Exhibit 99.2

Jason S. Brookner

Texas Bar No. 24033684

Lydia R. Webb

Texas Bar No. 24083758

GRAY REED & McGRAW, P.C.

1601 Elm Street, Suite 4600

Dallas, Texas 75201

Telephone: (214) 954-4135

Facsimile: (214) 953-1332

COUNSEL TO THE DEBTORS

IN THE UNITED STATES BANKRUPTCY COURT FOR THE

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

 

In re:		§		Chapter 11
		§
EASTERN 1996D LIMITED		§		Case No. 13-34773-HDH-11
PARTNERSHIP, et al.,1		§
		§		Jointly Administered
Debtors.		§
		§		Hearing Date and Time: February 27, 2014 at 9:30 a.m.

DEBTORS’ MOTION FOR ORDER PURSUANT TO 11 U.S.C. § 363 AND FED. R.

BANKR. P. 2002, 6004 AND 9014 AUTHORIZING SALE OF THE DEBTORS’

APPALACHIA ASSETS FREE AND CLEAR OF LIENS, CLAIMS,

INTERESTS AND ENCUMBRANCES

Eastern 1996D Limited Partnership, et al., the above-captioned debtors and debtors in possession (collectively, the “Debtors”), for their Motion (the “Motion”) for Order Pursuant to Section 363 of title 11 of the United States Code (the “Bankruptcy Code”) and Rules 2002, 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) Authorizing Sale of the Debtors’ Appalachia Assets (the “Appalachia Assets”) Free and Clear of Liens,

 

1

The Debtors in these chapter 11 cases, and the last four digits of their federal tax identification numbers, are: (i) Eastern 1996D Limited Partnership (1154); (ii) Eastern 1997D Limited Partnership (4713); (iii) Eastern 1998D Limited Partnership (7539); (iv) CO and PA 1999D Limited Partnership (8545); (v) Colorado 2000B Limited Partnership (3050); (vi) Colorado 2000C Limited Partnership (3437); (vii) Colorado 2000D Limited Partnership (4071); (viii) Colorado 2001A Limited Partnership (9061); (ix) Colorado 2001B Limited Partnership (9832); (x) Colorado 2001C Limited Partnership (3219); (xi) Colorado 2001D Limited Partnership (5051); and (xii) Colorado 2002A Limited Partnership (9674).

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 1

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Claims, Interests and Encumbrances, respectfully represent:²

JURISDICTION AND VENUE

1. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§157 and 1334. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).

2. Venue in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

INTRODUCTION

3. On September 16, 2013 (the “Petition Date”), each of the Debtors filed with this Court a petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and managing their properties as debtors in possession, pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

4. An official committee of limited partnership unit holders (the “Committee”) was appointed by the Office of the United States Trustee (the “U.S. Trustee”) on December 20, 2013. No trustee or examiner has been appointed.

BACKGROUND

5. The Debtors are publicly subscribed West Virginia limited partnerships that own undivided working interests in oil and natural gas wells. The Debtors were organized and began operations with cash contributed by limited and additional general partners (collectively, the “Investor Partners”) and the managing general partner. These Investor Partners own approximately 80% of the respective Debtors’ capital, or equity interests. PDC Energy, Inc. (f/k/a Petroleum Development Corp.) (“PDC,” and collectively with the Investor Partners, the “Partners”), a Nevada corporation, owns the remaining approximately 20% of the respective Debtors’ capital or equity interests, and is the managing general partner of each of the Debtors. In the aggregate, the Debtors have over 8,500 limited partnership unit holders. Prior to the Petition Date, Karen Nicolaou was retained and designated as the responsible party (the “Responsible Party”) for each of the Debtors.

 

2

The assets sought to be sold through this Motion are limited to the assets of Eastern 1996D, Eastern 1997D, Eastern 1998D, and the Appalachian assets held by CO & PA 1999D (the “Seller Debtors”). The assets of Colorado 2000B, Colorado 2000C, Colorado 2000D, Colorado 2001A, Colorado 2001B, Colorado 2001C, Colorado 2001D, Colorado 2002A, and the Wattenberg assets held by CO & PA 1999D were the subject of a separate sale motion [Docket No. 87] and orders [Docket No. 109 and 158].

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 2

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6. The primary business of the Debtors is the operation and development of oil and natural gas properties and the appropriate allocation of cash proceeds, costs, and tax benefits among the Partners. The Debtors are each a party to a separate joint operating agreement with PDC (the “JOA”), as operator for the Debtors oil and gas properties.³ The Debtors utilized substantially all of the capital raised in their respective offerings for the initial drilling and completion of their wells. In accordance with the Debtors’ limited partnership agreements, the Investor Partners that held general partnership interests in each Debtor had such interests converted to limited partnership units upon the completion of the Debtors’ drilling activities. PDC remains the sole general partner for each of the Debtors.

7. PDC serves as operator for each of the wells in which the Debtors have a working interest. PDC markets and sells the oil and gas, pays all applicable operating expenses and royalty interest holders, and thereafter, allocates the net distributable income on each applicable well to the appropriate Debtor and other non-debtor working interest holders. On behalf of each Debtor, PDC then distributes such Debtor’s net distributable income to each Debtor’s Partners. The Debtors have no operations, no employees and no creditors (other than PDC, to whom the Debtors owe, in any given month, reimbursement for expenses incurred in connection with drilling activities).

8. The Seller Debtors believe it is in the best interests of their respective estates to sell their remaining oil and gas interests, with the proceeds of the sale being paid to the Seller Debtors’ Partners after the payment of administrative expense claims and any other allowed claims. The Debtors believe that, following the sale, there will be sufficient proceeds to pay all allowed administrative claims, and make a final distribution to Partners.

 

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 3

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RELIEF REQUESTED

9. Alliance Petroleum Corporation (“Alliance”) has offered to purchase the Seller Debtors’ Appalachia Assets for the aggregate amount of $1,997,436 (the “Purchase Price”). This purchase is part of a larger overall transaction between Alliance, PDC, and certain other non-Debtor entities related to PDC, as memorialized by a purchase and sale agreement executed by those parties (the “Non-Debtor PSA”).⁴ Given the Debtors’ bankruptcy filings, the Seller Debtors’ assets were excluded from the Non-Debtor PSA. The form of purchase and sale agreement among the Seller Debtors and Alliance with respect to the Appalachia Assets (the “PSA”) is attached hereto as Exhibit “A”.

10. By this Motion, the Debtors seek entry of an Order, substantially in the form attached hereto as Exhibit “D” (the “Sale Order”) authorizing and approving the sale of the Appalachia Assets to Alliance. As more fully set forth below, the Seller Debtors believe that the sale to Alliance will maximize the value of their assets for the benefit of their respective estates.

THE SALE

11. The Appalachia Assets will be sold, free and clear of all liens, claims, interests and encumbrances. All of the assets to be sold pursuant to this Motion are located solely in the Appalachia (West Virginia and Pennsylvania) region. The portion of the Purchase Price allocable to each group of assets is as follows:

Eastern 1996D: $646,490 Eastern 1998D: $642,204

Eastern 1997D: $611,563 CO & PA 1999D: $97,179

 

 

3	By order dated October 22, 2013 [Docket No. 107], the Debtors were authorized to, and did, assume their JOAs.

4	A closing under the Non-Debtor PSA occurred on December 17, 2013.

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 4

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12. In the Debtors’ Motion for Order Pursuant to 11 U.S.C. § 363 and Fed. R. Bankr. P. 2002, 6004 and 9014 Authorizing and Approving (A) Bidding and Auction Procedures and Form and Manner of Sale Notice, and (B) Sale of Substantially all of the Debtors’ Assets Free and Clear of Liens, Claims, Interests and Encumbrances [Docket No. 46] (the “Original Sale Motion”), PDC, as the stalking horse bidder, allocated a lesser amount toward the Appalachia Assets (based on third party reserve reports prepared by Ryder Scott Co. LP, a nationally recognized petroleum engineering firm). Alliance, however, is a strategic purchaser, with the Appalachia Assets comprising just a portion of a larger overall transaction. Thus, as a result of the synergies created for Alliance by its ability to purchase a large number of wells in Appalachia, the proposed sale price for the Appalachia Assets is above the reserve report values. As a consequence, the Debtors amended their Original Sale Motion to remove the Appalachia Assets from the auction [Docket No. 87]. The Court was apprised of the reason for withdrawing the Appalachia Assets from the original auction on the record at the hearing on October 17, 2013. Hearing Tr., 12:7-18, Oct. 17, 2013.

13. On September 27, 2013, the Debtors filed a motion to assume their respective JOAs with PDC, including the JOAs between the Seller Debtors and PDC. Such JOAs each contemplated that a purchaser of the Debtors’ assets could choose to maintain PDC as the operator or terminate the JOA. Following Court approval of this Motion and upon closing of the contemplated transaction, Alliance intends to operate the Appalachia Assets and, thus, will seek to immediately terminate the Seller Debtors’ JOAs. The Debtors are informed that Alliance has met all legal requirements for operating the Appalachia Assets, and are further informed that PDC does not contest or oppose termination of the Seller Debtors’ JOAs as to the Appalachia Assets following closing (without liability to any of the Debtors). Further, the Debtors do not anticipate a rejection damages claim being filed as a result of termination of the Seller Debtors’ JOAs.

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 5

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14. On January 30, 2014, Alliance and PDC entered into a letter agreement (the “Letter Agreement”), pursuant to which PDC agreed to indemnify Alliance against losses arising from: (i) obligations relating to the Seller Debtors’ ownership of their respective interests in the Appalachia Assets prior to the effective time of the PSA; or (ii) any breach by the Seller Debtors of any of their representations or warranties contained in Article 6 of the PSA. The effect of the Letter Agreement is to remove any potential indemnification liability from the Seller Debtors upon closing, essentially making the sale “as is, where is” from the Seller Debtors’ perspective. The Letter Agreement is attached hereto as Exhibit “B,” and the side letter reference therein (pursuant to which, inter alia, the Seller Debtors’ assets were removed from the earlier sale to Alliance due to the bankruptcy filings) is attached hereto as Exhibit “C.”

ARGUMENT AND AUTHORITY

 

A.

Business Justification

15. Section 363(b)(1) of the Bankruptcy Code provides, in pertinent part, that “[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b)(1). A sale of property under section 363(b) should be approved when a legitimate business justification for the proposed action is shown. In re Cont’l Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986) (for a “trustee to satisfy its fiduciary duty to the debtor, creditors and equity holders, there must be some articulated business justification for using, selling, or leasing the property outside the ordinary course of business”); see also Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983); Comm. of Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns- Manville Corp.), 60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986) (“Where the debtor articulates a reasonable basis for its business decisions (as distinct from a decision made arbitrarily or capriciously), courts will generally not entertain objections to the debtor’s conduct”).

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 6

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16. The paramount goal in any proposed sale of property of the estate is to maximize the proceeds received by the estate. See Cadle Co. v. Moore (In re Moore), 608 F.3d 253, 263 (5th Cir. 2010) (debtor in possession “has the duty to maximize the value of the estate”); Commodity Future Trading Comm’m v. Weintraub, 471 U.S. 343, 353 (1985) (same); Four B. Corp. v. Food Barn Stores, Inc. (In re Barn Stores, Inc.), 107 F.3d 558, 564-65 (8th Cir. 1997) (in bankruptcy sales, “a primary objective of the Code [is] to enhance the value of the estate at hand”).

17. The Seller Debtors have determined that the sale to Alliance will maximize the value of their respective estates. As stated earlier, the purchase price for the Appalachia Assets exceeds the reserve report values for such assets. Because Alliance is a strategic purchaser with existing assets in the same region, Alliance is willing to pay a premium for the Appalachia Assets to create its own synergies and, as a result, will contribute maximum value to the Seller Debtors’ estates. Given the strategic nature of the proposed purchase by Alliance, as well as the fact that the Appalachia Assets are a smaller part of a larger overall transaction, the Seller Debtors do not believe that the Appalachia Assets could be sold at auction for greater value. Moreover, the Royal Bank of Canada marketed the Appalachia Assets from December 21, 2012 through December 17, 2013, when the Non-Debtor PSA closed (361 days) and found no other suitable purchaser. The Seller Debtors therefore believe that the Alliance offer represents the highest and best price for the Appalachia Assets.

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 7

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B.

Sale of the Appalachia Assets Free and Clear of Liens, Claims, Encumbrances, and Interests

18. Under section 363(f) of the Bankruptcy Code, a debtor in possession may sell property free and clear of any lien, claim, interest or encumbrance in such property held by an entity:

 

(1)

applicable nonbankruptcy law permits sale of such property free and clear of such interest;

 

(2)

such entity consents;

 

(3)

such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;

 

(4)

such interest is in bona fide dispute; or

 

(5)

such entity could be compelled in a legal or equitable proceeding, to accept a money satisfaction of such interest.

11 U.S.C. § 363(f); see also In re Collins, 180 B.R. 447, 449-50 (Bankr. E.D. Va. 1995) (“Section 363(f) is phrased in the disjunctive, such that only one of the enumerated conditions must be met in order for the Court to approve the proposed sale”); In re P.K.R. Convalescent Ctrs., Inc., 189 B.R. 90, 93-94 (Bankr. E.D. Va. 1995) (“[S]ection 363 covers more situation than just sales involving liens . . . Section 363(f) addresses sales free and clear of any interest . . .”); In re Gen. Bearing Corp., 136 B.R. 361, 366 (Bankr. S.D.N.Y. 1992) (listing requirements).

19. Section 363(f) permits the Seller Debtors to sell the Appalachia Assets free and clear of all liens, claims, interests and encumbrances, except for the liabilities specifically assumed by Alliance. Each lien, claim, interest or encumbrance satisfies at least one of the five conditions of section 363(f) of the Bankruptcy Code. The Seller Debtors submit that any such lien, claim, interest or encumbrance will be adequately protected by attachment to the net proceeds of the Sale, subject to any claims and defenses the Seller Debtors may possess with respect thereto. Accordingly, the Seller Debtors request that the Appalachia Assets be transferred to Alliance free and clear of all liens, claims, interest and encumbrances, with such liens, claims, and encumbrances to attach to the proceeds of the sale of the Appalachia Assets.

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 8

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C.

Alliance Is a Good Faith Purchaser Pursuant to Section 363(m) of the Bankruptcy Code and the Contemplated Sale Should Be Deemed Not Avoidable Pursuant to Section 363(n) of the Bankruptcy Code

20. Section 363(m) of the Bankruptcy Code provides:

The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.

21. While the Bankruptcy Code does not define “good faith,” the court in In re Sullivan Cent. Plaza I, Ltd., 106 B.R. 934 (Bankr. N.D. Tex. 1998), stated that:

[t]he type of conduct of a Buyer which would destroy its good faith status under § 363(m) involves fraud, collusion between the Buyer and other bidders of the trustee, or an attempt to take grossly unfair advantages of other bidders.

106 B.R. at 938 (citing Matter of Bleaufontaine, Inc., 634 F.2d 1383, 1388 (5th Cir. 1981)).

22. The Seller Debtors submit that the contemplated sale to Alliance was a fairly negotiated, non-collusive, arms-length transaction, in which Alliance has at all times acted in good faith. Indeed, the Seller Debtors (in conjunction with PDC) have been negotiating with Alliance for many months. The Seller Debtors thus request that the Court find that Alliance will have purchased the Appalachia Assets in good faith within the meaning of section 363(m) of the Bankruptcy Code, and further find that the sale is non-avoidable under section 363(n) of the Bankruptcy Code.

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 9

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NOTICE

23. Notice of this Motion has been provided to: (i) counsel to Alliance; (ii) counsel to the Committee; (iii) the U.S. Trustee; and (iv) the parties appearing on the attached Limited Service List. The Debtors respectfully submit that such notice is appropriate and that no other or further notice need be provided.

WHEREFORE the Debtors respectfully request that the Court enter an Order, substantially in the form attached hereto: (i) authorizing and approving the Sale of the Appalachia Assets free and clear of liens, claims, interests and encumbrances to Alliance; (ii) finding Alliance to be a good faith purchaser within the meaning of section 363(m) of the Bankruptcy Code; and (iii) granting such other and further relief as may be just and proper.

Respectfully submitted this 31st day of January, 2014.

 

 

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 10

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CERTIFICATE OF SERVICE

The undersigned hereby certifies that on the 31st day of January, 2014, he caused a true and correct copy of the foregoing document to be served on the parties appearing on the attached Service List via first class United States mail, postage prepaid and, where possible, via electronic mail.

 

 

DEBTORS’ MOTION FOR ORDER AUTHORIZING SALE OF APPALACHIA ASSETS – PAGE 11

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Eastern 1996D Limited Partnership et al.

Limited Service List as of 1/06/2014

 

Atropos, Inc.		Gray Reed & McGraw, P.C.		Office of the United States Trustee,
Attn: Karen Nicolaou		Attn: Jason S. Brookner,		Northern District of Texas
569 Trianon		Micheal Bishop and Lydia Webb		Attn: Lisa L. Lambert
Houston, TX 77024		1601 Elm Street, Suite 4600		1100 Commerce St., Room 976
		Dallas, TX 75201		Dallas, TX 75242
PDC Energy, Inc.		PDC Energy, Inc.		Andrews Kurth LLP
Attn: Daniel W. Amidon, GC		Attn: Darwin L. Stump, VP Acctg. Ops.		Attn: Robin Russell and Joseph Rovira
1775 Sherman St.		120 Genesis Blvd		600 Travis, Suite 4200
Suite 3000		PO Box 26		Houston, TX 77002
Denver, CO 80203		Bridgeport, WV 26330
Internal Revenue Service		Securities and Exchange Commission		Securities and Exchange Commission
Attn: Bankruptcy Unit		Attn: Sonia Chae		Attn: Neil J. Welch, Jr.
1100 Commerce St., Room 121		175 W. Jackson Blvd.		100 F St., N.E.
Dallas, TX 75242		Suite 900		Washington, D.C. 20549-6010
		Chicago, IL 60604
Holland N. O’Neil
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, TX 75201

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EXHIBIT “A” TO SALE MOTION

PURCHASE AND SALE AGREEMENT

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EXECUTION VERSION

PURCHASE AND SALE AGREEMENT

BY AND AMONG

EASTERN 1996D LIMITED PARTNERSHIP,

EASTERN 1997D LIMITED PARTNERSHIP,

EASTERN 1998D LIMITED PARTNERSHIP,

AND

CO and PA 1999D LIMITED PARTNERSHIP,

(Seller)

AND

ALLIANCE PETROLEUM CORPORATION

(Buyer)

BARBOUR, DODDRIDGE AND TAYLOR COUNTIES, WEST VIRGINIA

ARMSTRONG, CLEARFIELD, INDIANA AND WASHINGTON COUNTIES, PENNSYLVANIA

Dated January 30, 2014

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TABLE OF CONTENTS

 

				Page
ARTICLE 1		PURCHASE AND SALE			1
1.1		Purchase and Sale			1
1.2		Effective Time			1
1.3		Shallow Assets			1
1.4		Other Excluded Assets			2
1.5		Deep Rights			3
ARTICLE 2		PURCHASE PRICE			3
2.1		Purchase Price			3
2.2		Allocation of the Purchase Price			3
2.3		Adjustments to Purchase Price and Preliminary Settlement			3
2.4		Allocations for Federal Income Tax Purposes			6
ARTICLE 3		BUYER’S INSPECTION			6
3.1		Due Diligence			6
3.2		Access to Records			6
3.3		On-Site Inspection			6
3.4		Indemnification			7
ARTICLE 4		TITLE MATTERS			8
4.1		Definitions			8
4.2		Title Representations			9
4.3		Title Adjustment Procedures			10
4.4		Title Dispute Resolution			14
4.5		Consents; No Preferential Rights			14
ARTICLE 5		ENVIRONMENTAL MATTERS			15
5.1		Definitions			15
5.2		Environmental Liabilities and Obligations			16
5.3		NORM, Wastes and Other Substances			16
5.4		Environmental Defect Notice			16
5.5		Seller’s Right to Remediate			16
5.6		Defect Adjustments			16
5.7		Contested Environmental Defects			18
5.8		Exclusive Remedies			18
ARTICLE 6		SELLER’S REPRESENTATIONS AND WARRANTIES			18
6.1		Organization and Standing			19
6.2		Power			19
6.3		Authorization and Enforceability			19
6.4		Liability for Brokers’ Fees			19
6.5		Litigation			19
6.6		Compliance with Law			19
6.7		Status and Operation of Shallow Assets			19
6.8		Taxes			20
6.9		Imbalance Volumes			20
6.10		Leases			20
6.11		Material Agreements			20
6.12		Areas of Mutual Interest			20

 

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TABLE OF CONTENTS

(continued)

 

				Page
6.13		Production Payments			20
6.14		Insurance			20
6.15		No Other Representations or Warranties; Disclosed Materials			20
ARTICLE 7		BUYER’S REPRESENTATIONS AND WARRANTIES			21
7.1		Organization and Standing			21
7.2		Power			21
7.3		Authorization and Enforceability			21
7.4		Liability for Brokers’ Fees			21
7.5		Litigation			21
7.6		Financial Resources			21
7.7		Buyer’s Evaluation			21
7.8		Securities Laws			22
7.9		Buyer’s Qualification			22
ARTICLE 8		COVENANTS AND AGREEMENTS			22
8.1		Covenants and Agreements of Seller			22
8.2		Covenants and Agreements of Buyer			23
8.3		Covenants and Agreements of the Parties			24
ARTICLE 9		TAX MATTERS			25
9.1		Definitions			25
9.2		Apportionment of Property Taxes			27
9.3		Apportionment of Severance Taxes			27
9.4		Transfer Taxes			27
9.5		Post-Closing Tax Matters			27
ARTICLE 10		CONDITIONS PRECEDENT TO CLOSING			28
10.1		Seller’s Conditions			28
10.2		Buyer’s Conditions			28
10.3		Conditions of Both Parties			29
ARTICLE 11		RIGHT OF TERMINATION			29
11.1		Termination			29
11.2		Effects of Termination			30
11.3		Liabilities Upon Termination			30
ARTICLE 12		CLOSING			30
12.1		Date of Closing			30
12.2		Place of Closing			30
12.3		Closing Obligations			30
12.4		Non-Foreign Status			31
ARTICLE 13		POST-CLOSING ADJUSTMENTS			32
13.1		Final Settlement Statement			32
13.2		Dispute Mechanism			32
13.3		Payments			33

 

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TABLE OF CONTENTS

(continued)

 

					Page
ARTICLE 14		ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION; DISCLAIMERS			33
14.1		Survival of Warranties, Representations and Covenants			33
14.2		Buyer’s Assumption of Liabilities and Obligations			33
14.3		Indemnification			34
14.4		Procedure			34
14.5		No Insurance; Subrogation			35
14.6		Reductions in Losses			35
14.7		Reservation as to Non-Parties			35
14.8		Release			36
14.9		Disclaimers			36
ARTICLE 15		MISCELLANEOUS			37
15.1		Schedules			37
15.2		Expenses			37
15.3		Notices			37
15.4		Amendments			38
15.5		Assignment			38
15.6		Headings			38
15.7		Counterparts/Electronic and Fax Signatures			38
15.8		References			38
15.9		Governing Law			39
15.10		Disputes			39
15.11		Waiver of Certain Damages			39
15.12		Entire Agreement			39
15.13		Severability			39
15.14		Binding Effect			39
15.15		No Third-Party Beneficiaries			39

 

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Defined Terms

 

Term		Section
AAA		4.4
Affiliates		1.3(g)
Agreed Accounting Firm		13.2
Agreement		Opening paragraph
Allocated Value		2.2
Assumed Liabilities		14.2
Bankruptcy Court		10.3
Bankruptcy Proceeding		8.1(j)
Buyer’s Environmental Liabilities		5.2
Buyer’s Representatives		3.2
Buyer		Opening paragraph
Casualty Loss		8.3(c)
Claim		14.4(b)
Claim Notice		14.4(a)
Claims and Interests		12.3(a)
Closing		12.1
Closing Amount		2.3
Closing Date		12.1
Code		2.4
Condition		5.1(a)
Contracts		1.3(f)
Cure Period		4.3(e)
Current Tax Period		9.2
Defect Threshold		11.1(d)
Defensible Title		4.1(a)
Dispute		15.10
Due Diligence Review		3.1
earned		2.3(a)
Effective Time		1.2
Environmental Assessment		3.3(a)
Environmental Deductible		5.6(b)
Environmental Defect		5.1(b)
Environmental Defect Adjustment		5.6(a)(1)
Environmental Defect Exclusion		5.6(a)(2)
Environmental Defect Notice		5.4
Environmental Defect Property		5.4
Environmental Defect Value		5.4
Environmental Expert		5.7
Environmental Law(s)		5.1(c)
Equipment		1.3(e)
Excluded Assets		1.4
Execution Date		Opening Paragraph
Final Adjustment		13.1
Final Purchase Price		13.1
Final Settlement Date		13.1
Final Settlement Statement		13.1
Governmental Entity		5.1(d)

 

-iv-

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Defined Terms

(continued)

 

GP Indemnification Agreement		12.3(h)
Hazardous Materials		5.1(e)
Hydrocarbons		1.3(b)
Impact Fee		9.1(a)
Income Taxes		9.1(b)
incurred		2.3(a)
Indemnified Party		14.4(a)
Indemnifying Party		14.4(a)
Individual Title Threshold		4.3(i)
Information		8.2(b)
Initial Purchase Price		2.1
Initial Defect Notice Date		3.1
Knowledge		Article 6
Lands		1.3(a)
Leases		1.3(a)
Losses		14.3
Net Casualty Loss		8.3(c)
Net Revenue Interest		4.1(a)(1)
NORM		5.3
Notice of Defective Interest		4.3(c)
Obligations		14.2
Partial Assignment		4.2(a)
Partnership		Opening paragraph
Party, Parties		Opening paragraph
Permitted Encumbrances		4.1(b)
Person		1.3(g)
Post-Closing Cure Period		4.3(f)
Preliminary Settlement Statement		2.3
Production Taxes		9.1(c)
Property Expenses		2.3(b)
Property Taxes		9.1(d)
Purchase Price		2.1
Records		1.3(g)
Remediate; Remediation		5.1(f)
Seller		Opening paragraph
Seller Indemnified Parties		3.3(d)
Severance Taxes		9.1(e)
Shallow Assets		1.3
Shallow Wells		1.3(c)
Supplemental Defect Notice Date		3.1
Survival Period		14.1
Tax Controversy		9.5(d)
Taxes		9.1(f)
Title Arbitrator		4.4
Title Benefit		4.3(b)
Title Benefit Amount		4.3(h)
Title Benefit Notice		4.3(d)
Title Benefit Property		4.3(d)

 

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Defined Terms

(continued)

 

Title Deductible		4.3(i)
Title Defect		4.3(a)
Title Defect Adjustment		4.3(f)
Title Defect Amount		4.3(g)
Title Defect Property		4.3(c)
Title Disputed Matters		4.4
Transaction		Opening paragraph
Transfer Taxes		9.1(g)
Working Interest		4.1(a)(2)

 

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List of Exhibits

 

Exhibit A		Leases
Exhibit B		Shallow Wells
Exhibit C		Contracts
Exhibit D		Form of Partial Assignment, Bill of Sale and Conveyance
Exhibit E		Form of Assignment and Assumption Agreement
Exhibit F		Form of Certificate of Non-Foreign Status
List of Schedules
Schedule 2.2		Allocated Values
Schedule 6.1(a)		Seller’s Knowledge Representatives
Schedule 6.1(b)		Buyer’s Knowledge Representatives
Schedule 6.7		Status and Operation of Shallow Assets

 

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PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”), is dated January 30, 2014 (the “Execution Date”), by and between Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, and CO and PA 1999D Limited Partnership (each individually a “Partnership,” and collectively the “Seller”), and Alliance Petroleum Corporation, a Georgia corporation (“Buyer”), whose address is 4150 Belden Village Avenue N.W., Suite 410, Canton, Ohio, 44718. Seller and Buyer are individually referred to herein as a “Party” or collectively as the “Parties.” The transaction contemplated by this Agreement may be referred to as the “Transaction.”

RECITALS

A. Seller owns certain wellbore interests located in Barbour, Doddridge and Taylor Counties, West Virginia, and in Armstrong, Clearfield, Indiana and Washington Counties, Pennsylvania, as more fully described in Section 1.3;

B. Seller desires to sell and Buyer desires to purchase all of Seller’s interest in the Shallow Assets, as defined in Section 1.3, upon the terms and conditions set forth in 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, Buyer and Seller agree as follows:

ARTICLE 1

PURCHASE AND SALE

1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell, assign and deliver to Buyer, all of Seller’s right, title and wellbore interest in the Shallow Assets for the consideration specified in Article 2.

1.2 Effective Time. The purchase and sale of the Shallow Assets shall be effective as of April 1, 2013, at 12:01 a.m. Eastern Time (the “Effective Time”).

1.3 Shallow Assets. “Shallow Assets” refers to all of Seller’s right, title and interest (which are wellbore interests only) in and to the following as of the Effective Time:

(a) the wellbore interests (i.e., only such of the leaseholds as constitute the drillsite for the subject Shallow Wells, to and only to, the depth of each Shallow Well as of the Effective Time) in the oil and gas leases, subleases and other leaseholds described on Exhibit A (“Leases”), together with all amendments, supplements, renewals, extensions or ratifications thereof (collectively, the “Leases”), together with each and every kind and character of right, title, claim, and interest that Seller has in and to the lands covered by the Leases or the lands currently pooled, unitized or consolidated therewith (the “Lands”);

(b) the oil, gas, casinghead gas, coalbed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof, sulphur extracted from hydrocarbons and all other lease substances, combustible or non-combustible, under the Leases (“Hydrocarbons”) that may be produced from the Seller’s wellbore interests under the Leases;

 

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(c) the oil, gas, water, disposal, monitoring or injection wells located on the Lands, whether producing, shut-in, or abandoned, including those described in Exhibit B (the “Shallow Wells”) only as to the depth penetrated in each Shallow Well as of the Effective Time and all rights appurtenant to or associated with the Shallow Wells, including, without limitation, all of Seller’s right to use the surface adjacent to the Shallow Wells as is necessary to operate the Shallow Wells;

(d) the unitization and pooling agreements, declarations, orders, and the units created thereby relating to the Shallow Assets and to the production of Hydrocarbons, if any, attributable to the Shallow Assets;

(e) all equipment, machinery, fixtures and other tangible personal property and improvements, including but not limited to, tanks, boilers, compression facilities, pumping units, flow lines, pipelines, gathering systems, gas and oil treating facilities, machinery, power lines, roads, and other appurtenances, improvements and facilities (the “Equipment”) located on and used or held for use solely in connection with the operation of the Shallow Assets;

(f) all existing and effective operating agreements (the “Contracts”), insofar as they directly relate solely to the Shallow Assets, as described in Exhibit C, and provided, however, that “Contracts” shall not include the instruments constituting the Leases; and

(g) to the extent transferable without payment of additional consideration, copies of all lease files (Seller shall retain original lease files), land files, well files, gas and oil sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, logs, maps, engineering data and reports, interpretive data, technical evaluations and technical outputs, and other books, records, data, files, and accounting records, (the “Records”) in each case to the extent related to the Shallow Assets, or used or held for use in connection with the maintenance or operation thereof, but excluding (i) any books, records, data, files, logs, maps, evaluations, outputs, and accounting records to the extent disclosure or transfer would result in a violation of applicable law or is restricted by any Required Consent that is not satisfied pursuant to Section 4.5, (ii) computer or communications software or intellectual property (including tapes, codes, data and program documentation and all tangible manifestations and technical information relating thereto), (iii) attorney-client privileged communications and work product of Seller’s or any of its Affiliates’ legal counsel (other than title opinions), (iv) reserve studies and evaluations, and (v) records relating to the negotiation and consummation of the purchase or sale of the Shallow Assets; provided, however, that Seller may retain the originals of such Records as Seller has reasonably determined may be required for existing litigation, tax, accounting, and auditing purposes. “Affiliates” shall mean any Person that directly or indirectly controls, is controlled by or is under common control with such Person. The concept of control, controlling or controlled as used in this context means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another, whether through the ownership of voting securities, by contract or otherwise. “Person” shall mean any corporation, partnership (whether general, limited or otherwise), limited liability company, trust, association, joint venture, unincorporated organization, governmental entity, agency or branch or department thereof, or any other legal entity, or any natural person.

1.4 Other Excluded Assets. Notwithstanding anything in this Agreement to the contrary, the Shallow Assets shall not include, and there is excepted, reserved and excluded from the Transaction (the “Excluded Assets”):

(a) all partnership, financial, income and franchise tax and legal records of Seller that relate to Seller’s business generally (whether or not relating to the Shallow Assets), and all books, records and files that relate to the Excluded Assets and those records retained by Seller pursuant to Section 1.3(f) and copies of any other Records retained by Seller pursuant to Section 8.3(e);

 

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(b) all reserve estimates, economic estimates, and, to the extent excluded from Section 1.3(g), all logs, interpretive data, technical evaluations and technical outputs;

(c) all rights to any refunds for Taxes or other costs or expenses borne by Seller or Seller’s predecessors in interest and title attributable to periods prior to the Effective Time, in accordance with the provisions of Article 9;

(d) all rights, titles, claims and interests of Seller to or under any bond or bond proceeds;

(e) all documents and instruments of Seller that may be protected by an attorney-client privilege, other than title opinions, or the work product doctrine;

(f) any refunds due Seller by a third party for any overpayment of rentals, royalties, excess royalty interests or production payments attributable to the Shallow Assets with respect to any period of time prior to the Effective Time;

(g) any causes of action, claims, rights, indemnities or defenses available to or benefiting Seller with respect to any period of time prior to the Effective Time; and

(h) all amounts due or payable to Seller as adjustments to insurance premiums related to the Shallow Assets with respect to any period prior to the Effective Time.

1.5 Deep Rights. For the avoidance of doubt, Seller owns no rights in any formation below the top of the Rhinestreet formation within the State of West Virginia, and Seller owns no rights below the top of the Marcellus zone in the Commonwealth of Pennsylvania. Nothing in this Agreement shall be construed as transferring or granting any rights below the top of the Rhinestreet formation in the State of West Virginia or below the top of the Marcellus zone in the Commonwealth of Pennsylvania, because Seller does not own any rights to any formation below the top of such Rhinestreet formation or any rights to any formation below the top of the Marcellus zone.

ARTICLE 2

PURCHASE PRICE

2.1 Purchase Price. The purchase price for the Shallow Assets shall be One Million Nine Hundred Ninety Seven Thousand Four Hundred Thirty Six Dollars and Eight Cents ($1,997,436.08) (the “Initial Purchase Price”), subject to adjustment in accordance with the terms and conditions set forth in this Agreement (as adjusted, the “Purchase Price”). After Closing, final adjustments to the Purchase Price shall be made pursuant to the Final Settlement Statement to be delivered pursuant to Section 13.1 and payments made by Buyer or Seller as provided in Section 13.1.

2.2 Allocation of the Purchase Price. The Initial Purchase Price is allocated among the Shallow Assets as set forth on Schedule 2.2, which amounts shall be referred to as the “Allocated Value.”

2.3 Adjustments to Purchase Price and Preliminary Settlement. The Purchase Price shall be adjusted according to this Section 2.3 without duplication. Seller shall deliver to Buyer at least two (2) business days prior to Closing a draft settlement statement (“Preliminary Settlement Statement”) that shall set forth the adjusted Purchase Price reflecting each adjustment in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement. The Preliminary Settlement Statement will be used to adjust the Purchase Price at Closing, which adjusted amount is referred to herein as the “Closing Amount.”

 

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(a) Proration of Costs and Revenues. Buyer shall be entitled to all production of Hydrocarbons from or attributable to the Shallow Assets from and after the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Shallow Assets from or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Expenses (as defined in Section 2.3(b) below) incurred from and after the Effective Time. Seller shall be entitled to all Hydrocarbon production from or attributable to the Shallow Assets prior to the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Shallow Assets prior to the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Expenses incurred prior to the Effective Time. The terms “earned” and “incurred,” as used in this Agreement shall be interpreted in accordance with generally accepted accounting principles utilized by Seller, except as otherwise specified herein. For purposes of allocating production (and accounts receivable with respect thereto), under this Section 2.3(a), (i) liquid Hydrocarbons, including natural gas liquids, shall be deemed to be “from or attributable to” the Shallow Assets when they pass through the pipeline connecting into the storage facilities into which they are run or into tanks connected to the Shallow Wells and (ii) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Shallow Assets when they pass through the royalty measurement meters, delivery point sales meters or custody transfer meters on the gathering lines or pipelines through which they are transported (whichever meter is closest to the well). Seller shall utilize reasonable interpolative procedures, consistent with industry practice, to arrive at an allocation of production when exact meter readings or gauging and strapping data are not available. As part of the Preliminary Settlement Statement, Seller shall provide to Buyer, all data reasonably necessary to support any estimated allocation, for purposes of establishing the Closing Amount.

(b) Property Expenses. The term “Property Expenses” means all capital expenses (including all capital expenditures authorized by Section 8.1(a)) and operating expenses incurred in the ownership, development and operation of the Shallow Assets in the ordinary course of business and, where applicable, in accordance with any relevant operating agreement, if any, and all Lease rental and maintenance costs, net profit payments, royalties, overriding royalties and other similar burdens incurred in connection with the Leases or the production and sale of Hydrocarbons therefrom, but excluding Production Taxes (which shall be apportioned as of the Effective Time in accordance with Article 9). Property Expenses shall not include overhead for the period between the Effective Time and the Closing Date.

(c) Upward Adjustments. To calculate the Closing Amount, the Purchase Price shall be adjusted upward, without duplication, by the following:

(1) The aggregate amount of the following proceeds actually received by Buyer: (i) proceeds from the sale of Hydrocarbons attributable to the Shallow Assets (net of any royalties, overriding royalties or other burdens on or payable out of Hydrocarbon production from the Shallow Assets, gathering, processing and transportation costs and any Severance Taxes not reimbursed to Buyer by the purchaser of Hydrocarbon production from the Shallow Assets) produced from or attributable to the Shallow Assets for periods prior to the Effective Time, and (ii) other proceeds earned with respect to the Shallow Assets for periods prior to the Effective Time;

(2) The amount of all Property Expenses and other costs attributable to the ownership and operation of the Shallow Assets for the period from and after the Effective Time which are actually paid by Seller and incurred by Seller, except any Property Expenses and other such costs already deducted in the determination of proceeds in Section 2.3(c)(1);

 

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( 3) An amount equal to the value of (i) all oil and other Hydrocarbons produced from the Shallow Assets in pipelines or flowlines or in tanks above the pipeline sales connection (exclusive of any brine, sludge or water that may be present in the oil storage tanks), in each case that at the Effective Time, estimated based on run tickets as of the Effective Time, is credited to Seller’s interest in the Shallow Assets and (ii) all unsold inventory of gas plant products attributable to Seller’s interests in the Shallow Assets at the Effective Time, each such value to be the contract price in effect as of the Effective Time or, in the absence of an applicable contract price, the average price per unit for sales of production for the respective production period attributable to the Shallow Assets as of the Effective Time, less any applicable royalties, overriding royalties or other burdens;

(4) The amount of all Production Taxes allocated to Buyer pursuant to Article 9 that are actually paid by Seller; and

(5) Any other amount provided for in this Agreement or otherwise agreed to by Buyer and Seller.

(d) Downward Adjustments. To calculate the Closing Amount, the Purchase Price shall be adjusted downward, without duplication, by the following:

(1) An amount equal to the Title Defect Adjustment, if any, pursuant to Section 4.3(e);

(2) An amount equal to the Environmental Defect Adjustment, if any, pursuant to Section 5.6(a)(1) or Section 5.6(a)(2);

(3) An amount equal to the Allocated Value of any Shallow Assets not conveyed at Closing due to the failure to obtain a Required Consent to assign in accordance with Section 4.5(a);

(4) The aggregate amount of the following proceeds actually received by Seller: (i) proceeds from the sale of Hydrocarbons (net of any royalties, overriding royalties or other burdens on or payable out of Hydrocarbon production, gathering, processing and transportation costs and any Severance Taxes not reimbursed to Seller by the purchaser of Hydrocarbon production) produced from or attributable to the Shallow Assets during the period between the Effective Time and the date the Final Settlement Statement is executed by Seller and Buyer, and (ii) other proceeds earned with respect to the Shallow Assets during the period from and after the Effective Time and the date the Final Settlement Statement is executed by Seller and Buyer;

(5) The amount of all Property Expenses and other costs attributable to the ownership and operation of the Shallow Assets for the period prior to the Effective Time which are actually paid by Buyer, except any Property Expenses and other such costs already deducted in the determination of proceeds in Section 2.3(d)(4);

(6) The value of any Casualty Loss pursuant to Section 8.3(c);

(7) An amount equal to the revenue held in suspense by Seller for royalties, overriding royalties and similar leasehold burdens attributable to the Shallow Assets and handled in accordance with Section 8.1(i);

 

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(8) The amount of all Production Taxes allocated to Seller pursuant to Article 9 that are actually paid by Buyer; and

(9) Any other amount provided in this Agreement or otherwise agreed to by Buyer and Seller.

2.4 Allocations for Federal Income Tax Purposes. Buyer and Seller acknowledge that, under Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), Buyer and Seller must report information regarding the allocation of the Purchase Price to the United States Secretary of Treasury by attaching Department of Treasury, Internal Revenue Service, Form 8594 to their federal income tax returns for the tax period that includes the Closing Date. Buyer and Seller agree that the Allocated Values set forth in Schedule 2.2 (taking into account any adjustment to the Initial Purchase Price pursuant to this Agreement) shall be used by them in preparing their respective Form 8594. The Parties shall not take any income tax position (whether in audits, on tax returns, or otherwise) that is inconsistent with such allocation unless required to do so by applicable law.

ARTICLE 3

BUYER’S INSPECTION

3.1 Due Diligence. Upon execution of this Agreement, but subject to the other provisions of this Agreement (including this Section 3.1) and obtaining any required consents of third parties (with respect to which consents Seller shall use its commercially reasonable efforts to obtain, provided however, that Seller shall not be required to provide consideration, incur any expense or undertake any obligations to or for the benefit of such third parties), Seller will afford Buyer reasonable access to the Shallow Assets during normal business hours for inspection and review to permit Buyer to perform its due diligence (such due diligence, the “Due Diligence Review”) as hereinafter provided. All pre-Closing notices pertaining to the Due Diligence Review must be received by Seller no later than 5:00 p.m., Eastern Time, three (3) business days prior to the Closing Date (the “Initial Defect Notice Date”). All post-Closing notices pertaining to the Due Diligence Review must be received by Seller no later than 5:00 p.m., Eastern Time, thirty (30) days after Closing (the “Supplemental Defect Notice Date”).

3.2 Access to Records. From the date hereof and through the Closing Date, Seller shall provide Buyer, and its counsel, accountants and other representatives (“Buyer’s Representatives”), reasonable access during Seller’s normal business hours to the Records to enable Buyer to complete its Due Diligence Review. Seller shall also make available to Buyer and Buyer’s Representatives, upon reasonable notice during normal business hours, Seller’s personnel knowledgeable with respect to the Shallow Assets in order that Buyer may conduct its Due Diligence Review. The Due Diligence Review 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.

3.3 On-Site Inspection.

(a) Seller hereby consents to Buyer conducting, prior to Closing and upon advance written notice to Seller, at Buyer’s sole risk and expense, (i) on-site inspections; and (ii) an ASTM Phase One Environmental Assessment (an “Environmental Assessment”) of the Shallow Assets but only to the extent that Seller may grant such right without violating any obligations to any third party (provided that Seller shall use its commercially reasonable efforts to promptly obtain any necessary third-party consents to any Environmental Assessment to be conducted by Buyer). The Environmental Assessment shall not include sampling activities or other environmental testing. In connection with any Environmental Assessment, Buyer agrees not to interfere with the normal operation of the Shallow Assets and agrees to comply with all requirements and safety policies of the operator. Seller shall have the right to be present during any Environmental Assessment of the Shallow Assets.

 

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(b) In the event Buyer performs any Environmental Assessment on a portion of the Shallow Assets, Buyer shall provide Seller promptly, but not later than the Supplemental Defect Notice Date, copies of all reports (whether in draft or final form), test results, and other documentation and data prepared or compiled by Buyer and/or any of Buyer’s Representatives and which contain information collected or generated from the Environmental Assessment conducted with respect to such Shallow Assets. Seller shall not be deemed by its receipt of said documents or otherwise to have made any representation or warranty, expressed, implied or statutory, as to the condition to the Shallow Assets or to the accuracy of said documents or the information contained therein.

(c) Upon completion of Buyer’s Due Diligence Review, Buyer shall at its sole cost and expense and without any cost or expense to Seller or its Affiliates, (i) repair any damage done to the Shallow Assets in connection with Buyer’s due diligence in accordance with recognized industry standards or requirements of third-party operators, (ii) restore the Shallow Assets to substantially the same condition that existed prior to commencement of Buyer’s due diligence, to the full extent of any damage related to Buyer’s due diligence, and (iii) remove all equipment, tools or other property brought onto the Shallow Assets in connection with Buyer’s Due Diligence Review. Any disturbance to the Shallow Assets (including any real property or other fixtures associated with such Shallow Assets) resulting from Buyer’s Due Diligence Review will be promptly corrected by Buyer upon completion of Buyer’s Due Diligence Review.

(d) During all periods that Buyer, and/or any of Buyer’s Representatives are on the Shallow Assets, Buyer shall maintain, at its sole expense and with insurers reasonably satisfactory to Seller, policies of insurance of the types and in the amounts consistent with industry standards. Coverage under all insurance required to be carried by Buyer hereunder will (i) be primary insurance, (ii) list Seller, its Affiliates, their respective successors and assigns and the respective managers, members, shareholders, officers, directors, employees, representatives, consultants and agents of all of the foregoing (“Seller Indemnified Parties”) as additional insureds, (iii) waive subrogation against Seller Indemnified Parties, (iv) be maintained for three (3) years following Buyer’s and/or Buyer’s Representatives Due Diligence Review, and (v) provide for thirty (30) days’ prior notice to Seller in the event of cancellation or modification of the policy or reduction in coverage. Buyer shall deliver a certificate of insurance to Seller prior to entering upon the Shallow Assets.

3.4 Indemnification. BUYER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS THE SELLER INDEMNIFIED PARTIES AND EACH OF THE OPERATORS OF THE SHALLOW ASSETS, SELLER AND ITS AFFILIATES, THEIR RESPECTIVE SUCCESSORS AND ASSIGNS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, CONSULTANTS AND REPRESENTATIVES FROM AND AGAINST ANY AND ALL LOSSES ARISING OUT OF, RESULTING FROM OR RELATING TO ANY FIELD VISIT, ON-SITE INSPECTION, ENVIRONMENTAL ASSESSMENT OR OTHER DUE DILIGENCE ACTIVITY CONDUCTED BY BUYER OR ANY REPRESENTATIVE OF BUYER WITH RESPECT TO THE SHALLOW ASSETS, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY A SELLER INDEMNIFIED PARTY, EXCEPTING ONLY LIABILITIES RESULTING FROM OR ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A SELLER INDEMNIFIED PARTY.

 

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ARTICLE 4

TITLE MATTERS

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

(a) “Defensible Title” means such ownership of record deducible from the applicable county and state records, such that a prudent person engaged in the business of the ownership, development and operation of oil and gas leasehold and properties and having knowledge of all of the facts and their legal bearing would be willing to accept the same, to each Shallow Well, that, subject to and except for Permitted Encumbrances as defined in Section 4.1(b):

(1) Entitles Seller to receive a share of the Hydrocarbons produced, saved and marketed from any Shallow Well throughout the duration of the productive life of such Shallow Well after satisfaction of all royalties, overriding royalties, nonparticipating royalties, net profits interests, production payments or other similar burdens on or measured by production of Hydrocarbons (a “Net Revenue Interest”), of not less than the Net Revenue Interest shown in Exhibit B for such Shallow Well, except for (i) decreases in connection with those operations in which Seller may, from and after the Execution Date, be a non-consenting co-owner (to the extent permitted pursuant to Sections 8.1(a) or 8.1(b)), (ii) decreases resulting from the establishment or amendment of drilling and spacing units, tract allocation or other changes in pool or unit participation occurring after the Execution Date, and (iii) as otherwise stated in Exhibit B;

(2) Obligates Seller to bear a percentage of the costs and expenses for the maintenance, development, operation and the production relating to any Shallow Well throughout the productive life of such Shallow Well (“Working Interest”) not greater than the Working Interest shown in Exhibit B for such Shallow Well without increase, except (i) increases to the extent that they are accompanied by a proportionate increase in Seller’s Net Revenue Interest, (ii) increases resulting from contribution requirements with respect to defaults by co-owners from and after the Execution Date under applicable joint operating agreements, and (iii) as otherwise stated in Exhibit B; and

(3) is free and clear of liens, encumbrances, obligations, security interests or pledges arising by, through or under Seller, but not otherwise.

(b) “Permitted Encumbrances” means:

(1) lessors’ royalties, overriding royalties, net profits interests, production payments, reversionary interests and similar burdens attributable to the Shallow Assets if the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interests below those set forth in Exhibit B;

(2) liens affecting the Shallow Assets for Taxes or assessments not yet due and delinquent or, if delinquent, are being contested in good faith through appropriate proceedings;

(3) all rights to consent by, required notices to, filings with, or other actions by Governmental Entities, in connection with the conveyance of the applicable Shallow Asset if the same are customarily sought after such conveyance;

 

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(4) rights of reassignment contained in any Leases, or assignments thereof, providing for reassignment upon the surrender or expiration of any Leases;

(5) easements and other rights with respect to surface operations, on, over or in respect of any of the Shallow Assets or any restriction on access thereto that do not materially interfere with the operation of the affected Shallow Asset as currently conducted;

(6) materialmen’s, mechanics’, operators’ or other similar liens arising in the ordinary course of business affecting the Shallow Assets if such liens and charges (i) have not been filed pursuant to law and the time for filing such liens and charges has expired, (ii) if filed, have not yet become due and payable, or (iii) are being contested in good faith through appropriate proceedings;

(7) such Title Defects as Buyer has waived;

(8) any defects, irregularities or deficiencies in title to Easements that do not materially adversely affect the value of any Shallow Asset;

(9) the Contracts set forth on Exhibit C;

(10) the consents to assignment referenced in Section 4.5(a) to the extent they are extinguished in the Bankruptcy Proceeding;

(11) all rights reserved to or vested in any Governmental Entity to control or regulate any of the Shallow Assets in any manner, and all obligations and duties under all applicable laws or under any franchise, grant, license or permit issued by any such Governmental Entity;

(12) any liens burdening the Shallow Assets that will be released at or before Closing, as contemplated by this Agreement;

(13) matters that would otherwise be considered Title Defects but that do not meet the Individual Title Threshold and Aggregate Deductible set forth in Section 4.3(1);

(14) liens granted under applicable joint operating agreements pertaining to the Shallow Assets for amounts not yet delinquent; and

(15) all other liens, charges, encumbrances, contracts, agreements, instruments, obligations, defects and irregularities affecting the Shallow Assets that do not (or would not upon foreclosure or other enforcement) reduce the Net Revenue Interest set forth in Exhibit B, or prevent the receipt of proceeds of production therefrom, increase the share of costs above the Working Interest set forth in Exhibit B (unless accompanied by a proportionate increase in Seller’s Net Revenue Interest) or materially interfere with or detract from the ownership, operation, value or use of the Shallow Assets.

4.2 Title Representations.

(a) Defensible Title Representation. Subject to the limitations set forth in Section 4.2(c), Seller represents and warrants to Buyer that, as of the Effective Time and as of the Closing Date, its title to the Shallow Wells is Defensible Title. Except as set forth in this Section 4.2(a) and the Partial Assignment, Bill of Sale and Conveyance to be delivered at Closing, a form of which is attached hereto as Exhibit D (the “Partial Assignment”), Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to Seller’s title to the Shallow Wells, and Buyer hereby acknowledges and agrees that Buyer’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Shallow Wells before Closing, shall be Buyer’s right to adjust the Purchase Price to the extent provided in this Article 4 or terminate this Agreement pursuant to Section 11.1.

 

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(b) Intentionally Omitted.

(c) Exclusive Remedy. With the exception of the special warranty of title in the Partial Assignment, (i) the representation and warranty in Section 4.2(a) shall terminate as of the Closing Date and shall have no further force and effect thereafter, and (ii) Section 4.3 shall be the exclusive right and remedy of Buyer with respect to Seller’s failure to have Defensible Title with respect to the Shallow Wells. Notwithstanding anything herein provided to the contrary, if a Title Defect under this Article 4 results from any matter which could also result in the breach of any representation or warranty of Seller under Article 6 of this Agreement, then Buyer shall only be entitled to assert such matter before Closing as a Title Defect to the extent permitted by this Article 4. Buyer shall be precluded from also asserting such matter as the basis of the breach of any such representation or warranty under Article 6.

4.3 Title Adjustment Procedures.

(a) Title Defect. As used in this Agreement, the term “Title Defect” means any lien, charge, encumbrance, obligation (including contract obligation), defect, condition or other matter (including a discrepancy in Net Revenue Interest or Working Interest) that causes a breach of Seller’s representation and warranty in Section 4.2(a). Notwithstanding the foregoing, the following shall not be considered Title Defects:

(1) defects based solely on lack of information in Seller’s files;

(2) defects in the chain of title consisting of the mere failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, unless Buyer provides clear and convincing evidence that such failure or omission has resulted in another person’s actual and superior claim of title to the relevant Shallow Asset;

(3) defects based on failure to record Leases issued by any state or federal Governmental Entity, or any assignments of such Leases, in the real property, conveyance or other records of the county in which such Property is located;

(4) defects arising out of lack of survey, unless a survey is expressly required by applicable laws or regulations;

(5) defects asserting a change in Working Interest or Net Revenue Interest based on a change in drilling and spacing units, tract allocation or other changes in pool or unit participation occurring on or after the Execution Date;

(6) defects arising out of lack of corporate or other entity authorization unless Buyer provides a reasonable basis for the assertion that such corporate or other entity action was not authorized and results in another person’s actual and superior claim of title to the relevant Shallow Asset; and

(7) defects that have been cured by applicable laws of limitations or prescription.

 

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(b) Title Benefit. As used in this Agreement, the term “Title Benefit” shall mean any right, circumstance or condition that operates to increase the Net Revenue Interest being assigned to Buyer in any Shallow Well above that shown for such Shallow Well in Exhibit B, to the extent the same does not cause a greater than proportionate increase in the Working Interest being assigned to Buyer therein above that shown in Exhibit B.

(c) Notice of Defective Interest. Buyer shall advise Seller in writing of any matters that in Buyer’s reasonable opinion constitute a Title Defect with respect to Seller’s title to all or any portion of the Shallow Wells (“’Notice of Defective Interest”). The Notice of Defective Interest shall be in writing and contain the following: (i) a description of the alleged Title Defect(s), (ii) the Shallow Wells (and the applicable zone(s) therein) affected by the alleged Title Defect (each a “Title Defect Property”), (iii) the Allocated Value of each Title Defect Property, (iv) supporting documentation reasonably necessary for Seller (as well as any title attorney or examiner hired by Seller) to verify the existence of the alleged Title Defect(s), and (v) the amount by which Buyer reasonably believes the Allocated Value of each Title Defect Property is reduced by the alleged Title Defect(s) and the computations and information upon which Buyer’s belief is based. Buyer agrees that it will use reasonable efforts to furnish Seller once every two (2) weeks, commencing on the fourteenth (14^th) day following the date of this Agreement until the Initial Defect Notice Date, written notice of any Title Defect that any officer of Buyer or its Affiliates discovers or learns during such two (2) week period, which may be preliminary in nature and supplemented prior to the Supplemental Defect Notice Date; provided, however, that the failure of Buyer to give Seller any such preliminary notices shall not waive any Title Defects or constitute a breach of this Agreement. Subject to Seller’s continuing right to dispute the existence of a Title Defect or the Title Defect Amount, all Title Defects for which a Notice of Defective Interest has been submitted prior to the Initial Defect Notice Date shall be adjusted for in accordance with Section 4.3(f) and Section 4.3(g) on the Preliminary Closing Statement.

(i) From the Closing Date through the Supplemental Defect Notice Date, Buyer may deliver to Seller an additional Notice of Defective Interests for any Title Defects Buyer identifies during such period. Any Title Defect not identified on a Notice of Defective Interests delivered on or before the Supplemental Defect Notice Date shall be deemed to have been waived by Buyer. Buyer’s sole remedy for a Title Defect identified on a Notice of Defective Interest (delivered on or after the Initial Defect Notice Date and on or before the Supplemental Defect Notice Date) shall be an adjustment to the Initial Purchase Price (subject to all of the conditions set forth in this Article 4); provided, however, the sum of (x) aggregate adjustments for Title Defects (net of Title Benefits) and Environmental Defects asserted on before the Initial Defect Notice Date and Casualty Losses reflected on the Preliminary Settlement Statement plus (y) the sum of Title Defects (net of Title Benefits) described in the Notice of Defective Interest and the sum of Environmental Defects described on the Environmental Defect Notice, both delivered after the Closing Date but on or before the Supplemental Defect Notice Date, shall not exceed twenty percent (20%) of the Initial Purchase Price. For the avoidance of doubt, Buyer’s ability to raise Title Defects and Environmental Defects between the Closing Date and on or before the Supplemental Defect Notice Date shall not allow Buyer to raise more Title Defects and Environmental Defects (or be entitled to any adjustment to the Initial Purchase Price for) than it would have been allowed if no post-Closing Due Diligence Review were allowed hereunder. The provisions of Sections 4.3(e), (f), (g) and (i) and Section 4.4 shall apply to the Title Defects identified in the Notice of Defective Interests delivered pursuant to this Section 4.3(c)(i), and the Final Settlement Statement shall reflect all appropriate adjustments to the Initial Purchase Price permitted by this Section 4.3(c)(i).

 

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(d) Notice of Title Benefits. No later than 5:00 p.m. Eastern Time on the Supplemental Defect Notice Date, Seller shall have the right, but not the obligation, to advise Buyer in writing of any matters that in Seller’s reasonable opinion constitute a Title Benefit with respect to Seller’s title to all or any portion of the Shallow Wells (a “Title Benefit Notice”). The Title Benefit Notice shall be in writing and contain the following: (i) a description of the Title Benefit, (ii) the Shallow Wells (and the applicable zone(s) therein) affected by the Title Benefit (“Title Benefit Property”), (iii) the Allocated Values of the Shallow Wells (and the applicable zone(s) therein) subject to such Title Benefit, and (iv) the amount by which the Seller reasonably believes the Allocated Value of those Shallow Wells (and the applicable zone(s) therein) is increased by the Title Benefit, and the computations and information upon which Seller’s belief is based. Seller shall be deemed to have waived all Title Benefits of which it has not given notice prior to 5:00 p.m. Eastern Time on the Supplemental Defect Notice Date. Buyer shall promptly furnish Seller with written notice of any Title Benefit which is discovered by Buyer or any of its representatives while conducting Buyer’s title review, due diligence or investigation with respect to the Shallow Wells.

(e) Seller’s Right to Cure. Seller shall have the right, but not the obligation, to attempt, at its sole cost, to cure or remove at any time prior to the Closing (the “Cure Period”), to Buyer’s reasonable satisfaction, any Title Defects of which it has been advised by Buyer. Seller shall also have the right, but not the obligation to attempt, at its sole cost, to cure prior to the date it delivers the Final Settlement Statement to Buyer’s reasonable satisfaction any Title Defect described in the Notice of Defective Interest delivered after the Closing Date but on or before the Supplemental Defect Notice Date.

(f) Remedies for Title Defects. Subject to Seller’s continuing right to dispute the existence of a Title Defect or the Title Defect Amount asserted with respect thereto, in the event that any Title Defect timely asserted by Buyer in accordance with Section 4.3(c) actually exists and is not waived by Buyer or cured to Buyer’s reasonable satisfaction on or before the end of the Cure Period, Seller shall convey the Title Defect Property to Buyer at Closing with a reduction to the Purchase Price, provided, however, that Seller shall retain the right to cure such Title Defects after Closing, as set forth herein. The reduction to the Purchase Price contemplated by the foregoing sentence shall equal the amount of the aggregate Title Defect Amounts for all such Title Defects as determined pursuant to Section 4.3(g), subject to the Individual Title Threshold and the Aggregate Deductible set forth in Section 4.3(i), less an amount equal to the aggregate of all Title Benefit Amounts (as so calculated, the “Title Defect Adjustment”). Seller shall have one hundred twenty (120) days after the Closing Date (the “Post-Closing Cure Period”) in which to attempt to cure any such Title Defects to Buyer’s reasonable satisfaction, subject to the continuing application of the Individual Title Threshold and the Aggregate Deductible. Buyer shall use good faith efforts to cooperate with Seller’s efforts to cure such Title Defects. If Seller cures any such Title Defect to Buyer’s reasonable satisfaction prior to the end of the Post-Closing Cure Period, then the Title Defect Amount with respect to the Title Defect that is so cured shall promptly be paid to Seller. If the Parties are unable to agree as to whether the Title Defect has been cured to Buyer’s reasonable satisfaction, the provisions of Section 4.4 shall apply as written and the Title Arbitrator shall be selected within fifteen (15) business days following the end of the Post-Closing Cure Period.

(g) Title Defect Amount. The “Title Defect Amount” means the amount by which the Allocated Value of the Title Defect Property affected by such Title Defect is reduced as a result of the existence of such Title Defect and shall be determined in accordance with the following methodology, terms and conditions:

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

(2) if the Title Defect is a lien, encumbrance or other charge which is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount of the payment necessary to remove the Title Defect from the Title Defect Property;

 

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(3) if the Title Defect represents a discrepancy between (A) the Net Revenue Interest for any Title Defect Property and (B) the Net Revenue Interest stated in Exhibit B for such Title Defect Property, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest stated in Exhibit B; and

(4) if the Title Defect represents an obligation, encumbrance, burden or charge upon or other defect in title to the Title Defect Property of a type not described in subsections (1), (2), or (3) above, the Title Defect Amount shall be determined by taking into account the following factors: (i) any discrepancy between (A) the Net Revenue Interest or Working Interest for any Title Defect Property and (B) the Net Revenue Interest or Working Interest stated in Exhibit B; (ii) the Allocated Value of the Title Defect Property; (iii) the portion of the Title Defect Property affected by the Title Defect; (iv) the legal effect of the Title Defect; (v) the values placed upon the Title Defect by Buyer and Seller and (vi) such other reasonable factors as are necessary to make a proper evaluation.

Notwithstanding anything to the contrary in this Article 4, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property shall not exceed the Allocated Value of the Title Defect Property.

(h) Title Benefit Amount. “Title Benefit Amount” means the amount by which the Allocated Value of the Title Benefit Property affected by such Title Benefit is increased as a result of the existence of such Title Benefit and shall be determined in accordance with the following methodology, terms and conditions:

(1) if Buyer and Seller agree on the amount of the Title Benefit, that amount shall be the Title Benefit Amount;

(2) if the Title Benefit represents an increase between (A) the Net Revenue Interest for any Title Benefit Property and (B) the Net Revenue Interest set forth in Exhibit B for such Title Benefit Property, then the Title Benefit Amount shall be an amount equal to the product of the Allocated Value of such Title Benefit Property multiplied by a fraction, the numerator of which is the Net Revenue Interest and the denominator of which is the Net Revenue Interest set forth in Exhibit B; and

(3) if the Title Benefit is of a type not described above, then the applicable Title Benefit Amount shall be determined by taking into account the following factors: (i) any discrepancy between (A) the Net Revenue Interest or Working Interest for any Title Benefit Property and (B) the Net Revenue Interest or Working Interest stated in Exhibit B; (ii) the Allocated Value of the Title Benefit Property; (iii) the portion of the Title Benefit Property affected by the Title Benefit; (iv) the legal effect of the Title Benefit; and (v) such other reasonable factors as are necessary to make a proper evaluation; and

(4) if a Title Benefit Property has no Allocated Value, then such Title Benefit Property shall have no Title Benefit Amount.

 

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(i) Title Thresholds and Deductibles. Notwithstanding anything to the contrary, (i) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any individual Title Defect for which the Title Defect Amount does not exceed Ten Thousand Dollars ($10,000.00) (“Individual Title Threshold”); and (ii) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any Title Defect that exceeds the Individual Title Threshold unless the aggregate Title Defect Amounts of all Title Defects that exceed the Individual Title Threshold (excluding any Title Defects cured by Seller) less the aggregate Title Benefit Amounts, exceed two percent (2%) of the Initial Purchase Price (“Title Deductible”), after which point Buyer shall be entitled to adjustments to the Purchase Price or other remedies only with respect to such Title Defects in excess of such Title Deductible.

4.4 Title Dispute Resolution. The Parties agree to resolve disputes concerning the following matters pursuant to this Section 4.4: (i) the existence and scope of a Title Defect or Title Benefit, (ii) the Title Defect Amount or Title Benefit Amount, as the case may be, relating to the portion of the Shallow Asset affected by a Title Defect or Title Benefit and (iii) the adequacy of Seller’s Title Defect curative materials and Buyer’s reasonable satisfaction thereof (the “Title Disputed Matters”). The Parties agree to attempt to initially resolve all disputes through good faith negotiations. All Title Disputed Matters that are unresolved by the Parties shall be exclusively and finally resolved by arbitration pursuant to this Section 4.4. There shall be a single arbitrator, who shall be (i) a title attorney with at least ten (10) years’ experience in oil and gas titles involving properties in the region in which the subject Lease and Lands are located (“Title Arbitrator”) who shall not have performed any services for either Party during the previous five (5) years, as selected by mutual agreement of Buyer and Seller within fifteen (15) business days after the end of the Cure Period, and absent such mutual agreement, by the Pittsburgh, Pennsylvania office of the American Arbitration Association (the “AAA”). The arbitration proceeding shall be held in Pittsburgh, Pennsylvania and shall be conducted in accordance with the Commercial Arbitration Rules of the AAA, to the extent such rules do not conflict with the terms of this Section 4.4. The Title Arbitrator’s determination shall be made within fifteen (15) business days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal. In making his or her determination, the Title Arbitrator shall be bound by the rules set forth in this Article 4 and may consider such other matters as in the opinion of the Title Arbitrator are necessary or helpful to make a proper determination. Additionally, the Title Arbitrator may consult with and engage disinterested third parties to advise the expert or arbitrator, including petroleum engineers. The Title Arbitrator shall act as an expert for the limited purpose of determining the Title Disputed Matters submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter. Each Party may submit only one Title Defect Amount with respect to each alleged Title Defect and one Title Benefit Amount with respect to each Title Benefit (provided that the foregoing shall not be construed to preclude a Party from also arguing against, and the Title Arbitrator determining, the existence of a Title Defect or a Title Benefit). Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. Each Party shall bear one-half of the costs and expenses of the Title Arbitrator, including any costs incurred by the Title Arbitrator that are attributable to such third-party consultation. Within ten (10) days after the Title Arbitrator delivers written notice to Buyer and Seller of the award with respect to a Title Disputed Matter, Buyer shall pay to Seller the amount, if any, awarded by the Title Arbitrator, plus the interest accrued on such amount.

4.5 Consents; No Preferential Rights. The remedies set forth in this Section 4.5 are the exclusive remedies under this Agreement for consents to assign.

(a) Consents. Certain of the Leases provide that they cannot be assigned without the consent of their lessors. Such consents to assignment shall be addressed in the Bankruptcy Proceeding.

(b) No Preferential Purchase Rights. No preferential rights to purchase exist with respect to the sale of any of the Shallow Assets.

 

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ARTICLE 5

ENVIRONMENTAL MATTERS

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

(a) “Condition” means any circumstance, occurrence, status or defect that requires Remediation to comply with Environmental Laws.

(b) “Environmental Defect” means a Condition in, on, under or relating to a particular Shallow Asset (including air, land, soil, surface and subsurface strata, surface water, groundwater, or sediments) that causes a particular Shallow Asset to be in violation of an Environmental Law, if the lowest estimated cost of Remediation of that particular Shallow Asset alone exceeds Ten Thousand Dollars ($10,000.00) per Condition.

(c) “Environmental Law” or “Environmental Laws” shall mean, as of the Execution Date, any federal, state or local law (including the common law), statute, rule, regulation, requirement, ordinance and any writ, decree, bond, authorization, approval, license, permit, registration, binding criteria, standard, consent decree, settlement agreement, judgment, order, directive or binding policy issued by or entered into with a Governmental Entity pertaining or relating to: (a) pollution or pollution control, including stormwater discharge; (b) protection of human health from exposure to Hazardous Materials or protection of the environment; (c) employee safety in the workplace; or (d) the management, presence, use, generation, processing, extraction, treatment, recycling, refining, reclamation, labeling, transport, storage, collection, distribution, disposal or release or threat of release of Hazardous Materials. “Environmental Laws” shall include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. §6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C. §§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq., the Oil Pollution Act, 33 U.S.C. §2701 etseq., the Occupational Safety and Health Act, 29 U.S.C. §651 et seq., the Endangered Species Act, and the regulations and orders respectively promulgated thereunder, each as amended, or any equivalent or analogous state or local statutes, laws or ordinances, any regulation promulgated thereunder and any amendments thereto.

(d) “Governmental Entity” means any national, state or local government or any subdivision, agency, court, commission, department, board, bureau, regulatory authority or other division or instrumentality thereof.

(e) “Hazardous Materials” shall mean, without limitation, any waste, substance, product, or other material (whether solid, liquid, gas or mixed), which is or becomes identified, listed, published, or defined as a hazardous substance, hazardous waste, hazardous material, toxic substance, or radioactive material, including Hydrocarbons, oil, or petroleum waste, or which is otherwise regulated or restricted under any Environmental Law.

(f) “Remediation” or “Remediate” means investigation, assessment, characterization, delineation, monitoring, sampling, analysis, removal action, remedial action, response action, corrective action, mitigation, treatment or cleanup of Hazardous Materials or other similar actions as required by any applicable Environmental Laws from soil, land surface, groundwater, sediment, surface water, or subsurface strata or otherwise for the general protection of human health and the environment.

 

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5.2 Environmental Liabilities and Obligations, Upon Closing, Buyer agrees to assume and pay, perform, fulfill and discharge all claims, costs, expenses, liabilities and obligations accruing or relating to and release Seller and its Affiliates, and their respective successors and assigns and each of their respective stockholders, directors, officers, employees, advisors, agents and representatives from all Losses (including any civil fines, penalties, costs of assessment, clean-up, removal and Remediation, and expenses for the modification, repair or replacement of facilities on the Lands brought or assessed by any and all persons, including any Governmental Entity, as a result of any personal injury, illness or death, any damage to, destruction or loss of property, and any damage to natural resources (including soil, air, surface water or groundwater) to the extent any of the foregoing directly or indirectly is caused by, relates to, or otherwise involves any Condition of the Shallow Assets whether created or attributable to periods either before or after the Effective Time, including the presence, disposal or release of any Hazardous Material of any kind in, on or under the Shallow Assets or the Lands (collectively, “Buyer’s Environmental Liabilities”).

5.3 NORM, Wastes and Other Substances. Buyer acknowledges that the Shallow Assets have been used for the exploration, development, and production of Hydrocarbons and that there may be petroleum, produced water, wastes, or other substances or materials located in, on or under the Shallow Assets or associated with the Shallow Assets. Equipment and sites included in the Shallow Assets may contain Hazardous Materials, including naturally occurring radioactive material (“NORM”). NORM may affix or attach itself to the inside of wells, materials, and equipment as scale, or in other forms. The wells, materials, and equipment located on or included in the Shallow Assets may contain Hazardous Materials, including NORM. Hazardous Materials, including NORM, may have come in contact with various environmental media, including water, soils or sediment. Special procedures may be required for the assessment, remediation, removal, transportation, or disposal of environmental media and Hazardous Materials, including NORM, from the Shallow Assets.

5.4 Environmental Defect Notice. Buyer shall give Seller written notice of any Environmental Defect as to which Buyer has knowledge prior to the Initial Defect Notice Date (“Environmental Defect Notice”). An Environmental Defect Notice shall contain the following: (i) a description of the Condition in, on, under or relating to the Shallow Asset that causes the alleged Environmental Defect; (ii) a description of the particular Shallow Asset affected by the alleged Environmental Defect (each an “Environmental Defect Property”); (iii) the Allocated Value of each Environmental Defect Property; (iv) supporting documentation reasonably necessary for Seller (as well as any consultant hired by Seller) to verify the existence of the alleged Environmental Defect(s), and (v) Buyer’s estimated cost to Remediate the alleged Environmental Defect and supporting documentation reasonably necessary to verify such estimate (the “Environmental Defect Value”).

5.5 Seller’s Right to Remediate. Seller shall have the right, but not the obligation, to attempt, at its sole cost, to Remediate at any time prior to Closing any Environmental Defect of which it has been advised by Buyer prior to the Initial Defect Notice Date. Seller shall also have the right, but not the obligation, to attempt, at its sole cost, at any time within the Post-Closing Cure Period after the delivery of an Environmental Defect Notice after Closing but on or before the Supplemental Defect Notice Date to cure those Environmental Defects described in such Environmental Defect Notice.

5.6 Defect Adjustments. Upon delivery of a timely Environmental Defect Notice, the Parties shall proceed as follows:

(a) With respect to each Environmental Defect asserted by Buyer on or before the Initial Defect Notice Date, Seller may elect, in its sole discretion, on or before the date that is two (2) days prior to Closing, to:

 

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(1) reach agreement with Buyer on the existence of the Environmental Defect and subject to the Environmental Deductible set forth in Section 5.6(b), adjust the Purchase Price by the Environmental Defect Value of the Environmental Defect Property (the “Environmental Defect Adjustment”), whereupon Seller shall convey the Environmental Defect Property to Buyer at Closing and Buyer shall thereafter assume all liability for Remediation of the Environmental Defect Property;

(2) if the Parties are unable to reach agreement as to the existence of an Environmental Defect or the Environmental Defect Value or if the Environmental Defect Value exceeds the Allocated Value of the Environmental Defect Property, then Seller may remove the Environmental Defect Property from the Transaction and reduce the Purchase Price by the Allocated Value of the Environmental Defect Property (an “Environmental Defect Exclusion”). Seller shall have until the end of the Post-Closing Cure Period to attempt to Remediate any such Environmental Defect. If Seller Remediates any such Environmental Defect prior to the end of the Post-Closing Cure Period, Seller shall convey the subject Environmental Defect Property to Buyer, then Buyer shall promptly pay the amount of the Allocated Value to Seller, less any proceeds from the subject Environmental Defect Property after the Effective Time received and retained by Seller (net of Property Expenses paid by Seller attributable to such period). Seller’s election to Remediate an Environmental Defect after Closing is subject to Buyer’s agreement (which shall not be unreasonably withheld or delayed) to acquire the Environmental Defect Property which is not Remediated prior to Closing, with the Buyer to have no further claim after Closing with respect to the Environmental Defect that is so Remediated; or

(3) challenge the existence and/or scope of the Environmental Defect and/or Environmental Defect Value asserted by Buyer pursuant to Section 5.7.

(b) There shall be no reduction to the Purchase Price or other remedies provided by Seller for any Environmental Defect unless the Environmental Defect Values of all Environmental Defects in the aggregate (excluding any Environmental Defect Remediated by Seller), exceed two percent (2%) of the Initial Purchase Price (the “Environmental Deductible”) after which point Buyer shall be entitled to adjustments to the Purchase Price and remedies only with respect to such Environmental Defect in excess of such Environmental Deductible.

(c) With respect to any Environmental Defect asserted by Buyer after the Closing but on or before Supplemental Defect Notice Date, Seller may elect, in its sole discretion, during the post-Closing Cure Period to:

(1) reach agreement with Buyer on the existence of the Environmental Defect and subject to the Environmental Deductible set forth in Section 5.6(b), and reach agreement with the Buyer as to the Environmental Defect Adjustment to be included on the Final Settlement Statement. For the avoidance of doubt, the Environmental Defect Values of the Environmental Defects asserted prior to the Initial Defect Notice Date plus the Environmental Defect Values for the Environmental Defects asserted on or before the Supplemental Defect Notice Date must together, not separately, exceed the Environmental Deductible before there is any adjustment to the Purchase Price.

(2) attempt to remediate the Environmental Defect during the Post-Closing Time Period and, if it does so to Buyer’s reasonable satisfaction, there shall be no adjustment to the Purchase Price therefor on the Final Settlement Statement; or

 

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(3) challenge the existence and/or scope of the Environmental Defect and/or Environmental Defect Value asserted by Buyer pursuant to Section 5.7.

provided, however, notwithstanding any provision herein to the contrary, the sum of the (x) aggregate adjustments for Title Defects (net of Title Benefits) and Environmental Defects asserted on or before the Initial Defect Notice Date and net Casualty Losses reflected on the Preliminary Settlement Statement plus (y) the sum of the Title Defects (net of Title Benefits) described in the Notice of Defective Interests and the sum of Environmental Defects described in the Environmental Defect Notice, delivered on or before the Supplemental Defect Notice Date, shall not exceed twenty percent (20%) of the Initial Purchase Price.

5.7 Contested Environmental Defects. If, pursuant to Section 5.6(a)(3), Seller elects to proceed under this Section 5.7 with respect to an Environmental Defect, the following matters shall be determined pursuant to this Section 5.7: (a) the existence and scope of an Environmental Defect, and (b) the Environmental Defect Value. The Parties agree to attempt to initially resolve all disputes through good faith negotiations. If the Parties cannot resolve disputes regarding items (a) or (b) within thirty (30) days after the Defect Notice Date, either Party may submit the dispute to an environmental consultant or other professional approved in writing by Seller and Buyer that is experienced in environmental corrective action at oil and gas properties in the relevant jurisdiction and that shall not have performed professional services for either Party or any of their respective Affiliates during the previous five (5) years (the “Environmental Expert”). The Environmental Expert shall render his or her decision within fifteen (15) business days after submission of the matters in dispute, which decision shall be final and binding upon both Parties, without right of appeal. In making his or her determination, the Environmental Expert shall be bound by the rules set forth in this Article 5 and may consider such other matters as in the opinion of the Environmental Expert are necessary or helpful to make a proper determination. The Environmental Expert shall conduct the dispute resolution proceeding by written submissions from Buyer and Seller with exhibits, supplemented with appearances by Buyer and Seller, if necessary, as the Environmental Expert may deem necessary. The Environmental Expert shall act as an expert for the limited purpose of determining the disputed Environmental Defect matters submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case to the Environmental Expert. Each Party shall bear one-half of the costs and expenses of the Environmental Expert.

5.8 Exclusive Remedies. The right of Buyer to reduce the Purchase Price to reflect one or more Environmental Defect Adjustments pursuant to this Article 5 or terminate this Agreement pursuant to Section 11.1 shall be the exclusive right and remedy of Buyer with respect to environmental matters with respect to the Shallow Assets. Notwithstanding anything herein provided to the contrary, if an Environmental Defect under this Article 5 results from any matter which could also result in the breach of any representation or warranty of Seller in this Agreement, then Buyer shall only be entitled to assert such matter before the Environmental Defect Notice Date as an Environmental Defect to the extent permitted by this Article 5. Buyer shall be precluded from also asserting such matter as the basis of the breach of any such representation or warranty.

ARTICLE 6

SELLER’S REPRESENTATIONS AND WARRANTIES

Each Seller makes the following representations and warranties as of Closing and as of the Effective Time except where otherwise indicated. The term “Knowledge,” with respect to Seller, means the actual knowledge of Seller’s representatives listed on Schedule 6.1(a) hereto, and with respect to Buyer, means the actual knowledge of Buyer’s representatives listed on Schedule 6.1(b) hereto. The representations and warranties contained in this Article 6 do not include any matters with respect to Environmental Laws, such matters being addressed exclusively in Article 5.

 

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6.1 Organization and Standing. Each Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of West Virginia and is qualified to carry on its business in the State of West Virginia and/or the Commonwealth of Pennsylvania.

6.2 Power. Each Seller is authorized under the Bankruptcy Code to carry on its business in the ordinary course. Subject to Bankruptcy Court approval, the execution and delivery of this Agreement does not, and fulfillment of and compliance with the terms and conditions hereof will not, as of Closing, violate, or be in conflict with, any material provision of such Seller’s governing documents, any material agreement or instrument to which such Seller is a party or by which such Seller or the Shallow Assets may be bound, or any material laws applicable to any such Seller or any of the Shallow Assets.

6.3 Authorization and Enforceability. Upon the approval of the Bankruptcy Court, this Agreement constitutes such Seller’s legal, valid and binding obligation, enforceable in accordance with its terms.

6.4 Liability for Brokers’ Fees. Such 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.

6.5 Litigation.

(a) Except for the Bankruptcy Proceeding, there are no actions, suits, proceedings, notice of violation or claim pending or, to the Knowledge of such Seller, threatened, that would impair such Seller’s ability to consummate the Transaction or to assume the liabilities to be assumed by such Seller under this Agreement.

(b) Except for the Bankruptcy Proceeding, there are no actions, suits, proceedings, notice of violation or claim pending or, to the Knowledge of such Seller, threatened, against such Seller or any of the Shallow Assets, in any court or by or before any Governmental Entity involving the ownership or operation of the Shallow Assets; nor is such Seller in default under any order, writ, injunction, or decree of any court or Governmental Entity, in each case that would be reasonably likely to have a material adverse effect.

6.6 Compliance with Law. To such Seller’s Knowledge, the Shallow Assets have been operated in compliance in all material respects with all applicable federal, state and local laws, rules, regulations and orders. Such Seller has not received any written notice of a violation of any statute, law, ordinance, regulation, rule or order of any Governmental Entity, or any judgment, decree or order of any court, applicable to the Shallow Assets which in each case would be reasonably expected to have a material adverse effect on the Shallow Assets.

6.7 Status and Operation of Shallow Assets. Seller has incurred no expenses, and has made no commitments to make expenditures in connection with the ownership or operation of the Shallow Assets after the Effective Time (other than with respect to routine operations performed in the ordinary course of operating the existing Shallow Wells), which expenditures are, individually, estimated to cost Twenty-Five Thousand Dollars ($25,000.00) or more, net to Seller’s interest, and no contractual obligations, proposals or authorities for expenditures are currently outstanding (whether made by Seller or by any other party) to drill additional wells, or to deepen, plug back, rework any Shallow Well, or to conduct other operations on the Shallow Assets for which consent is required under the applicable operating agreement, to abandon any Shallow Well, or to conduct any other operation on the Shallow Assets for which the estimated cost exceeds Twenty-Five Thousand Dollars ($25,000.00), net to Seller’s interest. All expenses and commitments to make expenditures in connection with the ownership or operation of the Shallow Assets after the Effective Time (other than with respect to routine operations performed in the ordinary course of operating the existing Shallow Wells) are listed on Schedule 6.7.

 

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6.8 Taxes. All material Taxes pertaining to the Shallow Assets that are required to have been paid have been properly paid. There are no liens for Taxes with respect to the Shallow Assets other than Permitted Encumbrances. With respect to the Shallow Assets, there are no ongoing suits or proceedings, or to such Seller’s Knowledge, any claims, investigations, audits, inquiries pending or threatened against such Seller in respect of Taxes.

6.9 Imbalance Volumes. There are no gas pipeline and/or wellhead imbalances (positive or negative) (i) which are with gatherers, processors, or transporters, or with co-tenants or working interest owners in a well, unit, or field, (ii) which are associated with the Shallow Assets and (iii) where Seller has received a quantity of gas prior to the Effective Time for which Buyer will have a duty after the Effective Time to deliver an equivalent quantity of gas or pay a sum of money.

6.10 Leases. Such Seller has received no written notice of termination of any of the Leases.

6.11 Material Agreements. Except for the Leases, Exhibit C sets forth all Contracts related to the ownership and operation of the Shallow Assets to which Seller is a party and to which Buyer shall succeed Seller upon Closing.

6.12 Areas of Mutual Interest. Except as disclosed in any of the Contracts, no material Shallow Asset is subject to (or has related to it) any area of mutual interest agreement.

6.13 Production Payments. Seller is not obligated, by virtue of a production payment, prepayment arrangement under any contract for the sale of Hydrocarbons and containing a “take or pay,” advance payment or similar provision, gas balancing agreement or any other arrangement to deliver any material amounts of Hydrocarbons without then or thereafter receiving full payment therefor, or to make payment for any material amounts of Hydrocarbons already produced and sold.

6.14 Insurance. As of the Effective Time, such Seller maintained, and through the Closing Date will maintain, with respect to the Shallow Assets, the insurance coverage in amounts and on terms such Seller reasonably believes to be appropriate and customary in the circumstances.

6.15 No Other Representations or Warranties; Disclosed Materials. Except for the representations and warranties contained in this Agreement (as qualified by the Schedules) and the documents assigning the Shallow Assets, such Seller makes no other (and Buyer acknowledges that it is not relying upon any) express or implied representation or warranty with respect to such Seller, the Shallow Assets or the Transaction, and such Seller disclaims any other representations or warranties not contained in this Agreement, whether made by such Seller, any Affiliate of such Seller, or any of their respective officers, directors, managers, employees or agents. Except for the representations and warranties contained in this Agreement (as qualified by the Schedules), the disclosure of any matter or item in the Schedules shall not be deemed to constitute an acknowledgement that any such matter would or would reasonably be expected to be material or result in a material adverse effect on the Shallow Assets.

 

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ARTICLE 7

BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer makes the following representations and warranties as of Closing and as of the Effective Time:

7.1 Organization and Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Georgia and is duly qualified to carry on its business in the State of West Virginia and the Commonwealth of Pennsylvania.

7.2 Power. Buyer has all requisite power and authority to carry on its business as presently conducted. The execution and delivery of this Agreement does not, and the fulfillment of and compliance with the terms and conditions hereof will not, as of Closing, violate, or be in conflict with, any material provision of Buyer’s governing documents, or any material provision of any agreement or instrument to which Buyer is a party or by which it is bound, or, any judgment, decree, order, statute, rule or regulation applicable to Buyer.

7.3 Authorization and Enforceability. This Agreement constitutes Buyer’s legal, valid and binding obligation, enforceable in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other 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.

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

7.5 Litigation. There is no action, suit, proceeding, claim or investigation by any person, entity, or Governmental Entity pending or, to Buyer’s Knowledge, threatened against it before any Governmental Entity that impedes or is likely to impede its ability to consummate the Transaction and to assume the liabilities to be assumed by it under this Agreement.

7.6 Financial Resources. Buyer has, and shall have as of Closing, sufficient funds with which to pay the Closing Amount and consummate the Transaction and, following Closing, Buyer will have sufficient funds to pay any adjustments to the Purchase Price and meet its other payment obligations under this Agreement.

7.7 Buyer’s Evaluation.

(a) Review. Buyer is experienced and knowledgeable in the oil and gas business and is aware of its risks. Buyer acknowledges that Seller has not made any representations or warranties as to the Shallow Assets, including the Records, except as otherwise expressly provided herein and that Buyer may not rely on any of Seller’s estimates with respect to reserves, the value of the Shallow Assets, projections as to future events or other internal analyses, forward looking statements, or any other information other than as set forth in Seller’s representations and warranties herein.

(b) Independent Evaluation. In entering into this Agreement, Buyer acknowledges and affirms that it has relied and will rely solely on the terms of this Agreement and upon its independent analysis, evaluation and investigation of, and judgment with respect to, the business, economic, legal, tax or other consequences of this Transaction including its own estimate and appraisal of the extent and value of the Hydrocarbon reserves of the Shallow Assets.

 

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7.8 Securities Laws. Buyer is an “accredited investor” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and Buyer is acquiring the Shallow Assets for its own account and not with a view to, or for offer of resale in connection with, a distribution thereof, within the meaning of the Securities Act of 1933, as amended, and any other rules, regulations, and laws pertaining to the distribution of securities. Buyer has not sought or solicited, nor is Buyer participating with, investors, partners, or other third parties other than its lenders in order to fund the Purchase Price and to close this Transaction, and all funds to be used by Buyer in connection with this Transaction are Buyer’s own funds or those borrowed from its lenders.

7.9 Buyer’s Qualification. At Closing, Buyer shall be qualified and shall meet all requirements, comparable to the bonding requirements that have been imposed on Seller that are described in Section 8.2(d), to be designated operator of that portion of the Shallow Assets for which Seller serves as operator. It is understood and agreed that certain Governmental Entities may require Buyer to provide higher levels of financial security than they required of Seller. Buyer shall provide all such additional security in order to meet all requirements necessary for Buyer to be designated as operator of the Shallow Assets. Buyer shall cooperate with Seller to facilitate the release by Governmental Entities of Seller’s bonds described in Section 8.2(d).

ARTICLE 8

COVENANTS AND AGREEMENTS

8.1 Covenants and Agreements of Seller. Seller covenant and agree with Buyer as follows:

(a) Operations Prior to Closing. Except as otherwise consented to in writing by Buyer, which consent shall not be unreasonably withheld or delayed, or provided in this Agreement, from the Effective Time to the Closing, Seller will use reasonable efforts to cause the Shallow Assets to be operated in a good and workmanlike manner consistent with past practices. From the Execution Date to the Closing Date, Seller shall pay or cause to be paid its proportionate share of all costs and expenses incurred in connection with such operations. Seller will notify Buyer and obtain Buyer’s consent, which shall not be unreasonably withheld or delayed, to capital expenditures anticipated to cost in excess of Twenty-Five Thousand Dollars ($25,000.00) per operation, net to Seller’s interest, conducted on the Shallow Assets.

(b) Restriction on Operations. Subject to Section 8.1(a), unless Seller obtains the prior written consent of Buyer to act otherwise (which shall not be unreasonably withheld or delayed), Seller will not (i) abandon any part of the Shallow Assets (except in the ordinary course of business or the abandonment of leases upon the expiration of their respective primary terms), (ii) approve any operations on the Shallow Assets anticipated in any instance to cost more than Fifty Thousand Dollars ($50,000.00) per operation, net to Seller’s interest (excepting emergency operations required under presently existing contractual obligations, and operations undertaken to avoid a monetary penalty or forfeiture provision of any applicable agreement or order all of which shall be deemed to be approved, provided that Seller immediately notifies Buyer of any emergency operation or operation to avoid monetary penalty or forfeiture excepted herein), (iii) encumber, convey or dispose of any part of the Shallow Assets (other than replacement of equipment or the sale of Hydrocarbons produced from the Shallow Assets in the regular course of business), (iv) enter into any farmout or farmin affecting the Shallow Assets, (v) consent to letting lapse any insurance now in force with respect to the Shallow Assets, or (vi) materially modify, or terminate prior to its stated expiration, any Material Agreement.

(c) Marketing. Unless Seller obtains the prior written consent of Buyer (which shall not be unreasonably withheld or delayed) to act otherwise, Seller will not alter any existing marketing contracts currently in existence, or enter into any new marketing contracts or agreements providing for the sale of Hydrocarbons for a term in excess of one (1) month.

 

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(d) Consents. For the purposes of obtaining the written consents required in Sections 8.1(a) through (c), Buyer designates the following contact person: Thomas S. Wright. Such consents may be obtained in writing by overnight courier or given by .pdf or facsimile transmission.

(e) Status. Seller shall use all reasonable efforts to assure that as of the Closing Date, Seller will not be under any material legal or contractual restriction that would prohibit or delay the timely consummation of the Transaction.

(f) Notices of Claims. Seller shall promptly notify Buyer, if, between the date of execution of this Agreement and the Closing Date, Seller receives written notice of any claim, suit, action or other proceeding affecting the Shallow Assets or written notice of any default under the Leases or any Material Agreement.

(g) Compliance with Laws. During the period from the date of execution of this Agreement to the Closing Date, Seller shall use reasonable efforts to cause the Shallow Assets to be operated in compliance in all material respects with all applicable statutes, ordinances, rules, regulations and orders.

(h) Amendment to Schedules. Seller shall, with respect to the representations and warranties of Seller contained in this Agreement, no later than two (2) days prior to Closing, add, supplement or amend the Schedules to such representations and warranties with respect to any matter hereafter arising or discovered which, if existing or known as of the Execution Date or thereafter, would have been required to be set forth or described in such Schedules. For purposes of the Closing conditions set forth in Article 10, the Schedules to Seller’s representations and warranties contained in this Agreement will be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto; provided, however, that should Closing occur, any such addition, supplement or amendment shall be taken into account for purposes of the indemnification provisions set forth in Article 14.

(i) Suspense Accounts. Prior to Closing, Seller shall prepare a schedule setting forth the following information: (i) all proceeds of production attributable to the Shallow Assets held by Seller in suspense, (ii) the reason such proceeds are being held in suspense, and (ii) if known, the name or names of the persons claiming such proceeds. Buyer agrees to indemnify Seller against any claim relating to the failure to pay such funds after Closing.

(j) Approval from Bankruptcy Court. Promptly after the execution of this Agreement, Seller shall file in Eastern 1996D Limited Partnership, et a., Case No. 13-34773-HDH-11 pending in the Bankruptcy Court (the “Bankruptcy Proceeding”) a motion seeking approval of the sale of the Shallow Assets to Buyer on the terms and conditions set forth herein and shall file such other pleadings necessary to effect the sale of the Shallow Assets to Buyer. Seller shall provide Buyer with a copy of the motion for its review and approval prior to filing the motion with the Bankruptcy Court.

8.2 Covenants and Agreements of Buyer. Buyer covenants and agrees with Seller as follows:

(a) Status. Buyer shall use all reasonable efforts to assure that as of the Closing Date it will not be under any material legal or contractual restriction that would prohibit or delay the timely consummation of the Transaction.

 

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(b) Confidentiality. Upon Closing, the Confidentiality Agreement dated April 18, 2013, between Seller and Buyer, among others, shall terminate. All information obtained from Seller in connection with the Transaction whether before or after the execution of this Agreement (“Information”) is deemed by the Parties to be confidential and proprietary to Seller. Buyer shall take reasonable steps to ensure that Buyer’s employees, consultants and agents comply with the provisions of this Section 8.2(b). Until completion of the Closing, except as required by law, Buyer and its Affiliates and their respective officers, directors, employees, agents and representatives will hold in strict confidence the terms of this Agreement and all Information, subject to such exceptions as are contained in the Confidentiality Agreement. Upon Closing, any obligation of confidentiality under this Section 8.2(b) shall terminate.

(c) Successor Operator. Seller, or one of its Affiliates, is designated as operator of certain Shallow Assets pursuant to joint operating agreements with third parties. Buyer acknowledges that such third parties may not agree to allow Buyer to succeed Seller or one of its Affiliates as operator under such joint operating agreements or may otherwise exercise other rights they may have that would preclude Buyer from succeeding Seller or one of its Affiliates as operator. Buyer specifically acknowledges and agrees that Seller has made no representation or guarantee that Buyer will succeed Seller or one of its Affiliates as operator under any joint operating agreement; provided that Seller shall use commercially reasonably efforts, if requested by Buyer, to support Buyer’s succession of Seller or one of its Affiliates as operator as to any of the Shallow Assets currently operated by Seller or one of its Affiliates, subject to the provisions of any applicable joint operating agreement.

(d) Bonds. Letters of Credit and Guarantees. Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with Governmental Entities or third parties and relating to the Shallow Assets are transferable to Buyer. Except to the extent that Buyer will, as of Closing, be covered by the bonds (except the Seller’s bonds) of the operators of the applicable Shallow Assets, then on or before the Closing Date, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for such bonds, letters of credit and guarantees, to the extent such replacements are necessary to permit the cancellation as of Closing of the bonds, letters of credit and guarantees posted by Seller and/or its Affiliates. Buyer shall deliver true and correct copies of all its replacement bonds, letters of credit and guarantees prior to the Closing Date.

(e) Intentionally Omitted.

(f) Intentionally Omitted.

8.3 Covenants and Agreements of the Parties.

(a) Communication Between the Parties Regarding Breach. If Buyer develops information during its Due Diligence Review that leads Buyer to believe that Seller has breached a representation or warranty under this Agreement, Buyer shall inform Seller in writing of such potential breach as soon as practicable, but in any event, at or prior to Closing. If any Party believes the other Party has breached any term of this Agreement, the Party who believes the breach has occurred shall promptly give written notice to the breaching Party of the nature of the breach.

(b) Announcements. Prior to the Closing Date, Seller and Buyer shall consult with each other with regard to all press releases and other announcements concerning this Agreement or the Transaction, allowing a reasonable period of time for comment by the other Party; provided, however, that the foregoing shall not prevent either Party from timely complying with any applicable Bankruptcy Code provision, Bankruptcy Court order, securities laws or stock exchange rules. Prior to the Closing Date, neither Party shall be named in any press release or announcement of the other Party without such Party’s prior written consent, which shall not be unreasonably withheld or delayed.

 

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(c) Casualty Loss. Prior to Closing, if a portion of the Shallow Assets is destroyed by fire or other casualty or if a portion of the Assets is taken or threatened to be taken in condemnation or under the right of eminent domain (“Casualty Loss”), and the resulting loss from such Casualty Loss exceeds Two Hundred Thousand Dollars ($200,000.00) based on the Allocated Value of the affected Shallow Assets, Buyer shall not be obligated to purchase such Shallow Asset. If Buyer elects to purchase such Shallow Asset, the Purchase Price shall be reduced by the estimated cost to repair such Shallow Asset (with equipment of similar utility), less all insurance proceeds which shall be payable to Buyer, up to the Allocated Value thereof (the reduction being the “Net Casualty Loss”). If Buyer declines to purchase such Shallow Asset, the Purchase Price shall be reduced by the Allocated Value of such Shallow Asset. Seller, at its sole option and expense, may elect to cure such Casualty Loss and, in such event, Seller shall be entitled to all insurance proceeds. If Seller elects to cure such Casualty Loss, Seller may replace any personal property that is the subject of Casualty Loss with personal property of similar grade or utility. If the Casualty Loss is cured to Buyers reasonable satisfaction, Buyer shall purchase the affected Shallow Asset at Closing for the Allocated Value thereof.

(d) Cure of Misrepresentations. If any of the representations and warranties contained in Article 6 or Article 7 hereof are determined (whether by notice from a Party or otherwise) to have been untrue or incorrect as of the Execution Date, then any cure by the other Party prior to Closing of the same shall be at such other Party’s own expense.

(e) Records. Seller shall make the Records available for pick-up by Buyer at Closing to the extent possible, but in any event, within sixty (60) days after Closing. Seller may retain copies of the Records (except all original copies of Leases that Seller is retaining) and Seller shall have the right to review and copy the Records during standard business hours upon reasonable notice for so long as Buyer retains the Records. Buyer agrees that the Records will be maintained in compliance with all applicable laws governing document retention. Seller shall be entitled to keep a copy or copies of all Records; provided, however, that Seller shall not sell or otherwise allow third parties to review, copy or otherwise use (for any purpose) any Records retained by Seller for its own account.

(f) Intentionally Omitted.

(g) Intentionally Omitted.

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

(i) Intentionally Omitted.

(j) Intentionally Omitted.

(k) Intentionally Omitted.

ARTICLE 9

TAX MATTERS

9.1 Definitions. For the purposes of this Agreement:

(a) “Impact Fee” means the unconventional gas well fee authorized by Act 13 of 2012 of the Pennsylvania House of Representatives (HB 1950) and codified in Chapter 23, Title 58 of the Pennsylvania Consolidated Statutes, including any penalties, additions to Tax, and interest levied or assessed under or on such fee

 

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(b) “Income Taxes” means all Taxes based upon, measured by, or calculated with respect to (i) gross or net income or gross or net receipts or profits (including state franchise Taxes and any capital gains, alternative minimum Taxes, net worth and any Taxes on items of Tax preference, but not including sales, use, goods and services, real or personal property transfer or other similar Taxes), (ii) multiple bases (including corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based upon, measured by, or calculated with respect to, is described in clause (i) above, or (iii) withholding Taxes measured with reference to or as a substitute for any Tax described in clauses (i) or (ii) above, and (iv) and any penalties, additions to Tax, and interest levied or assessed with respect to a Tax described in (i), (ii), or (iii) above;

(c) “Production Taxes” shall mean all Severance Taxes and Property Taxes;

(d) “Property Taxes” shall mean all ad valorem, real property, personal property, and all other Taxes and similar obligations, including all Impact Fees, and any penalties, additions to Tax, and interest levied or assessed thereon, assessed against the Shallow Assets or based upon or measured by the ownership of the Shallow Assets, but not including Income Taxes, Severance Taxes and Transfer Taxes;

(e) “Severance Taxes” shall mean all extraction, production, excise, net proceeds, severance, windfall profit and all other Taxes and similar obligations, and any penalties, additions to Tax, and interest levied or assessed thereon, with respect to the Shallow Assets that are based upon or measured by the production of Hydrocarbons or the receipt of proceeds therefrom, but not including Property Taxes, Income Taxes, and Transfer Taxes;

(f) “Taxes” means (a) any taxes and assessments imposed by any Governmental Entity, including net income, gross income, profits, gross receipts, net receipts, capital gains, net worth, doing business, license, stamp, occupation, premium, alternative or add-on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use, environmental (including taxes under Code Section 59A), customs, duties, capital stock, stock, stamp, document, filing, recording, registration, authorization, franchise, excise, withholding, social security (or similar), fuel, excess profits, windfall profit, severance, extraction, production, net proceeds, estimated or other tax, including any interest, penalty or addition thereto, whether disputed or not, and any expenses incurred in connection with the determination, settlement or litigation of the Tax liability, (b) any obligations under any agreements or arrangements with respect to Taxes described in clause (a) above, and (c) any transferee liability in respect of Taxes described in clauses (a) and (b) above or payable by reason of assumption, transferee liability, operation of law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under law) or otherwise; and

(g) “Transfer Taxes” means any sales, use, excise, stock, stamp, document, filing, recording, registration, authorization and similar Taxes, fees and charges, and any penalties, additions to Tax, and interest levied or assessed thereon, but not including Production Taxes or Income Taxes, that are imposed with respect to the Transaction.

 

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9.2 Apportionment of Property Taxes. Property Taxes assessed on a calendar year shall be allocated to the Seller for 2012 and earlier and shall be allocated to the Buyer for 2013 and thereafter. Property Taxes that are not assessed on a calendar year and that are assessed against the Shallow Assets with respect to the Tax period in which the Effective Time occurs (the “Current Tax Period”) shall be allocated between Seller and Buyer as of the Effective Time with (a) Seller being allocated the liability for the share of the actual amount of such Property Taxes for the Current Tax Period determined by multiplying such actual Property Taxes by a fraction, the numerator of which is the number of days in the Current Tax Period prior to the Effective Time and the denominator of which is the total number of days in the Current Tax Period and (b) Buyer being allocated the remainder of the Property Taxes for the Current Tax Period. The foregoing allocations shall be made without duplicating any adjustment to the Purchase Price required by Section 2.3. For the purpose of calculating the Final Purchase Price under Section 13.1, Property Taxes shall be estimated based on based on the best available estimate of Property Tax liability available at the time of Closing with the resulting Purchase Price adjustment to be considered full and final settlement of all such Taxes without regard to the actual Tax rates or assessments; provided that, if the actual tax rates or assessment rates are not known at the time of the Closing, the amounts shall be re-estimated based on the best information available at the time of the Final Settlement Statement, and such estimated amounts shall thereupon become full and final settlement of such Taxes for purposes of this Agreement. After Closing, Buyer shall timely file or cause to be filed all required reports and returns for, related to, or incident to the Property Taxes and shall timely pay or cause to be paid to the taxing authorities all Property Taxes for any Property Tax period during which the Closing Date occurs. Any penalties, additions to Tax, or interest levied or assessed with respect to any failure of Buyer to comply with the previous sentence shall be allocated to, and shall be payable by, Buyer.

9.3 Apportionment of Severance Taxes. Severance Taxes shall be deemed attributable to the period during which the production of the Hydrocarbons with respect to such Severance Taxes occurred, and liability therefor shall be allocated to Seller for pre-Effective Time Severance Taxes and to Buyer for post-Effective Time Severance Taxes, without duplicating any adjustment to the Purchase Price required by Section 2.3. For the purpose of calculating the Final Purchase Price under Section 13.1, Severance Taxes determined with respect to 2012 production shall be estimated based on current State of West Virginia or Pennsylvania Severance Tax rates, as applicable, with the resulting Purchase Price adjustment to be considered full and final settlement of all such Taxes without regard to the actual Tax rates or assessments; provided that, if the actual amounts of such production and Severance Tax rates are not known at the time of the Closing, the amounts shall be re-estimated based on the best information available at the time of the Final Closing Statement, and such estimated amounts shall thereupon become full and final settlement of such Taxes for purposes of this Agreement. After Closing, Buyer shall timely file or cause to be filed all required reports and returns for, related to, or incident to Severance Taxes for any period that are due after the Closing Date and shall timely pay or cause to be paid to the taxing authorities all Severance Taxes for all taxable periods including the Closing Date. Any penalties, additions to Tax, or interest levied or assessed with respect to any failure of Buyer to comply with the previous sentence shall be allocated to, and shall be payable by, Buyer.

9.4 Transfer Taxes. Notwithstanding anything to the contrary herein, the Purchase Price excludes, and Buyer shall be liable for, any Transfer Taxes required to be paid in connection with the sale of the Shallow Assets pursuant to this Agreement. Buyer shall timely file or cause to be filed all required reports and returns for, related to, or incident to such Transfer Taxes and shall timely pay or cause to be paid to the taxing authorities all Transfer Taxes. Any penalties, additions to Tax, or interest levied or assessed with respect to any failure of Buyer to comply with the previous sentence shall be allocated to, and shall be payable by, Buyer.

9.5 Post-Closing Tax Matters. After the Closing Date, each of Buyer and Seller shall:

(a) reasonably assist the other in preparing any Tax returns with respect to any Tax incurred or imposed, or required to be filed, in connection with the Transaction, and in qualifying for any exemption or reduction in Tax that may be available;

(b) reasonably cooperate in preparing for any audits or examinations by, or disputes with, taxing authorities regarding any Tax incurred or imposed in connection with the Transaction;

 

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(c) make available to the other, and to any taxing authority as reasonably requested, any information, records, and documents relating to a Tax incurred or imposed in connection with the Transactions;

(d) provide timely notice to the other in writing of any pending or threatened Tax audit, examination, or assessment that could reasonably be expected to affect the other’s Tax liability under applicable law or this Agreement (a “Tax Controversy”), and to promptly furnish the other with copies of all correspondence with respect to any Tax Controversy; and

(e) allow the other to participate, at its own expense, in any Tax Controversy, and not settle any Tax Controversy without the prior written consent of the other, which may not be unreasonably withheld, conditioned or delayed.

ARTICLE 10

CONDITIONS PRECEDENT TO CLOSING

10.1 Seller’s Conditions. The obligations of Seller at the Closing are subject, at the option of Seller, to the satisfaction or waiver at or prior to the Closing of the following conditions precedent:

(a) All representations and warranties of Buyer contained in this Agreement are true and correct in all material respects (provided, however, that any such representation or warranty of the Buyer contained in Article 7 that is qualified by a materiality standard shall not be further qualified by materiality for purposes of this Section 10.1(a)) at and as of the Closing Date in accordance with their terms as if such representations and warranties were remade at and as of the Closing Date (except to the extent such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct as of the specified date); provided, however, that the foregoing condition shall be deemed to have been satisfied unless the individual or aggregate impact of all inaccuracies of such representations and warranties has had or would be reasonably likely to have a material adverse effect on the Shallow Assets; and Buyer has performed and satisfied all covenants and agreements required by this Agreement to be performed and satisfied by Buyer or jointly by Buyer and Seller at or prior to the Closing in all material respects and Buyer shall deliver a certificate to Seller confirming the foregoing.

(b) No order has been entered by any Governmental Entity having jurisdiction over the Parties (including the Bankruptcy Court) or the subject matter of this Agreement that restrains or prohibits the purchase and sale contemplated by this Agreement and that remains in effect at Closing.

(c) Buyer shall have delivered (or be ready, willing and able to immediately deliver) to Seller duly executed counterparts of the Partial Assignment and the Assignment and Assumption Agreement and all other documents and certificates to be delivered by Buyer under Section 12.3 and shall have performed (or be ready, willing and able to immediately perform) the other obligations required to be performed by it under Section 12.3 (including delivery of the Closing Amount).

(d) The aggregate reduction to the Purchase Price due to Title Defects, Environmental Defects and Net Casualty Losses shall not exceed the Defect Threshold.

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

 

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(a) All representations and warranties of Seller contained in this Agreement are true and correct in all material respects (provided, however, that any such representation or warranty of the Seller contained in Article 6 that is qualified by a materiality standard shall not be further qualified by materiality for purposes of this Section 10.2(a)) at and as of the Closing Date in accordance with their terms as if such representations were remade at and as of the Closing Date (except to the extent such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct as of the specified date); provided that the foregoing condition shall be deemed to have been satisfied unless the individual or aggregate impact of all inaccuracies of such representations and warranties has had or would be reasonably likely to have a material adverse effect on the Shallow Assets; and Seller has performed and satisfied all covenants and agreements required by this Agreement to be performed and satisfied by Seller or jointly by Buyer or Seller at or prior to the Closing in all material respects and Seller shall deliver a certificate to Buyer confirming the foregoing.

(b) No order has been entered by any Governmental Entity having jurisdiction over the Parties (including the Bankruptcy Court) or the subject matter of this Agreement that restrains or prohibits the purchase and sale contemplated by this Agreement and that remains in effect at the time of Closing.

(c) Seller shall have delivered (or be ready, willing and able to immediately deliver) to Buyer duly executed counterparts of the Partial Assignment and the Assignment and Assumption Agreement and all other documents and certificates to be delivered by Seller under Section 12.3 and shall have performed (or be ready, willing and able to immediately perform) the other obligations required to be performed by it under Section 12.3.

(d) The aggregate reduction to the Purchase Price due to Title Defects, Environmental Defects and Net Casualty Losses shall not exceed the Defect Threshold.

10.3 Conditions of Both Parties. The obligations of Buyer and Seller at the Closing are subject to the satisfaction of the following conditions precedent, which conditions may not be waived by either Party: the entry of a final, non-appealable order by the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”) in the Bankruptcy Proceeding approving the Transaction, as the Transaction is contemplated by this Agreement, under Section 363 of the United States Bankruptcy Code on the terms and conditions set forth herein.

ARTICLE 11

RIGHT OF TERMINATION

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

(a) by mutual consent of Seller and Buyer;

(b) by Seller, if Seller’s conditions set forth in Section 10.1(a) are not satisfied or are not capable of satisfaction at such time through no fault of Seller, or are not waived by Seller, as of the Closing Date;

(c) by Buyer, if Buyer’s conditions set forth in Section 10.2(a) are not satisfied or are not capable of satisfaction at such time through no fault of Buyer, or are not waived by Buyer, as of the Closing Date;

(d) by Buyer or Seller in the event that the aggregate reduction to the Initial Purchase Price due to Title Defects (net of any Title Benefits), Environmental Defects (covered by a Notice of Defective Interest and/or Environmental Defect Notice delivered on or before the Initial Defect Notice Date) and Net Casualty Losses exceeds twenty percent (20%) of the Initial Purchase Price (the “Defect Threshold”); or

 

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(e) without the necessity of any action by either Party, if the conditions set forth in Section 10.3 are not satisfied or are not capable of satisfaction on or before May 30, 2014.

If Buyer or Seller terminates this Agreement pursuant to this Section 11.1 and asserts that a breach of this Agreement has occurred, the notice of termination shall include a statement describing the nature of the alleged breach together with supporting documentation. If the Closing has not occurred on or prior to the date that is one hundred twenty (120) days after the Execution Date, then this Agreement shall terminate automatically.

11.2 Effects of Termination. If this Agreement is terminated pursuant to Section 11.1, this Agreement shall become void and of no further force or effect (except for the provisions of Section 3.4, Section 6.4, Section 7.4, Section 8.3(b) or Section 14.8 of this Agreement and this Article 11 which shall continue in full force and effect).

11.3 Liabilities Upon Termination.

(a) Buyer’s Default. If Closing does not occur because Seller terminates this Agreement pursuant to Section 11.1(b) based upon Buyer’s wrongful failure to tender performance at Closing or Buyer’s breach of this Agreement prior to Closing, and all of the conditions to Closing under Section 10.2(a) (other than the Defect Threshold condition and conditions to be satisfied at Closing) have been satisfied or waived, and Seller is ready to close, then Seller shall be entitled, in its sole discretion, to seek any remedies available at law or in equity. Under the foregoing sentence, Buyer’s failure to close shall not be considered wrongful if (1) Buyer’s conditions under Section 10.2(a) (other than the Defect Threshold condition and conditions to be satisfied at Closing) are not satisfied through no fault of Buyer and are not waived, or (2) Buyer has the right to terminate or has terminated this Agreement as of right under Section 11.1.

(b) Seller’s Default: Other Termination. Buyer shall be entitled, as its sole remedy, to seek to enforce specific performance against Seller hereunder. If Buyer seeks the remedy of specific performance, it must do so within fifteen (15) business days of the date by which it would otherwise deliver a notice of termination pursuant to the last sentence of Section 11.1.

(c) Mutual Conditions Not Met. If Closing does not occur because this Agreement is terminated pursuant to Section 11.1(e), neither Party shall be entitled to seek any remedy, or to recover any damages, from the other Party.

ARTICLE 12

CLOSING

12.1 Date of Closing. The “Closing” of the Transaction shall be held on the fifth business day following the satisfaction of the conditions set forth in Section 10.3 or such other date as the Parties may agree. The date the Closing actually occurs is called the “Closing Date.”

12.2 Place of Closing. The Closing shall be held at the Bridgeport, West Virginia offices of Seller at 9:00 a.m., Eastern Time or at such other time and place as Buyer and Seller may agree in writing.

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

 

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(a) Seller and Buyer shall execute, acknowledge and deliver to Buyer (i) the Partial Assignment with, as to only each Shallow Well, a special warranty of title by, through and under Seller but not otherwise and with no warranties, express or implied, as to the personal property, fixtures or condition of the Shallow Wells which are conveyed “as is, where is”; (ii) such other assignments, bills of sale, or deeds necessary to transfer the Shallow Assets to Buyer, including state forms of assignment; (iii) an Assignment and Assumption Agreement in the form attached as Exhibit E under which Seller assigns and Buyer assumes Seller’s interest in the contracts included in the Shallow Assets in accordance with the terms of this Agreement and (iv) all Shallow Assets shall be conveyed free and clear of all pledges, liens, security interests, encumbrances, claims, charges, options, and interests thereon (collectively “the Claims and Interests”) and any such Claims and Interests shall attach to the net proceeds of the sale of such Shallow Assets;

(b) Seller and Buyer shall deliver the certificates required in Sections 10.2(a) and 10.1(a), respectively.

(c) Seller and Buyer shall execute and deliver the Preliminary Settlement Statement in accordance with Section 2.3;

(d) Buyer shall cause the Closing Amount to be paid by wire transfer of immediately available funds to the account(s) designated by Seller in writing;

(e) Seller shall execute, acknowledge and deliver transfer orders or letters in lieu thereof notifying all purchasers of production of the change in ownership of the Shallow Assets and directing all purchasers of production to make payment to Buyer of proceeds attributable to production from the Shallow Assets;

(f) Seller shall execute and deliver to Buyer all required change of operator forms and notices required by any Governmental Entity or under any Contract;

(g) Seller shall execute and deliver to Buyer a certificate of non-foreign status in the form of Exhibit F, and any applicable West Virginia or Pennsylvania forms certifying that Seller is not subject to withholding pursuant West Virginia or Pennsylvania tax law;

(h) Buyer and PDC Energy, Inc. shall execute and deliver that certain letter agreement regarding indemnification providing for certain indemnification by the general partner of each Seller and related matters under the PSA (the “GP Indemnification Agreement”);

(i) Seller and Buyer shall take such other actions and deliver such other documents

as are contemplated by this Agreement; and

(j) At Closing, the Joint Operating Agreement dated September 10, 2013 governing the operation of the Shallow Assets shall be terminated and the Operator, PDC Energy, Inc. and Seller shall waive any claim for damages resulting from the termination of the Joint Operating Agreement.

12.4 Non-Foreign Status. If, on or prior to the Closing Date, Seller provides Buyer with the certificate of non-foreign status described in Section 12.3(g) and Buyer is otherwise permitted to rely on such certificate under Treasury Regulations § 1.1445-2, Buyer shall not withhold any amount under Section 1445 of the Code.

 

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ARTICLE 13

POST-CLOSING ADJUSTMENTS

13.1 Final Settlement Statement. As soon as practicable after the Closing, but in no event later than one hundred twenty (120) days after Closing, Seller, with the assistance of Buyer’s staff and with access to such records as necessary, will cause to be prepared and delivered to Buyer, in accordance with customary industry accounting practices, the final settlement statement (the “Final Settlement Statement”) setting forth each adjustment to the Purchase Price in final form in accordance with Section 2.3 and permitted post-Closing adjustments pursuant to Article 4 and Article 5 and showing the calculation of such adjustments and the resulting final purchase price (the “Final Purchase Price”). Seller shall, at Buyer’s request, supply reasonable documentation available to support any credit, charge, receipt or other item. Seller shall afford Buyer and its representatives the opportunity to review such statement and the supporting schedules, analyses, work papers, and other underlying records or documentation as are reasonably necessary and appropriate in Buyer’s review of the Final Settlement Statement. Each Party shall cooperate fully and promptly with the other and their respective representatives in such examination with respect to all reasonable requests related thereto. As soon as reasonably practicable but not later than sixty (60) days following receipt of Seller’s statement hereunder, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to such statement. Seller and Buyer shall undertake to agree on the Final Settlement Statement no later than thirty (30) days after receipt of Buyer’s written report containing recommended changes (the “Final Settlement Date”). Unless the Parties are unable to reach agreement on the Final Settlement Statement on or before the Final Settlement Date, then on or prior to the Final Settlement Date, (x) Buyer shall pay to Seller the amount by which the Final Purchase Price exceeds the Closing Amount or (y) Seller shall pay to Buyer the amount by which the Closing Amount exceeds the Final Purchase Price, as applicable (in either case, the “Final Adjustment”).

13.2 Dispute Mechanism. In the event that Seller and Buyer cannot reach agreement by the Final Settlement Date, either Party may refer the remaining matters in dispute to Hall Kistler & Company LLP, or a regionally-recognized independent accounting firm as may be mutually accepted by Buyer and Seller, for review and final determination (the “Agreed Accounting Firm”). If issues are submitted to the Agreed Accounting Firm for resolution, Seller and Buyer shall each enter into a customary engagement letter with the Agreed Accounting Firm at the time the issues remaining in dispute are submitted to the Agreed Accounting Firm. The Agreed Accounting Firm will be directed to (i) review the statement setting forth Seller’s calculation of the Final Purchase Price and the records relating thereto only with respect to items identified by Buyer in its written report containing changes to such statement that remain disputed immediately following the Final Settlement Date and (ii) determine the final adjustments. Each Party shall furnish the Agreed Accounting Firm such work papers and other records and information relating to the objections in dispute as the Agreed Accounting Firm may reasonably request and that are available to such Party or its Affiliates (and such Parties’ independent public accountants). The Parties will, and will cause their representatives to, cooperate and assist in the conduct of any review by the Agreed Accounting Firm, including making available books, records and, as available, personnel as reasonably required. The Agreed Accounting Firm shall conduct the arbitration proceedings in Pittsburgh, Pennsylvania in accordance with the Commercial Arbitration Rules of the AAA, to the extent such rules do not conflict with the terms of this Section 13.2. The Agreed Accounting Firm’s determination shall be made within thirty (30) days after submission of the matters in dispute and shall be final and binding on both Parties, without right of appeal and such decision shall constitute an arbitral award upon which a judgment may be entered by a court having jurisdiction thereof. In determining the proper amount of any adjustment to the Final Purchase Price, the Agreed Accounting Firm shall not increase the Final Purchase Price more than the increase proposed by Seller nor decrease the Final Asset Value more than the decrease proposed by Buyer, as applicable, and may not award damages or penalties to either Party with respect to any matter. Seller and Buyer shall each bear its own legal fees and other costs of presenting its case. Each Party shall bear one-half of the costs and expenses of the Agreed Accounting Firm. Within ten (10) business days after the date on which the Parties or the Agreed Accounting Firm, as applicable, finally determines the disputed matters, (x) Buyer shall pay to Seller the amount by which the Final Purchase Price exceeds the Closing Amount or (y) Seller shall pay to Buyer the amount by which the Closing Amount exceeds the Final Purchase Price, as applicable. The Parties acknowledge that it is not the intent of this Agreement that either Party be deprived of material amounts of revenue or be burdened by material amounts of expense until the Final Adjustment pursuant to Section 13.1. If at any time after Closing either Party is owed material revenues or material expense reimbursement, which revenues and expense reimbursement owed shall be netted against revenues and expenses due the other Party, it may request payment from the other Party, not more frequently than monthly, and such Party shall make payment of any undisputed amounts within a commercially reasonable period of time.

 

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13.3 Payments. All payments made or to be made hereunder to Seller shall be by electronic transfer of immediately available funds to the account of Seller as may be specified by Seller in writing. All payments made or to be made hereunder to Buyer shall be by electronic transfer of immediately available funds to a bank and account specified by Buyer in writing to Seller. Upon execution of the Final Settlement Statement by the Parties and the payment of the Final Adjustment by one Party to the other, neither Party shall have any further obligation to for any additional adjustments to the Purchase Price under Section 2.3.

ARTICLE 14

ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION; DISCLAIMERS

14.1 Survival of Warranties, Representations and Covenants. The representations and warranties contained in Section 4.1(a) shall terminate on the Initial Defect Notice Date. All other representations and warranties of the Seller, and all other covenants, indemnities and agreements of the Seller contained in this Agreement shall terminate on the Closing Date. The representations and warranties contained in Sections 7.1 through 7.7 shall survive indefinitely, subject to applicable statutes of limitation. All other representations and warranties of Buyer contained in this Agreement shall terminate on the date that is six (6) months following the Closing Date. Except as otherwise provided in this Section 14.1, the covenants, indemnities and agreements of Buyer contained in this Agreement shall survive the Closing and continue in accordance with their respective terms. Each applicable survival period may be referred to herein as a “Survival Period.”

14.2 Buyer’s Assumption of Liabilities and Obligations. Upon Closing, Buyer shall assume and pay, perform, fulfill and discharge all claims, costs, expenses, liabilities and obligations (“Obligations”), relating to the (a) ownership and operation of the Shallow Assets arising from and after the Effective Time, including the owning, developing, exploring, operating or maintaining the Shallow Assets or the producing, transporting and marketing of Hydrocarbons from the Shallow Assets including the payment of Property Expenses; (b) the obligation to plug and abandon all Shallow Wells located on the Lands and reclaim all Shallow Well sites located on the Lands; (c) the Buyer’s Environmental Liabilities; (d) “free gas or gas tap” obligations arising under any Lease, Easement, Contract or otherwise; and (e) all Obligations (other than plugging and abandonment Obligations and Environmental Liabilities, which Obligations Buyer assumes upon Closing without recourse) accruing or relating to the ownership or operation of the Shallow Assets before the Effective Time for which Claims have not been asserted pursuant to the GP Indemnification Letter being delivered under Section 12.3(h) before the date that is six (6) months following the Closing Date; (collectively, the “Assumed Liabilities”); provided, however, Buyer does not, and shall at no time, assume any Obligations of Seller to the extent that such Obligations of Seller are:

 

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(a) attributable to or arise out of the ownership, use or operation of the Excluded Assets; or

(b) attributable to any obligation of Seller or any of its Affiliates attributable to any Income Tax measured by or imposed on the net income of Seller or any of its Affiliates that was or is attributable to Seller’s or any of its Affiliates’ ownership of an interest in or the operation of the Shallow Assets; or

(c) attributable to any costs arising out of the administration of Sellers’ bankruptcy proceedings.

14.3 Indemnification.

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

(b) After the Closing, Buyer assumes all risk, liability, obligation and Losses in connection with, and shall defend, indemnify, and save and hold harmless Seller, its officers, directors, employees and agents, from and against all Losses which arise directly or indirectly from or in connection with (i) the Assumed Liabilities, (ii) any breach by Buyer of any of Buyer’s representations or warranties contained in Article 7 that survive Closing for the respective Survival Period set forth in Section 14.1, or (iii) any breach by Buyer of its covenants and agreements contained in this Agreement.

14.4 Procedure. The indemnifications contained in Section 14.3 shall be implemented as follows:

(a) Claim Notice. The Party seeking indemnification under the terms of this Agreement (“Indemnified Party”) shall submit a written notice (a “Claim Notice”) to the other Party (“Indemnifying Party”) which, to be effective, must be delivered prior to the end of the Survival Period and must state: (i) to the extent reasonably possible the amount of each payment claimed by an Indemnified Party to be owing, (ii) to the extent reasonably possible the basis for such claim, with supporting documentation, and (iii) a list identifying to the extent reasonably possible each separate item of Loss for which payment is so claimed. The amount claimed shall be paid by the Indemnifying Party to the extent required herein within thirty (30) days after receipt of the Claim Notice, or after the amount of such payment has been finally established as provided in Section 14.4(c), whichever last occurs.

 

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(b) Information. Within thirty (30) days after the Indemnified Party receives notice of a claim or legal action by a third party that may result in a Loss for which indemnification may be sought under this Article 14 (a “Claim”), the Indemnified Party shall give written notice of such Claim to the Indemnifying Party. If the Indemnifying Party or its counsel so requests, the Indemnified Party shall furnish the Indemnifying Party with copies of all pleadings and other information with respect to such Claim. At the election of the Indemnifying Party, which must be made within sixty (60) days after receipt of such notice and not thereafter, the Indemnified Party shall permit the Indemnifying Party to assume control of such Claim (to the extent only that such Claim, legal action or other matter relates to a Loss for which the Indemnifying Party is liable), including the determination of all appropriate actions, the negotiation of settlements on behalf of the Indemnified Party, and the conduct of litigation through attorneys of the Indemnifying Party’s choice; provided, however, that no such settlement can result in any liability or cost to the Indemnified Party for which it is entitled to be indemnified hereunder without its prior written consent. If the Indemnifying Party elects to assume control, (i) all reasonable expenses incurred by the Indemnified Party in connection with the investigation or defense of the Claim, legal action or other matter prior to the time the Indemnifying Party assumes control shall be reimbursed and paid by the Indemnifying Party, (ii) any expenses incurred by the Indemnified Party thereafter for investigation or defense of the matter shall be borne by the Indemnified Party except for reasonable expenses incurred in connection with providing information or assistance to the Indemnifying Party as required by subsection (iii), and (iii) the Indemnified Party shall give all reasonable information and assistance, other than pecuniary, that the Indemnifying Party shall deem necessary to the proper defense of such Claim, legal action, or other matter but shall be reimbursed and paid for such expenses as provided for in subsection (ii). Before such election is made or in the absence of such an election, the Indemnified Party shall use its best efforts to defend any claim, legal action or other matter and shall be reimbursed and paid by the Indemnifying Party for all reasonable expenses incurred in such defense. Before such election is made or in the absence of such election, the Indemnified Party may settle any Claim, legal action or other matter for which notice has been provided as required by Section 14.4(a), but only with the consent of the Indemnifying Party, which consent may not be unreasonably withheld. If such a Claim requires immediate action, both the Indemnified Party and the Indemnifying Party will cooperate in good faith to take appropriate action so as not to jeopardize defense of such Claim or either Party’s position with respect to such Claim.

(c) Dispute. If the existence of a valid Claim or amount to be paid by an Indemnifying Party is in dispute, the Parties agree to submit determination of the existence of a valid Claim or the amount to be paid pursuant to the Claim Notice to the Bankruptcy Court pursuant to the provisions of Section 15.10, except as otherwise provided in this Section 14.4. Any payment due pursuant to the Bankruptcy Court decision shall be made within fifteen (15) days of the Bankruptcy Court decision.

14.5 No Insurance; Subrogation. The indemnifications provided in this Article 14 shall not be construed as a form of insurance. Buyer and Seller hereby waive for themselves, their successors or assigns, including any insurers, any rights to subrogation for Losses for which each of them is respectively liable or against which each respectively indemnifies the other, and, if required by applicable policies, Buyer and Seller shall obtain waiver of such subrogation from its respective insurers.

14.6 Reductions in Losses. Each Indemnified Party shall use commercially reasonable efforts to mitigate any Losses, including by maintaining insurance coverage with respect to the Shallow Assets and making claims relating to the Shallow Assets thereunder. The amount of any Losses for which an Indemnified Person is entitled to indemnity under this Article 14 shall be reduced by (a) the amount of insurance proceeds realized by the Indemnified Person or its Affiliates with respect to such Losses, and (b) any Tax reductions or other benefits actually or likely to be received by the Indemnified Party in connection with the Losses, after giving effect to any related Tax detriment (determined by reference to the net present value of such Tax reduction or other benefit, calculated using the interest rate in effect at the time of the incurrence of the Tax leading to such Losses).

14.7 Reservation as to Non-Parties. Nothing herein is intended to limit or otherwise waive any recourse Buyer or Seller may have against any non-party for any obligations or liabilities that may be incurred with respect to the Shallow Assets.

 

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14.8 Release. EXCEPT WITH RESPECT TO POST-CLOSING REMEDIATION AGREED TO BY SELLER AND BUYER OR PROVIDED FOR BY DECISION OF THE ENVIRONMENTAL EXPERT PURSUANT TO SECTION 5.7 (IF ANY), AT THE CLOSING BUYER HEREBY RELEASES, REMISES AND FOREVER DISCHARGES THE SELLER ITS AFFILIATES, THEIR RESPECTIVE SUCCESSORS AND ASSIGNS AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, CONSULTANTS AND REPRESENTATIVES FROM ANY AND ALL CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR OTHERWISE, WHICH BUYER MIGHT NOW OR SUBSEQUENTLY MAY HAVE AGAINST THE SELLER, ITS AFFILIATES, THEIR RESPECTIVE SUCCESSORS AND ASSIGNS AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, CONSULTANTS AND REPRESENTATIVES, RELATING DIRECTLY OR INDIRECTLY TO THE CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING RIGHTS TO CONTRIBUTION UNDER CERCLA.

14.9 Disclaimers.

(a) EXCEPT FOR SELLER’S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, AND SELLER’S SPECIAL WARRANTY OF TITLE IN THE PARTIAL ASSIGNMENT EXECUTED AND DELIVERED TO BUYER AT CLOSING, THE SHALLOW ASSETS ARE BEING CONVEYED BY SELLER TO BUYER WITHOUT WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY, COMMON LAW OR OTHERWISE, AND THE PARTIES HEREBY EXPRESSLY DISCLAIM, WAIVE AND RELEASE ANY EXPRESS WARRANTY OF MERCHANTABILITY, CONDITION OR SAFETY AND ANY EXPRESSED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; AND BUYER ACCEPTS THE SHALLOW ASSETS, “AS IS, WHERE IS, WITH ALL FAULTS, WITHOUT RECOURSE.” ALL DESCRIPTIONS OF THE SHALLOW WELLS, EQUIPMENT, FACILITIES, PERSONAL PROPERTY, FIXTURES AND STRUCTURES HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY SELLER HAVE BEEN AND SHALL BE FURNISHED SOLELY FOR BUYER’S CONVENIENCE, AND HAVE NOT CONSTITUTED AND SHALL NOT CONSTITUTE A REPRESENTATION OR WARRANTY OF ANY KIND BY SELLER. SELLER SHALL HAVE NO LIABILITY TO BUYER FOR ANY CLAIMS, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY, INCIDENTALLY OR CONSEQUENTIALLY, BY SUCH SHALLOW WELLS, EQUIPMENT, FACILITIES, PERSONAL PROPERTY, FIXTURES AND STRUCTURES BY ANY INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR OTHERWISE, OR IN ANY WAY ARISING OUT OF BUYER’S PURCHASE THEREOF. BUYER EXPRESSLY WAIVES THE WARRANTY OF FITNESS AND THE WARRANTY AGAINST VICES AND DEFECTS, WHETHER APPARENT OR LATENT, IMPOSED BY ANY APPLICABLE STATE OR FEDERAL LAW. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW, THE DISCLAIMERS CONTAINED IN THIS AGREEMENT ARE “CONSPICUOUS” FOR THE PURPOSES OF SUCH APPLICABLE LAW.

(b) SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE ACCURACY OF ANY OF THE INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES OR THE VALUE OF THE SHALLOW ASSETS BASED THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY OF THE SHALLOW ASSETS; THIS DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE PRICES BUYER AND SELLER ARE OR WILL BE ENTITLED TO RECEIVE FROM PRODUCTION OF HYDROCARBONS OR OTHER SUBSTANCES FROM THE SHALLOW ASSETS, IT BEING ACKNOWLEDGED, AGREED AND EXPRESSLY UNDERSTOOD THAT ALL RESERVE, PRICE AND VALUE ESTIMATES UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY THE INDIVIDUAL EVALUATION OF BUYER. BUYER ALSO STIPULATES, ACKNOWLEDGES AND AGREES THAT RESERVE REPORTS ARE ONLY ESTIMATES OF PROJECTED FUTURE HYDROCARBON VOLUMES, FUTURE FINDING COSTS AND FUTURE HYDROCARBON SALES PRICES, ALL OF WHICH FACTORS ARE INHERENTLY IMPOSSIBLE TO PREDICT ACCURATELY EVEN WITH ALL AVAILABLE DATA AND INFORMATION.

ARTICLE 15 MISCELLANEOUS

 

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ARTICLE 15

MISCELLANEOUS

15.1 Schedules. The Schedules and Exhibits to in this Agreement are hereby incorporated in this Agreement by reference and constitute a part of this Agreement.

15.2 Expenses. Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the Transaction shall be paid by the Party incurring the same, including engineering, land, title, legal and accounting fees, costs and expenses.

15.3 Notices. All notices and communications required or permitted under this Agreement shall be in writing and addressed as set forth below. Any communication or delivery hereunder shall be deemed to have been duly made and the receiving Party charged with notice, whether personally delivered, sent by facsimile transmission, mail or overnight courier, when received. All notices shall be addressed as follows:

If to Seller:

Karen Nash Nicolau

Atropis, Inc.

8100 Washington Avenue, Suite 1000

Houston, Texas 77077

Telephone: (713)552-9834

Email: knicolau@atropis-inc.com

and to

c/o PDC Mountaineer, LLC

120 Genesis Boulevard

Bridgeport, West Virginia 26330

Attn: Deward W. Gerdom, Jr. CEO

Telephone: (304) 842-3597

Facsimile: (304) 808-0913

Email: dewey.gerdom@pdce.com

 

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If to Buyer:

Alliance Petroleum Corporation

4150 Belden Village Avenue N.W., Suite 410

Canton, Ohio 44718-2553

Attn: Thomas S. Wright

Telephone: (330) 493-0440

Facsimile: (330) 493-3409

Email: lfrtsw@msn.com

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

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

15.5 Assignment. Neither Seller nor Buyer shall assign all or any portion of its respective rights or delegate all or any portion of its respective duties under this Agreement without the written consent of the other Party, which consent shall not be unreasonably withheld.

15.6 Headings. The headings of the Articles and Sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement.

15.7 Counterparts/Electronic and Fax Signatures. This Agreement may be executed and delivered in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument. The exchange of copies of this Agreement and of signature pages by facsimile or by electronic image scan transmission in .pdf format shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes. Signatures of the Parties transmitted by facsimile or electronic image scan transmission in .pdf format shall be deemed to be their original signatures for all purposes. Any Party that delivers an executed counterpart signature page by facsimile or by electronic scan transmission in .pdf format shall promptly thereafter deliver a manually executed counterpart signature page to each of the other Parties; provided, however, that the failure to do so shall not affect the validity, enforceability, or binding effect of this Agreement.

15.8 References. References made in this Agreement, including use of a pronoun, shall be deemed to include where applicable, masculine, feminine, singular or plural, individuals or entities. All references to “dollars” or “$” shall mean United States dollars. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” All references to “law” or “laws” shall mean any constitution, decree, resolution, law, statute, act, ordinance, rule, directive, order, treaty, code or regulation and any injunction or final non-appealable judgment or any interpretation of the foregoing, as enacted, issued or promulgated by any governmental authority.

 

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15.9 Governing Law. THIS AGREEMENT AND THE TRANSACTION AND ANY ARBITRATION OR DISPUTE RESOLUTION CONDUCTED PURSUANT HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF WEST VIRGINIA WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES. THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH PROPERTY IS LOCATED. SUBJECT TO SECTION 15.10, JURISDICTION AND VENUE WITH RESPECT TO ANY DISPUTES ARISING HEREUNDER SHALL BE PROPER ONLY WITH THE BANKRUPTCY COURT, AND THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY BROUGHT IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE.

15.10 Disputes. In the event of a disagreement, dispute, controversy or claim between the Parties arising out of or relating to this Agreement or the transactions contemplated hereby that cannot be resolved between the Parties (a “Dispute”), such Dispute shall be brought in front of, and shall be decided by, the Bankruptcy Court. EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE SUBMISSION OF ANY DISPUTE TO THE BANKRUPTCY COURT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 15.10, AND HEREBY WAIVES THE RIGHT TO PROCEED TO ANY OTHER COURT OR ANY OTHER FORUM THAT MAY APPLY TO IT BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR FOR ANY OTHER REASON.

15.11 Waiver of Certain Damages. NO PARTY SHALL BE LIABLE FOR ANY PUNITIVE, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, LOST PROFITS OR DIMINUTION IN VALUE, ARISING IN CONNECTION WITH OR WITH RESPECT TO THIS AGREEMENT, ANY DOCUMENT OR INSTRUMENT DELIVERED TO IMPLEMENT THIS AGREEMENT OR CONSUMMATE THE TRANSACTION CONTEMPLATED HEREIN.

15.12 Entire Agreement. This Agreement constitutes the entire understanding among the Parties, their respective partners, members, trustees, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. The Parties stipulate and agree that this Agreement shall be deemed and considered for all purposes, as prepared through the joint efforts of the Parties, and shall not be construed against one Party or the other as a result of the preparation, submittal or other event of negotiation, drafting or execution thereof.

15.13 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transaction is not affected in any adverse manner to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transaction is fulfilled to the extent possible.

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

15.15 No Third-Party Beneficiaries. This Agreement is intended only to benefit the Parties hereto and their respective permitted successors and assigns.

[The balance of this page intentionally left blank]

 

-39-

---

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first above written.

 

 

[SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT]

---

EXHIBIT A

Partnership Leases

Wellbore Interest Only

 

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00003.000

H. B. McGee and Marjorie McGee, C. C. McGee and Eleanor McGee

Victory Energy Corporation

8/9/1997

1868

210

Clearfield

PA

428

137.098088 137.098091 137.098092 137.098094 137.098107 137.098109 137.098110 137.098111 137.098112 137.098113 137.098114 137.098115 137.098116

PAL00468.001

Marion Butler and Jay Butler, her husband

Victory Land Company

2/7/1987

1138

370

Clearfield

PA

511

137.097021

PAL00468.002

Florence O’Connell and Russell O’Connell, her husband

Victory Land Company

3/9/1987

1144

345

Clearfield

PA

511

137.097021

PAL00468.003

Dorothea J. Stauffer

Victory Land Company

4/1/1985

1137

478

Clearfield

PA

511

137.097021

PAL00468.004

Clarence Carl Stauffer and Louise Stauffer, his wife

Victory Land Company

4/30/1985

1137

483

Clearfield

PA

511

137.097021

PAL00502.000

Glenn E. Thomson, single and Glenn E. Thomson, as Agent for Mildred Thomson Older, widow, Gail T. Brunt and Thomas Brunt, Jr., her husband, Glenn T. McGee and Arlene McGee, his wife, William T. McGee, single, heirs and devisees of Helen T. McGee, deceased

Victory Energy Corporation

10/1/1991

1447

55-57

Clearfield

PA

433

137.097013 137.097014 137.097015 137.097016 137.097017 137.097018

PAL00504.000

John F. Mitchell, III

Phillips Production Company

2/2/1995

1667

141

Clearfield

PA

105

137.097098 137.097099

PAL00521.000

J. Wesley Oler, Jr., Mary Glenn Fowler and Mildred Thomson Oler, as Co-Executors of The Glenn E. Thomson Estate

Victory Energy Corporation

1/29/1996

1441

71

Clearfield

PA

483

137.097169 137.099069

PAL00522.000

The William T. Mahaffey Heirs, County National Bank as Trustee FBO Rebecca M. Latimer, Deborah M. Westover, and Kathryn M. Kramer; Harriet L. Mahaffey, widow

Victory Energy Corporation

2/7/1997

1843

48

Clearfield

PA

36

137.098016

PAL00523.000

Wayne P. Daisher, and Carol J. Kline

Victory Energy Corporation

1/14/1997

1817

522

Clearfield

PA

74

137.097080 137.097081

PAL00524.000

Glenn E. Thomson Estate, Mildred Thomson Oler, widow, Gail T. Brunt and Thomas Brunt, Jr., her husband, Glenn T. McGee and Arlene McGee, his wife, William T. McGee, single, Eric G. McGee, and Marie McGee, his wife, Heirs and Devisees of Helen T. McGee, deceased

Victory Energy Corporation

2/21/1994

1612

32

Clearfield

PA

713

137.097001 137.097002 137.097003 137.097028 137.097029 137.097065 137.097066

PAL00527.000

Richard E. Williams

Victory Energy Development Co.

8/11/1989

1309

371

Clearfield

PA

90

137.098093

PAL00528.001

F. lora Reade

Victory Energy Corporation

4/19/1990

1368

323

Clearfield

PA

375

137.098122 137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

 

Page 1 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00528.002

Dunlap Realty, A Partnership

Victory Energy Corporation

8/15/1990

1368

317

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00528.003

Arnold B. Shaw and Helen K. Shaw

Victory Energy Corporation

6/21/1990

1368

329

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00528.004

Sandra Shaw Decasper and Samuel Decasper

Victory Energy Corporation

5/22/1990

1368

335

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00532.000

George L. Prisk, Donald G. Prisk and Kenneth B. Prisk, t/d/b/a Prisk Dairy Farms

Victory Energy Corporation

10/26/1996

1807

321

Clearfield

PA

140

137.097007 137.097008 137.097086 137.097095

PAL00539.000

Donald B. Tubbs and Blake L. Tubbs

Victory Energy Corporation

1/10/1998

1901

340

Clearfield

PA

91

137.098220 137.098221

PAL00540.001

Evelyn J. DeHaven, widow

Victory Energy Corporation

12/18/1996

1821

240

Clearfield

PA

65

137.097069 137.097070 137.097071

PAL00540.002

Shirley and Ellis Passmore, Sr.

Victory Energy Corporation

12/18/1996

1820

160

Clearfield

PA

65

137.097069 137.097070 137.097071

PAL00544.000

Michael K. Straw and Debra J. Straw

Victory Energy Corporation

1/11/1997

1818

532

Clearfield

PA

25

137.097097

PAL00545.001

Chester J. and D. Lorraine Skonier

Victory Energy Corporation

4/1/1993

1527

139

Clearfield

PA

100

137.097073 137.097074

PAL00545.002

Alfred E. and Catherine Skonier

Victory Energy Corporation

1/18/1993

1527

143

Clearfield

PA

100

137.097073 137.097074

PAL00545.003

Evelyn F. Jennings

Victory Energy Corporation

1/28/1993

1527

147

Clearfield

PA

100

137.097073 137.097074

PAL00546.000

A & G Real Estate

Victory Energy Corporation

5/17/1996

1792

270

Clearfield

PA

122

137.098164 137.098165 137.098166 137.098167

 

Page 2 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00547.000

Robert and Eleanor Ludwig

Victory Energy Corporation

5/15/1997

1844

471

Clearfield

PA

194

137.098103 137.098105

PAL00548.000

Chetwin M. Hurd and Vera S. Hurd, his wife

Victory Energy Corporation

9/29/1997

1881

278

Clearfield

PA

830

137.098085 137.098086 137.098089 137.099145

PAL00549.000

S&D Energy

Victory Energy Corporation

7/15/1997

1859

35

Clearfield

PA

219

137.098181 137.098182 137.098183 137.098185 137.098186

PAL00559.000

Gordon B. Wood and Hazel Wood

Phillips Production Company

6/30/1994

1620

540

Clearfield

PA

48

137.098219

PAL00600.000

Peter W Summers and Shirley Ann Summers

Petroleum Development Corporation

12/13/1997

1896

564

Clearfield

PA

50.9

137.098157

PAL00601.000

Wayne A Freyer, Wayne E Freyer and William C Freyer t/d/b/a Wayne A Freyer and Sons

Petroleum Development Corporation

1/13/1998

1909

205

Clearfield

PA

108

137.099009 137.099010 137.099011 137.099012

PAL00609.000

F Douglas Beard and Tonda S Beard

Petroleum Development Corporation

12/15/1998

0

0

Clearfield

PA

23

137.099059

PAL00611.000

John McKeage Zold

Petroleum Development Corporation

10/31/1998

1987

96

Clearfield

PA

123

137.099007 137.099006 137.099008

PAL00614.000

C Alan Walker, Susan Walker Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shannon Land and Mining Company

Petroleum Development Corporation

11/7/1997

1888

478

Clearfield

PA

98

137.098097 137.099005

PAL00617.000

Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shan

Petroleum Development Corporation

11/7/1997

1888

501

Clearfield

PA

268

137.099066 137.099067

PAL00618.000

Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shan

Petroleum Development Corporation

11/7/1997

1888

495

Clearfield

PA

52

137.098095 137.098096

PAL00619.000

Fred J McCracken and Derek R McCracken and Kathryn A Tubbs

Petroleum Development Corporation

1/22/1998

1909

207

Clearfield

PA

50

137.099035 137.099036

PAL00632.000

Michael Kulikowski and John J Kulikowski

Eagle Resources Corporation

4/10/1997

3111

483

Washington

PA

57

137.098163

PAL00633.000

Harry J Lallier

Eagle Resources Corporation

6/26/1997

3153

144

Washington

PA

120

137.098162

PAL00634.000

David Johnson

Eagle Resources Corporation

5/28/1997

3128

143

Washington

PA

82

137.098161

PAL00635.000

Nicholas Rapsack

Eagle Resources Corporation

6/10/1997

3141

294

Washington

PA

94

137.098160

PAL00639.000

Randall A Rearick and Twila E Rearick

US Energy Expl Corp

2/26/1997

1721

269

Armstrong

PA

20

137.099108

PAL00640.000

William M Wilson and Mary Alice Cooper

U S Energy Expl Corp

11/16/1996

1664

0308

Armstrong

PA

120

137.099109 137.099111

PAL00641.000

Lawrence E Barr Jr and Laura Lee Bart

U S Energy Expl Corp

10/30/1996

1673

61

Armstrong

PA

62

137.099110

PAL00642.000

Audley Couch, Virginia L Couch, Mark A Couch and Jesse L Couch

U S Energy Expl Corp

4/15/1997

1698

101

Armstrong

PA

60

137.099112

PAL00643.000

Velma E Steidle

U S Energy Expl Corp

11/27/1998

1927

42

Armstrong

PA

17.8

137.099113

PAL00646.000

Kiski Township Sportsmen’s Assoc

U S Energy Expl Corp

4/27/1998

1863

61

Armstrong

PA

170

137.099116

PAL00649.001

Mary E Wateska, Raymond B Wateska

U S Energy Expl Corp

12/1/1998

2016

227

Armstrong

PA

157

137.000087 137.000091

 

Page 3 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00649.002

Debra Ann Walker-Crownover, Norman Eugene Crownover

U S Energy Expl Corp

12/1/1998

2016

224

Armstrong

PA

157

137.000087 137.000091

PAL00649.003

Robert J Walker and Grace M Shearer Walker

U S Energy Expl Corp

6/28/1999

2016

238

Armstrong

PA

157

137.000087 137.000091

PAL00649.004

Edward Walker, David R Walker, Debra Walker Crownover, Roberta A Gearhart

U S Energy Expl Corp

12/1/1998

1894

337

Armstrong

PA

157

137.000087 137.000091

PAL00650.000

Daniel K Shearer, Mary Lou Shearer or Grace Shearer Walker

U S Energy Expl Corp

2/18/1999

2016

233

Armstrong

PA

49.3

137.000025

PAL00652.000

Alfred and Phyllis Goldinger

U S Energy Expl Corp

3/29/1999

2019

256

Armstrong

PA

130

137.000080 137.000089 137.000101

PAL00653.000

C Alan Walker, Susan Walker Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shannon Land and Mining Company

Castle Gas Company Inc

8/8/1996

1792

540

Clearfield

PA

159

137.098153 137.098154 137.099062

PAL00654.000

Jean Bacharach Gallaher and Charles Gordon Herrington Trust

Castle Gas Company Inc

1/25/1996

1786

551

Clearfield

PA

57

137.098158

PAL00660.000

Robert A. Witherite

Victory Energy Corporation

2/20/1997

1822

241

Clearfield

PA

4.98

137.097094

PAL00661.000

Paul D. and Lorraine M. Witherite, brother and sister

Victory Energy Coorporation

11/8/1996

1807

313

Clearfield

PA

80

137.097094 137.097010 137.097011

PAL00662.000

Lorraine M. Witherite

Victory Energy Coorporation

2/27/1997

1822

245

Clearfield

PA

1.99

137.097094 137.097010 137.097011

PAL00663.000

George L. Prisk, Donald G. Prisk and Kenneth B. Prisk, t/d/b/a Prisk Diary Farms

Victory Energy Corporation

10/26/1996

1807

317

Clearfield

PA

30

137.097009

PAL00668.000

George and Patricia Dickey; Jerry Barrett; Donald and Hannah Barrett; Cloyd and Sandra Barrett

Victory Energy Corporation

3/11/1997

1834

604

Clearfield

PA

59

137.099039

PAL00673.000

Thomas E. Reighard and Tammy A. Reighard

Victory Energy Corporation

6/16/1998

470

Clearfield

PA

24

137.099034

PAL00674.000

National Bank as Trustee FBO Rebecca M. Latimer, Deborah M. Westover and Kathryn

Victory Energy Corporation

4/14/1997

1843

58

Clearfield

PA

107

137.099034

PAL00675.000

James F. and Muriel Reighard, h/w

Victory Energy Corporation

6/16/1998

228

Clearfield

PA

24

137.099034

PAL00676.000

Robert L. and Deborah Reighard

Victory Energy Corporation

6/16/1998

226

Clearfield

PA

24

137.099034

PAL00677.000

Timothy D. Iraca and Diane M. Iraca, His wife; and Beverly A. Smith and Llewellyn Smith, her husband

Victory Energy Corporation

11/4/1998

1983

103

Clearfield

PA

43

137.099024

PAL00678.001

Thomas P. Hartzfeld, James R. Hartzfeld, Judith A. Mogor c/o Hartzfeld Land Partners

Victory Energy Corporation

8/4/1998

1978

434

Clearfield

PA

78

137.099022

PAL00678.002

Jessie Hartzfeld, Individually, Jessie Hartzfeld as Guardian for Gordon Bruce Hartzfeld

Victory Energy Corporation

6/18/1998

1978

438

Clearfield

PA

78

137.099022

PAL00678.003

Dr. William Beckwith

Victory Energy Corporation

9/14/1998

1978

442

Clearfield

PA

78

137.099022

PAL00678.004

Carol Beckwith Clifton

Victory Energy Corporation

6/17/1998

1978

446

Clearfield

PA

78

137.099022

PAL00678.005

Patricia Jean Hogan

Victory Energy Corporation

6/17/1998

1978

458

Clearfield

PA

78

137.099022

PAL00678.006

Martha Downey

Victory Energy Corporation

6/15/1998

1978

454

Clearfield

PA

78

137.099022

PAL00678.007

Fred R. Day

Victory Energy Corporation

6/12/1998

1978

450

Clearfield

PA

78

137.099022

PAL00678.008

Phyllis Day

Victory Energy Corporation

10/30/1998

1983

91

Clearfield

PA

78

137.099022

PAL00678.009

Anne Y. Weigle and Donald K. Weigle

Victory Energy Corporation

6/12/1998

1978

462

Clearfield

PA

78

137.099022

 

Page 4 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00679.000

Spencer, Ray L. Spencer, and Robert G. Spencer trading and doing business as Spencer

Victory Energy Corporation

1/15/1997

1823

494

Clearfield

PA

127

137.099025 137.099026

PAL00680.000

John Mandel, Audrey Ann Mandel, and John P. Mande

Victory Energy Corporation

11/4/1998

1983

95

Clearfield

PA

71

137.099025 137.099026 137.099146

PAL00681.000

The Estate of Thomas Holt Murray, c/o Helen Dufton Clark, Administratrix

Victory Energy Corporation

2/5/1999

0

0

Clearfield

PA

30

137.099093

PAL00682.000

Susquehanna Recreation Corporation

Victory Energy Corporation

8/15/1997

1866

416

Clearfield

PA

227

137.099027 137.099103

PAL00685.000

Forney D. Winner and Mary E. Winner, his wife

Victory Energy Corporation

1/15/1999

0

0

Clearfield

PA

296

137.099149

PAL00686.000

John A. Weaver and James M. Weaver

Victory Energy Corporation

11/7/1998

1986

68

Clearfield

PA

182

137.099017

PAL00687.000

Dorothy L. Stineman, widow, Gilbert E. Caroff and Julie Anne Caroff, husband and wife, Howard C. Matthews and Karen S. Matthews, husband and wife

Victory Energy Corporation

10/29/1998

1144

265

Indiana

PA

443

137.099133 137.099134

PAL00689.000

Frank K. and Mary Clark Snyder

Victory Energy Corporation

10/18/1999

0

0

Clearfield

PA

72

137.000093

PAL00690.000

Jerry Guiher, and Rick Guiher

Victory Energy Corporation

9/19/1998

1971

391

Clearfield

PA

56

137.000023

PAL00695.000

The Thomson Residuary Beneficiaries, being Mary Glenn Flower, J. Wesley Oler Jr., William T. McGee, Glenn T. McGee, Gail T. Brunt, The Pennsylvania State University Varsity Tennis Endowment, the Pennsylvania State University Department of Electrical Engineering of the College of Engineering, The Pennsylvania State University Department of Locomotion Studies of the College of Health and Human Development, Juniata College, Dickinson School of Law, Clearfield Community YMCA, Newburg Baptist Church of LaJose, First Baptist Church of Clearfield, First Baptist Church of Pittsburgh

Victory Energy Corporation

9/4/1999

0

0

Clearfield

PA

421

137.000022

PAL00696.000

Greenwich Collieries, A Division of Pennsylvania Mines Corporatior

Victory Energy Corporation

1/13/1997

1458

1075

Indiana

PA

634

137.099079 137.099080 137.099083 137.000046 137.000055

PAL00700.000

Patricia A. Ireland and Dean Ireland

Angerman Associates, Inc.

1/12/1994

1588

061

Clearfield

PA

104

137.098108

PAL00701.000

Gilbert S. Couch, Trustee and Helen M.

US Energy Exlp. Corp.

2/2/2000

2076

0272

Armstrong

PA

143

137.000088

PAL00702.000

Ronald E. Pikulski, executor of the

U.S. Energy Expl. Corp.

12/16/1996

1664

0317

Armstrong

PA

282

137.000026 137.000027

PAL00703.000

Clarence M. Coleman and Kenneth A.

U.S. Energy Expl. Corp

1/22/1999

1169

256

Indiana

PA

130

137.000028 137.000029

PAL00704.000

Clearfield Bank and Trust Co. and Julia

Castle Gas Company, Inc.

8/14/1997

1867

047

Clearfield

PA

61.11

137.098156

PAL00711.000

Alice Margaret Tate, Lois J. Lipson, Martin C. and Carolyn B. Tate, Paul A. Tate

Victory Energy Corporation

11/16/1996

1809

92

Clearfield

PA

111

137.097004 137.097005 137.097006

WVL00024.001

Steve Thornburg and Clarcie Thornburg, husband and wife

Petroleum Development Corporation

1/5/1998

133

140

Barbour

WV

108

147.099049

WVL00024.002

Rebecca McNeil and J. Michael McNeil, husband and wife

Petroleum Development Corporation

1/10/1998

133

144

Barbour

WV

108

147.099049

WVL00024.003

Mary E. Moats, a widow woman

Petroleum Development Corporation

2/25/1998

133

253

Barbour

WV

108

147.099049

WVL00028.000

Jack W. Miller and Doris C. Miller, husband and wife

Petroleum Development Corporation

12/19/1997

133

88

Barbour

WV

131

147.098200 147.098203 147.098205

 

Page 5 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

WVL00176.000

Elladean Railing, a widow woman

Petroleum Development Corporation

6/30/1992

46, 58, 58, 58

681, 45, 47, 49

Taylor

WV

229.25

147.097064

WVL00206.000

Peggy Chesser Hadley, as attorney in fact for Lucille Crim Chesser

Beckler Energy Incorporated

7/11/1991

121

566

Barbour

WV

124

147.099073

WVL00207.000

Shirley Rinker, a widow woman

Petroleum Development Corporation

2/3/1997

131

469

Barbour

WV

15

147.099073

WVL00208.000

Ira D. Hovatter, a widow woman

Petroleum Development Corporation

9/14/1995

129

272

Barbour

WV

111.75

147.099003

WVL00210.000

Martha E. Poling, a widow woman

Petroleum Development Corporation

9/14/1995

129

276

Barbour

WV

82.46

147.099000

WVL00244.000

Glenn C. Larew and Jarrell S. Larew, husband and wife

Petroleum Development Corporation

4/14/1992

46

559

Taylor

WV

192

147.097043 147.099014 147.099052 147.099097

WVL00304.000

L. S. McGee, a widower man

Clarence W. Mutschelknaus

8/22/1978

105

141

Doddridge

WV

78

147.097037

WVL00305.001

Mary F. Hornor, a widow woman

Clarence W. Mutschelknaus

3/10/1981

119

600

Doddridge

WV

106

147.097038

WVL00305.002

Kenneth Guinn, single

Clarence W. Mutschelknaus

3/9/1981

119

529

Doddridge

WV

106

147.097038

WVL00305.003

Mildred Rittenhouse and Stanley Rittenhouse, husband and wife

Clarence W. Mutschelknaus

3/10/1981

119

527

Doddridge

WV

106

147.097038

WVL00305.004

Audra Varner, a widow woman

Clarence W. Mutschelknaus

3/16/1981

119

525

Doddridge

WV

106

147.097038

WVL00305.005

Clarence W. Mutschelknaus and Mary F. Mutschelknaus, husband and wife

Clarence W. Mutschelknaus

3/9/1981

119

421

Doddridge

WV

106

147.097038

WVL00305.006

Bernadette Poole and Robert Poole, husband and wife

Clarence W. Mutschelknaus

6/27/1980

117, 119

56, 418

Doddridge

WV

106

147.097038

WVL00496.001

Gerald M. Fogg, Special Receiver Appointed by Order of the Circuit Court of Barbour County, West Virginia, Entered on December 9,1996, in Civil Action No. 96-C-42

Petroleum Development Corporation

12/11/1996

131

396

Barbour

WV

170

147.097030 147.097031

WVL00496.002

Peggy C. Hadley

Petroleum Development Corporation

3/29/1996

130

515

Barbour

WV

170

147.097030 147.097031

WVL00496.003

John A. Mosesso and Mary K. Mosesso, husband and wife

Petroleum Development Corporation

2/26/1996

130

422

Barbour

WV

57

147.097030 147.097031

WVL00496.004

Donnie R. Daugherty and Naomi Daugherty

Petroleum Development Corporation

11/14/1996

131

337

Barbour

WV

20

147.097030 147.097031

WVL00496.005

Elsie Daugherty, a widow woman

Petroleum Development Corporation

11/19/1996

131

333

Barbour

WV

9

147.097030 147.097031

WVL00496.006

Rev. David E. Brown and Virginia M. Brown

Petroleum Development Corporation

11/19/1996

131

344

Barbour

WV

30

147.097030 147.097031

WVL00496.007

Millicent Canter, a widow woman

Petroleum Development Corporation

2/12/1996

130

406

Barbour

WV

170

147.097030 147.097031

WVL00496.008

Anne H. Collins, single

Petroleum Development Corporation

2/13/1996

130

414

Barbour

WV

170

147.097030 147.097031

WVL00496.009

Richard C. Hopkins, a widower man

Petroleum Development Corporation

2/8/1996

130

402

Barbour

WV

170

147.097030 147.097031

WVL00496.010

Nancy B. Collins, single

Petroleum Development Corporation

2/21/1996

130

410

Barbour

WV

170

147.097030 147.097031

WVL00496.011

R. Holt Poling and Mary Alice Poling, husband and wife

Petroleum Development Corporation

2/23/1996

130

418

Barbour

WV

170

147.097030 147.097031

WVL00496.012

Jack W. Canter

Petroleum Development Corporation

3/25/1996

130

523

Barbour

WV

170

147.097030 147.097031

 

Page 6 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

WVL00496.013

Rachel Bocock

Petroleum Development Corporation

3/4/1996

130

446

Barbour

WV

170

147.097030 147.097031

WVL00496.014

Betty Krifka

Petroleum Development Corporation

3/25/1996

130

531

Barbour

WV

170

147.097030 147.097031

WVL00496.015

Suzanne C. Sandell

Petroleum Development Corporation

3/27/1996

130

519

Barbour

WV

170

147.097030 147.097031

WVL00496.016

Lucinda H. Rogers, single

Petroleum Development Corporation

4/1/1996

130

527

Barbour

WV

170

147.097030 147.097031

WVL00501.000

Gerald M. Fogg, Special Receiver appointed by order of Circuit Court of Barbour County, entered on 10/21/91, in Burner, et al vs. Shockey, et al Civil Action No. 91 c-68

Petroleum Development Corporation

5/25/1995

129

166

Barbour

WV

172

147.097063 147.097092

WVL00506.001

William A. Shockey and Pauline B. Shockey, husband and wife

Petroleum Development Corporation

1/29/1996

130

78

Barbour

WV

83

147.097023 147.097055

WVL00506.002

Jerry L. Ware and Barbara J. Ware, husband and wife

W.R. McDaniel

1/29/1996

131

208

Barbour

WV

112

147.097023 147.097055

WVL00507.001

Henry W. Wheeler and Teresa Wheeler

Petroleum Development Corporation

2/23/1996

130

450

Barbour

WV

160

147.097056 147.097057

WVL00507.002

Virginia C. Baughman, widow;

Petroleum Development Corporation

1/29/1996

130

82

Barbour

WV

144

147.097056 147.097057

WVL00525.001

Mark V. Schumacher

Petroleum Development Corporation

1/8/1998

133

136

Barbour

WV

98.75

147.099053 147.099054

WVL00525.002

Empire National Bank of Clarksburg, a National Banking Associatior

Petroleum Development Corporation

1/25/1989

114

432

Barbour

WV

98.75

147.099053 147.099054

 

Page 7 of 7

---

Exhibit B

Shallow Wells

wellbore interest only

 

WELL NO		WELL NAME		API NO				PARTNER				Wl				NRI
137.000022		THOMPSON #110			37033243090000				PDC99D				99.70014				84.12196
137.000023		GUIHER #1			37033244380000				PDC99D				99.70014				84.12196
137.000025		SHEARER #2			37005262210000				PDC99D				99.70014				84.12196
137.000026		STANKAY#1			37005262340000				PDC99D				99.70014				84.12196
137.000027		STANKAY #2			37005262550000				PDC99D				99.70014				84.12196
137.000028		COLEMAN #1, C.			37063324180000				PDC99D				99.70014				84.12196
137.000029		COLEMAN #2, C.			37063324750000				PDC99D				99.70014				84.12196
137.000046		PA MINES #32			37021208610000				PDC99D				99.70014				84.12196
137.000055		PA MINES #33			37021208660000				PDC99D				99.70014				84.12196
137.000080		GOLDINGER #2			37005262420000				PDC99D				99.70014				84.12196
137.000087		WALKER #2			37005262250000				PDC99D				99.70014				84.12196
137.000088		COUCH #1, G.			37005262220000				PDC99D				99.70014				84.12196
137.000089		GOLDINGER #3			37005262430000				PDC99D				99.70014				84.12196
137.000091		WALKER #4			37005262240000				PDC99D				99.70014				84.12196
137.000093		SNYDER #32			37033245940000				PDC99D				99.70014				84.12196
137.000101		GOLDINGER #4			37005262450000				PDC99D				99.70014				84.12196
137.097001		THOMSON-STEPHENSON #85			37033237200000				PDC96D				94.24951				82.46857
137.097002		THOMSON-STEPHENSON #84			37033237190000				PDC96D				94.24951				82.46857
137.097003		THOMSON-STEPHENSON #81			37033237180000				PDC96D				94.24951				82.46857
137.097004		TATE #33			37033237110000				PDC96D				94.24951				82.46857
137.097005		TATE #34			37033237130000				PDC96D				94.24951				82.46857
137.097006		TATE #31			37033237300000				PDC96D				94.24951				82.46857
137.097007		PRISK #1			37033237360000				PDC96D				94.24951				82.46857
137.097008		PRISK #2			37033237370000				PDC96D				94.24951				82.46857
137.097009		PRISK #4			37033237410000				PDC96D				94.24951				82.46857
137.097010		WITHERITE #1			37033237340000				PDC96D				94.24951				82.46857
137.097011		WITHERITE #2			37033237350000				PDC96D				94.24951				82.46857
137.097013		TH0MS0N-GIBBS #34			37033237260000				PDC96D				94.24951				82.46857
137.097014		THOMSON-GIBBS #35			37033237270000				PDC96D				94.24951				82.46857
137.097015		THOMSON-GIBBS #36			37033237280000				PDC96D				94.24951				82.46857
137.097016		THOMSON-GIBBS #37			37033237420000				PDC96D				94.24951				82.46857
137.097017		THOMSON-GIBBS #38			37033237290000				PDC96D				94.24951				82.46857
137.097018		THOMSON-GIBBS #39			37033237440000				PDC96D				94.24951				82.46857
137.097021		KRICK #12			37033237460000				PDC96D				94.24951				82.46857
137.097022		MCCLURE #12			37065240650000				PDC96D				74.24984				62.00686
137.097028		THOMSON-STEPHENSON #82			37033237520000				PDC96D				94.24951				82.46857
137.097029		THOMSON-STEPHENSON #83			37033237470000				PDC96D				94.24951				82.46857
137.097058		SWOPE #154			37033236220000				PDC96D				74.24984				62.00686
137.097060		MCCAY #296			37033236200000				PDC96D				74.24984				62.00686
137.097065		THOMSON-STEPHENSON #80			37033237330000				PDC96D				94.24951				82.46857
137.097066		THOMSON-STEPHENSON #79			37033237310000				PDC96D				94.24951				82.46857
137.097069		DEHAVEN #1			37033237800000				PDC96D				94.24951				82.46857
137.097070		DEHAVEN #2			37033237860000				PDC96D				94.24951				82.46857
137.097071		DEHAVEN #3			37033237920000				PDC96D				94.24951				82.46857
137.097073		SKONIER #2			37033237530000				PDC96D				94.24951				82.46857
137.097074		SKONIER #3			37033237540000				PDC96D				94.24951				82.46857
137.097075		IRVIN #322			37033237020000				PDC96D				74.24984				62.00686
137.097079		HOPKINS #317			37033237400000				PDC96D				74.24984				62.00686

 

Page 1 of 4

---

WELL NO		WELL NAME		API NO				PARTNER				Wl				NRI
137.097080		DAISHER #1			37033237680000				PDC96D				94.24951				82.46857
137.097081		DAISHER #2			37033237720000				PDC96D				94.24951				82.46857
137.097083		MCHENRY #136			37033237630000				PDC96D				74.24984				62.00686
137.097086		PRISK #3			37033237790000				PDC96D				0.80000				0.70000
137.097087		DIEM #5			37033237480000				PDC96D				74.24984				62.00686
137.097091		SHEROSKY #3			37033237690000				PDC96D				74.24984				62.00686
137.097094		WITHERITE #3			37033237850000				PDC96D				94.24951				82.46857
137.097095		PRISK #5			37033237830000				PDC96D				94.24951				82.46857
137.097097		STRAW #1			37033237810000				PDC96D				94.24951				82.46857
137.097098		MITCHELL #5			37033237230000				PDC96D				94.24951				78.69891
137.097099		MITCHELL #6			37033237240000				PDC96D				94.24951				78.69891
137.097169		THOMSON-BLACKHILLS #55			37033238010000				PDC96D				94.24951				82.46857
137.097172		KAUFMAN #288			37033237490000				PDC96D				74.24984				61.99886
137.097174		CARDIN #311			37033237060000				PDC96D				74.24984				61.99886
137.097179		HAAG #327			37033237840000				PDC96D				74.24984				61.99886
137.098016		MAHAFFEY#13			37033238390000				PDC97D				94.59956				82.77486
137.098085		HURD #3			37033239020000				PDC97D				94.59956				82.77486
137.098086		HURD #4			37033238980000				PDC97D				94.59956				82.77486
137.098088		MCGEE #4			37033239060000				PDC97D				94.59956				82.77486
137.098089		HURD #1			37033239000000				PDC97D				94.59956				82.77486
137.098091		MCGEE #5			37033239310000				PDC97D				94.59956				82.77486
137.098092		MCGEE #7			37033239350000				PDC97D				94.59956				82.77486
137.098093		WILLIAMS #3			37033238630000				PDC97D				94.59956				82.77486
137.098094		MCGEE #1			37033239140000				PDC97D				94.59956				82.77486
137.098095		SHANNON #4			37033239770000				PDC97D				99.60029				90.15025
137.098096		SHANNON #5			37033239760000				PDC97D				99.60029				90.15025
137.098097		SHANNON #6			37033239780000				PDC97D				99.60029				90.15025
137.098103		LUDWIG #4			37033239290000				PDC97D				94.59956				82.77486
137.098105		LUDWIG #6			37033238690000				PDC97D				94.59956				82.77486
137.098107		MCGEE #6			37033239370000				PDC97D				94.59956				82.77486
137.098108		IRELAND #1, P.			37033240050000				PDC97D				69.59991				58.11629
137.098109		MCGEE #8			37033239360000				PDC97D				94.59956				82.77486
137.098110		MCGEE #9			37033239090000				PDC97D				94.59956				82.77486
137.098111		MCGEE #15			37033239580000				PDC97D				94.59956				82.77486
137.098112		MCGEE #10			37033239100000				PDC97D				94.59956				82.77486
137.098113		MCGEE #11			37033239110000				PDC97D				94.59956				82.77486
137.098114		MCGEE #12			37033239120000				PDC97D				94.59956				82.77486
137.098115		MCGEE #13			37033239300000				PDC97D				94.59956				82.77486
137.098116		MCGEE #14			37033239130000				PDC97D				94.59956				82.77486
137.098122		MYERS #1			37033239150000				PDC97D				94.59956				82.77486
137.098123		MYERS #2			37033239160000				PDC97D				94.59956				82.77486
137.098124		MYERS #3			37033239200000				PDC97D				94.59956				82.77486
137.098125		MYERS #4			37033239210000				PDC97D				94.59956				82.77486
137.098126		MYERS #5			37033239170000				PDC97D				94.59956				82.77486
137.098127		MYERS #6			37033239180000				PDC97D				94.59956				82.77486
137.098128		MYERS #7			37033239190000				PDC97D				94.59956				82.77486
137.098129		MYERS #8			37033239240000				PDC97D				94.59956				82.77486
137.098131		MYERS #10			37033239330000				PDC97D				94.59956				82.77486
137.098132		MYERS #11			37033239250000				PDC97D				94.59956				82.77486
137.098153		SHANNON #2			37033238950000				PDC97D				99.60029				84.03749
137.098154		SHANNON #3			37033238910000				PDC97D				99.60029				84.03749

 

Page 2 of 4

---

WELL NO		WELL NAME		API NO				PARTNER				Wl				NRI
137.098156		SPINGOLA #2			37033237220000				PDC97D				99.60029				84.03749
137.098157		SUMMERS #1			37033238900000				PDC97D				99.60029				84.03749
137.098158		HERRINGTON TRUST #1			37033238920000				PDC97D				99.60029				84.03749
137.098160		RAPSACK #1, NICHOLAS			37125218790000				PDC97D				0.74600				0.62944
137.098161		JOHNSON #1, DAVID			37125218330000				PDC97D				0.74600				0.62944
137.098162		LALUER #1, H.			37125218820000				PDC97D				0.74600				0.62944
137.098163		KULIKOWSKI #1			37125218810000				PDC97D				0.74600				0.62944
137.098164		A&G #21			37033239600000				PDC97D				94.59956				82.77486
137.098165		A&G #22			37033239920000				PDC97D				94.59956				82.77486
137.098166		A&G #23			37033239680000				PDC97D				94.59956				82.77486
137.098167		A&G #24			37033239690000				PDC97D				94.59956				82.77486
137.098181		S&D #1			37033239910000				PDC97D				94.59956				78.99148
137.098182		S&D #2			37033239710000				PDC97D				94.59956				78.99148
137.098183		S&D #3			37033239720000				PDC97D				94.59956				78.99148
137.098185		S&D #5			37033239740000				PDC97D				94.59956				78.99148
137.098186		S&D #6			37033239820000				PDC97D				94.59956				78.99148
137.098219		WOOD #21			37033240000000				PDC97D				94.59956				78.99148
137.098220		TUBBS #21			37033239900000				PDC97D				0.29600				0.25900
137.098221		TUBBS #22			37033239700000				PDC97D				94.59956				81.69986
137.099005		SHANNON #9R			37033241890000				PDC98D				99.59992				87.14981
137.099006		ZOLD #l			37033242420000				PDC98D				0.99600				0.74650
137.099007		ZOLD #2			37033242450000				PDC98D				0.99600				0.74650
137.099008		ZOLD #3			37033242460000				PDC98D				0.99600				0.74650
137.099009		FREYER #1			37033242070000				PDC98D				99.59992				87.14981
137.099010		FREYER #2			37033242080000				PDC98D				99.59992				87.14981
137.099011		FREYER #3			37033242090000				PDC98D				99.59992				87.14981
137.099012		FREYER #4			37033242570000				PDC98D				99.59992				87.14981
137.099015		MAHAFFEY #31			37033242250000				PDC98D				94.59959				82.77514
137.099016		MAHAFFEY #32			37033242200000				PDC98D				94.59959				82.77514
137.099017		WEAVER #1			37033242290000				PDC98D				94.59959				82.77514
137.099022		SPENCER UNIT #8			37033241870000				PDC98D				94.59959				82.77514
137.099024		IRACA #1			37033242010000				PDC98D				94.59959				82.77514
137.099025		MANDEL UNIT #2			37033242380000				PDC98D				94.59959				82.77514
137.099026		SPENCER UNIT #9			37033241810000				PDC98D				94.59959				82.77514
137.099027		SUSQUEHANNA REC. #3			37033241260000				PDC98D				94.59959				82.77514
137.099034		REIGHARD UNIT #1			37033242210000				PDC98D				94.59959				82.77514
137.099035		MCCRACKEN #1			37033242170000				PDC98D				99.59992				87.14981
137.099036		MCCRACKEN #2			37033242180000				PDC98D				99.59992				87.14981
137.099039		DICKEY #22			37033242230000				PDC98D				94.59959				82.77514
137.099059		BEARD #1			37033242700000				PDC98D				99.59992				87.14981
137.099062		SHANNON #1R			37033242060000				PDC98D				99.59992				84.03753
137.099066		SHANNON L&M #15			37033239960000				PDC98D				99.59992				87.14981
137.099067		SHANNON L&M #16			37033239970000				PDC98D				99.59992				87.14981
137.099069		THOMSON-BLACKHILLS #95			37033240480000				PDC98D				94.59959				82.77514
137.099079		PA MINE #36			37021208650000				PDC98D				94.59959				82.77514
137.099080		PA MINE #37			37063322770000				PDC98D				94.59959				82.77514
137.099083		PA MINE #40			37021208670000				PDC98D				94.59959				82.77514
137.099093		MURRAY #1			37033242630000				PDC98D				94.59959				82.77514
137.099103		SUSQUEHANNA REC. #4			37033242520000				PDC98D				94.59959				82.77514
137.099108		REARICK #1, R.			37005259200000				PDC98D				99.59992				84.03753
137.099109		WILSON #1			37005259430000				PDC98D				99.59992				84.03753

 

Page 3 of 4

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WELL NO		WELL NAME		API NO				PARTNER				Wl				NRI
137.099110		BARR #1			37005259490000				PDC98D				99.59992				84.03753
137.099111		WILSON #2			37005261080000				PDC98D				99.59992				84.03753
137.099112		COUCH #1, A.			37005261150000				PDC98D				99.59992				84.03753
137.099113		STEIDLE #1			37005259940000				PDC98D				99.59992				84.03753
137.099116		KISKI SPORTSMEN #2			37005261270000				PDC98D				99.59992				84.03753
137.099133		CAROFF #l			37063322570000				PDC98D				94.59959				82.77514
137.099134		CAROFF #2			37063322580000				PDC98D				94.59959				82.77514
137.099145		HURD #2			37033242670000				PDC98D				94.59959				82.77514
137.099146		MANDELUNIT #1			37033242600000				PDC98D				94.59959				82.77514
137.099149		WINNER #1			37033242620000				PDC98D				94.59959				82.77514
147.097023		SHOCKEY #2			47001027260000				PDC96D				99.24992				85.48647
147.097030		SANDRIDGE #1			47001027300000				PDC96D				99.24992				86.84381
147.097031		SANDRIDGE #2			47001027310000				PDC96D				99.24992				86.84381
147.097037		MCGEEL.S. 3			47017043410000				PDC96D				99.24992				84.13000
147.097038		POOLE #4			47017043390000				PDC96D				99.24992				84.13000
147.097043		COALTRAIN #13			47091010020000				PDC96D				99.24992				86.84381
147.097055		SHOCKEY #3			47001027250000				PDC96D				99.24992				85.48647
147.097056		BAUGHMAN #1			47001027270000				PDC96D				99.24992				86.84381
147.097057		BAUGHMAN #2			47001027280000				PDC96D				99.24992				86.84381
147.097063		BURNER-HEIRS #1			47001027210000				PDC96D				0.99250				0.83719
147.097064		RAILING #13			47091010000000				PDC96D				99.24992				86.84381
147.097092		BURNER-HEIRS #3			47001027220000				PDC96D				99.24992				86.84381
147.098200		MILLER #1, JACK			47001027400000				PDC97D				99.60029				87.15025
147.098203		MILLER #4, JACK			47001027430000				PDC97D				99.60029				87.15025
147.098205		MILLER #6, JACK			47001027450000				PDC97D				99.60029				87.15025
147.099000		POLING #1, M.			47001027520000				PDC98D				99.59992				87.14981
147.099003		HOVATER #1			47001027620000				PDC98D				99.59992				87.14981
147.099014		COALTRAIN #14			47091010030000				PDC98D				99.59992				87.14981
147.099049		MCNEIL #2			47001027580000				PDC98D				99.59992				87.14981
147.099052		COALTRAIN #15			47091010400000				PDC98D				99.59992				87.14981
147.099053		EMPIRE BANK #1			47001027470000				PDC98D				99.59992				87.14981
147.099054		EMPIRE BANK #2			47001027480000				PDC98D				99.59992				87.14981
147.099073		CHESSER-RINKERUNIT #1			47001027660000				PDC98D				99.59992				85.15807
147.099097		COALTRAIN #12			47091010410000				PDC98D				99.59992				87.14981

 

Page 4 of 4

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Exhibit C

Contracts

 

1.	Joint Operating Agreement dated September 10, 2013 by and between PDC Energy, Inc. (“PDCE”) and Eastern 1997-D Limited Partnership.

 

2.	Joint Operating Agreement dated September 10, 2013 by and between PDCE and CO and PA 1999-D Limited Partnership.

 

3.	Joint Operating Agreement dated September 10, 2013 by and between PDCE and Eastern 1996-D Limited Partnership.

 

4.	Joint Operating Agreement dated September 10, 2013 by and between PDCE and Eastern 1998-D Limited Partnership.

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Exhibit D

Form of

PARTIAL ASSIGNMENT, BILL OF SALE AND CONVEYANCE

This Partial Assignment, Bill of Sale and Conveyance (the “Assignment”), effective as of April 1, 2013, at 12:01 a.m. Eastern Time (“Effective Time”), is by and between Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, and CO and PA 1999D Limited Partnership, whose address is 120 Genesis Boulevard, Bridgeport, West Virginia 26330 (“Assignor”) and Alliance Petroleum Corporation, a Georgia corporation, whose address is 4150 Belden Village Avenue N.W., Suite 410, Canton, Ohio 44718 (“Assignee”). Assignor and Assignee are each a “Party” and collectively the “Parties.” [NTD: The Assignors will be revised for each individual assignment for each county.]

For Ten Dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor grants, bargains, sells, conveys, assigns, transfers, and delivers unto Assignee all of Assignor’s right, title, and interest whether present, contingent, or reversionary, in and to the following (collectively, the “Shallow Assets”):

(1) the wellbore interests (i.e., only such of the leaseholds as constitute the drillsite for the subject Shallow Wells, to and only to, the depth of each Shallow Well as of the Effective Time) in the oil and gas leases, subleases and other leaseholds described on Exhibit A, together with all amendments, supplements, renewals, extensions or ratifications thereof (collectively, the “Leases”), together with each and every kind and character of right, title, claim, and interest that Assignor has in and to the lands covered by the Leases or the lands currently pooled, unitized or consolidated therewith (the “Lands”);

(2) the oil, gas, casinghead gas, coalbed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof, sulphur extracted from hydrocarbons and all other lease substances, combustible or non-combustible, under the Leases (“Hydrocarbons”) that may be produced from the Assignor’s wellbore interests under the Leases;

(3) the oil, gas, water, disposal, monitoring or injection wells located on the Lands, whether producing, shut-in, or abandoned, including those described in Exhibit B (the “Shallow Wells”) only as to the depth penetrated in each Shallow Well as of the Effective Time and all rights appurtenant to or associated with the Shallow Wells, including, without limitation, all of Assignor’s right to use the surface adjacent to the Shallow Wells as is necessary to operate the Shallow Wells;

(4) the unitization and pooling agreements, declarations, orders, and the units created thereby relating to the Shallow Assets and to the production of Hydrocarbons, if any, attributable to the Shallow Assets;

(5) all equipment, machinery, fixtures and other tangible personal property and improvements, including but not limited to, tanks, boilers, compression facilities, pumping units, flow lines, pipelines, gathering systems, gas and oil treating facilities, machinery, power lines, roads, and other appurtenances, improvements and facilities (the “Equipment”) located on and used or held for use solely in connection with the operation of the Shallow Assets;

(6) all existing and effective operating agreements (the “Contracts”), insofar as they directly relate solely to the Shallow Assets, as described in Exhibit C, and provided, however, that “Contracts” shall not include the instruments constituting the Leases; and

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(7) to the extent transferable without payment of additional consideration, copies of all lease files (Assignor shall retain original lease files), land files, well files, gas and oil sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, logs, maps, engineering data and reports, interpretive data, technical evaluations and technical outputs, and other books, records, data, files, and accounting records, (the “Records”) in each case to the extent related to the Shallow Assets, or used or held for use in connection with the maintenance or operation thereof, but excluding (i) any books, records, data, files, logs, maps, evaluations, outputs, and accounting records to the extent disclosure or transfer would result in a violation of applicable law or is restricted by any Required Consent that is not satisfied pursuant to Section 4.5 of the Purchase Agreement, as defined below, (ii) computer or communications software or intellectual property (including tapes, codes, data and program documentation and all tangible manifestations and technical information relating thereto), (iii) attorney-client privileged communications and work product of Assignor’s or any of its Affiliates’ legal counsel (other than title opinions), (iv) reserve studies and evaluations, and (v) records relating to the negotiation and consummation of the purchase or sale of the Shallow Assets; provided, however, that Assignor may retain the originals of such Records as Assignor has reasonably determined may be required for existing litigation, tax, accounting, and auditing purposes. “Affiliates” shall mean any Person that directly or indirectly controls, is controlled by or is under common control with such Person. The concept of control, controlling or controlled as used in this context means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another, whether through the ownership of voting securities, by contract or otherwise. “Person” shall mean any corporation, partnership (whether general, limited or otherwise), limited liability company, trust, association, joint venture, unincorporated organization, governmental entity, agency or branch or department thereof, or any other legal entity, or any natural person.

NOTWITHSTANDING ANYTHING IN THIS ASSIGNMENT TO THE CONTRARY, the Shallow Assets shall not include, and there is excepted, reserved and excluded from the Assignment (together with the Deep Assets collectively, the “Excluded Assets”), including those items specifically identified in Schedule 1.5 to the Purchase Agreement:

(1) all partnership, financial, income and franchise tax and legal records of Assignor that relate to Assignor’s business generally (whether or not relating to the Shallow Assets), and all books, records and files that relate to the Excluded Assets and those records retained by Assignor pursuant to Section 1.3(f) of the Purchase Agreement, as defined below and copies of any other Records retained by Assignor pursuant to Section 8.3(e) of the Purchase Agreement, as defined below;

(2) all reserve estimates, economic estimates, and, to the extent excluded from the definition of Records, all logs, interpretive data, technical evaluations and technical outputs;

(3) all rights to any refunds for Taxes or other costs or expenses borne by Assignor or Assignor’s predecessors in interest and title attributable to periods prior to the Effective Time, in accordance with the provisions of Article 9 of the Purchase Agreement, as defined below;

(4) all rights, titles, claims and interests of Assignor to or under any bond or bond proceeds;

(5) all documents and instruments of Assignor that may be protected by an attorney-client privilege, other than title opinions, or the work product doctrine;

(6) any refunds due Assignor by a third party for any overpayment of rentals, royalties, excess royalty interests or production payments attributable to the Shallow Assets with respect to any period of time prior to the Effective Time;

 

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(7) any causes of action, claims, rights, indemnities or defenses available to or benefiting Assignor with respect to any period of time prior to the Effective Time; and

(8) all amounts due or payable to Assignor as adjustments to insurance premiums related to the Shallow Assets with respect to any period prior to the Effective Time.

For the avoidance of doubt, Assignor owns no rights in any formation below the top of the Rhinestreet formation within the State of West Virginia, and Assignor owns no rights below the top of the Marcellus zone in the Commonwealth of Pennsylvania. Nothing in this Assignment shall be construed as transferring or granting any rights below the top of the Rhinestreet formation in the State of West Virginia or below the top of the Marcellus zone in the Commonwealth of Virginia, because Assignor does not own any rights to any formation below the top of such Rhinestreet formation or any rights to any formation below the top of the Marcellus zone.

TO HAVE AND TO HOLD the Shallow Assets unto Assignee, its successors and assigns, forever, subject to the following terms and conditions.

A. Special Warranty of Title. SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT AND THE PERMITTED ENCUMBRANCES, ASSIGNOR AGREES TO WARRANT AND FOREVER DEFEND TITLE TO THE SHALLOW ASSETS UNTO ASSIGNEE AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TO CLAIM THE SAME, OR ANY PART THEREOF, BY, THROUGH, OR UNDER ASSIGNOR, BUT NOT OTHERWISE.

B. Subrogation. To the extent permitted by law, Assignee shall be subrogated to Assignor’s rights in and to representations, warranties, and covenants given with respect to the Shallow Assets. Assignor hereby grants and transfers to Assignee, its successors and assigns, to the extent so transferable and permitted by law, the benefit of and the right to enforce the covenants, representations, and warranties, if any, which Assignor is entitled to enforce with respect to the Shallow Assets, but only to the extent not enforced by Assignor.

C. Assumption of Contracts. Assignee hereby assumes and agrees to be bound by all express and implied covenants, rights, benefits, conditions, obligations, and liabilities under the Contracts insofar as they directly relate solely to the Shallow Rights.

D. Successors and Assigns. This Assignment binds and inures to the benefit of Assignor and Assignee and their respective successors and assigns, and all obligations shall be a covenant running with the land.

E. Entire Agreement; Purchase Agreement. This Assignment supersedes all other prior written or oral agreements, except the Purchase and Sale Agreement between Assignor and Assignee dated January 30, 2014 (the “Purchase Agreement”), which this Assignment is made subject to. If there is a conflict between the terms of this Assignment and the terms of the Purchase Agreement, the terms of the Purchase Agreement will control to the extent of the conflict. Assignor and Assignee intend that the terms of the Purchase Agreement not merge into the terms of this Assignment. There are no oral agreements between the Parties not set out in writing. All capitalized terms used but not defined herein have the meanings given them in the Purchase Agreement.

 

-3-

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F. DISCLAIMER OF WARRANTY. EXCEPT FOR ASSIGNOR’S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6 OF THE PURCHASE AGREEMENT, AND ASSIGNOR’S SPECIAL WARRANTY OF TITLE CONTAINED IN THIS ASSIGNMENT, THE SHALLOW ASSETS ARE BEING CONVEYED BY ASSIGNOR TO ASSIGNEE WITHOUT WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY, COMMON LAW OR OTHERWISE, AND THE PARTIES HEREBY EXPRESSLY DISCLAIM, WAIVE AND RELEASE ANY EXPRESS WARRANTY OF MERCHANTABILITY, CONDITION OR SAFETY AND ANY EXPRESSED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; AND ASSIGNEE ACCEPTS THE SHALLOW ASSETS, “AS IS, WHERE IS, WITH ALL FAULTS, WITHOUT RECOURSE.” ALL DESCRIPTIONS OF THE SHALLOW WELLS, EQUIPMENT, FACILITIES, PERSONAL PROPERTY, FIXTURES AND STRUCTURES HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY ASSIGNOR HAVE BEEN AND SHALL BE FURNISHED SOLELY FOR ASSIGNEES CONVENIENCE, AND HAVE NOT CONSTITUTED AND SHALL NOT CONSTITUTE A REPRESENTATION OR WARRANTY OF ANY KIND BY ASSIGNOR. ASSIGNOR SHALL HAVE NO LIABILITY TO ASSIGNEE FOR ANY CLAIMS, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY, INCIDENTALLY OR CONSEQUENTIALLY, BY SUCH SHALLOW WELLS, EQUIPMENT, FACILITIES, PERSONAL PROPERTY, FIXTURES AND STRUCTURES BY ANY INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR OTHERWISE, OR IN ANY WAY ARISING OUT OF ASSIGNEE’S PURCHASE THEREOF. ASSIGNEE EXPRESSLY WAIVES THE WARRANTY OF FITNESS AND THE WARRANTY AGAINST VICES AND DEFECTS, WHETHER APPARENT OR LATENT, IMPOSED BY ANY APPLICABLE STATE OR FEDERAL LAW. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW, THE DISCLAIMERS CONTAINED IN THIS ASSIGNMENT ARE “CONSPICUOUS” FOR THE PURPOSES OF SUCH APPLICABLE LAW. ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE ACCURACY OF ANY OF THE INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES OR THE VALUE OF THE SHALLOW ASSETS BASED THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY OF THE SHALLOW ASSETS; THIS DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE PRICES ASSIGNEE AND ASSIGNOR ARE OR WILL BE ENTITLED TO RECEIVE FROM PRODUCTION OF HYDROCARBONS OR OTHER SUBSTANCES FROM THE SHALLOW ASSETS, IT BEING ACKNOWLEDGED, AGREED AND EXPRESSLY UNDERSTOOD THAT ALL RESERVE, PRICE AND VALUE ESTIMATES UPON WHICH ASSIGNEE HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY THE INDIVIDUAL EVALUATION OF ASSIGNEE. ASSIGNEE ALSO STIPULATES, ACKNOWLEDGES AND AGREES THAT RESERVE REPORTS ARE ONLY ESTIMATES OF PROJECTED FUTURE HYDROCARBON VOLUMES, FUTURE FINDING COSTS AND FUTURE HYDROCARBON SALES PRICES, ALL OF WHICH FACTORS ARE INHERENTLY IMPOSSIBLE TO PREDICT ACCURATELY EVEN WITH ALL AVAILABLE DATA AND INFORMATION.

G. Further Assurances. Each Party, at the request of the other Party and without additional consideration, shall execute and deliver to the requesting Party all such further assignments, deeds, agreements, contracts, instruments and other documents as the requesting Party may reasonably request in order to perform, accomplish, perfect or record, if reasonably necessary, the assignment and conveyance to Assignee of the Shallow Assets acquired by Assignee hereunder as contemplated by this Assignment, to otherwise carry out the intention of this Assignment. Without limiting the foregoing, should it be determined after the Closing that Assignor owned as of the Effective Time additional oil and gas leases as described at the end of paragraph (1) above and wells in the county in which the Shallow Assets covered hereby are located that, if identified prior to the Closing would have been included among the Shallow Assets but not among the Excluded Assets, then Assignee may request Assignor to assign (subject to the depth limitation described in paragraph (1) above) such later identified oil and gas leases and wells at a mutually agreeable price. If the Parties reach such agreement, the subject interests shall be conveyed to Assignee with an instrument substantially in the form of this Assignment.

 

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H. Governing Law. THIS ASSIGNMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WEST VIRGINIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH PROPERTY IS LOCATED.

I. Schedules and Exhibits. All schedules and exhibits attached hereto are hereby made part hereof and incorporated herein by this reference. References in such schedules and exhibits to instruments on file in the public records are notice of such instruments for all purposes. Unless provided otherwise, all recording references in such schedules and exhibits are to the appropriate records of the counties in which the Shallow Assets are located.

J. Counterparts. This Assignment may be executed in any number of counterparts, and each counterpart hereof shall be effective as to each Party that executes the same whether or not all of such Parties execute the same counterpart. If counterparts of this Assignment are executed, the signature pages from various counterparts may be combined into one composite instrument for all purposes. All counterparts together shall constitute only one Assignment, but each counterpart shall be considered an original.

K. Amendment and Waiver. This Assignment may be altered, amended, or waived only by a written agreement executed by the Parties. No waiver of any provision of this Assignment shall be deemed or shall constitute a waiver of any other provision of this Assignment (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

[Remainder of page left intentionally blank. Signature page follows.]

 

-5-

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IN WITNESS WHEREOF, each Assignor has executed this Assignment as of the date of acknowledgment, but this Assignment shall be effective as of the Effective Time.

 

Partial Assignment, Bill of Sale and Conveyance

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ASSIGNOR’S ACKNOWLEDGEMENT

 

STATE OF WEST VIRGINIA		)
		) ss
COUNTY OF HARRISON		)

This instrument was acknowledged before me this                     day of             , 2014, by                     , as of                     , a                     , on behalf of the corporation.

 

ASSIGNEE ACKNOWLEDGEMENT

 

STATE OF WEST VIRGINIA		)
		) ss
COUNTY OF HARRISON		)

This instrument was acknowledged before me this                     day of             , 2014, by Thomas S. Wright, as President of Alliance Petroleum Corporation, a Georgia corporation, on behalf of the corporation.

 

 

THIS INSTRUMENT PREPARED BY:		PDC ENERGY, INC., 120 Genesis Boulevard,
		Bridgeport, West Virginia, 26330

 

-7-

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Exhibit E

Form of

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (“Assumption Agreement’”), entered into on                      , 2014, but effective as of April 1, 2013, at 12:01 a.m. Eastern Time (the “Effective Time’”), is by and among Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, CO and PA 1999D Limited Partnership, each a West Virginia limited partnership (“Assignor”), and Alliance Petroleum Corporation, a Georgia corporation (“Assignee”). Assignor and Assignee are referred to herein individually as “Party” and collectively as the “Parties.”

RECITALS

A. Assignor and Assignee have entered into a Purchase and Sale Agreement dated January 30, 2014, but effective as of the Effective Time (the “PSA”). Terms capitalized but not defined herein shall have the meaning given such terms in the PSA.

B. This Assumption Agreement is being executed contemporaneously with the Closing, pursuant to which Assignor is assigning all of its right, title and interest in and to the contracts directly relating solely to the Shallow Assets, including without limitation, those contracts described on Exhibit “A” hereto and incorporated herein (the “Contracts”) to Assignee on the terms and conditions set forth in the PSA.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Assignment. Assignor hereby transfers, conveys, and assigns unto Assignee, its successors and assigns, all of Assignor’s right, title, interest and benefits in and to the Contracts, together with all of Assignor’s covenants, conditions, obligations and liabilities in and under the Contracts, insofar as they are attributable to periods from and after the Effective Time.

2. Assumption. In consideration for the foregoing assignment, Assignee does hereby assume and agree to be bound by all express and implied covenants, conditions, obligations and liabilities in and under the Contracts, insofar as they are attributable to periods from and after the Effective Time.

3. No Third Party Beneficiaries. This Assumption Agreement will not (i) entitle any party other than Assignor and Assignee to any claim, cause of action, remedy or right of any kind; (ii) ratify, revive or reinstate any claim or cause of action under any of the Contracts which otherwise would have expired, terminated or been waived by passage of time; or (iii) provide any benefit to any third party under any of the Contracts or under any other contracts or agreements, it being the intent of the Assignor and Assignee that this Assumption Agreement will not be construed as a third party beneficiary contract.

4. Assets. The Contracts assigned in this Assumption Agreement comprise a portion of, and are not in addition to, the Shallow Assets conveyed in the PSA executed by Assignor and Assignee on the same date as this Assumption Agreement.

 

E-1

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5. Further Assurances. Each Party covenants and agrees to take such other action and to execute such additional instruments and documents as may be reasonably necessary or advisable to consummate the purposes contemplated by this Assumption Agreement.

6. Governing Law. This Assumption Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of West Virginia, without reference to rules relating to conflicts of law.

7. Dispute Resolution. Any dispute, claim or controversy of any kind or nature between the Parties related to, arising under or connected with this Assumption Agreement shall be resolved using the procedures set forth in Section 15.10 of the PSA.

8. Headings. The headings of the Sections of this Assumption Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Assumption Agreement.

9. Exhibits. All Exhibits attached to this Assumption Agreement are hereby incorporated and made a part of this Assumption Agreement.

10. Severability. If any provision of this Assumption Agreement is held by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision shall be severed and enforced to the extent possible or modified in such a way as to make it enforceable, and the invalidity, illegality or unenforceability thereof shall not affect the validity, legality or enforceability of the remaining provisions of this Assumption Agreement.

11. Counterparts. This Assumption Agreement may be executed in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Electronic and fax signatures shall be considered binding.

[Signature Page Follows]

 

E-2

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IN WITNESS WHEREOF, Assignor and Assignee have executed this Assumption Agreement on the date indicated above, but effective as of the Effective Time.

 

SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT

 

E-3

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EXHIBIT A

Attached to Assignment and Assumption Agreement dated January 30, 2014, by and among Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, CO and PA 1999D Limited Partnership as Assignor, and Alliance Petroleum Corporation, as Assignee

Contracts

 

E-4

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EXHIBIT F

FORM OF CERTIFICATE OF SELLER’S NON-FOREIGN STATUS

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity that has legal title to a U.S. real property interest under local law will be the transferor of the property and not the disregarded entity. To inform the transferee, Alliance Petroleum Corporation, that withholding of tax is not required upon the disposition of a U.S. real property interest by [Eastern 1996D Limited Partnership] [Eastern 1997D Limited Partnership] [Eastern 1998D Limited Partnership] [CO and PA 1999D Limited Partnership] (“Transferor”), the undersigned hereby certifies under penalties of perjury the following on behalf of Transferor:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2. Transferor is not a disregarded entity as defined in Treas. Reg. § 1.1445-2(b)(2)(iii);

3. Transferor’s U.S. employer identification number is             ; and

4. Transferor’s office address is: 120 Genesis Boulevard, Bridgeport, West Virginia 26330.

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

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

 

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Schedule 2.2

Allocated Values

 

WELL NO		WELL NAME		API NO				PARTNER				ALLOCATED VALUE
147.099073		CHESSER-RINKERUNIT #1			47001027660000				PDC98D			$	92,712.20
137.098094		MCGEE #1			37033239140000				PDC97D			$	60,944.84
137.097071		DEHAVEN #3			37033237920000				PDC96D			$	58,365.15
137.098129		MYERS #8			37033239240000				PDC97D			$	49,153.18
137.098126		MYERS #5			37033239170000				PDC97D			$	48,212.74
137.097069		DEHAVEN #1			37033237800000				PDC96D			$	47,854.93
147.099000		POLING #1, M.			47001027520000				PDC98D			$	46,668.42
137.097029		THOMSON-STEPHENSON #83			37033237470000				PDC96D			$	45,603.61
147.099014		COALTRAIN #14			47091010030000				PDC98D			$	45,115.09
137.098128		MYERS #7			37033239190000				PDC97D			$	41,633.06
147.098205		MILLER #6, JACK			47001027450000				PDC97D			$	41,019.03
137.098166		A&G #23			37033239680000				PDC97D			$	39,709.97
137.097002		THOMSON-STEPHENSON #84			37033237190000				PDC96D			$	38,329.62
147.097064		RAILING #13			47091010000000				PDC96D			$	37,278.45
137.099011		FREYER #3			37033242090000				PDC98D			$	34,639.49
147.099054		EMPIRE BANK #2			47001027480000				PDC98D			$	34,475.86
137.097081		DAISHER #2			37033237720000				PDC96D			$	34,013.77
137.099116		KISKI SPORTSMEN #2			37005261270000				PDC98D			$	33,948.96
137.097066		THOMSON-STEPHENSON #79			37033237310000				PDC96D			$	32,502.39
137.097065		THOMSON-STEPHENSON #80			37033237330000				PDC96D			$	32,162.30
137.099109		WILSON #1			37005259430000				PDC98D			$	30,272.33
137.097074		SKONIER #3			37033237540000				PDC96D			$	29,006.80
137.098127		MYERS #6			37033239180000				PDC97D			$	27,674.51
137.098016		MAHAFFEY #13			37033238390000				PDC97D			$	27,032.74
137.000022		THOMPSON #110			37033243090000				PDC99D			$	26,402.47
137.098164		A&G #21			37033239600000				PDC97D			$	22,893.43
147.099049		MCNEIL #2			47001027580000				PDC98D			$	22,401.08
147.098203		MILLER #4, JACK			47001027430000				PDC97D			$	22,157.15
137.097098		MITCHELL #5			37033237230000				PDC96D			$	22,019.93
147.097037		MCGEE L.S. 3			47017043410000				PDC96D			$	21,977.83
137.098095		SHANNON #4			37033239770000				PDC97D			$	21,293.50
137.099080		PA MINE #37			37063322770000				PDC98D			$	20,856.66
137.099110		BARR #1			37005259490000				PDC98D			$	20,367.05
137.000023		GUIHER #1			37033244380000				PDC99D			$	20,144.92
147.097043		COALTRAIN #13			47091010020000				PDC96D			$	19,378.70
137.099026		SPENCER UNIT #9			37033241810000				PDC98D			$	19,226.69
137.099113		STEIDLE #1			37005259940000				PDC98D			$	17,400.15
137.099083		PA MINE #40			37021208670000				PDC98D			$	17,059.71
137.099027		SUSQUEHANNAREC. #3			37033241260000				PDC98D			$	16,845.44
137.099112		COUCH #1, A.			37005261150000				PDC98D			$	16,568.69
137.000046		PA MINES #32			37021208610000				PDC99D			$	15,912.73
137.098124		MYERS #3			37033239200000				PDC97D			$	14,884.40
137.098114		MCGEE #12			37033239120000				PDC97D			$	14,278.02
137.098109		MCGEE #8			37033239360000				PDC97D			$	14,250.69
137.097022		MCCLURE #12			37065240650000				PDC96D			$	13,854.32
137.098113		MCGEE #11			37033239110000				PDC97D			$	13,692.10
137.098165		A&G #22			37033239920000				PDC97D			$	13,637.43
147.097023		SHOCKEY #2			47001027260000				PDC96D			$	13,440.41
147.097031		SANDRIDGE #2			47001027310000				PDC96D			$	12,911.64
137.097003		THOMSON-STEPHENSON #81			37033237180000				PDC96D			$	12,740.50
137.097004		TATE #33			37033237110000				PDC96D			$	12,701.60
137.098115		MCGEE #13			37033239300000				PDC97D			$	12,629.02
137.000029		COLEMAN #2, C.			37063324750000				PDC99D			$	12,557.18
137.099133		CAROFF #1			37063322570000				PDC98D			$	12,552.00
137.000093		SNYDER #32			37033245940000				PDC99D			$	11,935.69

 

Page 1 of 4

---

147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.098125		MYERS #4			37033239210000				PDC97D			$	11,326.93
137.098089		HURD #1			37033239000000				PDC97D			$	11,299.38
137.099059		BEARD #1			37033242700000				PDC98D			$	10,875.58
137.097001		THOMSON-STEPHENSON #85			37033237200000				PDC96D			$	10,811.76
137.099035		MCCRACKEN #1			37033242170000				PDC98D			$	10,389.13
137.098116		MCGEE #14			37033239130000				PDC97D			$	10,266.84
137.099007		ZOLD #2			37033242450000				PDC98D			$	9,175.85
137.097075		IRVIN #322			37033237020000				PDC96D			$	9,078.24
137.098097		SHANNON #6			37033239780000				PDC97D			$	8,710.64
147.097038		POOLE #4			47017043390000				PDC96D			$	8,649.10
137.099093		MURRAY #1			37033242630000				PDC98D			$	8,631.12
137.098093		WILLIAMS #3			37033238630000				PDC97D			$	8,555.86
137.097169		THOMSON-BLACKHILLS #55			37033238010000				PDC96D			$	8,530.61
147.099053		EMPIRE BANK#1			47001027470000				PDC98D			$	8,423.57
137.098096		SHANNON #5			37033239760000				PDC97D			$	8,385.23
137.097091		SHEROSKY#3			37033237690000				PDC96D			$	8,300.88
137.097079		HOPKINS #317			37033237400000				PDC96D			$	7,950.29
137.099025		MANDELUNIT #2			37033242380000				PDC98D			$	7,921.78
137.099006		ZOLD #l			37033242420000				PDC98D			$	7,892.01
137.098091		MCGEE #5			37033239310000				PDC97D			$	7,843.79
137.098112		MCGEE #10			37033239100000				PDC97D			$	7,753.11
137.099010		FREYER #2			37033242080000				PDC98D			$	7,691.58
137.099039		DICKEY #22			37033242230000				PDC98D			$	7,567.52
137.099017		WEAVER #1			37033242290000				PDC98D			$	7,504.49
137.099108		REARICK #1, R.			37005259200000				PDC98D			$	7,492.06
137.097017		THOMSON-GIBBS #38			37033237290000				PDC96D			$	7,229.04
137.097028		THOMSON-STEPHENSON #82			37033237520000				PDC96D			$	7,139.02
137.098221		TUBBS #22			37033239700000				PDC97D			$	6,974.95
137.097083		MCHENRY #136			37033237630000				PDC96D			$	6,870.10
137.099079		PA MINE #36			37021208650000				PDC98D			$	6,839.56
137.097016		THOMSON-GIBBS #37			37033237420000				PDC96D			$	6,810.49
137.098181		S&D #1			37033239910000				PDC97D			$	6,769.80
137.099005		SHANNON #9R			37033241890000				PDC98D			$	6,730.20
137.099036		MCCRACKEN #2			37033242180000				PDC98D			$	6,510.28
147.097030		SANDRIDGE #1			47001027300000				PDC96D			$	6,441.40
137.097099		MITCHELL #6			37033237240000				PDC96D			$	6,327.68
137.097097		STRAW #1			37033237810000				PDC96D			$	6,288.08
137.097015		THOMSON-GIBBS #36			37033237280000				PDC96D			$	6,232.82
137.099034		REIGHARDUNIT #1			37033242210000				PDC98D			$	6,136.33
137.097060		MCCAY #296			37033236200000				PDC96D			$	6,076.92
137.097009		PRISK #4			37033237410000				PDC96D			$	6,045.09
137.098131		MYERS #10			37033239330000				PDC97D			$	5,772.90
137.099062		SHANNON #1R			37033242060000				PDC98D			$	5,768.73
137.099022		SPENCER UNIT #8			37033241870000				PDC98D			$	5,747.35
137.097014		THOMSON-GIBBS #35			37033237270000				PDC96D			$	5,647.26
137.099149		WINNER #1			37033242620000				PDC98D			$	5,138.54
137.099069		THOMSON-BLACKHILLS #95			37033240480000				PDC98D			$	4,990.83
137.097073		SKONIER #2			37033237530000				PDC96D			$	4,957.06
137.098182		S&D #2			37033239710000				PDC97D			$	4,694.63
137.097005		TATE #34			37033237130000				PDC96D			$	4,529.33
137.097070		DEHAVEN #2			37033237860000				PDC96D			$	4,013.22
137.099008		ZOLD #3			37033242460000				PDC98D			$	3,900.64
137.097095		PRISK #5			37033237830000				PDC96D			$	3,564.05
137.098085		HURD #3			37033239020000				PDC97D			$	3,498.03
137.097087		DIEM #5			37033237480000				PDC96D			$	3,443.65
147.098200		MILLER #1, JACK			47001027400000				PDC97D			$	3,195.28
137.097058		SWOPE #154			37033236220000				PDC96D			$	3,125.65
137.099016		MAHAFFEY #32			37033242200000				PDC98D			$	3,011.38

 

Page 2 of 4

---

147.099073		CHESSER-RINKERUNIT #1			47001027660000				PDC98D			$	92,712.20
137.098107		MCGEE #6			37033239370000				PDC97D			$	2,995.76
137.097013		THOMSON-GIBBS #34			37033237260000				PDC96D			$	2,501.84
137.000080		GOLDINGER #2			37005262420000				PDC99D			$	2,419.26
137.099066		SHANNON L&M #15			37033239960000				PDC98D			$	2,408.05
137.099067		SHANNON L&M #16			37033239970000				PDC98D			$	2,408.05
137.000055		PA MINES #33			37021208660000				PDC99D			$	2,244.02
137.098220		TUBBS #21			37033239900000				PDC97D			$	2,097.46
137.098132		MYERS #11			37033239250000				PDC97D			$	1,943.54
147.099097		COALTRAIN #12			47091010410000				PDC98D			$	1,942.74
137.098108		IRELAND #1, P.			37033240050000				PDC97D			$	1,862.52
137.098161		JOHNSON #1, DAVID			37125218330000				PDC97D			$	1,813.61
137.097021		KRICK #12			37033237460000				PDC96D			$	1,620.15
137.000027		STAN KAY #2			37005262550000				PDC99D			$	1,562.79
137.097006		TATE #31			37033237300000				PDC96D			$	1,391.62
147.097055		SHOCKEY #3			47001027250000				PDC96D			$	1,350.25
147.099052		COALTRAIN #15			47091010400000				PDC98D			$	996.86
137.098086		HURD #4			37033238980000				PDC97D			$	570.53
137.097007		PRISK #1			37033237360000				PDC96D			$	500.00
137.097008		PRISK #2			37033237370000				PDC96D			$	500.00
137.097010		WITHERITE #1			37033237340000				PDC96D			$	500.00
137.097011		WITHERITE #2			37033237350000				PDC96D			$	500.00
137.097018		THOMSON-GIBBS #39			37033237440000				PDC96D			$	500.00
137.097080		DAISHER #1			37033237680000				PDC96D			$	500.00
137.097094		WITHERITE #3			37033237850000				PDC96D			$	500.00
137.097172		KAUFMAN #288			37033237490000				PDC96D			$	500.00
137.097174		CARDIN #311			37033237060000				PDC96D			$	500.00
137.097179		HAAG #327			37033237840000				PDC96D			$	500.00
147.097056		BAUGHMAN #1			47001027270000				PDC96D			$	500.00
147.097057		BAUGHMAN #2			47001027280000				PDC96D			$	500.00
147.097092		BURNER-HEIRS #3			47001027220000				PDC96D			$	500.00
137.098088		MCGEE #4			37033239060000				PDC97D			$	500.00
137.098092		MCGEE #7			37033239350000				PDC97D			$	500.00
137.098103		LUDWIG #4			37033239290000				PDC97D			$	500.00
137.098105		LUDWIG #6			37033238690000				PDC97D			$	500.00
137.098110		MCGEE #9			37033239090000				PDC97D			$	500.00
137.098111		MCGEE #15			37033239580000				PDC97D			$	500.00
137.098122		MYERS #1			37033239150000				PDC97D			$	500.00
137.098123		MYERS #2			37033239160000				PDC97D			$	500.00
137.098153		SHANNON #2			37033238950000				PDC97D			$	500.00
137.098154		SHANNON #3			37033238910000				PDC97D			$	500.00
137.098156		SPINGOLA #2			37033237220000				PDC97D			$	500.00
137.098157		SUMMERS #1			37033238900000				PDC97D			$	500.00
137.098158		HERRINGTON TRUST #1			37033238920000				PDC97D			$	500.00
137.098167		A&G #24			37033239690000				PDC97D			$	500.00
137.098183		S&D #3			37033239720000				PDC97D			$	500.00
137.098185		S&D #5			37033239740000				PDC97D			$	500.00
137.098186		S&D #6			37033239820000				PDC97D			$	500.00
137.098219		WOOD #21			37033240000000				PDC97D			$	500.00
137.099009		FREYER #1			37033242070000				PDC98D			$	500.00
137.099012		FREYER #4			37033242570000				PDC98D			$	500.00
137.099015		MAHAFFEY #31			37033242250000				PDC98D			$	500.00
137.099024		IRACA #1			37033242010000				PDC98D			$	500.00
137.099103		SUSQUEHANNAREC. #4			37033242520000				PDC98D			$	500.00
137.099111		WILSON #2			37005261080000				PDC98D			$	500.00
137.099134		CAROFF #2			37063322580000				PDC98D			$	500.00
137.099145		HURD #2			37033242670000				PDC98D			$	500.00
137.099146		MANDELUNIT #1			37033242600000				PDC98D			$	500.00
147.099003		HOVATER #1			47001027620000				PDC98D			$	500.00

 

Page 3 of 4

---

147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.000025		SHEARER #2			37005262210000				PDC99D			$	500.00
137.000026		STAN KAY #1			37005262340000				PDC99D			$	500.00
137.000028		COLEMAN #1, C.			37063324180000				PDC99D			$	500.00
137.000087		WALKER #2			37005262250000				PDC99D			$	500.00
137.000088		COUCH #1, G.			37005262220000				PDC99D			$	500.00
137.000089		GOLDINGER #3			37005262430000				PDC99D			$	500.00
137.000091		WALKER #4			37005262240000				PDC99D			$	500.00
137.000101		GOLDINGER #4			37005262450000				PDC99D			$	500.00
147.097063		BURNER-HEIRS #1			47001027210000				PDC96D			$	484.38
137.097086		PRISK #3			37033237790000				PDC96D			$	437.66
137.098160		RAPSACK #1, NICHOLAS			37125218790000				PDC97D			$	378.91
137.098162		LALLIER #1, H.			37125218820000				PDC97D			$	378.91
137.098163		KULIKOWSKI #1			37125218810000				PDC97D			$	378.91
												$	1,997,436.08

 

Page 4 of 4

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Schedule 6.1(a)

Seller’s Knowledge Representatives

Dewey Gerdom, Chief Executive Officer of PDCM

Brad McPherson, Land Manager of PDCM

Eddie Carder, EHS Manager of PDCM

---

Schedule 6.1(b)

Buyer’s Knowledge Representatives

Thomas Wright, President of Buyer

Dora L. Silvis, Executive Vice President/Chief Operating Officer of Buyer

---

Schedule 6.7

Status and Operation of Shallow Assets

NONE

---

EXHIBIT “B” TO SALE MOTION

LETTER AGREEMENT

---

 

Corporate Office

1775 Sherman Street, #3000

Denver, Colorado 80203

303.860.5800

www.pdce.com

January 30, 2014

Alliance Petroleum Corporation

4150 Belden Village Avenue N.W., Suite 410

Canton, Ohio 44718-2553

Attention: Thomas S. Wright

 

Re:	Letter Agreement (this “Letter Agreement”) regarding indemnification and related matters under the PSA (as defined below)

To Whom it May Concern:

Reference is made to the Purchase and Sale Agreement dated as of January 30, 2014 (the “PSA”) by and among Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, and CO and PA 1999D Limited Partnership (each individually a “Partnership,” and collectively the “Seller”), and Alliance Petroleum Corporation, a Georgia corporation (“Buyer”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the PSA.

On October 8, 2013, PDC Mountaineer, LLC, a Delaware limited liability company, PDC Energy, Inc., a Nevada corporation (“PDC”), Seneca Upshur Petroleum, LLC, a West Virginia limited liability company, Eastern 1984 Limited Partnership, Eastern 1985A Limited Partnership, Eastern 1987B Limited Partnership, Eastern 1989A Limited Partnership and Eastern 1989B Limited Partnership, as sellers, and Buyer, as buyer, entered into that certain Purchase and Sale Agreement (the “Original PSA”). The parties to the Original PSA and the parties hereto originally contemplated that all of Seller’s right, title and interest in the Shallow Assets would be sold and conveyed to Buyer under the Original PSA, with each Partnership executing the Original PSA as a Seller. However, prior to the execution of the Original PSA, each Partnership filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Proceeding”) with the United Stated Bankruptcy Court in the Northern District of Texas (the “Bankruptcy Court”). As a result of the Bankruptcy Proceeding, each Partnership and all of their interests in the Shallow Assets were removed from the transactions contemplated by the Original PSA.

---

Alliance Petroleum Corporation

January 30, 2014

Page 2

 

Concurrently with the execution of the Original PSA, PDC, Buyer and each Partnership entered into that certain Letter Agreement regarding Exclusion of the Excluded Partnerships and the Excluded Partnership Related Assets (the “Original Side Letter”) from the Closing of the PSA. Pursuant to the Original Side Letter, PDC, Buyer and each Partnership agreed that, promptly following the execution of the Original PSA, each Partnership would seek approval of the Bankruptcy Court under Section 363 of the United States Bankruptcy Code (the “Code”) for the sale by the Partnerships of their interests in the Shallow Assets to Buyer, and Buyer would, upon receipt of such approval by the Bankruptcy Court, purchase such Shallow Assets. Furthermore, pursuant to the Original Side Letter, the parties thereto agreed that such subsequent purchase and sale would be completed pursuant to a purchase and sale agreement substantially in the form of the Original PSA, but subject to reasonably and necessary modifications arising out of the Bankruptcy Proceeding.

As contemplated by the Original Side Letter, the PSA contains certain material modifications as compared to the Original PSA, all of which have been agreed to by the parties in order to comply with the requirements of the Bankruptcy Court in connection with its approval of the PSA under the Code. Among other matters, Seller is not (i) making certain representations and warranties to Buyer, (ii) agreeing to indemnify Buyer for certain matters, or (iii) taking other actions or making other agreements to the extent that the same bind Seller from and after the date of the execution of the PSA.

In light of the foregoing and in order to induce Buyer to enter into the PSA, PDC is executing and delivering this Letter Agreement, as contemplated by Section 12.3(h) of the PSA, to Buyer and binding itself to the following:

Indemnification.

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

1.2 Survival Period. The representations and warranties contained in Sections 6.1 through 6.4 of the PSA shall survive until each of the Sellers are dissolved after the completion of the Bankruptcy Proceeding. All other representations and warranties of Seller contained in the Agreement shall terminate on the date that is six (6) months following the Closing Date. Except as otherwise provided in this Section 1.2, the covenants, indemnities and agreements contained in the PSA shall survive the Closing and continue in accordance with their respective terms. Each applicable survival period may be referred to herein as a “Survival Period.”

1.3 PDC’s Indemnification of Buyer. PDC assumes all risk, liability, obligation and Losses in connection with, and shall defend, indemnify, and save and hold harmless Buyer, its officers, directors, employees and agents, from and against all Losses which arise directly or indirectly from or in connection with (i) all Obligations relating to the Partnerships’ ownership of their respective interests in the Shallow Assets prior to the Effective Time, other than the Buyer’s Environmental Liabilities and plugging and abandonment Obligations, for which Claims have been asserted pursuant to Section 14.4 of the PSA before the date that is six (6) months following the Closing Date, or (ii) any breach by the Partnerships of any of the Partnerships’ representations or warranties contained in Article 6 of the PSA, subject to the respective Survival Period set forth in Section 1.2 hereof.

---

Alliance Petroleum Corporation

January 30, 2014

Page 3

 

1.4 Limitations on Seller’s Indemnity. Notwithstanding anything to the contrary set forth herein or in the PSA, PDC shall have no liability for indemnification hereunder in connection with the breach of any representation, warranty or covenant contained in the PSA or for any Losses arising in connection with or with respect to the Transaction until (i) the individual amount of any Loss exceeds One Hundred Fifty Thousand Dollars ($150,000.00) and (ii) the total of all Losses with respect to such matters exceeds three percent (3%) of the Initial Purchase Price and then only for the amount by which such Losses exceeds three percent (3%) of the Initial Purchase Price. In the aggregate, PDC shall not have any liability for indemnification with respect to Losses suffered by the Buyer in excess of ten percent (10%) of the Initial Purchase Price. From and after the Closing, indemnification under this Section 1.4 shall be the sole and exclusive remedy available to Buyer against any party hereto or to the PSA for any claims arising out of or based upon the matters set forth in the PSA, in this Letter Agreement and the Transaction, and no party hereto shall seek relief against any other party hereto to this Letter Agreement or to the PSA other than through indemnification provided in this Section, subject to the limitations provided for in this Section 1.4.

1.5 Claims Extinguished in the Bankruptcy Proceeding. It is the expectation of PDC and Buyer that the order of the Bankruptcy Court approving the sale of Seller’s interests in the Shallow Assets pursuant to the PSA is expected to provide that such interests shall be delivered free of all liens, claims, interests, and encumbrances. That being the case, it is acknowledged and agreed that (a) nothing in this Letter Agreement shall be in any manner construed, revive or in any manner reinstate any lien, claim, interest and/or encumbrance discharged or extinguished by such order entered by the Bankruptcy Court, (b) this Letter Agreement shall create no third-party beneficiaries who can use this Letter Agreement as a basis to assert that his, her or its lien, claim, interest or encumbrance was not discharged by the order of the Bankruptcy Court, and (c) Buyer shall have no right to indemnification for, and PDC shall have no obligations under this Letter Agreement to Buyer, with respect to any lien, claim, interest or encumbrance discharged by the Bankruptcy Court, except for costs, expenses (including court costs, reasonable fees and expenses of attorneys, technical experts and expert witnesses and the cost of investigation) incurred by Buyer with respect to any such lien, claim, interest or encumbrance.

1.6 Procedure; Related Matters. The indemnifications contained herein shall be implemented as set forth in Section 14.4 of the PSA, and Sections 14.5 through 14.9 of the PSA shall be incorporated into and deemed part of this Letter Agreement as if expressly set forth herein and updated to apply to the Parties.

All notices and communications to Buyer made pursuant to this Letter Agreement shall be delivered as provided for in Section 15.3 of the PSA, with all notices to PDC addressed to PDC at its address set forth on the signature page hereto. This Letter Agreement may be executed and delivered in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument.

---

Alliance Petroleum Corporation

January 30, 2014

Page 4

 

This Letter Agreement shall be construed in accordance with, and governed by, the laws of the State of West Virginia without regard to its choice of law principles.

Any disagreement, dispute, controversy or claim between Buyer and PDC arising out of or relating to this Letter Agreement, shall be resolved by arbitration in accordance with the terms and conditions of Section 15.10 of the Purchase and Sale Agreement dated October 8, 2013, to which Buyer and PDC are parties.

PDC and Buyer agree to take such further actions and to execute such further documents and instruments as may be necessary to effectuate the intent of this Letter Agreement.

The parties acknowledged that any obligations of PDC and Buyer hereunder are expressly subject to the approval of the PSA and the transaction contemplated thereunder by the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, presiding over the jointly administered cases No. 13-34773-HDH-11, et al. In the event that the Bankruptcy Court does not approve the PSA and the transaction contemplated thereunder, all obligations of PDC and Buyer relating to the PSA and this Letter Agreement shall terminate and be of no further force and effect, with each party hereto to bear its own costs without damages assertable by any party hereto.

[Signature page follows.]

---

PDC ENERGY, INC.
By:		/s/ Lance A. Lauck
		Name: Lance A. Lauck
		Title: SVP - Corporate Development
		PDC Energy, Inc. 1775 Sherman Street Denver, Colorado 80202 Attn: General Counsel

 

---

EXHIBIT “C” TO SALE MOTION

SIDE LETTER

---

 

Corporate Office

1775 Sherman Street, #3000

Denver, Colorado 80203

303.860.5800

www.pdce.com

October 8, 2013

Alliance Petroleum Corporation

4150 Belden Village Avenue N.W., Suite 410

Canton, Ohio 44718-2553

Attention: Thomas S. Wright

 

Re:	Exclusion of the Excluded Partnerships and the Excluded Partnership Related Assets from the Closing of the PSA

Tom:

Reference is made to the Purchase and Sale Agreement, dated of even date herewith (the “PSA”), by and among PDC Mountaineer, LLC, a Delaware limited liability company (“PDCM”), PDC Energy, Inc., a Nevada corporation (“PDCE”), Seneca-Upshur Petroleum, LLC, a West Virginia limited liability company (“Seneca-Upshur”), Eastern 1984 Limited Partnership, Eastern 1985A Limited Partnership, Eastern 1987B Limited Partnership, Eastern 1989A Limited Partnership, Eastern 1989B Limited Partnership (the “Partnerships” and, together with PDCM, PDCE and Seneca-Upshur, the “Seller”) and Alliance Petroleum Corporation, a Georgia corporation (the “Buyer”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the PSA. Non-Debtor Closing Date as used herein shall be the Closing Date as defined in the PSA.

PDCE and Buyer initially contemplated that Eastern 1996D Limited Partnership, Eastern 1997D Limited Partnership, Eastern 1998D Limited Partnership, and CO and PA 1999D Limited Partnership (the “Excluded Partnerships”) would be parties to the PSA, with each Excluded Partnership executing the PSA as a Seller. However, the Excluded Partnerships, each filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Northern District of Texas on September 16, 2013 (the “Bankruptcy Proceedings”). As a result, the Excluded Partnerships and the Assets owned by the Excluded Partnerships, (which includes all right, title and interest of the Excluded Partnerships in the leases identified on Exhibit A (“Excluded Partnership Leases”) and the wells identified on Exhibit B (“Excluded Partnership Wells”) and are collectively referred to herein as the “Excluded Partnership Related Assets”) have been removed from the transactions contemplated by the PSA.

---

Alliance Petroleum Corporation

October 8, 2013

Page 2

 

PDCE, Buyer and the Excluded Partnerships are executing this letter agreement in order to evidence their agreement with respect to the Excluded Partnerships and the Excluded Partnership Related Assets. Promptly following the execution of the PSA, the Excluded Partnerships shall seek approval of the Bankruptcy Court under section 363 of the Bankruptcy Code for the sale of the Excluded Partnership Related Assets to Buyer. Buyer agrees to purchase from the Excluded Partnerships all of the Excluded Partnership Related Assets upon the later of (i) thirty (30) days after the entry of a final order approving the sale by the Bankruptcy Court and (ii) sixty (60) days of the execution of the PSA (the “Outside Date”). The purchase and sale of the Excluded Partnership Related Assets as described herein will be (i) completed pursuant to a purchase and sale agreement substantially in the form of the PSA (the “Excluded Partnership Purchase Agreement”), subject to reasonable and necessary modifications arising out of the Bankruptcy Proceedings, and (ii) for an initial purchase price to be paid in cash and in an amount equal to the sum of the allocated value of the Excluded Partnership Related Assets as set forth on Exhibit A and B hereto, subject to any applicable adjustments as provided in Article 2 of the PSA and any adjustments arising out of the Bankruptcy Proceedings. Buyer acknowledges that no indemnities of the Seller shall survive Closing.

In connection with the Bankruptcy Proceedings, the Excluded Partnerships have filed a motion to assume ajoint operating agreement (the “JOA”) with PDCE that would be applicable to the operation of the Excluded Partnership Related Assets by the purchaser thereof in the Bankruptcy Proceedings. Should Buyer be the successful purchaser of the Excluded Partnership Related Assets in the Bankruptcy Proceedings, it is acknowledged and agreed that, in light of the transition services agreement to be executed and delivered at the Non-Debtor Closing Date, the JOA is unnecessary. Accordingly, PDCE, the Partnerships and Buyer covenant and agree that, should Buyer be the successful acquirer of the Excluded Partnership Related Assets in the Bankruptcy Proceedings, each JOA assumed in connection with the Bankruptcy Proceedings shall be immediately terminated by the respective parties thereto and that operation of the Excluded Partnership Related Assets shall be governed by the aforementioned transition services agreement and the PSA.

All notices and communications made pursuant to this letter agreement shall be delivered as provided for in Section 15.3 of the PSA. This letter agreement may be executed and delivered in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument. This letter agreement shall be construed in accordance with, and governed by, the laws of the State of West Virginia without regard to its choice of law principles.

Buyer and Seller hereby irrevocably submit to the exclusive jurisdiction of the Bankruptcy Court for the Northern District of Texas for the purpose of any action or proceeding arising out of or relating to this letter agreement and Buyer and Seller irrevocably agree that all claims in respect to such action or proceeding shall be heard and determined in such court. Buyer and Seller agree that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

---

Alliance Petroleum Corporation

October 8, 2013

Page 3

 

The Parties agree to take such further actions and to execute such further documents and instruments, including, without limitation, the Excluded Partnership Purchase Agreement and all necessary documents and instruments executed in connection therewith, as may be necessary to effectuate the intent of this letter agreement.

Any obligations of the Excluded Partnerships hereunder are expressly subject to the approval of the U.S. Bankruptcy Court for the Northern District of Texas presiding over the jointly administered cases No. 13-34773-HDH-11, et. al. In the event that the Bankruptcy Court does not approve the transactions contemplated hereunder, all obligations of PDCE and the Excluded Partnerships relating to the sale of the Excluded Partnership Related Assets shall terminate and be of no further force and effect with each party hereto to bear its own costs without damages assertable by any party.

[Signature page follows.]

---

PDC ENERGY, INC.
By:		/s/ Lance A. Lauck
		Name: Lance A. Lauck
		Title: SVP CORP DEVL
EASTERN 1996D LIMITED PARTNERSHIP EASTERN 1997D LIMITED PARTNERSHIP EASTERN 1998D LIMITED PARTNERSHIP CO and PA 1999D LIMITED PARTNERSHIP
By:		PDC ENERGY, INC., its General Partner
By:		/s/ Karen G Nicolaou
		Name: Karen G Nicolaou
		Title: Retained Person

 

[Signature Page – Letter Agreement Regarding Excluded Partnerships]

---

EXHIBIT A

Partnership Leases

Wellbore Interest Only

 

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00003.000

H. B. McGee and Marjorie McGee, C. C. McGee and Eleanor McGee

Victory Energy Corporation

8/9/1997

1868

210

Clearfield

PA

428

137.098088 137.098091 137.098092 137.098094 137.098107 137.098109 137.098110 137.098111 137.098112 137.098113 137.098114 137.098115 137.098116

PAL00468.001

Marion Butler and Jay Butler, her husband

Victory Land Company

2/7/1987

1138

370

Clearfield

PA

511

137.097021

PAL00468.002

Florence O’Connell and Russell O’Connell, her husband

Victory Land Company

3/9/1987

1144

345

Clearfield

PA

511

137.097021

PAL00468.003

Dorothea J. Stauffer

Victory Land Company

4/1/1985

1137

478

Clearfield

PA

511

137.097021

PAL00468.004

Clarence Carl Stauffer and Louise Stauffer, his wife

Victory Land Company

4/30/1985

1137

483

Clearfield

PA

511

137.097021

PAL00502.000

Glenn E. Thomson, single and Glenn E. Thomson, as Agent for Mildred Thomson Older, widow, Gail T. Brunt and Thomas Brunt, Jr., her husband, Glenn T. McGee and Arlene McGee, his wife, William T. McGee, single, heirs and devisees of Helen T. McGee, deceased

Victory Energy Corporation

10/1/1991

1447

55-57

Clearfield

PA

433

137.097013 137.097014 137.097015 137.097016 137.097017 137.097018

PAL00504.000

John F. Mitchell, III

Phillips Production Company

2/2/1995

1667

141

Clearfield

PA

105

137.097098 137.097099

PAL00521.000

J. Wesley Oler, Jr., Mary Glenn Fowler and Mildred Thomson Oler, as Co-Executors of The Glenn E. Thomson Estate

Victory Energy Corporation

1/29/1996

1441

71

Clearfield

PA

483

137.097169 137.099069

PAL00522.000

The William T. Mahaffey Heirs, County National Bank as Trustee FBO Rebecca M. Latimer, Deborah M. Westover, and Kathryn M. Kramer; Harriet L. Mahaffey, widow

Victory Energy Corporation

2/7/1997

1843

48

Clearfield

PA

36

137.098016

PAL00523.000

Wayne P. Daisher, and Carol J. Kline

Victory Energy Corporation

1/14/1997

1817

522

Clearfield

PA

74

137.097080 137.097081

PAL00524.000

Glenn E. Thomson Estate, Mildred Thomson Oler, widow, Gail T. Brunt and Thomas Brunt, Jr., her husband, Glenn T. McGee and Arlene McGee, his wife, William T. McGee, single, Eric G. McGee, and Marie McGee, his wife, Heirs and Devisees of Helen T. McGee, deceased

Victory Energy Corporation

2/21/1994

1612

32

Clearfield

PA

713

137.097001 137.097002 137.097003 137.097028 137.097029 137.097065 137.097066

PAL00527.000

Richard E. Williams

Victory Energy Development Co.

8/11/1989

1309

371

Clearfield

PA

90

137.098093

PAL00528.001

F. lora Reade

Victory Energy Corporation

4/19/1990

1368

323

Clearfield

PA

375

137.098122 137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

 

Page 1 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00528.002

Dunlap Realty, A Partnership

Victory Energy Corporation

8/15/1990

1368

317

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00528.003

Arnold B. Shaw and Helen K. Shaw

Victory Energy Corporation

6/21/1990

1368

329

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00528.004

Sandra Shaw Decasper and Samuel Decasper

Victory Energy Corporation

5/22/1990

1368

335

Clearfield

PA

375

137.098123 137.098124 137.098125 137.098126 137.098127 137.098128 137.098129 137.098131 137.098132

PAL00532.000

George L. Prisk, Donald G. Prisk and Kenneth B. Prisk, t/d/b/a Prisk Dairy Farms

Victory Energy Corporation

10/26/1996

1807

321

Clearfield

PA

140

137.097007 137.097008 137.097086 137.097095

PAL00539.000

Donald B. Tubbs and Blake L. Tubbs

Victory Energy Corporation

1/10/1998

1901

340

Clearfield

PA

91

137.098220 137.098221

PAL00540.001

Evelyn J. DeHaven, widow

Victory Energy Corporation

12/18/1996

1821

240

Clearfield

PA

65

137.097069 137.097070 137.097071

PAL00540.002

Shirley and Ellis Passmore, Sr.

Victory Energy Corporation

12/18/1996

1820

160

Clearfield

PA

65

137.097069 137.097070 137.097071

PAL00544.000

Michael K. Straw and Debra J. Straw

Victory Energy Corporation

1/11/1997

1818

532

Clearfield

PA

25

137.097097

PAL00545.001

Chester J. and D. Lorraine Skonier

Victory Energy Corporation

4/1/1993

1527

139

Clearfield

PA

100

137.097073 137.097074

PAL00545.002

Alfred E. and Catherine Skonier

Victory Energy Corporation

1/18/1993

1527

143

Clearfield

PA

100

137.097073 137.097074

PAL00545.003

Evelyn F. Jennings

Victory Energy Corporation

1/28/1993

1527

147

Clearfield

PA

100

137.097073 137.097074

PAL00546.000

A & G Real Estate

Victory Energy Corporation

5/17/1996

1792

270

Clearfield

PA

122

137.098164 137.098165 137.098166 137.098167

 

Page 2 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00547.000

Robert and Eleanor Ludwig

Victory Energy Corporation

5/15/1997

1844

471

Clearfield

PA

194

137.098103 137.098105

PAL00548.000

Chetwin M. Hurd and Vera S. Hurd, his wife

Victory Energy Corporation

9/29/1997

1881

278

Clearfield

PA

830

137.098085 137.098086 137.098089 137.099145

PAL00549.000

S&D Energy

Victory Energy Corporation

7/15/1997

1859

35

Clearfield

PA

219

137.098181 137.098182 137.098183 137.098185 137.098186

PAL00559.000

Gordon B. Wood and Hazel Wood

Phillips Production Company

6/30/1994

1620

540

Clearfield

PA

48

137.098219

PAL00600.000

Peter W Summers and Shirley Ann Summers

Petroleum Development Corporation

12/13/1997

1896

564

Clearfield

PA

50.9

137.098157

PAL00601.000

Wayne A Freyer, Wayne E Freyer and William C Freyer t/d/b/a Wayne A Freyer and Sons

Petroleum Development Corporation

1/13/1998

1909

205

Clearfield

PA

108

137.099009 137.099010 137.099011 137.099012

PAL00609.000

F Douglas Beard and Tonda S Beard

Petroleum Development Corporation

12/15/1998

0

0

Clearfield

PA

23

137.099059

PA100611.000

John McKeage Zold

Petroleum Development Corporation

10/31/1998

1987

96

Clearfield

PA

123

137.099007 137.099006 137.099008

PAL00614.000

C Alan Walker, Susan Walker Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shannon Land and Mining Company

Petroleum Development Corporation

11/7/1997

1888

478

Clearfield

PA

98

137.098097 137.099005

PAL00617.000

Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shan

Petroleum Development Corporation

11/7/1997

1888

501

Clearfield

PA

268

137.099066 137.099067

PAL00618.000

Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shan

Petroleum Development Corporation

11/7/1997

1888

495

Clearfield

PA

52

137.098095 137.098096

PAL00619.000

Fred J McCracken and Derek R McCracken and Kathryn A Tubbs

Petroleum Development Corporation

1/22/1998

1909

207

Clearfield

PA

50

137.099035 137.099036

PAL00632.000

Michael Kulikowski and John J Kulikowski

Eagle Resources Corporation

4/10/1997

3111

483

Washington

PA

57

137.098163

PAL00633.000

Harry J Lallier

Eagle Resources Corporation

6/26/1997

3153

144

Washington

PA

120

137.098162

PAL00634.000

David Johnson

Eagle Resources Corporation

5/28/1997

3128

143

Washington

PA

82

137.098161

PAL00635.000

Nicholas Rapsack

Eagle Resources Corporation

6/10/1997

3141

294

Washington

PA

94

137.098160

PAL00639.000

Randall A Rearick and Twila E Rearick

US Energy Expl Corp

2/26/1997

1721

269

Armstrong

PA

20

137.099108

PAL00640.000

William M Wilson and Mary Alice Cooper

U S Energy Expl Corp

11/16/1996

1664

0308

Armstrong

PA

120

137.099109 137.099111

PAL00641.000

Lawrence E Barr Jr and Laura Lee Bart

U S Energy Expl Corp

10/30/1996

1673

61

Armstrong

PA

62

137.099110

PAL00642.000

Audley Couch, Virginia L Couch, Mark A Couch and Jesse L Couch

U S Energy Expl Corp

4/15/1997

1698

101

Armstrong

PA

60

137.099112

PAL00643.000

Velma E Steidle

U S Energy Expl Corp

11/27/1998

1927

42

Armstrong

PA

17.8

137.099113

PAL00646.000

Kiski Township Sportsmen’s Assoc

U S Energy Expl Corp

4/27/1998

1863

61

Armstrong

PA

170

137.099116

PAL00649.001

Mary E Wateska, Raymond B Wateska

U S Energy Expl Corp

12/1/1998

2016

227

Armstrong

PA

157

137.000087 137.000091

 

Page 3 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00649.002

Debra Ann Walker-Crownover, Norman Eugene Crownover

U S Energy Expl Corp

12/1/1998

2016

224

Armstrong

PA

157

137.000087 137.000091

PAL00649.003

Robert J Walker and Grace M Shearer Walker

U S Energy Expl Corp

6/28/1999

2016

238

Armstrong

PA

157

137.000087 137.000091

PAL00649.004

Edward Walker, David R Walker, Debra Walker Crownover, Roberta A Gearhart

U S Energy Expl Corp

12/1/1998

1894

337

Armstrong

PA

157

137.000087 137.000091

PAL00650.000

Daniel K Shearer, Mary Lou Shearer or Grace Shearer Walker

U S Energy Expl Corp

2/18/1999

2016

233

Armstrong

PA

49.3

137.000025

PAL00652.000

Alfred and Phyllis Goldinger

U S Energy Expl Corp

3/29/1999

2019

256

Armstrong

PA

130

137.000080 137.000089 137.000101

PAL00653.000

C Alan Walker, Susan Walker Kriner, Anne Walker Macko, acting by and through E David Nelson, agent, dba Shannon Land and Mining Company

Castle Gas Company Inc

8/8/1996

1792

540

Clearfield

PA

159

137.098153 137.098154 137.099062

PAL00654.000

Jean Bacharach Gallaher and Charles Gordon Herrington Trust

Castle Gas Company Inc

1/25/1996

1786

551

Clearfield

PA

57

137.098158

PAL00660.000

Robert A. Witherite

Victory Energy Corporation

2/20/1997

1822

241

Clearfield

PA

4.98

137.097094

PAL00661.000

Paul D. and Lorraine M. Witherite, brother and sister

Victory Energy Coorporation

11/8/1996

1807

313

Clearfield

PA

80

137.097094 137.097010 137.097011

PAL00662.000

Lorraine M. Witherite

Victory Energy Coorporation

2/27/1997

1822

245

Clearfield

PA

1.99

137.097094 137.097010 137.097011

PAL00663.000

George L. Prisk, Donald G. Prisk and Kenneth B. Prisk, t/d/b/a Prisk Diary Farms

Victory Energy Corporation

10/26/1996

1807

317

Clearfield

PA

30

137.097009

PAL00668.000

George and Patricia Dickey; Jerry Barrett; Donald and Hannah Barrett; Cloyd and Sandra Barrett

Victory Energy Corporation

3/11/1997

1834

604

Clearfield

PA

59

137.099039

PAL00673.000

Thomas E. Reighard and Tammy A. Reighard

Victory Energy Corporation

6/16/1998

470

Clearfield

PA

24

137.099034

PAL00674.000

National Bank as Trustee FBO Rebecca M. Latimer, Deborah M. Westover and Kathryn

Victory Energy Corporation

4/14/1997

1843

58

Clearfield

PA

107

137.099034

PAL00675.000

James F. and Muriel Reighard, h/w

Victory Energy Corporation

6/16/1998

228

Clearfield

PA

24

137.099034

PAL00676.000

Robert L. and Deborah Reighard

Victory Energy Corporation

6/16/1998

226

Clearfield

PA

24

137.099034

PAL00677.000

Timothy D. Iraca and Diane M. Iraca, His wife; and Beverly A. Smith and Llewellyn Smith, her husband

Victory Energy Corporation

11/4/1998

1983

103

Clearfield

PA

43

137.099024

PAL00678.001

Thomas P. Hartzfeld, James R. Hartzfeld, Judith A. Mogor c/o Hartzfeld Land Partners

Victory Energy Corporation

8/4/1998

1978

434

Clearfield

PA

78

137.099022

PAL00678.002

Jessie Hartzfeld, Individually, Jessie Hartzfeld as Guardian for Gordon Bruce Hartzfeld

Victory Energy Corporation

6/18/1998

1978

438

Clearfield

PA

78

137.099022

PAL00678.003

Dr. William Beckwith

Victory Energy Corporation

9/14/1998

1978

442

Clearfield

PA

78

137.099022

PAL00678.004

Carol Beckwith Clifton

Victory Energy Corporation

6/17/1998

1978

446

Clearfield

PA

78

137.099022

PAL00678.005

Patricia Jean Hogan

Victory Energy Corporation

6/17/1998

1978

458

Clearfield

PA

78

137.099022

PAL00678.006

Martha Downey

Victory Energy Corporation

6/15/1998

1978

454

Clearfield

PA

78

137.099022

PAL00678.007

Fred R. Day

Victory Energy Corporation

6/12/1998

1978

450

Clearfield

PA

78

137.099022

PAL00678.008

Phyllis Day

Victory Energy Corporation

10/30/1998

1983

91

Clearfield

PA

78

137.099022

PAL00678.009

Anne Y. Weigle and Donald K. Weigle

Victory Energy Corporation

6/12/1998

1978

462

Clearfield

PA

78

137.099022

 

Page 4 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

PAL00679.000

Spencer, Ray L. Spencer, and Robert G. Spencer trading and doing business as Spencer

Victory Energy Corporation

1/15/1997

1823

494

Clearfield

PA

127

137.099025 137.099026

PAL00680.000

John Mandel, Audrey Ann Mandel, and John P. Mande

Victory Energy Corporation

11/4/1998

1983

95

Clearfield

PA

71

137.099025 137.099026 137.099146

PAL00681.000

The Estate of Thomas Holt Murray, c/o Helen Dufton Clark, Administratrix

Victory Energy Corporation

2/5/1999

0

0

Clearfield

PA

30

137.099093

PAL00682.000

Susquehanna Recreation Corporation

Victory Energy Corporation

8/15/1997

1866

416

Clearfield

PA

227

137.099027 137.099103

PAL00685.000

Forney D. Winner and Mary E. Winner, his wife

Victory Energy Corporation

1/15/1999

0

0

Clearfield

PA

296

137.099149

PAL00686.000

John A. Weaver and James M. Weaver

Victory Energy Corporation

11/7/1998

1986

68

Clearfield

PA

182

137.099017

PAL00687.000

Dorothy L. Stineman, widow, Gilbert E. Caroff and Julie Anne Caroff, husband and wife, Howard C. Matthews and Karen S. Matthews, husband and wife

Victory Energy Corporation

10/29/1998

1144

265

Indiana

PA

443

137.099133 137.099134

PAL00689.000

Frank K. and Mary Clark Snyder

Victory Energy Corporation

10/18/1999

0

0

Clearfield

PA

72

137.000093

PAL00690.000

Jerry Guiher, and Rick Guiher

Victory Energy Corporation

9/19/1998

1971

391

Clearfield

PA

56

137.000023

PAL00695.000

The Thomson Residuary Beneficiaries, being Mary Glenn Flower, J. Wesley Oler Jr., William T. McGee, Glenn T. McGee, Gail T. Brunt, The Pennsylvania State University Varsity Tennis Endowment, the Pennsylvania State University Department of Electrical Engineering of the College of Engineering, The Pennsylvania State University Department of Locomotion Studies of the College of Health and Human Development, Juniata College, Dickinson School of Law, Clearfield Community YMCA, Newburg Baptist Church of LaJose, First Baptist Church of Clearfield, First Baptist Church of Pittsburgh

Victory Energy Corporation

9/4/1999

0

0

Clearfield

PA

421

137.000022

PAL00696.000

Greenwich Collieries, A Division of Pennsylvania Mines Corporatior

Victory Energy Corporation

1/13/1997

1458

1075

Indiana

PA

634

137.099079 137.099080 137.099083 137.000046 137.000055

PAL00700.000

Patricia A. Ireland and Dean Ireland

Angerman Associates, Inc.

1/12/1994

1588

061

Clearfield

PA

104

137.098108

PAL00701.000

Gilbert S. Couch, Trustee and Helen M.

US Energy Exlp. Corp.

2/2/2000

2076

0272

Armstrong

PA

143

137.000088

PAL00702.000

Ronald E. Pikulski, executor of the

U.S. Energy Expl. Corp.

12/16/1996

1664

0317

Armstrong

PA

282

137.000026 137.000027

PAL00703.000

Clarence M. Coleman and Kenneth A.

U.S. Energy Expl. Corp

1/22/1999

1169

256

Indiana

PA

130

137.000028 137.000029

PAL00704.000

Clearfield Bank and Trust Co. and Julia

Castle Gas Company, Inc.

8/14/1997

1867

047

Clearfield

PA

61.11

137.098156

PAL00711.000

Alice Margaret Tate, Lois J. Lipson, Martin C. and Carolyn B. Tate, Paul A. Tate

Victory Energy Corporation

11/16/1996

1809

92

Clearfield

PA

111

137.097004 137.097005 137.097006

WVL00024.001

Steve Thornburg and Clarcie Thornburg, husband and wife

Petroleum Development Corporation

1/5/1998

133

140

Barbour

WV

108

147.099049

WVL00024.002

Rebecca McNeil and J. Michael McNeil, husband and wife

Petroleum Development Corporation

1/10/1998

133

144

Barbour

WV

108

147.099049

WVL00024.003

Mary E. Moats, a widow woman

Petroleum Development Corporation

2/25/1998

133

253

Barbour

WV

108

147.099049

WVL00028.000

Jack W. Miller and Doris C. Miller, husband and wife

Petroleum Development Corporation

12/19/1997

133

88

Barbour

WV

131

147.098200 147.098203 147.098205

 

Page 5 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

WVL00176.000

Elladean Railing, a widow woman

Petroleum Development Corporation

6/30/1992

46, 58, 58, 58

681, 45, 47, 49

Taylor

WV

229.25

147.097064

WVL00206.000

Peggy Chesser Hadley, as attorney in fact for Lucille Crim Chesser

Beckler Energy Incorporated

7/11/1991

121

566

Barbour

WV

124

147.099073

WVL00207.000

Shirley Rinker, a widow woman

Petroleum Development Corporation

2/3/1997

131

469

Barbour

WV

15

147.099073

WVL00208.000

Ira D. Hovatter, a widow woman

Petroleum Development Corporation

9/14/1995

129

272

Barbour

WV

111.75

147.099003

WVL00210.000

Martha E. Poling, a widow woman

Petroleum Development Corporation

9/14/1995

129

276

Barbour

WV

82.46

147.099000

WVL00244.000

Glenn C. Larew and Jarrell S. Larew, husband and wife

Petroleum Development Corporation

4/14/1992

46

559

Taylor

WV

192

147.097043 147.099014 147.099052 147.099097

WVL00304.000

L. S. McGee, a widower man

Clarence W. Mutschelknaus

8/22/1978

105

141

Doddridge

WV

78

147.097037

WVL00305.001

Mary F. Hornor, a widow woman

Clarence W. Mutschelknaus

3/10/1981

119

600

Doddridge

WV

106

147.097038

WVL00305.002

Kenneth Guinn, single

Clarence W. Mutschelknaus

3/9/1981

119

529

Doddridge

WV

106

147.097038

WVL00305.003

Mildred Rittenhouse and Stanley Rittenhouse, husband and wife

Clarence W. Mutschelknaus

3/10/1981

119

527

Doddridge

WV

106

147.097038

WVL00305.004

Audra Varner, a widow woman

Clarence W. Mutschelknaus

3/16/1981

119

525

Doddridge

WV

106

147.097038

WVL00305.005

Clarence W. Mutschelknaus and Mary F. Mutschelknaus, husband and wife

Clarence W. Mutschelknaus

3/9/1981

119

421

Doddridge

WV

106

147.097038

WVL00305.006

Bernadette Poole and Robert Poole, husband and wife

Clarence W. Mutschelknaus

6/27/1980

117, 119

56, 418

Doddridge

WV

106

147.097038

WVL00496.001

Gerald M. Fogg, Special Receiver Appointed by Order of the Circuit Court of Barbour County, West Virginia, Entered on December 9,1996, in Civil Action No. 96-C-42

Petroleum Development Corporation

12/11/1996

131

396

Barbour

WV

170

147.097030 147.097031

WVL00496.002

Peggy C. Hadley

Petroleum Development Corporation

3/29/1996

130

515

Barbour

WV

170

147.097030 147.097031

WVL00496.003

John A. Mosesso and Mary K. Mosesso, husband and wife

Petroleum Development Corporation

2/26/1996

130

422

Barbour

WV

57

147.097030 147.097031

WVL00496.004

Donnie R. Daugherty and Naomi Daugherty

Petroleum Development Corporation

11/14/1996

131

337

Barbour

WV

20

147.097030 147.097031

WVL00496.005

Elsie Daugherty, a widow woman

Petroleum Development Corporation

11/19/1996

131

333

Barbour

WV

9

147.097030 147.097031

WVL00496.006

Rev. David E. Brown and Virginia M. Brown

Petroleum Development Corporation

11/19/1996

131

344

Barbour

WV

30

147.097030 147.097031

WVL00496.007

Millicent Canter, a widow woman

Petroleum Development Corporation

2/12/1996

130

406

Barbour

WV

170

147.097030 147.097031

WVL00496.008

Anne H. Collins, single

Petroleum Development Corporation

2/13/1996

130

414

Barbour

WV

170

147.097030 147.097031

WVL00496.009

Richard C. Hopkins, a widower man

Petroleum Development Corporation

2/8/1996

130

402

Barbour

WV

170

147.097030 147.097031

WVL00496.010

Nancy B. Collins, single

Petroleum Development Corporation

2/21/1996

130

410

Barbour

WV

170

147.097030 147.097031

WVL00496.011

R. Holt Poling and Mary Alice Poling, husband and wife

Petroleum Development Corporation

2/23/1996

130

418

Barbour

WV

170

147.097030 147.097031

WVL00496.012

Jack W. Canter

Petroleum Development Corporation

3/25/1996

130

523

Barbour

WV

170

147.097030 147.097031

 

Page 6 of 7

---

Lease No

Lessor

Lessee

Lease Date

Book

Page

County

State

Gross Acres

Associated Partnership Wells

WVL00496.013

Rachel Bocock

Petroleum Development Corporation

3/4/1996

130

446

Barbour

WV

170

147.097030 147.097031

WVL00496.014

Betty Krifka

Petroleum Development Corporation

3/25/1996

130

531

Barbour

WV

170

147.097030 147.097031

WVL00496.015

Suzanne C. Sandell

Petroleum Development Corporation

3/27/1996

130

519

Barbour

WV

170

147.097030 147.097031

WVL00496.016

Lucinda H. Rogers, single

Petroleum Development Corporation

4/1/1996

130

527

Barbour

WV

170

147.097030 147.097031

WVL00501.000

Gerald M. Fogg, Special Receiver appointed by order of Circuit Court of Barbour County, entered on 10/21/91, in Burner, et al vs. Shockey, et al Civil Action No. 91 c-68

Petroleum Development Corporation

5/25/1995

129

166

Barbour

WV

172

147.097063 147.097092

WVL00506.001

William A. Shockey and Pauline B. Shockey, husband and wife

Petroleum Development Corporation

1/29/1996

130

78

Barbour

WV

83

147.097023 147.097055

WVL00506.002

Jerry L. Ware and Barbara J. Ware, husband and wife

W.R. McDaniel

1/29/1996

131

208

Barbour

WV

112

147.097023 147.097055

WVL00507.001

Henry W. Wheeler and Teresa Wheeler

Petroleum Development Corporation

2/23/1996

130

450

Barbour

WV

160

147.097056 147.097057

WVL00507.002

Virginia C. Baughman, widow;

Petroleum Development Corporation

1/29/1996

130

82

Barbour

WV

144

147.097056 147.097057

WVL00525.001

Mark V. Schumacher

Petroleum Development Corporation

1/8/1998

133

136

Barbour

WV

98.75

147.099053 147.099054

WVL00525.002

Empire National Bank of Clarksburg, a National Banking Associatior

Petroleum Development Corporation

1/25/1989

114

432

Barbour

WV

98.75

147.099053 147.099054

 

Page 7 of 7

---

Exhibit B

Excluded Partnership Wells

 

WELL NO		WELL NAME		API NO				PARTNER				ALLOCATED VALUE
147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.098094		MCGEE #1			37033239140000				PDC97D			$	60,944.84
137.097071		DEHAVEN #3			37033237920000				PDC96D			$	58,365.15
137.098129		MYERS #8			37033239240000				PDC97D			$	49,153.18
137.098126		MYERS #5			37033239170000				PDC97D			$	48,212.74
137.097069		DEHAVEN #1			37033237800000				PDC96D			$	47,854.93
147.099000		POLING #1, M.			47001027520000				PDC98D			$	46,668.42
137.097029		THOMSON-STEPHENSON #83			37033237470000				PDC96D			$	45,603.61
147.099014		COALTRAIN #14			47091010030000				PDC98D			$	45,115.09
137.098128		MYERS #7			37033239190000				PDC97D			$	41,633.06
147.098205		MILLER #6, JACK			47001027450000				PDC97D			$	41,019.03
137.098166		A&G #23			37033239680000				PDC97D			$	39,709.97
137.097002		THOMSON-STEPHENSON #84			37033237190000				PDC96D			$	38,329.62
147.097064		RAILING #13			47091010000000				PDC96D			$	37,278.45
137.099011		FREYER #3			37033242090000				PDC98D			$	34,639.49
147.099054		EMPIRE BANK #2			47001027480000				PDC98D			$	34,475.86
137.097081		DAISHER #2			37033237720000				PDC96D			$	34,013.77
137.099116		KISKI SPORTSMEN #2			37005261270000				PDC98D			$	33,948.96
137.097066		THOMSON-STEPHENSON #79			37033237310000				PDC96D			$	32,502.39
137.097065		THOMSON-STEPHENSON #80			37033237330000				PDC96D			$	32,162.30
137.099109		WILSON #1			37005259430000				PDC98D			$	30,272.33
137.097074		SKONIER #3			37033237540000				PDC96D			$	29,006.80
137.098127		MYERS #6			37033239180000				PDC97D			$	27,674.51
137.098016		MAHAFFEY #13			37033238390000				PDC97D			$	27,032.74
137.000022		THOMPSON #110			37033243090000				PDC99D			$	26,402.47
137.098164		A&G #21			37033239600000				PDC97D			$	22,893.43
147.099049		MCNEIL #2			47001027580000				PDC98D			$	22,401.08
147.098203		MILLER #4, JACK			47001027430000				PDC97D			$	22,157.15
137.097098		MITCHELL #5			37033237230000				PDC96D			$	22,019.93
147.097037		MCGEE L.S. 3			47017043410000				PDC96D			$	21,977.83
137.098095		SHANNON #4			37033239770000				PDC97D			$	21,293.50
137.099080		PA MINE #37			37063322770000				PDC98D			$	20,856.66
137.099110		BARR #1			37005259490000				PDC98D			$	20,367.05
137.000023		GUIHER #1			37033244380000				PDC99D			$	20,144.92
147.097043		COALTRAIN #13			47091010020000				PDC96D			$	19,378.70
137.099026		SPENCER UNIT #9			37033241810000				PDC98D			$	19,226.69
137.099113		STEIDLE #1			37005259940000				PDC98D			$	17,400.15
137.099083		PA MINE #40			37021208670000				PDC98D			$	17,059.71
137.099027		SUSQUEHANNA REC. #3			37033241260000				PDC98D			$	16,845.44
137.099112		COUCH #1, A.			37005261150000				PDC98D			$	16,568.69
137.000046		PA MINES #32			37021208610000				PDC99D			$	15,912.73
137.098124		MYERS #3			37033239200000				PDC97D			$	14,884.40
137.098114		MCGEE #12			37033239120000				PDC97D			$	14,278.02
137.098109		MCGEE #8			37033239360000				PDC97D			$	14,250.69
137.097022		MCCLURE #12			37065240650000				PDC96D			$	13,854.32
137.098113		MCGEE #11			37033239110000				PDC97D			$	13,692.10
137.098165		A&G #22			37033239920000				PDC97D			$	13,637.43
147.097023		SHOCKEY #2			47001027260000				PDC96D			$	13,440.41
147.097031		SANDRIDGE #2			47001027310000				PDC96D			$	12,911.64
137.097003		THOMSON-STEPHENSON #81			37033237180000				PDC96D			$	12,740.50
137.097004		TATE #33			37033237110000				PDC96D			$	12,701.60
137.098115		MCGEE #13			37033239300000				PDC97D			$	12,629.02
137.000029		COLEMAN #2, C.			37063324750000				PDC99D			$	12,557.18
137.099133		CAROFF #1			37063322570000				PDC98D			$	12,552.00
137.000093		SNYDER #32			37033245940000				PDC99D			$	11,935.69

 

Page 1 of 4

---

147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.098125		MYERS #4			37033239210000				PDC97D			$	11,326.93
137.098089		HURD #1			37033239000000				PDC97D			$	11,299.38
137.099059		BEARD #1			37033242700000				PDC98D			$	10,875.58
137.097001		THOMSON-STEPHENSON #85			37033237200000				PDC96D			$	10,811.76
137.099035		MCCRACKEN #1			37033242170000				PDC98D			$	10,389.13
137.098116		MCGEE #14			37033239130000				PDC97D			$	10,266.84
137.099007		ZOLD #2			37033242450000				PDC98D			$	9,175.85
137.097075		IRVIN #322			37033237020000				PDC96D			$	9,078.24
137.098097		SHANNON #6			37033239780000				PDC97D			$	8,710.64
147.097038		POOLE #4			47017043390000				PDC96D			$	8,649.10
137.099093		MURRAY #1			37033242630000				PDC98D			$	8,631.12
137.098093		WILLIAMS #3			37033238630000				PDC97D			$	8,555.86
137.097169		THOMSON-BLACKHILLS #55			37033238010000				PDC96D			$	8,530.61
147.099053		EMPIRE BANK #1			47001027470000				PDC98D			$	8,423.57
137.098096		SHANNON #5			37033239760000				PDC97D			$	8,385.23
137.097091		SHEROSKY #3			37033237690000				PDC96D			$	8,300.88
137.097079		HOPKINS #317			37033237400000				PDC96D			$	7,950.29
137.099025		MANDEL UNIT #2			37033242380000				PDC98D			$	7,921.78
137.099006		ZOLD #1			37033242420000				PDC98D			$	7,892.01
137.098091		MCGEE #5			37033239310000				PDC97D			$	7,843.79
137.098112		MCGEE #10			37033239100000				PDC97D			$	7,753.11
137.099010		FREYER #2			37033242080000				PDC98D			$	7,691.58
137.099039		DICKEY #22			37033242230000				PDC98D			$	7,567.52
137.099017		WEAVER #1			37033242290000				PDC98D			$	7,504.49
137.099108		REARICK #1, R.			37005259200000				PDC98D			$	7,492.06
137.097017		THOMSON-GIBBS #38			37033237290000				PDC96D			$	7,229.04
137.097028		THOMSON-STEPHENSON #82			37033237520000				PDC96D			$	7,139.02
137.098221		TUBBS #22			37033239700000				PDC97D			$	6,974.95
137.097083		MCHENRY #136			37033237630000				PDC96D			$	6,870.10
137.099079		PA MINE #36			37021208650000				PDC98D			$	6,839.56
137.097016		THOMSON-GIBBS #37			37033237420000				PDC96D			$	6,810.49
137.098181		S&D #1			37033239910000				PDC97D			$	6,769.80
137.099005		SHANNON #9R			37033241890000				PDC98D			$	6,730.20
137.099036		MCCRACKEN #2			37033242180000				PDC98D			$	6,510.28
147.097030		SANDRIDGE #1			47001027300000				PDC96D			$	6,441.40
137.097099		MITCHELL #6			37033237240000				PDC96D			$	6,327.68
137.097097		STRAW #1			37033237810000				PDC96D			$	6,288.08
137.097015		THOMSON-GIBBS #36			37033237280000				PDC96D			$	6,232.82
137.099034		REIGHARD UNIT #1			37033242210000				PDC98D			$	6,136.33
137.097060		MCCAY #296			37033236200000				PDC96D			$	6,076.92
137.097009		PRISK #4			37033237410000				PDC96D			$	6,045.09
137.098131		MYERS #10			37033239330000				PDC97D			$	5,772.90
137.099062		SHANNON #1R			37033242060000				PDC98D			$	5,768.73
137.099022		SPENCER UNIT #8			37033241870000				PDC98D			$	5,747.35
137.097014		THOMSON-GIBBS #35			37033237270000				PDC96D			$	5,647.26
137.099149		WINNER #1			37033242620000				PDC98D			$	5,138.54
137.099069		THOMSON-BLACKHILLS #95			37033240480000				PDC98D			$	4,990.83
137.097073		SKONIER #2			37033237530000				PDC96D			$	4,957.06
137.098182		S&D #2			37033239710000				PDC97D			$	4,694.63
137.097005		TATE #34			37033237130000				PDC96D			$	4,529.33
137.097070		DEHAVEN #2			37033237860000				PDC96D			$	4,013.22
137.099008		ZOLD #3			37033242460000				PDC98D			$	3,900.64
137.097095		PRISK #5			37033237830000				PDC96D			$	3,564.05
137.098085		HURD #3			37033239020000				PDC97D			$	3,498.03
137.097087		DIEM #5			37033237480000				PDC96D			$	3,443.65
147.098200		MILLER #1, JACK			47001027400000				PDC97D			$	3,195.28
137.097058		SWOPE #154			37033236220000				PDC96D			$	3,125.65
137.099016		MAHAFFEY #32			37033242200000				PDC98D			$	3,011.38

 

Page 2 of 4

---

147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.098107		MCGEE #6			37033239370000				PDC97D			$	2,995.76
137.097013		THOMSON-GIBBS #34			37033237260000				PDC96D			$	2,501.84
137.000080		GOLDINGER #2			37005262420000				PDC99D			$	2,419.26
137.099066		SHANNON L&M #15			37033239960000				PDC98D			$	2,408.05
137.099067		SHANNON L&M #16			37033239970000				PDC98D			$	2,408.05
137.000055		PA MINES #33			37021208660000				PDC99D			$	2,244.02
137.098220		TUBBS #21			37033239900000				PDC97D			$	2,097.46
137.098132		MYERS #11			37033239250000				PDC97D			$	1,943.54
147.099097		COALTRAIN #12			47091010410000				PDC98D			$	1,942.74
137.098108		IRELAND #1, P.			37033240050000				PDC97D			$	1,862.52
137.098161		JOHNSON #1, DAVID			37125218330000				PDC97D			$	1,813.61
137.097021		KRICK #12			37033237460000				PDC96D			$	1,620.15
137.000027		STANKAY #2			37005262550000				PDC99D			$	1,562.79
137.097006		TATE #31			37033237300000				PDC96D			$	1,391.62
147.097055		SHOCKEY #3			47001027250000				PDC96D			$	1,350.25
147.099052		COALTRAIN #15			47091010400000				PDC98D			$	996.86
137.098086		HURD #4			37033238980000				PDC97D			$	570.53
137.097007		PRISK #1			37033237360000				PDC96D			$	500.00
137.097008		PRISK #2			37033237370000				PDC96D			$	500.00
137.097010		WITHERITE #1			37033237340000				PDC96D			$	500.00
137.097011		WITHERITE #2			37033237350000				PDC96D			$	500.00
137.097018		THOMSON-GIBBS #39			37033237440000				PDC96D			$	500.00
137.097080		DAISHER #1			37033237680000				PDC96D			$	500.00
137.097094		WITHERITE #3			37033237850000				PDC96D			$	500.00
137.097172		KAUFMAN #288			37033237490000				PDC96D			$	500.00
137.097174		CARDIN #311			37033237060000				PDC96D			$	500.00
137.097179		HAAG #327			37033237840000				PDC96D			$	500.00
147.097056		BAUGHMAN #1			47001027270000				PDC96D			$	500.00
147.097057		BAUGHMAN #2			47001027280000				PDC96D			$	500.00
147.097092		BURNER-HEIRS #3			47001027220000				PDC96D			$	500.00
137.098088		MCGEE #4			37033239060000				PDC97D			$	500.00
137.098092		MCGEE #7			37033239350000				PDC97D			$	500.00
137.098103		LUDWIG #4			37033239290000				PDC97D			$	500.00
137.098105		LUDWIG #6			37033238690000				PDC97D			$	500.00
137.098110		MCGEE #9			37033239090000				PDC97D			$	500.00
137.098111		MCGEE #15			37033239580000				PDC97D			$	500.00
137.098122		MYERS #1			37033239150000				PDC97D			$	500.00
137.098123		MYERS #2			37033239160000				PDC97D			$	500.00
137.098153		SHANNON #2			37033238950000				PDC97D			$	500.00
137.098154		SHANNON #3			37033238910000				PDC97D			$	500.00
137.098156		SPINGOLA #2			37033237220000				PDC97D			$	500.00
137.098157		SUMMERS #1			37033238900000				PDC97D			$	500.00
137.098158		HERRINGTON TRUST #1			37033238920000				PDC97D			$	500.00
137.098167		A&G #24			37033239690000				PDC97D			$	500.00
137.098183		S&D #3			37033239720000				PDC97D			$	500.00
137.098185		S&D #5			37033239740000				PDC97D			$	500.00
137.098186		S&D #6			37033239820000				PDC97D			$	500.00
137.098219		WOOD #21			37033240000000				PDC97D			$	500.00
137.099009		FREYER #1			37033242070000				PDC98D			$	500.00
137.099012		FREYER #4			37033242570000				PDC98D			$	500.00
137.099015		MAHAFFEY #31			37033242250000				PDC98D			$	500.00
137.099024		IRACA #1			37033242010000				PDC98D			$	500.00
137.099103		SUSQUEHANNA REC. #4			37033242520000				PDC98D			$	500.00
137.099111		WILSON #2			37005261080000				PDC98D			$	500.00
137.099134		CAROFF #2			37063322580000				PDC98D			$	500.00
137.099145		HURD #2			37033242670000				PDC98D			$	500.00
137.099146		MANDEL UNIT #1			37033242600000				PDC98D			$	500.00
147.099003		HOVATER #1			47001027620000				PDC98D			$	500.00

 

Page 3 of 4

---

147.099073		CHESSER-RINKER UNIT #1			47001027660000				PDC98D			$	92,712.20
137.000025		SHEARER #2			37005262210000				PDC99D			$	500.00
137.000026		STANKAY #1			37005262340000				PDC99D			$	500.00
137.000028		COLEMAN #1, C.			37063324180000				PDC99D			$	500.00
137.000087		WALKER #2			37005262250000				PDC99D			$	500.00
137.000088		COUCH #1, G.			37005262220000				PDC99D			$	500.00
137.000089		GOLDINGER #3			37005262430000				PDC99D			$	500.00
137.000091		WALKER #4			37005262240000				PDC99D			$	500.00
137.000101		GOLDINGER #4			37005262450000				PDC99D			$	500.00
147.097063		BURNER-HEIRS #1			47001027210000				PDC96D			$	484.38
137.097086		PRISK #3			37033237790000				PDC96D			$	437.66
137.098160		RAPSACK #1, NICHOLAS			37125218790000				PDC97D			$	378.91
137.098162		LALLIER #1, H.			37125218820000				PDC97D			$	378.91
137.098163		KULIKOWSKI #1			37125218810000				PDC97D			$	378.91

 

Page 4 of 4

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EXHIBIT “D” TO SALE MOTION

PROPOSED ORDER

 

---

IN THE UNITED STATES BANKRUPTCY COURT FOR THE

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

 

In re:		§		Chapter 11
		§
EASTERN 1996D LIMITED		§		Case No. 13-34773-HDH-11
PARTNERSHIP, et al., 1		§
		§		Jointly Administered
Debtors.		§

ORDER GRANTING DEBTORS’ MOTION PURSUANT TO 11 U.S.C. § 363 AND FED. R.

BANKR. P. 2002, 6004 AND 9014 AUTHORIZING SALE OF THE DEBTORS’

APPALACHIA ASSETS FREE AND CLEAR OF LIENS, CLAIMS,

INTERESTS AND ENCUMBRANCES

Upon the Motion (“Motion”) of the above-captioned debtors and debtors in possession (collectively, the “Debtors”), for entry of an Order Pursuant to Section 363 of title 11 of the United States Code (the “Bankruptcy Code”) and Rules 2002, 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) Authorizing Sale of the Debtors’Appalachia Assets (the “Appalachia Assets”) Free and Clear of Liens, Claims, Interests and Encumbrances;² and the Court having jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157(a) and 1334; and this matter being a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A); and the Court being satisfied that the relief requested in the Motion is appropriate and is in the best interests of the Debtors and their respective estates; and it appearing that sufficient notice of the Motion has been given, and that no other or further notice is required; and upon all of the proceedings had before the Court; and after due deliberation and good cause appearing therefor, it is

 

1

The Debtors in these chapter 11 cases, and the last four digits of their federal tax identification numbers, are: (i) Eastern 1996D Limited Partnership (1154); (ii) Eastern 1997D Limited Partnership (4713); (iii) Eastern 1998D Limited Partnership (7539); (iv) CO and PA 1999D Limited Partnership (8545); (v) Colorado 2000B Limited Partnership (3050); (vi) Colorado 2000C Limited Partnership (3437); (vii) Colorado 2000D Limited Partnership (4071); (viii) Colorado 2001A Limited Partnership (9061); (ix) Colorado 2001B Limited Partnership (9832); (x)

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

HEREBY FOUND AND DETERMINED THAT:³

A. The Seller Debtors have articulated good and sufficient reasons for approving (i) the form of notice of the sale, and (ii) the sale of the Appalachia Assets.

B. The contemplated sale to Alliance was negotiated, proposed and entered into by the Seller Debtors and Alliance without collusion, in good faith and from arms’-length bargaining positions, and for value. Neither the Seller Debtors, nor Alliance, nor any of their respective representatives have engaged in any conduct that would cause or permit the sale to be avoided under section 363(n) of the Bankruptcy Code. Specifically, neither Alliance nor any of its representatives have acted in a collusive manner with any person. The terms and conditions of the PSA are fair and reasonable and shall not be avoided under section 363(n) of the Bankruptcy Code.

 

Colorado 2001C Limited Partnership (3219); (xi) Colorado 2001D Limited Partnership (5051); and (xii) Colorado 2002A Limited Partnership (9674).

² Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Motion or the PSA, as applicable.

³ The assets sought to be sold through the Motion are limited to the assets of Eastern 1996D, Eastern 1997D, Eastern 1998D, and the Appalachian assets held by CO & PA 1999D. As a result, this Order does not apply to Colorado 2000B, Colorado 2000C, Colorado 2000D, Colorado 2001A, Colorado 2001B, Colorado 2001C, Colorado 2001D, Colorado 2002A, and their respective assets, or the Wattenberg assets held by CO & PA 1999D.

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

C. The transaction approved by this Order was undertaken by Alliance without collusion and in good faith, as that term is used in section 363(m) of the Bankruptcy Code and, accordingly, the reversal or modification on appeal of the authorization provided herein to consummate the proposed sale shall not affect the validity of the sale with Alliance, unless such authorization is duly stayed pending such appeal prior to the closing of such sale. Alliance is a good faith purchaser of the Appalachia Assets within the meaning of section 363(m) of the Bankruptcy Code and is entitled to all of the protections afforded thereby.

D. Good and sufficient notice of the Motion and the proposed sale to Alliance has been provided.

THEREFORE, IT IS ORDERED AS FOLLOWS:

Notice

1. Notice of Debtors’ intent to sell the Appalachia Assets was given during the first day hearings in this case, and the Motion and notice of hearing were properly and timely served. As a result, good, proper and sufficient notice of the sale of the Appalachia Assets was provided by the Debtors to parties in interest.

Approval of the Sale

2. Pursuant to 11 U.S.C. § 363(b)(1), the sale of the Appalachia Assets to Alliance, and the PSA, are hereby approved.

3. All objections, if any, to the sale of the Appalachia Assets to Alliance that have not been withdrawn, waived or settled are hereby overruled on the merits.

4. Pursuant to 11 U.S.C. § 363(b)(1), the Debtors are authorized to perform their obligations under the PSA and comply with the terms thereof to consummate the sale.

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

5. Each of the signatories to the PSA is directed to take all actions necessary or appropriate to effectuate the terms of this Order and the sale.

6. The Seller Debtors are authorized and directed to execute and deliver, and empowered to perform under, consummate, and implement, the PSA, and to take all further actions as may reasonably be request by Alliance for the purpose of assigning, transferring, granting, conveying, and conferring to Alliance or reducing to possession, the Appalachia Assets, or as may be necessary or appropriate to the performance of the obligations as contemplated by the PSA.

7. This Order and the PSA shall be binding in all respects upon the Seller Debtors, Alliance, all successors and assigns of Alliance and the Seller Debtors, all affiliates and subsidiaries of Alliance and the Seller Debtors, and any subsequent trustee appointed in the Seller Debtors’ chapter 11 cases, or upon a conversion to chapter 7 under the Bankruptcy Code, and shall not be subject to rejection or avoidance. To the extent any provision of this Order is inconsistent with the terms of the PSA, this Order shall govern.

Sale and Transfer of the Appalachia Assets

8. Except as expressly permitted or otherwise specifically provided for in the PSA or this Order, pursuant to sections 363(b)(1) and 363(f) of the Bankruptcy Code, upon the consummation of the sale and as of Closing, the Appalachia Assets shall be deemed transferred to Alliance free and clear or all Claims and Interests, with all such Claims and Interests to attach to the proceeds of the sale with the same order of priority, validity, force, and effect which they now have as against the Appalachia Assets, subject to any claims and defenses the Seller Debtors may possess with respect thereto.

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

9. The transfer of the Appalachia Assets to Alliance pursuant to the PSA constitutes a legal, valid, and effective transfer of the Appalachia Assets, and shall vest Alliance with all right, title, and interest of the Seller Debtors in and to the Appalachia Assets free and clear of all Claims and Interests.

10. If any person or entity which has filed financing statements, mortgages, mechanic’s liens, lis pendens, or other documents or agreements evidencing Claims and Interests against or in the Appalachia Assets shall not have delivered to the Seller Debtors prior to the Closing of the sale, in proper form for filing and executed by the appropriate parties, termination statements, instruments of satisfactions, releases of all Claims and Interests that such person or entity has with respect to the Appalachia Assets, or otherwise, then (a) the Seller Debtors are hereby authorized to execute and file such statements, instruments, releases, and other documents on behalf of such person or entity with respect to the Appalachia Assets and (b) Alliance is hereby authorized to file, register, or otherwise record a certified copy of this Order, which, once filed, registered, or otherwise recorded, shall constitute conclusive evidence of the release of all Claims and Interests in the Appalachia Assets of any kind or nature whatsoever.

Additional Provisions

11. The consideration provided by Alliance for the Appalachia Assets is hereby deemed to constitute reasonably equivalent value and fair consideration under the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, and under the laws of the United States, and any state, territory, possession, or the District of Columbia, and may not be avoided under section 363(n) of the Bankruptcy Code.

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

12. As a result of finding C above, Alliance is a good faith purchaser of the Appalachia Assets, and is entitled to all of the benefits and protections afforded by section 363(m) of the Bankruptcy Code.

13. Upon the Closing of the Sale, this Order shall be construed, and shall constitute for any and all purposes, a full and complete general assignment, conveyance, and transfer of all of the Appalachia Assets or a bill of sale transferring good and marketable title in such Appalachia Assets to Alliance pursuant to the terms of the PSA.

14. Each and every federal, state, and governmental agency or department, and any other person or entity, is hereby authorized to accept any and all documents and instruments necessary and appropriate to consummate the transactions contemplated by the PSA.

15. The Seller Debtors, including, but not limited to, their officers, employees, agents and representatives are hereby authorized to execute such documents and do such acts as are necessary or desirable to carry out the transactions contemplated by the terms and conditions of the PSA and this Order.

16. Except as otherwise expressly provided for in this Order, Alliance shall not have any liability or other obligation of the Seller Debtors arising under or relating to the Appalachia Assets, shall not be liable for any Claims against the Seller Debtors or any of their predecessors or affiliates, and shall have no successor or vicarious liabilities of any kind, character or nature whatsoever, including under any theory of antitrust, successor or transferee liability, labor law, or de facto merger whether known or unknown as of the date hereof, now existing or hereafter arising, whether fixed or contingent, whether asserted or unasserted, whether legal or equitable, whether liquidated or unliquidated, including but not limited to, liabilities on account of any taxes arising, accruing or payable under, out of, in connection with, or in any way relating to the Appalachia Assets prior to the Closing of the sale.

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS

---

17. Notwithstanding the provisions of Bankruptcy Rules 6004 and 6006 or any applicable provisions of the Local Bankruptcy Rules for the Northern District of Texas, this Order shall not be stayed for fourteen (14) days after the entry hereof, but shall be effective and enforceable immediately upon entry. Time is of the essence in closing the transaction referenced herein, and the Seller Debtors and Alliance intend to close the sale of the Appalachia Assets as soon as practicable. Any party objecting to this Order must exercise due diligence in filing an appeal and pursuing a stay, or risk its appeal being foreclosed as moot.

18. This Court shall retain jurisdiction to hear and determine all matters arising from the implementation of this Order.

# # # END OF ORDER # # #

 

ORDER AUTHORIZING SALE OF APPALACHIA ASSETS