PURCHASE AND SALE AGREEMENT

PURCHASE AND SALE AGREEMENT

BETWEEN

TETON DJ LLC

AS SELLER

AND

NOBLE ENERGY, INC.

AS BUYER

DATED EFFECTIVE FEBRUARY 1, 2009

CHASE, DUNDY, KEITH AND PERKINS COUNTIES, NEBRASKA
PHILLIPS, SEDGWICK AND YUMA COUNTIES, COLORADO

CONFIDENTIAL
TABLE OF CONTENTS

Page

EXHIBITS

DISCLOSURE SCHEDULES

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (“ Agreement ”), dated March 31, 2009, is by and between Teton DJ LLC, a Colorado limited liability company, (“ Seller ” or “ Teton DJ ”) with an address of 600 17th Street, Suite 1600 North, Denver, Colorado 80202, and Noble Energy, Inc., a Delaware corporation (“ Buyer ” or “Noble” ) with an address of 1625 Broadway, Suite 2200, Denver, Colorado 80202. The transaction contemplated by this Agreement may be referred to as the “ Transaction .” Seller and Buyer may be referred to individually as a “ Party ” or collectively as the “ Parties .” Teton Energy Corporation (“ Teton Energy ”) joins in this Agreement for the purposes of providing certain guarantees in accordance with existing agreements between the Parties.

RECITALS

A. Teton Energy and Noble entered into an Acreage Earning Agreement dated effective December 31, 2005 (the “ Acreage Earning Agreement ”) , providing for the earning by Noble of an interest in oil and gas leasehold properties owned by Teton Energy (the “ Teton Leases ”), the exploration for oil and gas, the drilling and operation of wells, the installation of production infrastructure, and the acquisition of oil and gas properties within an area of mutual interest (the “ AMI ”), among other matters, in Chase, Dundy, Keith and Perkins Counties, Nebraska and Sedgwick County, Colorado.

B. By First Amendment to Acreage Earning Agreement dated effective December 31, 2005 (the “ Amendment ”), among other matters, Teton Energy and Noble acknowledge that title to the Teton Leases is held by Teton DJ, a wholly owned subsidiary of Teton Energy and, therefore, Teton DJ should be a party to the joint operating agreements covering jointly owned oil and gas properties in the AMI.

C. The Amendment provides that Teton Energy agrees to indemnify, hold harmless and defend Noble from and against all losses whatsoever arising out of any failure on the part of Teton DJ to perform its obligations under joint operating agreements covering the jointly owned properties in the AMI.

D. Seller owns and desires to sell the Assets, as defined below, to Buyer upon the terms and conditions set forth in this Agreement.

E. Buyer desires to purchase the Assets pursuant to the terms and conditions of this Agreement.

AGREEMENT

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

ARTICLE 1
PURCHASE AND SALE

1.1 Purchase and Sale . Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase and receive from Seller, the Assets, as defined below.

1.2 Assets . The “ Assets ” are all of Seller’s right, title and interest in and to the following real and personal property interests, located in Chase, Dundy, Keith and Perkins Counties, Nebraska, and Phillips, Sedgwick and Yuma Counties, Colorado.

a. The oil and gas leases described on Exhibits A-1 and A-2 , including extensions and renewals thereof (the “ Leases ”) (including without limitation working interests, operating rights, overriding royalty interests, production payments and net profits interests) insofar as the Leases cover all lands covered by the Leases, whether or not such lands are adequately or fully described on Exhibit A (the “ Lands ”), and the oil, gas and all other hydrocarbons (including, but not limited to, coalbed methane) (“ Hydrocarbons ”), that may be produced from the Leases and Lands;

b. The oil and gas wells located on the Leases and Lands described on Exhibit A-1 only, or lands pooled or unitized therewith, including without limitation, the oil and gas wells specifically described on Exhibit B , whether producing or non-producing; all injection and disposal wells on the Leases and Lands described on Exhibit A-1 only (the “ Wells ”), and all personal property and equipment associated with the Wells as of the Effective Time;

c. The rights, to the extent transferable, in and to all existing and effective unitization, pooling and communitization agreements, declarations and orders, and the properties covered and the units created thereby, to the extent that they relate to or affect any of the interests described in Sections 1.2.a. and 1.2.b. or the post-Effective Time production of Hydrocarbons from the Leases and Lands;

d. The rights, to the extent transferable, in and to the Material Agreements described on Schedule 6.8 , only insofar as they relate to the Leases and Lands;

e. All of the personal property, materials, fixtures, improvements, well equipment, piping, valves, electrical, communications, separation, dehydration, compression and other equipment and facilities, tanks, chemicals, injection facilities, saltwater disposal facilities, flow lines, gathering systems (including without limitation the Chundy Gathering System), permits, licenses, approvals, servitudes, rights-of-way, easements, surface leases, and other surface rights and all other appurtenances and facilities located on or used in connection with or otherwise related to the exploration for or production, gathering, treatment, processing, storing, sale or disposal of Hydrocarbons or water produced from the properties and interests described in Sections 1.2.a through 1.2.d, including without limitation the easements and surface leases described on Exhibit C and the personal property and equipment described on Exhibit D ;

f. The lands described on Exhibit E (“Facility Sites”);

g. All data, interpretive data and geophysical modeling seismic lines over the general area of the Assets owned by Seller, including 3-D seismic over Seller’s “Frenchman Creek” prospect, but excluding from the foregoing those files, records, data and information that are (i) subject to unaffiliated third party contractual restrictions on disclosure or transfer, which are applicable to Buyer or (ii) subject to a transfer fee, unless Buyer agrees in writing to pay such transfer fees; and

h. All files, records, correspondence, data and information relating to the items described in Sections 1.2.a through 1.2.g maintained by Seller (the “ Records ”), including, without limitation, lease and land files, abstracts, title reports, memoranda and opinions, well files, contract files, tax and accounting files related to the Assets.

1.3 Excluded Wells, Frenchman Creek . All wellbores on the Leases and Lands described on Exhibit A-2, including without limitation the Kramer 24-12 Well located in the SE/4SW/4 of Section 12, T. 6 N., R. 43 W., and the Kramer 12-13 Well located in the SW/4NW/4 of Section 13, T. 6 N., R. 43 W., Phillips County, Colorado, are excluded from this Agreement and the Transaction (the “ Excluded Wellbores ”).

1.4 Teton ORRI LLC . For the avoidance of doubt, the Assets do not include any overriding royalty interests in the Leases and Lands owned by Teton ORRI LLC on the date of Closing.

1.5 Effective Time . The purchase and sale of the Assets shall be effective as of February 1, 2009 at 7:00 a.m., Mountain Time (the “ Effective Time ”).

ARTICLE 2
PURCHASE PRICE

2.1 Purchase Price . The Purchase Price for the Assets shall be Three Million Eight Hundred Thousand Dollars ($3,800,000.00) (the “ Purchase Price ”), subject to Section 2.2 below. Based on market valuations performed by independent third parties, and Seller’s reasonable judgment based on several factors, including but not limited to market solicitations, offers made to Seller, and expressions of interest made and received by Seller, the Purchase Price is fair and reasonable consideration for the Assets.

2.2 Adjustments to Purchase Price . The Purchase Price shall be adjusted at Closing according to this Section without duplication pursuant to a “ Settlement Statement ” approved by Seller and Buyer on or before Closing. A draft of the Settlement Statement will be prepared by Buyer and provided to Seller on or before Closing for Buyer’s comment and review. The Settlement Statement shall set forth the Purchase Price as adjusted as provided in this Section, which amount is referred to as the “ Closing Amount .” For the purposes of this Agreement, the term “ Property Expenses ” shall mean all capital expenses, joint interest billings, lease operating expenses, lease rental and maintenance costs, Taxes (as defined and apportioned as of the Effective Time pursuant to Article 13), drilling expenses, workover expenses, geological, geophysical and any other exploration or development expenditures chargeable under applicable operating agreements or other agreements consistent with the standards established by the Council of Petroleum Accountant Societies of North America that are attributable to the maintenance and operation of the Assets during the period in question.

a. Upward Adjustments . The Purchase Price shall be adjusted upward by the following:

i. An amount equal to all Property Expenses, including prepaid expenses, attributable to the Assets after the Effective Time that were paid by Seller (all to be apportioned as of the Effective Time except as otherwise provided), including without limitation, prepaid rentals and royalties, including lease rentals;

ii. The proceeds of production attributable to the Assets occurring before the Effective Time and received by Buyer, net of royalties and taxes measured by production;

iii. An amount equal to the value actually received by Buyer for Seller’s share of any oil or condensate in tanks or storage facilities produced from or credited to the Leases and Lands prior to the Effective Time based upon the quantities in oil or condensate tanks or storage facilities as measured by and reflected in Seller’s records; and

iv. Any other amount provided in this Agreement or agreed upon by Seller and Buyer.

b. Downward Adjustments . The Purchase Price shall be adjusted downward by the following:

i. An amount equal to all Property Expenses attributable to the Assets prior to the Effective Time that are paid by Buyer, subject to Section 2.2.c.;

ii. An amount equal to the sum of all Title Defect adjustments under Section 4.4.b.;

iii. An amount equal to the sum of all Environmental Defect adjustments under Section 5.3.b;

iv. The proceeds of production attributable to the Assets occurring on or after the Effective Time and received by Seller, net of royalties and taxes measured by production; and

v. Any other amount provided in this Agreement or agreed upon by Seller and Buyer.

c. Final Allocation of Property Expenses . The Parties have agreed on the amount of all Property Expenses related to periods prior to the Effective Time, subject to the apportionment of Taxes as provided in Article 13, on an arms’ length basis and after adequate and sufficient inquiry and investigation. For purposes of this paragraph only, Property Expenses shall not include claims by third parties for additional royalties payable with respect to Seller’s interest in the Assets prior to the Effective Time.

2.3 Allocated Values . Buyer and Seller have agreed to allocate the Purchase Price among the Assets as follows, which amounts shall be referred to as the “ Allocated Value .”

ARTICLE 3
DUE DILIGENCE REVIEW

3.1 Access to Records . Subject to Section 3.2, Seller will disclose and make available to Buyer and its representatives at Seller’s or Seller’s agent’s office and during Seller’s normal business hours, all Records in Seller’s possession or control relating to the Assets for the purpose of permitting Buyer to perform its due diligence review including, but not limited to, all title opinions, well, leasehold, unit, title, contract, division order, accounting, tax, gas marketing, vendor and creditor files. Seller agrees to cooperate with Buyer in Buyer’s efforts to obtain, at Buyer’s sole expense, such additional information relating to the Assets as Buyer may reasonably desire. Buyer may inspect the Records only to the extent it may do so without violating any obligation, confidence or contractual commitment of Seller to a third party. Seller shall use reasonable efforts to obtain the necessary consents to allow Buyer’s examination of any confidential information that is material to this transaction.

3.2 Representation and Warranty . Seller makes no representations regarding the accuracy of any of the Records; provided, however, Seller does represent that (i) all of the Records are files, or copies thereof, that Seller has used in the ordinary course of operating and owning the Assets, (ii) Seller has not intentionally withheld any material information in the Records and (iii) Seller has not intentionally misrepresented any material information in the Records. Except as set forth in this Section 3.2, no representation or warranty of any kind is made by Seller as to the Records and Buyer expressly agrees that any conclusions drawn therefrom shall be the result of its own independent review and judgment. The representations contained in this paragraph shall apply only to matters of fact, and shall not apply to any information, data, printouts, extrapolations, projections, documentation, maps, graphs, charts, or tables which reflect, depict, present, portray, or represent, or which are based upon or derived from, in whole or in part, interpretation of the Records including, but not limited to, matters of geological, geophysical, engineering, or scientific interpretation.

ARTICLE 4
TITLE MATTERS

4.1 Defensible Title . The term “Defensible Title” means such title to the Assets, that, subject to and except for Permitted Encumbrances: (i) entitles Seller to receive not less than the net revenue interest set forth on Exhibit B for each Well listed on Exhibit B (“ NRI ”); (ii) obligates Seller to bear costs and expenses relating to the maintenance, development, operation and the production of Hydrocarbons from each Well in an amount not greater than the working interest set forth in Exhibit B (“ WI ”); (iii) is not subject to reduction by virtue of the exercise by any third party of a reversionary interest, back in or similar right except as scheduled in Exhibit B ; (iv) is free and clear of mortgages, encumbrances, liens, delinquent taxes and preferential rights to purchase or rights of first refusal unless the foregoing rights are waived by the holders thereof; (v) is not subject to unperformed drilling obligations except as expressly assumed by Buyer; and (vi) is not subject to defects or conditions that would create a material impairment of use or loss of interest in the affected Asset.

4.2 Permitted Encumbrances . The term “ Permitted Encumbrances ” shall mean:

a. lessors’ royalties, overriding royalties, net profits interests, production payments, reversionary interests and similar burdens if the net cumulative effect of such burdens does not operate to reduce the NRI set forth on Exhibit B ;

b. liens for Taxes, or assessments, not yet due or delinquent;

c. all rights to consent by, required notices to, filings with, or other actions by federal, state and local governmental entities in connection with the ownership or operation of the Leases if the same are customarily obtained subsequent to such transfer of ownership or operations;

d. easements, rights-of-way, servitudes, permits, and surface leases on, over, or in respect of property owned or leased by Seller or over which Seller owns rights-of-way, easements, permits, or licenses that are of record in the applicable county to the extent such matters, individually or in the aggregate, do not materially interfere with oil and gas operations on the Leases and do not materially affect the value thereof;

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

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

g. any encumbrance, title defect or matter waived or deemed waived by Buyer pursuant to Section 4.4.a.

4.3 Title Defects . The term “ Title Defect ” means any encumbrance, encroachment, irregularity, defect in or objection to real property title, excluding Permitted Encumbrances, that alone or in combination with other defects renders title to an Asset less than Defensible Title.

4.4 Adjustments for Title Defects .

a. Notice of Title Defects . Buyer shall deliver to Seller a written “ Notice of Title Defects ” on or before March 31, 2009. The Notice of Title Defects shall describe the Title Defect and state the reduction in the Allocated Value of an Asset caused by the Title Defect (the “ Defect Value ”). Other than matters which are violative of Seller’s special warranty of title set out in Exhibit I , any matters not described in a written Notice of Title Defect shall conclusively be deemed to have been waived and accepted by Buyer, and shall be deemed Permitted Encumbrances hereunder. In determining the Defect Value, the Parties intend to include only that portion of the Asset affected by the Title Defect. The Defect Value may not exceed the Allocated Value of the Asset and shall be determined by the Parties in good faith, taking into account all relevant factors, including without limitation the following:

i. If the Title Defect is a lien or encumbrance on the Asset created by Seller, and such lien or encumbrance is unconditionally released at or prior to Closing, there shall be no Defect Value associated with such lien or encumbrance.

ii. If the Title Defect is an actual reduction in NRI or any other matter that does not fall within the matters described in subsection i., then the Buyer will rerun its ARIES based calculation (or similar program) that resulted in the Allocated Value for the affected portion of the Assets using the same economic and engineering criteria except as changed to accommodate the Title Defect to calculate the impact on the Allocated Value for the affected Asset. This revised calculation of the Allocated Value will be presented to Seller, and Buyer and Seller will act in good faith to reach mutual agreement as to the diminution effect of the Title Defect and thus the Defect Value.

b. Defect Adjustments . With respect to adjustments to the Purchase Price for Title Defects, the Parties agree as follows:

i. “ Excluded Assets ” are Assets excluded from this Agreement pursuant to Sections 4.4.b.iii and 5.3.b.

ii. Seller shall have the option of attempting to cure Title Defects to the reasonable satisfaction of Buyer on or before the Closing Date, which option shall be communicated to Buyer prior to the Closing Date.

iii. If Seller does not elect to cure or cannot cure a Title Defect to Buyer’s reasonable satisfaction, Buyer shall have the option to either accept assignment of the Asset affected by a Title Defect, and the Purchase Price shall be adjusted downward by the Defect Value, or to exclude such Asset from this Agreement. If Buyer elects to exclude such Asset, the Purchase Price shall be adjusted downward by an amount equal to the Allocated Value of the Excluded Asset.

4.5 Dispute Resolution . The Parties agree to resolve disputes concerning the following matters pursuant to this Section 4.5: (i) the existence of a Title Defect, (ii) the adequacy of Title Defect curative materials submitted pursuant to Section 4.4.b, and (iii) the amount of a Defect Value (collectively, the “ Disputed Defect Matters ”). The Parties agree to attempt to initially resolve all disputes through good-faith negotiations. Subject to Buyer’s and Seller’s right to terminate this Agreement under Article 10 prior to Closing, if the Parties cannot resolve such disputes on or before Closing, the Disputed Defect Matters shall be submitted to binding arbitration in accordance with the procedures set forth in Section 14.5.d. In such event, an amount equal to the Defect Values associated with the Disputed Defect Matters shall be withheld from the Purchase Price paid by Buyer to Seller at Closing, and the affected Assets shall be retained by Seller at Closing. If, following binding arbitration, the Seller is obligated to sell and the Buyer is obligated to purchase the Assets or portions of the Assets affected by a Disputed Defect Matter, the closing date for the affected Assets shall occur within ten (10) Business Days following the decision of the arbitrators or as otherwise agreed to by the Parties. “ Business Day ” means a day on which commercial banks located in Denver, Colorado are open for business. Notwithstanding the foregoing, Closing shall occur on March 31, 2009 as to Assets which are not affected by a Disputed Defect Matter, subject, however, to the rights of Seller and Buyer to terminate this Agreement under Article 10.

4.6 Casualty Loss . After the Effective Time and prior to Closing, if a portion of the Assets is destroyed by fire or other casualty, or is taken or threatened to be taken in condemnation or under the right of eminent domain, (with such event being a “ Casualty Loss ”), Buyer shall purchase the Asset at Closing for the Allocated Value of the Asset reduced by the estimated cost to repair or replace such Asset (with equipment of similar utility). In no event shall the watering out of a well, casing collapse, or breakage of equipment constitute a Casualty Loss.

ARTICLE 5
ENVIRONMENTAL MATTERS

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

a. Environmental Laws . “ Environmental Laws ” shall mean all laws, rules, regulations, statutes, ordinances, decrees or orders of any Governmental Authority relating to (a) the control of any potential pollutant or protection of the air, water or land, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation, and (c) exposure to hazardous, toxic or other substances alleged to be harmful, and includes without limitation final and binding requirements related to the foregoing imposed by (i) the terms and conditions of any license, permit, approval or other authorization by any Governmental Authority, and (ii) applicable judicial, administrative or other regulatory decrees, judgments and orders of any Governmental Authority. The term “ Environmental Laws ” shall include, but not be limited to, the following statutes and the regulations promulgated thereunder, as currently in effect: the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C. § 6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 11011 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Water Pollution Control Act, 33 U.S.C. § 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136, et. seq., and any similar state, federal or local statute or ordinance.

b. Governmental Authority . “ Governmental Authority ” shall mean any and all foreign, federal, state or local governments, governmental institutions, public authorities and governmental entities of any nature whatsoever, and any subdivisions or instrumentalities thereof, including, but not limited to, departments, boards, bureaus, commissions, agencies, courts, administrations and panels, and any divisions or instrumentalities thereof, whether permanent or ad hoc and whether now or hereafter constituted or existing.

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

d. Remediation . “ Remediation ” means actions or activities required to comply with Environmental Laws to (a) clean up or remove hazardous materials from the environment, (b) prevent or minimize the movement, leaching or migration of hazardous materials into the environment, (c) prevent, minimize or mitigate the release or threatened release of hazardous materials into the environment, or injury or damage from such release, and including without limitation, costs and expenses payable in connection with the foregoing for legal, engineering or other consultant services, for investigation, testing, sampling and monitoring, for boring excavation and construction, for removal, modifications or replacement of equipment or facilities, for labor and material, and for proper storage, treatment and disposal of hazardous materials.

5.2 Environmental Assessment . Buyer may conduct an on-site inspection, environmental assessment and compliance audit of the Assets (an “ Environmental Assessment ”) at Buyer’s cost and expense. Seller shall provide Buyer with all information in Seller’s possession or control pertaining to the environmental condition of the Assets, including, but not limited to, status of any environmental audits, permits, records and assessments in Seller’s possession or control, and shall make available to Buyer all present personnel who would reasonably be expected to have knowledge or information regarding the environmental status or condition of the Assets. Buyer shall provide Seller prior written notice of any environmental inspections and tests, including sampling activities, and Buyer shall give Seller the opportunity to participate in all such inspections and tests. Buyer shall provide Seller, at no cost to Seller, all reports of environmental inspections and tests, provided that all such reports shall be deemed to be confidential between the parties and subject to the confidentiality provisions of Section 8.6.a of this Agreement. Buyer agrees to release, indemnify, defend, and hold harmless Seller against all Losses (as defined in Section 14.3) arising from or related to the activities of Buyer, its employees, agents, contractors and other representatives in connection with Buyer’s Environmental Assessment regardless of the negligence or strict liability of Seller.

5.3 Adjustments for Environmental Defects Pre-Closing .

a. Notice of Environmental Defects . Buyer shall provide Seller with written notice of any Environmental Defect which Buyer’s Environmental Assessment reveals and will provide evidence thereof. Such notice and evidence shall be given on or before March 31, 2009. Buyer will be deemed to have conclusively waived the right to adjust the Purchase Price with respect to any Environmental Defect about which it fails to notify Seller in writing prior to March 31, 2009.

b. Defect Adjustments . Upon receipt of a notice of Environmental Defect, Seller may, at its sole election prior to the Closing Date, either: (i) agree with Buyer on an adjustment to the Purchase Price which shall be reflected on the Settlement Statement, which adjustment shall reflect the cost to remediate such Environmental Defect (“ Environmental Defect Value ”); or (ii) in the event of the failure of the Parties to come to agreement under (i), remove the affected Asset(s) from this Agreement and adjust the Purchase Price downward by the Allocated Value(s) of the excluded Asset(s) on the Settlement Statement. Any Remediation of an Environmental Defect shall be conducted by or under the supervision of Buyer. In no event will Buyer have any obligation to remediate any such Environmental Defect unless Buyer expressly agrees in writing to do so. There shall be no reduction to the Purchase Price until such time as the sum of all Environmental Defect Values exceeds Seventy-Five Thousand Dollars ($75,000) (the “ Environmental Threshold Amount ”) but, in such event, the Purchase Price reduction shall include the Environmental Threshold Amount.

5.4 Environmental Dispute Resolution Pre-Closing . The parties agree to resolve disputes concerning the following matters pursuant to this Section: (i) the existence and scope of Environmental Defect, (ii) Buyer’s estimate of costs of Remediation of an Environmental Defect and (iii) the effectiveness of Remediation. The parties agree to attempt to initially resolve all disputes through good faith negotiations. If the parties cannot resolve disputes regarding items (i), (ii) or (iii) on or before the Closing Date, the disputed matters will be finally determined by binding arbitration pursuant to Section 14.5.d.

5.5 Seller’s Indemnity .

a. Seller shall indemnify, hold harmless, release and defend Buyer from and against all damages, losses, claims, demands, causes of action, judgments and other costs (including but not limited to any civil fines, penalties, costs of assessment, clean-up, removal and remediation of pollution or contamination, and expenses for the modification, repair or replacement of facilities on the Lands) brought by any and all persons and any agency or other body of federal, state or local government, on account of any personal injury, illness or death, any damage to, destruction or loss of property, and any contamination or pollution of natural resources (including soil, air, surface water or groundwater) to the extent any of the foregoing directly or indirectly is caused by or otherwise involves any environmental condition of the Assets or Lands, which is created and arises prior to Closing, including, but not limited to, the presence, disposal or release of any material (whether hazardous, extremely hazardous, toxic or otherwise) of any kind in, on or under the Assets or the Lands before Closing (the “ Pre-Closing Environmental Liabilities ”). Notwithstanding the foregoing, Seller’s obligation under this Section 5.5 is effective only if the Environmental Threshold Amount is exceeded (in which event Seller’s Pre-Closing Environmental Liabilities shall include the Environmental Threshold Amount and if, and to the extent that, Buyer gives written notice to Seller of an asserted Pre-Closing Environmental Liability within six (6) months from the date of Closing (“ Retained Environmental Liability ”).

b. Seller’s indemnification obligations shall extend to and include, but not be limited to the following with respect to Pre-Closing Environmental Liabilities: (i) the negligence or other fault of Seller, third parties and its agents, whether such negligence is active or passive, joint, sole or concurrent, (ii) Seller’s or Buyer’s strict liability, and (iii) Seller’s or Buyer’s liabilities or obligations under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. §§ 466 et seq., the Safe Drinking Water Act (14 U.S.C. §§ 1401-1450), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601-2629), the Clean Air Act (42 U.S.C. § 7401 et seq.) as amended, the Clean Air Act Amendments of 1990 and all state and local laws and any replacement or successor legislation or regulation thereto. This indemnification shall be in addition to any other indemnity provisions contained in this Agreement, and it is expressly understood and agreed that any terms of this article shall control over any conflicting or contradicting terms or provisions contained in this Agreement; however, this Article 5 shall constitute Buyer’s sole remedy for any Pre-Closing Environmental Liabilities.

c. Seller’s indemnification shall not extend to matters or conditions for which an adjustment of the Purchase Price was made pursuant to Section 5.3.b(i).

5.6 Buyer’s Indemnity .

a. Except for Excluded Assets, Buyer shall indemnify, hold harmless, release and defend Seller from and against all damages, losses, claims, demands, causes of action, judgments and other costs (including but not limited to any civil fines, penalties, costs of assessment, clean-up, removal and remediation of pollution or contamination, and expenses for the modification, repair or replacement of facilities on the Lands) brought by any and all persons and any agency or other body of federal, state or local government, on account of any personal injury, illness or death, any damage to, destruction or loss of property, and any contamination or pollution of natural resources (including soil, air, surface water or groundwater) to the extent any of the foregoing directly or indirectly is caused by or otherwise involves any environmental condition of the Assets or Lands, which is created and arises after Closing, including, but not limited to, the presence, disposal or release of any material (whether hazardous, extremely hazardous, toxic or otherwise) of any kind in, on or under the Assets or the Lands after Closing (the “ Post-Closing Environmental Liabilities ”).

b. Buyer’s indemnification obligations shall extend to and include, but not be limited to the following with respect to Post-Closing Environmental Liabilities: (i) the negligence or other fault of Buyer, third parties, and its agents, whether such negligence is active or passive, joint, sole or concurrent, (ii) Seller’s or Buyer’s strict liability, and (iii) Seller’s or Buyer’s liabilities or obligations under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. §§ 466 et seq.), the Safe Drinking Water Act (14 U.S.C. §§ 1401-1450), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601-2629), the Clean Air Act (42 U.S.C. § 7401 et seq.) as amended, the Clean Air Act Amendments of 1990 and all state and local laws and any replacement or successor legislation or regulation thereto. This indemnification shall be in addition to any other indemnity provisions contained in this Agreement, and it is expressly understood and agreed that any terms of this Section shall control over any conflicting or contradicting terms or provisions contained in this Agreement.

ARTICLE 6
SELLER’S REPRESENTATIONS

Seller makes the following representations and warranties as of the date of this Agreement and as of Closing:

6.1 Existence and Qualification . Teton DJ is a Colorado limited liability company duly organized, validly existing and in good standing under the laws of Colorado. Teton Energy Corporation is a Delaware corporation duly organized, validly existing and in good standing under the laws of Delaware.

6.2 Power . Seller has all requisite power and authority to carry on its business as presently conducted and to enter into this Agreement and convey the Assets. The execution and delivery of this Agreement, consummation of the Transaction, and the fulfillment of and compliance with the terms and conditions hereof will not violate, or be in conflict with, any material provision of the governing documents of Seller or any material provision of any agreement or instrument to which Seller is a party or by which Seller is bound, or any judgment, decree, order, statute, rule or regulation applicable to Seller.

6.3 Authorization and Enforceability . The execution, delivery and performance of this Agreement and the Transaction have been duly and validly authorized by all requisite action on Seller’s part. This Agreement constitutes Seller’s legal, valid and binding obligation, enforceable in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws for the protection of creditors, as well as to general principles of equity, regardless whether such enforceability is considered in a proceeding in equity or at law.

6.4 Liability for Brokers’ Fees . Seller has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the Transaction for which Buyer shall have any responsibility whatsoever.

6.5 No Bankruptcy . There are no bankruptcy proceedings pending, being contemplated by, or to Seller’s knowledge, based upon reasonable inquiry and investigation, threatened against Seller or Teton Energy.

6.6 Litigation . Seller has not received written notice of any pending proceeding, notice of violation, action, suit, claim or investigation before any federal, state or other governmental court, or agency involving the ownership, operation or environmental condition of the Leases. There is no action, suit, proceeding, protest, claim or investigation by any person, entity, administrative agency or governmental body pending or, to Seller’s knowledge, threatened, against Seller before any governmental authority that impedes or is likely to impede Seller’s ability to consummate the Transaction or to assume the liabilities to be assumed by Seller under this Agreement.

6.7 Taxes . All taxes and assessments pertaining to the Assets based on ownership of the Assets for all taxable periods prior to the taxable period in which this Agreement is executed have been properly paid. All income taxes and obligations relating thereto that could result in a lien or other claim against any of the Leases have been properly paid, unless contested in good faith by appropriate proceeding.

6.8 Agreements . All of the material agreements pertaining to the Leases and Lands, which affect the interest being acquired by Buyer in the Assets pursuant to this Agreement, or Buyer’s exploration, development, or production operations on the Leases and Lands, including agreements for the gathering and transportation of Hydrocarbons produced from the Leases and Lands (the “ Material Agreements ”) (but excluding surface use agreements to which Buyer is a Party) are listed on Schedule 6.8 .

6.9 Tax Partnerships . The Assets are not subject to any tax partnership agreements requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code, with the exception of tax partnership agreements which are a part of the Material Agreements.

6.10 Prepayments . Except as set forth on Schedule 6.10 , there are no agreements involving any prepayments for production or any agreements requiring the delivery of oil, gas or other minerals produced from or allocated to any of the Leases at some future time without receiving full payment therefor at the time of delivery.

6.11 Hydrocarbon Sales Contracts . Except as set forth on Schedule 6.10 , no Hydrocarbons are subject to a sales contract (other than spot sales agreements terminable on no more than 30 days notice) and no person has any call upon, option to purchase or similar rights with respect to the production from the Assets.

6.12 Hedging Arrangements . The Leases are not subject to any gas sales, gathering or transportation contracts which include provisions for hedging, price risk management or other such financial arrangements or transactions, which will affect or burden the Leases from and after the Closing Date.

6.13 Preferential Rights to Purchase and Areas of Mutual Interest . With the exception of the area of mutual interest obligation in the Acreage Earning Agreement dated effective May 1, 2007 between Teton DJ LLC and Targe Energy Exploration and Production, LLC, there are no preferential rights to purchase or area of mutual interest obligations which entitle any third par