PURCHASE AND SALE AGREEMENT

Exhibit 2.5

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

EXCO OPERATING COMPANY, LP

EXCO PRODUCTION COMPANY, LP

as Seller

and

BG US PRODUCTION COMPANY, LLC

as Buyer

EXECUTED ON June 29, 2009

EFFECTIVE DATE: January 1, 2009

TABLE OF CONTENTS

 

 

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LIST OF APPENDIXES, EXHIBITS AND SCHEDULES

 

 

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (as may be amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”) is entered into the 29 ^th day of June, 2009, among EXCO OPERATING COMPANY, LP , a Delaware limited partnership (“ EOC ”), and EXCO PRODUCTION COMPANY, LP , a Texas limited partnership (“ EPC ” and collectively, with EOC, “ EXCO ” or “ Seller ”) and BG US PRODUCTION COMPANY, LLC , a Delaware limited liability company (“ Buyer ”). Buyer and Seller may be referred to collectively as the “ Parties ” or individually as a “ Party ”.

Recitals

Seller and Buyer desire to enter into an arrangement for the joint exploration, development and operation of certain oil and gas properties located in the counties of Cherokee, Gregg, Harrison, Marion, Nacogdoches, Panola, Rusk and Shelby in the state of Texas and the parishes of Bienville, Bossier, Caddo, DeSoto, Red River and Webster in the state of Louisiana (such counties and parishes are referred to collectively as the “Subject Counties”) as hereinafter described, and in connection therewith Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, an undivided 50% interest in and to Seller’s right, title and interest in such properties in accordance with this Agreement.

The purchase and sale of the Conveyed Interests (as hereinafter defined) and the Parties’ agreement regarding the joint exploration and development of the Assets will be consummated on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, for and in consideration of the mutual promises contained herein, the benefits to be derived by each Party, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

1.1 Defined Terms . In addition to the terms defined in the introductory paragraph and the Recitals of this Agreement, for purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings set forth in Appendix I .

1.2 References and Rules of Construction . All references in this Agreement to Exhibits, Schedules, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Appendices, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular Article, Section, subsection or other subdivision unless expressly so limited. The words “this Article,” “this Section,” and “this subsection,” and words of similar import, refer only to Article, Section or subsection hereof in which such words occur. The word “including” (in its various forms) means including without limitation. All references to “$” or “dollars” shall

 

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be deemed references to United States dollars. Each accounting term not defined herein will have the meaning given to it under GAAP as interpreted as of the date of this Agreement. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Appendices, Exhibits and Schedules referred to herein are attached to and by this reference incorporated herein for all purposes.

ARTICLE II

PURCHASE AND SALE

2.1 Purchase and Sale . Subject to the terms and conditions of this Agreement, Seller agrees to sell, and Buyer agrees to purchase and pay for the interests described below in and to the following assets and properties (less and except for (i) the Excluded Assets and (ii) any other assets excluded pursuant to the terms of Sections 11.2(d)(i)(B), 11.4(b) and 12.1(b)(iii) , such interests in such assets and properties described in (a), (b), (c) and (d) of this Section shall be referred to herein collectively as the “Conveyed Interests”):

(a) an undivided 50% of all of Seller’s right, title and interest in and to the following assets and properties:

(i) the oil, gas and/or mineral leases, subleases, operating agreements granted by the Louisiana State Mineral Board, fee interests, fee mineral interests, mineral servitudes, royalties, overriding royalties, production payments, net profits interests, carried interests, reversionary interests and other interests in oil, gas and/or minerals in place (collectively, the “ Oil and Gas Interests ”) more particularly described in Exhibit A and all other Oil and Gas Interests located in the Subject Counties (such 50% of Seller’s interests in all such Oil and Gas Interests being referred to collectively as the “ Leases ”), together with any and all other rights, titles, and interests of Seller in and to (A) the leasehold estates created by the Leases, (B) the lands covered by the Leases (such 50% of Seller’s interests in such lands, the “ Lands ”), and (C) the interests in any pooled acreage, communitized acreage or units arising on account of the Leases or Lands having been pooled, communitized or unitized into such units (such 50% of Seller’s interests in such units, the “ Units ”);

(ii) all oil and gas wells and injection wells that have not been permanently abandoned located on the Leases, the Lands or the Units (such 50% of Seller’s interests in such wells, collectively and including, without limitation, the wells set forth on Exhibit B , the “ Wells ”), and all Hydrocarbons produced therefrom or allocated thereto (the Leases, the Lands, the Units and the Wells being collectively referred to hereinafter as the “ Properties ”); and

(iii) all equipment, machinery, fixtures, and other real, immovable, personal, movable and mixed property primarily used or held for use in connection with the Properties or the other Conveyed Interests described above, including, without limitation, saltwater disposal wells, well equipment, casing, rods, tanks, boilers, buildings, tubing, pumps, motors, fixtures, machinery, compression equipment, flow lines, and separation facilities, structures, materials, and other items used or held for use in the operation thereof and located

 

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upstream of the outlet flange of the relevant custody transfer meter (or, in the case of Hydrocarbon liquids, upstream of the outlet flange in the tanks) (such 50% of Seller’s interest in such properties, the “ Personal Property ”);

(b) to the extent assignable (with consent, if applicable), all of Seller’s (i) beneficial interest in and to all surface fee interests, surface leases, easements, rights-of-way, permits, licenses, servitudes, and other surface rights and (ii) legal right, title and interest in and to those surface fee interests, surface leases, easements, rights of way, and other surface rights set forth on Exhibit A-2 , (in each case) to the extent and only to the extent that such interests, assets and rights are associated with the Properties or Personal Property (such interests, the “ Rights of Way ”);

(c) all of Seller’s right, title and interest in and to the following assets and properties to the extent, and only to the extent, that such assets and properties are associated with the Properties, the Personal Property or the Rights of Way:

(i) to the extent assignable, the beneficial interest in all water withdrawal and disposal and other permits, licenses, orders, approvals, variances, waivers, franchises, rights and other authorizations issued by any Governmental Authority;

(ii) to the extent assignable (with consent, if applicable), all Applicable Contracts;

(iii) all Imbalances;

(iv) copies of any files, records, maps, information, and data, whether written or electronically stored, including: (A) land and title records (including abstracts of title, title opinions, and title curative documents); (B) contract files; (C) correspondence; (D) operations, environmental, production, and accounting records and (E) production, facility and well records and data (including logs and cores), but excluding any of the foregoing items that are Excluded Assets (“ Records ”);

(v) to the extent assignable (with consent, if applicable) without payment of fees or other penalties, all geophysical and other seismic and related technical data and information listed on Schedule 2.1 ; and

(vi) all liens and security interests securing payment for the sale or other disposition of Hydrocarbons produced from or allocated to the Properties, including the security interests granted under Texas Uniform Commercial Code § 9.343, but only to the extent that such liens and security interests relate to the period from and after the Effective Time; and

(d) to the extent assignable, all of Seller’s right, title and interest in and to all rights, claims and causes of action to the extent, and only to the extent, that such rights, claims or causes of action are associated with the Conveyed Interests described in Section 2.1(a), 2.1(b) or 2.1(c) above as of the Closing Date and (i) relate to the period from and after the Effective Time or (ii) relate to the period prior to the Effective Time and are not asserted by Seller in writing to Buyer or the applicable Third Party on or before the applicable Seller Indemnity Cut-off Date, and in any case excluding tax claims and loss carry forwards, provided that, at Buyer’s request,

 

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Seller shall use its reasonable efforts to enforce, for the benefit of Buyer, at Buyer’s cost and expense, any right, claim or cause of action that would otherwise be transferred hereunder but is not assignable.

In addition, as part of the transactions contemplated by this Agreement, effective as of the Closing, each Party shall grant to the other Party the AMI Rights and the Preferential Rights by such Party’s execution and delivery of the Joint Development Agreement at Closing.

2.2 Excluded Assets . Seller shall reserve and retain all of the Excluded Assets.

2.3 Revenues and Expenses .

(a) Except to the extent otherwise taken into account in connection with adjustments to the Closing Cash Consideration under Article III , Seller shall remain entitled to all of the rights of ownership (including, without limitation, the right to all production, proceeds of production and other proceeds) and shall remain responsible for all Operating Expenses (and entitled to any refunds with respect thereto), in each case attributable to the Conveyed Interests for the period of time prior to the Effective Time. Except to the extent otherwise taken into account in connection with adjustments to the Closing Cash Consideration under Article III , or as otherwise provided in the last sentence of this Section, and subject to the occurrence of the Closing, Buyer shall be entitled to all of the rights of ownership (including, without limitation, the right to all production, proceeds of production, and other proceeds), and shall be responsible for all Operating Expenses (and entitled to any refunds with respect thereto), in each case, attributable to the Conveyed Interests for the period of time from and after the Effective Time. All Operating Expenses attributable to the Conveyed Interests, in each case that are: (i) incurred with respect to operations conducted or production prior to the Effective Time shall be paid by or allocated to Seller and (ii) incurred with respect to operations conducted or production from and after the Effective Time shall be paid by or allocated to Buyer. Notwithstanding the other terms of this Section 2.3, Seller shall remain responsible for all Technical Services Costs (and entitled to any refunds with respect thereto) attributable to the Conveyed Interests for the period of time from and after the Effective Time and prior to the Closing Date, and subject to the terms of the Joint Development Agreement, for any period of time, following the Closing Date, after EOC ceases to serve as “Joint Development Operator” under the Joint Development Agreement or undergoes a change in Control of its ultimate parent entity.

(b) Buyer will pay to Seller any and all revenues and other proceeds attributable to the rights of ownership of the Conveyed Interests received after Closing by Buyer (to the extent not accounted for in the Preliminary Settlement Statement or the Final Settlement Statement) that are attributable to the Conveyed Interests prior to the Effective Time. Subject to the occurrence of Closing, Seller will pay to Buyer any and all revenues and other proceeds attributable to the rights of ownership of the Conveyed Interests received after Closing by Seller (to the extent not accounted for in the Preliminary Settlement Statement or the Final Settlement Statement) that are attributable to the Conveyed Interests on and after the Effective Time. The Party responsible for the payment of amounts received shall reimburse the other Party within 5 Business Days after the end of the month in which such amounts were received by the Party responsible for payment and, to the extent paid, such amounts shall not be taken into account for purposes of the Final Settlement Statement. Notwithstanding the foregoing, this Section 2.3(b)

 

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shall not apply to amounts received prior to Closing if such amounts are included, in whole or in part, in the Preliminary Settlement Statement. Such amounts (to the extent the same differ from estimates in the Preliminary Settlement Statement) will be accounted for in the Final Settlement Statement to the extent accounted for by the Parties pursuant to this Section 2.3(b) prior to the date of the Final Settlement Statement.

(c) Seller will reimburse Buyer for any and all Operating Expenses that are paid after Closing by Buyer (to the extent not accounted for in the Preliminary Settlement Statement or the Final Settlement Statement) and that are attributable to the Conveyed Interests prior to the Effective Time. Buyer will reimburse Seller for any and all Operating Expenses that are paid after Closing by Seller (to the extent not accounted for in the Preliminary Settlement Statement or the Final Settlement Statement) and that are attributable to the Conveyed Interests on and after the Effective Time, excluding Technical Services Costs attributable to the Conveyed Interests for the period of time on and after the Effective Time and prior to the Closing Date, and subject to the terms of the Joint Development Agreement, for any period of time, following the Closing Date, after EOC ceases to serve as “Joint Development Operator” under the Joint Development Agreement or undergoes a change in Control of its ultimate parent entity. The Party responsible for the payment of such costs and expenses shall reimburse the other Party within 5 Business Days after the end of the month in which the applicable invoice and proof of payment of such invoice were received by the Party responsible for payment and, to the extent paid, such amounts shall not be taken into account for purposes of the Final Settlement Statement. Notwithstanding the foregoing, this Section 2.3(c) shall not apply to amounts paid prior to Closing if such amounts are included, in whole or in part, in the Preliminary Settlement Statement. Such amounts (to the extent the same differ from the estimates in the Preliminary Settlement Statement) will be accounted for in the Final Settlement Statement to the extent accounted for by the Parties pursuant to this Section 2.3(c) prior to the date of the Final Settlement Statement.

(d) Each of Seller and Buyer shall be permitted to offset any Operating Expenses owed by such Party to the other Party pursuant to this Section 2.3 against revenues owing by such Party to such other Party pursuant to this Section 2.3 , but not otherwise, provided a detailed description of all such Operating Expenses and revenues and showing the calculation of the net amount is provided with the applicable payment or statement.

(e) After Closing, each Party shall be entitled to participate in all joint interest audits and other audits of Operating Costs for which such Party is entirely or in part responsible under the terms of this Section 2.3 .

2.4 Guaranty . Simultaneously with the execution and delivery of this Agreement, Buyer has executed and delivered the Buyer Parent Guaranty.

ARTICLE III

CONSIDERATION

3.1 Consideration . The consideration for the sale of the Conveyed Interests and the creation of the AMI Rights and the Preferential Rights as contemplated pursuant to Section 2.1 , shall be an amount equal to $655,000,000 to be paid in cash at Closing by Buyer to Seller (the “ Closing Cash Consideration ”), as adjusted pursuant to this Agreement, payable in United States currency by wire transfer in same day funds as and when provided in this Agreement.

 

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3.2 Deposit .

(a) Prior to the execution of this Agreement, Buyer has paid to Seller the sum of $20,000,000 (such amount, together with any interest actually earned thereon the “ Initial Deposit ”). Within 2 Business Days following the execution of the Escrow Agreement (the “ Deposit Date ”), Buyer will deposit by wire transfer in same day funds with Escrow Agent, to be held in escrow pursuant to the Escrow Agreement, an additional sum of $32,750,000 (such amount, together with any interest actually earned thereon, the “ Subsequent Deposit ” and together with the Initial Deposit, the “ Deposit ”). The Deposit shall be applied toward the Closing Cash Consideration at the Closing.

(b) If the transactions contemplated by this Agreement are not consummated on or before the Termination Date because of the willful breach by Buyer of any of its covenants or agreements hereunder in any material respect, including Buyer’s covenants under Section 9.3 (other than as a result of Seller’s breach of this Agreement), then, in such event, Seller shall have the option to (i) terminate this Agreement, receive the Deposit (and the Parties shall instruct the Escrow Agent to release the Subsequent Deposit to Seller pursuant to the terms of the Escrow Agreement) as liquidated damages and Seller’s sole and exclusive remedy (other than Seller’s remedy for breaches by Buyer of Sections 5.9, 6.6, 10.1(c) and (e), 10.2, and 14.4) free of any claims by Buyer thereto, (ii) seek the rights and remedies set forth in Section 14.2 , or (iii) terminate this Agreement, instruct the Escrow Agent to release the Subsequent Deposit to Buyer pursuant to the terms of the Escrow Agreement, pay the Initial Deposit to Buyer by wire transfer of immediately available funds, and seek the rights and remedies set forth in Section 14.3 .

(c) If this Agreement is terminated by the mutual written agreement of Buyer and Seller, or if the Closing does not occur on or before the Termination Date for any reason other than as set forth in Section 3.2(b) , then Buyer shall be entitled to the delivery of the Deposit, free of any claims by Seller with respect thereto and Buyer and Seller shall instruct the Escrow Agent to release the Subsequent Deposit to Buyer pursuant to the terms of the Escrow Agreement and Seller shall pay the Initial Deposit to Buyer by wire transfer of immediately available funds within 5 days of such termination. Buyer and Seller shall thereupon have the rights and obligations set forth in Sections 14.2 and 14.3 .

3.3 Adjustments to Closing Cash Consideration . All adjustments to the Closing Cash Consideration shall be made (y) in accordance with the terms of this Agreement and, to the extent not inconsistent with this Agreement, in accordance with U.S. generally accepted accounting principles as consistently applied in the oil and gas industry and (z) without duplication. The Closing Cash Consideration shall be adjusted as follows, and the resulting amount shall be herein called the “ Adjusted Closing Cash Consideration ”:

 

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(a) The Closing Cash Consideration shall be adjusted upward by the following amounts (without duplication):

(i) an amount equal to all Operating Expenses and other costs and expenses paid by Seller that are attributable to the Conveyed Interests during the Interim Period, whether paid before or after the Effective Time, including (A) bond and insurance premiums paid by or on behalf of Seller during the Interim Period, (B) royalties or other burdens upon, measured by or payable out of proceeds of production, and (C) rentals and other lease maintenance payments, but excluding (w) Technical Services Costs (for which Seller is responsible during the Interim Period), (x) Overhead Costs which are covered in Section 3.3(a)(v) below, (y) any amounts deducted under Section 3.3(b)(i) below; and (z) any amounts attributable to personal injury or death, property damage (other than damage to structures, fences, irrigations systems and other fixtures, crops, livestock and other personal property in the ordinary course of business), torts, breach of contract (other than failure to make payments under the terms of a contract) or violation of Law (or private rights of action under any Law).

(ii) Title Benefit Amounts as a result of any Pre-Closing Title Benefits for which the Title Benefit Amount has been determined prior to Closing;

(iii) the amount of all Asset Taxes prorated to Buyer in accordance with Section 15.2 but payable by Seller;

(iv) to the extent that Seller is underproduced as of the Effective Time as shown with respect to the net Imbalances set forth in Schedule 4.13 , as complete and final settlement of all Imbalances (subject to Buyer’s remedies for a breach of Seller’s representation set forth in Section   4.13 and subject to Section 3.10 ), the sum of $0.00 which is an amount equal to the product of (A) 0 Mcf times (B) $3.00/Mcf;

(v) to the extent attributable to the Interim Period, the Overhead Costs; and

(vi) any other amount provided for elsewhere in this Agreement or otherwise agreed upon in writing by Seller and Buyer as an upward adjustment to the Closing Cash Consideration.

(b) The Closing Cash Consideration shall be adjusted downward by the following amounts (without duplication):

(i) an amount equal to: (A) all proceeds received by Seller attributable to the sale of Hydrocarbons produced from or allocable to the Conveyed Interests during the Interim Period, net of expenses (other than Operating Expenses) paid by Seller and directly incurred in earning or receiving such proceeds, and any sales, excise or similar taxes or fees payable or incurred in connection therewith not reimbursed to Seller by a Third Party purchaser, and (B) any other net proceeds received by Seller from sales of equipment, materials or other real or personal property, payments for data or as contributions toward Wells, and payments made for waivers or modifications of Applicable Contracts (to the extent included in the Conveyed Interests), or in lieu of other performance thereof, or as a result of the breach thereof, in each case attributable to the Conveyed Interests during the Interim Period;

 

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(ii) if the Parties make the election under Section 11.2(d)(i)(A) with respect to a Pre-Closing Title Defect, the Title Defect Amount with respect to such Title Defect if the Title Defect Amount has been determined prior to Closing;

(iii) if the Parties make the election under Section 12.1(b)(i) with respect to an Environmental Defect, the Remediation Amount with respect to such Environmental Defect if the Remediation Amount has been determined prior to Closing;

(iv) an amount determined pursuant to Section 11.2(d)(i)(B), Section 11.4(b) , Section 11.4(d) or Section 12.1(b)(iii) for any Conveyed Interests excluded from the transaction contemplated hereby pursuant to such Sections;

(v) the amount of all Asset Taxes prorated to Seller in accordance with Section 15.2 but payable by Buyer;

(vi) to the extent that Seller is overproduced as of the Effective Time as shown with respect to the net Imbalances set forth in Schedule 4.13 , as complete and final settlement of all Imbalances (subject to Buyer’s remedies for a breach of Seller’s representation set forth in Section 4.13 and subject to Section 3.10 ), the sum of $0.00 which is an amount equal to the product of (A) 0 Mcf times (B) $3.00/Mcf; and

(vii) any other amount provided for elsewhere in this Agreement or otherwise agreed upon in writing by Seller and Buyer as a downward adjustment to the Closing Cash Consideration.

3.4 Adjustment Methodology . When available, actual figures will be used for the adjustments to the Closing Cash Consideration at the Closing. To the extent actual figures are not available, estimates will be used subject to final adjustments in accordance with Section 3.6 .

3.5 Preliminary Settlement Statement . Not less than 5 Business Days prior to the Closing, Seller shall prepare and submit to Buyer for review, using the best information available to Seller, a draft settlement statement (the “ Preliminary Settlement Statement ”) that shall set forth the Adjusted Closing Cash Consideration, reflecting each adjustment made in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement and the calculation of the adjustments used to determine such amount, together with the designation of Seller’s accounts for the wire transfers of funds as set forth in Section 9.3(d) . Within 3 Business Days of receipt of the Preliminary Settlement Statement, Buyer will deliver to Seller a written report containing all changes with the explanation therefor that Buyer proposes to be made to the Preliminary Settlement Statement. The Preliminary Settlement Statement, as agreed upon by the Parties, will be used to adjust the Closing Cash Consideration at Closing. If the Parties cannot agree on the Preliminary Settlement Statement prior to the Closing, the Preliminary Settlement Statement as presented by Seller will be used to adjust the Closing Cash Consideration at Closing.

3.6 Final Settlement Statement . A final settlement statement (the “ Final Settlement Statement ”) will be prepared by Seller, based on actual income and expenses during the Interim Period and which takes into account all final adjustments made to the Closing Cash Consideration and shows the resulting final Closing Cash Consideration (the “ Final Cash

 

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Price ”), and delivered to Buyer on or before 120 days after Closing. The Final Settlement Statement shall set forth the actual proration of the amounts required by this Agreement. Seller shall, at Buyer’s request, supply reasonable documentation in its or its Affiliates’ possession available to support the actual revenue, expenses and other items for which adjustments are made. As soon as practicable, and in any event within 45 days after receipt of the Final Settlement Statement, Buyer shall return a written report containing any proposed changes to the Final Settlement Statement and an explanation of any such changes and the reasons therefor (the “ Dispute Notice ”). If the Final Cash Price set forth in the Final Settlement Statement is mutually agreed upon by Seller and Buyer, the Final Settlement Statement and the Final Cash Price, shall be final and binding on the Parties.

3.7 Disputes . If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice, each of Buyer and Seller shall within 14 Business Days after the delivery of such Dispute Notice, summarize its position with regard to such dispute in a written document and submit such summaries to Ernst & Young LLP in Dallas, Texas, or such other Person as may be selected pursuant to this Section (the “ Accounting Arbitrator ”), together with the Dispute Notice, the Final Settlement Statement and any other documentation such Party may desire to submit. The Accounting Arbitrator shall also be furnished with a copy of this Agreement. Should Ernst & Young LLP fail or refuse to agree to serve as Accounting Arbitrator within 20 days after receipt of a written request from any Party to serve, the Parties shall request Deloitte & Touche LLP to serve as Accounting Arbitrator. Should Deloitte & Touche LLP fail or refuse to agree to serve as Accounting Arbitrator within 20 days after receipt of a written request from any Party to serve, and should the Parties fail to agree in writing on another replacement Accounting Arbitrator within 10 days after the end of that 20 day period, or should no replacement Accounting Arbitrator agree to serve within 60 days after the original written request pursuant to this Section, the Accounting Arbitrator shall be appointed by the Dallas office of the American Arbitration Association. Within 20 Business Days after receiving the Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’s position with respect to each matter addressed in any Dispute Notice, whichever is most accurate based on the terms of this Agreement and the materials described above. Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding on Seller and Buyer and will be enforceable against any of the Parties in any court of competent jurisdiction. The Accounting Arbitrator shall act as an expert for the limited purpose of determining the specific disputed aspects of the Final Settlement Statement submitted by any Party and may not award damages, interest, or penalties to any Party with respect to any matter. The costs of such Accounting Arbitrator shall be borne one-half by Buyer and one-half by Seller.

3.8 Adjustment for Final Settlement Statement . Subject to adjustments for revenues and expenses paid by the Parties pursuant to Sections 2.3(b) and 2.3(c) , any difference in the Adjusted Closing Cash Consideration as paid at Closing pursuant to the Preliminary Settlement Statement and the Final Cash Price as determined pursuant to Section 3.6 and, if applicable, Section 3.7 , shall be paid, together with interest from the Closing Date to the date of payment at a rate equal to the one month London Inter-Bank Offer Rate (as published in the Wall Street Journal) plus an additional 2.5 percentage points (or, if such rate is contrary to any applicable usury Law, the maximum rate permitted by such applicable Law), by the owing Party within 10 days of final determination hereunder to the owed Party. All amounts paid pursuant to this Section 3.8 shall be delivered in United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party.

 

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3.9 Allocated Values . The “ Allocated Value ” for any Conveyed Interest equals the portion of the unadjusted Closing Cash Consideration allocated to such Conveyed Interest on Exhibit B or, with respect to any Lease listed on Exhibit A-1 , the applicable Net Acre Allocation, (a) adjusted on a Property by Property basis by the adjustments provided in Sections 3.3(a)(ii), 3.3(b)(ii), 3.3(b)(iii) and 3.3(b)(iv) and (b) on a pro rata basis by the adjustments provided in Section 3.3 , other than Sections 3.3(a)(ii), 3.3(b)(ii), 3.3(b)(iii) and 3.3(b)(iv) , provided that, for purposes of calculating adjustments to the Closing Cash Consideration and sending notices to preferential right holders as provided herein, the “Allocated Value” shall be the unadjusted Closing Cash Consideration allocated to each Conveyed Interest in Exhibit B or, with respect to any Lease listed on Exhibit A-1 , the applicable Net Acre Allocation.

3.10 Allocation for Imbalances at Closing . If, prior to Closing, Buyer or Seller discovers an error in the Imbalances set forth in Schedule 4.13 , then the Closing Cash Consideration shall be further adjusted at Closing pursuant to Section 3.3(a)(iv) or Section 3.3(b)(vi) , as applicable, and Schedule 4.13 will be deemed amended immediately prior to the Closing to reflect the Imbalances for which the Closing Cash Consideration is so adjusted.

3.11 Maintenance of Value .

(a) Seller shall receive at Closing pursuant to this Agreement in excess of $500 million from the Adjusted Closing Cash Consideration. EOC agrees that until December 31, 2011, it will maintain a minimum of $500 million of such consideration (the “ Minimum Consideration ”) in EPC and/or EOC and shall not dividend or otherwise distribute any of such Minimum Consideration to any of Seller’s Affiliates, or use any of such Minimum Consideration to repay debt to any of Seller’s Affiliates or to satisfy any obligation on behalf of any of Seller’s Affiliates, other than (in each case) Seller’s own direct or indirect wholly-owned subsidiaries; provided, however, Seller may use all or any portion of such Minimum Consideration to (i) pay expenses or costs in connection with Seller’s general corporate purposes, (ii) keep such amounts as cash or cash equivalents and make other short-term investments of such amounts, (iii) acquire properties or other assets, (iv) make capital expenditures, including the payment of any Development Costs and Operating Expenses (as each such term is defined in the Joint Development Agreement), (v) satisfy the debt described in clause (a) of the definition of “Seller Debt Instruments” by making a payment to reduce the outstanding principal and interest thereunder to the extent such payment is made because of a mandatory reduction of the borrowing base under such Seller Debt Instrument in connection with the disposition of collateral to Buyer as part of the transactions contemplated by this Agreement and (vi) satisfy the debt described in clause (b) of the definition of “Seller Debt Instruments” by paying off the outstanding principal and interest under such Seller Debt Instrument and all of such uses shall be considered maintenance of such consideration in EPC and/or EOC as required pursuant to foregoing. To the extent that Seller or its direct or indirect wholly-owned subsidiaries uses all or any portion of such Minimum Consideration for the purposes set forth in clause (i), (iii), (iv), (v)  or (vi) , the amount required to be maintained by EOC as Minimum Consideration shall be decreased by the amount of such usage, and, in the event the amount required to be maintained by EOC as Minimum Consideration is reduced to zero, then this Section 3.11(a) shall thereafter terminate and be of no further force and effect, subject, however, to Section 3.11(b).

 

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(b) Notwithstanding Section 3.11(a), should a portion of the consideration be used to pay off amounts owing pursuant to the Seller Debt Instruments and (i) the payment does not satisfy the requirements of Section 3.11(a)(v) or (vi), then additional amounts thereafter borrowed under such Seller Debt Instruments, up to the amount previously repaid that did not satisfy the requirements of Section 3.11(a)(v) or (vi), shall again be subject to the restrictions in Section 3.11(a) or (ii) the debt represented in the Seller Debt Instruments be consolidated with other debt from any of Seller’s Affiliates (other than its own direct or indirect wholly-owed subsidiaries) or be replaced by a new credit arrangement providing for indebtedness of both EOC and one or more of its Affiliates (other than its own direct or indirect wholly-owed subsidiaries), Seller shall provide Buyer with a payment guarantee of Seller’s obligations for Development Costs under Section 2.3 of the Joint Development Agreement and under any Applicable Operating Agreement (as that term is defined in the Joint Development Agreement) from EOC’s ultimate parent entity (presently EXCO Resources, Inc.) in a form substantially similar to the Buyer Parent Guaranty Agreement, provided that such guaranty shall terminate at the same time that the Joint Development Agreement terminates, and the restrictions on use of consideration in Section 3.11(a) shall thereafter terminate and be of no further effect. If Buyer in the future enters into any agreement for borrowed money or security arrangements that are in whole or in part for the benefit of Buyer’s Affiliates (other than its own direct or indirect wholly-owed subsidiaries) as borrowers, Buyer shall provide Seller with a payment guarantee of Buyer’s obligations for Development Costs under Section 2.3 of the Joint Development Agreement and any Applicable Operating Agreement from Buyer’s ultimate parent entity (for this purpose, presently BG Energy Holdings Limited) in a form substantially similar to the Buyer Parent Guaranty Agreement, provided that such guaranty shall terminate at the same time that the JDA terminates.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as follows:

4.1 Organization, Existence . EOC is a limited partnership duly formed and validly existing under the laws of the State of Delaware. EPC is a limited partnership duly formed and validly existing under the laws of the State of Texas. Seller has all requisite power and authority to own and operate its property (including, without limitation, its interests in the Conveyed Interests) and to carry on its business as now conducted. Seller is duly licensed or qualified to do business as a foreign limited partnership and is in good standing in all jurisdictions in which such qualification is required by Law, except where the failure to qualify or be in good standing would not have a Material Adverse Effect.

4.2 Authorization . Seller has full power and authority to enter into and perform this Agreement and the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery, and performance by Seller of this Agreement have been and at Closing the Transaction Documents to which it is a party will have been duly and validly authorized and approved by all necessary partnership action on the part of

 

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Seller. This Agreement is, and the Transaction Documents to which Seller is a party when executed and delivered by Seller will be, the valid and binding obligation of Seller and enforceable against Seller in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar Laws affecting the rights of creditors generally, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

4.3 No Conflicts . Except as disclosed in Schedule 4.3 and assuming the receipt of all consents and the waiver of all preferential purchase rights applicable to the transactions contemplated hereby, the execution, delivery, and performance by Seller of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein does not and will not (a) conflict with or result in a breach of any provisions of the organizational documents or other governing documents of Seller, (b) except for Permitted Encumbrances, result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any Lease, Applicable Contract, note, bond, mortgage, indenture, license, or other material agreement to which any Seller is a party or by which any Seller or the Conveyed Interests may be bound or (c) assuming the Parties make the necessary HSR Act filings and otherwise comply with the HSR Act, violate any Law applicable to any Seller or any of the Conveyed Interests, except in the case of clauses (b) and (c) where such default, Encumbrance, termination, cancellation, acceleration or violation would not, individually or in the aggregate, have a Material Adverse Effect.

4.4 Consents . Except (a) as set forth in Schedule 4.4 , (b) for Customary Post-Closing Consents, (c) under Contracts that are terminable upon not greater than 60 days notice without payment of any fee, (d) requirements under the HSR Act and (e) preferential purchase rights set forth in Schedule 4.10 , there are no consents or other restrictions on assignment, including, but not limited to, requirements for consents from Third Parties to any assignment (in each case) that would be applicable in connection with the transfer of the Conveyed Interests (assuming the various limitations “to the extent assignable” are not present in the definition of “Conveyed Interests” for this purpose) or the consummation of the transactions contemplated by this Agreement by Seller.

4.5 Bankruptcy . There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened against Seller or its Affiliates, and neither Seller nor any of its Affiliates is insolvent or generally not paying its debts as they become due.

4.6 Foreign Person . EOC and EPC are each entities disregarded from EXCO Resources, Inc. EXCO Resources, Inc. (a) is not a “foreign person” within the meaning of Section 1445 of the Code and (b) is not an entity disregarded as separate from any other Person within the meaning of Section 301.7701-3(a) of the Treasury Regulations.

4.7 Claims and Litigation . Except as set forth in Schedule 4.7 , there is no written claim for breach of contract, tort, or violation of Law, or investigation of which Seller has received written notice, or any suit, action or litigation, by any Person, and no legal, administrative or arbitration proceedings, (in each case) pending, or to Seller’s Knowledge,

 

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threatened in writing against Seller with respect to its ownership or operation of the Conveyed Interests or that, as of the date hereof, would have a material adverse effect upon the ability of Seller to consummate the transactions contemplated by this Agreement.

4.8 Material Contracts .

(a) Schedule 4.8 sets forth all Applicable Contracts of the type described below (collectively, the “ Material Contracts ”):

(i) any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller of more than $250,000 during the current or any subsequent fiscal year or $1,000,000 in the aggregate over the term of such Applicable Contract (in each case, based solely on the terms thereof and current quantities, if applicable, without regard to any expected increase in quantities or revenues);

(ii) any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller of more than $250,000 during the current or any subsequent fiscal year or $1,000,000 in the aggregate over the term of such Applicable Contract (in each case, based solely on the terms thereof and current quantities, if applicable, without regard to any expected increase in quantities or revenues);

(iii) any Hydrocarbon purchase and sale, gathering, transportation, processing or similar Contract unless terminable by each party without penalty on 60 days or less notice;

(iv) any Applicable Contract that is an indenture, mortgage, loan, credit or sale-leaseback, guaranty of any obligation, bonds, letters of credit or similar financial Contract (a “ Debt Instrument ”);

(v) any Applicable Contract that constitutes a lease under which Seller is the lessor or the lessee of real, immovable, personal or movable property which lease (A) cannot be terminated by Seller without penalty upon 60 days or less notice and (B) involves an annual base rental of more than $250,000;

(vi) any Applicable Contract that constitutes a non-competition agreement or any agreement that purports to restrict, limit or prohibit the manner in which, or the locations in which, Seller conducts business, including area of mutual interest Contracts;

(vii) any Applicable Contract with any Affiliate of Seller which will be binding on Buyer after the Closing Date and will not be terminable by Buyer within 30 days or less notice other than the Joint Development Operating Agreement and the Joint Development Agreement;

(viii) any Applicable Contract that contains a call on production;

(ix) any Applicable Contract where the primary purpose thereof was to indemnify another Person;

 

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(x) any executory Applicable Contract that constitutes a pending purchase and sale agreement, farmout agreement, exploration agreement, participation agreement or other Contract providing for the purchase, sale or earning of any material asset;

(xi) any Applicable Contract that constitutes a partnership agreement, joint venture agreement or similar Contract (in each case, other than a tax partnership);

(xii) any Applicable Contract that constitutes a joint operating agreement; and

(xiii) any Applicable Contract that is a seismic or other geophysical acquisition agreement or license.

(b) The Material Contracts are in full force and effect as to Seller and, to Seller’s Knowledge, each counterparty (excluding any Material Contract that terminates as a result of expiration of its existing term). Except as set forth on Schedule 4.8 , there exist no material defaults under the Material Contracts by Seller or, to Seller’s Knowledge, by any other Person that is a party to such Material Contracts. Except as set forth on Schedule 4.8 and except for such matters that would not, individually or in the aggregate, have a Material Adverse Effect, no event has occurred that with notice or lapse of time or both would constitute any default under any such Material Contract by Seller or, to Seller’s Knowledge, by any other Person who is a party to such Material Contract. Prior to the execution of this Agreement, Seller has made available to Buyer true and complete copies of each Material Contract and all amendments thereto. Seller has not received or given any unresolved written notice of default, amendment, waiver, price redetermination, market out, curtailment or termination with respect to any Material Contract.

(c) Except as set forth on Schedule 4.8, part 2 , the Applicable Contracts do not include:

(i) any non-competition agreements or agreements that purport to restrict, limit or prohibit the manner in which, or the locations in which, Seller conducts business, including area of mutual interest Contracts:

(ii) any “tag along” or similar rights allowing a third party to participate in future sales of any of the Conveyed Interests;

(iii) any calls on, or options to purchase, material quantities of Hydrocarbon production, other than pursuant to currently effective Hydrocarbon purchase and sale contracts;

(iv) any Contracts with Affiliates of Seller which will remain in effect at the Closing.

4.9 No Violation of Laws . Except as set forth on Schedule 4.9 , (a) there is no uncured violation by Seller of any applicable Laws with respect to the ownership and operation of the Assets, except where such violations, individually or in the aggregate, would not have a Material Adverse Effect or (b) to Seller’s Knowledge, there is no uncured material violation by

 

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any other Person of any applicable Laws with respect to the ownership and operation of the Assets. This Section 4.9 does not include any matters with respect to Environmental Laws, such matters being addressed exclusively in Section 4.15 .

4.10 Preferential Rights . Except as set forth in Schedule 4.10 , there are no preferential rights to purchase that are applicable to the transfer of the Conveyed Interests in connection with the transactions contemplated hereby.

4.11 Royalties, Etc . Except for such items that are being held in suspense as permitted pursuant to applicable Law, Seller has paid in all material respects all royalties, overriding royalties and other burdens on production due by Seller with respect the Conveyed Interests.

4.12 Payout Status . To Seller’s Knowledge, Schedule 4.12 contains a list of the status of any “payout” balance, as of the date set forth on such Schedule, for the Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).

4.13 Imbalances . Schedule 4.13 sets forth all Imbalances associated with the Properties as of the Effective Time.

4.14 Current Commitments . Schedule 4.14 sets forth, as of the date of this Agreement, all authorities for expenditures or other current commitments (“ AFE’s ”) relating to the Conveyed Interests to drill or rework Wells or for other capital expenditures that in each case will be binding upon Buyer or the Conveyed Interests after Closing, for which all of the activities anticipated in such AFE’s have not been completed by the date of this Agreement.

4.15 Environmental .

(a) With respect to the Conveyed Interests, Seller has not entered into, or is not subject to, any agreements, consents, orders, decrees, judgments, license or permit conditions, or other directives of any Governmental Authority in existence as of the date of this Agreement based on any Environmental Laws that relate to the future use of any of the Conveyed Interests and that require any remediation or other change in the present conditions of any of the Conveyed Interests.

(b) Except as set forth in Schedule 4.15 , as of the date of this Agreement Seller has not received written notice from any Person of any release, disposal, event, condition, circumstance, activity, practice or incident concerning any land, facility, asset or property included in the Conveyed Interests that: (i) interferes with or prevents compliance by Seller or the Assets with any Environmental Law or the terms of any permits, licenses, orders, approvals, variances, waivers, franchises, rights or other authorizations issued pursuant thereto; or (ii) gives rise to or results in any common law or other liability of Seller to any Person which, in the case of either clause (i) or (ii) hereof, would have a Material Adverse Effect.

(c) To Seller’s Knowledge, all material reports, studies, written notices from environmental Governmental Authorities, tests, analyses, and other documents specifically addressing environmental matters related to Seller’s ownership or operation of the Properties, which are in Seller’s possession, have been made available to Buyer.

 

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(d) Except as set forth on Schedule 4.15 and except for any matters that Buyer has claimed as Environmental Defects pursuant to Section 12.1(a) , to Seller’s Knowledge, there are no material uncured violations of any applicable Environmental Laws with respect to the Assets and no material obligations to remediate conditions upon the Assets under applicable Environmental Law (and no such obligation would arise as a result of notice or lapse of time or both).

4.16 Taxes . Except as disclosed in Schedule 4.16:

(a) all Asset Taxes that have become due and payable have been properly paid;

(b) all returns with respect to Asset Taxes that are required to be filed by the owner of the Assets have been filed;

(c) Seller has not received written notice of any pending claim against it (which remains outstanding) from any applicable Governmental Authority for assessment of Asset Taxes and, to Seller’s Knowledge, no such claim has been threatened;

(d) no audit, litigation or other proceeding with respect to Asset Taxes has been commenced or is presently pending;

(e) the tangible personal property transferred pursuant to this Agreement, if any, is being transferred incidental to the transfer of real property; the transfer of tangible personal property, if any, is of an undivided interest in such property upon which sales tax that was due has been paid; and Seller is not regularly engaged in the business of selling tangible personal property of the type being transferred pursuant to this Agreement in the State of Louisiana; and

(f) there are no liens for taxes (including any interest, fine, penalty or additions to tax imposed by a Governmental Authority in connection with such taxes) on the Conveyed Interests other than statutory liens for current taxes not yet due.

4.17 Brokers Fees . Seller has incurred no liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement or the Transaction Documents for which Buyer or any Affiliate of Buyer shall have any responsibility.

4.18 Drilling Obligations . Except to the extent of those obligations previously fulfilled by Seller or any of its predecessors, none of the Leases or any Applicable Contract contain express provisions obligating Seller to drill any wells on the Properties (other than provisions requiring optional drilling as a condition of maintaining or earning all or a portion of a presently non-producing Lease).

4.19 Advance Payments . Seller is not obligated by virtue of any take or pay payment, advance payment or other similar payment (other than royalties, overriding royalties and similar arrangements reflected with respect to the Net Revenue Interests for the Wells set forth in Exhibit B and gas balancing arrangements), to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Conveyed Interests at some future time without receiving payment therefor at or after the time of delivery.

 

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4.20 Plugging and Abandonment .

(a) Except as set forth on Schedule 4.20 , there are no Wells that constitute a part of the Assets (i) in respect of which Seller has received an order from any Governmental Authority requiring that such Wells be plugged and abandoned; or (ii) that are neither in use for purposes of production or injection, nor suspended or temporarily abandoned in accordance with applicable Law, that have not been plugged and abandoned in accordance with applicable Law.

(b) To Seller’s Knowledge, all Wells have been drilled and completed within the limits permitted by all applicable Leases, the Applicable Contracts and pooling or unit orders.

(c) To Seller’s Knowledge, no Well is subject to penalties on allowables after the Effective Time because of overproduction.

4.21 Partnerships . Except as set forth on Schedule 4.21 , none of Seller’s interests in the Conveyed Interests is subject to tax partnership reporting for federal income tax purposes. Schedule 4.21 sets forth all of Seller’s interest in the Properties that are deemed by agreement or applicable Law to be held by a partnership for federal tax purposes, and, to the extent any of the Properties are deemed by agreement or applicable Law to be held by a partnership for federal tax purposes, each such partnership has or shall have in effect an election under Section 754 of the Code that will apply with respect to such portion of the Properties being sold and purchased under this Agreement.

4.22 Permits . Seller possesses all material permits, licenses, orders, approvals, variances, waivers, franchises, rights, and other authorizations, required to be obtained from any Governmental Authority for conducting its business with respect to the Assets as presently conducted and there are no material uncured violations of the terms and provisions of such authorizations. To Seller’s Knowledge, any Third Parties which operate any of the Assets possess all material permits, licenses, orders, approvals, variances, waivers, franchises rights, and other authorizations, required to be obtained from any Governmental Authority for conducting their business with respect to the Assets and there are no material uncured violations of the terms and provisions of such authorizations. With respect to each such permit; Seller has not received written notice from any Governmental Authority of any violations of such permits that remains uncured.

4.23 Conveyed Interests Complete . The Conveyed Interests include a 50% undivided share (beneficial interest only where so described) in all equipment, material, Contracts, data and records and other property primarily used or primarily held for use by Seller or any of its Affiliates in connection with the ownership and use of the Properties and the disposal of Hydrocarbons therefrom, excluding the following: (a) all Excluded Assets, (b) all assets held by Seller solely in its capacity as operator of any Conveyed Interest as permitted pursuant to the applicable joint operating agreement or, to the extent listed on Schedule 4.23 , all assets held by an Affiliate of Seller for use by Seller in its capacity as operator of any Conveyed Interest as permitted pursuant to the applicable joint operating agreement, (c) all assets of TGG Pipeline Ltd. and Talco Midstream Assets, Ltd., and (d) general corporate assets and services not specifically acquired or held for use with the Properties.

 

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4.24 Nonconsent . No operations are being conducted or since October 2, 2006 have been conducted on the Properties with respect to which Seller has elected to be a nonconsenting party under the applicable operating agreement and with respect to which all of Seller’s rights have not yet reverted to it.

4.25 No Material Adverse Change . Except as set forth in Schedule 4.25, since the Effective Date up to the date of this Agreement, there has been no:

(a) material damage, destruction or loss to the Assets;

(b) Material Adverse Effect; or

(c) action that would have required the consent of Buyer under Section 6.1(b), (f) or (i) , had those Sections then been in effect.

ARTICLE V

BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to Seller the following:

5.1 Organization; Existence . Buyer is a limited liability company, duly formed, validly existing and in good standing under the laws of the state of its formation and has all requisite power and authority to own and operate its property and to carry on its business as now conducted.

5.2 Authorization . Buyer has full power and authority to enter into and perform this Agreement and the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery, and performance by Buyer of this Agreement have been and at Closing the Transaction Documents to which it is a party will have been duly and validly authorized and approved by all necessary limited liability company action on the part of Buyer. This Agreement is, and the Transaction Documents to which Buyer is a party when executed and delivered by Seller will be, the valid and binding obligation of Buyer and enforceable against Buyer in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting the rights of creditors generally, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

5.3 No Conflicts . The execution, delivery, and performance by Buyer of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of the organizational or other governing documents of Buyer, (b) result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, or other material agreement to which Buyer is a party or by which Buyer or any of its property may be bound or (c) assuming the Parties make the necessary HSR Act filings

 

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and otherwise comply with the HSR Act, violate any Law applicable to Buyer or any of its property, except in the case of clauses (b) and (c) where such default, Encumbrance, termination, cancellation, acceleration or violation would not, individually or in the aggregate, have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement.

5.4 Consents . There are no consents or other restrictions on assignment, including, but not limited to, requirements for consents from Third Parties to any assignment (in each case) that would be applicable in connection with the consummation of the transactions contemplated by this Agreement by Buyer and are not also required of Seller.

5.5 Bankruptcy . There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Buyer’s knowledge, threatened against Buyer or Buyer Parent, and neither Buyer nor Buyer’s Parent is insolvent or generally not paying its debts as they become due.

5.6 Claims and Litigation . There is no written claims for breach of contract, tort or violation of Law or investigation of which Buyer has received written notice, or any suit, action or litigation, by any Person, and no legal, administrative, or arbitration proceedings, (in each case) pending, or to Buyer’s knowledge, threatened in writing against Buyer, or to which Buyer is a party, that would have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement.

5.7 Financing . Buyer has, or as of the Closing Date shall have, sufficient funds with which to pay the Closing Cash Consideration and consummate the transactions contemplated by this Agreement and following Closing Buyer will have sufficient funds to pay and meet its obligations under the Joint Development Agreement as and when called for under that Agreement.

5.8 Independent Evaluation . Buyer is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities. In making its decision to enter into this Agreement and to consummate the transaction contemplated herein, Buyer, except to the extent of Seller’s express representations and warranties in Article IV hereof, in the Assignment, or in the certificate delivered by Seller at Closing pursuant to Section 9.3(k) , (a) has relied or shall rely solely on its own independent investigation and evaluation of the Conveyed Interests and the advice of its own legal, tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives or consultants or advisors engaged by Seller, and (b) has satisfied or shall satisfy itself through its own due diligence as to the environmental and physical condition of and contractual arrangements and other matters affecting the Conveyed Interests.

5.9 Broker’s Fees . Buyer has incurred no liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement or the Transaction Documents for which Seller or Seller’s Affiliates shall have any responsibility.

 

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5.10 Accredited Investor . Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire the Conveyed Interests for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.

5.11 Oil & Gas Interests . Other than as contemplated by this Agreement and the Transaction Documents, as of the date of this Agreement, Buyer and its Affiliates have no interests in any, nor have they entered into any contracts or agreements to acquire any, oil, gas and/or mineral leases, subleases, fee mineral interests, royalties, overriding royalties, production payments, net profits interests, carried interests, reversionary interests and other interests in oil, gas and/or minerals in place in the Subject Counties.

ARTICLE VI

CERTAIN AGREEMENTS

6.1 Conduct of Business . Except as set forth in Schedule 6.1 or as expressly contemplated by this Agreement or as expressly consented to in writing by Buyer, Seller agrees that from and after the date hereof until Closing, Seller will:

(a) maintain or cause its Affiliates to maintain, and if Seller or one of its Affiliates is the operator thereof, to operate, the Conveyed Interests in a good and workmanlike manner, consistent with past practice, and in accordance with the Applicable Contracts and applicable Laws in all material respects;

(b) maintain or cause its Affiliates to maintain the books of account and records relating to the Conveyed Interests in the usual, regular and ordinary manner, in accordance with US generally accepted accounting principles, and the usual accounting practices of each such Person;

(c) give written notice to Buyer as soon as is practicable (but within 5 Business Days) of any written notice received or given by Seller or any of Seller’s Affiliates with respect to (i) any alleged material breach of any Lease or Material Contract, (ii) any action to alter, terminate, rescind or procure a judicial reformation of any Lease or Material Contract or (iii) notice in writing of any new claim for damages or any new investigation, suit, action or litigation with respect to the Assets;

(d) except for (i) emergency operations related to well blowouts, fires, oil spills or other events that endanger property, lives or the environment, or (ii) operations required under presently existing AFE’s described on Schedule 4.14 or the 2009 Annual Work Program and Budget attached to the Joint Development Agreement as Exhibit “E-1”, not propose or commence any operations on the Conveyed Interests anticipated to cost (as to Seller’s or its Affiliates’ interest in the Conveyed Interests) in excess of $500,000 per operation or $10,000,000 in the aggregate; provided that with respect to emergency operations, Seller shall notify Buyer of said emergency as soon as reasonably practicable, and provided further that with respect to AFE’s in excess of $500,000 net to Seller’s (or its Affiliates’) interest in the Conveyed Interests, Seller shall forward same to Buyer as soon as reasonably practicable following receipt thereof

 

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and Buyer shall review and respond to same in writing to Seller within 5 Business Days of its receipt thereof (or within such lesser time as is required under the terms of the applicable Third Party agreement and stated in Seller’s notice, but in no event less than 24 hours after receipt) and if Buyer does not approve or reject any such AFE within such time period, Buyer shall be deemed to have responded to same in the same manner as Seller (or its Affiliate) elects to vote;

(e) not enter into, or permit any of its Affiliates to enter into, an Applicable Contract that if entered into prior to the date of this Agreement would be required to be listed in a Schedule attached to this Agreement, and not amend, waive any material right under or terminate (other than by failing to renew an existing term), or permit any of its Affiliates to amend, waive any material right under or terminate (other than by failing to renew an existing term), an Applicable Contract that is listed in a Schedule attached to this Agreement or that if entered into prior to the date of this Agreement would be required to be listed in a Schedule attached to this Agreement (either before the action proposed to be taken or as a result of the action proposed to be taken);

(f) not transfer, sell, mortgage, pledge, encumber or dispose of (or permit any Affiliates to do any of the foregoing) any portion of the Conveyed Interests other than the sale and/or disposal of Hydrocarbons in the ordinary course of business and sales of equipment that is no longer necessary in the operation of the Conveyed Interests or for which replacement equipment of equal or greater value has been obtained;

(g) maintain insurance coverage on the Assets in the amounts and types currently in force;

(h) not grant or create any preferential right to purchase, right of first opportunity or other transfer restriction or requirement with respect to the Conveyed Interests;

(i) use commercially reasonable efforts to maintain in full force and effect all (x) Oil and Gas Interests, except where any such interest terminates pursuant to its existing term, and (y), all material Rights of Way and all material permits, licenses, orders, approvals, variances, waivers, franchises, rights and authorizations held by it and issued by any Governmental Authority with respect to the Properties, (in each case) except where any such Right of Way, permit, license, order, approval, variance, waiver, franchise, right or authorization terminates pursuant to its existing terms or where a reasonably prudent operator would not maintain the same;

(j) give prompt written notice to Buyer of any material damage to or destruction of any of the Assets; and

(k) not agree, whether in writing or otherwise, to do any of the things Seller has agreed not to do in this Section 6.1;

provided that, in the case of operations described in Section 6.1(d) which are undertaken to avoid any penalty provision of any applicable agreement or are proposed by Third Parties relating to drilling, sidetracking, deepening, reworking or other similar operations with respect to an existing or prospective well, if Buyer rejects the proposal within the time period permitted under Section 6.1(d) (but in no event shall such period be longer than 5 Business Days from Buyer’s

 

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receipt thereof), Seller may commit to the operation, in which case the operation shall be deemed to be a “Sole Risk Development Operation” in which Buyer is not participating under the terms of the Joint Development Agreement and no costs and expenses thereof, and no proceeds therefrom, shall be reflected in the adjustments pursuant to Article III . Buyer acknowledges that Seller owns undivided interests in certain of the Assets with respect to which it is not the operator, and Buyer agrees that the acts or omissions of the other working interests owners (including the operators) who are not Seller or any Affiliates of Seller and which Seller or its Affiliates do not have the contractual right to control shall not constitute a breach of the provisions of this Section 6.1 , nor shall any action required by a vote of working interest owners constitute such a breach so long as Seller has voted its interest in a manner that complies with the provisions of this Section 6.1 .

6.2 Governmental Bonds . Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with Governmental Authorities and relating to the Conveyed Interests are transferable to Buyer. At or prior to Closing, Buyer shall deliver to Seller evidence of the posting of any bonds or other security required to be posted by Buyer as the owner of the Conveyed Interests with any applicable Governmental Authorities meeting the requirements of such authorities to own the Conveyed Interests.

6.3 Notifications . If either Seller or Buyer obtains actual knowledge that the other Party apparently has breached a representation, warranty, covenant or other agreement under this Agreement, that Party shall promptly inform the other Party of such potential breach so that it may attempt to remedy or cure such breach prior to Closing. Notwithstanding the foregoing, this Section shall not apply to breach of the Parties’ obligations at Closing and shall not operate to delay Closing. If any of Seller’s or Buyer’s representations or warranties is untrue, or Seller’s or Buyer’s covenants or agreements have not been performed or observed, but such breach or failure is cured to the reasonable satisfaction of the other Party by Closing (or, if Closing does not occur, by the Termination Date), then such breach or failure shall be deemed not to have occurred for all purposes of this Agreement. Notwithstanding the other terms of this Section 6.3 , the other provisions of this Agreement and the various documents and agreements to be executed and delivered pursuant hereto relating to representations, warranties, indemnities and agreements of Seller or Buyer shall not be altered or modified by Buyer’s or Seller’s knowledge of any event, or failure to provide notice of the same, or Buyer’s or Seller’s review of any documents or other matters.

6.4 HSR Act . Within 10 Business Days following the execution by Buyer and Seller of this Agreement, Buyer and Seller will each prepare and simultaneously file with the DOJ and the FTC the notification and report form required for the transactions contemplated by this Agreement by the HSR Act, and request early termination of the waiting period thereunder. Buyer and Seller agree to respond promptly to any inquiries from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act. Buyer and Seller shall cooperate with each other and, subject to the terms of the Confidentiality Agreement, shall promptly furnish all information to the other Party that is necessary in connection with Buyer’s and Seller’s compliance with the HSR Act. Buyer and Seller shall keep each other fully advised with respect to any requests from or communications with the DOJ or FTC concerning such filings and shall consult with each other with respect to all responses thereto. Each of Seller and Buyer shall use its reasonable efforts to take all actions

 

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reasonably necessary and appropriate in connection with any HSR Act filing to consummate the transactions consummated hereby. All filing fees incurred in connection with the filings made pursuant to this Section 6.4 shall be borne one-half by Seller and one-half by Buyer.

6.5 Amendment to Schedules . As of the Closing Date, all Schedules to Article IV may be deemed amended and supplemented by Seller to include reference to any matter (a) relating to Seller or the Assets which first arises or occurs after the date of this Agreement and does not result from a breach by Seller of any provision of Article IV , or this Article VI or (b) which results in an adjustment to the Closing Cash Consideration pursuant to Section 3.3 as a result of the removal under the terms of this Agreement of any Conveyed Interest from the transactions contemplated by this Agreement.

6.6 Non-Solicitation of Employees . From and after the date of this Agreement until the date that is 1 year after the Closing Date, Buyer will not, and will cause its Affiliates not to, directly or indirectly, solicit for employment or employ any officer or employee of Seller or its Affiliates with whom Buyer or its Affiliates have had direct contact with as part of its evaluation, negotiation or consummation of the transactions contemplated hereby without obtaining the prior written consent of Seller; provided, however, that the term “solicit for employment” shall not include general solicitations of employment not specifically directed towards employees of Seller or its Affiliates.

6.7 Assignment of Downstream Contract Interests . The Parties agree to comply with the terms of Exhibit F hereto with respect to Seller’s downstream transportation contracts.

6.8 AMI . The Parties acknowledge that Seller or its Affiliates will be acquiring additional Leases in the East Texas/North Louisiana Area from and after the date of this Agreement (the “ Additional Interests ”). Such Additional Interests shall be excluded from the transactions contemplated by this Agreement (and no adjustment shall be made to the Closing Cash Consideration or the Carried Cost Obligation as a result thereof) and the Parties agree that, upon Closing, Seller or any such Affiliate shall offer to Buyer its 50% undivided share of any such Additional Interests pursuant to Article 9 of the Joint Development Agreement.

6.9 Enforcement of Third Party Warranties, Guarantees and Indemnities . Seller agrees that, to the extent pertaining to the Conveyed Interests described in Sections 2.1(a), 2.1(b) or 2.1(c) as of the Closing Date and relating to the period from and after the Effective Time, at Buyer’s request, Seller shall use its reasonable efforts to enforce, for the benefit of Buyer, at Buyer’s cost and expense, all of Seller’s rights against Third Parties under any warranties, guarantees or indemnities given by such Third Parties with respect to such Conveyed Interests.

6.10 Negotiation of Ancillary Agreements . Each of Seller and Buyer shall use its reasonable efforts to complete negotiation of and agree in writing upon the form of the Ancillary Agreements, and, subject to each Party obtaining board of director or other similar management approval, to execute and deliver the Contribution Agreement, at least 5 Business Days prior to the scheduled Closing Date under Section 9.1.

 

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ARTICLE VII

BUYER’S CONDITIONS TO CLOSING

The obligations of Buyer to consummate the transactions provided for herein are subject, at the option of Buyer, to the fulfillment on or prior to the Closing of each of the following conditions:

7.1 Representations . The representations and warranties of Seller set forth in Article IV shall be true and correct in all material respects (other than those representations and warranties of Seller that are qualified by materiality, which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though made on and as of such date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date).

7.2 Performance . Seller shall have materially performed or complied with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Seller is required prior to or at the Closing Date.

7.3 No Legal Proceedings . No material suit, action, or other proceeding instituted by a Third Party shall be pending before any Governmental Authority or arbitrator seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement. No order, award or judgment shall have been issued by any Governmental Authority or arbitrator to restrain, prohibit, enjoin, or declare illegal, or awarding substantial damages in connection with, the transactions contemplated by this Agreement.

7.4 Title Defects and Environmental Defects . The sum of (a) all Title Defect Amounts determined pursuant to Section 11.2(g) and the sum of all Closing Cash Consideration adjustments determined pursuant to Section 11.2(d)(i)(B) less the sum of all Title Benefit Amounts determined pursuant to Section 11.2(h), plus (b) all Remediation Amounts for Environmental Defects determined pursuant to Section 12.1(b)(i) and the sum of all Closing Cash Consideration adjustments determined pursuant to Section 12.1(b)(iii), shall be less than $211,000,000.

7.5 HSR Act . Any waiting period applicable to the consummation of the transaction contemplated hereby under the HSR Act shall have lapsed or terminated (by early termination or otherwise).

7.6 Consent and Waivers . All consents and approvals, other than those under the HSR Act, required from Governmental Authorities (excluding Customary Post Closing Consents), and all consents and approvals required from other Persons listed on Schedule 4.4 , Part 2 for the consummation of the transactions contemplated by this Agreement shall have been granted, and all preferential purchase rights, rights of first opportunity and similar rights with respect to such transactions shall have been exercised, waived, expired without exercise or, in the case of a right of first opportunity or similar right, resulted in an offer which was properly rejected by Seller.

 

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7.7 Contribution Agreement . Closing shall be simultaneously occurring under the Contribution Agreement.

7.8 Closing Deliverables . Seller shall have delivered (or be ready, willing and able to deliver at Closing) to Buyer the documents and other items required to be delivered by Seller under Section 9.3 , including the documents required under  Section 9.3(n).

7.9 No Material Event . No Material Event with respect to Seller or its Affiliates shall have occurred and be continuing and no material default by Seller or its Affiliates under any Seller Debt Instrument (including any payment default or default under any debt to equity financial covenant or other financial ratio) or acceleration of debt under any Seller Debt Instrument shall have occurred and be continuing.

7.10 No Material Adverse Effect . No Material Adverse Effect shall have occurred since the date of this Agreement.

7.11 Ancillary Agreements . All Ancillary Agreements shall have been agreed upon by the Parties in writing in form satisfactory to Buyer, in its discretion, and the Contribution Agreement shall have been executed and delivered by both Parties.

ARTICLE VIII

SELLER’S CONDITIONS TO CLOSING

The obligations of Seller to consummate the transactions provided for herein are subject, at the option of Seller, to the fulfillment on or prior to the Closing of each of the following conditions:

8.1 Representations . The representations and warranties of Buyer set forth in Article V shall be true and correct in all material respects (other than those representations and warranties of Buyer that are qualified by materiality, which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though made on and as of such date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date).

8.2 Performance . Buyer shall have materially performed or complied with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Buyer is required prior to or at the Closing Date.

8.3 No Legal Proceedings . No material suit, action, or other proceeding instituted by a Third Party shall be pending before any Governmental Authority or arbitrator seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement. No order, award or judgment shall have been issued by any Governmental Authority or arbitrator to restrain, prohibit, enjoin, or declare illegal, or awarding substantial damages in connection with, the transactions contemplated by this Agreement.

8.4 Title Defects and Environmental Defects . The sum of (a) all Title Defect Amounts determined pursuant to Section 11.2(g) and the sum of all Closing Cash Consideration

 

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adjustments determined pursuant to Section 11.2(d)(i)(B) less the sum of all Title Benefit Amounts determined pursuant to Section 11.2(h), plus (b) all Remediation Amounts for Environmental Defects determined pursuant to Section 12.1(b)(i) and the sum of all Closing Cash Consideration adjustments determined pursuant to Section 12.1(b)(iii), shall be less than $211,000,000.

8.5 HSR Act . Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have lapsed or terminated (by early termination or otherwise).

8.6 Consent and Waivers . All consents and approvals, other than those under the HSR Act, required from Governmental Authorities (excluding Customary Post Closing Consents), and all consents and approvals required from other Persons listed in Schedule 4.4 , Part 2, for the consummation of the transactions contemplated by this Agreement shall have been granted, and all preferential purchase rights, rights of first opportunity and similar rights with respect to such transactions shall have been exercised, waived, expired without exercise or, in the case of a right of first opportunity or similar right, resulted in an offer which was properly rejected by Seller.

8.7 Contribution Agreement . Closing shall be simultaneously occurring under the Contribution Agreement.

8.8 Closing Deliverables . Buyer shall have delivered (or be ready, willing and able to deliver at Closing) to Seller the documents and other items required to be delivered by Buyer under Section   9.3 .

8.9 No Material Event . No Material Event with respect to Buyer or Buyer Parent shall have occurred and be continuing and no material default by Buyer or Buyer Parent under any Buyer Debt Instrument (including any payment default or default under any debt to equity financial covenant or other financial ratio) or acceleration of debt under any Buyer Debt Instrument shall have occurred and be continuing.

8.10 Ancillary Agreements . All Ancillary Agreements shall have been agreed upon by the Parties in writing in form satisfactory to Seller, in its discretion, and the Contribution Agreement shall have been executed and delivered by both Parties.

ARTICLE IX

CLOSING

9.1 Date of Closing . Subject to the terms and conditions stated in this Agreement, the sale by Seller and the purchase by Buyer of the Conveyed Interests pursuant to this Agreement (the “ Closing ”) shall occur on August 13, 2009, or if all conditions to Closing in Articles VII or VIII have not yet been satisfied or waived by that date, as soon thereafter as such conditions have been satisfied or waived, or such other date as Buyer and Seller may agree upon in writing. The date of the Closing shall be the “ Closing Date ”.

 

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9.2 Place of Closing . The Closing shall be held at the offices of Vinson & Elkins LLP, Suite 3700, 2001 Ross Avenue, Dallas, Texas 75201 or such other location as Buyer and Seller may agree upon in writing.

9.3 Closing Obligations . At the Closing, the following documents shall be delivered and the following events shall occur, the execution of each document and the occurrence of each event being a condition precedent to the others and each being deemed to have occurred simultaneously with the others:

(a) Seller and Buyer shall execute, acknowledge and deliver the Assignment, in sufficient counterparts to facilitate recording in the applicable counties and parishes, covering the Conveyed Interests;

(b) Seller and Buyer shall execute and deliver assignments, on appropriate forms, of state and of federal leases comprising portions of the Conveyed Interests, if any;

(c) Seller and Buyer shall execute and deliver an acknowledgement of the Preliminary Settlement Statement;

(d) Buyer shall deliver to EOC, as agent on behalf of Seller, to the accounts designated in the Preliminary Settlement Statement, by direct bank or wire transfer in same day funds, the Adjusted Closing Cash Consideration, less the amount of the Deposit, and Buyer and Seller shall deliver instructions to the Escrow Agent authorizing the release of the Subsequent Deposit to Seller pursuant to the terms of the Escrow Agreement;

(e) Seller shall deliver on forms supplied by Buyer and reasonably acceptable to Seller transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production from the Conveyed Interests from and after the Effective Time, for delivery by Buyer to the purchasers of production;

(f) EXCO Resources, Inc. shall deliver an executed statement described in Treasury Regulation § 1.1445-2(b)(2);

(g) Seller and Buyer shall execute and deliver the Joint Development Agreement;

(h) RESERVED;

(i) RESERVED;

(j) Buyer shall execute and deliver a certificate from an officer of Buyer certifying on behalf of Buyer that the conditions set forth in Section 8.1 and Section 8.2 have been fulfilled by Buyer;

(k) Seller shall execute and deliver a certificate from an officer of Seller certifying on behalf of Seller that the conditions set forth in Section 7.1 and Section 7.2 have been fulfilled by Seller;

 

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(l) Buyer shall deliver a certificate duly executed by the secretary or any assistant secretary of Buyer, dated as of the Closing, (i) attaching, and certifying on behalf of Buyer as complete and correct, copies of (A) the certificate of formation and limited liability company agreement of Buyer, each as in effect as of the Closing, and (B) the resolutions of the members of Buyer authorizing the execution, delivery and performance by Buyer of this Agreement and the transactions contemplated hereby and (ii) certifying on behalf of Buyer the incumbency of each officer of Buyer executing this Agreement or any document delivered in connection with the Closing;

(m) Seller shall deliver a certificate duly executed by the secretary or any assistant secretary of the general partner of each of EOC and EPC, dated as of the Closing, (i) attaching, and certifying on behalf of such general as complete and correct, copies of (A) the certificate of limited partnership and agreement of limited partnership of EOC or EPC, as applicable, and the certificate of incorporation and the bylaws of such general partner, all as in effect as of the Closing, (B) the resolutions of the partners of EOC or EPC, as applicable, authorizing the execution, delivery and performance by such Party of this Agreement and the transactions contemplated hereby and (C) the resolutions of the board of directors of such general partner authorizing the execution of this Agreement and such other documents on behalf of EOC or EPC, as applicable, and (ii) certifying on behalf of such general partner the incumbency of each officer of such general partner executing this Agreement or any document delivered in connection with the Closing;

(n) Seller shall deliver a recordable release of any trust, mortgages, financing statements, fixture filings and security agreements made by Seller or its Affiliates affecting the Conveyed Interests and relating to the Seller Debt Instruments; and

(o) Seller and Buyer shall execute and deliver any other Transaction Documents and other agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered at the Closing.

9.4 Records . In addition to the obligations set forth under Section   9.3 above, 30 days following the Closing, Seller shall deliver to Buyer possession of the Records.

ARTICLE X

ACCESS / DISCLAIMERS

10.1 Access .

(a) From and after the date hereof and up to and including the Closing Date (or earlier termination of this Agreement) but subject to the other provisions of this Section 10.1 and obtaining any required consents of Third Parties, including Third Party operators of the Assets (with respect to which consents Seller shall use commercially reasonable efforts to obtain), Seller shall afford to Buyer and its officers, employees, agents, accountants, attorneys, investment bankers, consultants and other authorized representatives (“ Buyer’s Representatives ”) full access, during normal business hours, to the Assets and all Records and other documents in Seller’s or any their respective Affiliates’ possession relating primarily to the Assets. Seller shall also make available to Buyer and Buyer’s Representatives, upon reasonable notice during normal

 

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business hours, Seller’s personnel knowledgeable with respect to the Assets in order that Buyer may make such diligence investigation as Buyer considers necessary or appropriate. All investigations and due diligence conducted by Buyer or any Buyer’s Representative shall be conducted at Buyer’s sole cost, risk and expense and any conclusions made from any examination done by Buyer or any Buyer’s Representative shall result from Buyer’s own independent review and judgment. Buyer shall coordinate its access rights and physical inspections of the Assets with Seller to reasonably minimize any inconvenience to or interruption of the conduct of business by Seller. Buyer shall, and shall cause all Buyer’s Representatives to, abide by Seller’s, and any Third Party operator’s safety rules, regulations, and operating policies of which they are informed while conducting its due diligence evaluation of the Assets including any environmental or other inspection or assessment of the Assets.

(b) Before conducting any sampling, boring, drilling or other invasive investigation activities (“ Invasive Activities ”) on or with respect to any of the Properties, Buyer shall furnish Seller with a written description of the proposed scope of the Invasive Activities to be conducted, including a description of the activities to be conducted and a description of the approximate location and expected timing of such activities. If any of the proposed Invasive Activities may unreasonably interfere with normal operation of the Properties, Seller may request an appropriate modification of the proposed Invasive Activity. Any Invasive Activities shall be conducted by a reputable environmental consulting or engineering firm, approved in advance by Seller (such approval not to be unreasonably withheld or delayed) and, once approved, such environmental consulting or engineering firm shall be deemed to be a “Buyer’s Representative.” Seller hereby approves ERM NA Holdings Corp., ERM Group Holdings Limited and any Affiliate thereof as an environmental consulting firm that may conduct such Invasive Activities and such environmental consulting firm is hereby deemed to be a “Buyer’s Representative.” Seller shall have the right, at its option and expense, to split any samples collected from the Properties with Buyer.

(c) Buyer hereby defends, indemnifies and holds harmless each of the operators of the Assets and Seller Indemnified Parties from and against any and all Liabilities attributable to personal injury, death or physical property damage, or violation of Seller&rs