ASSET PURCHASE AGREEMENT DATED AS OF AUGUST 25, 2006, BY AND BETWEEN CABOT OIL & GAS CORPORATION AND CODY ENERGY LLC, AS SELLER, AND PHOENIX EXPLORATION COMPANY LP, AS BUYER

Exhibit 99.1

ASSET PURCHASE AGREEMENT

DATED AS OF AUGUST 25, 2006,

BY AND BETWEEN

CABOT OIL & GAS CORPORATION AND CODY ENERGY LLC,

AS SELLER,

AND

PHOENIX EXPLORATION COMPANY LP,

AS BUYER

 

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EXHIBITS

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of August 25, 2006, is by and between CABOT OIL & GAS CORPORATION, a Delaware corporation (“ COGC ”), and CODY ENERGY LLC, a Colorado limited liability company (“ Cody ”) (collectively, “ Seller ”), and, PHOENIX EXPLORATION COMPANY LP, a Delaware limited partnership (“ Buyer ”).

WHEREAS, Seller owns certain oil and gas properties and related assets;

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, such oil and gas properties and related assets upon the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:

ARTICLE I.

CERTAIN DEFINITIONS

Section 1.1 Certain Defined Terms . Unless the context otherwise requires, the respective terms defined in Appendix A attached hereto and incorporated herein shall, when used herein, have the respective meanings therein specified, with each such definition to be equally applicable both to the singular and the plural forms of the term so defined.

Section 1.2 References, Gender, Number . All references in this Agreement to an “Article,” “Section,” or “subsection” shall be to an Article, Section or subsection of this Agreement, unless the context requires otherwise. Unless the context otherwise requires, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Whenever the context requires, the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural.

ARTICLE II.

SALE AND PURCHASE

Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, the Assets.

ARTICLE III.

CONSIDERATION AND PAYMENT

Section 3.1 Consideration . The consideration for the sale and conveyance of the Assets to Buyer is Three Hundred and Forty Million Dollars ($340,000,000.00) (the “ Purchase Price ”), as adjusted in accordance with the terms of this Agreement. The “ Adjusted Purchase Price ” shall be the Purchase Price

(i) as adjusted by the Initial Adjustment Amount determined pursuant to Section 3.3,

 

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(ii) as adjusted for Title Defects, if any, in accordance with Section 6.2,

(iii) as may be adjusted in respect of the exercise of Preference Rights contemporaneously with Closing, in accordance with and as contemplated by Section 7.2,

(iv) as may be adjusted for amounts paid to the Escrow Agent pursuant to the Escrow Agreement in respect of Preference Properties that are not conveyed to Buyer at the Closing because the third parties holding such Preference Rights have not elected to purchase and have not waived such Preference Right as of the Closing, in accordance with and as contemplated by Section 7.2,

(v) as may be adjusted for amounts paid to the Escrow Agent pursuant to the Escrow Agreement in respect of Retained Assets that are not conveyed to Buyer at the Closing because of Transfer Requirements that have not been satisfied as of the Closing, in accordance with and as contemplated by Section 7.3,

(vi) as adjusted for the net gas imbalance position set forth on Schedule A-3 calculated in the manner contemplated by Section 3.5,

(vii) as adjusted for the total amount of Royalty Amounts set forth on Schedule A-4 , and

(viii) as adjusted upward by an amount equal to interest on the Purchase Price, as adjusted in the manner provided in items (i) through (vii) above, minus the General Deposit Amount, from the Effective Time until the Closing Date at the Agreed Rate.

Section 3.2 Payment . Contemporaneously with the execution of this Agreement, Buyer has deposited $22,000,000.00 with Seller as a deposit hereunder (the “ Deposit ”). Upon the execution of the Escrow Agreement by Seller, Buyer and the Escrow Agent, Seller shall promptly pay to the Escrow Agent $5,000,000.00 of the Deposit (the “ Hedging Security ”) to be held by Escrow Agent pursuant to and in accordance with the Escrow Agreement. At (and subject to) the Closing, Buyer shall wire transfer an amount equal to the Adjusted Purchase Price minus $17,000,000.00 of the Deposit (the “ General Deposit Amount ”) in immediately available funds to JPMorgan Chase Bank, N.A. ABA No. 111-000-614 for the account of Seller, Account No. 636462608, or such other account specified by Seller to Buyer on or prior to the Business Day immediately preceding the Closing Date.

Section 3.3 Adjustment Period Cash Flow . (a) The Purchase Price shall be increased or decreased, as the case may be, by an amount equal to the Net Cash Flow with respect to the Assets for the time period (the “ Adjustment Period ”) beginning at the Effective Time and ending at 7:00 a.m. (local time) on the Closing Date. Seller shall deliver to Buyer no later than noon on the Business Day immediately preceding the Closing Date a statement (the “ Adjustment Statement ”) setting forth Seller’s preliminary determination (the “ Initial Adjustment Amount ”) of the Net Cash Flow. If the Initial Adjustment Amount shown on the Adjustment Statement is a positive number, then the Purchase Price shall be increased by such amount. If the Initial Adjustment Amount shown on the Adjustment Statement is a negative number, then the Purchase Price shall be decreased by such amount.

(b) The Adjustment Statement shall be based upon actual information available to Seller at the time of its preparation (which shall occur no earlier than ten (10) days

 

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prior to the Closing Date) and upon Seller’s good faith estimates and assumptions. There shall be attached to the Adjustment Statement such supporting documentation and other data as is reasonably necessary to provide a basis for the Net Cash Flow shown therein.

(c) The “ Net Cash Flow ” shall be the algebraic sum of (i) a positive amount equal to the aggregate amount paid by Seller as Seller’s share of the costs and expenses of exploration, maintenance, development, production and operation of the Assets incurred with respect to the Adjustment Period (including prepayments of any such costs or expenses), (ii) a positive amount equal to the sum of (A) all overhead charges paid by Seller to any operator of any of the Assets (other than operators that are Affiliates of Seller) incurred with respect to the Adjustment Period, and (B) with respect to any properties operated by Seller or any Affiliate of Seller, the overhead charges payable to Seller or such Affiliated operator on account of the Subject Interests in such properties under existing operating agreements or, if no overhead charge is applicable to a Subject Interest under an existing operating agreement, an overhead charge to such Subject Interest equal to the average drilling and producing well rates paid by Seller in the same geographic area as such Subject Interest during the six-month period immediately preceding the Effective Time, in each case incurred with respect to the Adjustment Period, and (iii) a negative amount equal to the aggregate gross proceeds received by Seller (A) from the sale or disposition of oil, gas and other hydrocarbons produced from the Assets during the Adjustment Period and (B) from the rental, sale, salvage or other disposition of any other Assets during the Adjustment Period.

Section 3.4 Post Closing Review . After the Closing, Seller shall review the Adjustment Statement, actual revenues and expenses and determine the actual Net Cash Flow. On or prior to the ninetieth (90 ^th ) day after the Closing Date, Seller shall present Buyer with a statement of the actual Net Cash Flow and such supporting documentation as is reasonably necessary to support the Net Cash Flow shown therein (the “ Final Adjustment Statement ”). Buyer will give representatives of Seller reasonable access to its premises and to its books and records for purposes of preparing the Final Adjustment Statement and will cause appropriate personnel of Buyer to assist Seller and Seller’s representatives, at no cost to Seller, in the preparation of the Final Adjustment Statement. Seller will give representatives of Buyer reasonable access to its premises and to its books and records for purposes of reviewing the calculation of Net Cash Flow and will cause appropriate personnel of Seller to assist Buyer and its representatives, at no cost to Buyer, in verification of such calculation. The Final Adjustment Statement shall become final and binding on Seller and Buyer as to the Net Cash Flow thirty (30) days following the date the Final Adjustment Statement is received by Buyer, except to the extent that prior to the expiration of such thirty (30) day period Buyer shall deliver to Seller notice, as hereinafter required, of its disagreement with the contents of the Final Adjustment Statement. Such notice shall be in writing and set forth all of Buyer’s disagreements with respect to any portion of the Final Adjustment Statement, together with Buyer’s proposed changes thereto, and shall include an explanation in reasonable detail of, and such supporting documentation as is reasonably necessary to support, such changes. If Buyer has timely delivered such a notice of disagreement to Seller, then, upon written agreement between Buyer and Seller resolving all disagreements of Buyer set forth in such notice, the Final Adjustment Statement will become final and binding upon Buyer and Seller as to the Net Cash Flow. If the Final Adjustment Statement has not become final and binding by the sixtieth (60th) day following its receipt by Buyer, then Buyer or Seller may submit any unresolved disagreements of

 

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Buyer set forth in such notice to final and binding arbitration in accordance with the Arbitration Procedures. Upon resolution of such unresolved disagreements of Buyer, the Final Adjustment Statement shall be final and binding upon Buyer and Seller as to the Net Cash Flow. Within three (3) Business Days after the Final Adjustment Statement becomes final and binding, Seller or Buyer, as appropriate, shall pay to the other party the amount, if any, by which the Net Cash Flow as shown in the Final Adjustment Statement is less than or exceeds the Initial Adjustment Amount, together with interest thereon from the Closing Date until paid at the Agreed Rate.

Section 3.5 Gas Imbalances . On or prior to the 180 ^th day after the Closing Date, Buyer shall prepare and present to Seller a revised Schedule A-3 setting forth the Negative Imbalances and the Positive Imbalances together with such supporting documentation, similar to that used by Seller in preparing Schedule A-3 , as is reasonably necessary for Seller to substantiate the information set forth therein (collectively, the “ Imbalance Information ”). The Adjusted Purchase Price paid by Buyer at the Closing shall be deemed to be (a) reduced by an amount equal to (1) the Negative Imbalances multiplied by (2) $4.00 per Mcf and (b) increased by an amount equal to (1) the Positive Imbalances multiplied by (2) $4.00 per Mcf. A calculation of such deemed adjustment to the Adjusted Purchase Price (together with supporting documentation reasonably necessary for Seller to substantiate same) shall accompany the Imbalance Information delivered to Seller by Buyer pursuant to the terms of this Section 3.5. The Imbalance Information shall become final and binding on Seller and Buyer as to the Negative Imbalances and Positive Imbalances ten (10) days following the date the Imbalance Information is received by Seller, except to the extent that prior to the expiration of such ten (10) day period Seller shall deliver to Buyer notice, as hereinafter required, of its disagreement with the contents of the Imbalance Information. Such notice shall be in writing and set forth all of Seller’s disagreements with respect to any portion of the Imbalance Information, together with Seller’s proposed changes thereto, and shall include an explanation in reasonable detail of, and such supporting documentation as is reasonably necessary to support, such changes. If Seller has timely delivered such a notice of disagreement to Buyer, then, upon written agreement between Buyer and Seller resolving all disagreements of Seller set forth in such notice, the Imbalance Information will become final and binding upon Buyer and Seller as to the Negative Imbalances and Positive Imbalances. If the Imbalance Information has not become final and binding by the thirtieth (30th) day following its receipt by Seller, then Buyer or Seller may submit any unresolved disagreements of Seller set forth in such notice to final and binding arbitration in accordance with the Arbitration Procedures. Upon resolution of such unresolved disagreements of Seller, the Imbalance Information shall be final and binding upon Buyer and Seller as to the Negative Imbalances and Positive Imbalances. Within three (3) Business Days after the Imbalance Information becomes final and binding, Seller or Buyer, as appropriate, shall pay to the other party the amount by which the Adjusted Purchase Price is deemed to be decreased or increased on account of such imbalances, together with interest thereon from the Closing Date until paid at the Agreed Rate.

 

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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

Section 4.1 Representations and Warranties of Seller . Seller represents and warrants to Buyer as follows:

(a) Organization and Qualification . COGC is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. Cody is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Colorado and has the requisite limited liability company power to carry on its business as it is now being conducted. Seller is duly qualified to do business, and is in good standing, in each jurisdiction in which the Assets owned or leased by it makes such qualification necessary.

(b) Authority . COGC has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Cody has all requisite limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate or limited liability company, as applicable, action on the part of Seller.

(c) Enforceability . This Agreement constitutes a valid and binding agreement of Seller enforceable against Seller in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, and (ii) general principles of equity.

(d) No Conflict or Violation . Neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller will (i) conflict with or result in any breach of any provision of the certificate of incorporation or by-laws, limited liability company agreement or other governing documents of Seller; (ii) be rendered void or ineffective by or under the terms, conditions or provisions of any agreement, instrument or obligation to which Seller is a party or is subject; (iii) result in a material default under the terms, conditions or provisions of any Asset (or of any material agreement, instrument or obligation relating to or burdening any Asset); or (iv) subject to the limitations contained in Section 4.1(c), violate in any material respect or be rendered void or ineffective under any Law or any judgment, order or decree of a Governmental Authority; provided that the representations and warranties contained in clauses (ii), (iii) and (iv) of this Section 4.1(d) are subject to the matters expressly described and set forth in Schedule 4.1(d) and the exceptions set forth in clauses (i) and (ii) of Section 4.1(e).

(e) Consents . Except for (i) consents of or filings in connection with the assignment of any federal or state leases or any interest therein, (ii) Preference Rights and Transfer Requirements set forth on Schedule 7.1 , and (iii) the consents, filings or notices expressly described and set forth in Schedule 4.1(e) , no material consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Seller or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller.

(f) Actions . Except as set forth on Schedule 4.1(f) , there are no Actions pending against Seller or, to the knowledge of Seller, threatened against Seller that relate to the Assets or the transactions contemplated by this Agreement. Seller is not subject to any outstanding order, writ, injunction or decree that is reasonably likely to interfere in any material

 

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respect with the use, ownership or operation of the Assets or would prevent or delay in any material respect the consummation of the transactions contemplated by this Agreement. Except as set forth on Schedule 4.1(f) , Seller has not received any written demand regarding improper royalty payments relating to the Subject Interests that has not been resolved.

(g) Compliance With Laws . Except as set forth on Schedule 4.1(g) , Seller is not in violation in any material respect of any Law applicable to the Assets. This Section 4.1(g) does not apply to environmental matters (for which Section 4.1(h) is applicable).

(h) Environmental Matters . Except as set forth on Schedule 4.1(h) , no written notice, demand or complaint has been received by Seller from any Governmental Authority with respect to any material violation of any Environmental Law applicable to the Assets.

(i) Brokerage Fees and Commissions . Neither Seller nor any Affiliate of Seller has incurred any obligation or entered into any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplated by this Agreement for which Buyer shall incur any liability.

(j) Bankruptcy . There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or, to the knowledge of Seller, threatened against Seller.

(k) Basic Documents . To Seller’s knowledge, Seller is not in material breach of the Basic Documents and to Seller’s knowledge, all Basic Documents are set forth on Schedule 4.1(k) . All Basic Documents are in full force and effect and are the valid and legally binding obligations of the parties thereto and are enforceable in accordance with their respective terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, and (ii) general principles of equity. To the knowledge of Seller, no other party to any Basic Document (or any successor in interest thereto) is in material breach or default with respect to any of its obligations thereunder. To Seller’s knowledge, there has not occurred any event, fact or circumstance that with the lapse of time or the giving of notice, or both, would constitute such a material breach or default on behalf of Seller or with respect to any other party under the Basic Documents. Neither Seller nor, to the knowledge of Seller, any other party to any Basic Document has given or threatened to give notice of any action to terminate, cancel, rescind or procure a judicial reformation of any Basic Document or any provision thereof.

(l) Commitments, Abandonments or Proposals . Except as set forth in Schedule 4.1(l) , to Seller’s knowledge, (1) Seller has incurred no expenses, and has made no commitments to make expenditures (including Seller has not entered into any agreements that would obligate Buyer to make expenditures), in connection with the ownership or operation of the Assets after the Effective Time, other than routine expenses incurred in connection with the ownership and normal operation of the Assets; (2) Seller has not abandoned any wells (or removed any material items of equipment, except those replaced by items of materially equal or better condition, suitability and value) on the Subject Interests since the Effective Time; and (3) no proposals or authorities for expenditures are currently outstanding (whether made by Seller or

 

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by any other party) to drill additional wells, or to deepen, plug back or rework existing wells, or to conduct other operations for which consent is required under the applicable operating or unitization agreement, or to conduct any other operations other than normal operation of existing wells on the Subject Interests, or to abandon any wells, on the Subject Interests.

(m) Consents and Preferential Rights . To Seller’s knowledge, Schedule 7.1 contains a complete and accurate list of all Preference Rights and Transfer Requirements required to be obtained by Seller or waived for the assignment of the Assets to Buyer.

(n) Well Status . Except as set forth on Schedule 4.1(n) , and except to the extent as would not have a material impact on the value, use or operation of the Assets, to Seller’s knowledge, there are no wells located on the Subject Interests that: (a) have been plugged and abandoned but have not been plugged in accordance with all applicable requirements of each Regulatory Authority having jurisdiction over the Subject Interests or (b) have been temporarily abandoned but not yet plugged and abandoned.

(o) FIRPTA Disclaimer . Seller is not a foreign person or foreign corporation under the Deficit Reduction Act of 1984, 26 U.S.C. § 1445, et seq. and none of the Purchase Price need be withheld pursuant to such statute or the regulations promulgated thereunder.

(p) Federal Leases . To Seller’s knowledge, all federal lease accounts, with respect to federal leases included in the Assets, are current and all payments required thereunder have been made.

(q) Taxes . Seller has timely filed or caused to be filed all federal, state, local and foreign Tax and information returns required under the Law of such jurisdictions. All Taxes (other than those being contested in good faith for which adequate provisions will be made) shown on said returns to be due and additional assessments received prior to the date hereof that are due and payable have been paid.

(r) Sales Agreements . Except as set forth on Schedule 4.1(r) , (i) all crude oil and condensate sales arrangements and division orders relating to the Properties have index price or other market-sensitive price terms and may be terminated by Buyer upon not more than 92 days’ notice without penalty or detriment to Buyer; and (ii) to Seller’s knowledge, Seller has not received at any time nor is Seller obligated to receive any advance, take-or-pay or other similar payments under production sales contracts that entitle the purchasers thereunder to recoup or otherwise receive deliveries of oil, gas or other hydrocarbons at any time on or after the Effective Date without payment therefor.

(s) Wells . To Seller’s knowledge, (i) all of the wells in which Seller has an interest by virtue of its ownership in the Assets have been drilled and completed within the boundaries of the related Subject Interest or within the limits otherwise permitted by contract, pooling or unit agreement, and by Law, and (ii) all drilling and completion of the wells included in each Subject Interest and all development and operations on such Subject Interest are being conducted in compliance in all material respects with all applicable Laws and permits, and judgments, orders and decrees of any Governmental Authority. To Seller’s knowledge, no well included on any Subject Interest is subject to material penalties on allowables after the date

 

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hereof because of any overproduction or any other violation of applicable Laws or permits or judgments, orders or decrees of any Governmental Authority that would prevent in any material respect such well from being entitled to its full legal and regular allowable from and after the date hereof as prescribed by any Governmental Authority. Notwithstanding anything herein provided to the contrary, this Section 4.1(s) does not apply to environmental matters (for which Section 4.1(h) is applicable).

(t) Imbalances . To Seller’s knowledge, based on the information available to Seller at the date of execution of this Agreement, Schedule A-3 sets forth all wellhead or pipeline imbalances pertaining to the Subject Interests and the Gas Plants as of June 30, 2006.

(u) Tax Partnerships . Except as set forth on Schedule 4.1(u) , none of the Properties is subject to an agreement or arrangement which is treated as a partnership for federal income tax purposes with respect to which a valid election has not been made to be excluded from all of Subchapter K of Chapter 1 of Subtitle A of the Code.

(v) Insurance . Schedule 4.1(v) sets forth Seller’s insurance coverages on the Assets and the operation thereof. The insurance coverages set forth in Schedule 4.1(v) are in full force and effect and Seller has paid all premiums associated therewith on a timely basis. To Seller’s knowledge, there have been no actions or omissions by Seller which violate the terms of Seller’s insurance coverages set forth on Schedule 4.1(v) .

Section 4.2 Representations and Warranties of Buyer . Buyer represents and warrants to Seller as follows:

(a) Organization and Qualification . Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite limited partnership power to carry on its business as it is now being conducted. As of the Closing Date, Buyer will be duly qualified to do business and is in good standing in each jurisdiction in which the Assets to be acquired by it makes such qualification necessary.

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

(c) Enforceability . This Agreement constitutes a valid and binding agreement of Buyer enforceable against Buyer in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws of general application with respect to creditors, and (ii) general principles of equity.

(d) No Conflict or Violation . Neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyer will (i) conflict with or result in any breach of any provision of the certificate of formation or agreement of limited partnership (or other similar governing documents) of Buyer; (ii) be rendered void or ineffective by or under the terms, conditions or provisions of any agreement, instrument or obligation to which Buyer is a party or

 

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is subject; or (iii) subject to the limitations contained in Section 4.2(c), violate in any material respect or be rendered void or ineffective under any Law or any judgment, order or decree of a Governmental Authority; provided that the representations and warranties contained in clauses (ii) and (iii) of this Section 4.2(d) are subject to the matters expressly described and set forth in Schedule 4.2(d) and the exceptions set forth in clauses (i) and (ii) of Section 4.2(e).

(e) Consents . Except for (i) consents of or filings in connection with the assignment of any federal or state leases or any interest therein, (ii) Preference Rights and Transfer Requirements, and (iii) the consents, filings or notices expressly described and set forth in Schedule 4.2(e) , no consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Buyer or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyer.

(f) Actions . Except as set forth on Schedule 4.2(f) , there are no Actions pending against Buyer or, to the knowledge of Buyer, threatened against Buyer that relate to the transactions contemplated by this Agreement.

(g) Brokerage Fees and Commissions . Neither Buyer nor any Affiliate of Buyer has incurred any obligation or entered into any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplated by this Agreement for which Seller shall incur any liability.

(h) Qualified Owner . As of the Closing Date, Buyer (i) will be qualified to own federal oil, gas and mineral leases, and state oil and gas leases in the states of Texas and Louisiana, and (ii) will have complied with all necessary governmental bonding requirements arising from its ownership of the Assets. The consummation of the transactions contemplated hereby will not cause Buyer to be disqualified as an owner of such leases or to exceed any acreage limitation imposed by any statute, rule, regulation or order of Governmental Authority.

(i) Funds . Buyer has sufficient funds available to enable Buyer to consummate the transactions contemplated hereby and to pay all related fees and expenses of Buyer.

(j) No Distribution . Buyer is an experienced and knowledgeable investor in the oil and gas business. Prior to entering into this Agreement, Buyer was advised by its counsel and such other Persons it has deemed appropriate concerning this Agreement and has relied solely on the express representations and warranties of Seller in this Agreement and on an independent investigation and evaluation of, and appraisal and judgment with respect to, the geologic and geophysical characteristics of the Subject Interests, the estimated reserves recoverable therefrom, and the price and expense assumptions applicable thereto. Buyer is not acquiring any interests in the Assets in connection with a distribution thereof in violation of the Securities Act of 1933 and the rules and regulations thereunder or any applicable state blue sky laws.

 

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(k) Bankruptcy . There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to the knowledge of Buyer, threatened against Buyer.

ARTICLE V.

INVESTIGATION OF ASSETS; CONFIDENTIALITY

Section 5.1 Investigation of Assets . Promptly following the execution of this Agreement and until the Closing Date (or earlier termination of this Agreement), Seller (i) shall permit Buyer and its representatives at reasonable times to examine, in Seller’s offices, all drill site title opinions, division order title opinions, ownership maps, lease files, assignments and division orders and other Records relating to the Assets insofar as the same are in Seller’s possession and insofar as Seller may do so without (a) violating legal constraints or any legal obligation or (b) waiving any attorney/client privilege (except with respect to title opinions, title reports and other title materials prepared by Seller’s attorneys, which shall be made available to Buyer) and (ii), subject to any required consent of any third Person, shall permit Buyer and its representatives at reasonable times and at Buyer’s sole risk, cost and expense, to conduct reasonable inspections of the Assets; provided, however , (x) Buyer shall have no right to perform any environmental due diligence whatsoever and (y) Buyer shall indemnify and hold harmless, release and agree to defend the Seller Indemnified Parties from and against any and all Covered Liabilities resulting or arising in whole or in part from Buyer’s inspection of the Assets, including, without limitation, claims for personal injuries, property damage and reasonable attorney’s fees, regardless of any concurrent negligence or strict liability on the part of the Seller Indemnified Parties and regardless of the form of claim whether at common law, strict liability, negligence or under any statute or regulation; provided that Buyer shall not indemnify any of the Seller Indemnified Parties for claims arising out of the gross negligence or willful misconduct of any Seller Indemnified Party .

Section 5.2 Confidential Information . Unless and until the Closing occurs, Buyer agrees to maintain all information made available to it pursuant to Section 5.1 confidential and to cause its officers, employees, representatives, consultants and advisors to maintain all information made available to them pursuant to Section 5.1 confidential, all as provided in that certain Confidentiality Agreement dated June 20, 2006 (the “ Confidentiality Agreement ”), by and between COGC and Buyer, the terms of which are incorporated herein by reference and made a part of this Agreement.

ARTICLE VI.

TITLE AND ENVIRONMENTAL DEFECTS

Section 6.1 No Warranty or Representation . Without limiting Buyer’s right to adjust the Purchase Price by operation of Section 6.2 and except to the extent expressly provided in the Conveyance, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to Seller’s title to any of the Assets and Buyer hereby acknowledges and agrees that Buyer’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Assets shall be pursuant to the procedures set forth in this Article VI, which remedies shall cease, and be deemed to be finally and conclusively satisfied, in all respects, other than with respect to any unresolved Deferred Adjustment Claims which will be governed by Section

 

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6.5, upon the Closing. Furthermore, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to the accuracy or completeness of the information, records and data now, heretofore or hereafter made available to Buyer in connection with this Agreement (including, without limitation, any description of the Assets, pricing assumptions, potential for production of oil, gas or other hydrocarbons from the Subject Interests or reserves attributable to the Subject Interests, projected development costs, projected plugging and abandonment costs, any geological or other interpretations or other economic evaluations or any other matters contained in or related to the Reserve Data; any environmental information; or any other material furnished to Buyer by Seller or by Seller’s agents or representatives). Without limiting in any way the provisions of Section 6.6, the preceding sentence is not intended to modify the express terms and provisions of Section 4.1.

Section 6.2 Buyer’s Title Review .

(a) Buyer’s Assertion of Title Defects . Prior to the expiration of the period commencing on the execution of this Agreement and ending at 12:00 p.m., Central Daylight Time, on September 20, 2006 (the “ Title Examination Period ”), Buyer shall notify Seller in writing of any matters that, in Buyer’s opinion, constitute Title Defects and that Buyer intends to assert as a Title Defect with respect to any Property pursuant to this Article VI. For all purposes of this Agreement, Buyer shall be deemed to have waived any Title Defect that Buyer fails to assert as a Title Defect by written notice given to Seller on or before the expiration of the Title Examination Period. To be effective, Buyer’s written notice of a Title Defect must include (i) a brief description of the matter constituting the asserted Title Defect, (ii) the claimed Title Defect Amount attributable thereto, and (iii) supporting documents reasonably necessary for Seller to verify the existence of such asserted Title Defect. Buyer shall promptly furnish Seller with written notice of any Seller Title Credit that is discovered by any of Buyer’s employees or representatives while conducting Buyer’s title review, due diligence or investigation with respect to the Subject Interests and Properties; provided, however , that nothing in this Agreement shall impose upon Buyer any affirmative duty or obligation to search for any Seller Title Credits.

(b) Purchase Price Allocations . The Purchase Price has been allocated to the various Subject Interests in Properties in the manner and in accordance with the respective values set forth in Allocated Value Schedule. If any adjustment is made to the Purchase Price pursuant to this Section 6.2, a corresponding adjustment shall be deemed to be automatically made to the portion of the Purchase Price allocated to the affected Property in the Allocated Value Schedule.

(c) Seller’s Opportunity to Cure . Seller shall have until two (2) days prior to the Closing Date, at its cost and expense, if it so elects but without obligation, to cure all or a portion of such asserted Title Defects. Notwithstanding Buyer’s assertion of a Title Defect pursuant to Section 6.2(a), by notice to Seller, Buyer may at any time thereafter waive such Title Defect. Any asserted Title Defects that are waived by Buyer or cured within such time shall be deemed “Permitted Encumbrances” hereunder. If Seller within such time fails to cure any Title Defect of which Buyer has given timely written notice as required above and Buyer has not and does not waive same on or before the day immediately preceding the Closing Date, the Property affected by such uncured and unwaived Title Defect shall be a “ Title Defect Property ”.

 

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(d) Buyer’s Title Adjustments . Subject to the immediately following sentence of this Section 6.2(d), as Buyer’s sole and exclusive remedy against Seller or any of its Affiliates with respect to Title Defects asserted pursuant to Section 6.2(a), Buyer shall be entitled to reduce the Purchase Price at the Closing by the amount, if any, by which the aggregate amount of Title Defect Amounts with respect to all Title Defect Properties (other than those from which Seller elects to indemnify Buyer pursuant to the immediately following sentence and those that are the subject of a Deferred Adjustment Claim which will be governed by Section 6.5) exceeds the Deductible. Notwithstanding anything herein provided to the contrary, Seller may elect to indemnify Buyer (as provided in Article XIII) from and against any Covered Liabilities resulting from any Title Defect relating to a Title Defect Property by electing prior to Closing (with respect to an undisputed Title Defect) or before or within five (5) Business Days after receipt of the final and written decision of the board or arbitrators (with respect to a Title Defect that is the subject of a Deferred Adjustment Claim) to treat the Covered Liabilities resulting from such Title Defect as Retained Liabilities. “ Title Defect Amount ” shall mean, with respect to a Title Defect Property, the amount by which the value of such Title Defect Property is impaired as a result of the existence of one or more Title Defects, which amount shall be determined as follows:

(1) If the Title Defect results from Seller having a lesser Net Revenue Interest in such Title Defect Property than the Net Revenue Interest specified therefor in the Allocated Value Schedule, the Title Defect Amount shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Title Defect Property in the Allocated Value Schedule by a fraction, the numerator of which is the reduction in the Net Revenue Interest and the denominator of which is the Net Revenue Interest specified for such Title Defect Property in the Allocated Value Schedule.

(2) If the Title Defect results from Seller having a greater Working Interest in a Title Defect Property than the Working Interest specified therefor in the Allocated Value Schedule, the Title Defect Amount shall be equal to the present value (discounted at 10% compounded annually) of the increase in the costs and expenses forecasted in the Reserve Data with respect to such Title Defect Property for the period from and after the Effective Time that is attributable to such increase in Seller’s Working Interest.

(3) If the Title Defect results from the existence of a lien, security interest or charge for a liquidated amount, the Title Defect Amount shall be an amount sufficient to discharge such lien, security interest, or charge for a liquidated amount.

(4) If the Title Defect results from any matter not described in paragraphs (1), (2) or (3) above, the Title Defect Amount shall be an amount equal to the difference between the value of the Title Defect Property affected by such Title Defect with such Title Defect and the value of such Title Defect Property without such Title Defect (taking into account the portion of the Purchase Price allocated in the Allocated Value Schedule to such Title Defect Property); provided , that if such Title Defect is reasonably susceptible of being

 

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cured, the Title Defect Amount shall be the reasonable cost and expense of curing such Title Defect, if less.

(5) If a Title Defect is not effective or does not affect a Title Defect Property after a date certain, such fact shall be taken into account in determining the Title Defect Amount.

(6) The Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder. For example, but without limitation, if a lien affects more than one Title Defect Property or the curative work with respect to one Title Defect results in the curing of any other Title Defect affecting the same or another Title Defect Property, the amount necessary to discharge such lien or the cost and expense of such curative work shall only be included in the Title Defect Amount for one Title Defect Property and only once in such Title Defect Amount.

(7) If a Title Defect affects only a portion of a Property (as contrasted with an undivided interest in the entirety of such Property) and a portion of the Purchase Price has not been allocated specifically to such portion of a Property in the Allocated Value Schedule, then for purposes of computing the Title Defect Amount, the portion of the Purchase Price allocated to such Property shall be further allocated among the portions of such Property in the proportion that the portion of such Property affected by such Title Defect bears to the entire Property.

(8) The Title Defect Amount attributable to a Title Defect Property or any portion thereof shall not exceed the portion of the Purchase Price allocated to such Title Defect Property or such portion in Section 6.2(b) and paragraph (7) above. For example, but without limitation, if Seller does not own fifty percent (50%) of the Net Revenue Interest specified in the Allocated Value Schedule for a Title Defect Property and such unowned fifty percent (50%) interest is also burdened by a lien, the Title Defect Amount for such Title Defect Property shall not exceed the portion of the Purchase Price allocable to such fifty percent (50%) interest notwithstanding that it may be affected by multiple Title Defects.

(9) No Title Defect Amount shall be allowed on account of and to the extent that an increase in Seller’s Working Interest in a Property has the effect of proportionately increasing Seller’s Net Revenue Interest in such Property.

Section 6.3 Determination of Title Defects . A portion of a Property shall be deemed to have a “ Title Defect ” if any one or more of the following statements is untrue with respect to such portion of a Property as of the Effective Time and as of the Closing Date:

(a) Seller has Defensible Title thereto.

(b) All royalties, rentals, Pugh clause payments, shut-in gas payments and other payments due with respect to such portion of a Property have been properly and timely

 

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paid, except for payments held in suspense for title or other reasons that do not constitute grounds for cancellation of Seller’s rights in such Property.

(c) Seller is not in default under the material terms of any leases, farm-out agreements or other contracts or agreements respecting such portion of a Property that could (1) prevent Seller from receiving the oil, gas or other hydrocarbons or proceeds from the sale of such production attributable to Seller’s interest therein, or (2) result in cancellation, forfeiture, termination or relinquishment of Seller’s interest therein.

Notwithstanding any other provision in this Agreement to the contrary, the following matters shall not be asserted as, and shall not constitute Title Defects: (i) any title defect that does not result in a diminution in the present value of a Property by more than $100,000.00, (ii) defects in the early chain of the title consisting of the mere failure to recite marital status in a document or omissions of successions of heirship proceedings, unless Buyer provides affirmative evidence that such failure or omission results in another party’s superior claim of title to the relevant Property, or portion thereof, (iii) defects arising out of lack of survey, (iv) defects arising out of lack of corporate authorization, unless Buyer provides affirmative evidence that such corporate action was not authorized and results in another party’s superior claim of title to the relevant Property or portion thereof, (v) defects that have been cured by possession under the applicable statutes of limitations or statutes for prescription, (vi) any title defect that results from Seller’s compliance with Section 8.1(c), excluding Section 8.1(c)(4)(i), provided that such compliance does not result in a violation of Section 8.1(b), (vii) the matter described in Schedule 4.1(h) , and (viii) the matters referenced in or resulting from the disclosures set forth in item 4 on Schedule 4.1(f) and as threatened actions on Schedule 4.1(f) and the disclosures set forth in Schedule 4.1(u) .

Section 6.4 Seller Title Credit . A “ Seller Title Credit ” shall mean, with respect to a Property, the amount by which the value of such Property is enhanced by virtue of (a) Seller having a greater Net Revenue Interest in such Property than the Net Revenue Interest specified therefor in the Allocated Value Schedule, or (b) Seller having a lesser Working Interest in such Property than the Working Interest specified therefor in the Allocated Value Schedule, which amount shall be determined as follows:

(1) If the Seller Title Credit results from Seller having a greater Net Revenue Interest in such Property than the Net Revenue Interest specified therefor in the Allocated Value Schedule, the Seller Title Credit shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Property in the Allocated Value Schedule by a fraction, the numerator of which is the increase in the Net Revenue Interest and the denominator of which is the Net Revenue Interest specified for such Property in the Allocated Value Schedule.

(2) If the Seller Title Credit results from Seller having a lesser Working Interest in a Property than the Working Interest specified therefor in the Allocated Value Schedule, the Seller Title Credit shall be equal to the present value (discounted at 10% compounded annually) of the decrease in the costs and expenses forecasted in the Reserve Data with respect to such Property for the

 

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period from and after the Effective Time that is attributable to such decrease in Seller’s Working Interest.

(3) In determining the amount of Seller Title Credits, the principles and methodology set forth in paragraphs (5), (6) and (7) of Section 6.2(d) shall be applied, mutatis mutandis .

(4) No Seller Title Credit shall be allowed on account of and to the extent that a decrease in Seller’s Working Interest in a Property has the effect of proportionately decreasing Seller’s Net Revenue Interest in such Property.

Section 6.5 Deferred Claims and Disputes . In the event that Buyer and Seller have not agreed upon one or more title adjustments, credits or offsets claimed by Buyer or Seller pursuant to and in accordance with the requirements of this Article VI, any such claim (a “ Deferred Adjustment Claim ”) shall be settled pursuant to this Section 6.5 and, except as provided in Sections 9.1(e) and 9.2(e), shall not prevent or delay Closing. With respect to each potential Deferred Adjustment Claim, Buyer and Seller shall deliver to the other a written notice describing each such potential Deferred Adjustment Claim, the amount in dispute and a statement setting forth the facts and circumstances that support such party’s position with respect to such Deferred Adjustment Claim. At Closing, the Purchase Price shall not be reduced on account of, and, except as provided in Sections 9.1(e) and 9.2(e), no effect shall be given to, the Deferred Adjustment Claim. On or prior to the thirtieth (30th) consecutive calendar day following the Closing Date (the “ Deferred Matters Date ”), Seller and Buyer shall attempt in good faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to resolve by written agreement all disputes regarding the Deferred Adjustment Claims. Any Deferred Adjustment Claims that are not so resolved on or before the Deferred Matters Date may be submitted by either Buyer or Seller to final and binding arbitration in accordance with the Arbitration Procedures; provided, however , that Seller may elect at any time to resolve all disputes relating to the Deferred Adjustment Claims by (i) reducing the Deductible (to the extent the Deductible has not been reduced to zero) or paying to Buyer the amount by which the Purchase Price would have been reduced at Closing on account of the Title Defects that constitute Deferred Adjustment Claims if same did not constitute Deferred Adjustment Claims, together with interest thereon from the Closing Date to the date of such payment at the Agreed Rate, or (ii) indemnifying Buyer from and against any Covered Liabilities resulting from any Title Defect that constitutes a Deferred Adjustment Claim by electing to treat such Title Defect as a Retained Liability. Notwithstanding anything herein provided to the contrary, including Section 6.2(c), Seller shall be entitled to cure any Title Defect that constitutes a Deferred Adjustment Claim at any time prior to the point in time when a final and binding written decision of the board of arbitrators is made with respect thereto in accordance with the Arbitration Procedures. Subject to Seller’s indemnification rights pursuant to Section 6.2(d), any Title Defect Amount to which Buyer becomes entitled under the final and binding written decision of the board of arbitrators shall (i) reduce the Deductible (to the extent the Deductible has not been reduced to zero), or (ii) be refunded by Seller to Buyer within five Business Days after such decision, together with interest thereon from the Closing Date to the date of payment at the Agreed Rate.

 

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Section 6.6 No Duplication . Notwithstanding anything herein provided to the contrary, if the breach of any representation or warranty of Seller set forth in Section 4.1 also could result in a Title Defect, then Buyer shall only be entitled to assert such Title Defect pursuant to this Article VI and shall be precluded from also asserting such Title Defect and recovering the resulting Title Defect Amount or any losses or damages resulting from such Title Defect on the basis of the breach of any such representation or warranty.

Section 6.7 Environmental Defects .

(a) Following the Closing, for any Environmental Defect Property for which Buyer provides notice of an Environmental Defect prior to the execution of this Agreement, Buyer shall, in its discretion, conduct investigative, remedial or other activities (“ Environmental Activities ”) at the Environmental Defect Property so that it ceases to have the Environmental Defect; provided however , all fair and reasonable out-of-pocket costs paid by Buyer to conduct Environmental Activities reasonably necessary to bring the Environmental Defect Property into compliance with Environmental Laws (as those Laws exist at Closing) for which Buyer furnishes Seller reasonable substantiation shall be applied to reduce any portion of the Deductible that has not been reduced pursuant to Section 6.2(d) or Section 13.4(b). Notwithstanding anything herein provided to the contrary, Buyer acknowledges and agrees that if the Environmental Defect Amount attributable to an Environmental Defect is less than or equal to $100,000.00, then Seller shall have no liability whatsoever with respect to such Environmental Defect pursuant to this Section 6.7 or otherwise. Any costs incurred by Buyer to conduct additional Environmental Activities required by standards imposed by a Governmental Authority that become applicable after Closing or costs for any additional Environmental Activities required as a result of events that occur after Closing shall not be applied to reduce the Deductible. If, and only if, Buyer pays costs in conducting Environmental Activities in accordance with this Section 6.7(a) that result in the reduction of the Deductible to zero, Buyer shall no longer be obligated to conduct or pay for Environmental Activities under this Subsection 6.7(a) and then Subsections 6.7(b)-(d) shall apply instead.

(b) If Buyer is no longer obligated to conduct or pay for Environmental Activities as provided in the last sentence of Section 6.7(a), then, with respect to any Environmental Defect Property for which Buyer provides notice of an Environmental Defect prior to the execution of this Agreement, Seller shall conduct, at Seller’s sole cost, risk and expense, Environmental Activities at the Environmental Defect Property so that it ceases to have the Environmental Defect. Seller’s obligation under this Section 6.7(b) shall be limited to Environmental Activities reasonably necessary to bring the Environmental Defect Property into compliance with Environmental Laws as those Laws exist at Closing. Buyer shall be responsible for any additional Environmental Activities required by standards imposed by a Governmental Authority that become applicable after Closing or for any additional Environmental Activities required as a result of events that occur after Closing. Buyer shall reasonably cooperate with Seller as Seller conducts any Environmental Activities. Seller shall use its commercially reasonable efforts to complete the Environmental Activities required to be performed by it pursuant to this Section 6.7(b) as soon as is reasonably practical. To the extent any damage to an Environmental Defect Property is caused by any Environmental Activities conducted by or on behalf of Seller, Seller shall be responsible to repair such damage. Seller shall keep Buyer informed of the nature, kind, scope, proposed timing, duration and results of the Environmental

 

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Activities and shall share with the Buyer all information regarding the Environmental Activities and Environmental Defects as may be reasonably requested by Buyer.

(c) Seller shall, with reasonable care and consistent with sound investigation and remediation practices, undertake any Environmental Activities it conducts in a manner that will not unreasonably interfere with Buyer’s use of Environmental Defect Properties for oil and gas exploration and development purposes. Buyer acknowledges that Environmental Activities that may be undertaken by Seller include, without limitation, sampling and excavating soil and the sampling, operation and maintenance of groundwater monitoring and recovery wells, associated piping, groundwater pumping and treatment equipment, and other facilities and equipment. Buyer shall, without further compensation, cost or fees to Seller, grant and provide all necessary access reasonably required by Seller to enter Environmental Defect Properties to undertake Environmental Activities.

(d) Seller shall have the right to control any Environmental Activities it undertakes and the right to select an appropriate cleanup standard for any Environmental Defect in accordance with Environmental Laws, including cleanup standards applicable to industrial properties or oil and gas exploration and production properties. Buyer acknowledges that Environmental Activities conducted to remedy any Environmental Defects may involve the filing of land use and deed restrictions, institutional and engineering controls, groundwater use restrictions, and access and easement rights, and restrictive covenants (including, but not limited to, a prohibition against installation of water wells on Environmental Defect Properties). No such land and deed restriction, institutional and engineering controls, access and easement rights, or restrictive covenants shall unreasonably interfere with the ability to use the Environmental Defect Property for oil and gas exploration and production purposes, and the processing, treatment, handling and transportation of oil, gas and other hydrocarbons and the handling and disposal of other substances and materials used in such operations. Buyer shall cooperate with Seller in obtaining and maintaining any necessary documents, permits or deed conditions, and Buyer shall not take any action in contravention of such land use, deed restrictions and other requirements. To the extent such matters are within Buyer’s control, Buyer shall not use any Environmental Defect Property, or permit any Environmental Defect Property to be used, for residential, health care, childcare or school purposes unless such properties are used for such purposes as of the Closing Date.

ARTICLE VII.

PREFERENCE RIGHTS AND CONSENTS

Section 7.1 Compliance . Buyer’s purchase of the Assets is expressly subject to all validly existing and applicable Preference Rights and Transfer Requirements. Prior to the Closing Date, Seller shall initiate, and shall use commercially reasonable efforts to complete, all procedures required to comply with or obtain the waiver of all Preference Rights and Transfer Requirements set forth in Schedule 7.1 with respect to the transactions contemplated by this Agreement. With respect to all Retained Assets for which Seller has not obtained, complied with or otherwise satisfied applicable Transfer Requirements prior to the Closing Date, Seller shall continue to use its commercially reasonable efforts to obtain the waiver of such Transfer Requirements for one hundred eighty (180) days after the Closing Date. Seller shall be liable for any costs and expenses incurred in connection with complying with or obtaining the waiver of all

 

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Preference Rights and Transfer Requirements. Notwithstanding anything herein provided to the contrary, neither Seller nor Buyer shall be obligated to pay any money to any Person in order to comply with or obtain the waiver of any Preference Right or Transfer Requirement.

Section 7.2 Effect of Preference Rights . If a third party who has been offered a Preference Property pursuant to Section 7.1 elects prior to Closing to purchase such Preference Property in accordance with the terms of such Preference Right, and Seller receives, and promptly delivers to Buyer, written notice of such election prior to the Closing Date, such Preference Property will be eliminated from the Assets and the Purchase Price shall be reduced by the portion of the Purchase Price allocated to such Preference Property pursuant to the immediately following sentence. The portion of the Purchase Price to be allocated to any Asset or portion thereof affected by a Preference Right (a “ Preference Property ”) shall be the portion of the Purchase Price allocated thereto in the Allocated Value Schedule. If a Preference Right affects only a portion of a Property and a portion of the Purchase Price has not been allocated specifically to such portion of a Property in Allocated Value Schedule, then the portion of the Purchase Price to be allocated to such Preference Property shall be determined in the same manner as provided in Section 6.2(d)(7) when a Title Defect affects only a portion of a Property. If a third party who has been offered a Preference Property or who has been requested to waive its Preference Right pursuant to Section 7.1 does not elect to purchase such Preference Property or waive such Preference Right with respect to the transactions contemplated by this Agreement prior to the Closing Date, such Preference Property shall be not be conveyed to Buyer at Closing subject to such Preference Right, but shall be retained by Seller pending resolution of the matter, and the value of the Preference Property shall be paid by the Buyer to the Escrow Agent at Closing. If a third party elects to purchase a Preference Property subject to a Preference Right and Closing has already occurred, Seller shall be obligated to convey said Preference Property to such third party and shall be entitled to the consideration for the sale of such Preference Property, and Buyer shall have no liabilities or obligations with respect to such Preference Property, and the Seller shall be obligated to direct the Escrow Agent to refund to Buyer the amount previously placed in escrow by Buyer in respect thereof, together with the interest earned on such amount pursuant to the Escrow Agreement. If a third party does not elect to purchase a Preference Property subject to a Preference Right and Closing has already occurred, Seller shall be obligated to convey said Preference Property to Buyer within ten (10) days following the date on which such third party elects not to purchase such Preference Property or such election period expires and Buyer shall be obligated to direct the Escrow Agent to pay to Seller contemporaneously with such conveyance an amount equal to the money withheld by Buyer from the Purchase Price on account thereof, together with the interest earned on such amount pursuant to the Escrow Agreement from the Closing Date to the date of payment. Any subsequent conveyance of a Preference Property will be subject to all Closing requirements and conditions applicable to the initial Closing hereunder and appropriate adjustments in Net Cash Flow and proration of revenues and expenses will be made to account for any delayed Closing with respect to a Preference Property.

Section 7.3 Transfer Requirements . Promptly after the execution of this Agreement, Seller shall initiate all procedures required to comply with or obtain the waiver of all Transfer Requirements set forth on Schedule 7.1 applicable to the transactions contemplated by this Agreement. If a Transfer Requirement applicable to the transactions contemplated by this Agreement is not obtained, complied with or otherwise satisfied prior to the Closing Date, then

 

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any Asset or portion thereof affected by such Transfer Requirement (a “ Retained Asset ”) shall be held back from the Assets to be transferred and conveyed to Buyer at Closing and the portion of the Purchase Price that would be allocated to such Retained Asset pursuant to Section 7.2 if such Retained Asset were a Preference Property shall be paid by the Buyer to the Escrow Agent at Closing. Any Retained Asset so held back at the initial Closing will be conveyed to Buyer within ten (10) days following the date on which Seller obtains, complies with or otherwise satisfies all Transfer Requirements with respect to such Retained Asset (or, in the absence of such compliance or satisfaction, if mutually agreed to by Seller and Buyer) and Buyer shall be obligated to direct the Escrow Agent to pay to Seller contemporaneously with such conveyance an amount equal to the money withheld by Buyer from the Purchase Price on account thereof, together with the interest earned on such amount pursuant to the Escrow Agreement from the Closing Date to the date of payment; provided, however, if all Transfer Requirements with respect to any Retained Asset so held back at the initial Closing are not obtained, complied with or otherwise satisfied within one hundred eighty (180) days following the Closing Date, then such Retained Asset shall be eliminated from the Assets and this Agreement and Buyer shall have no liabilities or obligations with respect to such Retained Asset, and the Seller shall be obligated to direct the Escrow Agent to refund to Buyer the amount previously placed in escrow by the Buyer in respect thereof, together with the interest earned on such amount pursuant to the Escrow Agreement. Any subsequent conveyance of a Retained Asset will be subject to all Closing requirements and conditions applicable to the initial Closing hereunder and appropriate adjustments in Net Cash Flow and proration of revenues and expenses will be made to account for any delayed Closing with respect to a Retained Asset.

Section 7.4 Express Conditions on Sale . Buyer acknowledges that Seller desires to sell all of the Assets and would not have entered into this Agreement but for Buyer’s agreement to purchase all of the Assets as herein provided. Accordingly, it is expressly understood and agreed that Seller does not desire to sell any Preference Property unless the sale of all of the Assets is consummated by the Closing Date in accordance with the terms of this Agreement. In furtherance of the foregoing, Seller’s obligation hereunder to sell the Preference Properties to Buyer is expressly conditioned upon the consummation by the Closing Date of the sale of all of the Assets in accordance with the terms of this Agreement, either by conveyance to Buyer or conveyance pursuant to an applicable Preference Right; provided that, nothing herein is intended or shall operate to extend or apply any Preference Right to any portion of the Assets that is not otherwise burdened thereby. Time is of the essence with respect to the parties’ agreement to consummate the sale of the Assets by the Closing Date.

ARTICLE VIII.

COVENANTS OF SELLER AND BUYER

Section 8.1 Conduct of Business Pending Closing . Subject to Section 8.2 and the constraints of applicable operating and other agreements from the date hereof through the Closing, except as disclosed in Schedule 8.1 , or as otherwise consented to or approved by Buyer in writing (which consent or approval shall not be unreasonably withheld or delayed), Seller covenants and agrees that:

(a) Sales . Seller shall not sell, transfer, assign, convey, farmout, release, abandon or otherwise dispose of any Assets, or negotiate with, solicit offers from or otherwise

 

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pursue any transaction or series of transactions with any third party or enter into any transaction the effect of which would be to cause Seller’s ownership interest in any of the Assets to be altered from Seller’s ownership interest as of the date of this Agreement, other than (i) the sale of oil, gas and other hydrocarbons produced, saved and sold in the ordinary course of business, and (ii) the sale of personal property and equipment that is replaced with personal property and equipment of comparable or better value and utility in the ordinary and routine maintenance and operation of the Assets.

(b) Encumbrances . Seller shall not create or permit the creation of any lien, security interest or encumbrance on any Assets, except to the extent required or permitted incident to the operation of the Assets pursuant to this Section 8.1.

(c) Operation of Assets . Seller shall:

(1) cause the Assets to be maintained and operated in the ordinary course of business, as a reasonable and prudent operator and in accordance with Law, maintain insurance now in force with respect to the Assets, and pay or cause to be paid all costs and expenses in connection therewith promptly when due;

(2) not commit to participate in the drilling of any new well without the advance written consent of Buyer;

(3) not commit to other new operations on the Assets the cost of which (net to Seller’s interest) is in excess of $100,000.00 in any single instance, without the advance written consent of Buyer, which consent or non-consent must be given by Buyer within the lesser of (x) ten (10) days of Buyer’s receipt of the notice from Seller or (y) one-half (  ¹ / 2 ) of the applicable notice period within which Seller is contractually obligated to respond to third parties to avoid a deemed election by Seller regarding such operation, as specified in Seller’s notice to Buyer requesting such consent;

(4) maintain and keep the Assets in full force and effect, except where such failure is due to (i) the failure to pay a delay rental, royalty, shut in royalty or other payment by mistake or oversight (including Seller’s negligence) unless caused by Seller’s gross negligence or willful misconduct; provided, that the Purchase Price shall be reduced by the value of the affected Assets as shown on the Allocated Value Schedule, or (ii) the failure to participate in an operation that Buyer does not timely approve;

(5) use commercially reasonable efforts to maintain its relationships with suppliers, customers and others having material business relations with Seller with respect to the Assets so that they will be preserved for Buyer on and after the Closing Date; and

(6) maintain all insurance currently maintained by Seller with respect to the Assets and waive any rights of subrogation against Buyer with respect thereto and, upon the request of Buyer, cause Buyer to be named as an additional insured thereunder (except with respect to any such Workers’ Compensation

 

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Insurance) for the period commencing on the date of the execution of this Agreement through the earlier to occur of the Closing or the termination of this Agreement pursuant to Section 14.1, and cause the insurance underwriters to provide a waiver of subrogation against Buyer with respect thereto; provided, however, that all costs and expenses associated with the naming of Buyer as an additional insured thereunder shall be borne by Buyer.

(d) Contracts and Agreements . Seller shall not:

(1) grant or create any Preference Right or Transfer Requirement with respect to the Assets provided that the foregoing shall not prevent the performance by Seller of an obligation or agreement existing on the date hereof or pursuant to this Agreement;

(2) enter into any oil, gas or other hydrocarbon sales, supply, exchange, processing or transportation contract with respect to the Assets that is not terminable without penalty or detriment on notice of thirty (30) days or less;

(3) voluntarily relinquish any Seller’s position as operator with respect to the Assets; or

(4) enter into any Basic Document.

(e) Notice of Defaults . Seller shall give prompt written notice to Buyer of any Actions filed or threatened against Seller, or any written notice of default (or threat of default, whether disputed or denied) received or given by Seller under any material instrument or agreement affecting the Assets to which Seller is a party or by which Seller or any of the Assets are bound.

Section 8.2 Qualifications on Seller’s Conduct .

(a) Emergencies; Legal Requirements . Seller may take (or not take, as the case may be) any of the actions mentioned in Section 8.1(c) above if reasonably necessary under emergency circumstances or if required or prohibited (as the case may be) pursuant to Law and provided Buyer is notified as soon thereafter as practicable.

(b) Non-Operated Properties . If Seller is not the operator of a particular portion of the Assets, the obligations of Seller in Section 8.1 above with respect to such portion of the Assets that have reference to operations or activities which pursuant to existing contracts are carried out or performed by the operator shall be construed to require only that Seller use commercially reasonable efforts (without being obligated to incur any expense or institute any cause of action) to cause the operator of such portion of the Assets to take such actions or render such performance within the constraints of the applicable operating agreements and other applicable agreements.

(c) Certain Operations . Should Seller not wish to pay any lease rental or other payment or participate in any reworking, deepening, drilling, completion, equipping or other operation on or with respect to any well or other Subject Interest that may otherwise be required

 

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by Section 8.1 above, Seller shall give Buyer written notice thereof at least fifteen (15) days prior to the date such rental or other payment is due or, in the case of an operation, promptly after Seller receives notice of such proposed operation from the operator of such property (or if Seller is the operator, at the same time Seller gives or is required to give notice of such proposed operation to the non-operators of such property); and Seller shall not be obligated to make any such payment or to elect to participate in any such operation that Seller does not wish to make or participate in unless Seller receives from Buyer, within five days prior to the date when such payment or election is required to be made by Seller, the written election and agreement of Buyer (i) to require Seller to take such action and (ii) to pay all costs and expenses of Seller with respect to such lease rental or other payment or such operation. Notwithstanding the foregoing, Seller shall not be obligated to pay any lease rental or other payment or to elect to participate in any operation if the operator of the property involved recommends that such action not be taken. If Buyer advances any funds pursuant to this Section 8.2(c) with respect to a particular portion of the Assets, such portion of the Assets is not conveyed to Buyer at Closing or Closing does not occur, and such funds are not reimbursed to Buyer within thirty (30) days after the earlier of Closing or termination of this Agreement, then with respect to such particular portion of the Assets, (i) Buyer shall own and be entitled to any interest of Seller that would have lapsed but for such payment or (ii) in the case of operations, Buyer shall be entitled to receive the penalty, if any, that Seller, as nonconsenting party, would have suffered under the applicable operating or other agreement with respect to such operations as if Buyer were a consenting party thereunder; in each case, subject to and after deduction of any damages or other relief to which Seller may be entitled with respect to any breach by Buyer of this Agreement.

Section 8.3 Conveyance . Upon the terms and subject to the conditions of this Agreement, at or prior to the Closing, Seller and Buyer shall execute and deliver or cause the execution and delivery of the General Conveyance, in substantially the form attached hereto as Exhibit 8.3 (the “ Conveyance ”), together with recording counterparts thereof suitable for recording the counties and parishes where the Assets are located, together with any special state and federal assignment forms as may be required by Law to be executed in connection with the conveyance of specific Assets; provided that the terms and provisions of the Conveyance shall control as to any conflict between the Conveyance and any such special assignment forms.

Section 8.4 Public Announcements . Without the prior written approval of the other party hereto, which approval shall not be unreasonably withheld, no party hereto will issue, or permit any agent or Affiliate of it to issue, any press releases or otherwise make, or cause any agent or Affiliate of it to make, any public statements with respect to this Agreement and the transactions contemplated hereby, except where such release or statement is deemed in good faith by the releasing party to be required by Law or any national securities exchange, in which case the party will use commercially reasonable efforts to provide a copy to the other party prior to any release or statement.

Section 8.5 Further Assurances . Seller and Buyer each agrees that, from time to time, whether before, at or after the Closing Date, each of them will execute and deliver or cause their respective Affiliates to execute and deliver such further instruments of conveyance and transfer and take such other action as may be necessary to carry out the purposes and intents of this Agreement. Any separate or additional assignment of the Assets or any portion thereof required pursuant to this Section 8.5 shall (i) evidence the conveyance and assignment of the

 

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Assets made or intended to be made in the Conveyance, (ii) not modify or be deemed to modify any of the terms, covenants and conditions set forth in the Conveyance, and (iii) be deemed to contain all of the terms and provisions of the Conveyance, as fully as though the same were set forth at length in such separate or additional assignment.

Section 8.6 Removal . Within sixty (60) days following the Closing, Buyer shall remove the name and mark of Seller and any of its Affiliates and any variations and derivatives thereof and logos relating thereto from the equipment and fixtures comprising the Assets (other than the Records).

Section 8.7 Records . At Closing, or, in Buyer’s discretion, within a reasonable period of time following the Closing, Seller shall make all Records available for delivery to Buyer in Houston, Texas or at the locations of the Assets in the case of Records maintained at such locations. Buyer agrees to maintain the Records that are acquired pursuant to this Agreement until the fifth anniversary of the Closing Date (or, at Seller’s cost, for such longer period of time as Seller shall advise Buyer is necessary in order to have Records available with respect to open years for tax audit purposes), or, if any of such Records pertain to any claim or dispute pending on the fifth anniversary of the Closing Date, Buyer shall maintain any of such Records designated by Seller until such claim or dispute is finally resolved and the time for all appeals has been exhausted. After Closing, Buyer shall provide Seller and its representatives reasonable access to and the right to copy, at Seller’s cost, such Records for the purposes of (i) preparing and delivering any accounting provided for under this Agreement and adjusting, prorating and settling the charges and credits provided for in this Agreement, (ii) complying with any law, rule or regulation affecting Seller’s interest in the Assets prior to the Closing Date, (iii) preparing any audit of the books and records of any third party relating to Seller’s interest in the Assets prior to the Closing Date, or responding to any audit prepared by such third parties, (iv) preparing tax returns, (v) responding to or disputing any tax audit or (vi) asserting, defending or otherwise dealing with any claim or dispute under this Agreement or with respect to the Assets.

Section 8.8 Recording . Immediately following the Closing, Buyer, at its cost and expense, shall use commercially reasonable efforts to record the Conveyance and all other instruments of assignment in the appropriate governmental offices of the jurisdictions in which the Assets are located. Following such recording, Buyer shall advise Seller in writing of the pertinent recording data.

Section 8.9 Asbestos and NORM . Buyer acknowledges that the Assets may currently or have in the past contained asbestos or naturally occurring radioactive materials (“ NORM ”) and that special procedures may be required for the assessment, remediation, removal, transportation or disposal of such asbestos and NORM. Notwithstanding anything contained in this Agreement to the contrary, Buyer agrees to accept full responsibility for and shall pay all costs and expenses associated with the assessment, remediation, removal, transportation and disposal of the asbestos or NORM associated with the Assets as required by Law, and shall not be entitled to claim the fact that the assessment, remediation, removal, transportation or disposal of the asbestos or NORM is not complete or that additional cost will be required to complete the assessment, remediation, removal, transportation or disposal of the asbestos or NORM as a Title Defect, breach of Seller’s representations and warranties or breach

 

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of any of Seller’s other obligations under this Agreement, and Buyer (on behalf of itself, its officers, agents, employees, Affiliates, successors and assigns) irrevocably waives such claims. In conducting the duties and obligations contained in this Section 8.9, Buyer agrees to comply with all Laws.

Section 8.10 Amendment of Schedules . As of the Closing Date, all Schedules hereto shall be deemed amended and supplemented to include reference to any matter (a) relating to Seller or the Assets that arises or occurs after the date hereof as a result of Seller’s compliance with Section 8.1 (other than Section 8.1(c)(1)), (b) that results in an adjustment to the Purchase Price pursuant to Section 3.1, or (c) that relates to a property excluded from the Assets pursuant to Section 8.2(c).

Section 8.11 Seismic Data . Upon the receipt by Seller of the written consent of the licensor of any seismic license or similar agreement related to the Subject Interests, Seller shall assign to Buyer all of Seller’s right, title and interest therein, provided that Seller shall have no obligation to make any payments to any provider of seismic data. Subject to the immediately preceding sentence, Seller shall cooperate with Buyer in its efforts to obtain any such consent to assign.

Section 8.12 Hedges . (a) Following the execution by Buyer of a ISDA Master Agreement with each of JPMorgan Chase Bank, N.A. and Banque Paribas (collectively, the “ Counterparties ”), COGC shall use commercially reasonable efforts to effect the hedging transactions set forth on Schedule 8.12 (the “ Hedging Transactions ”) with the Counterparties on terms and conditions reasonably acceptable to COGC and Buyer. Buyer acknowledges and agrees that COGC shall have no obligation to enter into any Hedging Transaction unless and until each of the Counterparties agrees in writing to (i) the assignment by COGC to Buyer at the Closing of all of the trades that are the subject of the Hedging Transactions and (ii) release COGC from any and all obligations and liabilities related or attributable to such Hedging Transactions upon such assignment. The respective agreements between COGC and each Counterparty shall be evidenced by a Novation Agreement that is in form and substance reasonably acceptable to COGC.

(b) COGC acknowledges and agrees that none of the hedges that are the subject of the Hedging Transactions shall cover any period prior to October 1, 2006. COGC further covenants and agrees that, subject to Section 8.12(e) below, any Hedging Transactions entered into by COGC pursuant to this Section 8.12 shall be maintained in effect by COGC until the Closing.

(c) Buyer does hereby covenant and agree that except in the case of a Seller Default Buyer shall be solely responsible for and shall pay any and all Covered Liabilities suffered by COGC resulting from or attributable to the Hedging Transactions prior to the Closing.

(d) At the Closing, Buyer shall accept an assignment from COGC of all of the trades that are the subject of the Hedging Transactions and shall assume all obligations and liabilities attributable thereto pursuant to documentation required by the Counterparties and Seller shall direct the Escrow Agent to refund the Hedging Security to Buyer, together with the interest earned on such amount pursuant to the Escrow Agreement.

 

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(e) Within five (5) Business Days of the delivery by Buyer or Seller to the other Party, as the case may be, of a notice of the termination of this Agreement in accordance with Section 14.1, COGC shall furnish to Buyer written notice of whether it elects to unwind the Hedging Transactions. If COGC notifies Buyer that it elects not to unwind the Hedging Transactions, Buyer shall have no further obligations whatsoever to COGC or otherwise with respect to the Hedging Transactions and Seller shall direct the Escrow Agent to refund the Hedging Security to Buyer, together with the interest earned on such amount pursuant to the Escrow Agreement. However, if COGC notifies Buyer that it elects to unwind the Hedging Transactions, Buyer shall be obligated for and shall promptly pay, and Buyer does hereby indemnify and hold harmless COGC from and against, any and all Covered Liabilities suffered by COGC resulting from or attributable to the Hedging Transactions and the unwind thereof unless the termination of this Agreement resulted from the default by Seller of its obligations under this Agreement which default causes or results in one or more of Buyer’s conditions to Closing not being met (a “ Seller Default ”), in which case Seller shall remain liable for all such Covered Liabilities and Seller shall direct the Escrow Agent to refund the Hedging Security to Buyer, together with the interest earned on such amount pursuant to the Escrow Agreement. If COGC suffers any Covered Liabilities as a result of unwinding the Hedging Transactions and a Seller Default has not occurred, Buyer shall direct the Escrow Agent to release an amount equal to the Covered Liabilities suffered by COGC to Seller, and Buyer shall direct the Escrow Agent to refund an amount, if any, equal to the Hedging Security less the amount equal to the Covered Liabilities suffered by COGC to Buyer, together with the interest earned on such amount pursuant to the Escrow Agreement. Notwithstanding anything herein provided to the contrary, to the extent that the amount of the Hedging Security received by Seller from the Escrow Agent is insufficient to cover the Covered Liabilities suffered by COGC as a result of such unwind, Buyer shall promptly pay the difference to Seller. If COGC elects to unwind the Hedging Transactions and mark-to-market gain exists at the time of such unwind, (i) if the termination of this Agreement resulted from the default by Buyer of its obligations under this Agreement which default causes or results in one or more of Seller’s conditions to Closing not being met (a “ Buyer Default ”), COGC shall be entitled to retain 100% of any payment received by it on account of such gain and Buyer shall be entitled to no portion thereof, (ii) if the termination of this Agreement resulted from a Seller Default, COGC shall promptly pay to Buyer 100% of any payment received by it on account of such gain, or (iii) if the termination of this Agreement did not result from either a Buyer Default or a Seller Default, COGC shall promptly pay to Buyer one-half of any payment received by it on account of such gain.

ARTICLE IX.

CLOSING CONDITIONS

Section 9.1 Seller’s Closing Conditions . The obligation of Seller to consummate the transactions contemplated hereby is subject, at the option of Seller, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(a) Representations, Warranties and Covenants . The (1) representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects (except with respect to any provisions that include an express materiality qualification, which shall be true and correct in all respects) on and as of the Closing Date, and (2) covenants and

 

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agreements of Buyer to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects.

(b) Certificate . Seller shall have received a certificate of Buyer dated as of the Closing Date, executed by a duly authorized officer of Buyer, to the effect that the conditions set forth in paragraph (a) of this Section 9.1 have been satisfied.

(c) Conveyance . Buyer shall have executed and delivered the Conveyance prior to or on the Closing Date.

(d) No Action . On the Closing Date, no Action (excluding any such Action initiated by Seller or any of its Affiliates) shall be pending or threatened before any Governmental Authority seeking to enjoin or restrain the consummation of the transactions contemplated by this Agreement or to recover damages from Seller resulting therefrom.

(e) Title Adjustments and Environmental Defect Amounts . The sum of (i) the aggregate amount of all undisputed Title Defect Amounts, (ii) the aggregate amount of Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims, and (iii) the aggregate amount of Environmental Defect Amount for which Buyer has provided notice to Seller in accordance with Section 6.2(a) shall not exceed $20,000,000.00.

Section 9.2 Buyer’s Closing Conditions . The obligation of Buyer to consummate the transactions contemplated hereby is subject, at the option of Buyer, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(a) Representations, Warranties and Covenants . The (1) representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects (except with respect to any provisions that include an express materiality qualification, which shall be true and correct in all respects) on and as of the Closing Date, and (2) covenants and agreements of Seller to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects.

(b) Certificate . Buyer shall have received a certificate of Seller dated as of the Closing Date, executed by a duly authorized officer of Seller, to the effect that the conditions set forth in paragraph (a) of this Section 9.2 have been satisfied.

(c) Conveyance . Seller shall have executed and delivered the Conveyance prior to or on the Closing Date.

(d) No Action . On the Closing Date, no Action (excluding any such Action initiated by Buyer or any of its Affiliates) shall be pending or threatened before any Governmental Authority seeking to enjoin or restrain the consummation of the transactions contemplated by this Agreement or to recover damages from Buyer resulting therefrom.

(e) Title Adjustments and Environmental Defect Amounts . The sum of (i) the aggregate amount of all undisputed Title Defect Amounts, (ii) the aggregate amount of Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims, and

 

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(iii) the aggregate amount of Environmental Defect Amounts for which Buyer has provided notice to Seller in accordance with Section 6.2(a) shall not exceed $20,000,000.00.

ARTICLE X.

CLOSING

Section 10.1 Closing . The Closing shall be held on the Closing Date at 10:00 a.m., Houston time, at the offices of Seller’s counsel, at 1301 McKinney Street, Houston, Texas, or at such other time or place as Seller and Buyer may otherwise agree in writing.

Section 10.2 Seller’s Closing Obligations . At Closing, Seller shall direct the Escrow Agent to refund the Hedging Security to Buyer, together with the interest earned on such amount pursuant to the Escrow Agreement, and shall execute and deliver, or cause to be executed and delivered, to Buyer the following and shall take the following actions:

(a) The Conveyance;

(b) The certificate referred to in Section 9.2(b);

(c) An Affidavit of Non-Foreign Status, substantially in the form attached hereto as Exhibit 10.2(c) ;

(d) Letters in lieu of division and transfer orders relating to the Subject Interests in form reasonably necessary to reflect the conv