business  prospects of such party or any of its subsidiaries  which would result
in a GI Material Adverse Effect or Acquiree Material Adverse Effect, as the case
may be.

(6) It shall not  permit  to occur,  any (1)  change in  accounting  principles,
methods or  practices,  investment  practices,  claims,  payment and  processing
practices or policies  regarding  intercompany  transactions,  (2) incurrence of
Indebtedness  or any  commitment  to incur  Indebtedness,  any  incurrence  of a
contingent  liability,  Contingent  Obligation  or other  liability of any type,
except for,  with respect to  Acquiree,  other than  obligations  related to the
Exchange of Inventory in the ordinary  course of business  consistent  with past
practices,  (3)  cancellation  of any debt or waiver or release of any contract,
right or claim,  except for cancellations,  waivers and releases in the ordinary
course of business  consistent with its past practice which do not exceed $5,000
in the aggregate,  (4) amendment,  termination or revocation of, or a failure to
perform  obligations  or the  occurrence of any default  under,  any contract or
agreement (including, without limitation, leases) to which it is or, as of April
30, 2011, was a party, other than in the ordinary course of business  consistent
with past practice,  or any License, (5) execution of termination,  severance or
similar  agreements with any of its officers,  directors,  employees,  agents or
independent  contractors  or (6)  entering  into any leases of real  property or
agreement to acquire real property.

<PAGE>

SECTION 5.02      No Action.

         During the period from the date of this Agreement and continuing  until
the Effective Time, Acquiree and GI agrees as to itself and, with respect to GI,
that it shall not, and Acquiree  shall not,  take or agree or commit to take any
action,  (i) that is  reasonably  likely to make any of its  representations  or
warranties  hereunder  inaccurate;  or (ii) that is  prohibited  pursuant to the
provisions of this Article V.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

SECTION 6.01      Access to Information.

         From  the  date  hereof  until  the  Effective   Time  or  the  earlier
termination  of this  Agreement,  each party  shall give the other party and its
respective counsel, accountants, representatives and agents, and with respect to
Acquiree it shall  provide to GI with  respect to Acquiree,  full  access,  upon
reasonable  notice  and  during  normal  business  hours,  to such  party's  and
Acquieree's   facilities  and  the  financial,   legal,   accounting  and  other
representatives  of such party and Acquiree  with  knowledge of the business and
the assets of such party and Acquiree  and,  upon  reasonable  notice,  shall be
furnished all relevant documents,  records and other information  concerning the
business,  finances  and  properties  of such  party  and its  subsidiaries  and
Acquiree  that  the  other  party  and  its  respective  counsel,   accountants,
representatives and agents, may reasonably request. No investigation pursuant to
this Section 6.02 shall affect or be deemed to modify any of the representations
or warranties  hereunder or the condition to the  obligations  of the parties to
consummate the Exchange; it being understood that the investigation will be made
for  the  purposes  among  others  of the  board  of  directors  of  each  party
determining in its good faith reasonable  business  judgment the accuracy of the
representations  and  warranties  of  the  other  party.  In  the  event  of the
termination of this  Agreement,  each party, if so requested by the other party,
will return or destroy  promptly every document  furnished to it by or on behalf
of the other party in  connection  with the  transactions  contemplated  hereby,
whether so obtained  before or after the  execution of this  Agreement,  and any
copies thereof  (except for copies of documents  publicly  available)  which may
have been made, and will use reasonable efforts to cause its representatives and
any  representatives of financial  institutions and investors and others to whom
such documents  were furnished  promptly to return or destroy such documents and
any copies thereof any of them may have made. It is hereby  acknowledged  the GI
has filed all of its  financial  reports  with the SEC  which  shall  constitute
delivery of the same to Acquiree.

<PAGE>

SECTION 6.02      No Shop; Exchange Proposals.

         From  the  date  hereof  until  the  Effective   Time  or  the  earlier
termination of this  Agreement,  neither  Acquiree nor GI shall,  nor shall they
authorize or permit any of their  respective  officers,  directors or employees,
Acquiree  employees  or any  investment  banker,  financial  advisor,  attorney,
accountant  or other  representative  retained  by it to,  solicit,  initiate or
encourage (including by way of furnishing information), or take any other action
to facilitate, any inquiries or the making of any proposal which constitutes, or
may  reasonably  be expected to lead to, any Takeover  Proposal (as  hereinafter
defined),  or  negotiate  with  respect  to,  agree to or endorse  any  Takeover
Proposal  (except in any case if the board of directors or special  committee of
GI or Acquiree,  as the case may be,  determines  in good faith,  based upon the
written  opinion of its outside legal  counsel,  that the failure to do so would
constitute a breach of the fiduciary  duties of the GI' or  Acquiree's  board of
directors or special  committee,  as the case may be, to its stockholders  under
applicable law).  Acquiree shall promptly advise GI and GI shall promptly advise
Acquiree,  as the case may be,  orally and in writing of any such  inquiries  or
proposals and shall also promptly advise GI or Acquiree,  as the case may be, of
any developments or changes regarding such inquiries or proposals.  Acquiree and
GI shall immediately  cease and cause to be terminated any existing  discussions
or  negotiations  with  any  persons  (other  than  Acquiree  and GI)  conducted
heretofore with respect to any Takeover  Proposal.  Acquiree and GI agree not to
release  (by waiver or  otherwise)  any third party from the  provisions  of any
confidentiality or standstill agreement to which Acquiree or GI is a party.

SECTION 6.03      Legal Conditions to Exchange; Reasonable Efforts.

         Acquiree,  GI shall take all  reasonable  actions  necessary  to comply
promptly with all legal requirements which may be imposed on itself with respect
to the Exchange and will promptly cooperate with and furnish information to each
other in connection with any such  requirements  imposed upon any of them or any
of their Subsidiaries in connection with the Exchange. Acquiree and GI will take
all reasonable  actions  necessary to obtain (and will cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party,  required to
be obtained or made by Acquiree  or GI in  connection  with the  Exchange or the
taking of any action contemplated thereby or by this Agreement.

SECITON 6.04      Certain Filings.

         Each party shall  cooperate with the other in (a)  connection  with the
preparation of an announcement or required filings,  (b) determining whether any
action by or in respect  of, or filing  with,  any  governmental  body,  agency,
official or  authority  is  required,  or any  actions,  consents,  approvals or
waivers are required to be obtained from parties to any material  contracts,  in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement  and (c) seeking any such actions,  consents,  approvals or waivers or
making any such filings, furnishing information required in connection therewith
or with  the 8-K and  seeking  timely  to  obtain  any such  actions,  consents,
approvals or waivers. Each party shall consult with the other in connection with
the foregoing and shall use all reasonable  commercial efforts to take any steps
as may be  necessary  in order to obtain  any  consents,  approvals,  permits or
authorizations required in connection with the Exchange.

<PAGE>

SECTION 6.05      Public Announcements and Filings.

         Each party  shall give the other a  reasonable  opportunity  to comment
upon,  and,  unless  disclosure  is  required,  in the  opinion of  counsel,  by
applicable law, approve (which approval shall not be unreasonably withheld), all
press  releases  or other  public  communications  of any sort  relating to this
Agreement or the transactions contemplated hereby.

SECTION 6.06      Tax Matters.

         From  the  date  hereof  until  the  Effective   Time  or  the  earlier
termination of this  Agreement,  without the prior written  consent of the other
party or if required in the opinion of counsel,  neither GI nor Acquiree,  shall
make or change any election, change an annual accounting period, adopt or change
any  accounting  method,  file any amended  Tax  Return,  enter into any closing
agreement,  settle any Tax claim or  assessment  relating to it,  surrender  any
right to claim a refund  of Taxes,  consent  to any  extension  or waiver of the
limitation period  applicable to any Tax claim or assessment  relating to it, or
take any other action relating to the filing of any Tax Return or the payment of
any Tax.

SECTION 6.07      Supplements to Schedules.

         Prior to the Closing,  Acquiree will supplement or amend its disclosure
schedule  with respect to any matter  hereafter  arising  which,  if existing or
occurring  at the date of this  Agreement,  would have been  required  to be set
forth or described in such disclosure schedule. No supplement to or amendment of
the  disclosure  schedule  made pursuant to this Section 6.07 shall be deemed to
cure any breach of any  representation or warranty made in this Agreement unless
the other parties  hereto  specifically  agree thereto in writing.  Prior to the
Closing,  GI may supplement or amend its disclosure schedule with respect to any
matter which, if existing or occurring at the date of this Agreement, would have
been  required to be set forth or  described  in such  disclosure  schedule.  No
supplement  to or amendment of the  disclosure  schedule  made  pursuant to this
Section  6.07  shall be  deemed  to cure any  breach  of any  representation  or
warranty made in this  Agreement  unless the other parties  hereto  specifically
agree thereto in writing.

                                   ARTICLE VII
                           CONDITIONS OF THE EXCHANGE

SECTION 7.01      Conditions to Each Party's Obligation to Effect the Exchange.

         The respective obligations of each party to effect the Exchange and the
other transactions  contemplated  herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions,  any or all of which
may be waived, in whole or in part to the extent permitted by applicable law:

<PAGE>

         (a) Shareholder  Approval.  This Agreement shall have been duly adopted
and agreed by the holders of at least 80% of the outstanding  shares of Acquiree
or  convertible  note  interests,  through an  Exchange  Agreement,  Consent and
Representations signed by each shareholder or note-holder of Acquiree.

         (b)  No  Injunctions  or  Restraints.   No  governmental  authority  of
competent  jurisdiction  shall have enacted,  issued,  promulgated,  enforced or
entered any statute,  rule, regulation,  execution order, decree,  injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts,  prevents or prohibits  consummation of the Exchange
or any transaction contemplated by this Agreement;  provided,  however, that the
parties shall use their reasonable  commercial efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted.

SECTION 7.02      Additional Conditions of Obligations of GI.

         The obligations of GI to effect the Exchange and the other transactions
contemplated by this Agreement are also subject to the  satisfaction at or prior
to the Closing Date of the following additional conditions unless waived by GI:

         (a) Representations and Warranties.  The representations and warranties
of  Acquiree  set  forth in this  Agreement  shall be true  and  correct  in all
material respects (except for those  representations and warranties qualified by
materiality,  which shall be true and correct in all respects) as of the date of
this  Agreement  and as of the  Closing  Date  as  though  made on and as of the
Closing Date, except as otherwise contemplated by this Agreement.

         (b)  Performance  of  Obligations  of  Acquiree.  Acquiree  shall  have
performed in all material  respects all  conditions,  covenants,  agreements and
obligations  required to be performed by it under this  Agreement at or prior to
the Closing Date.

         (c)  No  Material  Adverse  Change  to  Acquiree.  From the date
hereof  through  and  including  the Effective Time, no event shall have
occurred which would have an Acquiree Material Adverse Effect.

         (d) Third Party Consents. Acquiree shall have obtained all consents and
approvals,  required to be obtained prior to or at the Closing Date,  from third
parties or  governmental  and  regulatory  authorities  in  connection  with the
execution,  delivery  and  performance  by  Acquiree of this  Agreement  and the
consummation of the transactions contemplated hereby.

         (e) No Governmental  Order or Other Proceeding or Litigation.  No order
of any  Governmental  Entity shall be in effect that  restrains or prohibits the
transactions  contemplated hereby and by the other Transaction Documents, and no
suit,  action or other  proceeding  by any  Governmental  Entity shall have been
instituted  or threatened  which seeks to restrain or prohibit the  transactions
contemplated hereby or thereby.

         (f) Deliveries.  At the  Closing,  Acquiree  shall have  delivered  to
GI or GI shall have  otherwise obtained:

<PAGE>

         (1)  true,  correct  and  complete  copies  of (1) the  certificate  of
         organization or other charter document, as amended to date, of Acquiree
         as filed with, the Secretary of State or other appropriate  official of
         the state or other  jurisdiction of  organization of Acquiree,  (2) the
         by-laws or other similar  organizational  document of Acquiree, and (3)
         resolutions  duly and validly adopted by the Board of Directors and the
         stockholders of Acquiree  evidencing the authorization of the execution
         and  delivery of this  Agreement,  the other  Transaction  Documents to
         which  it  is  a  party  and  the   consummation  of  the  transactions
         contemplated  hereby  and  thereby,  in  each  case,  accompanied  by a
         certificate of the Secretary or Assistant Secretary of Acquiree,  dated
         as of the  Closing  Date,  stating  that no  amendments  have been made
         thereto from the date thereof through the Closing Date; and

        (2) Audited  GAAP  Financial  Statements  of Acquiree  pursuant to SEC
        Rules and Regulations through July 31, 2011.

        (3) The stock  Certificates  and Notes of South Uintah Gas Properties,
        Inc.  constituting  100% of the issued and outstanding stock and notes
        of Acquiree.

        (4) Acquiree's Indebtedness.  All outstanding Indebtedness of Acquiree
        as listed on Section 7.02(d) shall have been assumed by GI.

        (5) Acquiree's  ownership of GI shares.  Acquiree shall  surrender and
        cancel 3,000,000 common shares of GI owned by Acquiree.

SECTION 7.03      Additional Conditions of Obligations of Acquiree.

         The  obligation  of  Acquiree  to  effect  the  Exchange  and the other
transactions  contemplated by this Agreement is also subject to the satisfaction
at or prior to the Closing Date of the following  additional  conditions  unless
waived by Acquiree:

         (a) Representations and Warranties.  The representations and warranties
of GI set forth in this  Agreement  shall be true and  correct  in all  material
respects  (except  for  those   representations  and  warranties   qualified  by
materiality)  as of the date of this  Agreement  and as of the  Closing  Date as
though made on and as of the Closing Date,  except as otherwise  contemplated by
this Agreement.

         (b)  Performance  of  Obligations of GI. GI shall have performed in all
material respects all conditions, covenants, agreements and obligations required
to be performed by them under this Agreement at or prior to the Closing Date.

         (c) No Material  Adverse Change to GI. From the date hereof through and
including the Effective Time, no event shall have occurred which would have a GI
Material Adverse Effect.

         (d) No Governmental  Order or Other Proceeding or Litigation.  No order
of any  Governmental  Entity shall be in effect that  restrains or prohibits the
transactions  contemplated hereby and by the other Transaction Documents, and no
suit,  action or other  proceeding  by any  Governmental  Entity shall have been
instituted  or threatened  which seeks to restrain or prohibit the  transactions
contemplated hereby or thereby.

         (e) Deliveries.  At the Closing, GI shall have delivered to
shareholders of Acquiree:

<PAGE>

          (1) the  share  certificates  specified  in  Section  1.01(a),  issued
          pro-rata in the names of Shareholders of Acquiree, in proper amounts.

          (2)  Convertible  Promissory  Notes and Promissory  Notes of GI in the
          amounts shown on Schedule 7.03(e)(2).

          (3) Warrants as specified in Schedule 1.01(c).

          (4) An  Agreement to authorize  and issue  Preferred  Stock in certain
          Series as set forth on Schedule 7.03(e)(4).

          (5) Board Resolutions  appointing 2 new officers of Acquiree's choice,
          or an election of new directors by the shareholders.

          (6) Resignations of existing officers effective at closing.

          (7) Appointments of new officers of Acquiree's choice.

                                  ARTICLE VIII
                                   TERMINATION

SECTION 8.01      Termination.

         This  Agreement  may be  terminated  at any time prior to the Effective
Time, by GI or Acquiree as set forth below:

         (a) by mutual consent of the boards of directors of GI and Acquiree; or

         (b) by GI upon written notice to Acquiree, if: (A) any condition to the
obligation of GI to close contained in Article VII hereof has not been satisfied
by 60 days after date hereof (the "End Date") (unless such failure is the result
of  GI's  breach  of  any  of  its  representations,  warranties,  covenants  or
agreements  contained  herein) or (B) the GI  stockholders  do not  approve  the
Exchange; or

         (c) by Acquiree upon written notice to GI, if: (A) any condition to the
obligation  of  Acquiree to close  contained  in Article VII hereof has not been
satisfied  by the End Date  (unless  such  failure is the  result of  Acquiree's
breach  of any of  its  representations,  warranties,  covenants  or  agreements
contained  herein);  or (B) the  Acquiree  shares  holders  do not  approve  the
Exchange; or

         (d)  by GI if  the  board  of  directors  or  special  committee  of GI
determines  in good faith,  based upon the written  opinion of its outside legal
counsel,  that the failure to terminate this Agreement would constitute a breach
of the fiduciary duties of the GI board of directors or special committee to the
GI stockholders under applicable law; or

<PAGE>

     (e) by GI if South  Uintah Gas  Properties,  Inc. has failed to acquire all
interests under certain contracts listed on Confidential Schedule 8.01(e).

SECTION 8.02      Fees, Costs and Expenses.

         Whether  or not the  Exchange  is  consummated,  all  legal  costs  and
expenses  incurred  in  connection  with  this  Agreement  and the  transactions
contemplated hereby shall be paid by South Uintah Gas Properties, Inc.

                                   ARTICLE IX
                   SURVIVAL OF REPRESENTATIONS AND WARRANTIES

   None of the  representations  and warranties of the parties set forth in this
Agreement shall survive the Closing.  Following the Closing Date with respect to
any  particular  representation  or  warranty,  no party  hereto  shall have any
further liability with respect to such representation and warranty.  None of the
covenants,  agreements  and  obligations of the parties hereto shall survive the
Closing.

                                    ARTICLE X
                                  MISCELLANEOUS

SECTION 10.01     Notices.

         All notices,  requests and other  communications to any party hereunder
shall be in writing (including telecopy,  telex or similar writing) and shall be
deemed given or made as of the date  delivered,  if delivered  personally  or by
telecopy (provided that delivery by telecopy shall be followed by delivery of an
additional copy personally,  by mail or overnight courier),  one day after being
delivered by overnight courier or three days after being mailed by registered or
certified mail (postage prepaid,  return receipt  requested),  to the parties at
the following addresses:

         if to GI  to:     Garner Investments, Inc.
                           7609 Ralston Road
                           Arvada, CO 80002

         if to SUGP:       South Uintah Gas Properties, Inc.
                           C/O 7609 Ralston Road
                           Arvada, Colorado  80002

or such other  address or telex or telecopy  number as such party may  hereafter
specify for the purpose by notice to the other party hereto.

<PAGE>

SECTION 10.02     Amendment; Waiver.

         This Agreement may be amended, modified or supplemented, and waivers or
consents to departures  from the provisions  hereof may be given,  provided that
the same are in writing and signed by or on behalf of the parties hereto.

SECTION 10.03     Successors and Assigns.

         The provisions of this Agreement shall be binding upon and inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns,
provided that no party shall assign,  delegate or otherwise  transfer any of its
rights or obligations  under this Agreement  without the written  consent of the
other party hereto.

SECTION 10.04     Governing Law.

         This  Agreement  shall be construed in accordance  with and governed by
the law of the State of Delaware  without  regard to  principles  of conflict of
laws.

SECTION 10.05     Waiver of Jury Trial.

         Each party hereto hereby  irrevocably  and  unconditionally  waives any
rights to a trial by jury in any legal action or  proceeding in relation to this
Agreement and for any counterclaim therein.

SECTION 10.06     Consent to Jurisdiction.

         Each of the Parties hereby irrevocably and  unconditionally  submits to
the exclusive  jurisdiction of any court of the State of Colorado or any federal
court sitting in Colorado for purposes of any suit,  action or other  proceeding
arising out of this Agreement and the  Transaction  Documents (and agrees not to
commence any action,  suit or proceedings  relating  hereto or thereto except in
such courts).  Each of the Parties agrees that service of any process,  summons,
notice or  document  pursuant  to the laws of the State of New Jersey and on the
individuals  designated in Section  10.01 shall be effective  service of process
for any action, suit or proceeding brought against it in any such court.

SECTION 10.07     Counterparts; Effectiveness.

         Facsimile  transmissions  of  any  executed  original  document  and/or
retransmission of any executed facsimile  transmission shall be deemed to be the
same as the delivery of an executed  original.  This  Agreement may be signed in
any number of  counterparts,  each of which shall be an original,  with the same
effect as if the signatures thereto and hereto were upon the same instrument.

<PAGE>

SECTION 10.08     Entire Agreement; No Third Party Beneficiaries; Rights of
                  Ownership.

         Except as expressly  provided  herein,  this  Agreement  (including the
documents  and  the  instruments  referred  to  herein)  constitute  the  entire
agreement and supersede all prior  agreements and  understandings,  both written
and oral, among the parties with respect to the subject matter hereof. Except as
expressly  provided  herein,  this  Agreement is not intended to confer upon any
person  other than the parties  hereto,  any rights or remedies  hereunder.  The
parties  hereby  acknowledge  that no person  shall have the right to acquire or
shall be deemed to have  acquired  shares  of  common  stock of the other  party
pursuant to the Exchange until consummation thereof.

SECTION 10.09     Headings.

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

SECITON 10.10     No Strict Construction.

         The parties hereto have  participated  jointly in the  negotiation  and
drafting of this  Agreement.  In the event an ambiguity or question of intent or
interpretation  arises under any  provision of this  Agreement,  this  Agreement
shall  be  construed  as if  drafted  jointly  by the  parties  thereto,  and no
presumption or burden of proof shall arise favoring or disfavoring  any party by
virtue of the authorship of any of the provisions of this Agreement.

SECTION 10.11     Severability.

         If any term or other provision of this Agreement is invalid, illegal or
unenforceable, all other provisions of this Agreement shall remain in full force
and  effect  so long as the  economic  or legal  substance  of the  transactions
contemplated  hereby is not affected in a manner that is  materially  adverse to
any party.

                                   ARTICLE XI
                                   DEFINITIONS

         "Affiliate" shall mean (a) with respect to an individual, any member of
such  individual's  family including lineal ancestors and descendents;  (b) with
respect to an entity,  any officer,  director,  stockholder,  partner,  manager,
investor or holder of an  ownership  shares of or in such entity or of or in any
Affiliate  of such entity;  and (c) with  respect to a Person,  any Person which
directly  or  indirectly,  through  one or  more  intermediaries,  controls,  is
controlled by, or is under common control with such Person or entity.

          "Acquiree"  shall have the meaning  set forth in the  preamble to this
Agreement.

<PAGE>

         "Acquiree  Common  Stock"  shall  have  the  meaning  set  forth in the
recitals to this  Agreement,  and  elsewhere in Section  4.02"Acquiree  Material
Adverse Effect" shall mean an event or change,  individually or in the aggregate
with other  events or  changes,  that could  reasonably  be  expected  to have a
material adverse effect on (a) the business,  properties,  prospects,  condition
(financial or  otherwise) or results of operations of Acquiree  taken as a whole
(other than those events,  changes or effects  resulting  from general  economic
conditions  or the industry in which  Acquiree is engaged  generally) or (b) the
ability of Acquiree to consummate the transactions contemplated hereby.

         "Acquiree Shareholders" mean the holders of common shares in Acquiree.

         "Agreement"  shall have the meaning  set forth in the  preamble to this
Agreement.

         "Certificates" shall have the meaning set forth in Section 1.04 of this
Agreement.

         "Closing"  shall have the  meaning  set forth in  Section  2.01 of this
Agreement.

         "Closing Date" shall have the meaning set forth in Section 2.01 of this
Agreement.

         "Code"  shall  have  the  meaning  set  forth in the  recitals  of this
Agreement.

         "Contingent  Obligation"  as to any Person  shall mean the undrawn face
amount of any letters of credit  issued for the account of such Person and shall
also mean any  obligation  of such Person  guaranteeing  or having the  economic
effect of guaranteeing any Indebtedness, leases, dividends, letters of credit or
other  obligations  ("Primary  Obligations")  of any other Person (the  "Primary
Obligor") in any manner,  whether  directly or  indirectly,  including,  without
limitation,  any obligation of such Person,  whether or not  contingent,  (a) to
purchase any such Primary  Obligation  or any  property  constituting  direct or
indirect security therefore, (b) to advance or supply funds (i) for the purchase
or payment of any such Primary Obligation or (ii) to maintain working capital or
equity  capital of the Primary  Obligor or otherwise  to maintain the  financial
condition  or  solvency  of  the  Primary  Obligor,  (c) to  purchase  property,
securities  or services  primarily for the purpose of assuring the obligee under
any such  Primary  Obligation  of the  ability  of the  Primary  Obligor to make
payment of such Primary Obligation,  or (d) otherwise to assure or hold harmless
the obligee  under such  Primary  Obligation  against  loss in respect  thereof;
provided,  however,  that the  term  Contingent  Obligation  shall  not  include
endorsements  of instruments for deposit or collection in the ordinary course of
business.

         "Contracts" shall mean all contracts,  leases, subleases, notes, bonds,
mortgages,  indentures, Permits and Licenses,  non-competition agreements, joint
venture or partnership agreements,  powers of attorney, purchase orders, and all
other  agreements,  arrangements  and other  instruments,  in each case  whether
written or oral,  to which such Person is a party or by which any of them or any
of its assets are bound.

         "Convertible  Notes" shall mean  $1,350,000 in aggregate notes shown on
Schedule 1.01(c) and 7.03(e)(2).

<PAGE>

         "Effective  Time"  shall  be the date all  conditions  and  performance
hereunder has been completed but no later than August 31, 2011.

         "End Date"  shall have the  meaning  set forth in Section  8.01 of this
Agreement.

         "Exchange"  shall have the  meaning  set forth in the  recitals of this
Agreement.

         "GI"  shall  have  the  meaning  set  forth  in the  preamble  to  this
Agreement.

         "GI Common  Stock"  shall have the meaning set forth in the recitals to
this agreement.

         "GI  Common  Stock  Equivalents"  shall have the  meaning  set forth in
Section 3.02 of this Agreement.

         "GI  Material   Adverse   Effect"   shall  mean  an  event  or  change,
individually,  or in the  aggregate  with other  events or  changes,  that could
reasonably  be expected to have a material  adverse  effect on (a) the business,
properties,   prospects,  condition  (financial  or  otherwise)  or  results  of
operations  of GI and the GI  Subsidiaries  taken as a whole  (other  than those
events,  changes or effects  resulting from general  economic  conditions or the
industry  in  which  GI is  engaged  generally)  or  (b)  the  ability  of GI to
consummate the transactions contemplated hereby.

          "Governmental  Approval"  shall mean the consent,  approval,  order or
authorization  of,  or  registration,  declaration  or  filing  with any  court,
administrative  agency or commission or other Governmental Entity,  authority or
instrumentality, domestic or foreign.

         "Governmental  Entity"  means the  government  of the United  States of
America, any other nation or any political subdivision thereof, whether foreign,
state or local,  and any agency,  authority,  instrumentality,  regulatory body,
court, tribunal,  arbitrator, central bank or other entity exercising executive,
legislative,  judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.

         "Indebtedness"  shall  mean as to any Person and  whether  recourse  is
secured by or is otherwise available against all or only a portion of the assets
of such Person and whether or not contingent, but without duplication: (a) every
obligation  of such  Person for money  borrowed;  (b) every  obligation  of such
Person  evidenced  by bonds,  debentures,  notes or other  similar  instruments,
including  obligations  incurred in  connection  with the  Exchange of property,
assets or  businesses;  (c) every  reimbursement  obligation of such Person with
respect to letters of credit,  bankers' acceptances or similar facilities issued
for the account of such Person;  (d) every  obligation  of such Person issued or
assumed as the  deferred  purchase  price of  property  or  services  (including
securities repurchase agreements but excluding trade accounts payable or accrued
liabilities  arising in the ordinary  course of business which are not more than
120 days  overdue  or which are being  contested  in good  faith by  appropriate
proceedings  and for which  adequate  reserves  have been provided in accordance
with  GAAP);  (e)  every  Capital  Lease  Obligation  of  such  Person;  (f) any
obligation  of such  Person  to pay any  discount,  shares,  fees,  indemnities,
penalties,  recourse,  expenses or other amounts in connection with any sales by
such Person unless such sales are on a non-recourse basis (as to collectability)
of (i) accounts or

<PAGE>

general  intangibles  for  money  due or to  become  due,  (ii)  chattel  paper,
instruments  or documents  creating or evidencing a right to payment of money or
(iii) other  receivables,  whether pursuant to a purchase facility or otherwise,
other than in connection with the disposition of the business operations of such
Person relating thereto or a disposition of defaulted receivables for collection
and not as a financing  arrangement;  (g) every  obligation of such Person under
any  forward  contract,  futures  contract,  swap,  option  or  other  financing
agreement or arrangement (including,  without limitation,  caps, floors, collars
and similar  agreements),  the value of which is  dependent  upon shares  rates,
currency exchange rates, commodities or other indices (a "derivative contract");
(h) every  obligation in respect of Indebtedness of any other entity  (including
any  partnership  in which such Person is a general  partner) to the extent that
such Person is liable therefore as a result of such Person's ownership shares in
or other  relationship with such entity,  except to the extent that the terms of
such  Indebtedness  provide  that such Person is not liable  therefore  and such
terms are enforceable under applicable law; and (i) every Contingent  Obligation
of such Person with respect to Indebtedness  of another Person.  Notwithstanding
anything to the contrary in this Agreement,  the term  "Indebtedness"  expressly
includes the following debts and obligations of Acquiree.

         "Laws" shall mean all foreign, federal, state and local statutes, laws,
ordinances,   regulations,  rules,  resolutions,   orders,  writs,  injunctions,
judgments and decrees  applicable to the specified  Person and to the businesses
and assets thereof.

         "License"  shall mean any franchise,  authorization,  license,  permit,
certificate of occupancy, easement, variance, exemption, certificate, consent or
approval of any Governmental Entity or other Person.

         "Lien" shall mean any mortgage, pledge, assessment,  security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind.

          "Person" shall mean any individual, sole proprietorship,  partnership,
joint venture, trust,  unincorporated  organization,  limited liability company,
association,  Entity,  institution,  entity,  party,  Governmental Entity or any
other juridical entity of any kind or nature whatsoever.

          "Preferred Shares" shall mean those Series A, B, and C preferred Stock
shown on Schedule 1.01(a).

          "Takeover  Proposal"  shall mean any proposal for a tender or exchange
offer, Exchange, consolidation, sale of all or substantially all of such party's
assets,  sale of in excess of fifteen  percent of the shares of capital stock or
other  business  combination  involving  such party or any  proposal or offer to
acquire  in any  manner  a  substantial  equity  shares  (including  any  shares
exceeding fifteen percent of the equity outstanding) in, or all or substantially
all of the assets of, such party  other than the  transactions  contemplated  by
this Agreement.

<PAGE>

         "Taxes" means all federal, state, county, local, municipal, foreign and
other  taxes,  assessments,  duties or similar  charges of any kind  whatsoever,
including all corporate franchise, income, gross receipts, occupation,  windfall
profits, sales, use, ad valorem,  value-added,  profits,  license,  withholding,
payroll, employment, excise, premium, real property, personal property, customs,
net  worth,  capital  gains,  transfer,  stamp,  documentary,  social  security,
disability,  environmental,  alternative minimum, recapture and other taxes, and
including  all shares,  penalties and  additions  imposed with respect  thereto,
whether  disputed or not and including any obligations to indemnify or otherwise
assume or succeed to the Tax  liability  of any  Person,  and any  liability  in
respect  of any Tax as a result of being a member of any  affiliated,  combined,
consolidated, unitary or similar group.

         "Tax   Return"   means  any  report,   return,   statement,   estimate,
informational  return,  declaration or other written information  required to be
supplied to a taxing authority in connection with Taxes.

         "Taxing  Authority"  means any domestic,  foreign,  federal,  national,
state, county or municipal or other local government,  any subdivision,  agency,
commission or authority thereof, or any  quasi-governmental  body exercising tax
regulatory authority.

          "Transaction Documents" shall mean this Agreement.

         IN WITNESS  WHEREOF,  the parties  hereto  have  caused  this  Exchange
Agreement to be duly executed as of the day and year first above written.

                                                 GARNER INVESTMENTS, INC.

                                                 By:
                                                          Name:
                                                          Title:

                                               SOUTH UINTAH GAS PROPERTIES, INC.

                                                 By:
                                                          Name:
                                                          Title:

<PAGE>

                                SCHEDULE 1.01(A)
                               SHARES AND WARRANTS

<PAGE>

                                SCHEDULE 1.01(b)
                                CONVERTIBLE NOTES

<PAGE>

                                SCHEDULE 1.01(c)
                                PROMISSORY NOTES

<PAGE>

                                JOINDER / CONSENT

The  undersigned,  being the holder of a financial  or equity  interest in South
Uintah        Gas         Properties,         Inc.         described         as:
______________________________________________   and   dated:   _______________,
hereby join in and consent and agree to terms as set forth in the Share Exchange
and Acquisition Agreement dated _____________ by and between Garner Investments,
Inc.  and South  Uintah Gas  Properties,  Inc.  attached  hereto and made a part
hereof by this reference.

                                      ------------------------------------
                                      Name:

<PAGE>

                     EXCHANGE AGREEMENT AND REPRESENTATIONS

Gentlemen:

         I understand that  shareholders  of South Uintah Gas  Properties,  Inc.
(the "SUGP"), a Colorado  corporation,  are offering to exchange their shares of
Common  stock and  Preferred,  for shares of stock of Garner  Investments,  Inc.
("Company"), a Wyoming corporation.

         I hereby  offer to  exchange  all of my shares  of Common or  Preferred
stock of SUGP, as shown on the transfer records of SUGP for equivalent number of
shares of the Company (the  "Shares") and tender all my shares of SUGP herewith,
on a one for one basis and upon acceptance by you, agree to become a shareholder
of the Company.  In order to induce the Company to accept my offer, I advise you
as follows; and acknowledge:

1.  Corporate  Documents.  Receipt of copies of Articles,  By-Laws,  and audited
financial  statements  of  the  Company  and  such  other  documents  as I  have
requested,  I hereby  acknowledge  that I have received the documents (as may be
supplemented  from  time  to  time)  relating  to the  Company  and  that I have
carefully  read  the  information  and  that I  understand  all of the  material
contained  therein,  and agree to the terms,  and understand the risk factors as
described therein.

2. Availability of Information.  I hereby  acknowledge that the Company has made
available to me the  opportunity  to ask questions of, and receive  answers from
the Company and any other person or entity acting on its behalf,  concerning the
terms  and  conditions  of  the  Plan,  the  financial  statements  and  related
information  of the  Company  and the 2010  10K,  10Q for  3/31/11  and 8K dated
7/11/11 of the Company and the information contained in the corporate documents,
and to obtain any additional  information,  to the extent the Company  possesses
such  information  or can  acquire it without  unreasonable  effort or  expense,
necessary to verify the accuracy of the information  provided by the Company and
any other person or entity acting on its behalf.

3.  Representations and Warranties.  I represent and warrant to the Company (and
understand  that it is  relying  upon  the  accuracy  and  completeness  of such
representations  and  warranties  in  connection  with  the  availability  of an
exemption  for the  offer  and  exchange  of the  shares  from the  registration
requirements of applicable federal and state securities laws) that:

(a) RESTRICTED SECURITIES.

(I) I understand that the Shares have not been  registered  under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws.

(II) I understand that if this exchange agreement is accepted and the Shares are
issued to me, I cannot sell or otherwise dispose of the shares unless the Shares
are  registered  under  the  Act or the  state  securities  laws  or  exemptions
therefrom are available (and consequently, that I must bear the economic risk of
the investment for an indefinite period of time):

<PAGE>

(III) I  understand  that the  Company has no  obligation  now or at any time to
register  the  Shares  under  the Act or the  state  securities  laws or  obtain
exemptions therefrom.

(IV) I understand  that the Company will  restrict the transfer of the Shares in
accordance with the foregoing representations.

(V) There is a limited  public  market for the common  stock of the  Company and
there  is no  certainty  that a more  liquid  market  will  ever  develop  or be
maintained.  There can be no assurance that I will be able to sell or dispose of
the  Shares.  Moreover,  no  assignment,   sale,  transfer,  exchange  or  other
disposition  of the  Shares  can be made  other  than  in  accordance  with  all
applicable  securities laws. It is understood that a transferee may at a minimum
be required to fulfill the investor suitability  requirements established by the
Company, or registration may be required.

(b)      LEGEND.

I agree  that any  certificate  representing  the  Shares  will  contain  and be
endorsed with the following, or a substantially equivalent, LEGEND:

"This  share   certificate   has  been   acquired   pursuant  to  an  investment
representation  by the holder and shall not be sold,  pledged,  hypothecated  or
donated or otherwise transferred except upon the issuance of a favorable opinion
by its counsel and the submission to the Company of other evidence  satisfactory
to and as required by counsel to the Company,  that any such  transfer  will not
violate the Securities Act of 1933, as amended,  and applicable state securities
laws. These shares are not and have not been registered in any jurisdiction."

(c)      OWN ACCOUNT.

I am the only party in interest  with respect to this exchange  offer,  and I am
acquiring the Shares for my own account for long-term  investment  only, and not
with an intent to resell, fractionalize, divide, or redistribute all or any part
of my interest to any other person.

(d)      AGE:     CITIZENSHIP.

I am at least twenty-one years old and a citizen of the United States.

(e)      ACCURACY OF INFORMATION.

All  information  which I have  provided to the Company  concerning my financial
position and knowledge of financial and business matters is correct and complete
as of the date set forth at the end hereof,  and if there should be any material
change in such  information  prior to acceptance  of this exchange  offer by the
Company, I will immediately provide the Company with such information.

<PAGE>

4. Exchange Procedure. I understand that this exchange is subject to each of the
following terms and conditions:

(a) The Company may reject this  exchange for legal  reasons,  and this exchange
shall become  binding upon the Company only when  accepted,  in writing,  by the
Company.

(b) This offer may not be withdrawn by me.

(c) The share  certificates to be issued and delivered pursuant to this exchange
will be issued in the name of and delivered to the undersigned.

5. Suitability. I hereby warrant and represent:

(a) That I can afford a complete loss of the  investment  and can afford to hold
the securities being received hereunder for an indefinite period of time.

(b) That I consider this investment a suitable investment, and

(c) That I am sophisticated  and  knowledgeable and have had prior experience in
financial matters and investments.

6.  Acknowledgement  of Risks. I have been furnished and have carefully read the
Plan and  information  relating to the Company,  including this form of Exchange
Agreement. I am aware that:

(a) There are  substantial  risks  incident to the  ownership of Shares from the
Company,  and such  investment is speculative and involves a high degree of risk
of loss by me of my entire investment in the Company.

(b) No federal or state agency has passed upon the Shares or made any finding or
determination concerning the fairness of this investment.

(c) The books and  records  of the  Company  will be  reasonably  available  for
inspection by me and/or my investment  advisors,  if any, at the Company's place
of business.

(d) All assumptions  and projections set forth in any documents  provided by the
Company have been included  therein for purposes of  illustration  only,  and no
assurance  is given  that  actual  results  will  correspond  with  the  results
contemplated by the various assumptions set forth therein.

(e) Prior to the completion of the exchange,  SUGP has a very limited  operating
history.  SUGP is in the  development  stage,  and its proposed  operations  are
subject  to all of the risk  inherent  in the  establishment  of a new  business
enterprise,  including a limited  operating  history.  The  unlikelihood  of the
success of the Company must be considered  in light of the  problems,  expenses,
difficulties, complications and delays frequently encountered in connection with
the formation and operation of a new business and the competitive environment in
which the Company will operate.

<PAGE>

7. Receipt of Advice.  I acknowledge  that I have been advised to consult my own
attorney and investment advisor

concerning the investment.

8. Restrictions on Transfer. I acknowledge that the investment in the Company is
an illiquid investment. In particular, I recognize that:

(a) Due to restrictions  described  below, the lack of any market existing or to
exist for these Shares,  in the event I should  attempt to sell my Shares in the
Company,  my  investment  will be highly  illiquid  and,  probably  must be held
indefinitely.

(b) I must bear the economic  risk of investment in the Shares for an indefinite
period of time,  since the Shares have not been registered  under the Securities
Act of 1933, as amended,  and issuance is made in reliance upon Section 4(2) and
4(6) of said Act and/or Rules  501-506 of  Regulation D under the Act, as may be
applicable. Therefore, the Shares cannot be offered, sold, transferred, pledged,
or  hypothecated  to any person unless either they are  subsequently  registered
under said Act or an  exemption  from such  registration  is  available  and the
favorable  opinion of counsel for the Company to that effect is obtained,  which
is not  anticipated.  Further,  unless  said  Shares  are  registered  with  the
securities  commission of the state in which offered and sold, I may not resell,
hypothecate, transfer, assign or make other disposition of said Shares except in
a  transaction  exempt or  exempted  from the  registration  requirement  of the
securities  act of such state,  and that the specific  approval of such sales by
the securities regulatory body of the state is required in some states.

(c) My right to  transfer  my  Shares  will  also be  restricted  by the  legend
endorsed on the certificates.

9. Access to Information. I represent and warrant to the Company that:

(a)  I  have  carefully   reviewed  and  understand  the  risks  of,  and  other
considerations  relating to, the exchange of the Shares,  including the risks of
total loss in the event the Company's business is unsuccessful.

(b) I and my  investment  advisors,  if any,  have been  furnished all materials
relating to the Company and its proposed activities and anything which they have
requested  and have been  afforded  the  opportunity  to obtain  any  additional
information  necessary to verify the accuracy of any  representations  about the
Company.

(c) The Company has answered all inquiries that I and my investment advisors, if
any, have put to it concerning  the Company and its proposed  activities and the
Plan and exchange for the Shares.

<PAGE>

(d)  Neither I nor my  investment  advisors,  if any,  have been  furnished  any
offering  literature other than the documents attached as exhibits thereto and I
and my  investment  advisors,  if  any,  have  relied  only  on the  information
contained in such exhibits and the  information,  as described in  subparagraphs
(b) and (c) above, furnished or made available to them by the Company.

(e) I am acquiring the Shares for my own account,  as principal,  for investment
purposes  only and not with a view to the resale of  distribution  of all or any
part  of such  Shares,  and  that I have  no  present  intention,  agreement  or
arrangement  to divide my  participation  with others or to resell,  transfer or
otherwise  dispose  of all or any part of the Shares  subscribed  for unless and
until I determine,  at some future  date,  that  changed  circumstances,  not in
contemplation at the time of this exchange, makes such disposition advisable;

(f) I, the undersigned,  if on behalf of a corporation,  partnership,  trust, or
other form of business entity,  affirm that: it is authorized and otherwise duly
qualified  to  purchase  and hold  Shares  in the  Company;  recognize  that the
information  under the caption as set forth in (a) above related to  investments
by an individual and does not address the federal income tax  consequences of an
investment  by  any  of the  aforementioned  entities  and  have  obtained  such
additional  tax  advice  that I have  deemed  necessary;  such  entity  has  its
principal  place of  business as set forth  below;  and such entity has not been
formed for the specific purpose of acquiring Shares in the Company.

(g) I have  adequate  means of  providing  for my  current  needs  and  personal
contingencies and have no need for liquidity in this investment; and

(h) The information provided by the Company is confidential and non-public and I
agree that all such  information  shall be kept in  confidence by it and neither
used by it to its personal  benefit (other than in connection  with its exchange
for the Shares)  nor  disclosed  to any third  party for any  reason;  provided,
however,  that this obligation shall not apply to any such information which (i)
is part of the public knowledge or literature and readily accessible at the date
hereof;  (ii) becomes part of the public  knowledge  or  literature  and readily
accessible by publication  (except as a result of a breach of these provisions);
or (iii) is received from third parties  (except those parties who disclose such
information in violation of any confidentiality  agreements  including,  without
limitation, any Exchange Agreement they may have with the Company).

10. Binding Agreement.  I hereby adopt, accept, and agree to be bound by all the
terms and  conditions of the Plan, and by all of the terms and conditions of the
Articles of Incorporation,  and amendments thereto,  and By-Laws of the Company.
Upon  acceptance  of this  Exchange  Agreement by the Company,  I shall become a
Shareholder for all purposes.

11.  Agreement  to Be Bound.  The Exchange  Agreement,  upon  acceptance  by the
Company, shall be binding upon the heirs, executors, administrators, successors,
and assigns of mine.

<PAGE>

12. Indemnification. I further represent and warrant:

(a) I hereby  indemnify  the  Company  and hold the  Company  harmless  from and
against any and all liability,  damage,  cost, or expense incurred on account of
or arising out of:

(I)  Any  inaccuracy  in  my  declarations,   representations,   and  warranties
hereinabove set forth;

(II) The  disposition of any of the Shares which I will receive,  contrary to my
foregoing declarations, representations, and warranties; and

(III)  Any  action,  suit or  proceeding  based  upon (1) the  claim  that  said
declarations,  representations,  or warranties  were inaccurate or misleading or
otherwise  cause for obtaining  damages or redress from the Company;  or (2) the
disposition of any of the Shares or any part thereof.

13.  Governing  Law. This  Agreement  shall be construed in accordance  with and
governed by the laws of the State of Colorado,  except as to the manner in which
the undersigned  elects to take title to the Shares in the Company that shall be
construed in accordance with the state of his principal residence.

14. Financial  Statement.  Upon request of the Company,  I shall provide a sworn
and signed copy of my current financial statement.

15.  Accredited  Investor.  [__] (Check if applicable.  Accredited  Investor.  I
represent  that I am an  "Accredited  Investor" or an Officer of an  "Accredited
Investor" as defined below:

                Accredited  investor  shall mean any person who comes within any
of the following  categories,  or who the issuer reasonably believes come within
any of the following  categories,  at the time of the sale of the  securities to
that person.

                (1) Any bank as defined in  section  3(a)(2) of the Act,  or any
savings  and loan  association  or  other  institution  as  defined  in  section
3(a)(5)(A) of the Act whether  acting in its  individual or fiduciary  capacity;
any  broker  or dealer  registered  pursuant  to  section  15 of the  Securities
Exchange Act of 1934;  any insurance  company as defined in section 2(13) of the
Act; any investment  company registered under the Investment Company Act of 1940
or a business  development  company as defined in section  2(a)(48) of that Act;
any Small  Business  Investment  Company  licensed  by the U.S.  Small  Business
Administration  under section 301(c) or (d) of the Small Business Investment Act
of  1958;  any  plan  established  and  maintained  by a  state,  its  political
subdivisions,  or any  agency  or  instrumentality  of a state or its  political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of  $5,000,000;  any  employee  benefit  plan  within the  meaning of the
Employee  Retirement  Income Security Act of 1974 if the investment  decision is
made by a plan  fiduciary,  as defined in  section  3(21) of such act,  which is
either a bank, savings and loan association,  insurance  company,  or registered
investment  adviser,  or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;

<PAGE>

                (2) Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;

                (3) Any  organization  described  in  section  501(c)(3)  of the
Internal Revenue Code, corporation,  Massachusetts or similar business trust, or
partnership,  not formed for the specific  purpose of acquiring  the  securities
offered, with total assets in excess of $5,000,000;

                (4) Any director,  executive officer,  or general partner of the
issuer of the  securities  being  offered or sold,  or any  director,  executive
officer, or general partner of a general partner of that issuer;

                (5) Any natural person whose  individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;

                (6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse  in  excess  of  $300,000  in each of those  years  and has a  reasonable
expectation of reaching the same income level in the current year;

                (7) Any trust,  with total assets in excess of  $5,000,000,  not
formed for the  specific  purpose of acquiring  the  securities  offered,  whose
purchase   is   directed   by   a   sophisticated   person   as   described   in
ss.230.506(b)(2)(ii); and

                (8) Any entity in which all of the equity owners are accredited
investors.

                (9) An entity or person  defined under SEC CFR  ss.2330.001  and
California Corporations Code ss.25102(n) (by inclusion).

                An affiliate of, or person  affiliated  with, a specific  person
shall  mean  a  person  that  directly,   or  indirectly  through  one  or  more
intermediaries,  controls or is controlled  by, or is under common control with,
the person specified.

I will hold title to my interest as follows:

                {  }  Community Property

                {  }  Joint Tenants with Right Survivorship

                {  }  Tenants in Common

                {  }  Individually

                {  }  Other:  (Corporation, Trust, Etc., please indicate)

<PAGE>

                (Note:  Subscribers should seek the advice of their attorneys in
deciding in which of the above forms they should take  ownership  of the Shares,
since  different  forms  of  ownership  can  have  varying  gift  tax and  other
consequences,  depending  on the  state of the  investor's  domicile  and  their
particular personal circumstances. For example, in community property states, if
community  property  assets  are  used to  purchase  shares  held in  individual
ownership, this might have adverse gift tax consequences.  If OWNERSHIP IS BEING
TAKEN IN JOINT  NAME WITH A SPOUSE OR ANY OTHER  PERSON,  THEN ALL  SUBSCRIPTION
DOCUMENTS MUST BE EXECUTED BY ALL SUCH PERSONS.)

16. No Assignability.  This exchange is personal to the person/entity whose name
and address appear below.  The  undersigned  may not assign any of its rights or
obligations under this Exchange Agreement to any other person or entity.

17.  Conditions.  This Exchange  Agreement shall become binding upon the Company
only when accepted, in writing, by the Company.

18. Effective Date. The exchange for Shares evidenced by this Exchange Agreement
shall, if accepted by the Company,  be effective as soon after July 28, 2011, as
all state laws have been complied with to effectuate the transaction.

19.  Conveyance.  I hereby agree to convey title to all of my interest in all my
common or preferred  shares of SUGP, as shown on the transfer records of SUGP to
the Company in exchange for an equal number of Common (or  Preferred  shares) as
applicable.

20. Further Acts. The  undersigned  hereby agrees to execute any other documents
and take any further  actions that are  reasonably  necessary or  appropriate in
order to implement the transaction contemplated by this Exchange Agreement.

                                   Shareholder

Dated: _________________________    ____________________________________
                                      Name:arete8kex_7282011.htm

 

Exhibit 10.7

 

Amended and Restated

Purchase and Sale Agreement

By and Between

Tucker Family Investments, LLLP

Tindall Operating Company

and

DNR OIL & GAS, INC

Tucker Energy, LLC

as Sellers

and

Arête Industries, Inc.

as Buyer

Dated Effective April 1, 2011

********

EXHIBIT LIST

	  	
Exhibit A

	
Leases

	  
	  	
Exhibit B

	
Wells/WI/NRI/Allocated Values

	  
	  	
Exhibit C

	
Additional Purchase Price

	  
	  	
Exhibit C-1

	
Separate Interests

	  
	  	
Exhibit C-2

	
Agreement Regarding Application of Proceeds

	  
	  	
Exhibit D

	
Capital Projects

	  
	  	
Exhibit E

	
Agreements

	  
	  	
Exhibit F

	
Hydrocarbon Sales Contracts/Calls On Production

	  
	  	
Exhibit G

	
Imbalance Volumes

	  
	  	
Exhibit H

	
Assignment, Bill Of Sale And Conveyance

	  
	  	
Exhibit I

	
Buyer’s Officer Certificate

	  
	  	
Exhibit J

	
Sellers’ Officer Certificate

	  
	  	
Exhibit K

	
Non-Foreign Affidavit

	  
	  	
Exhibit L

	
Contract Operating Agreement

	  

 

  

 

  

TABLE OF CONTENTS

	 	  	 	
 

	
Page

	ARTICLE 1 PURCHASE AND SALE	
3

	 	
1.1

	 	
Purchase and Sale.

	
3

	 	
1.2

	 	
The Assets.

	
3

	 	
 

	 	
A.  Leases, Lands, Hydrocarbons and Interests.

	
3

	 	
 

	 	
B.  Wells.

	
2

	 	
 

	 	
C.  Rights in Unitized, Pooled or Communitized Tracts.

	
2

	 	
 

	 	
D.  Other Agreements.

	
2

	 	
 

	 	
E.  Records.

	
3

	 	 	 	F.  Yard Equipment	3
	 	
1.3

	 	
Excluded Assets.

	
3

	 	
 

	 	
A.  Interests in Excess of those Listed in Exhibits A and B.

	
3

	 	
1.4

	 	
Effective Time.

	
3

	 	 	 
	ARTICLE 2 PURCHASE PRICE	
3

	 	
2.1

	 	
Purchase Price.

	
3

	 	
2.2

	 	
Allocation of the Purchase Price.

	
4

	 	
2.3

	 	
Settlement Statement.

	
4

	 	 	 
	ARTICLE 3 BUYER’S INSPECTION	
5

	 	
3.1

	 	
Access to the Records.

	
5

	 	
3.2

	 	
Disclaimer.

	
5

	 	
3.3

	 	
Physical Access to the Leases, Lands, and Wells.

	
5

	 	
3.4

	 	
Buyer’s Agents.

	
6

	 	 	 
	ARTICLE 4 TITLE MATTERS	
6

	 	
4.1

	 	
Definitions.

	
6

	 	
 

	 	
A.  Defensible Title.

	
6

	 	
 

	 	
B.  Permitted Encumbrances.

	
6

	 	
 

	 	
C.  Title Defect.

	
7

	 	
 

	 	
D.  Title Defect Value.

	
7

	 	
4.2

	 	
Purchase Price Adjustments for Title Defects.

	
8

	 	
 

	 	
A.  Notices of Title Defects.

	
8

	 	
 

	 	
B.  Defect Adjustments.

	
8

	 	
4.3

	 	
Dispute Resolution.

	
9

	 	
4.4

	 	
Casualty Loss.

	
9

	 	
4.5

	 	
Preferential Rights and Consents.

	
9

	 	
 

	 	
A.  Required Consents.

	
9

	 	
 

	 	
B.  Preferential Purchase Rights.

	
9

	 	
 

	 	
C.  Exclusive Remedy.

	
10

 

 

  

Page ii

  

 

 

 

	 	 	 
	ARTICLE 5 ENVIRONMENTAL MATTERS	
10

	 	
5.1

	 	
Definitions.

	
10

	 	
5.2

	 	
Environmental Representations.

	
11

	 	
 

	 	
A.  Sellers’ Ownership Period.

	
11

	 	
5.3

	 	
Environmental Liabilities and Obligations.

	
11

	 	
 

	 	
A.  Complete Assumption of Environmental Liabilities by Buyer.

	
11

	 	 	 
	ARTICLE 6 SELLERS’ REPRESENTATIONS	
11

	 	
6.1

	 	
Company Representations.

	
11

	 	
 

	 	
A.  Entities Comprising Sellers.

	
11

	 	
 

	 	
B.  No Violation.

	
12

	 	
6.2

	 	
Authorization and Enforceability.

	
12

	 	
6.3

	 	
Liability for Brokers’ Fees.

	
12

	 	
6.4

	 	
No Bankruptcy.

	
12

	 	
6.5

	 	
Litigation.

	
12

	 	
6.6

	 	
Capital Projects.

	
12

	 	
6.7

	 	
Judgments.

	
12

	 	
6.8

	 	
Compliance with Law.

	
12

	 	
6.9

	 	
Agreements.

	
13

	 	
6.10

	 	
Governmental Permits.

	
13

	 	
6.11

	 	
Personal Property and Equipment.

	
13

	 	
6.12

	 	
Hydrocarbon Sales Contracts.

	
13

	 	
6.13

	 	
Area of Mutual Interest and Other Agreements; Tax Partnerships.

	
13

	 	
6.14

	 	
Imbalance Volumes.

	
13

	 	
 

	 	
A.  Gas Pipeline Imbalances.

	
13

	 	
 

	 	
B.  Wellhead Gas Imbalances.

	
14

	 	
6.15

	 	
Property Expenses.

	
14

	 	
6.16

	 	
Records.

	
14

	 	
6.17

	 	
NEPA Documents.

	
14

	 	
6.18

	 	
Notice of Breach of Representation and Warranty.

	
14

	 	 	 
	ARTICLE 7 BUYER’S REPRESENTATIONS	
15

	 	
7.1

	 	
orporate Representations.

	
15

	 	
A.

	 	
Status of Buyer.

	
15

	 	
B.

	 	
Authority of Buyer.

	
15

	 	
C.

	 	
No Violation.

	
15

	 	
7.2

	 	
Authorization and Enforceability.

	
15

	 	
7.3

	 	
Liability for Brokers’ Fees.

	
15

	 	
7.4

	 	
Litigation.

	
15

	 	
7.5

	 	
Securities Laws.

	
15

	 	
7.6

	 	
Buyer’s Evaluation.

	
16

	 	
 

	 	
A.  Records.

	
16

	 	
 

	 	
B.  Independent Evaluation.

	
16

 

 

 

  

Page iii

  

 

 

 

	 	 	 
	ARTICLE 8 COVENANTS AND AGREEMENTS	
16

	 	
8.1

	 	
Covenants and Agreements of Sellers.

	
16

	 	
 

	 	
A.  Operations Prior to Closing.

	
16

	 	
 

	 	
B.  Restriction on Operations.

	
17

	 	
 

	 	
C.  Notification of Claims.

	
17

	 	
 

	 	
D.  Consents.

	
18

	 	
 

	 	
E.  Entity Status.

	
18

	 	
8.2

	 	
Covenants and Agreements of Buyer.

	
18

	 	
 

	 	
EA.  ntity Status.

	
18

	 	
8.3

	 	
Covenants and Agreements of the Parties.

	
18

	 	
 

	 	
A.  Confidentiality.

	
18

	 	
 

	 	
B.  Return of Information.

	
18

	 	
 

	 	
C.  Injunctive Relief.

	
19

	 	
 

	 	
D.  Cure Period for Breach.

	
19

	 	
 

	 	
E.  Notice of Breach.

	
19

	 	 	 
	ARTICLE 9 TAX MATTERS	
19

	 	
9.1

	 	
Apportionment of Tax Liability.

	
19

	 	
9.2

	 	
Calculation of Tax Liability.

	
19

	 	
9.3

	 	
Tax Reports and Returns.

	
20

	 	
9.4

	 	
Sales Taxes.

	
20

	 	 	 
	ARTICLE 10 CONDITIONS PRECEDENT TO CLOSING	
20

	 	
10.1

	 	
Sellers’ Conditions Precedent.

	
20

	 	
 

	 	
A.  Satisfaction by Buyer of its Obligations.

	
20

	 	
 

	 	
B.  No Court or Government Orders.

	
20

	 	
 

	 	
C.  Purchase Price Reduction.

	
20

	 	
10.2

	 	
Buyer’s Conditions Precedent.

	
20

	 	
 

	 	
A.  Satisfaction by Sellers of their Obligations.

	
20

	 	
 

	 	
B.  No Court or Government Orders.

	
21

	 	
 

	 	
C.  Purchase Price Reduction.

	
21

	 	 	 
	ARTICLE 11 RIGHT OF TERMINATION AND ABANDONMENT	
21

	 	
11.1

	 	
Termination.

	
21

	 	
 

	 	
A.  Failure by Buyer.

	
21

	 	
 

	 	
B.  Failure by Sellers.

	
21

	 	
 

	 	
C.  Purchase Price Reduction.

	
21

	 	
11.2

	 	
Liabilities Upon Termination.

	
22

	 	
 

	 	
A.  Buyer’s Breach.

	
22

	 	
 

	 	
B.  Sellers’ Breach.

	
22

	 	
11.3

	 	
Unwind.

	
22

 

 

  

Page iv

  

 

 

	 	
 

	 
	ARTICLE 12 CLOSING	
22

	 	
12.1

	 	

Date of Closing.

	
22

	 	
12.2

	 	
Place of Closing.

	
22

	 	
12.3

	 	
Closing Obligations.

	
22

	 	
 

	 	
A.  Assignment - Exhibit F.

	
22

	 	
 

	
 

	
B.  Governmental Forms of Assignment.

	
23

	 	
 

	
 

	
C.  Payment.

	
23

	 	
 

	
 

	
D.  er’s Officer Certificate - Exhibit G.

	
23

	 	
 

	
 

	
E.  ler’s Officer Certificate - Exhibit H.

	
23

	 	
 

	
 

	
F.  -Foreign Affidavit - Exhibit I.

	
23

	 	
 

	
 

	
G.  tract Operating Agreement - Exhibit J.

	
23

	 	
 

	
 

	
H.  er Actions.

	
23

	 	 	 
	ARTICLE 13 POST-CLOSING OBLIGATIONS	
23

	 	
13.1

	 	
Post-Closing Adjustments.

	
23

	 	
 

	 	
A.  Settlement Statement.

	
23

	 	
 

	 	
B.  Adjustments to the Purchase Price.

	
24

	 	
13.2

	 	
Final Settlement Statement.

	
25

	 	
13.3

	 	
Records.

	
25

	 	
13.4

	 	
Operations After Closing.

	
25

	 	
13.5

	 	
Further Assurances.

	
25

	 	 	 
	ARTICLE 14 ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION	
26

	 	
14.1

	 	
Buyer’s Assumption of Liabilities and Obligations.

	
26

	 	
14.2

	 	
Sellers’ Retention of Liabilities and Obligations.

	
26

	 	
14.3

	 	
Proceeds and Invoices for Property Expenses Received After the Settlement Date.

	
26

	 	
 

	 	
A.  Proceeds.

	
26

	 	
 

	 	
B.  Property Expenses.

	
26

	 	
14.4

	 	
Indemnification.

	
27

	 	
 

	 	
A.  Sellers’ Indemnification of Buyer.

	
27

	 	
 

	 	
B.  Buyer’s Indemnification of Sellers.

	
27

	 	
 

	 	
C.  Release.

	
28

	 	
14.5

	 	
Procedure.

	
28

	 	
 

	 	
A.  Coverage.

	
28

	 	
 

	 	
CB.  laim Notice.

	
28

	 	
 

	 	
C.  Information.

	
28

	 	
14.6

	 	
Dispute Resolution.

	
28

	 	
14.7

	 	
No Insurance; Subrogation.

	  
	 	
14.8

	 	
Reservation as to Non-Parties.

	
29

 

 

  

Page v

  

 

 

 

	 	 	 
	ARTICLE 15 MISCELLANEOUS	
29

	 	
15.1

	 	
Expenses.

	
29

	 	
15.2

	 	
Notices.

	
30

	 	
15.3

	 	
Amendments/Waiver.

	
31

	 	
15.4

	 	
Assignment.

	
31

	 	
15.5

	 	
Announcements.

	
31

	 	
15.6

	 	
Counterparts/Fax Signatures.

	
31

	 	
15.7

	 	
Governing Law.

	
31

	 	
15.8

	 	
Entire Agreement.

	
31

	 	
15.9

	 	
Knowledge.

	
31

	 	
15.10

	 	
Binding Effect.

	
31

	 	
15.11

	 	
Survival.

	
32

	 	
15.12

	 	
Limitation on Damages.

	
32

	 	
15.13

	 	
No Third-Party Beneficiaries.

	
32

	 	
15.14

	 	
Several Liability.

	
32

	 	
15.15

	 	
Condition Precedent.

	
32

	 	
15.16

	 	
References, Titles and Construction.

	
32

	 	
 

	 	
A.  References.

	
32

	 	
 

	 	
B.  Titles.

	
32

	 	
 

	 	
C.  Agreement.

	
32

	 	
 

	 	
D.  Singular and Plural, Masculine and Feminine.

	
32

	 	
 

	 	
E.  References to Agreements, Instruments and Documents.

	
33

	 	
 

	 	
F.  Examples.

	
33

	 	
 

	 	
G.  Conjunctions.

	
33

	 	
 

	 	
H.  No Construction Against Any Drafter.

	
33

	 	
 

	 	
I.  References to Dollars.

	
33

  

Page vi

  

Purchase And Sale Agreement

 

This Amended and Restated Purchase and Sale Agreement (this “Agreement”), dated July 29, 2011, but effective April 1, 2011 (“Effective Date”), is by and among Tucker Family Investments, LLLP, a Colorado limited liability limited partnership (“Tucker”); DNR Oil & Gas, Inc., a Colorado corporation (“DNR”); Tindall Operating Company, a Colorado corporation (“Tindall”), and Tucker Energy, LLC, a Colorado limited liability company (“Tucker Energy”), whose collective address is 12741 E. Caley, Unit 142, Englewood, Colorado 80111; and Arête Industries, Inc., 7260 Osceola Street, Westminster, CO 80030, (“Buyer”).  Tucker Energy and DNR may be referred to collectively as “Sellers.”  Sellers, Buyer, Tindall, and Tucker may be referred to individually as a “Party” or collectively as the “Parties.”  The transaction contemplated by this Agreement may be referred to as the “Transaction.”

 

RECITALS

 

A. Tindall, Tucker, DNR, and Buyer previously executed a Purchase and Sale Agreement Dated May 25, 2011 (“PSA”) pertaining to matters discussed in this Agreement.

 

B. Because certain post-execution obligations under the PSA were not fulfilled by Buyer, and because the Parties seek to amend and clarify certain matters in connection with the PSA, the Parties now desire to enter into this Agreement modifying, amending and restating the terms of the PSA.

 

C. Accordingly, it is mutually agreed between the Parties that this Agreement shall fully replace and supersede the PSA and all written or oral negotiations, discussions, and prior agreements and understandings relating to the PSA and the subject matters discussed therein.

 

D. The Parties further desire to fully release, discharge, and indemnify each other against any and all claims which have been raised or could be raised with regard to the PSA, on the terms set forth in this Agreement.

 

E. Sellers own and desire to sell certain of their interests in oil and gas properties located in Colorado, Wyoming, Kansas, and Montana (the “Assets”, all as more particularly described in Section 1.2 below).

 

F. Buyer has conducted and will soon complete an independent investigation of the nature and extent of the Assets and desires to purchase the Assets pursuant to the terms of this Agreement.

 

G. The Parties recognize that Charles Davis is both a principal in Seller DNR, and a shareholder and director of Buyer, and agree that nothing in these relationships will hinder the purposes of this Agreement.

 

H. To accomplish the foregoing, the Parties wish to enter into this Agreement.

  

-1 -

  

 

AGREEMENT

 

In consideration of the mutual promises contained herein, $100 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE 1

PURCHASE AND SALE

 

1.1 Purchase and Sale.

  Sellers agree to sell and Buyer agrees to purchase Sellers’ right, title and interest in the Assets, all pursuant to the terms of this Agreement, including the Recitals set forth above which are incorporated herein as true and correct representations by the Parties.

 

1.2 The Assets.

  As used herein, the term “Assets” refers to Sellers’ right, title and interest in and to the following:

 

A. Leases, Lands, Hydrocarbons and Interests.

  The oil, gas and/or mineral leases, rights-of-way and other agreements specifically described in Exhibit A (the “Leases”), the lands described in Exhibit A (the “Lands”) and the oil, gas and other hydrocarbons (“Hydrocarbons”) attributable to the Leases or Lands to the extent and only to the extent of the working interest (“WI”) and net revenue interest (“NRI”) set forth on Exhibit B, together with all the property and rights incident thereto, including all rights in any pooled, unitized or communitized acreage by virtue of the Lands or Leases being a part thereof and all Hydrocarbons produced from the pool or unit allocated to any such Lands or Leases.

 

B. Wells.

  The oil and gas wells specifically described in Exhibit B (the “Wells”) to the extent and only to the extent of the WI and NRI set forth on Exhibit B, together with the personal property, equipment, fixtures, improvements, permits, water discharge permits, rights-of-way and easements associated with such WI and located on the Lands and presently used in connection with the production, gathering, treatment, processing, storing, transportation, sale or disposal of Hydrocarbons or water produced from the properties and interests described in Section 1.2 A.;

 

C. Rights in Unitized, Pooled or Communitized Tracts.

  The unitization, pooling and communitization agreements, declarations and orders, and the units created thereby and all other such agreements relating to the properties and interests described in Sections 1.2 A. and B. and to the production of Hydrocarbons, if any, attributable to said properties and interests;

 

D. Other Agreements.

  All existing and effective sales, purchases, exchanges, gathering agreements, service agreements and other contracts, agreements and instruments, which relate, and only insofar as they relate, to the properties and interests described in Subsections 1.2 A. through C., and including those which are described in Exhibit C (the “Agreements”); and

  

-2 -

  

 

E. Records.

  All files, records and data relating to the items described in Sections 1.2.A. through D. maintained by Sellers, including without limitation, the following, if and to the extent that such files exist: title files, lease files, land files, well files and division order files, but excluding from the foregoing those files, records and data subject to unaffiliated third party contractual restrictions on disclosure or transfer (the “Records”).  If any of the Records contain interpretations of Sellers, Buyer agrees to rely on such interpretations at its own risk.  The Records do not contain and Sellers are not selling any seismic or other geophysical data related to the Lands.

F.                Yard Equipment.     The Assets do not include any equipment from the storage yards, including but not limited to any oilfield equipment related to operations, production or otherwise beneficial to the continual efficient operation of the Assets.

G.                Right to Proceeds.  In addition to the foregoing, the Assets purchased by Buyer hereunder shall also include the right to receive certain proceeds (“Buyer Proceeds”) from the sale by DNR of certain oil and gas interests owned by DNR in the lands described in Exhibit C-1 (“Separate Interests”) in accordance with the terms of Section 2.5 of this Agreement.

 

1.3 Effective Time.

  This Agreement shall be effective at 7:00 a.m. Mountain Time on the Effective Date (the “Effective Time”).

 

ARTICLE 2

 

PURCHASE PRICE

 

2.1 Base Purchase Price.

  The base purchase price for the Assets shall be $11,000,000 (the “Base Purchase Price”), payable as follows:

 

A. Initial Payment.  Buyer shall pay to Sellers the sum of Nine Hundred Thousand and 00/l00 Dollars ($900,000.00) (“Initial Payment”), comprised of (i) a credit in the amount of Five Hundred Thousand and 00/l00 Dollars ($500,000.00) previously paid by Buyer in connection with the PSA; and (ii) Four Hundred Thousand and 00/l00 Dollars ($400,000.00) in immediately verifiable funds contemporaneously with the execution of this Agreement.  The entire amount of the Initial Payment shall be non-refundable under any circumstances.

 

B. Monthly Payments and Interest.  The remaining principal balance in the amount of Ten Million One Hundred Thousand and 00/l00 Dollars ($10,100,000.00), together with interest at the monthly interest rate of  Eighty Three Hundredths of One Percent (0.83%), shall be paid to Sellers in in three monthly payments of immediately verifiable funds as follows:

 

1. On or before August 15, 2011, Buyer shall pay Sellers the amount of  Three Million Two Hundred Thousand and 00/l00 Dollars ($3,200,000.00) (“Monthly Payment”) together with the additional amount of Five Hundred Thousand and 00/l00 Dollars ($500,000.00), plus interest at the rate set forth above on the average outstanding principal balance during the preceding month. 

  

-3 -

  

 

 

2. On or before September 15, 2011, Buyer shall deliver another Monthly Payment to Sellers, plus interest at the rate set forth above on the average outstanding principal balance during the preceding month.

 

3. On or before October 15, 2011, Buyer shall deliver a final Monthly Payment to Sellers, plus interest at the rate set forth above on the average outstanding principal balance during the preceding month.

 

4. All payments shall be made directly to Sellers at the address first set forth above, or to such other address as the Sellers may from time to time designate by giving notice to Buyer at Buyer’s address listed above.  Buyer and Sellers shall be responsible for notifying the other Party of any changes in their addresses, changes in the address payments are sent to, and any changes in insurance and/or taxes and assessments.

 

5. Buyer may prepay any amounts without penalty, but the prepayment shall not reduce the amount of the Monthly Payment next due, except where the remaining amount of principal and interest is less than the total amount of the scheduled Monthly Payment.

 

6. In the event that, prior to Closing, Buyer fails to (i) make any Monthly Payment when due under this Agreement; or (ii) otherwise fails to correct any other material breach of this Agreement by Buyer within twenty (20) days after receipt of written notice of breach, this Agreement shall immediately be deemed terminated, Buyer shall not have any continuing right to, or interest in, the Assets, and Buyer shall be deemed to have forfeited, as liquidated damages to Seller, any and all payments made to Sellers under the PSA and/or this Agreement, including but not limited to the Initial Payment and any and all Monthly Payments.

 

2.2 Allocation of the Base Purchase Price.

  Buyer, based on Buyer’s’ engineering report, has allocated the Base Purchase Price among the Assets as set forth on Exhibit B.  Buyer and Sellers agree to use the values so allocated as the values for the individual Assets when filing all tax returns.  The value so allocated to a particular Asset may be referred to as the “Allocated Value” for that Asset.  The percentage and ownership (as between Sellers) of Wells affected by Allocated Value shall also be used by the Sellers in distributing both the Base Purchase Price and any Additional Purchase Price.

 

2.3 Settlement Statement.

  The Base Purchase Price shall be adjusted after Closing pursuant to a “Settlement Statement” as more specifically described in Section 13.1.

                    2.4 Additional Purchase Price.   In addition to the Base Purchase Price, Buyer shall pay Seller the additional sums set out and described in Exhibit C, at such times and under such circumstances described therein (the “Additional Purchase Price”), but in no event shall the Additional Purchase Price exceed $25,000,000.  All Parties shall be solely responsible for their own tax consequences for any amounts received pursuant to Exhibit C.

  

-4 -

  

                2.5   Buyer Proceeds From Sale of Separate Interests.  DNR owns, and intends to sell, and shall use its commercially reasonable best efforts to sell, the Separate Interests described in Exhibit C-1.  Upon the sale of the Separate Interests, in whole or in part, by DNR to any third party, Buyer shall be entitled to receive the Buyer Proceeds from said sale in accordance with the Agreement Regarding Allocation of Proceeds attached hereto as Exhibit C-2.

 

ARTICLE 3

 

BUYER’S INSPECTION

 

3.1 Access to the Records.

  Sellers have made the Records available to Buyer for inspection, copying, and review at Sellers’ offices during normal business hours to permit Buyer to perform its due diligence review.  During the period between the execution of this Agreement and August 29, 2011 (“Due Diligence Period”), and subject to Section 8.3, Sellers will continue to make the Records available to Buyer for inspection, copying, and review at Sellers’ offices during normal business hours to permit Buyer to complete its due diligence review.  Subject to the consent and cooperation of third parties, Sellers will assist Buyer in Buyer’s efforts to obtain, at Buyer’s expense, such additional information from such parties as Buyer may reasonably desire.

 

3.2 Disclaimer.

  Except for the representations contained in this Agreement, Sellers make no representation of any kind as to the Records or any information contained therein.  Buyer agrees that any conclusions drawn from the Records shall be the result of its own independent review and judgment.

 

3.3 Physical Access to the Leases, Lands, and Wells.

  During reasonable business hours during the Due Diligence Period, Sellers agree to grant Buyer physical access to the Leases, Lands, and Wells to allow Buyer to conduct, at Buyer’s sole risk and expense, on-site inspections and environmental assessments of the Leases, Lands, and Wells.  In connection with any such on-site inspections and assessments, Buyer agrees not to interfere with the normal operation of the Leases and Wells and agrees to comply with all operational and safety requirements of the operators of the Wells.  If Buyer or its agents prepares an environmental assessment of any Lease, Lands or Well, Buyer agrees, where lawful, to keep such assessment confidential and to furnish copies thereof to Sellers.  Such information shall be held confidential but may be disclosed to Buyer or Buyer’s affiliates, attorneys, officers, employees and consultants used in Buyer’s evaluation of the Assets.  Furthermore, Buyer’s obligations of confidentiality shall not apply to information (i) required to be disclosed by legal process, order, regulation, or rule, or (ii) available to the public, or (iii) acquired from third parties not known by Buyer to have confidentiality obligations to Sellers, provided that Buyer agrees to inquire of such third parties whether such third party has an obligation of confidence to Sellers.  In connection with granting such access, Buyer represents that it is adequately insured and waives, releases and agrees to indemnify Sellers, and their respective directors, officers, shareholders, employees, agents and representatives against all claims for injury to, or death of, persons or for damage to property arising as a result of any act or omission committed by Buyer or its employees, agents, contractors or representatives in conducting Buyer’s on-site inspections and environmental assessments of the Leases and Wells.  This waiver, release and indemnity by Buyer shall survive termination of this Agreement.

  

-5 -

  

 

3.4 Buyer’s Agents.

  To the extent that Buyer uses agents to conduct its due diligence activities, either in Sellers’ offices or on the Lands, Buyer agrees to (i) make such agents aware of the terms and conditions set forth in this Article 3 and the confidentiality provisions of Article 8, and (ii) ensure that such agents agree to be bound by the terms of this Article 3 and the confidentiality provisions of Article 8.

 

ARTICLE 4

 

TITLE MATTERS

 

4.1 Definitions.

 

A. Defensible Title.

  The term “Defensible Title” means such title to the Assets, that, subject to and except for Permitted Encumbrances: (i) entitles Sellers to receive not less than the NRI set forth on Exhibit B for the currently producing formations in each Well or Unit; (ii) obligates Sellers to bear costs and expenses relating to the maintenance, development, operation and the production of Hydrocarbons from the currently producing formations in each Well in an amount not greater than the working interest set forth in Exhibit B (“WI”); and (iii) is free and clear of encumbrances, liens and defects.

 

B. Permitted Encumbrances.

  The term “Permitted Encumbrances” shall mean:

 

1. lessors’ royalties, overriding royalties, net profits interests, production payments, reversionary interests and similar burdens (payable or in suspense) if the net cumulative effect of such burdens does not operate to reduce the NRI;

 

2. liens for Taxes, or assessments not yet due and delinquent or, if delinquent, that are being contested in good faith in the normal course of business and for which Sellers shall retain responsibility;

 

3. all rights to consent by, required notices to, filings with, or other actions by federal, state, local or foreign governmental bodies, in connection with the conveyance of the applicable Asset if the same are customarily obtained after such conveyance;

 

4. rights of reassignment upon the surrender or expiration of any Lease;

 

5. the terms and conditions of the Agreements and all documents of record to the extent such do not decrease the NRI for the affected Asset or increase the WI for such Asset without a corresponding proportionate increase in the NRI for such Asset;

 

6. easements, rights-of-way, servitudes, permits, surface leases and other rights with respect to surface operations, on, over or in respect of any of the Assets or any restriction on access thereto that do not materially interfere with the operation of the affected Asset as has been conducted in the past or materially affect the value thereof;

  

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7. liens to be released in connection with the Closing; and

 

8. materialmen’s, mechanics’, operators’ or other similar liens arising in the ordinary course of business incidental to operation of the Assets (i) if such liens and charges have not been filed pursuant to law and the time for filing such liens and charges has expired, (ii) if filed, such liens and charges have not yet become due and payable or payment is being withheld as provided by law, or (iii) if their validity is being contested in good faith by appropriate action and for which Sellers shall retain responsibility.

 

C. Title Defect.

  The term “Title Defect” means any lien or monetary encumbrance affecting the Assets, excluding Permitted Encumbrances, or claim, defect in or objection to real property title made by a third party, excluding Permitted Encumbrances, properly submitted to Sellers by the Title Defect Date set forth below, that alone or in combination with other defects (i) renders the Sellers’ title to the Asset less than Defensible Title, and (ii) reduces the Allocated Value of the affected Asset by more than 1% (with such amount being the “Individual Title Threshold”) and (iii) causes or is likely to cause Sellers’ title to the Asset to fail.  For the purposes of this Agreement, the term “third party claim” or “claim by a third party” or phrases of similar import, means a claim by an unaffiliated third party made without any involvement by Buyer whatsoever.  Notwithstanding the foregoing, the following shall not be considered Title Defects: 

 

1. defects in the early chain of title, consisting of the failure to recite marital status in a document or omissions of successors of heirship or estate proceedings, unless Buyer provides reasonable written evidence that such failure or omission has resulted in another party actually claiming title to the relevant Asset;

 

2. defects based on a lack of information in Sellers’ files;

 

3. defects arising out of lack of survey;

 

4. defects based on a gap in Sellers’ chain of title in the BLM records as to federal leases, or in the state’s records as to state leases, if no such gap exists in the county records;

 

5. defects arising out of lack of corporate or other entity authorization unless Buyer provides affirmative written evidence that the action was not authorized and results in another party actually claiming title to the Asset;

 

6. defects that are uncontrovertibly defensible by possession under applicable statutes of limitation for adverse possession or for prescription;

 

7. defects based on a gap in Sellers’ chain of title in the county records as to fee leases, unless such gap is affirmatively shown to exist in such records and written evidence of such break in the chain of title shall be included in a Notice of Title Defects, and provided further, the consequence of such break in the chain of title must result in another party having a justiciable claim to a portion or all of the affected Asset;

  

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8. any defect if the net cumulative effect of such burdens does not operate to reduce the WI or NRI for the particular Asset; and

 

9. any defect, if one or more of the Sellers have received proceeds of production from the Asset affected by the Title Defect, consistent with the NRI set forth on Exhibit B for the last three years without interruption or challenge from a third party based on the Title Defect.

 

D. Title Defect Value.

  “Title Defect Value” means the amount by which the Allocated Value of an Asset has been reduced by a Title Defect.  In determining the Title Defect Value, the Parties intend to include only that portion of the Asset affected by the defect.  The Title Defect Value may not exceed the Allocated Value of the Asset and shall be determined by the Parties in good faith taking into account all relevant factors, including without limitation, the following:

 

1. If the Title Defect is a lien or encumbrance on the Asset created by Sellers, Sellers shall have the lien or monetary encumbrance unconditionally released, and consequently, there shall be no Title Defect Value associated with such lien or encumbrance.

 

2. If the Title Defect is an actual reduction in NRI or any other matter that does not fall within the matters described in subsection 1., then the Buyer will rerun its economic evaluation of the affected Asset using the same economic and engineering criteria except as changed to accommodate the Title Defect to calculate the impact on the Allocated Value for the affected Asset.  This revised calculation of the Allocated Value will be presented to Sellers and Buyer and Sellers will act in good faith to reach mutual agreement as to the diminution effect of this Title Defect and thus the Title Defect Value.

 

4.2 Purchase Price Adjustments for Title Defects.

 

A. Notices of Title Defects.

  Buyer shall give each of the Sellers a written “Title Defect Notice” as soon as possible but no later than 5:00 p.m. Mountain Time on September 19, 2011 (the “Title Defect Date”).  To be effective, each Title Defect Notice must be in writing and must satisfy the following conditions precedent:  (i) name the affected Asset; (ii) describe each Title Defect in reasonable detail; (iii) describe the basis for each Title Defect which must include a third party claim supporting the Title Defect; (iv) attach Supporting Documentation; (v) state the Allocated Value of the affected Asset; (vi) state Buyer’s good faith estimate of the Title Defect Value; and (vii) set forth the computations upon which Buyer’s estimate is based.  For the purposes of this Section, “Supporting Documentation” for a particular Title Defect means if the basis is derived from any document, a copy of such document (or pertinent part thereof) or if the basis is derived from any gap in Sellers’ chain of title, the documents preceding and following the gap shall be attached, or in any case other reasonable written documentation or actual claim from a third party.  If such Supporting Documentation is in Sellers’ possession, Buyer agrees to provide a copy of such documentation to Sellers, or alternatively, specific information about how and where Sellers may obtain such supporting documentation, such as a file number, etc.  Any and all title objections of any kind not submitted in the form above and by the Title Defect Date are deemed waived by Buyer, whether or not they would have constituted Title Defects had they been timely and properly submitted.

  

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B. Defect Adjustments.

 

1. If an Asset is affected by a Title Defect, the Purchase Price will be reduced in the Final Settlement Statement and as set forth below, unless, at Sellers’ election: (i) Sellers cure the Title Defect prior to the Final Settlement Date, (ii) Buyer agrees to waive the relevant Title Defect, (iii) Sellers elect on or before the Final Settlement Date to cure such Title Defect no later than 90 days after closing; (iv) Sellers elect on or before the Settlement Date to indemnify Buyer against any loss attributable to the relevant Title Defect or (v) Sellers elect to exclude the affected Asset from the Transaction and reduce the Purchase Price accordingly.  The Purchase Price shall be adjusted only for Title Defects that exceed the Individual Title Threshold.

 

2. If Sellers elect to cure the relevant Title Defect after the Final Settlement Date, and if Sellers cure the relevant Title Defect to Buyer’s reasonable satisfaction, there shall be no adjustment to the Purchase Price.  Subject to the Individual Title Threshold, if Sellers do not cure the relevant Title Defect to Buyer’s reasonable satisfaction, then at Sellers’ election, (i) the Purchase Price shall be adjusted for the Title Defect Value attributable to the applicable Title Defect, or (ii) the affected Asset shall be excluded from this Agreement and the Purchase Price shall be adjusted accordingly.

 

4.3 Dispute Resolution.

  The Parties agree to resolve disputes concerning title matters pursuant to the Arbitration procedure set forth in Section 14.6.

 

4.4 Casualty Loss.

  After the Effective Time and prior to Closing, if a portion of the Assets is destroyed by fire or other casualty, or is taken or threatened to be taken in condemnation or under the right of eminent domain (with such event being a “Casualty Loss”), Buyer shall purchase the Asset at Closing for the Allocated Value of the Asset reduced by the estimated cost to repair or replace such Asset (with equipment of similar utility) up to the Allocated Value thereof (the reduction being the “Net Casualty Loss”).  At its sole option, Sellers may elect to cure such Casualty Loss.  If Sellers elect to cure such Casualty Loss, Sellers may replace any personal property that is the subject of a Casualty Loss with equipment of similar grade and utility.  If Sellers cure the Casualty Loss, Buyer shall purchase the affected Asset at Closing for the Allocated Value thereof without any Purchase Price Adjustment for such Casualty Loss.

 

4.5 Preferential Rights and Consents.

  To Sellers’ knowledge, there are no preferential purchase rights and/or required consents affecting the Assets.  To the extent that there are preferential purchase rights or required consents affecting the Assets, the provisions of this Section 4.5 shall apply.  Sellers shall use reasonable efforts to obtain all required consents and to give notices required in connection with preferential purchase rights prior to Closing.  If Buyer discovers other affected Assets during the course of Buyer’s due diligence activities, Buyer shall notify Sellers immediately and Sellers shall use their best efforts to obtain such consents or obtain waivers and to give the notices required in connection with the preferential rights prior to Closing.

  

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A. Required Consents.

  Except for consents and approvals which are customarily obtained post-Closing, and those consents which would not invalidate the conveyance of the Assets (with such consents being “Required Consents”), if a Required Consent to assign any Lease has not been obtained as of the Settlement Date, then Buyer shall re-convey the affected Asset to Sellers effective as of the Effective Time and Buyer shall pay Sellers the Allocated Value of the affected Asset, reduced by the amount of any net proceeds from the affected Asset attributable to the period of time after the Effective Time with Sellers retaining such net proceeds attributable to the period of time after the Effective Time until the affected Asset is assigned, and with Sellers bearing all attendant Property Costs for the affected Asset accruing during this period of time.  Buyer shall reasonably cooperate with Sellers in obtaining any Required Consent including providing assurances of reasonable financial conditions, but Buyer shall not be required to expend funds or make any other type of financial commitments a condition of obtaining such consent.

 

B. Preferential Purchase Rights.

 

1. If any preferential right to purchase any portion of the Assets is exercised and consummated prior to Closing, that portion of the Assets affected by such preferential purchase right shall be excluded from the Assets and the Purchase Price shall be adjusted downward by an amount equal to the Allocated Value of such affected Assets without the requirement for Buyer to give notice (with such adjustment being an “Exclusion Adjustment”).

 

2. If by the Settlement Date, the time frame for the exercise of such preferential purchase rights has not expired and Sellers have not received notice of an intent not to exercise or a waiver of the preferential purchase right, that portion of the Assets affected by such preferential purchase right shall be included in the Assets.

 

3. If the affected Asset has been conveyed to Buyer at Closing, and a preferential purchase right affecting the Asset is consummated after Closing, Buyer agrees to convey such affected Asset to the party exercising such preferential purchase right on the same terms and conditions under which Sellers conveyed such Assets to Buyer and retain all amounts paid by the party exercising such preferential right to purchase.  In the event of such exercise, Buyer shall prepare, execute and deliver a form of conveyance of such Asset to such exercising party, such conveyance to be in form and substance as provided in this Agreement, and Sellers agree to hold harmless and indemnify Buyer from any and all liabilities and obligations associated with such conveyed Asset.

 

C. Exclusive Remedy.

  The remedies set forth in this Section 4.5 are the exclusive remedies under this Agreement for exercised preferential purchase rights and required consents to assign the Assets.

4.6           Special Warranty of Title.  Sellers warrant Defensible Title to the Assets from and against all claims arising by, through, and under Sellers, subject to the Permitted Encumbrances and the terms of this Agreement, but not otherwise.

  

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ARTICLE 5

 

ENVIRONMENTAL MATTERS

 

The provisions of this Article apply to environmental matters associated with the Assets as the result of oil and gas operations on the Land.

 

5.1 Definitions.

  For the purposes of the Agreement, the following terms shall have the following meanings:

 

“Environmental Defect” means a condition in, on or under an Asset (including, without limitation, air, land, soil, surface and subsurface strata, surface water and ground water) attributable to the period of time prior to the Effective Time that (i) causes an Asset to be in material violation of an Environmental Law, or (ii) requires Remediation under an Environmental Law.

 

“Environmental Law” means any law, statute, rule, regulation, code, ordinance or order issued by any federal, state, or local governmental entity in effect on or before the Effective Time regulating or imposing liability or standards of conduct concerning protection of the environment or human health and safety or the release or disposal of waste or hazardous materials.

 

“Remediation” means actions taken to correct an Environmental Defect or otherwise required to remediate in compliance with applicable Environmental Law.

 

5.2 Environmental Representations.

 

A. Sellers’ Ownership Period.

  Sellers own a working interest in all of the Assets and operate all of the Assets.  For the period of Sellers’ ownership of the Assets, and to the knowledge of Sellers, Sellers represent to Buyer that the Assets have been operated in material compliance with all Environmental Laws and Sellers have not received a written notice of a material violation of an Environmental Law with respect to the Assets that remains uncured.  To allege a breach of this representation, Buyer must provide Seller with a written notice detailing the Environmental Defect giving rise to the breach prior to Closing.  Buyer’s sole remedy for breach of this representation shall be the right to exclude the affected Asset from the Transaction and reduce the Purchase Price by no more than the Allocated Value of the Asset.

 

5.3 Environmental Liabilities and Obligations.

 

A. Complete Assumption of Environmental Liabilities by Buyer.

  Buyer shall have no remedy, judicial or otherwise, against Sellers after the Effective Time for Environmental Defects.  Any costs, expense or liability relating in any way to any Environmental Defect arising from or attributable to the Assets, whether accruing or becoming known before or after the Effective Time, shall be wholly borne by Buyer.  Buyer also agrees to indemnify, save and hold harmless Sellers, their officers, directors, employees, and agents, from and against all losses, costs, expenses, liabilities, damages, demands, suits, claims and sanctions of every kind and character arising from or related to any Environmental Defect including, but not limited to, any and all costs and attorney fees incurred by Sellers to defend against any Environmental Defect and to enforce this indemnity.

  

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ARTICLE 6

 

SELLERS’ REPRESENTATIONS

 

The Parties’ agreement with respect to Title Matters and Environmental Matters is set forth in Articles 4 and 5 respectively, and the provisions of those Articles set forth Sellers’ representations with respect to Title Matters and Environmental Matters.  Except for Title Matters and Environmental Matters, Sellers make the following representations as of the execution of this Agreement and as of Closing:

 

6.1 Company Representations.

 

A. Entities Comprising Sellers.

  DNR Oil & Gas, Inc. is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado.  Tucker Energy, LLC is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Colorado.  Each entity comprising Sellers has all requisite power and authority to own the Assets, to carry on its business as presently conducted to execute, deliver, and perform this Agreement and each other document executed or to be executed by Sellers in connection with the Transaction.  The execution, delivery, and performance by Sellers of this Agreement and each other document executed or to be executed by Sellers in connection with the Transaction and the consummation by it of the Transaction have been duly authorized by all necessary company action of Sellers.

 

B. No Violation.

 The execution and delivery of this Agreement does not (i) create a lien or encumbrance on the Assets that will remain in existence after Closing, (ii) violate, or be in conflict with, any provision of Sellers’ governing documents, or any provision of any statute, rule or regulation applicable to Sellers or the Assets or any material lease, contract, agreement, instrument or obligation to which Sellers are a party or by which Sellers or the Assets are bound, or, (iii) violate or conflict with any judgment, decree or order applicable to Sellers.

 

6.2 Authorization and Enforceability.

  This Agreement and all other documents executed by Sellers in connection with this Transaction constitutes Sellers’ legal, valid and binding obligation, enforceable in accordance with their respective terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other laws for the protection of creditors and equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

 

6.3 Liability for Brokers’ Fees.

  Sellers have not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to this Transaction for which Buyer shall have any responsibility whatsoever.

 

6.4 No Bankruptcy.

  There are no bankruptcy proceedings pending, being contemplated by or, to the knowledge of Sellers, threatened against Sellers by any third party.

  

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6.5 Litigation.

  Sellers have not received a written claim or written demand that has not been resolved that would adversely affect any of the Assets.  There are no actions, suits, written governmental inquiries or proceedings pending or, to the knowledge of Sellers, threatened against Sellers or any of the Assets, in any court or by or before any federal, state, municipal or other governmental agency that relate to any of the Assets, or that would affect the Sellers’ ability to execute and deliver this Agreement or to consummate this Transaction.

 

6.6 Capital Projects.

  Except as shown on Exhibit D, there are no proposed wells or other specified capital projects with estimated costs in excess of $50,000 per well or project net to Sellers’ interest to the extent such capital projects will extend beyond the Effective Time.

 

6.7 Judgments.

  There are no unsatisfied judgments or injunctions issued by a court of competent jurisdiction or other governmental agency outstanding against Sellers that would be reasonably expected to materially interfere with the operation of any of the Assets, or materially affect the value of any of the Assets, or impair Sellers’ ability to enter into this Agreement or consummate this Transaction.

 

6.8 Compliance with Law.

  Sellers have not received a written notice of a material violation of any statute, law, ordinance, regulation, permit, rule or order of any federal, state, or local government or any other governmental department or agency, or any judgment, decree or order of any court, applicable to the Assets or operations on the Assets, which remains uncured.

 

6.9 Agreements.

  To the extent not listed elsewhere in this Agreement and except for the Leases, Exhibit E is a list of those agreements known to Sellers that relate to the ownership and operation of the Assets (the “Agreements”).

 

6.10 Governmental Permits.

  To Sellers’ knowledge, Sellers have all governmental licenses, filings and permits (including, without limitation, permits, licenses, approval registrations, notifications, exemptions and any other authorizations pursuant to Law) necessary or appropriate to own and operate the Assets as presently being owned and operated.  Sellers have not received written notice of any violations in respect of any such licenses or permits that remains uncured.  All of Sellers’ representations related to governmental licenses, filings and permits (including, without limitation, permits, licenses, approval registrations, notifications, exemptions and any other authorizations pursuant to Environmental Laws) related to Environmental Laws are set forth in Section 5.2.

  

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6.11 Personal Property and Equipment.

  The personal property, equipment and fixtures currently attendant to the Wells have been used on the Wells to produce the Hydrocarbons prior to the execution of this Agreement.  Sellers have good title to the personal property, equipment and fixtures free and clear of encumbrances, liens and defects.  Sellers expressly disclaim and negate any warranty as to the condition of any personal property, equipment, fixtures and items of movable property comprising any part of the Assets, including: (i) any implied or express warranty of merchantability, (ii) any implied or express warranty of fitness for a particular purpose, (iii) any implied or express warranty of conformity to models or samples of materials, (iv) any rights of assignee under applicable statutes to claim diminution of consideration, and (v) any claim by Buyer for damages because of defects, whether known or unknown, it being expressly understood by Buyer that said personal property, fixtures, equipment and items are being conveyed to Buyer “as is, where is,” with all faults and in their present condition and state of repair.

 

6.12 Hydrocarbon Sales Contracts.

  Except for the Hydrocarbon Sales Contracts listed in Exhibit D, no Hydrocarbons are subject to a sales contract (other than division orders or spot sales agreements terminable on no more than 30 days notice) and no person has any call upon, option to purchase or similar rights with respect to the production from the Assets.  Proceeds from the sale of oil, condensate, and gas from the Assets are being received in all respects by Sellers in a timely manner and are not being held in suspense for any reason.

 

6.13 Area of Mutual Interest and Other Agreements; Tax Partnerships.

  To Sellers’ knowledge, no Asset is subject to (or has related to it) any area of mutual interest agreements or any farm-out or farm-in agreement under which any party thereto is entitled to receive assignments not yet made, or could earn additional assignments after the Effective Time other than the Wells listed on Exhibit B as having an after payout NRI.  No Asset is subject to (or has related to it) any tax partnership.

 

6.14 Imbalance Volumes.

 

A. Gas Pipeline Imbalances.

  Except for the gas imbalances reflected on Exhibit G (“Imbalance Volumes”), there do not exist any gas imbalances (i) which are with gatherers processors, or transporters (ii) which are associated with the Assets and (iii) for which Sellers have received a quantity of gas prior to the Effective Time for which Buyer will have a duty after the Effective Time to deliver an equivalent quantity of gas or pay a sum of money.

 

B. Wellhead Gas Imbalances.

  Except for the Imbalances Volumes, there do not exist any gas imbalances relating either to production from or at the wellhead between co-tenants or working interest owners in a well, unit, or field which are associated with the Assets for which Sellers have received any quantity of gas prior to the Effective Time for which Buyer will have a duty after the Effective Time to deliver an equivalent quantity of gas or pay a sum of money.

  

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6.15 Property Expenses.

  In the ordinary course of business, Sellers have paid all Property Expenses attributable to the period of time prior to the Effective Time as such Property Expenses become due, and such Property Expenses are being paid in a timely manner before the same become delinquent, except such Property Expenses as are disputed in good faith by Sellers in a timely manner.

 

6.16 Records.

  Sellers make no representations regarding the accuracy of any of the Records; provided, however, Sellers do represent that (i) all of the Records are files, or copies thereof, that Sellers have used in the ordinary course of operating and owning the Assets, (ii) Sellers have not intentionally withheld any material information from the Records and (iii) Sellers have not intentionally misrepresented any material information in the Records.  Buyer acknowledges that the Records and Sellers’ files may be incomplete.  Except as set forth in this Section 6.16, no representation or warranty of any kind is made by Sellers as to the Information or with respect to the Assets to which the Information relates and Buyer expressly agrees that any conclusions drawn therefrom shall be the result of its own independent review and judgment.

 

6.17 NEPA Documents.

  The Assets may be subject to National Environmental Policy Act documents.  Buyer agrees to accept the Assets subject to the terms of the NEPA documents as they exist now and in the future, and agrees that the NEPA Documents and their effect on operations will not be the basis for an Environmental Defect, Title Defect or other claim by Buyer.

 

6.18 Notice of Breach of Representation and Warranty.

  In the event of a breach by Sellers of any representation or warranty set forth in Sections 6.6 through 6.17 prior to Closing, Buyer shall give Sellers a written “Notice of Breach of Representation” as soon as the breach becomes known to Buyer, but in no event less than ten (10) days prior to Closing.  To be effective, each Notice of Breach of Representation must be in writing and satisfy the following conditions precedent:  (i) name the representation; (ii) describe the breach in reasonable detail including the affected Asset; (iii) attach Supporting Documentation; and (iv) state Buyer’s good faith estimate of the value of the breach.  If Sellers cannot cure such breach in a reasonable timeframe, the Purchase Price shall be adjusted in the Final Settlement Statement only for breaches of Buyer’s representation that exceed the “Individual Representation Threshold” of 1%, the aggregate of which exceeds a deductible of 10% of the Purchase Price (“Representation Deductible) and then only for the amount exceeding the Representation Deductible (with the amount of such adjustment being the “Representation Adjustment”).  The Environmental Deductible, Title Deductible and Representation Deductible are separate and distinct and operate independently.

  

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ARTICLE 7

 

BUYER’S REPRESENTATIONS

 

Buyer makes the following representations to Sellers, Tucker, and Tindall as of the execution of this Agreement and as of Closing:

 

7.1 Corporate Representations.

 

A. Status of Buyer.

  Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of Colorado and is, or will be at the Closing, duly qualified to carry on its business in Colorado, Kansas, Montana, and Wyoming.  There are no bankruptcy proceedings contemplated, threatened or filed by or against Buyer.

 

B. Authority of Buyer.

  Buyer has all requisite power and authority to own the Assets after Closing, to carry on its business as presently conducted to execute, deliver, and perform this Agreement and each other document executed in connection with the Transaction.  The execution, delivery, and performance by Buyer of this Agreement and each other document executed by Buyer in connection with the Transaction, and the consummation by it of the Transaction and thereby, have been duly authorized by all necessary corporate action of Buyer.

 

C. No Violation.

  The execution and delivery of this Agreement does not (i) violate, or be in conflict with, any provision of Buyer’s governing documents, or any provision of any statute, rule or regulation applicable to Buyer or any material lease, contract, agreement, instrument or obligation to which Buyer is a party or by which Buyer is bound, or (ii) violate, or be in conflict with any judgment, decree or order applicable to Buyer.

 

7.2 Authorization and Enforceability.

  The execution, delivery and performance of this Agreement and this Transaction have been duly and validly authorized by all requisite action on behalf of Buyer.  This Agreement and all other documents executed by Buyer in connection with this Transaction constitute Buyer’s legal, valid and binding obligations, enforceable in accordance with their respective terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws for the protection of creditors and equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

 

7.3 Liability for Brokers’ Fees.

  Buyer has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to this Transaction for which Sellers shall have any responsibility whatsoever.

 

7.4 Litigation.

  There is no action, suit, proceeding, claim or investigation by any person, entity, administrative agency or governmental body pending or, to Buyer’s knowledge, threatened against it before any governmental authority that impedes or is likely to impede Buyer’s ability to consummate this Transaction and to assume the liabilities to be assumed by Buyer under this Agreement, including without limitation, the Assumed Liabilities.

  

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7.5 Securities Laws.

  Buyer is familiar with the Assets and it is a knowledgeable, experienced and sophisticated investor in the oil and gas business.  Buyer understands and accepts the risks and absence of liquidity inherent in ownership of the Assets.  Buyer acknowledges that the Assets are or may be deemed to be “securities” under the Securities Act of 1933, as amended, and certain applicable state securities or Blue Sky laws and that resales thereof may therefore be subject to the registration requirements of such acts.  The Assets are being acquired solely for Buyer’s own account for the purpose of investment and not with a view to resale, distribution or granting a participation therein in violation of any securities laws.

 

7.6 Buyer’s Evaluation.

 

A. Records.

  Buyer is experienced and knowledgeable in the oil and gas business and is aware of its risks.  Buyer acknowledges that Sellers are making available to it the Records and the opportunity to examine, to the extent it deems necessary in its sole discretion, all real property, personal property and equipment associated with the Assets.  Except for the representations of Sellers contained in this Agreement, Buyer acknowledges and agrees that Sellers have not made any representations or warranties, express or implied, written or oral, as to the accuracy or completeness of the Records or any other information relating to the Assets furnished or to be furnished to Buyer or its representatives by or on behalf of Sellers including, without limitation, any estimate with respect to the value of the Assets, estimates or any projections as to reserves and/or events that could or could not occur, future operating expenses, future workover expenses and future cash flow.

B.           Independent Evaluation.

  In entering into this Agreement, Buyer acknowledges and affirms that it has relied and will rely solely on the terms of this Agreement and upon its independent analysis, evaluation and investigation of, and judgment with respect to, the business, economic, legal, tax or other consequences of this Transaction including its own estimate and appraisal of the extent and value of the petroleum, natural gas and other reserves of the Assets, the value of the Assets and future operation, maintenance and development costs associated with the Assets.  Buyer is aware of the geologic factors and risks associated with operating oil and gas wells in the area of the Assets.  Accordingly, Buyer assumes the risk of the downhole condition of the Wells.  Except as expressly provided in this Agreement, Sellers shall not have any liability to Buyer or its affiliates, agents, representatives or employees resulting from any use, authorized or unauthorized, of the Records or other information relating to the Assets provided by or on behalf of Sellers.

  

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ARTICLE 8

 

COVENANTS AND AGREEMENTS

 

8.1 Covenants and Agreements of Sellers.

  Sellers covenant and agree with Buyer as follows:

 

A. Operations Prior to Closing.

  From the date of execution hereof to the Closing, Sellers will operate the Assets in a good and workmanlike manner and consistent with past practices.  Sellers agree to maintain the insurance now in effect with respect to the Assets through the date of Closing.  From the date of execution of this Agreement to the Closing Date, Sellers shall receive and account for revenues, and pay or cause to be paid its proportionate shares of all Property Expenses incurred, in connection with the ownership or operations of the Assets.  Except for Capital Projects, Sellers will timely notify Buyer of proposed activities and major capital expenditures that could reasonably be expected to cost in excess of $25,000 per activity net to Sellers’ interests conducted on the Assets and will keep Buyer timely informed of all material developments affecting any of the Assets.

 

B. Restriction on Operations.

  Except in the case of an emergency, Sellers will promptly inform Buyer of all requests for commitments to expend funds in excess of $25,000 with respect to the Assets.  Without the prior written consent of Buyer, Sellers shall not:

 

	
1.  

	
enter into any new agreements or commitments with respect to the Assets which extend beyond the Closing,

 

	
2.  

	
commit to or incur any expenditures in excess of $25,000 (net to Sellers’ interest) with respect to any part of the Assets,

 

	
3.  

	
make any nonconsent elections with respect to operations affecting the Assets,

 

	
4.  

	
abandon any Well or release or permit to terminate, or modify or reduce its rights under all or any portion of any of the Leases,

 

	
5.  

	
modify or terminate any of the Agreements or waive or relinquish any right thereunder,

 

	
6.  

	
agree to any renegotiated price, take or other terms under existing gas purchase agreements,

 

	
7.  

	
agree to any credit or prepayment arrangement that would reduce the share of gas deliverable with respect to the Assets following the Effective Time,

 

	
8.  

	
enter into any agreement or instrument for the sale, treatment, or transportation of production from the Assets (except for sales agreements terminable on no more than 30 days’ notice),

 

	
9.  

	
create any material gas imbalance affecting the Assets,

  

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10.  

	
encumber, sell or otherwise dispose of any of the Assets, other than personal property that is replaced by equivalent property or consumed in the normal operation of the Assets, and

 

	
11.  

	
except where necessary in the event of an emergency regarding Sellers’ interest in the Assets propose (a) the drilling of any additional wells, (b) the deepening, plugging back or reworking of any Well, (c) the conducting of any other operations which require consent under the applicable operating agreement, or (d) the conducting of any other operations other than the normal operation of the existing wells on the Assets.

 

C. Notification of Claims.

  Sellers shall promptly notify Buyer of any suit, action or other written proceeding before any court or governmental agency and any cause of action that relates to the Assets or that might, in Sellers’ reasonable judgment, result in impairment or loss of Sellers’ title to any portion of the Assets or the value thereof or that might hinder or impede the operation of the Leases arising or threatened prior to the Closing.

 

D. Consents.

  For the purposes of obtaining the written consents required in this Section 8.1, Buyer designates the person set forth in Section 15.2.  Such consents may be obtained in writing by overnight courier or given by telecopy or facsimile transmission.

 

E. Entity Status.

  Each of the entities comprising Sellers shall maintain its corporate status from the date hereof through the Settlement Date to assure that as of the Settlement Date, Sellers will not be under any material legal or contractual restriction that would prohibit or delay the timely consummation of this Transaction.

 

8.2 Covenants and Agreements of Buyer.

  Buyer covenants and agrees with Sellers as follows:

 

A. Entity Status.

  Buyer shall maintain its corporate status from the date hereof until the Settlement Date, and use all reasonable efforts to assure that as of the Closing Date and the Settlement Date it will not be under any material legal or contractual restriction that would prohibit or delay the timely consummation of this Transaction.

 

8.3 Covenants and Agreements of the Parties.

  The Parties covenant and agree as follows:

  

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A. Confidentiality.

  All data and information, whether written or oral, obtained from Sellers in connection with this Transaction, including the Records, whether obtained by Buyer before or after the execution of this Agreement, and data and information generated by Buyer in connection with this Transaction  (collectively, the “Information”), is deemed by the Parties to be confidential and proprietary to Sellers.  Until the Closing (and for a period of one year if Closing should not occur for any reason), except as required by law or applicable stock exchange rule, Buyer and its officers, agents and representatives will hold in strict confidence the terms of this Agreement, and all Information, except any Information which:  (1) at the time of disclosure to Buyer by Sellers is in the public domain; (2) after disclosure to Buyer by Sellers becomes part of the public domain by publication or otherwise, except by breach of this commitment by Buyer; (3) Buyer can establish by competent proof was rightfully in Buyer’s possession at the time of disclosure to Buyer by Sellers; (4) Buyer rightfully receives from third parties free of any obligation of confidence; or (5) is developed independently by Buyer without the Information, provided that the person or persons developing the data shall not have had unauthorized access to the Information.

 

B. Return of Information.

  If this Transaction does not close on or before Closing, or such later date as agreed to by the Parties, Buyer shall (i) return to Sellers all copies of the Information in possession of Buyer obtained pursuant to any provision of this Agreement, which Information is at the time of termination required to be held in confidence pursuant to Section 8.3.A.; (ii) not utilize or permit utilization of the Information to compete with Sellers; and (iii) destroy any and all notes, reports, studies or analyses based on or incorporating the Information.  The terms of Section 8.3.A., B. and C. shall survive termination of this Agreement.

 

C. Injunctive Relief.

  Buyer agrees that Sellers will not have an adequate remedy at law if Buyer violates any of the terms of Sections 8.3.A. and/or 8.3.B.  In such event, Sellers will have the right, in addition to any other it may have, to obtain injunctive relief to restrain any breach or threatened breach of the terms of Sections 8.3.A. and/or 8.3.B., or to obtain specific enforcement of such terms.

 

D. Cure Period for Breach.

  If any Party believes any other Party has breached the terms of this Agreement, the Party who believes the breach has occurred shall give written notice to the breaching Party of the nature of the breach and, except as otherwise expressly provided in this Agreement, give the breaching Party twenty (20) days  to cure.  Notwithstanding the foregoing, this Subsection shall not apply to (i) breach of any payment obligation by Buyer hereunder, upon which this Agreement shall immediately terminate; (ii) Sellers’ obligations addressed in Section 6.18, which shall be governed by the terms of that Section; or (iii) the Parties’ obligations at Closing, and this provision shall not operate to delay Closing.

  

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E. Notice of Breach.

  If any of the Sellers or Buyer develops or possesses information that leads it to believe that another Party may have breached a representation or warranty under this Agreement, that Party shall promptly inform the other Parties of such potential breach so that it may attempt to remedy or cure such breach prior to Closing.  The provisions of this Agreement and the various documents and agreements to be executed and delivered pursuant hereto relating to representations, warranties, indemnities and agreements of Sellers or Buyer shall not be altered or modified by the Closing or by Buyer’s or Sellers’ knowledge of any event or Buyer’s or Sellers’ review of any documents or other matters except as expressly provided herein to the contrary.

 

ARTICLE 9

 

TAX MATTERS

 

9.1 Apportionment of Tax Liability.

  “Taxes” shall mean all ad valorem, property, production, excise, net proceeds, severance and all other taxes and similar obligations assessed against the Assets or based upon or measured by the ownership of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom, other than income taxes.  All Taxes based on or attributable to the ownership of, or based on production of hydrocarbons shall be deemed attributable to the period during which such production occurred, with the exception of severance taxes, which shall be based on the date such severance taxes were assessed.  All Taxes for all taxable periods that begin before and end after the Effective Time shall be prorated between Buyer and Sellers as of the Effective Time.  The apportionment of Taxes between the Parties shall take place in the Settlement Statement, using estimates of such Taxes if actual numbers are not available.  Subject to the provisions of Section 14.3, Taxes are considered part of the Property Expenses.

 

9.2 Calculation of Tax Liability.

  Consistent with Section 9.1, and based on the best current information available as of Closing, the proration of Taxes shall be made between the Parties as an adjustment to the Purchase Price in the Settlement Statement and thereafter pursuant to the provision of Section 14.3.

 

9.3 Tax Reports and Returns.

  Sellers agree to file all tax returns for the period of time prior to the Effective Time and Buyer agrees to file all tax returns for the period of time after the Effective Time.  The Party not filing the return agrees to provide the Party filing the return with appropriate information which is necessary to file any required tax reports and returns related to the Assets.  Buyer agrees to file all tax returns and reports applicable to the Assets that are required to be filed after the Closing, and pay all required Taxes payable with respect to the Assets subject to the provisions of Sections 9.1 and 14.3.

 

9.4 Sales Taxes.

  Buyer shall be liable for and shall indemnify Sellers for, any sales and use taxes, conveyance, transfer and recording fees and real estate transfer stamps or taxes that may be imposed on any transfer of the Assets pursuant to this Agreement.  If required by applicable law, Sellers shall, in accordance with applicable law, calculate and remit any sales or similar taxes that are required to be paid as a result of the transfer of the Assets to Buyer and Buyer shall promptly reimburse Sellers therefor. If Sellers receive notice that any sales and/or use taxes are due, Sellers shall promptly forward such notice to Buyer for handling.

  

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ARTICLE 10

 

CONDITIONS PRECEDENT TO CLOSING

 

10.1 Sellers’ Conditions Precedent.

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

 

A. Satisfaction by Buyer of its Obligations.

  All representations and warranties of Buyer contained in this Agreement are true in all material respects (considering this Transaction as a whole) at and as of the Closing in accordance with their terms as if such representations and warranties were remade at and as of the Closing.  Buyer has performed and satisfied all covenants and agreements required by this Agreement to be performed and satisfied by Buyer at or prior to the Closing in all material respects and Buyer shall deliver a certificate to Buyer confirming the foregoing;

 

B. No Court or Government Orders.

  No order has been entered by any court or governmental agency having jurisdiction over the Parties or the subject matter of this Agreement that restrains or prohibits this Transaction and that remains in effect at the time of Closing; and

 

C. Purchase Price Reduction.

  The aggregate net reduction to the Purchase Price due to Title Defects, and reductions based on breaches of representations and warranties, but excluding reductions for Exclusion Adjustments, does not exceed in the aggregate 10% of the Purchase Price.

 

10.2 Buyer’s Conditions Precedent.

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

 

A. Satisfaction by Sellers of their Obligations.

  All representations and warranties of Sellers contained in this Agreement are true in all material respects at and as of the Closing in accordance with their terms as if such representations were remade at and as of the Closing.  Sellers have performed and satisfied all covenants and agreements required by this Agreement to be performed and satisfied by Sellers at or prior to the Closing in all material respects and Sellers shall deliver a certificate to Buyer confirming the foregoing;

 

B. No Court or Government Orders.

  No order has been entered by any court or governmental agency having jurisdiction over the Parties or the subject matter of this Agreement that restrains or prohibits this Transaction and that remains in effect at the time of Closing; and

 

C. Purchase Price Reduction.

  The aggregate net reduction to the Purchase Price due to Title Defects, and reductions based on breaches of representations and warranties, but excluding reductions for Exclusion Adjustments, does not exceed in the aggregate 10% of the Purchase Price.

  

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ARTICLE 11

 

RIGHT OF TERMINATION AND ABANDONMENT

 

11.1 Termination.

  This Agreement may be terminated in accordance with the following provisions:

 

A. Failure by Buyer.

  By Sellers (i) immediately upon any failure by Buyer to make any payment due under this Agreement, or (ii) if either Sellers’ conditions set forth in Section 10.1 are not satisfied through no fault of Sellers, or are not waived by Sellers, as of the Closing Date;

 

B. Failure by Sellers.

  By Buyer, upon material breach by Sellers prior to the Closing Date and failure by Sellers to cure within a reasonable period after receipt of written notice; and

 

C. Purchase Price Reduction.

  By either Party if the Purchase Price reduction exceeds the amount described in either Sections 10.1.C or 10.2.C and not been waived by both Sellers and Buyer.

 

11.2 Liabilities Upon Termination.

 

A. Buyer’s Breach.

  If Closing does not occur because Buyer wrongfully fails to tender performance at Closing or otherwise breaches this Agreement prior to Closing, the Agreement shall immediately be deemed terminated, Buyer shall not have any continuing right to, or interest in, the Assets, and Buyer shall be deemed to have forfeited, as liquidated damages to Seller, any and all payments made by Buyer to Sellers under this Agreement, including but not limited to the Initial Payment and any and all Monthly Payments.  Sellers and Buyer agree that Sellers’ damages in the event Buyer wrongfully fails to close are difficult to measure and Sellers and Buyer agree that the amount of the liquidated damages provided herein bears a reasonable relationship to and is a reasonable estimation of such damages.

 

B. Sellers’ Breach.

  If Closing does not occur because Sellers wrongfully fail to tender performance at Closing or otherwise breach this Agreement prior to Closing, and Buyer is ready and otherwise able to close, Buyer shall retain all remedies, legal and equitable, for Sellers’ wrongful failure to Close.

 

11.3 Unwind.

 If, as of the Final Settlement Date, the aggregate net reduction to the Purchase Price due to Title Defects, reductions based on breaches of representations and warranties and reductions for Exclusion Adjustments exceeds in the aggregate 1% of the unadjusted Purchase Price, then Sellers may elect to unwind this Transaction, such election to be made on the Final Settlement Date.  If this Transaction is to be unwound, the Parties agree to take all necessary actions to place the Parties in the same position as they were prior to the Transaction, provided however, that each Party shall bear all of its own costs and expenses related to the Transaction and the unwind.

  

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ARTICLE 12

 

CLOSING

 

12.1 Date of Closing.

  The Closing shall be on or before October 15, 2011.

 

12.2 Place of Closing.

  The Closing shall be held at the offices of Sellers’ Attorneys, at 1600 Stout Street, Suite 1400, Denver, Colorado, at 10:00 a.m. or at such other time and place as Buyer and Sellers may agree in writing.

 

12.3 Closing Obligations.

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

 

A. Assignment - Exhibit H.

 Sellers shall execute, acknowledge and deliver to Buyer, an Assignment, Bill of Sale and Conveyance in the form attached as Exhibit H in sufficient counterparts for recording in each county where the Assets are located, conveying the Assets to Buyer as of the Effective Time, with (i) a special warranty of the real property title by, through and under Sellers but not otherwise, and (ii) with all personal property and fixtures conveyed “AS IS, WHERE IS,” with no warranties whatsoever, express, implied or statutory.

 

B. Governmental Forms of Assignment.

 Sellers shall execute, acknowledge and deliver to Buyer, an assignment on the required governmental forms necessary to convey the Assets to Buyer.

 

C. Payment.

 Buyer shall deliver the final Monthly Payment to the account at the bank designated by Sellers in writing, by wire transfer in immediately available funds, or by such other method as agreed to by the Parties.

 

D. Buyer’s Officer Certificate - Exhibit I.

  Buyer shall deliver to Sellers the Officer Certificate, dated as of the Closing Date, in form and substance as set forth in Exhibit I.

 

E. Seller’s Officer Certificate - Exhibit J.

 Sellers shall deliver to Buyer the Officer Certificate, dated as of the Closing Date, in form and substance as set forth in Exhibit J.

 

F. Non-Foreign Affidavit - Exhibit K.

  Sellers shall execute and deliver to Buyer an Affidavit of Non-Foreign Status and No Requirement for Withholding under Section 1445 of the Code in the form attached as Exhibit K.

 

G. Contract Operating Agreement - Exhibit L.

 

1.   Sellers and Buyer shall execute the Contract Operating Agreement attached as Exhibit L.

 

H. Other Actions.

  Sellers and Buyer shall take such other actions and deliver such other documents as are contemplated by this Agreement.

  

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ARTICLE 13

 

POST-CLOSING OBLIGATIONS

 

13.1 Post-Closing Adjustments.

 

A. Settlement Statement.

  As soon as practicable after the Closing, but in no event later than 60 days after Closing, Sellers, with assistance from Buyer’s staff, will prepare and deliver to Buyer, in accordance with customary industry accounting practices, the Settlement Statement (the “Settlement Statement”) setting forth each adjustment or payment that was not finally determined as of the Closing and showing the calculation of such adjustment and the resulting final purchase price (the “Final Purchase Price”).  As soon as practicable after receipt of the Settlement Statement, but in no event later than on or before 30 days after receipt of Sellers’ proposed Settlement Statement, Buyer shall deliver to Sellers a written report containing any changes that Buyer proposes to make to the Settlement Statement.  Buyer’s failure to deliver to Sellers a written report detailing proposed changes to the Settlement Statement by that date shall be deemed an acceptance by Buyer of the Settlement Statement as submitted by Sellers.  The Parties shall agree with respect to the changes proposed by Buyer, if any, no later than 45 days after receipt of Sellers’ proposed Settlement Statement.  The date upon which such agreement is reached or upon which the Final Purchase Price is established shall be herein called the “Settlement Date.”  If the Final Purchase Price is more than the Base Purchase Price, Buyer shall pay Sellers the amount of such difference.  If the Final Purchase Price is less than the Base Purchase Price, Sellers shall pay to Buyer the amount of such difference.  Any payment by Buyer or Sellers, as the case may be, shall be made by wire transfer of immediately available funds within 5 days of the Settlement Date.  Any adjustments requiring additional payment by either Buyer or Sellers shall also be made in the same manner.

 

B. Adjustments to the Purchase Price.

  All adjustments to the Purchase Price shall be made (i) according to the factors described in this Section, (ii) in accordance with generally accepted accounting principles as consistently applied in the oil and gas industry, and (iii) without duplication.

 

	
1.  

	
Property Expenses.

  For the purposes of this Agreement, the term “Property Expenses” shall mean all capital expenses, joint interest billings, lease operating expenses, lease rental and maintenance costs, royalties, overriding royalties, leasehold payments, Taxes (as defined and apportioned as of the Effective Time pursuant to Article 9), drilling expenses, workover expenses, geological, geophysical and any other exploration or development expenditures chargeable under applicable operating agreements or other agreements consistent with the standards established by the Council of Petroleum Accountant Societies of North America that are attributable to the maintenance and operation of the Assets during the period in question.

  

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2.  

	
Upward Adjustments.

  The Purchase Price shall be adjusted upward by the following:

 

(i) An amount equal to all proceeds (net of royalty and Taxes not otherwise accounted for hereunder) received and retained by the Buyer from the sale of all Hydrocarbons produced from or credited to the Assets prior to the Effective Time;

 

(ii)  An amount equal to all direct and actual expenses attributable to the Assets, including, without limitation, the Property Expenses, incurred and paid by Sellers that are attributable to the period after the Effective Time;

 

(iii) To the extent not covered in the preceding paragraph, an amount equal to all prepaid expenses attributable to the Assets after the Effective Time that were paid by or on behalf of Sellers, including without limitation, prepaid drilling and/or completion costs, applicable insurance costs through Closing, and prepaid utility charges;

 

(iv) An amount equal to the value (net of applicable Taxes) of Sellers’ share of all oil in storage tanks above twelve (12) inches at the Effective Time to be calculated as follows:  The value shall be the product of (i) the volume in each storage tank (attributable to Sellers’ interest) as of the Effective Time as shown by the actual gauging reports, multiplied by (ii) the price actually received for  production under the applicable marketing contract if the Hydrocarbons in question had been sold; provided, however, that the adjustment contemplated by this subsection (iv) shall be made only to the extent that Sellers do not receive and retain the proceeds, or portion thereof, attributable to the pre-Effective Time merchantable oil in the storage tanks; and

 

(v) Any other amount agreed to by Buyer and Sellers.

 

	
3.  

	
Downward Adjustments.

  The Purchase Price shall be adjusted downward by the following:

 

(i) Proceeds received and retained by Sellers (net of applicable Taxes and royalties) that are attributable to production from the Assets after the Effective Time together with the COPAS reimbursement received or accrued from the interests of the non-operators involved in the Assets;

 

(ii) The amount of all direct and actual expenses attributable to the Assets, including, without limitation, the Property Expenses, that remain unpaid by Sellers, or that have been paid by Buyer, that are attributable to the period prior to the Effective Time;

 

(iii) An amount equal to the Title Defect Adjustments; and

 

(iv) Any other amount agreed to by Buyer and Sellers.

  

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4.  

	
Tax Adjustments.

 To adjust the Purchase Price for the apportionment of Taxes, the Parties agree to adjust the Purchase Price, downward or upward, as appropriate, pursuant to the provision of Article 9.

 

	
5.  

	
Dispute Resolution.

  If the Parties are unable to resolve a dispute as to the Final Purchase Price by 45 days after Buyer’s receipt of Sellers’ proposed Settlement Statement, the Parties shall submit the dispute to binding arbitration to be conducted pursuant to Section 14.6.

 

13.2 Final Settlement Statement.

  On or before 90 days after closing, Sellers will prepare and deliver to Buyer, in accordance with customary accounting practices, the “Final Settlement Statement,” setting forth all monetary adjustments necessitated by Title Defect Adjustments, and Representation Adjustments.  The Parties agree to work in good faith to agree on the amount set forth in the Final Settlement Statement within 30 days of Buyer’s receipt of the Final Settlement Statement.  The date upon which such agreement is reached is called the “Final Settlement Date.”  The Parties agree to pay each other the sums specified in the Final Settlement Statement within five days of the Final Settlement Date.  The Parties expressly acknowledge and agree that all provisions of the Title Matters and Representations and Warranties shall apply, subject to the individual thresholds and applicable deductibles.

 

13.3 Records.

  After Closing, Sellers shall make the Records available for pick up by Buyer within a reasonable period.  After termination, Sellers may retain copies of the Records and Sellers also shall have the right to review and copy the Records at Buyer’s offices during standard business hours upon reasonable notice for so long as Buyer retains the Records.  Buyer agrees that the Records shall be maintained in compliance with all applicable laws governing document retention.  Buyer shall not destroy or otherwise dispose of Records for a period of 7 years after Closing unless Buyer first gives Sellers reasonable notice and an opportunity to copy the Records to be destroyed.

 

13.4 Operations After Closing.

 At Closing, Sellers and Buyer shall enter into Contract Operating Agreements for a period not to exceed one (1) year, and the form set out in Exhibit L, attached hereto ,whereby Sellers will act as contract operators for Buyer under their own bonds, for a period of one year.

 

13.5 Further Assurances.

  From time to time after Closing, Sellers and Buyer shall each execute, acknowledge and deliver to the other such further instruments and take such other action as may be reasonably requested in order to accomplish more effectively the purposes of this Transaction.

  

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ARTICLE 14

 

ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION

 

14.1 Buyer’s Assumption of Liabilities and Obligations.

  Upon Closing, and except for Retained Liabilities and subject to Section 5.3A, 14.3 and 14.4, (and subject to the Contract Operating Agreement provided for in Exhibit L) Buyer shall assume and pay, perform, fulfill and discharge all claims, costs, expenses, liabilities and obligations accruing or relating to the owning, developing, exploring, operating or maintaining of the Assets or the producing, transporting and marketing of Hydrocarbons from the Assets for the period before and after the Effective Time, including, without limitation, (i) the Material Contracts, (ii) the Assumed Environmental Liabilities whether arising before or after the Effective Time, (iii) the obligation to plug and abandon all wells and reclaim all well sites located on the Lands regardless of when the obligations arose, (iv) the make-up and balancing obligations for gas from the Wells, (v) any injury, death, casualty, tortious action or inaction occurring on or attributable to the Assets and attributable to the period of time after the Effective Time; and (vi) any breach of any representation, warranty, covenant or agreement of Buyer contained in this Agreement (collectively, the “Assumed Liabilities”).

 

14.2 Sellers’ Retention of Liabilities and Obligations.

  Upon Closing and subject to Sections 5.3A, 14.3 and 14.4, Sellers retain all claims, costs, expenses, liabilities and obligations accruing or relating to any injury, death, casualty, tortious action or inaction occurring on or attributable to the Assets and attributable to the period of time prior to the Effective Time and any breach of any representation, warranty, covenant or agreement of Sellers contained in this Agreement.  (collectively, the “Retained Liabilities”).

 

14.3 Proceeds and Invoices for Property Expenses Received After the Settlement Date.

  After the Settlement Date, those proceeds attributable to the Assets received by a Party or invoices received for or Property Expenses paid by one Party for or on behalf of the other Party with respect to the Assets, which were not already included or addressed in the Settlement Statement, shall be settled as follows, subject to the terms of the Contract Operating Agreement:

 

A. Proceeds.

  Proceeds received by Buyer with respect to sales of Hydrocarbons produced prior to the Effective Time shall be remitted or forwarded to Sellers.  Proceeds received by Sellers with respect to sales of Hydrocarbons produced after the Effective Time shall be forwarded to Buyer.

 

B. Property Expenses.

  Invoices for Property Expenses received by Buyer that relate to operations on the Assets prior to the Effective Time shall be forwarded to Sellers by Buyer, or if already paid by Buyer, invoiced by Buyer to Sellers.  Invoices for Property Expenses received by Sellers that relate to operations on the Assets after the Effective Time shall be forwarded to Buyer by Sellers, or if already paid by Sellers, invoiced by Sellers to Buyer.  Buyer specifically agrees to assume, pay, become liable for and release Sellers from all obligations and liabilities for Property Expenses related to the Assets attributable to the periods of time after the Effective Time.  All such liabilities and obligations shall become part of the Assumed Liabilities.

  

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14.4 Indemnification.

  “Losses” shall mean any actual losses, costs, expenses (including court costs, reasonable fees and expenses of attorneys, technical experts and expert witnesses and the cost of investigation), liabilities, damages, demands, suits, claims, and sanctions of every kind and character (including civil fines) arising from, related to or reasonably incident to matters indemnified against; excluding however any special, consequential, punitive or exemplary damages, diminution of value of an Asset, loss of profits incurred by a Party hereto or Loss incurred as a result of the indemnified Party indemnifying a third party.

 

After the Closing, the Parties shall indemnify each other as follows:

 

A. Sellers’ Indemnification of Buyer.

  Sellers assume all risk, liability, obligation and Losses in connection with, and shall defend, indemnify, and save and hold harmless Buyer, its officers, directors, employees and agents, from and against all Losses which arise from or in connection with (i) the Retained Liabilities, (ii) any matter for which Sellers has agreed to indemnify Buyer under this Agreement, and (iii) any breach by Sellers of this Agreement.

 

B. Buyer’s Indemnification of Sellers.

  Buyer assumes all risk, liability, obligation and Losses in connection with, and shall defend, indemnify, and save and hold harmless Sellers, its members, officers, directors, employees and agents, from and against all Losses which arise from or in connection with (i) the Assumed Liabilities, (ii) any matter for which Buyer has agreed to indemnify Sellers under this Agreement, and (iii) any breach by Buyer of this Agreement.

 

C. Release by Sellers, Tindall and Tucker.

  Sellers, Tucker, and Tindall release any and all past, present or future claims, demands, obligations, actions, causes of action, rights, damages, costs, loss of time, loss of service, lost profits, attorneys' fees, costs of litigation, and expenses and compensation of any nature whatsoever, including without limitation, any and all known or unknown claims for lost profits or other business injury, which have been raised or could have been raised against Buyer by Sellers, Tindall, and Tucker in connection with the PSA.

 

D. Buyer’s Release and Indemnification of Sellers, Tindall and Tucker.

  Buyer releases, and agrees to indemnify Sellers, Tindall, and Tucker against any and all past, present or future claims, demands, obligations, actions, causes of action, rights, damages, costs, loss of time, loss of service, lost profits, attorneys' fees, costs of litigation, and expenses and compensation of any nature whatsoever, including without limitation, any and all known or unknown claims for lost profits or other business injury, which have been raised or could have been raised (i) by Buyer against Sellers, Tindall, and/or Tucker in connection with the PSA; and/or (ii) by any party against Sellers, Tindall, and/or Tucker arising from Buyer’s actions in connection with the PSA, including, but not limited to, any and all costs and attorney fees incurred by Sellers, Tindall, and/or Tucker to defend against any claim covered by this provision and/or to enforce this indemnity.

  

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E. Release.

  Buyer shall be deemed to have released Sellers, Tindall, and Tucker at the Closing from any Losses for which Buyer has agreed to indemnify Sellers, Tindall, and Tucker hereunder, and Sellers, Tindall, and Tucker shall be deemed to have released Buyer at the Closing from any Losses for which Sellers, Tindall, and Tucker have agreed to indemnify Buyer hereunder.

 

14.5 Procedure.

  The indemnifications contained in Section 14.4 shall be implemented as follows:

 

A. Coverage.

  Such indemnity shall extend to all Losses suffered or incurred by the indemnified Party.

 

B. Claim Notice.

  The Party seeking indemnification under the terms of this Agreement (“Indemnified Party”) shall submit a written “Claim Notice” to the other Party (“Indemnifying Party”) which shall list the amount claimed by an Indemnified Party, the basis for such claim, with supporting documentation, and list each separate item of Loss for which payment is so claimed.  The amount claimed shall be paid by the Indemnifying Party to the extent required herein within 30 days after receipt of the Claim Notice, or after the amount of such payment has been finally established, whichever last occurs.

 

C. Information.

  If the Indemnified Party receives notice of a claim or legal action that may result in a Loss for which indemnification may be sought under this Agreement (a “Claim”), the Indemnified Party shall give written notice of such Claim to the Indemnifying Party as soon as is practicable.  If the Indemnifying Party or its counsel so requests, the Indemnified Party shall furnish the Indemnifying Party with copies of all pleadings and other information with respect to such Claim.  At the election of the Indemnifying Party made within 60 days after receipt of such notice, the Indemnified Party shall permit the Indemnifying Party to assume control of such Claim (to the extent only that such Claim, legal action or other matter relates to a Loss for which the Indemnifying Party is liable), including the determination of all appropriate actions, the negotiation of settlements on behalf of the Indemnified Party, and the conduct of litigation through attorneys of the Indemnifying Party’s choice; provided, however, that any settlement of the claim by the Indemnifying Party may not result in any liability or cost to the Indemnified Party without its prior written consent.  If the Indemnifying Party elects to assume control, (i) any expense incurred by the Indemnified Party thereafter for investigation or defense of the matter shall be borne by the Indemnified Party, and (ii) the Indemnified Party shall give all reasonable information and assistance, other than pecuniary, that the Indemnifying Party shall deem necessary to the proper defense of such Claim.  In the absence of such an election, the Indemnified Party will use its best efforts to defend, at the Indemnifying Party’s expense, any claim, legal action or other matter to which such other Party’s indemnification under this Article 14 applies until the Indemnifying Party assumes such defense.  If the Indemnifying Party fails to assume such defense within the time period provided above, the Indemnified Party may settle the Claim, in its reasonable discretion at the Indemnifying Party’s expense.  If such a Claim requires immediate action, both the Indemnified Party and the Indemnifying Party will cooperate in good faith to take appropriate action so as not to jeopardize defense of such Claim or either Party’s position with respect to such Claim.

  

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14.6 Dispute Resolution.

  The Parties agree to resolve all “Disputes” concerning this Agreement pursuant to the provisions of this section, such disputes to include without limitation (i) the existence and scope of a Title Defect, (ii) the Title Defect Value of that portion of the Asset affected by a Title Defect, (iii) the existence of an Environmental Defect, or (iv) disputes concerning a Claim or amount to be paid by an Indemnifying Party.  The Parties agree to submit all Disputes first to mediation by an impartial mediator, and if such dispute cannot be resolved by mediation, to binding arbitration in Denver, Colorado, such arbitration to be conducted as follows:  The arbitration proceeding shall be governed by Colorado law and shall be conducted through the Judicial Arbiter Group in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), with discovery to be conducted in accordance with the Federal Rules of Civil Procedure, and with any disputes over the scope of discovery to be determined by the “Arbitrators.”  The arbitration shall be before a single arbitrator chosen by the mutual agreement of the Parties involved in the matter to be arbitrated, or if no such agreement can be reached within 10 days, a three-person panel of neutral arbitrators, consisting of one person picked by each side, and the two arbitrators so selected picking the third (with the panel so picked being the “Arbitrators”).  The Arbitrator(s) shall conduct a hearing no later than 60 days after submission of the matter to arbitration, and the Arbitrator(s) shall render a written decision within 30 days of the hearing.  At the hearing, the Parties shall present such evidence and witnesses as they may choose, with or without counsel.  Adherence to formal rules of evidence shall not be required but the arbitration panel shall consider any evidence and testimony that it determines to be relevant, in accordance with procedures that it determines to be appropriate.  Any award entered in the arbitration shall be made by a written opinion stating the reasons and basis for the award made and any payment due pursuant to the arbitration shall be made within 15 days of the decision by the Arbitrator(s).  The final decision shall be binding on the Parties, final and non-appealable, and may be filed in a court of competent jurisdiction and may be enforced by any Party as a final judgment of such court.  Each Party shall bear its own costs and expenses of the arbitration, provided, however, that the costs of employing the Arbitrator(s) shall be borne by the party not prevailing in the arbitration or, if that cannot be determined, then 50% by the Sellers and 50% by the Buyer.

 

14.7 No Insurance; Subrogation.

  The indemnifications provided in this Agreement shall not be construed as a form of insurance.  Buyer and Sellers hereby waive for themselves, their respective successors or assigns, including, without limitation, any insurers, any rights to subrogation for Losses for which each of them is respectively liable or against which each respectively indemnifies the other, and, if required by applicable policies, Buyer and Sellers shall obtain waiver of such subrogation from their respective insurers.

 

14.8 Reservation as to Non-Parties.

  Nothing herein is intended to limit or otherwise waive any recourse Buyer or Sellers may have against any non-Party for any obligations or liabilities that may be incurred with respect to the Assets.

  

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ARTICLE 15

 

MISCELLANEOUS

 

15.1 Expenses.

  All fees, costs and expenses incurred by Buyer or Sellers in negotiating this Agreement or in consummating this Transaction shall be paid by the Party incurring the same, including, without limitation, engineering, land, title, legal and accounting fees, costs and expenses.

 

15.2 Notices.

  All notices and communications required or permitted under this Agreement shall be sent in writing to each of the Sellers and to Buyer and addressed as set forth below.  Any communication or delivery hereunder shall be deemed to have been made and the receiving Party charged with notice when received whether by (i) telecopy or facsimile transmission, (ii) mail or (iii) overnight courier.  All notices shall be addressed as follows:

To Sellers:

Tucker Energy, LLC

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn:          R. Lee Tucker

Fax:          303-850-0175

DNR Oil & Gas Inc.

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn:          Charles B. Davis, President

Fax:          303-825-2968

To Tucker Family Investments, LLLP:

Tucker Family Investments, LLLP

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn:          R. Lee Tucker

Fax:          303-850-0175

To Tindall Operating Company:

Tindall Operating Company

12741 E. Caley, Unit 142

Englewood, CO 80111

Attn:          R. Lee Tucker

Fax:          303-850-0175

 

 

To Buyer:

  

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Arête Industries, Inc.

7260 Osceola Street

Westminster, CO 80030

Attn.: Donald W. Prosser

Fax: 303-429-9664.

Any Party may, by written notice so delivered to the other Parties, change the address or individual to which delivery shall thereafter be made under this subsection.

 

15.3 Amendments/Waiver.

  Except for waivers specifically provided for in this Agreement, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the Party to be charged with such amendment or waiver and delivered by such Party to the Party claiming the benefit of such amendment or waiver.

 

15.4 Assignment.

  If either Party assigns all or a portion of its rights and obligations under this Agreement, such Party shall remain responsible for all of its obligations under this Agreement, provided, however, that Sellers’ indemnity of Buyer set forth in this Agreement shall not be assignable in any form, and shall not be transferable in the event of a merger, consolidation or other corporate transaction of Buyer.  Further, if Buyer assigns its interests in the Assets on or before the Title Defect Date, Buyer’s successors and assigns shall not be able to give notices of Title Defects or Notices of Breaches of Representations.  No such assignment or obligation shall increase the burden on the non-assigning Party or impose any duty on the non-assigning Party to communicate with or report to any transferee, and the non-assigning Party may continue to look to the assigning Party for all purposes under this Agreement.

 

15.5 Announcements.

  Sellers and Buyer shall consult with each other with regard to all press releases and other announcements issued after the date of execution of this Agreement and prior to the Closing Date concerning this Agreement or this Transaction and, except as may be required by applicable laws or the applicable rules and regulations of any governmental agency or stock exchange, Buyer or Sellers shall not issue any such press release or other publicity without the prior written consent of the other Party, which consent shall not be unreasonably withheld.

 

15.6 Counterparts/Fax Signatures.

  The Parties may execute this Agreement in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument.  The Parties agree that facsimile signatures are binding.

 

15.7 Governing Law.

  This Agreement and this Transaction and any arbitration or dispute resolution conducted pursuant hereto shall be construed in accordance with, and governed by, the laws of the State of Colorado.

  

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15.8 Entire Agreement.

  This Agreement constitutes the entire understanding among the Parties, their respective members, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all written or oral negotiations and discussions, and prior agreements and understandings relating to such subject matter. Each Exhibit and Schedule attached to this Agreement is incorporated into this Agreement.

 

15.9 Knowledge.

  The “knowledge of a Party” shall mean for purposes of this Agreement, the actual, conscious knowledge of the Party at the time the assertion regarding knowledge is made.  If the Party is a limited liability company, or corporation, or other entity other than a natural person, such actual, conscious knowledge must be on the part of the person having supervising management authority over the matters to which such knowledge pertains.

 

15.10 Binding Effect.

  This Agreement shall be binding upon, and shall inure to the benefit of, the Parties hereto, and their respective successors and assigns.

 

15.11 Survival.

  The representations set forth in Sections 6.1 through 6.4, and Sections 7.1 through 7.6 shall survive without limitation as to time.  The remaining representations and warranties set forth in this Agreement, except those relating to Sellers’ special warranty of title as described herein, shall survive until June 1, 2013. Except for representations that survive without limitation as to time, a claim for a breach of a representation or warranty must be made on or before June 1, 2013 at 5:00 p.m. Mountain Time, and is subject to Section 6.18.  Delivery of the Assignment, Bill of Sale and Conveyance at the Closing will not constitute a merger of this Agreement with such Assignment.

 

15.12 Limitation on Damages.

  The Parties shall not have any liability to each other for consequential, special, punitive or exemplary damages arising out of or related to a Party’s breach of any provision of this Agreement.

 

15.13 No Third-Party Beneficiaries.

  This Agreement is intended to benefit only the Parties hereto and their respective permitted successors and assigns.  There are no third party beneficiaries to this Agreement.

 

15.14 Several Liability.

  All of Sellers’ liabilities and obligations under this Agreement shall be several among each of the entities comprising Sellers, and not joint.  In addition, the liability and obligations of each Seller under the terms of this Agreement shall be tied directly to the Assets owned by each Seller and capped at the amount of the Purchase Price received at Closing by that particular Seller.  Buyer hereby waives and releases each of the entities and individuals comprising Sellers from any liabilities and obligations above each Sellers’ cap described in the preceding sentence.

 

15.15 Condition Precedent.

  A condition precedent to the effectiveness of this Agreement is signature by both Buyer and Sellers.  Unless and until both Buyer and Sellers have executed this Agreement, the Agreement will not be legally binding.

  

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15.16 References, Titles and Construction.

 

A. References.

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

 

B. Titles.

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

 

C. Agreement.

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

 

D. Singular and Plural, Masculine and Feminine.

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

 

E. References to Agreements, Instruments and Documents.

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

 

F. Examples.

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

 

G. Conjunctions.

  The word “or” is not intended to be exclusive and the word “includes” and its derivatives mean “includes, but is not limited to” and corresponding derivative expressions.

 

H. No Construction Against Any Drafter.

  No consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this Agreement.  All Parties have had an equal opportunity to draft and review this Agreement.

 

I. References to Dollars.

 All references herein to “$” or “dollars” shall refer to U.S. Dollars.

 

Remainder Of This Page Is Left Intentionally Blank.

  

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The Parties have executed this Agreement as of July 29, 2011, effective as of the Effective Time.

	  	  
	  	
TUCKER FAMILY INVESTMENTS, LLLP

	  	  
	  	
By:_______________________________________

	  	
Name: ____________________________________

	  	
Title: _____________________________________

	  	  
	  	
TINDALL OPERATING COMPANY

	  	  
	  	
By:_______________________________________

	  	
Name: ____________________________________

	  	
Title:___________________________________

	  	  
	  	  
	  	
SELLERS:

	  	  
	  	
TUCKER ENERGY, LLC

	  	  
	  	
By:_______________________________________

	  	
Name: ____________________________________

	  	
Title: _____________________________________

	  	  
	  	
DNR OIL & GAS, INC.

	  	  
	  	
By:_______________________________________

	  	
Name: ____________________________________

	  	
Title:_____________________________________

	  	  
	  	  
	  	
BUYER:

	  	  
	  	
ARÊTE INDUSTRIES, INC.

	  	  
	  	
By:_______________________________________

	  	
Name:__________________________________

	  	
Title:  ____________________________________

  

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