Page

Article 1

INTERPRETATION

2

1.1

Definitions

2

1.2

Currency

16

1.3

Interpretation Not Affected by Headings, etc.

17

1.4

Number, Gender and Persons

17

1.5

Date for any Action

17

1.6

Statutory References

17

1.7

Invalidity of Provisions

17

1.8

Accounting Matters

17

1.9

Knowledge

17

1.10

Meaning of “Ordinary and Regular Course of Business”

18

1.11

Schedules

18

Article 2

THE ARRANGEMENT

18

2.1

The Arrangement and Interim Order

18

2.2

Plan of Arrangement

19

2.3

Joint Circular and Lynden Meeting

19

2.4

Final Order

21

2.5

Court Proceedings

22

2.6

Effective Date and Closing

22

2.7

U.S. Tax Matters

22

2.8

U.S. Securities Law Matters

23

2.9

Lynden Options

24

2.10

Payment of Consideration

25

2.11

Withholding Taxes

25

2.12

Preparation of Filings

25

2.13

Announcement and Shareholder Communications

25

Article 3

REPRESENTATIONS AND WARRANTIES

26

3.1

Representations and Warranties of Lynden

26

3.2

Representations and Warranties of Earthstone and Earthstone Acquisition

40

3.3

Lynden Disclosure Letter

56

3.4

Earthstone Disclosure Letter

56

3.5

Survival of Representations and Warranties.

56

Article 4

COVENANTS

56

4.1

Mutual Covenants

56

4.2

Covenants Relating to Regulatory Approval

58

4.3

Covenants of Earthstone and Earthstone Acquisition

58

4.4

Covenants of Lynden

60

4.5

No Solicitation by Lynden; Etc.

62

4.6

Resignation and Mutual Releases

64

4.7

Privacy Matters

64

4.8

Control of the Other Party’s Business

66

4.9

Earthstone Common Stock

66

Article 5

CONDITIONS PRECEDENT

67

5.1

Mutual Conditions Precedent

67

5.2

Additional Conditions Precedent to the Obligations of Lynden

68

5.3

Additional Conditions Precedent to the Obligations of Earthstone

69

5.4

Notice and Cure Provisions

70

5.5

Satisfaction of Conditions

70

5.6

Frustration of Conditions

71

Article 6

TERMINATION OF AGREEMENT

71

6.1

Termination by Earthstone or Lynden

71

6.2

Effect of Termination

72

6.3

Fees and Expenses

72

Article 7

INDEMNIFICATION

74

7.1

Indemnification

74

Article 8

GENERAL

75

8.1

Notice

75

8.2

Fees and Expenses

77

8.3

Successors and Assigns

77

8.4

Time of Essence

77

8.5

Public Announcements

77

8.6

Governing Law

77

8.7

Entire Agreement

77

8.8

Further Assurances

78

8.9

Amendment or Waiver

78

8.10

Counterparts

79

8.11

Enforcement of Agreement

79

1.1

Definitions

(a)

“1940 Act” means the United States Investment Company Act of 1940, as amended from time to time;

(b)

“2015 10-K” has the meaning set out in Section 3.1(j);

(c)

“Acquisition Agreement” has the meaning set out in Section 4.5(a);

(d)

“Acquisition Proposal” means any inquiry, proposal or offer from any Person or “group” (as defined in Section 13(d) of the U.S. Exchange Act), other than Earthstone and its Subsidiaries, relating to any (i) direct or indirect sale, disposition or joint venture (or any lease or other arrangement having the same economic effect as a sale), in a single transaction or a series of related transactions, outside of the ordinary course of business, of assets of Lynden and its Subsidiaries (including securities of Subsidiaries) equal to twenty percent (20%) or more of Lynden’s consolidated assets or to which twenty percent (20%) or more of Lynden’s revenues on a consolidated basis are attributable, (ii) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning of Section 13 under the U.S. Exchange Act) of twenty percent (20%) or more of any class of equity securities of Lynden, (iii) any direct or indirect takeover bid, tender offer, exchange offer, treasury issuance or other transaction that, if consummated, would result in any Person or “group” (as defined in Section 13(d) of the U.S. Exchange Act) beneficially owning twenty percent (20%) or more of any class of equity securities of Lynden or (iv) any plan of arrangement, merger, amalgamation, consolidation, unit exchange, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution, winding up or similar transaction involving Lynden which is structured to permit such Person or group to acquire beneficial ownership of at least twenty percent (20%) of Lynden’s consolidated assets or equity interests; in each case, other than the transactions contemplated hereby;

(e)

“Adverse Recommendation Change” has the meaning set out in Section 4.5(a);

(f)

“Affiliated Group” means one or more chains of corporations connected through stock ownership with a common parent corporation, but only if:

(i)

the common parent corporation owns directly stock that possesses at least 80% of the total voting power, and has a value at least equal to 80% of the total value, of the stock in at least one of the other corporations, and

(ii)

stock possessing at least 80% of the total voting power, and having a value at least equal to 80% of the total value, of the stock in each corporation (except the common parent corporation) is owned directly by one or more of the other corporations;

(g)

“Agreement” means this Arrangement Agreement (including the Schedules hereto) as the same may be supplemented, amended or restated from time to time together with the Lynden Disclosure Letter and the Earthstone Disclosure Letter;

(h)

“Arrangement” means the arrangement pursuant to Section 288 of the Business Corporations Act, on the terms and conditions set out in the Plan of Arrangement, subject to any amendment or supplement thereto made in accordance with the terms of this Agreement and the Plan of Arrangement or made at the direction of the Court in the Final Order;

(i)

“Arrangement Resolution” means the special resolution to be passed by the Lynden Shareholders approving the Arrangement substantially in the form and content set out in Schedule B;

(j)

“Associated Persons” has the meaning set out in Section 6.3(g);

(k)

“Benefit Plans” means employee benefit, welfare, supplemental employment benefit, bonus, pension, profit sharing, deferred compensation, stock compensation, stock option or purchase, retirement, hospitalization insurance, medical, dental, legal, disability and similar plans or arrangements or practices applicable to present or former employees, officers, directors or independent contractors of a Person which are currently maintained or participated in by a Person and each loan to an officer or director of a Person;

(l)

“Business Corporations Act” means the British Columbia Business Corporations Act, S.B.C. 2002, c. 57, as amended;

(m)

“Business Day” means any day which is not a Saturday, Sunday or a day on which banks are not open for business in Vancouver, British Columbia;

(n)

“Canadian GAAP” means generally accepted accounting principles in Canada as adopted by the Canadian Institute of Chartered Accountants, and in relation to any financial period beginning on or after January 1, 2011, International Financial Reporting Standards;

(o)

“Code” means the U.S. Internal Revenue Code of 1986, as amended;

(p)

“Consideration” means, collectively, (a) in respect of each Lynden Share held by Lynden Shareholders, the shares of Earthstone Common Stock receivable therefor by the Lynden Shareholders pursuant to the Plan of Arrangement, and (b) in respect of each Lynden Option held by Lynden Optionholders, the shares of Earthstone Common Stock receivable therefor by the Lynden Optionholders pursuant to the Plan of Arrangement;

(q)

“Contract” means any contract, agreement, license, franchise, lease, arrangement, commitment, or other right or obligation (written or oral) to which a party or any of its subsidiaries are a party or by which a party or any of its subsidiaries are bound or affected or to which any of their properties or other assets is subject;

(r)

“Court” means the Supreme Court of British Columbia;

(s)

“Credit Facility” has the meaning set out in Section 3.1(c)(i)(C);

(t)

“Depositary” means any trust company, bank or financial institution agreed to in writing between Lynden and Earthstone for the purpose of, among other things, receiving Letters of Transmittal (as defined in the Plan of Arrangement);

(u)

“Derivative” means a derivative transaction within the coverage of Statement of Financial Accounting Standard No. 133, as issued by the Financial Accounting Standards Board, including any swap transaction, option, hedge, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, credit-related events or conditions or any indexes, or any other similar transaction (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral, transportation or other similar arrangements related to such transaction;

(v)

“Disclosed Personal Information” has the meaning set out in Section 4.7(a);

(w)

“Dissent Rights” means the rights of dissent in respect of the Arrangement described in Article 4 of the Plan of Arrangement and in the Interim Order;

(x)

“Dissenting Shareholder” means a registered Lynden Shareholder that validly exercises his, her or its Dissent Rights with respect to the Arrangement in accordance with the requirements set out in the Interim Order and whose Dissent Rights remain valid immediately before the Effective Time;

(y)

“DOL” means the U.S. Department of Labor;

(z)

“D&O Tail Policy” has the meaning set out in Section 7.1(b);

(aa)

“Earthstone Acquisition Board” means the board of directors of Earthstone Acquisition;

(bb)

“Earthstone Board” means the board of directors of Earthstone;

(cc)

“Earthstone Common Stock” means the common stock, $0.001 par value per share, of Earthstone;

(dd)

“Earthstone Disclosure Letter” means the disclosure letter delivered by Earthstone and Earthstone Acquisition to Lynden, contemporaneously with the execution and delivery of this Agreement, with respect to certain matters in this Agreement;

(ee)

“Earthstone Financial Statements” has the meaning set out in Section 3.2(i);

(ff)

“Earthstone Material Contracts” means all such contracts designated as material in Earthstone’s SEC filings;

(gg)

“Earthstone MD&A” has the meaning set out in Section 3.2(j);

(hh)

“Earthstone Options” means options to purchase shares of Earthstone Common Stock;

(ii)

“Earthstone Payment” has the meaning set out in Section 2.7;

(jj)

“Earthstone Plan” means a Benefit Plan of Earthstone;

(kk)

“Earthstone properties and assets” has the meaning set out in Section 3.2(o);

(ll)

“Earthstone Public Documents” means the public documents filed by Earthstone in the two years prior to the date hereof and available on EDGAR under Earthstone’s profile;

(mm)

“Earthstone Report Preparer” has the meaning set out in Section 3.2(nn);

(nn)

“Earthstone Reserve Report” has the meaning set out in Section 3.2(nn);

(oo)

“Earthstone Shareholders” at any time means the holders at that time of shares of Earthstone Common Stock;

(pp)

“Earthstone Subsidiaries” means Earthstone Acquisition, Basic Petroleum Services, Inc., EF Non-Op, LLC, Earthstone Operating, LLC, and Sabine River Energy, LLC;

(qq)

“Earthstone Subsidiary Benefit Plans” means a Benefit Plan of an Earthstone Subsidiary;

(rr)

“Earthstone Termination Fee” means an amount of cash, equal to (1) U.S.$250,000, plus (2) reimbursement of Earthstone’s and its Subsidiaries for all reasonable out-of-pocket expenses incurred by Earthstone or any of its Subsidiaries in connection with the negotiation, preparation, execution and performance of this Agreement and related documentation, including printing fees, filing fees and fees and expenses of its legal, accounting and financial advisors, petroleum engineers and consultants and all fees and expenses payable to any financing sources related to this Agreement, the transactions contemplated hereby and any related financing with such reimbursement amount in this subsection (2) not to exceed a combined total of U.S.$500,000.

(ss)

“Earthstone Warrants” means warrants to purchase shares of Earthstone Common Stock;

(tt)

“EDGAR” means the Electronic Data Gathering, Analysis and Retrieval System;

(uu)

“Effective Date” means the date that is three Business Days after the last of the conditions precedent to the completion of the Arrangement contained in Article 5 have been satisfied or waived (other than those conditions which cannot, by their terms, be satisfied until the Effective Date, but subject to satisfaction or waiver of such conditions as of the Effective Date) or such earlier or later date as is agreed to in writing by Earthstone and Lynden;

(vv)

“Effective Time” means 12:01 a.m. (Vancouver time) on the Effective Date, or such other time on the Effective Date as may be agreed to in writing by Earthstone and Lynden;

(ww)

“Encumbrance” means any mortgage, pledge, assignment, charge, lien, claim, security interest, adverse interest, adverse claim, other third party interest or encumbrance of any kind, whether contingent or absolute, and any agreement, option, right or privilege (whether by Law, contract or otherwise) capable of becoming any of the foregoing;

(xx)

“Environment” means the ambient air, all layers of the atmosphere, surface water, underground water, all land, all living organisms and the interacting natural systems that include components of air, land, water, organic and inorganic matter and living organisms;

(yy)

“Environmental Approvals” means all permits, certificates, licences, authorizations, consents, instructions, registrations, directions or approvals issued or required by any Governmental Authority pursuant to any Environmental Laws;

(zz)

“Environmental Laws” means all applicable federal, state, provincial, municipal or local statutes, regulations, by‑laws, orders, rules, policies or guidelines of any Governmental Authority having the force of law, and any requirements or obligations arising under the common law, relating to the Environment, the protection of the Environment, the transportation of dangerous goods or occupational, employee and public health and safety, and included Environmental Approvals;

(aaa)

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended;

(bbb)

“ERISA Affiliate” means any entity that is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) of which a Person is a member, an unincorporated trade or business under common control with such Person (as determined under Section 414(c) of the Code), or a member of an “affiliated service group” (within the meaning of Section 414(m) of the Code) of which such Person is a member;

(ccc)

“Final Order” means the final order of the Court approving the Arrangement as such order may be amended by the Court at any time prior to the Effective Date (with the consent of the parties, acting reasonably) or, if appealed then, unless such appeal is withdrawn or denied, as affirmed or amended on appeal;

(ddd)

“Financial Advisor” means SunTrust Robinson Humphrey, Inc., financial advisor to Lynden;

(eee)

“Foreign Private Issuer” has the meaning ascribed thereto in Rule 405 under the U.S. Securities Act;

(fff)

“Good and Defensible Title” means such title that is free from reasonable doubt to the end that a prudent person engaged in the business of purchasing and owning, developing, and operating producing or non-producing oil and gas properties in the geographical areas in which they are located, with knowledge of all of the facts and their legal bearing, would be willing to accept the same acting reasonably;

(ggg)

“Governmental Authority” means any applicable:

(i)

multinational or supranational body or organization, nation, government, state, province, country, territory, municipality, quasigovernment, administrative, judicial or regulatory authority, agency, board, body, bureau, commission, instrumentality, court or tribunal or any political subdivision thereof, or any central bank (or similar monetary or regulatory authority) thereof, any taxing authority, any ministry or department or agency of any of the foregoing;

(ii)

self‑regulatory organization or stock exchange, including, but not limited to, the TSXV and the NYSE MKT;

(iii)

entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government; and

(iv)

corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of such entities or other bodies referred to above;

(hhh)

“Hazardous Materials” means any chemicals, materials, substances or wastes in any amount or concentration which are defined as or included in the definition of “hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “toxic wastes,” “pollutants,” “regulated substances” or “contaminants” or words of similar import under any applicable Environmental Laws;

(iii)

“Hydrocarbon” means means crude oil, natural gas, condensate, drip gas and natural gas liquids (including coalbed gas) and other liquids or gaseous hydrocarbons or other substances (including minerals) produced or associated therewith;

(jjj)

“IFRS” means the International Financial Reporting Standards issued by the International Accounting Standards Board and adopted by the Canadian Institute of Chartered Accountants;

(kkk)

“Indebtedness” means, as to any Person, without duplication, all of the following, whether or not included as Indebtedness or liabilities in accordance with U.S. GAAP:

(i)

all obligations of such Person for borrowed money, including all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(ii)

all direct or contingent obligations of such Person to reimburse any letter of credit issuer in respect of amounts paid under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties and similar instruments;

(iii)

all Indebtedness arising or created under any conditional sale agreement or title retention agreement relating to any property acquired by such Person (even through the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property);

(iv)

all obligations of such Person to pay the deferred purchase price of property or services, other than (A) accounts payable arising in the ordinary course of business; (B) accounts payable that are being contested in good faith; and (C) any obligations included in that certain entry or entries in the Person’s financial records representing revenue suspense accounts;

(v)

capitalized lease liabilities;

(vi)

obligations of such Person under any lease which is treated as an operating lease for financial accounting purposes and a financing lease for tax purposes (i.e., a “synthetic lease”); and

(vii)

all contingent obligations of such Person in respect of any of the foregoing;

(lll)

“Interim Order” means the interim court order of the Court providing for, among other things, the calling and holding of the Lynden Meeting, as the same may be amended, supplemented or varied by the Court (with the consent of the parties, acting reasonably);

(mmm)

“IRS” means the U.S. Internal Revenue Service;

(nnn)

“Joint Circular” means the management information circular of Lynden, including all schedules, appendices and exhibits attached thereto, and the notice of meeting and proxy form to be sent by Lynden to the Lynden Securityholders soliciting their approval of the Arrangement Resolution including any amendments or supplements thereto and the Schedule 14(c) information statement of Earthstone;

(ooo)

“Key Regulatory Approvals” means those Regulatory Approvals that are set out in Schedule D;

(ppp)

“Laws” means all laws, statutes, codes, ordinances, decrees, rules, regulations, by‑laws, statutory rules, principles of law, published policies and guidelines, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, including general principles of common and civil law, and terms and conditions of any grant of approval, permission, authority or license of any Governmental Authority, statutory body or self-regulatory authority, and the term “applicable” with respect to such Laws and in the context that refers to one or more Persons, means that such Laws apply to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Governmental Authority (or any other Person) having jurisdiction over the aforesaid Person or Persons or its or their business, undertaking, property or securities;

(qqq)

“Letter of Transmittal - Options” means the letter of transmittal sent by Lynden to the Lynden Optionholders providing for the delivery of certificates representing their Lynden Options to the Depositary;

(rrr)

“Letter of Transmittal - Shares” means the letter of transmittal sent by Lynden to the Lynden Shareholders providing for the delivery of certificates representing their Lynden Shares to the Depositary;

(sss)

“Lynden Board” means the board of directors of Lynden;

(ttt)

“Lynden Board Approval” has the meaning set out in Section 3.1(d);

(uuu)

“Lynden Board Recommendation” means the recommendation of the Lynden Board that the Lynden Securityholders approve the Arrangement and vote in favour of the Arrangement Resolution;

(vvv)

“Lynden Disclosure Letter” means the disclosure letter delivered by Lynden to Earthstone, contemporaneously with the execution and delivery of this Agreement, with respect to certain matters in this Agreement;

(www)

“Lynden Financial Statements” has the meaning set out in Section 3.1(i);

(xxx)

“Lynden Material Contracts” means any Contract that: (i) if terminated would reasonably be expected to result in a Material Adverse Effect on Lynden; (ii) provides for obligations or entitlements of Lynden, or which has an economic value to Lynden, in excess of $50,000 in the aggregate; (iii) is a Contract that contains any non‑competition obligations or otherwise restricts in any material way the business of Lynden or that includes any material exclusive dealing arrangement or any other material arrangement that grants any material right of first refusal or material right of first offer or similar material right or that limits or purports to limit in any material respect the ability of Lynden to own, operate, sell, transfer, pledge or otherwise dispose of any material assets or business; (iv) provides for the incurrence by Lynden of indebtedness in excess of $50,000, or the incurrence by Lynden of the direct or indirect guarantee or assumption by Lynden (contingent or otherwise) of any payment or performance obligations of any other Person in excess of $50,000; (v) is a financial risk management Contract, such as a currency, commodity, interest or equity related hedge or derivative Contract; (vi) provides for the disposition or acquisition by Lynden after the date of this Agreement of an amount of assets in excess of $50,000 or pursuant to which Lynden has any ownership interest in any other Person or other business enterprise in excess of $50,000; (vii) provides for the acquisition or sale by Lynden of any operating business or the capital stock or other ownership interest of any other Person; (viii) that is a material shareholders, joint venture, alliance or partnership agreement other than any joint operating agreement to which any of Lynden’s oil and gas properties are subject; (ix) is one under which Lynden has directly or indirectly guaranteed any liabilities or obligations of a third party (other than ordinary course endorsements for collection) in excess of $50,000 in the aggregate; or (x) is otherwise material to Lynden and any Lynden Subsidiaries (taken as a whole); and for greater certainty Lynden Material Contracts includes the Contracts of Lynden as set forth in the Lynden Disclosure Letter;

(yyy)

“Lynden Meeting” means the special meeting of Lynden Securityholders and any adjournment or postponement thereof, to be held in accordance with the Interim Order to consider and, if deemed advisable, pass the Arrangement Resolution;

(zzz)

“Lynden Notice” has the meaning set out in Section 4.5(d);

(aaaa)

“Lynden Option Plan” means Lynden’s stock option plan in effect on the date of this Agreement;

(bbbb)

“Lynden Optionholders” at any time means the registered holders at that time of Lynden Options;

(cccc)

“Lynden Options” means the outstanding options to purchase Lynden Shares;

(dddd)

“Lynden Plan” means a Benefit Plan of Lynden;

(eeee)

“Lynden properties and assets” has the meaning set out in Section 3.1(o);

(ffff)

“Lynden Public Documents” means the public documents filed by Lynden in the two years prior to the date hereof and available on SEDAR and/or EDGAR under Lynden’s profile;

(gggg)

“Lynden Report Preparer” has the meaning set out in Section 3.1(ll);

(hhhh)

“Lynden Reserve Report” has the meaning set out in Section 3.1(ll);

(iiii)

“Lynden Securities” means, collectively, the Lynden Shares and the Lynden Options;

(jjjj)

“Lynden Securityholders” at any time means the registered holders at that time of Lynden Securities;

(kkkk)

“Lynden Shareholder Approval” has the meaning set out in Section 2.1(b)(ii);

(llll)

“Lynden Shareholders” at any time means the registered holders at that time of Lynden Shares;

(mmmm)

“Lynden Shares” means the common shares in the authorized share capital of Lynden;

(nnnn)

“Lynden Subsidiaries” means Lynden USA, Inc., a Utah corporation, and Lynden Exploration Ltd., a corporation existing under the laws of Alberta, Canada;

(oooo)

“Lynden Supporting Shareholders” means, collectively, (i) each of the directors and officers of Lynden and (ii) entities related to JVL Advisors, LLC;

(pppp)

“Lynden Termination Fee” means an amount of cash, equal to (1) U.S.$250,000, plus (2) reimbursement of Lynden’s and its Subsidiaries for all reasonable out-of-pocket expenses incurred by Lynden or any of its Subsidiaries in connection with the negotiation, preparation, execution and performance of this Agreement and related documentation, including printing fees, filing fees and fees and expenses of its legal, accounting and financial advisors, petroleum engineers and consultants and all fees and expenses payable to any financing sources related to this Agreement, the transactions contemplated hereby and any related financing with such reimbursement amount in this subsection (2) not to exceed a combined total of U.S.$500,000.

(qqqq)

“Material Adverse Effect” means, in respect of  a party, any change, event, effect, occurrence, state of facts or development, which, either individually or in the aggregate, is, or could reasonably be expected to be, material and adverse (a) to the business, condition (financial or otherwise), properties, assets (tangible or intangible), liabilities (whether absolute, accrued, conditional, contingent or otherwise), operations, or results of operations of that party and its subsidiaries, taken as a whole, or (b) the ability of such party to perform its obligations under this Agreement and to consummate the transactions contemplated by this Agreement, other than in the case of either (a) or (b), any change, event, effect, occurrence, state of facts or development:

(i)

relating to conditions generally affecting the oil and gas industry, including a decrease in the price of oil and gas;

(ii)

relating to general or economic, financial, currency exchange, securities or commodities market, capital market, regulatory, or political conditions;

(iii)

relating to U.S. GAAP, Canadian GAAP or the interpretation or application thereof;

(iv)

resulting from any matter which was publicly disclosed or which was communicated in writing to the other party prior to the date of this Agreement; or

(v)

attributable to the announcement or pendency of this Agreement or the Arrangement, or otherwise contemplated by or resulting from the terms of this Agreement;

(vi)

relating to changes, developments or conditions resulting from any act of sabotage or terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of sabotage, terrorism, hostilities or war;

(vii)

relating to any failure by such party or any of its Subsidiaries to meet any internal or published industry analyst projects or forecasts or estimates of revenues or earnings for any period;

(viii)

relating to any shareholder litigation or threatened shareholder litigation, in each case, arising from allegations of a violation of any laws or rules established by any Securities Authorities or breach of fiduciary duties or similar allegations in connection with this Agreement or the Arrangement; and

(ix)

relating to any decrease in the market price or any decline in the trading volume of that party’s common shares (it being understood that the causes underlying such change in the market price or trading volume (other than those in items (i) to (viii) above) may be taken into account in determining whether a Material Adverse Effect has occurred);

(rrrr)

“Meeting Deadline” means April 29, 2016, or such later date as may be agreed to in writing by the parties, such agreement to not be withheld unreasonably;

(ssss)

“MI 61‑101” means Multilateral Instrument 61‑101 – Protection of Securityholders in Special Transactions as amended or replaced from time to time;

(tttt)

“MI 62‑104” means Multilateral Instrument 62‑104 – Take Over Bids and Issuer Bids as amended or replaced from time to time;

(uuuu)

“NYSE MKT” means the NYSE MKT, LLC;

(vvvv)

“Order” means any writ, fine, award, determination, order, judgment, injunction, ruling, decision, opinion, decree, or similar action of a Governmental Authority;

(wwww)

“Other Party” means (i) with respect to Lynden, Earthstone or Earthstone Acquisition; and (ii) with respect to Earthstone or Earthstone Acquisition, Lynden, in each case unless the context otherwise requires;

(xxxx)

“Outside Date” means September 30, 2016, or such later date as may be agreed to in writing by the parties;

(yyyy)

“parties” means collectively, Earthstone, Earthstone Acquisition and Lynden, and “party” means any one of them;

(zzzz)

“Permit” means any license, permit, certificate, consent, order, grant, approval, classification, registration or other authorization of and from any Governmental Authority;

(aaaaa)

“Permitted Encumbrances” means (i) Encumbrances for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings for which adequate accruals or reserves have been established and included in the consolidated balance sheets included in or incorporated by reference into the Lynden Public Documents or the Earthstone Public Documents, as applicable, filed prior to the date of this Agreement, (ii) Encumbrances affecting the interest of the grantor of any easements benefitting owned real property and liens of record attaching to real property, fixtures or leasehold improvements, which would not materially impair the use of the real property in the operation of the business thereon or the value of such real property, (iii) statutory Encumbrances of landlords with respect to leased real property, (iv) in the case of oil and gas leases, the lessor’s Production Burdens, (v) Encumbrances reflected in Lynden’s or Earthstone’s, as applicable, consolidated balance sheets included in or incorporated by reference into the Lynden Public Documents or the Earthstone Public Documents, as applicable, filed prior to the date of this Agreement, (vi) Encumbrances in favor of vendors, carriers, warehousemen, mechanics, materialmen, repairmen, construction or similar Encumbrances or other encumbrances arising by operation of applicable Law, in

each case for amounts not yet delinquent, (vii) Encumbrances created under joint operating agreements, participation agreements or development agreements, in each case for amounts not yet delinquent, (viii) in the case of real property, in addition to items in clauses (i), (ii), (iii) and (iv), zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, interfere in any material respect with the present use of or occupancy of the affected parcel by such party or any of such party’s Subsidiaries or materially impair the value of such assets and (ix) Encumbrances, exceptions, defects or irregularities in title, easements, imperfections of title, claims, charges, security interests, rights-of-way, covenants, restrictions and other similar matters that would be accepted by a reasonably prudent purchaser of oil and gas interests, that would not reduce the net revenue interest, or increase the working interest, of such party or any of such party’s Subsidiaries in any oil and gas lease and that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect of such party;

(bbbbb)

“Person” means any individual, corporation, firm, sole proprietorship, partnership (including a limited partnership), joint venture, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, a natural person in his capacity as trustee, executor, administrator, or other legal representative and the Crown or any agency or instrumentality thereof;

(ccccc)

“Plan of Arrangement” means the plan of arrangement in substantially the form and content set out in Schedule A, as amended or supplemented from time to time in accordance with the terms of this Agreement, Article 6 of the Plan of Arrangement (with the consent of the parties acting reasonably) or made at the direction of the Court;

(ddddd)

“Proceeding” means any claim, charge, assertion, cause of action, complaint, litigation, controversy, action, suit, arbitration, investigation or other proceeding, whether civil, criminal or administrative;

(eeeee)

“Production Burdens” means all royalty interests, overriding royalty interests, production payments, net profit interests or other similar interests that constitute a burden on, and are measured by or are payable out of, the production of Hydrocarbons or the proceeds realized from the sale or other disposition thereof (including any amounts payable to publicly traded royalty trusts), other than Taxes and assessments of Governmental Authorities;

(fffff)

“Providing Party” has the meaning set out in Section 4.7(a);

(ggggg)

“Receiving Party” has the meaning set out in Section 4.7(a);

(hhhhh)

“Registrar” means the Registrar of Companies appointed under Section 400 of the Business Corporations Act;

(iiiii)

“Regulatory Approvals” means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the waiver or lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of a Governmental Authority required in connection with the consummation of the Arrangement;

(jjjjj)

“Related Person” means,

(i)

a corporation that, immediately before or immediately after a purchase, exchange, redemption, or other acquisition of Lynden Shares or shares of Earthstone Common Stock, as the case may be, is a member of an Affiliated Group (as defined herein) of which Lynden or Earthstone, as applicable, (or any successor corporation thereto) is a member; or

(ii)

a corporation in which Lynden or Earthstone, as applicable, (or any successor corporation thereto), owns, or which owns with respect to Lynden or Earthstone, as applicable, (or any successor corporation thereto), directly or indirectly, immediately before or immediately after such purchase, exchange, redemption, or other acquisition, at least 50% of the total combined voting power of all classes of stock entitled to vote or at least 50% of the total value of shares of all classes of stock, taking into account for purposes of this clause (ii) any stock owned by 5% or greater stockholders of Lynden or Earthstone, as applicable, (or any successor thereto) or such corporation, a proportionate share of the stock owned by entities in which Lynden or Earthstone, as applicable, (or any successor thereto) or such corporation owns an interest, and any stock which may be acquired pursuant to the exercise of options;

(kkkkk)

“Release” includes releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, migrating, escaping, leaching, disposing, dumping, depositing, spraying, burying, abandoning, seeping or placing, or any similar action defined in any Environmental Law;

(lllll)

“Representatives” has the meaning set out in Section 4.5(a);

(mmmmm)

“Return” means any return, estimated Tax return, report, declaration, form, claim for refund or information statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof;

(nnnnn)

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder from time to time;

(ooooo)

“SEC” means the U.S. Securities and Exchange Commission;

(ppppp)

“Section 3(a)(10) Exemption” has the meaning set out in Section 2.8;

(qqqqq)

“Securities Authorities” means the securities commissions and/or other securities regulatory authorities in the provinces, states and territories of Canada and the United States applicable to Lynden, Earthstone or Earthstone Acquisition, as the case may be;

(rrrrr)

“Securities Laws” means the applicable securities legislation in Canada, the U.S. Securities Act, the U.S. Exchange Act and the Sarbanes-Oxley Act, in each case, as amended from time to time, and the applicable rules and regulations promulgated thereunder from time to time as well as the applicable stock exchange rules and listing standards of the TSXV and NYSE MKT;

(sssss)

“SEDAR” means the System for Electronic Document Analysis and Retrieval;

(ttttt)

“Share Exchange Ratio” has the meaning given to it in Section 3.1(b) of the Plan of Arrangement;

(uuuuu)

“Subsidiary” has the meaning ascribed thereto in the Securities Act (British Columbia);

(vvvvv)

“Superior Proposal” means a bona fide written Acquisition Proposal, obtained after the date of this Agreement and not in breach of Section 4.5 (other than an immaterial breach), to acquire, directly or indirectly, more than fifty percent (50%) of the outstanding equity securities of Lynden or assets of Lynden and its Subsidiaries on a consolidated basis, made by a third party, which is on terms and conditions which the Lynden Board determines in its good faith to be more favorable to the Lynden Shareholders from a financial point of view than the transactions contemplated hereby;

(wwwww)

“Support Agreements” means the voting support agreements (including all amendments thereto) entered into between Earthstone and the Lynden Supporting Shareholders, setting forth the terms and conditions upon which the Lynden Supporting Shareholders shall agree, inter alia, to vote in favour of the Arrangement Resolution at the Lynden Meeting, in the form attached hereto as Schedule E;

(xxxxx)

“Tax Act” means the Income Tax Act (Canada), as amended;

(yyyyy)

“Tax Returns” means  all returns, schedules, elections, forms, notices, declarations, reports information returns and statements filed or required to be filed with any Governmental Authority relating to Taxes;

(zzzzz)

“Taxes” means all taxes, assessments, charges, dues, duties, rates, fees, imposts, levies and similar charges of any kind lawfully levied, assessed or imposed by any Governmental Authority, including, without limitation, all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all capital taxes, gross receipts taxes, environmental taxes, sales taxes, uses taxes, ad valorem taxes, value added taxes, transfer taxes (including, without limitation, taxes relating to the transfer of interests in real property or entities holding interests therein), franchise taxes, licence taxes, withholding taxes, payroll taxes, employment taxes, Canada Pension Plan contributions, employer health taxes, excise, severance, social security, workers’ compensation, employment insurance or compensation taxes or premium, stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or add‑on minimum taxes, goods and services tax, customs duties or other taxes, fees, imports, assessments or charges of any kind whatsoever, together with any interest, fines and any penalties or additional amounts imposed by any taxing authority (domestic or foreign) or that may become payable in respect thereof; and liability for any of the foregoing as a transferee or successor, guarantor or surety or in a similar capacity under any law, contract, arrangement, agreement, understanding or commitment (whether written or oral);

(aaaaaa)

“Topping Fee” means an amount of cash, equal to (1) U.S.$2,250,000, plus (2) reimbursement of Earthstone’s and its Subsidiaries for all reasonable out-of-pocket expenses incurred by Earthstone or any of its Subsidiaries in connection with the negotiation, preparation, execution and performance of this Agreement and related documentation, including printing fees, filing fees and fees and expenses of its legal, accounting and financial advisors, petroleum engineers and consultants and all fees and

expenses payable to any financing sources related to this Agreement, the transactions contemplated hereby and any related financing with such reimbursement amount in this subsection (2) not to exceed a combined total of U.S.$500,000;

(bbbbbb)

“Transmittal Letters” means, collectively, the Letter of Transmittal – Shares and the Letter of Transmittal – Options, and “Transmittal Letter” means either of them;

(cccccc)

“Treasury Regulations” means the regulations promulgated by the United States Treasury Department under the Code;

(dddddd)

“TSXV” means the TSX Venture Exchange;

(eeeeee)

“United States” or “U.S.” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia;

(ffffff)

“U.S. Earthstone Subsidiary” means Basic Petroleum Services, Inc., EF Non-Op, LLC, Earthstone Operating, LLC, and Sabine River Energy, LLC;

(gggggg)

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

(hhhhhh)

“U.S. GAAP” means the generally accepted accounting principles in the United States;

(iiiiii)

“U.S. Lynden Subsidiary” means Lynden USA Inc., a corporation existing under the laws of the State of Utah;

(jjjjjj)

“U.S. Person” has the meaning ascribed to it in Rule  902 of Regulation S under the U.S. Securities Act;

(kkkkkk)

“U.S. Securities Act” means the United States Securities Act of 1933, as amended; and

(llllll)

“Willful Breach” means either (i) with respect to any breach of any representations and warranties or any failure to perform any covenants or other agreements contained in this Agreement such that the conditions set forth in (A) in the case of any such breach or failure to perform by Earthstone or Earthstone Acquisition, Section 5.2(a) or Section 5.2(b) and (B) in the case of any such breach or failure to perform by Lynden, Section 5.3(a) or Section 5.3(b), in the case of (A) or (B) would not be satisfied prior to the Outside Date, such breach or failure is a consequence of an act or intentional omission undertaken by the breaching party (or, in the case of Section 4.5 with respect to Lynden, the consequence of an act or intentional omission of a Subsidiary of Lynden, or of a Representative of Lynden at the direction of Lynden) with the knowledge that the taking of, or failure to take, such act would, or would be reasonably expected to, cause such a breach or failure of such representation, warranty, covenant or agreement or (ii) the failure by any party to consummate the transactions contemplated hereby after all of the conditions set forth in Article 5 have been satisfied or waived (by the party entitled to waive any such applicable conditions).

1.2

Currency

1.3

Interpretation Not Affected by Headings, etc.

1.4

Number, Gender and Persons

1.5

Date for any Action

1.6

Statutory References

1.7

Invalidity of Provisions

1.8

Accounting Matters

1.9

Knowledge

1.10

Meaning of “Ordinary and Regular Course of Business”

1.11

Schedules

Schedule

Matter

A

Plan of Arrangement

B

Form of Arrangement Resolution

C

Form of Resignation and Mutual Release

D

Key Regulatory Approvals

E

Form of Support Agreement

2.1

The Arrangement and Interim Order

(a)

Earthstone, Earthstone Acquisition and Lynden agree, subject to the terms and conditions contained in this Agreement, to implement the Plan of Arrangement.

(b)

Lynden will, in a manner reasonably acceptable to Earthstone and Lynden, apply to the Court pursuant to Section 291 of the Business Corporations Act for the Interim Order, and thereafter proceed with and diligently seek the Interim Order, providing, among other things:

(i)

that the Persons to whom notice is to be provided in respect of the Arrangement and the Lynden Meeting shall be the Lynden Securityholders and for the manner in which such notice is to be provided;

(ii)

that the requisite approval for the Arrangement Resolution will be 66⅔% of the votes cast on the Arrangement Resolution by Lynden Securityholders present in person or by proxy at the Lynden Meeting voting as a single class, together with minority approval in accordance with MI 61‑101, if required (together, the “Lynden Shareholder Approval”);

(iii)

that in all other respects, the terms, conditions and restrictions of the Lynden constating documents, including quorum requirements and other matters, will apply in respect of the Lynden Meeting;

(iv)

for the grant of the Dissent Rights;

(v)

for notice requirements with respect to the application to the Court for the Final Order;

(vi)

that the Lynden Meeting may be adjourned from time to time by management of Lynden, subject to the terms of this Agreement, without the need for additional approval of the Court; and

(vii)

that the record date to determine the Lynden Securityholders entitled to notice of and to vote at the Lynden Meeting will not change in respect of any adjournment(s) of the Lynden Meeting.

(c)

Lynden will advise the Court of Earthstone’s intention to rely upon the Section 3(a)(10) Exemption as provided for in Section 2.8(a).

(d)

Lynden will convene and use commercially reasonable efforts to hold the Lynden Meeting by the Meeting Deadline in accordance with the Interim Order.

(e)

Subject to obtaining the approvals as contemplated by the Interim Order and as may be directed by the Court in the Interim Order, Lynden will, as soon as reasonably practicable thereafter, take all steps necessary to submit the Arrangement to the Court and apply for the Final Order.

(f)

If the Final Order is obtained, subject to the satisfaction, waiver or release of the conditions set forth in Article 5 (as confirmed by each party to the other in writing), each of Lynden, Earthstone and Earthstone Acquisition will, as soon as reasonably practicable thereafter, take all such actions as may be necessary to effect the Arrangement.

2.2

Plan of Arrangement

2.3

Joint Circular and Lynden Meeting

(a)

Earthstone and Lynden will, as soon as practicable after execution of this Agreement, jointly prepare, the Joint Circular which will, among other things, reflect the Lynden Board Approval and will include the Lynden Board Recommendation, and, subject to the issuance of the Interim Order and receipt of receipt of no comment or no further comments from the SEC of the Joint Circular, Lynden will convene the Lynden Meeting and cause the Joint Circular to be distributed to the Lynden Securityholders and other appropriate Persons in accordance with the Interim Order, applicable Laws and the Articles of Lynden.

(b)

Lynden shall ensure that the Joint Circular provides notice of, and advises Lynden Shareholders of their right to attend the Court hearing of Lynden’s application for the Final Order.

(c)

Lynden shall disclose in the Joint Circular that the Lynden Board has determined after receiving financial and legal advice, that the Consideration is fair from a financial perspective and that the Arrangement is in the best interests of Lynden.

(d)

Earthstone shall provide to Lynden all information regarding Earthstone, its affiliates and the shares of Earthstone Common Stock, as required by the Interim Order or applicable Laws for inclusion in the Joint Circular or in any amendments or supplements to such Joint Circular.  Earthstone shall also use commercially reasonable efforts to obtain any necessary consents from any of its auditors and any other advisors to the use of any financial, technical or other expert information required to be included in the Joint Circular and to the identification in the Joint Circular of each such advisor. Earthstone shall ensure that such information shall be complete and correct in all material respects and comply in all material respects with applicable Laws and that it does not include any misrepresentation, and that such information constitutes full, true and plain disclosure concerning Earthstone, its assets and the shares of Earthstone Common Stock.

(e)

Earthstone and its legal counsel shall be given a reasonable opportunity to review and comment on the Joint Circular prior to the Joint Circular being printed and filed with any Governmental Authority, and reasonable consideration shall be given to any comments made by Earthstone and its legal counsel; provided, however, that all information relating solely to Earthstone, its affiliates, the shares of Earthstone Common Stock and Earthstone’s reliance on the Section 3(a)(10) Exemption and the effect thereof included in the Joint Circular shall be the sole responsibility of, and in form and content satisfactory to, Earthstone. All information in the Joint Circular relating solely to Lynden, its affiliates, and the Lynden Shares shall be the sole responsibility of, and in form and content satisfactory to, Lynden. Lynden shall provide Earthstone with final copies of the Joint Circular prior to the mailing to the Lynden Shareholders.

(f)

Subject to Section 4.5 in all respects:

(i)

Lynden shall solicit proxies in favour of the Arrangement Resolution, against any resolution submitted by any Lynden Shareholder, including, if reasonably requested by Earthstone, using the services of dealers and proxy solicitation services selected by Lynden, the compensation and expenses of which shall be the sole expense of Lynden, and permitting Earthstone to otherwise assist Lynden in such solicitation, and take all other actions that are reasonably necessary or desirable to seek the approval of the Arrangement by Lynden Shareholders; provided, however, that the aggregate amount of any expenses required to be incurred by Lynden in connection with the solicitation of proxies pursuant to this Section 2.3 shall not exceed U.S.$150,000;

(ii)

the Lynden Board shall recommend to Lynden Shareholders that they vote in favour of the Arrangement Resolution;

(iii)

the Lynden Board shall not make an Adverse Recommendation Change; and

(iv)

Lynden shall include in the Joint Circular a statement that each Lynden Supporting Shareholder intends to vote all of such Person’s Lynden Shares in favour of the Arrangement Resolution, subject to the other terms of this Agreement and the Support Agreements.

(g)

Subject to Section 2.3(h), Lynden will hold the Lynden Meeting on or before the Meeting Deadline and will provide notice to Earthstone of the Lynden Meeting and allow representatives of Earthstone to attend the Lynden Meeting.

(h)

Lynden will not adjourn, postpone or cancel the Lynden Meeting (or propose to do so), except if a quorum is not present at the Lynden Meeting; provided, however, that Lynden, after consultation with Earthstone, may adjourn or postpone the Lynden Meeting (A) to the extent the Lynden Board determines in good faith, after consultation with outside legal counsel, that such adjournment or postponement is necessary to ensure that any supplement or amendment to the Joint Circular in accordance with this Agreement and required by applicable Law is provided to the Lynden Shareholders and that such Lynden Shareholders have a reasonable period of time to review any such required supplement or amendment; or (B) to solicit additional votes and proxies for the purpose of obtaining the Lynden Shareholder Approval.

(i)

Lynden will provide Earthstone with (i) information on the proxies received and the securityholder votes on the Arrangement Resolution on a daily basis commencing at least ten Business Days before the date of the Lynden Meeting to the extent that such information is available to Lynden, and (ii) in a timely and expeditious manner, a copy of any purported exercise of the Dissent Rights and written communications with the Lynden Shareholders purportedly exercising such Dissent Rights, and will not settle or compromise any action brought by any present, former or purported holder of any of the Lynden Securities in connection with the transactions contemplated by this Agreement, including the Arrangement, without the prior consent of Earthstone.

(j)

In a timely and expeditious manner, Lynden will prepare, (in consultation with Earthstone), and file any mutually agreed (or as otherwise required by applicable Laws) amendments or supplements to the Joint Circular (which amendments or supplements will be in a form satisfactory to Earthstone, acting reasonably) with respect to the Lynden Meeting and mail such amendments or supplements, as required by the Interim Order and in accordance with all applicable Laws, in and to all jurisdictions where such amendments or supplements are required to be mailed, complying in all material respects with all applicable Laws on the date of the mailing thereof.

(k)

Earthstone will prepare, in a timely and expeditious manner, in consultation with Lynden, the form of the Transmittal Letters, and Lynden will, at the time of mailing of the Joint Circular, forward or cause to be forwarded the Transmittal Letters to each holder of Lynden Shares at the address of such holder as it appears on the register maintained by or on behalf of Lynden in respect of the holders of Lynden Shares.

2.4

Final Order

(a)

the Interim Order is obtained; and

(b)

the Arrangement Resolution is passed at the Lynden Meeting as provided for in the Interim Order and as required by applicable Law,

2.5

Court Proceedings

2.6

Effective Date and Closing

2.7

U.S. Tax Matters

2.8

U.S. Securities Law Matters

(a)

the Arrangement will be subject to the approval of the Court;

(b)

the Court will be advised prior to the hearing required to approve the Arrangement that, based on the Court’s determination of the fairness of the Plan of Arrangement and approval of the Arrangement, Earthstone will rely upon the Section 3(a)(10) Exemption with respect to certain securities to be issued to the Lynden Shareholders;

(c)

the Court will be required to satisfy itself as to the fairness of the Arrangement to the Lynden Shareholders to be issued shares of Earthstone Common Stock pursuant to the Arrangement and the Final Order approving the Arrangement that is obtained from the Court will expressly state that the Arrangement is approved by the Court as being fair to such Lynden Shareholders;

(d)

the Lynden Securityholders will be given adequate and timely notice advising them of their right to attend the hearing of the Court for the Final Order to approve the Arrangement and providing them with sufficient information necessary for them to exercise that right, and Lynden will file with the Court, prior to sending such information to the Lynden Shareholders, a copy of the Joint Circular, Transmittal Letters and all other materials which will be provided to the Lynden Securityholders;

(e)

the Interim Order will specify that each Lynden Shareholder will have the right to appear before the Court and make submissions at the hearing of the Court for the Final Order to approve the Arrangement so long as they enter an appearance within a reasonable time;

(f)

the Lynden Shareholders will be advised that the shares of Earthstone Common Stock issued in the Arrangement in exchange for the Lynden Shares have not been registered under the U.S. Securities Act and will be issued by Earthstone in reliance on the Section 3(a)(10) Exemption and will not be subject to trading restrictions subject to, with respect to certain Lynden Shareholders who are or, at the Effective Time, become affiliates (as defined by Rule 144 of the U.S. Securities Act) of Earthstone, certain restrictions on resale under Rule 144 of the U.S. Securities Act; and

(g)

the Final Order shall include a statement to substantially the following effect:

2.9

Lynden Options

2.10

Payment of Consideration

2.11

Withholding Taxes

2.12

Preparation of Filings

2.13

Announcement and Shareholder Communications

3.1

Representations and Warranties of Lynden

(a)

Organization.  Each of Lynden and all Lynden Subsidiaries have been incorporated, are validly subsisting and have full corporate and legal power and authority to own its property and assets and to conduct its business as currently owned and conducted.  Each of Lynden and all Lynden Subsidiaries are registered, licensed or otherwise qualified in each jurisdiction where the nature of the business or the location or character of the property and assets owned or leased by it requires it to be so registered, licensed or otherwise qualified, other than those jurisdictions where the failure to be so registered, licensed or otherwise qualified would not have a Material Adverse Effect on Lynden.  All of the outstanding shares of the Lynden Subsidiaries are beneficially owned, directly or indirectly, by Lynden.  Except pursuant to restrictions on transfer contained in the articles or by‑laws (or their equivalent) of all Lynden Subsidiaries, the outstanding shares of any Lynden Subsidiary are owned free and clear of all Encumbrances and Lynden is not liable to any creditor in respect thereof. There are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any issued or unissued securities of, or interest in, any of the Lynden Subsidiaries or any of its material assets from either Lynden or any Lynden Subsidiary.

(b)

Capitalization.  Lynden is authorized to issue an unlimited number of Lynden Shares.  As of the date hereof, there were issued and outstanding:

(i)

130,198,411 Lynden Shares; and

(ii)

Lynden Options to acquire an aggregate of 4,010,000 Lynden Shares the terms of which are set forth in the Lynden Disclosure Letter.

(c)

Authority.  Lynden has all necessary corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by Lynden as contemplated by this Agreement, and to perform its obligations hereunder and under such other agreements and instruments.  The execution and delivery of this Agreement by Lynden and the completion by Lynden of the Arrangement contemplated by this Agreement have been authorized by the Lynden Board and, subject to obtaining the Lynden Shareholder Approval, approval of the TSXV, the Interim Order and the Final Order in the manner contemplated herein, no other corporate or shareholder proceedings on the part of Lynden or the Lynden Shareholders are necessary to authorize this Agreement or the completion of Lynden of the transactions contemplated hereby other than in connection with the approval by the Lynden Board of the Joint Circular.  This Agreement has been executed and delivered by Lynden and constitutes a legal, valid and binding obligation of Lynden, enforceable against Lynden in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other applicable Laws relating to or affecting creditors’ rights generally, and to general principles of equity.  The execution and delivery by Lynden of this Agreement and the performance by Lynden of its obligations hereunder and the completion of the transactions contemplated hereby, do not and will not:

(i)

result in a violation, contravention or breach of or constitute a default under, or entitle any party to terminate, accelerate, modify or call any obligations or rights under, require any consent to be obtained under or give rise to any termination rights under any provision of:

(A)

the Articles, By‑laws or Notice of Articles of Lynden or any Lynden Subsidiary,

(B)

any applicable Law or the rules or policies of the TSXV, or

(C)

any revolving line of credit of Lynden (the “Credit Facility”), note, bond, mortgage, indenture, deed of trust, lease, franchise, concession, easement, contract, agreement, licence, permit or other instrument to which Lynden or any Lynden Subsidiary are bound or are subject to or of which Lynden or any Lynden Subsidiary are the beneficiary;

(ii)

cause any indebtedness owing by Lynden or any of the Lynden Subsidiaries to come due before its stated maturity or cause any available credit to cease to be available;

(iii)

result in the imposition of any Encumbrance upon any of the property or assets of Lynden or any of the Lynden Subsidiaries or give any Person the right to acquire any of the assets of Lynden or any of the Lynden Subsidiaries, or restrict, hinder, impair or limit the ability of Lynden or any of the Lynden Subsidiaries to conduct the business of Lynden or any of the Lynden Subsidiaries as and where it is now being conducted; or

(iv)

result in or accelerate the time for payment or vesting of, or the amount of any severance, unemployment compensation, “golden parachute”, interest bonus, termination payments or otherwise, becoming due to any director or officer of Lynden or any of the Lynden Subsidiaries or increase any benefits otherwise payable under any Benefits Plan of Lynden or any of the Lynden Subsidiaries or result in the acceleration of the time of payment or vesting of any such benefits;

(d)

Lynden Board Approval.  The Lynden Board:

(i)

as of December 16, 2015, determined that the Consideration is fair, from a financial point of view, to the Lynden Shareholders and the Lynden Optionholders and the Arrangement is in the best interests of Lynden;

(ii)

indicated that they will recommend that the Lynden Shareholders vote in favour of the Arrangement Resolution, subject to Section 4.5; and

(iii)

authorized the entering into of this Agreement, and the performance of Lynden’s obligations hereunder (the “Lynden Board Approval”).

(e)

Lynden Subsidiaries.  The Lynden Subsidiaries are the only Subsidiaries of Lynden and Lynden does not own a direct or indirect voting or equity interest in any Person that is not one of the Lynden Subsidiaries.

(f)

Material Contracts.  The Lynden Disclosure Letter sets forth a complete and accurate list of all Lynden Material Contracts as of the date hereof.  Lynden has made available to Earthstone true and complete copies of all such Lynden Material Contracts.  Neither Lynden nor any of the Lynden Subsidiaries are in breach or violation of or default under (in each case, with or without notice or lapse of time or both) the terms of any Lynden Material Contract.  As of the date hereof, to the knowledge of Lynden, no other party to any Lynden Material Contract is in material breach of, violation of, or default under the terms of, or has threatened to terminate, any such Lynden Material Contract, and to the knowledge of Lynden, there exists no state of facts which after notice or lapse of time or both would constitute a default, violation or breach of any such Lynden Material Contract.  Each Lynden Material Contract is a valid and binding obligation of Lynden or a Lynden Subsidiary, as applicable, and is in full force and effect in accordance with its terms.  There is no Lynden Material Contract which: (i) would be violated, contravened or breached by, or under which a default would occur; (ii) requires any consent or prior approval be obtained from any Person (including consents relating to the change of control of Lynden) or notice to be given (prior to or following the Effective Time); (iii) would terminate; or (iv) would entitle any party to terminate, accelerate, modify or call any obligations or rights under; in each case, as a result of the execution of this Agreement or the completion of the Arrangement. Except for this Arrangement Agreement, no Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from Lynden or any of the Lynden

Subsidiaries of any material assets of Lynden or any of the Lynden Subsidiaries and neither Lynden nor any of the Lynden Subsidiaries has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from any Person of any securities or any assets which could reasonably be expected to be material to Lynden.

(g)

Absence of Changes.  Since September 30, 2015:

(i)

each of Lynden and the Lynden Subsidiaries have conducted its business only in the ordinary and regular course of business consistent with past practice;

(ii)

neither Lynden nor any Lynden Subsidiary have incurred or suffered a Material Adverse Effect;

(iii)

there has not been any acquisition or sale by Lynden or any Lynden Subsidiary of any material property or assets;

(iv)

other than in the ordinary and regular course of business consistent with past practice, there has not been any incurrence, assumption or guarantee by Lynden or any Lynden Subsidiary of any debt for borrowed money, any creation or assumption by Lynden or any Lynden Subsidiary of any Encumbrance, any making by Lynden or any Lynden Subsidiary of any loan, advance or capital contribution to or investment in any other Person or any entering into, amendment of, relinquishment, termination or non‑renewal by Lynden or any Lynden Subsidiary of any contract, agreement, licence, lease transaction, commitment or other right or obligation;

(v)

Lynden has not declared or paid any dividends or made any other distribution on any of the Lynden Shares;

(vi)

Lynden has not effected or passed any resolution to approve a split, consolidation or reclassification of any of the outstanding Lynden Shares;

(vii)

other than in the ordinary and regular course of business consistent with past practice, there has not been any material increase in or modification of the compensation payable to or to become payable by Lynden or any Lynden Subsidiaries to any of their respective directors, officers, employees or consultants or any grant to any such director, officer, employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement (including, without limitation, the granting of Lynden Options) made to, for or with any of such directors or officers;

(viii)

Neither Lynden nor any Lynden subsidiary has effected any material change in its accounting methods, principles or practices; and

(ix)

Lynden has not adopted any, or materially amended any, collective bargaining agreement, bonus, pension, profit sharing, stock purchase, stock option or other benefit plan or shareholder rights plan.

(h)

Employment Agreements.  Neither Lynden nor any Lynden Subsidiary:

(i)

is a party to any written or oral policy, agreement, obligation or understanding providing for severance or termination payments to, or any employment or consulting agreement with, any director or officer of Lynden or any Lynden Subsidiary that would be triggered by Lynden entering into this Agreement or the completion of the Arrangement;

(ii)

has any employee or consultant whose employment or contract with Lynden or any Lynden Subsidiary cannot be terminated by Lynden following completion of the Arrangement; and

(iii)

(A) is a party to any collective bargaining agreement, (B) is, to the knowledge of Lynden, subject to any application for certification or threatened or apparent union‑organizing campaigns for employees not covered under a collective bargaining agreement, or (C) is subject to any current, or to the knowledge of Lynden, pending or threatened strike or lockout.

(i)

Financial Matters.  The audited comparative annual financial statements of Lynden for the financial years ended June 30, 2015 and 2014 and the unaudited interim financial statements of Lynden for the three months ended September 30, 2015 and 2014 and the notes thereto (collectively the “Lynden Financial Statements”) were prepared in accordance with applicable accounting standards consistently applied and fairly present in all material respects the consolidated financial condition of Lynden at the respective dates indicated and the results of operations of Lynden for the periods covered on a consolidated basis.  As of the date hereof, neither Lynden nor any of the Lynden Subsidiaries have any liability or obligation (including, without limitation, liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, or any related party transactions or off‑balance sheet transactions not reflected in the Lynden Financial Statements, except liabilities and obligations incurred in the ordinary and regular course of business (including the business of exploring Lynden’s projects) since September 30, 2015, which liabilities or obligations would not reasonably be expected to have a Material Adverse Effect on Lynden.

(j)

Disclosure Controls and Procedures.  Lynden has (i) designed disclosure controls and procedures to provide reasonable assurance that the information Lynden is required to disclose in the reports that it files or submits under the U.S. Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and includes, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to Lynden’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure; (ii) designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes; (iii) has evaluated the effectiveness of Lynden’s disclosure controls and procedures and has disclosed in Item 9A of its Annual Report on Form 10-K for the fiscal year ended June 30, 2015 (the “2015 10-K”) its conclusions about the effectiveness of its disclosure controls and procedures; and (iv) has disclosed in its 2015 10-K the necessary disclosure relating to any material weaknesses. For purposes of this Agreement, the term “material weakness” shall have the meaning assigned to it in the Statement of Auditing Standards No. 115, as in effect on the date of this Agreement. There are (is) no:

(i)

material weaknesses in the internal controls over financial reporting of Lynden that could reasonably be expected to adversely affect Lynden’s ability to record, process, summarize and report financial information; or

(ii)

fraud, whether or not material, involving management or any other employees who have a significant role in the internal control over financial reporting of Lynden and the Lynden Subsidiaries.

(k)

Books and Records.  The corporate records and minute books of Lynden and all Lynden Subsidiaries have been maintained in accordance with all applicable Laws and are complete and accurate in all material respects except where such incompleteness or inaccuracy would not have a Material Adverse Effect on Lynden.  Financial books and records and accounts of Lynden and all Lynden Subsidiaries, in all material respects (i) have been maintained in accordance with good business practices on a basis consistent with prior years and past practice, (ii) are stated in reasonable detail and accurately and fairly reflect the transactions and acquisitions and dispositions of assets of Lynden and the Lynden Subsidiaries, and (iii) accurately and fairly reflect the basis for the consolidated financial statements of Lynden.

(l)

Claims.  There are no claims, actions, suits, judgments, grievances, complaints, arbitration, charges, audits, indictments, investigations, reviews or proceedings of any kind outstanding, pending or to the knowledge of Lynden, threatened against or affecting Lynden or the Lynden Subsidiaries or any of their respective properties and assets or their respective directors, officers or promoters at law or in equity or before any Governmental Authority of any kind, nor is Lynden aware of any facts or circumstances that could form the basis for any such claim, action, suit, judgment, grievance, complaint, arbitration, charge, audit, indictment, investigation, review or proceedings.  There is no bankruptcy, liquidation, winding‑up or other similar proceeding pending or in progress, or, to the knowledge of Lynden, threatened against or relating to Lynden or any Lynden Subsidiary before any Governmental Authority.  Neither Lynden nor any Lynden Subsidiary nor any of their respective properties or assets is subject to any outstanding judgment, order, writ, injunction or decree.

(m)

Indebtedness.  Neither Lynden nor any of the Lynden Subsidiaries has any material outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, and is not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any Person, other than those specifically disclosed in the Lynden Public Documents filed prior to the date of this Agreement, specifically identified in the Lynden Financial Statements, which relate to the proposed Arrangement or incurred in the ordinary course of conduct of the continuing business operations of Lynden and the Lynden Subsidiaries since the date of the Lynden Financial Statements.

(n)

Auditors.  The auditors of Lynden are Deloitte LLP, independent public accountants as required by applicable Law and there is not now, and there has never been, any reportable disagreement with the present or any former auditors of Lynden.

(o)

Title to Properties and Operational Matters.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Lynden, Lynden and the Lynden Subsidiaries have Good and Defensible Title to the oil and gas and other related properties and assets of any kind and nature reflected in the Lynden Reserve Reports as attributable to interest owned by Lynden and the Lynden Subsidiaries, including working, leasehold and mineral interests and all interests in equipment and machinery (including wells, well equipment and machinery) and other tangible personal property and fixtures associated with, appurtenant to or necessary for the operation of any of the foregoing (collectively, for the purposes of this Section 3.1(o), the “Lynden properties and assets”), except for such oil and gas and other related properties and assets sold, used or otherwise disposed of since June 30, 2015 in the ordinary course of business, free and clear of all Encumbrances except (1) Permitted Encumbrances and (2) Production Burdens.  Lynden has not, and nor has any Lynden Subsidiary, received any notice of the revocation or cancellation of, or any intention to revoke or cancel, any of the Lynden properties and assets, that would, individually or in the aggregate, result in a Material Adverse Effect on Lynden.  

(p)

Permits.  Lynden and the Lynden Subsidiaries possess all Permits issued by the appropriate Governmental Authorities necessary to conduct the business now operated by them and all such certificates, authorizations, permits and licenses are valid and subsisting and in good standing. Lynden and the Lynden Subsidiaries are in compliance with the terms of such certificates, authorizations, permits and licenses, and, to Lynden’s knowledge, neither Lynden nor the Lynden Subsidiaries have received any notice of proceedings relating to the revocation or modification of any such certificate, authority, permit or license which, if the subject of an unfavourable decision, ruling or finding could reasonably be expected to have a Material Adverse Effect on Lynden.

(q)

Environmental Approvals.  With the express recognition by Earthstone that Lynden does not act as operator with respect to any of its oil and gas related properties, and except where the non‑compliance with any Laws (including Environmental Laws) or Permits (including Environmental Approvals) or failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect, Lynden and the Lynden Subsidiaries:

(i)

have obtained all Environmental Approvals, if any, that are required to carry on Lynden and Lynden Subsidiaries’ businesses and operations under all applicable Environmental Laws, and

(ii)

are in compliance with all applicable Environmental Laws and Environmental Approvals, if any, in each jurisdiction in which Lynden and Lynden Subsidiaries carry on business or have assets.

(r)

Royalties.  To the knowledge of Lynden, with the express recognition by Earthstone that Lynden does not act as operator with respect to any of its oil and gas related properties, all rentals, royalties, overriding royalty interests, production payments, net profits, interest burdens, payments and obligations due and payable, or performable, as the case may be, on or prior to the date hereof under, with respect to, or on account of, any direct or indirect Lynden assets or its material joint ventures have been: (A) duly paid; (B) duly performed; or (C) provided for prior for the date hereof.

(s)

Expenses. To the knowledge of Lynden, all costs, expenses, and liabilities payable on or prior to the date hereof under the terms of any contracts and agreements to which Lynden or any of the Lynden Subsidiaries or their material joint ventures is directly or indirectly bound have been property and timely paid, except for such expenses that are being currently paid prior to delinquency in the ordinary course of business.

(t)

Insurance.  Lynden maintains policies of insurance in amounts and in respect of such risks as are normal and usual for companies of a similar size engaged in similar businesses and such policies are in full force and effect as of the date hereof.

(u)

Environmental.  Except to the extent that any violation or other matter referred to in this subsection would not reasonably be expected to have a Material Adverse Effect on Lynden and any Lynden Subsidiary, and with the express recognition by Earthstone that Lynden does not act as operator with respect to any of its oil and gas related properties, to Lynden’s knowledge:

(i)

Lynden and all of the Lynden Subsidiaries are in compliance in all material respects with Environmental Laws;

(ii)

Lynden and all of the Lynden Subsidiaries have operated their respective businesses at all times and have received, handled, used, stored, treated, shipped and disposed of all contaminants in compliance with Environmental Laws;

(iii)

there is no material claim or judicial or administrative proceeding which may affect either Lynden or any Lynden Subsidiary or any of the properties or assets of Lynden or any Lynden Subsidiary relating to or alleging any violation of or liability under Environmental Laws; and

(iv)

neither Lynden nor any Lynden Subsidiary have failed to report to the proper federal, provincial, municipal or other political subdivision, government, department, commission, board, bureau, agency or instrumentality, domestic or foreign, the occurrence of any event which is required to be so reported by Lynden or any Lynden Subsidiary under any Environmental Laws.

(v)

Hazardous Materials.  With the express recognition by Earthstone that Lynden does not act as operator with respect to any of its oil and gas related properties: (i) there are no claims pending or, to the knowledge of Lynden, threatened against Lynden or any of the Lynden Subsidiaries alleging the violation of or non‑compliance with Environmental Laws or Releases of Hazardous Materials, except for claims which if adversely decided, would not constitute, individually or in the aggregate, a Material Adverse Effect in respect of Lynden; (ii) to Lynden’s knowledge, neither Lynden nor any of the Lynden Subsidiaries has transported or arranged for the treatment, storage, handling, or disposal of any Hazardous Materials to any off‑site location that has or could reasonably be expected to result in a claim under or relating to any Environmental Laws against Lynden or any of the Lynden Subsidiaries, except for claims which, if adversely decided, would not constitute, individually or in the aggregate, a Material Adverse Effect in respect of Lynden; (iii) to the knowledge of Lynden, no facts, circumstances or conditions exist, including, to the knowledge of Lynden, the presence of Hazardous Materials at, in, on or migrating to or from any property currently or formerly owned, operated, controlled, managed, or leased by Lynden or any of the Lynden Subsidiaries that would reasonably be expected to result in Lynden or the Lynden Subsidiaries incurring liability under

Environmental Laws, which liability constitutes, individually or in the aggregate, a Material Adverse Effect in respect of Lynden; and (iv) neither Lynden nor any of the Lynden Subsidiaries has received any order or written notice from any Person either alleging a material violation by Lynden or a Lynden Subsidiary of any Environmental Law.

(w)

Tax Matters.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to Lynden or any of the Lynden Subsidiaries, on a consolidated basis:

(i)

each of Lynden and the Lynden Subsidiaries have duly and timely filed all Tax Returns required to be filed by it with the appropriate Governmental Authority and have, in all material respects, completely and correctly reported all income and all other amounts or information required to be reported thereon;

(ii)

each of Lynden and the Lynden Subsidiaries have (A) duly and timely paid all Taxes due and payable by it, (B) duly and timely withheld all Taxes required by applicable Law to be withheld by it and has duly and timely remitted to the appropriate Governmental Authority such Taxes required by applicable Law to be remitted by it, and (C) duly and timely collected all amounts on account of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by applicable Law to be collected by it and has duly and timely remitted to the appropriate Governmental Authority any such amounts required by applicable Law to be remitted by it;

(iii)

the charges, accruals and reserves for Taxes reflected on the Lynden Financial Statements (whether or not due and whether or not shown on any Tax Return but excluding any provision for deferred income taxes) are adequate to cover Taxes with respect to Lynden and any Lynden Subsidiary accruing through the date hereof;

(iv)

no waiver of any statutory limitation period with respect to Taxes has been given or requested with respect to Lynden or any Lynden Subsidiary;

(v)

there are no proceedings, investigations, audits, assessments, reassessments or claims now pending or to the knowledge of Lynden, threatened, against Lynden or any Lynden Subsidiary that propose to assess Taxes in addition to those reported in the Tax Returns;

(vi)

there are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Lynden or any Lynden Subsidiary;

(vii)

there has been no extension of time beyond the statutory and disaster relief extended filing dates within which to file any Tax Return granted to Lynden or any Lynden Subsidiary; and

(viii)

neither Lynden nor any Lynden Subsidiary will be required to include any amount of income in, or exclude any amount as a deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Date as a result of any change in method of accounting or change in Tax rules or procedures for a taxable period ending on or prior to the Effective Date.

(x)

Pension and Employee Benefits.  Lynden and the Lynden Subsidiaries have complied, in all material respects, with all of the terms of Benefit Plans, including the provisions of any collective agreements, funding and investment contracts or obligations applicable thereto, arising under or relating to each of the pension or retirement income plans or other employee compensation or benefit plans, agreements, policies, programs, arrangements or practices, whether written or oral, which are maintained by or binding upon Lynden or any Lynden Subsidiary, other than such non‑compliance that would not reasonably be expected to have a Material Adverse Effect on Lynden.  There are no unfunded accrued liabilities under the Lynden Plans. With regard to any Benefit Plan of any U.S. Lynden Subsidiary: (i) such Benefit Plan has been operated in all material respects with applicable Laws; (ii) no such Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code, nor is such Benefit Plan a “multi-employer plan” within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA; (iii)  no such Benefit Plan would provide any participant with a gross-up for any Tax; and (iv) no Lynden Shares or other security of Lynden, any of the Lynden Subsidiaries or other affiliates and no real property is held in trust or otherwise set aside for funding benefit obligations under any such Benefit Plan.

(y)

Listing.  The Lynden Shares are listed on the TSXV.

(z)

Reports.  Since September 30, 2015, Lynden has filed with the Securities Authorities, stock exchanges and all applicable self‑regulatory authorities a true and complete copy of all forms, reports, schedules, statements, certifications, material change reports and other documents required to be filed by it.  The Lynden Public Documents, at the time filed or, if amended, as of the date of such amendment (i) did not contain any misrepresentation (as defined in the Securities Act (British Columbia)) and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (ii) complied in all material respects with the requirements of applicable securities legislation and the rules, policies and instruments of all Securities Authorities having jurisdiction over Lynden except where such non‑compliance has not had or would not reasonably be expected to have a Material Adverse Effect on Lynden.  Lynden has not filed any confidential material change or other report or other document with any Securities Authorities or stock exchange or other self‑regulatory authority which at the date hereof remains confidential. Except as may be disclosed in the Lynden Public Documents, there is no material fact that Lynden has not disclosed to Earthstone in writing or made available for review by Earthstone as requested by Earthstone as part of its due diligence investigations that has or would have a Material Adverse Effect on Lynden.

(aa)

Corrupt Practices.  Neither Lynden nor any Lynden Subsidiary nor, to the knowledge of Lynden, any of its directors, executives, representatives, agents or employees: (i) has, has committed to, or has been alleged to have used or is using any corporate funds of Lynden or the Lynden Subsidiaries for any illegal contributions, gifts, entertainment or other expenses relating to political activity that would be illegal, (ii) has, has committed to, or has been alleged to have or is using any corporate funds of Lynden or the Lynden Subsidiaries for any direct or indirect illegal payments to any foreign or domestic governmental officials or employees, (iii) has, has committed to, or has been alleged to have violated or is violating any provision of the United States Foreign Corrupt Practices Act of 1977 (and the regulations promulgated thereunder), the Corruption of Foreign Public Officials Act (Canada) (and the regulations promulgated thereunder) or

any applicable Law of similar effect of any other jurisdiction, (iv) has, has committed to, or has been alleged to have established or maintained, or is maintaining, any illegal fund of corporate monies of Lynden or the Lynden Subsidiaries or other of their properties or (v) has made, has committed to make, or has been alleged to have made or is making any bribe, illegal rebate, illegal payoff, influence payment, kickback or other illegal payment of any nature.

(bb)

Compliance With Laws.  Lynden and each Lynden Subsidiary have complied with and are not in violation of any applicable Laws, other than such non‑compliance or violations that would not, individually or in the aggregate, have a Material Adverse Effect on Lynden.

(cc)

Compliance With Disclosure Obligations.  Lynden trades on the TSXV and is in compliance in all material respects with its timely and continuous disclosure obligations under applicable Securities Laws and the rules and regulations of the TSXV. Lynden is a “reporting issuer” or its equivalent in the provinces of British Columbia, Alberta and Ontario and not on the list of reporting issuers in default under applicable securities laws.

(dd)

No Cease Trade.  Lynden is not subject to any cease trade or other order of any applicable stock exchange or Securities Authority and, to the knowledge of Lynden, no investigation or other proceedings involving Lynden that may operate to prevent or restrict trading of any securities of Lynden are currently in progress or pending before any applicable stock exchange or Securities Authority.

(ee)

No Option on Assets.  No Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from Lynden or any Lynden Subsidiary or any of the assets of Lynden or any Lynden Subsidiary.

(ff)

Certain Contracts.  Neither Lynden nor any Lynden Subsidiary are a party to or bound by any non‑competition agreement or any other agreement, obligation, judgment, injunction, order or decree that purports to (i) limit the manner or the localities in which all or any material portion of the business of Lynden or any Lynden Subsidiary are conducted, (ii) limit any business practice of Lynden or any Lynden Subsidiary in any material respect, or (iii) restrict any acquisition or disposition of any property by Lynden or any Lynden Subsidiary in any material respect.

(gg)

No Broker’s Commission.  Other than fees payable to the Financial Advisor, Lynden has not entered into any agreement that would entitle any Person to any valid claim against Lynden for a broker’s commission, finder’s fee or any like payment in respect of the Arrangement or any other matter contemplated by this Agreement.

(hh)

Vote Required.  The only votes of the holders of any class or series of the Lynden Securities necessary to approve this Agreement and the Arrangement and the transactions contemplated hereby or thereby is, subject to the Interim Order, the Lynden Shareholder Approval.

(ii)

U.S. Securities Law Matters.  The Lynden Shares are registered under Section 12 of the U.S. Exchange Act and Lynden is not registered or required to register as an investment company under the 1940 Act.

(jj)

No Shareholdings in Earthstone.  Lynden does not, legally or beneficially, own, directly or indirectly, any securities of Earthstone and does not have any right, agreement or obligation to purchase any securities of Earthstone or any securities or obligations of any kind convertible into or exchangeable for any securities of Earthstone.

(kk)

All Information.  Lynden has not withheld from Earthstone any material information or documents concerning Lynden or any of the Lynden Subsidiaries or their respective assets or liabilities during the course of Earthstone’s review of Lynden and its assets.  No representation or warranty contained herein and no statement contained in any schedule or other disclosure document provided or to be provided to Earthstone by Lynden pursuant hereto contains or will contain an untrue statement of a material fact which is necessary to make the statements herein or therein not misleading.

(ll)

Reserve Reports. Lynden has delivered or otherwise made available to Earthstone true and correct copies of all written reports requested or commissioned by Lynden or the Lynden Subsidiaries and delivered to Lynden or the Lynden Subsidiaries in writing on or before the date of this Agreement estimating Lynden’s and such subsidiaries’ proved oil and gas reserves prepared by any unaffiliated person (each, a “Lynden Report Preparer”) concerning the Oil and Gas Interests of Lynden and such subsidiaries as of June 30, 2015 (the “Lynden Reserve Reports”). Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Lynden, the factual, non-interpretive data provided by Lynden and the Lynden Subsidiaries to each Lynden Report Preparer in connection with the preparation of the Lynden Reserve Reports that was material to such Lynden Report Preparer’s estimates of the proved oil and gas reserves set forth in the Lynden Reserve Reports was, as of the time provided (or as modified or amended prior to the issuance of the Lynden Reserve Reports) accurate.  With respect to the proved reserves reflected in the Lynden Reserve Reports, the Lynden Reserve Report conforms in all material respects to the SEC guidelines applicable thereto applied on a consistent basis throughout the periods involved. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in respect of the matters addressed in the Lynden Reserve Reports that would have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Lynden.

(mm)

Derivatives. The Lynden Public Documents accurately summarize, in all material respects, the outstanding Derivative positions of Lynden and the Lynden Subsidiaries, including Hydrocarbon and financial Derivative positions attributable to the production and marketing of Lynden and the Lynden Subsidiaries, as of the dates reflected therein. As of the date of this Agreement, all Derivative Contracts to which Lynden or the Lynden Subsidiaries are a party have been made available to Earthstone.

(nn)

Canadian Business. Company is a “Canadian business” within the meaning of the Investment Canada Act.

(oo)

Interested Party Transactions. Since September 30, 2015 until the date of this Agreement, no event has occurred or transaction entered into that would be required to be reported by Lynden pursuant to Item 404 of Regulation S-K promulgated by the SEC under the U.S. Exchange Act and has not been reported in the Lynden Public Documents.

(pp)

Opinion of Financial Advisors. The Lynden Board has received the opinion of the Financial Advisor, dated the date of the meeting of the Lynden Board at which this Agreement was approved by the Lynden Board, to the effect that, as of such date, and based upon and subject to the various assumptions, qualifications, limitations and other matters considered in connection with the preparation of such opinion, the Share Exchange Ratio in the Arrangement pursuant to this Agreement and the Plan of Arrangement was fair, from a financial point of view, to the Lynden Shareholders.

(qq)

Certain Tax Matters. Neither Lynden nor any of the Lynden Subsidiaries has taken or agreed to take any action that would prevent this Agreement and the Plan of Arrangement from constituting a reorganization within the meaning of Section 368(a) of the Code.  Without limiting the generality of the foregoing:

(i)

The fair market value of the Consideration will be approximately equal to the fair market value of the Lynden Shares surrendered in the Arrangement, determined as of the last Business Day before the date of this Agreement.

(ii)

Prior to the Effective Time and in connection with or anticipation of this Agreement or the Plan of Arrangement, (i) none of the Lynden Shares will be redeemed, (ii) no extraordinary dividends will be made with respect to the Lynden Shares, and (iii) none of the Lynden Shares will be acquired by Lynden or any Related Person.

(iii)

Any compensation paid to Lynden Shareholders who enter (or have entered) into employment, consulting or noncompetitive contracts, if any, with Earthstone (a) will be for services actually rendered or to be rendered, (b) will be commensurate with amounts paid to third parties bargaining at arm’s length for similar services, and (c) will not represent consideration for the surrender of the Lynden Shares in the Arrangement.

(iv)

No debt of Lynden is guaranteed by any Lynden Shareholder.

(v)

No assets of Lynden have been sold, transferred or otherwise disposed of which would prevent Earthstone from continuing the historic business of Lynden or from using a significant portion of Lynden’s historic business assets in a business following the Plan of Arrangement, within the meaning of Treasury Regulation Section 1.368-1(d).

(vi)

Lynden is not an investment company as defined in Section 368(a)(2)(F) of the Code.  An investment company is (1) a regulated investment company; (2) a real estate investment trust; or (3) a corporation (i) fifty percent (50%) or more of the value of whose total assets are stock and securities, and (ii) eighty percent (80%) or more of the value of whose total assets are held for investment.  In making the fifty percent and eighty percent determinations under the preceding sentence, stock and securities in any subsidiary corporation shall be disregarded and a parent corporation shall be deemed to own its ratable share of the subsidiary’s assets, and a corporation shall be considered a subsidiary if a parent owns fifty percent (50%) or more of the combined voting power of all classes of stock entitled to vote, or fifty percent (50%) or more of the total value of shares of all classes of stock outstanding.  For this purpose, “total assets” shall not include cash and cash items (including receivables) and government securities.

(vii)

The fair market value of the assets of Lynden will exceed the sum of the liabilities assumed or paid by Earthstone, plus the amount of liabilities, if any, to which the assets are subject.

(viii)

Lynden is not under the jurisdiction of a court in a title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

(ix)

There is no Indebtedness existing between Earthstone and Lynden that was or will be issued, acquired, or settled at a discount in connection with this Agreement or the Plan of Arrangement.

(x)

Lynden has substantial non-tax business purposes and reasons for the Plan of Arrangement, and the terms of this Agreement and the Plan of Arrangement are the product of arm’s length negotiations.

(xi)

Lynden will not take, and Lynden has no knowledge of any plan or intention of any of Lynden Shareholders to take, any position on any Return, or take any other Tax reporting position, that is inconsistent with the treatment of the Arrangement as a reorganization within the meaning of Section 368(a) of the Code, unless otherwise required by a “determination” (as defined in Code Section 1313(a)(1)).

(xii)

No stock or securities of Lynden will be issued to any Lynden Shareholder for services rendered to or for the benefit of Earthstone or Lynden in connection with this Agreement or the Plan of Arrangement (except to the extent of outstanding Lynden Options).

(xiii)

No stock or securities of Earthstone or of Lynden will be issued to any Lynden Shareholder for any Indebtedness owed to any Lynden Shareholder in connection with this Agreement or the Plan of Arrangement.

(xiv)

The liabilities of Lynden to be assumed or paid and the liabilities to which the assets of Lynden are subject were incurred by Lynden in the ordinary course of its business.

(xv)

No assets were transferred to Lynden, nor did Lynden assume any liabilities, in anticipation of this Agreement or the Plan of Arrangement.

(xvi)

Lynden has not distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since November 30, 2013. The stock of Lynden has not been distributed in a transaction satisfying the requirements of Section 355 of the Code since November 30, 2013.

(xvii)

Following the transaction, Lynden will hold at least 90 percent of the fair market value of its net assets and at least 70 percent of the fair market value of its gross assets and at least 90 percent of the fair market value of Earthstone Acquisition’s net assets and at least 70 percent of the fair market value of Earthstone Acquisition’s gross assets held immediately prior to the transaction. For purposes of this representation, amounts paid by Lynden or Earthstone Acquisition to Dissenting Shareholders, amounts paid by Lynden or Earthstone Acquisition to shareholders who receive cash or other property, amounts used by Lynden or

Earthstone Acquisition to pay reorganization expenses, and all redemptions and distributions (except for regular, normal dividends) made by Lynden will be included as assets of Lynden or Earthstone Acquisition, respectively, immediately prior to the transaction.

(xviii)

Lynden has no plan or intention to issue additional shares of its stock that would result in Earthstone losing control of Lynden within the meaning of Section 368(c)(1) of the Code.

(xix)

In the arrangement, shares of Lynden stock representing control of Lynden, as defined in Section 368(c)(1) of the Code, will be exchanged solely for voting stock of Earthstone, for purposes of this representation, shares of Lynden stock exchanged for cash or other property originating with Earthstone will be treated as outstanding Lynden stock on the date of the Closing.

(xx)

Subject to Section 6.3, Earthstone, Earthstone Acquisition, Lynden, and the shareholders of Lynden will pay their respective expenses, if any, incurred in connection with the transaction.

(xxi)

At the time of the Closing, Lynden will not have outstanding any warrants, options, convertible securities, or any other type of right pursuant to which any person could acquire stock in Lynden that, if exercised or converted, would affect Earthstone’s acquisition or retention of control of Lynden, as defined in Section 368(c)(1) of the Code.

3.2

Representations and Warranties of Earthstone and Earthstone Acquisition

(a)

Organization.  Each of Earthstone and all Earthstone Subsidiaries have been incorporated, are validly subsisting and have full corporate and legal power and authority to own its property and assets and to conduct its business as currently owned and conducted.  Each of Earthstone and all Earthstone Subsidiaries are registered, licensed or otherwise qualified in each jurisdiction where the nature of the business or the location or character of the property and assets owned or leased by it requires it to be so registered, licensed or otherwise qualified, other than those jurisdictions where the failure to be so registered, licensed or otherwise qualified would not have a Material Adverse Effect on Earthstone or Earthstone Acquisition.  All of the outstanding shares of the Earthstone Subsidiaries are beneficially owned, directly or indirectly, by Earthstone.  Except pursuant to restrictions on transfer contained in the articles or by‑laws (or their equivalent) of all Earthstone Subsidiaries, the outstanding shares of any Earthstone Subsidiary are owned free and clear of all Encumbrances and Earthstone is not liable to any creditor in respect thereof. There are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any issued or unissued securities of, or interest in, any of the Earthstone Subsidiaries or any of its material assets from either Earthstone or any Earthstone Subsidiary.

(b)

Capitalization.  Earthstone is authorized to issue 100,000,000 shares of Earthstone Common Stock.  As of the date hereof, there were issued and outstanding:

(i)

13,835,128 shares of Earthstone Common Stock;

(ii)

Earthstone Options to acquire an aggregate of 0 shares of Earthstone Common Stock; and

(iii)

Earthstone Warrants to acquire an aggregate of 0 Earthstone Warrants.

(c)

Authority.  Earthstone and Earthstone Acquisition have all necessary corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by Earthstone and Earthstone Acquisition as contemplated by this Agreement, and to perform its obligations hereunder and under such other agreements and instruments.  The execution and delivery of this Agreement by Earthstone and Earthstone Acquisition and the completion by Earthstone and Earthstone Acquisition of the Arrangement contemplated by this Agreement have been authorized by the Earthstone Board and the Earthstone Acquisition Board and, subject to receipt of no comment or no further comment from the SEC, no other corporate or shareholder proceedings on the part of Earthstone, Earthstone Acquisition or their respective shareholders are necessary to authorize this Agreement or the completion by Earthstone and Earthstone Acquisition of the transactions contemplated hereby.  This Agreement has been executed and delivered by Earthstone and Earthstone Acquisition and constitutes a legal, valid and binding obligation of Earthstone and Earthstone Acquisition, enforceable against Earthstone and Earthstone Acquisition in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other

applicable Laws relating to or affecting creditors’ rights generally, and to general principles of equity.  The execution and delivery by Earthstone and Earthstone Acquisition of this Agreement and the performance by it of its obligations hereunder and the completion of the transactions contemplated hereby, do not and will not:

(i)

result in a violation, contravention or breach of or constitute a default under, or entitle any party to terminate, accelerate, modify or call any obligations or rights under, require any consent to be obtained under or give rise to any termination rights under any provision of:

(A)

the Articles, Bylaws or Notice of Articles of Earthstone or any Earthstone Subsidiary,

(B)

any applicable Law or the rules or policies of the NYSE MKT, or

(C)

any credit arrangement, note, bond, mortgage, indenture, deed of trust, lease, franchise, concession, easement, contract, agreement, licence, permit or other instrument to which Earthstone or any Earthstone Subsidiary are bound or are subject to or of which Earthstone or any Earthstone Subsidiary are the beneficiary;

(ii)

cause any indebtedness owing by Earthstone or any of the Earthstone Subsidiaries to come due before its stated maturity or cause any available credit to cease to be available;

(iii)

result in the imposition of any Encumbrance upon any of the property or assets of Earthstone or any of the Earthstone Subsidiaries or give any Person the right to acquire any of assets of Earthstone or any of the Earthstone Subsidiaries, or restrict, hinder, impair or limit the ability of Earthstone or any of the Earthstone Subsidiaries to conduct the business of Earthstone or any of the Earthstone Subsidiaries as and where it is now being conducted; or

(iv)

result in or accelerate the time for payment (or vesting of, or increase the amount of any severance, unemployment compensation, “golden parachute”, bonus, termination payments or otherwise) becoming due to any director or officer of Earthstone or any of the Earthstone Subsidiaries or increase any benefits otherwise payable under any pension or benefits plan of Earthstone or any of the Earthstone Subsidiaries or result in the acceleration of the time of payment or vesting of any such benefits.

(d)

Earthstone and Earthstone Acquisition Board Approval.  Each of Earthstone Board and Earthstone Acquisition Board has:

(i)

determined that the Arrangement is in the best interests of Earthstone and Earthstone Acquisition, as applicable;

(ii)

indicated that they will recommend that the shareholders of Earthstone and Earthstone Acquisition vote in favour of the transactions contemplated by this Agreement; and

(iii)

authorized the entering into of this Agreement, and the performance of Earthstone’s and Earthstone Acquisition’s obligations hereunder.

(e)

Earthstone Subsidiaries.  The Earthstone Subsidiaries are the only subsidiaries of Earthstone and Earthstone does not own a direct or indirect voting or equity interest in any Person that is not one of the Earthstone Subsidiaries.

(f)

Material Contracts.  The Earthstone Disclosure Letter sets forth a complete and accurate list of all Earthstone Material Contracts as of the date hereof. Earthstone has made available to Lynden true and complete copies of all such Earthstone Material Contracts.  Neither Earthstone nor any Earthstone Subsidiary are in breach or violation of or default under (in each case, with or without notice or lapse of time or both) the terms of any Earthstone Material Contract.  As of the date hereof, to the knowledge of Earthstone, no other party to any Earthstone Material Contract is in material breach of, violation of, or default under the terms of, or has threatened to terminate, any such Earthstone Material Contract, and to the knowledge of Earthstone, there exists no state of facts which after notice or lapse of time or both would constitute a default, violation or breach of any such Earthstone Material Contract.  Each Earthstone Material Contract is a valid and binding obligation of Earthstone or any Earthstone Subsidiary, as applicable, and is in full force and effect in accordance with its terms.  There is no Earthstone Material Contract which: (i) would be violated, contravened or breached by, or under which a default would occur; (ii) requires any consent or prior approval be obtained from any Person (including consents relating to the change of control of Earthstone) or notice to be given (prior to or following the Effective Time); (iii) would terminate; or (iv) would entitle any party to terminate, accelerate, modify or call any obligations or rights under; in each case, as a result of the execution of this Agreement or the completion of the Arrangement.  Except for this Arrangement Agreement, no Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from Earthstone or any of the Earthstone Subsidiaries of any material assets of Earthstone or any of the Earthstone Subsidiaries and neither Earthstone nor any of the Earthstone Subsidiaries has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from any Person of any securities or any assets which could reasonably be expected to be material to Earthstone.

(g)

Absence of Changes.  Since September 30, 2015, except as disclosed by Earthstone in the Earthstone Disclosure Letter:

(i)

Each of Earthstone and the Earthstone Subsidiaries have conducted its business only in the ordinary and regular course of business consistent with past practice;

(ii)

Neither Earthstone nor any Earthstone Subsidiary have incurred or suffered a Material Adverse Effect;

(iii)

There has not been any acquisition or sale by Earthstone or any Earthstone Subsidiary of any material property or assets;

(iv)

There has not been any incurrence, assumption or guarantee by Earthstone or any Earthstone Subsidiary of any debt for borrowed money, any creation or assumption by Earthstone or any Earthstone Subsidiary of any Encumbrance, any making by Earthstone or any Earthstone Subsidiary of any loan, advance or capital contribution to or investment in any other Person or any entering into, amendment of, relinquishment, termination or non‑renewal by Earthstone or any Earthstone Subsidiary, of any contract, agreement, licence, lease transaction, commitment or other right or obligation;

(v)

Earthstone has not declared or paid any dividends or made any other distribution on any of the shares of Earthstone Common Stock;

(vi)

Earthstone has not effected or passed any resolution to approve a split, consolidation or reclassification of any of the outstanding shares of Earthstone Common Stock;

(vii)

Other than in the ordinary and regular course of business consistent with past practice, there has not been any material increase in or modification of the compensation payable to or to become payable by Earthstone or any Earthstone Subsidiary to any of their respective directors, officers, employees or consultants or any grant to any such director, officer, employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement (including, without limitation, the granting of Earthstone Options) made to, for or with any of such directors or officers;

(viii)

Neither Earthstone nor any Earthstone subsidiary has effected any material change in its accounting methods, principles or practices; and

(ix)

Earthstone has not adopted any, or materially amended any, collective bargaining agreement, bonus, pension, profit sharing, stock purchase, stock option or other benefit plan or shareholder rights plan.

(h)

Employment Agreements.  Neither Earthstone nor any Earthstone Subsidiary:

(i)

are a party to any written or oral policy, agreement, obligation or understanding providing for severance or termination payments to, or any employment or consulting agreement with any director or officer of Earthstone or any Earthstone Subsidiary that would be triggered by Earthstone or Earthstone Acquisition entering into this Agreement or the completion of the Arrangement; and

(ii)

(a) are a party to any collective bargaining agreement, (b) are, to the knowledge of Earthstone, subject to any application for certification or threatened or apparent union‑organizing campaigns for employees not covered under a collective bargaining agreement, or (c) are subject to any current, or to the knowledge of Earthstone, pending or threatened strike or lockout.

(i)

Financial Matters.  The audited comparative annual financial statements of Earthstone for the financial years ended December 31, 2014 and 2013 and the respective notes thereto and the unaudited interim financial statements of Earthstone for the nine months ended September 30, 2015 and 2014 and the notes thereto (collectively, the “Earthstone Financial Statements”) were prepared in accordance with applicable accounting standards consistently applied and fairly present in all material respects the consolidated financial condition of Earthstone at the respective dates indicated and the results of operations of Earthstone for the periods covered on a consolidated basis.  As of the date hereof, neither Earthstone nor any Earthstone Subsidiary have any liability or obligation (including, without limitation, liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, or any related party transactions or off‑balance sheet transactions not reflected in the Earthstone Financial Statements except liabilities and obligations incurred in the ordinary and regular course of business including the business of operating, developing, constructing and exploring Earthstone’s projects since September 30, 2015, which liabilities or obligations would not reasonably be expected to have a Material Adverse Effect on Earthstone.

(j)

Disclosure Controls and Procedures.  Earthstone has (i) designed disclosure controls and procedures to provide reasonable assurance that material information relating to Earthstone and the Earthstone Subsidiaries is made known to the Principal Executive Officer and Principal Financial Officer of Earthstone on a timely basis, particularly during the periods in which the annual or interim filings are being prepared; (ii) designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes; (iii) has evaluated the effectiveness of Earthstone’s disclosure controls and procedures and has disclosed in its management discussion and analysis for the period ended December 31, 2014 (“Earthstone MD&A”) its conclusions about the effectiveness of its disclosure controls and procedures; and (iv) has evaluated the effectiveness of Earthstone’s internal control over financial reporting and has disclosed in its Earthstone MD&A its conclusions about the effectiveness of internal control over financial reporting and, if applicable, the necessary disclosure relating to any material weaknesses. Earthstone has not failed to disclose any information regarding any event, circumstance or action taken or failed to be taken within the knowledge of Earthstone as at the date of this Agreement which could reasonably be expected to have a Material Adverse Effect in respect of Earthstone. There are (is) no:

(i)

material weaknesses in the internal controls over financial reporting of Earthstone that could reasonably be expected to adversely affect Earthstone’s ability to record, process, summarize and report financial information; and

(ii)

fraud, whether or not material, involving management or any other employees who have a significant role in the internal control over financial reporting of Earthstone and the Earthstone Subsidiaries.

(k)

Books and Records.  The corporate records and minute books of Earthstone and all Earthstone Subsidiaries have been maintained in accordance with all applicable Laws and are complete and accurate in all material respects, except where such incompleteness or inaccuracy would not have a Material Adverse Effect on Earthstone.  Financial books and records and accounts of Earthstone and all Earthstone Subsidiaries, in all material respects (i) have been maintained in accordance with good business practices on a basis consistent with prior years and past practice, (ii) are stated in reasonable detail and accurately and fairly reflect the transactions and acquisitions and dispositions of assets of Earthstone and the Earthstone Subsidiaries, and (iii) accurately and fairly reflect the basis for the consolidated financial statements of Earthstone.

(l)

Claims.  There are no claims, actions, suits, judgments, grievances, complaints, arbitration, charges, audits, indictments, investigations, reviews or proceedings of any kind outstanding, pending or to the knowledge of Earthstone, threatened against or affecting Earthstone or the Earthstone Subsidiaries or any of their respective properties and assets or their respective directors, officers or promoters at law or in equity or before any Governmental Authority of any kind, nor is Earthstone aware of any facts or circumstances that could form the basis for any such claim, action, suit, judgment, grievance, complaint, arbitration, charge, audit, indictment, investigation, review or proceedings.  There is no bankruptcy, liquidation, winding‑up or other similar proceeding pending or in progress, or, to the knowledge of Earthstone, threatened against or relating to Earthstone or any Earthstone Subsidiary before any Governmental Authority.  Neither Earthstone nor any Earthstone Subsidiary nor any of their respective properties or assets is subject to any outstanding judgment, order, writ, injunction or decree.

(m)

Indebtedness.  Neither Earthstone nor any of the Earthstone Subsidiaries has any material outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, and is not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any Person, other than those specifically disclosed in the Earthstone Public Documents filed prior to the date of this Agreement, specifically identified in the Earthstone Financial Statements, which relate to the proposed Arrangement or incurred in the ordinary course of conduct of the continuing business operations of Earthstone and the Earthstone Subsidiaries since the date of the Earthstone Financial Statements.

(n)

Auditors.  The auditors of Earthstone are Weaver and Tidwell, L.L.P., an independent public accountants as required by applicable Law and there is not now, and there has never been, any reportable disagreement with the present or any former auditors of Earthstone since December 31, 2010.

(o)

Title to Properties and Operational Matters.  Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Earthstone, Earthstone and the Earthstone Subsidiaries have Good and Defensible Title to the oil and gas and other related properties and assets of any kind and nature reflected in the Earthstone Reserve Reports as attributable to interest owned by Earthstone and the Earthstone Subsidiaries, including working, leasehold and mineral interests and all interests in equipment and machinery (including wells, well equipment and machinery) and other tangible personal property and fixtures associated with, appurtenant to or necessary for the operation of any of the foregoing

(collectively, for the purposes of this Section 3.2(o), the “Earthstone properties and assets”), except for such oil and gas and other related properties and assets sold, used or otherwise disposed of since December 31, 2014 in the ordinary course of business, free and clear of all Encumbrances except (1) Permitted Encumbrances and (2) Production Burdens.  Earthstone has not, and nor has any Earthstone Subsidiary, received any notice of the revocation or cancellation of, or any intention to revoke or cancel, any of the Earthstone properties and assets, that would, individually or in the aggregate, result in a Material Adverse Effect on Earthstone.  

(p)

Permits.  Earthstone and the Earthstone Subsidiaries possess all Permits issued by the appropriate Governmental Authorities necessary to conduct the business now operated by them and all such certificates, authorizations, permits and licenses are valid and subsisting and in good standing. Earthstone and the Earthstone Subsidiaries are in compliance with the terms of such certificates, authorizations, permits and licenses, and, to Earthstone’s knowledge, neither Earthstone nor the Earthstone Subsidiaries have received any notice of proceedings relating to the revocation or modification of any such certificate, authority, permit or license which, if the subject of an unfavourable decision, ruling or finding could reasonably be expected to have a Material Adverse Effect on Earthstone.

(q)

Environmental Approvals.  Except where the non‑compliance with any Laws (including Environmental Laws) or Permits (including Environmental Approvals) or failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect, Earthstone and the Earthstone Subsidiaries:

(i)

have obtained all Environmental Approvals, if any, that are required to carry on Earthstone and Earthstone Subsidiaries’ businesses and operations under all applicable Environmental Laws, and

(ii)

are in compliance with all applicable Environmental Laws and Environmental Approvals, if any, in each jurisdiction in which Earthstone and Earthstone Subsidiaries carry on business or have assets.

(r)

Royalties.  To the knowledge of Earthstone, all rentals, royalties, overriding royalty interests, production payments, net profits, interest burdens, payments and obligations due and payable, or performable, as the case may be, on or prior to the date hereof under, with respect to, or on account of, any direct or indirect Earthstone assets or its material joint ventures have been: (A) duly paid; (B) duly performed; or (C) provided for prior for the date hereof.

(s)

Expenses. To the knowledge of Earthstone, all costs, expenses, and liabilities payable on or prior to the date hereof under the terms of any contracts and agreements to which Earthstone or any of the Earthstone Subsidiaries or their material joint ventures is directly or indirectly bound have been property and timely paid, except for such expenses that are being currently paid prior to delinquency in the ordinary course of business.

(t)

Insurance.  Earthstone maintains policies of insurance in amounts and in respect of such risks as are normal and usual for companies of a similar size engaged in exploration and development and such policies are in full force and effect as of the date hereof.

(u)

Environmental.  Except to the extent that any violation or other matter referred to in this subsection would not reasonably be expected to have a Material Adverse Effect on Earthstone and any Earthstone Subsidiary, to Earthstone’s knowledge:

(i)

Earthstone and all Earthstone Subsidiaries are in compliance in all material respects with Environmental Laws;

(ii)

Earthstone and all Earthstone Subsidiaries have operated their respective businesses at all times and have received, handled, used, stored, treated, shipped and disposed of all contaminants in compliance with Environmental Laws;

(iii)

There have been no spills, releases, deposits or discharges of hazardous or toxic substances, contaminants or wastes into the earth, air or into any body of water or any municipal or other sewer or drain water systems by Earthstone or any Earthstone Subsidiary that have not been remedied;

(iv)

There is no material claim or judicial or administrative proceeding which may affect either Earthstone or any Earthstone Subsidiary or any of the properties or assets of Earthstone or any Earthstone Subsidiary relating to, or alleging any violation of, or liability under, Environmental Laws; and

(v)

Neither Earthstone nor any Earthstone Subsidiary have failed to report to the proper federal, provincial, municipal or other political subdivision, government, department, commission, board, bureau, agency or instrumentality, domestic or foreign, the occurrence of any event which is required to be so reported by Earthstone or any Earthstone Subsidiary under any Environmental Laws.

(v)

Hazardous Materials.  (i) There are no claims pending or, to the knowledge of Earthstone, threatened against Earthstone or any of the Earthstone Subsidiaries alleging the violation of or non‑compliance with Environmental Laws or Releases of Hazardous Materials, except for claims which if adversely decided, would not constitute, individually or in the aggregate, a Material Adverse Effect in respect of Earthstone; (ii) to Earthstone’s knowledge, neither Earthstone nor any of the Earthstone Subsidiaries has transported or arranged for the treatment, storage, handling, or disposal of any Hazardous Materials to any off‑site location that has or could reasonably be expected to result in a claim under or relating to any Environmental Laws against Earthstone or any of the Earthstone Subsidiaries, except for claims which, if adversely decided, would not constitute, individually or in the aggregate, a Material Adverse Effect in respect of Earthstone; (iii) to the knowledge of Earthstone, no facts, circumstances or conditions exist, including, to the knowledge of Earthstone, the presence of Hazardous Materials at, in, on or migrating to or from any property currently or formerly owned, operating, controlled, managed or leased by Earthstone or any of the Earthstone Subsidiaries that would reasonably be expected to result in Earthstone or the Earthstone Subsidiaries incurring liability under Environmental Laws, which liability constitutes, individually or in the aggregate, a Material Adverse Effect in respect of Earthstone; and (iv) neither Earthstone nor any of the Earthstone Subsidiaries has received any order or written notice from any Person either alleging a material violation by Earthstone or an Earthstone Subsidiary of any Environmental Law.

(w)

Tax Matters.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to Earthstone or any Earthstone Subsidiary on a consolidated basis:

(i)

Each of Earthstone and the Earthstone Subsidiaries have duly and timely filed all Tax Returns required to be filed by it with the appropriate Governmental Authority and have, in all material respects, completely and correctly reported all income and all other amounts or information required to be reported thereon;

(ii)

Each of Earthstone and the Earthstone Subsidiaries have (A) duly and timely paid all Taxes due and payable by it, (B) duly and timely withheld all Taxes and other amounts required by applicable Law to be withheld by it and has duly and timely remitted to the appropriate Governmental Authority such Taxes and other amounts required by applicable Law to be remitted by it, and (C) duly and timely collected all amounts on account of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by applicable Law to be collected by it and has duly and timely remitted to the appropriate Governmental Authority any such amounts required by applicable Law to be remitted by it;

(iii)

The charges, accruals and reserves for Taxes reflected on the Earthstone Financial Statements (whether or not due and whether or not shown on any Tax Return but excluding any provision for deferred income taxes) are adequate to cover Taxes with respect to Earthstone and any Earthstone Subsidiary accruing through the date hereof;

(iv)

No waiver of any statutory limitation period with respect to Taxes has been given or requested with respect to Earthstone or any Earthstone Subsidiary;

(v)

There are no proceedings, investigations, audits, assessments, reassessments or claims now pending or to the knowledge of Earthstone, threatened against Earthstone or any Earthstone Subsidiary that propose to assess Taxes in addition to those reported in the Tax Returns;

(vi)

There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Earthstone or any Earthstone Subsidiary;

(vii)

There has been no extension of time beyond the statutory and disaster relief extended filing dates within which to file any Tax Return granted to Earthstone or any Earthstone Subsidiary; and

(viii)

Neither Earthstone nor any Earthstone Subsidiary will be required to include any amount of income in, or exclude any amount as a deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Date as a result of any change in method of accounting or change in Tax rules or procedures for a taxable period ending on or prior to the Effective Date.

(x)

Pension and Employee Benefits.  Earthstone and the Earthstone Subsidiaries have complied, in all material respects, with all of the terms of Benefit Plans, including the provisions of any collective agreements, funding and investment contracts or obligations applicable thereto, arising under or relating to each of the pension or retirement income

plans or other employee compensation or benefit plans, agreements, policies, programs, arrangements or practices, whether written or oral, which are maintained by or binding upon Earthstone or any Earthstone Subsidiary, other than such non‑compliance that would not reasonably be expected to have a Material Adverse Effect on Earthstone.  There are no unfunded accrued liabilities under the Earthstone Plans.  With regard to any Benefit Plan of Earthstone or any U.S. Earthstone Subsidiary:

(i)

None of Earthstone, any Subsidiary of Earthstone, any ERISA Affiliate, any of the Earthstone Plans, any trust created under an Earthstone Plan and, to the knowledge of Earthstone, any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action with respect to an Earthstone Plan in connection with which Earthstone, any of the Earthstone Subsidiaries or any ERISA Affiliate would be reasonably likely to be subject to a material civil penalty assessed pursuant to Section 409, 501, 502 or 510 of ERISA or a Tax imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of the Code.

(ii)

Each of the Earthstone Plan, Earthstone Subsidiary Benefit Plans and each other (including former) benefit plan, program, agreement, policy or arrangement has been operated and administered by Earthstone, the Earthstone Subsidiaries and their respective ERISA Affiliates in all material respects in accordance with applicable Laws, including ERISA and the Code.  With respect to each Earthstone Plan and Earthstone Subsidiary Benefit Plan, all reports, returns, notices and other documentation that are required to have been filed or furnished with the IRS, the DOL or any other Governmental Authority, or to the participants or beneficiaries of such Benefit Plans (or their representative) have been filed or furnished on a timely basis. No individual who has performed services for Earthstone or an affiliate (or the predecessor of any such person) has been improperly included or excluded from participation in any Earthstone Plan. Earthstone, the Earthstone Subsidiaries and ERISA Affiliates have maintained all data necessary to administer each Earthstone Plan and such data is true and correct and maintained in usable form. Earthstone and the Earthstone Subsidiaries and ERISA Affiliates have not initiated any proceedings pursuant to the IRS Employee Plans Compliance Resolution System.  Earthstone, the Earthstone Subsidiaries and ERISA Affiliates have made the required payments and filings necessary to satisfy the requirements of the DOL’s Voluntary Fiduciary Correction Program and the DOL’s Delinquent Filer Voluntary Compliance Program with respect to all returns, reports or other documentation required to have been filed with the IRS or the DOL and that initially were not properly filed, and there are no audits or similar proceedings pending with the IRS or the DOL with respect to any Earthstone Plan.  None of Earthstone, any Earthstone Subsidiary, employee, officer or other service provider of Earthstone, or any ERISA Affiliates, and to Earthstone’s knowledge, no other fiduciary has any liability for breach of fiduciary duty or any other failure to act or comply with the requirements of ERISA, the Code or any other applicable Laws in connection with the administration or investment of the assets of any Earthstone Plan.  No current or former officer, director, employee, leased employee, consultant or agent (or their respective beneficiaries) of Earthstone or an Earthstone Subsidiary has or will obtain a right to receive a gross-up payment from Earthstone or an Earthstone Subsidiary with respect to any Tax that may be imposed upon such individual pursuant to Section 409A of the Code, Section 4999 of the Code or otherwise.

(iii)

With respect to each of the Earthstone Plans and Earthstone Subsidiary Benefit Plans that is intended to be “qualified” within the meaning of Section 401(a) of the Code, Earthstone or the Earthstone Subsidiaries, as applicable, has received a currently effective determination letter from the IRS or such plan is subject to a current IRS opinion letter stating that it is so qualified, such letter has not been revoked, and, to the knowledge of Earthstone, no event has occurred that would be reasonably likely to adversely affect such qualified status.  No fund established under an Earthstone Plan or an Earthstone Subsidiary Benefit Plan is intended to satisfy the requirements of Section 501(c)(9) of the Code.

(iv)

Neither Earthstone nor any of the Earthstone Subsidiaries nor any of their ERISA Affiliates has maintained or contributed to, had an obligation to contribute to or has any liability, whether contingent or otherwise with respect to a plan maintained by more than one employer within the meaning of Code Section 413(c), a plan subject to ERISA Section 4063, 4064 or 4066, a “multiemployer plan” within the meaning of Section 3(37) of ERISA, a multiple employer welfare arrangement within the meaning of Section 3(40) of ERISA or any benefit plan, program, agreement or arrangement subject to Title IV of ERISA or Section 412 or 430 of the Code.

(v)

All contributions required to be made under each Earthstone Plan and Earthstone Subsidiary Benefit Plan, as of the date hereof, have been timely made and all obligations in respect of each Earthstone Plan and Earthstone Subsidiary Benefit Plan have been properly accrued and reflected in the most recent consolidated balance sheet filed or incorporated by reference in the Earthstone Public Documents.  None of the Earthstone Plans and Earthstone Subsidiary Benefit Plans (as applicable) has failed to satisfy the minimum funding standard applicable under Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate of Earthstone has an outstanding funding waiver. None of the Earthstone Plans and Earthstone Subsidiary Benefit Plans (as applicable) has been required to file information pursuant to Section 4010 of ERISA for the current or most recently completed plan year.

(vi)

All Earthstone Plans and Earthstone Subsidiary Benefit Plans that are subject to Section 409A of the Code are in compliance with the requirements of such Code section and regulations and other guidance thereunder.  No shares of Earthstone Common Stock or other security of Earthstone, any of the Earthstone Subsidiaries or other affiliates and no real property is held in trust or otherwise set aside for funding benefit obligations under any Earthstone Plan or Earthstone Subsidiary Benefit Plan.

(y)

Listing.  The shares of Earthstone Common Stock are listed on the NYSE MKT.

(z)

Reports.  Since September 30, 2015, Earthstone has filed with the Securities Authorities, stock exchanges and all applicable self‑regulatory authorities a true and complete copy of all forms, reports, schedules, statements, certifications, material change reports and other documents required to be filed by it.  The Earthstone Public Documents, at the time filed or, if amended, as of the date of such amendment (i) did not contain any misrepresentation and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (ii) complied in all

material respects with the requirements of applicable securities legislation and the rules, policies and instruments of all Securities Authorities having jurisdiction over Earthstone except where such non‑compliance has not had or would not reasonably be expected to have a Material Adverse Effect on Earthstone.  Earthstone has not filed any confidential material change or other report or other document with any Securities Authorities or stock exchange or other self‑regulatory authority which at the date hereof remains confidential. Except as may be disclosed in the Earthstone Public Documents, there is no material fact that Earthstone has not disclosed to Lynden in writing or made available for review by Lynden as requested by Lynden as part of its due diligence investigations that has or would have a Material Adverse Effect on Earthstone.

(aa)

Corrupt Practices.  Neither Earthstone nor any Earthstone Subsidiary nor, to the knowledge of Earthstone, any of its directors, executives, representatives, agents or employees: (i) has, has committed to, or has been alleged to have used or is using any corporate funds of Earthstone or its subsidiaries for any illegal contributions, gifts, entertainment or other expenses relating to political activity that would be illegal, (ii) has, has committed to, or has been alleged to have or is using any corporate funds of Earthstone or its subsidiaries for any direct or indirect illegal payments to any foreign or domestic governmental officials or employees, (iii) has, has committed to, or has been alleged to have violated or is violating any provision of the United States Foreign Corrupt Practices Act of 1977 (and the regulations promulgated thereunder), the Corruption of Foreign Public Officials Act (Canada) (and the regulations promulgated thereunder) or any applicable Law of similar effect of any other jurisdiction, (iv) has, has committed to, or has been alleged to have established or maintained, or is maintaining, any illegal fund of corporate monies of Earthstone or its subsidiaries or other of their properties or (v) has made, has committed to make, or has been alleged to have made or is making any bribe, illegal rebate, illegal payoff, influence payment, kickback or other illegal payment of any nature.

(bb)

Compliance with Laws.  Earthstone and each Earthstone Subsidiary have complied with and are not in violation of any applicable Law other than such non‑compliance or violations that would not, individually or in the aggregate, have a Material Adverse Effect on Earthstone.

(cc)

Compliance with Disclosure Obligations.  Earthstone trades on the NYSE MKT and is in compliance in all material respects with its timely and continuous disclosure obligations under applicable Securities Laws and the rules and regulations of the NYSE MKT.  

(dd)

No Cease Trade.  Earthstone is not subject to any cease trade or other order of any applicable stock exchange or Securities Authority and, to the knowledge of Earthstone, no investigation or other proceedings involving Earthstone that may operate to prevent or restrict trading of any securities of Earthstone are currently in progress or pending before any applicable stock exchange or Securities Authority.

(ee)

No Option on Assets.  No Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from Earthstone or any Earthstone Subsidiary or any of the assets of Earthstone or any Earthstone Subsidiary.

(ff)

Certain Contracts.  Neither Earthstone nor any Earthstone Subsidiary are a party to or bound by any non‑competition agreement or any other agreement, obligation, judgment, injunction, order or decree that purports to (i) limit the manner or the localities in which all or any material portion of the business of Earthstone or any Earthstone Subsidiary are conducted, (ii) limit any business practice of Earthstone or any Earthstone Subsidiary in any material respect, or (iii) restrict any acquisition or disposition of any property by Earthstone or any Earthstone Subsidiary in any material respect.

(gg)

No Broker’s Commission.  Neither Earthstone nor Earthstone Acquisition has entered into any agreement that would entitle any Person to any valid claim against Earthstone or Earthstone Acquisition for a broker’s commission, finder’s fee or any like payment in respect of the Arrangement or any other matter contemplated by this Agreement.

(hh)

Vote of Shareholders. No vote or consent of the shareholders of shares of Earthstone or Earthstone Acquisition, other than the Earthstone Shareholder Consent and a consent of the Earthstone Acquisition sole shareholder, is necessary to approve this Agreement and the Arrangement and the transactions contemplated hereby.  Earthstone will distribute to its shareholders an information statement in respect of the foregoing Earthstone Shareholder Consent.

(ii)

U.S. Securities Law Matters.  The Earthstone Common Stock is registered under Section 12 of the U.S. Exchange Act and Earthstone is not registered or required to register as an investment company under the 1940 Act.

(jj)

Consideration.  The shares of Earthstone Common Stock issued pursuant to the Arrangement, will, when issued, be duly and validly issued as fully paid and non‑assessable shares of Earthstone Common Stock.  All shares of Earthstone Common Stock issued in exchange for Lynden Shares and Lynden Options pursuant to the Arrangement shall not be subject to trading restrictions subject to, with respect to certain Lynden Shareholders and Lynden Optionholders who are or, at the Effective Time, become affiliates (as defined by Rule 144 of the U.S. Securities Act) of Earthstone, certain restrictions on resale under Rule 144 of the U.S. Securities Act.

(kk)

No Shareholdings in Lynden.  Neither Earthstone nor Earthstone Acquisition legally or beneficially owns, directly or indirectly, any securities of Lynden, and does not have any right, agreement or obligation to purchase any securities of Lynden or any securities or obligations of any kind convertible into or exchangeable for any securities of Lynden.

(ll)

All Information.  Earthstone has not withheld from Lynden any material information or documents concerning Earthstone or any of the Earthstone Subsidiaries or their respective assets or liabilities during the course of Lynden’s review of Earthstone and its assets.  No representation or warranty contained herein and no statement contained in any schedule or other disclosure document provided or to be provided to Lynden by Earthstone pursuant hereto contains or will contain an untrue statement of a material fact which is necessary to make the statements herein or therein not misleading.

(mm)

Shares. The shares of Earthstone Common Stock to be issued pursuant to the Arrangement, as assumed and adjusted in accordance with Article 2, will, upon issue, be issued as fully paid and non‑assessable shares.

(nn)

Reserve Reports. Earthstone has delivered or otherwise made available to Lynden true and correct copies of all written reports requested or commissioned by Earthstone or the Earthstone Subsidiaries and delivered to Earthstone or the Earthstone Subsidiaries in writing on or before the date of this Agreement estimating Earthstone’s and such subsidiaries’ proved oil and gas reserves prepared by any unaffiliated person (each, a “Earthstone Report Preparer”) concerning the Oil and Gas Interests of Earthstone and such subsidiaries as of December 31, 2014 (the “Earthstone Reserve Reports”). Except for any such matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on Earthstone, the factual, non-interpretive data provided by Earthstone and the Earthstone Subsidiaries to each Earthstone Report Preparer in connection with the preparation of the Earthstone Reserve Reports that was material to such Earthstone Report Preparer’s estimates of the proved oil and gas reserves set forth in the Earthstone Reserve Reports was, as of the time provided (or as modified or amended prior to the issuance of the Earthstone Reserve Reports) accurate.  With respect to the proved reserves reflected in the Earthstone Reserve Reports, the Earthstone Reserve Report conforms in all material respects to the SEC guidelines applicable thereto applied on a consistent basis throughout the periods involved. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in respect of the matters addressed in the Earthstone Reserve Reports that would have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Earthstone.

(oo)

Derivatives. The Earthstone Public Documents accurately summarize, in all material respects, the outstanding Derivative positions of Earthstone and the Earthstone Subsidiaries, including Hydrocarbon and financial Derivative positions attributable to the production and marketing of Earthstone and the Earthstone Subsidiaries, as of the dates reflected therein. As of the date of this Agreement, all Derivative Contracts to which Earthstone or the Earthstone Subsidiaries are a party have been made available to Lynden.

(pp)

Interested Party Transactions. Since December 31, 2014 until the date of this Agreement, no event has occurred or transaction entered into that would be required to be reported by Earthstone pursuant to Item 404 of Regulation S-K promulgated by the SEC under the U.S. Exchange Act and has not been reported in the Earthstone Public Documents.

(qq)

Certain Tax Matters.  Neither Earthstone nor any Earthstone Subsidiary has taken or agreed to take any action that would prevent this Agreement and the Plan of Arrangement from constituting a reorganization within the meaning of Section 368(a) of the Code.  Without limiting the generality of the foregoing:

(i)

The fair market value of the Consideration will be approximately equal to the fair market value of the Lynden Shares surrendered in the Arrangement, determined as of the last Business Day before the date of this Agreement.

(ii)

Prior to the Effective Time and in connection with or anticipation of this Agreement or the Plan of Arrangement, (i) none of the shares of Earthstone Common Stock will be redeemed, (ii) no extraordinary dividends will be made with respect to the shares of Earthstone Common Stock, and (iii) none of the shares of Earthstone Common Stock will be acquired by Earthstone or any Related Person.

(iii)

Neither Earthstone nor Earthstone Acquisition is an investment company as defined in Section 368(a)(2)(F) of the Code.  An investment company is (1) a regulated investment company; (2) a real estate investment trust; or (3) a corporation (i) fifty percent (50%) or more of the value of whose total assets are stock and securities, and (ii) eighty percent (80%) or more of the value of whose total assets are held for investment.  In making the fifty percent and eighty percent determinations under the preceding sentence, stock and securities in any subsidiary corporation shall be disregarded and a parent corporation shall be deemed to own its ratable share of the subsidiary’s assets, and a corporation shall be considered a subsidiary if a parent owns fifty percent (50%) or more of the combined voting power of all classes of stock entitled to vote, or fifty percent (50%) or more of the total value of shares of all classes of stock outstanding.  For this purpose, “total assets” shall not include cash and cash items (including receivables) and government securities.

(iv)

Neither Earthstone nor Earthstone Acquisition is under the jurisdiction of a court in a title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.

(v)

There is no Indebtedness existing between Lynden and Earthstone that was or will be issued, acquired, or settled at a discount in connection with this Agreement or the Plan of Arrangement.

(vi)

Each of Earthstone and Earthstone Acquisition has substantial non-tax business purposes and reasons for the Plan of Arrangement, and the terms of this Agreement and the Plan of Arrangement are the product of arm’s length negotiations.

(vii)

Neither Earthstone nor Earthstone Acquisition will take any position on any Return, or take any other Tax reporting position, that is inconsistent with the treatment of the Arrangement as a reorganization within the meaning of Section 368(a) of the Code, unless otherwise required by a “determination” (as defined in Code Section 1313(a)(1)).

(viii)

No stock or securities of Earthstone will be issued to any Lynden Shareholder for services rendered to or for the benefit of Lynden or Earthstone in connection with this Agreement or the Plan of Arrangement (except to the extent of outstanding Lynden Options).

(ix)

No stock or securities of Lynden or of Earthstone will be issued to any Lynden Shareholder for any Indebtedness owed to any Lynden Shareholder in connection with this Agreement or the Plan of Arrangement.

(x)

Earthstone has not distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since November 30, 2013. The stock of Earthstone has not been distributed in a transaction satisfying the requirements of Section 355 of the Code since November 30, 2013.

(xi)

Earthstone has no plan or intention to reacquire any of its stock issued in the transaction.

(xii)

Earthstone has no plan or intention to liquidate Lynden; to merge Lynden with or into another corporation; to sell or otherwise dispose of the stock of Lynden except for transfers of stock to corporations controlled by Earthstone; or to cause Lynden to sell or otherwise dispose of any of its assets or any of the assets acquired from Earthstone Acquisition, except for dispositions made in the ordinary course of business or transfers of assets to a corporation controlled by Earthstone.

(xiii)

Earthstone Acquisition will have no liabilities assumed by Lynden, and will not transfer to Lynden any assets subject to liabilities, in the transaction.

(xiv)

Earthstone does not own, nor has it owned during the past five years, any shares of the stock of Lynden.

(xv)

Subject to Section 6.3, Earthstone, Earthstone Acquisition, Lynden, and the shareholders of Lynden will pay their respective expenses, if any, incurred in connection with the transaction.

(xvi)

Earthstone has no plan or intention to issue additional shares of Lynden stock that would result in Earthstone losing control of Lynden within the meaning of Section 368(c)(1) of the Code.

3.3

Lynden Disclosure Letter

3.4

Earthstone Disclosure Letter

3.5

Survival of Representations and Warranties.

4.1

Mutual Covenants

(a)

it will, and will cause its Subsidiaries to, use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable (i) to ensure that the representations and warranties in Section 3.1, in the case of Lynden, and Section 3.2, in the case of Earthstone and Earthstone Acquisition, remain true and correct in all material respects as of the Effective Date as if such representations and warranties were made at and as of such date; (ii) to satisfy (or cause the satisfaction of) the conditions set out in Article 5 to the extent the same is within its control and to consummate and make effective as promptly as is practicable the transactions contemplated herein; and (iii) for the discharge by each party of its respective obligations under this Agreement, the Interim Order, the Plan of Arrangement and the Final Order, including its obligations under applicable Laws, in each case including the execution and delivery of such documents as the Other Party hereto may reasonably require.  Each of the parties hereto, where appropriate, will reasonably co‑operate with the Other Party in taking such actions;

(b)

until the Effective Date, it will notify the Other Party in writing: (i) promptly after the occurrence thereof of any changes, effects, events, occurrences or states of facts that, either individually or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect (actual, anticipated, or to the best of its knowledge, threatened) with respect to it; and (ii) promptly after the occurrence, or failure to occur, of any such event, of information of which it becomes aware with respect to any event which, if known as of the date of this Agreement, would have been required to be disclosed to the Other Party or which would have been likely to cause any of its representations or warranties in this Agreement to be untrue or incorrect in any material respect or result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by any party herein, provided, however, that no such notification will affect the representations or warranties of the parties or the conditions to the obligations of the parties herein and a failure to comply with this Section 4.1(b) shall not constitute the failure of any condition set forth in Article 5 to be satisfied unless the underlying breach or Material Adverse Effect would independently result in the failure of a condition set forth in Article 5 to be satisfied;

(c)

Earthstone, Earthstone Acquisition and Lynden shall each use their commercially reasonable efforts to cause the Plan of Arrangement to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and before or after the Effective Time, none of Earthstone or Lynden shall knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could cause the Plan of Arrangement to fail to qualify as a reorganization under Section 368(a) of the Code;

(d)

Earthstone, Earthstone Acquisition and Lynden shall comply with the record keeping and information reporting requirements set forth in Treasury Regulation Section 1.368-3; and

(e)

following the Plan of Arrangement, each of Earthstone, Earthstone Acquisition and Lynden will not take any action and will not fail to take any action that would prevent the Plan of Arrangement from satisfying the “continuity of business enterprise” requirement for a “reorganization” as provided in Treasury Regulation Section 1.368-1(d).

4.2

Covenants Relating to Regulatory Approval

(a)

As soon as reasonably practicable after the date hereof, each party will use its commercially reasonable efforts to make all necessary or advisable filings, applications and submissions with Governmental Authorities under all applicable Laws, including obtaining the Key Regulatory Approvals, in respect of the transactions contemplated herein.  Each party will provide such additional information and make or cause to be made such additional filings reasonably required by any Governmental Authority in respect of the transactions contemplated herein.

(b)

Each party will use its commercially reasonable efforts to obtain all consents, approvals, authorizations or waivers required or advisable to be obtained by it from Governmental Authorities in respect of the transactions contemplated herein (including participating and appearing in any proceedings before Governmental Authorities) and to avoid or resolve any suit or threatened suit so as to permit the consummation of the transactions contemplated herein on a timely basis.

(c)

Subject to applicable Laws, each party will provide the Other Party and its counsel with reasonable opportunity to review and comment on all filings, applications, submissions and other material communications to Governmental Authorities.  Each party will use its commercially reasonable efforts to cooperate with and assist the Other Party in the preparation and making of all filings, applications and submissions to such Governmental Authorities.

(d)

Each party will promptly notify the Other Party of any material communication to such party from any Governmental Authority in respect of the transactions contemplated herein and, subject to applicable Laws, provide the Other Party with a copy thereof if such communication is in writing.  Each party will consult with the Other Party and its counsel prior to participating in any substantive meeting or discussion with any Governmental Authority in respect of the transactions contemplated herein and give the Other Party and its counsel the opportunity to attend and participate thereat.

4.3

Covenants of Earthstone and Earthstone Acquisition

(a)

in a timely and expeditious manner, Earthstone and Earthstone Acquisition will provide to Lynden all information as may be reasonably requested by Lynden or as required by the Interim Order or applicable Laws with respect to Earthstone, Earthstone Acquisition and their respective business and properties for inclusion in the Joint Circular or in any amendment or supplement to the Joint Circular which complies in all material respects with all applicable Laws, including corporate and securities legislation and requirements, on the date of the mailing thereof and containing all material facts relating to Earthstone and Earthstone Acquisition required to be disclosed in the Joint Circular and not containing any misrepresentation (as defined under applicable securities legislation) with respect thereto;

(b)

each of Earthstone and Earthstone Acquisition will not take any action, refrain from taking any action (subject to commercially reasonable efforts), or permit any action to be taken or not taken, which is inconsistent with the provisions of this Agreement or which would reasonably be expected to materially impede the completion of the transactions contemplated hereby or which would be reasonably likely to have a Material Adverse Effect on Earthstone or Earthstone Acquisition, provided that where Earthstone or Earthstone Acquisition is required to take any such action or refrain from taking such action (subject to commercially reasonable efforts) as a result of this Agreement, Earthstone and/or Earthstone Acquisition will immediately notify Lynden in writing of such circumstances;

(c)

each of Earthstone and Earthstone Acquisition will carry on its business only in the usual and ordinary course, consistent with past practice and the activities set out in the Earthstone Disclosure Letter and, except with the prior written consent of Lynden (such consent not to be unreasonably withheld or delayed) or other than as expressly contemplated or permitted by this Agreement, each of Earthstone and Earthstone Acquisition:

(i)

will use commercially reasonable efforts, to the extent it has the financial resources to do so, to maintain and preserve its business, assets and advantageous business relationships;

(ii)

will maintain payables and other liabilities (other than for money borrowed) at levels consistent with past practice;

(iii)

will use commercially reasonable efforts to maintain in force its current policies of insurance and pay all premiums in respect of such insurance policies that become due after the date hereof;

(iv)

each of Earthstone and Earthstone Acquisition will not:

(A)

resolve or propose to be wound‑up, dissolved, liquidated, appoint or agree to the appointment of a liquidator, receiver or trustee in bankruptcy for it or consent to an order by a court for its winding‑up or dissolution;

(B)

make any changes to its existing accounting practices except as required by Law, U.S. GAAP or make any material tax election inconsistent with past practice;

(C)

declare or pay any dividends or make any distribution of its properties or assets to its shareholders or purchase or retire any shares of Earthstone Common Stock;

(D)

alter or amend or authorize any alteration or amendment to its constating documents as they exist at the date of this Agreement, except as required to complete the Arrangement or any transaction contemplated under this Agreement or the Arrangement;

(E)

split, consolidate, exchange or reclassify any shares of Earthstone Common Stock or other securities;

(F)

take any action or fail to take any action which would cause any of the conditions precedent set forth in Article 5 not to be satisfied; and

(G)

announce an intention, enter into any agreement, or otherwise make a commitment to do any of the things prohibited by any of the foregoing;

(d)

each of Earthstone and Earthstone Acquisition will execute and do all such acts and further deeds, things and assurances as may be required in the reasonable opinion of Lynden’s counsel to consummate the Arrangement;

(e)

each of Earthstone and Earthstone Acquisition will vote or cause to be voted all Lynden Shares beneficially owned or over which control or direction is exercised by it or any of its affiliates in favour of the Arrangement Resolution; and

(f)

Earthstone will use its commercially reasonable efforts to cause the shares of Earthstone Common Stock to be issued pursuant to the Arrangement to be approved for listing on the NYSE MKT, subject to official notice of issuance.

4.4

Covenants of Lynden

(a)

Lynden will carry on its business only in the usual and ordinary course, consistent with past practice and the activities set out in the Lynden Disclosure Letter and, except with the prior written consent of Earthstone (such consent not to be unreasonably withheld or delayed) or other than as expressly contemplated or permitted by this Agreement, Lynden:

(i)

will use commercially reasonable efforts, to the extent it has the financial resources to do so, to maintain and preserve its business, assets and advantageous business relationships;

(ii)

will maintain payables and other liabilities (other than for money borrowed) at levels consistent with past practice;

(iii)

will use commercially reasonable efforts to maintain in force its current policies of insurance and pay all premiums in respect of such insurance policies that become due after the date hereof;

(iv)

Lynden will not:

(A)

resolve or propose to be wound‑up, dissolved, liquidated, appoint or agree to the appointment of a liquidator, receiver or trustee in bankruptcy for it or consent to an order by a court for its winding‑up or dissolution;

(B)

make any changes to its existing accounting practices except as required by Law or make any material tax election inconsistent with past practice;

(C)

declare or pay any dividends or make any distribution of its properties or assets to its shareholders or purchase or retire any Lynden Shares;

(D)

alter or amend or authorize any alteration or amendment to its constating documents as they exist at the date of this Agreement, except as required to complete the Arrangement or any transaction contemplated under this Agreement or the Arrangement;

(E)

split, consolidate, exchange or reclassify any Lynden Shares or other securities;

(F)

enter into or modify any employment, consulting, bonus, retention or similar agreements or arrangements with, or grant any bonuses, salary increases, stock options, severance, retirement allowances, deferred or incentive compensation, termination pay or any other form of compensation to, or make any loan to, any of its officers, directors, employees or consultants;

(G)

incur or commit to incur any indebtedness for borrowed money in excess of the greater of its existing borrowing base as of the date hereof under the Credit Facility or as it may be redetermined under the Credit Facility;

(H)

elect to participate in programs proposed by the operator where the gross amount of the authority for expenditure exceeds U.S.$200,000;

(I)

acquire or agree to acquire (other than pursuant to this Agreement), by amalgamating, plan of arrangement, merging, consolidating or entering into a business combination with or purchasing or leasing substantially all of the assets or otherwise of, any business or undertaking of any corporation, partnership, association or other business organization or division thereof;

(J)

sell, lease, transfer, mortgage or otherwise dispose of or encumber any of its property or assets, real or personal, or agree to the same, other than for actions under the Credit Facility in the ordinary and regular course of business;

(K)

allot or issue, or enter into any agreement for the allotment or issuance, or grant any other rights to acquire, Lynden Shares or other securities or securities convertible into, exchangeable for, or which carry a right to acquire, directly or indirectly, any Lynden Shares or other securities, other than Lynden Shares issuable upon exercise of convertible securities of Lynden issued prior to the date hereof;

(L)

take any action or fail to take any action which would cause any of the conditions precedent set forth in Article 5 not to be satisfied;

(M)

satisfy or settle any claims or liabilities prior to the same being due, which are, individually or in the aggregate, material to Lynden except that Lynden may prepay cash calls from operators of its oil and gas properties before any 30-day due date in accordance with the ordinary course of business of Lynden consistent with its past practices;

(N)

grant any waiver, exercise any option or relinquish any contractual rights which are, individually or in the aggregate, material; and

(O)

announce an intention, enter into any agreement, or otherwise make a commitment to do any of the things prohibited by any of the foregoing;

(b)

Lynden will use commercially reasonable efforts to cause each Lynden Supporting Shareholder to enter into a Support Agreement with Earthstone concurrently with execution of this Agreement;

(c)

Subject to Section 4.5, Lynden will execute and do all acts, further deeds, things and assurances as may be required in the reasonable opinion of Earthstone’s counsel to consummate the transactions contemplated herein;

(d)

In a timely and expeditious manner, Lynden will provide to Earthstone all information as may be reasonably requested by Earthstone or as required by the Interim Order or applicable Laws with respect to Lynden and its business and properties for inclusion in the Joint Circular or in any amendment or supplement to the Joint Circular which complies in all material respects with all applicable Laws, including corporate and securities legislation and requirements, on the date of the mailing thereof and containing all material facts relating to Earthstone required to be disclosed in the Joint Circular and not containing any misrepresentation (as defined under applicable securities legislation) with respect thereto.

4.5

No Solicitation by Lynden; Etc.

(a)

Except as otherwise permitted hereunder, Lynden shall not, and shall use its commercially reasonable efforts to cause its directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives (collectively, “Representatives”) not to, directly or indirectly: (i) solicit, initiate, knowingly facilitate, knowingly encourage or knowingly induce any inquiries or any proposals that constitute the submission of an Acquisition Proposal, (ii) furnish confidential information or enter into any confidentiality agreement, merger agreement, letter of intent, agreement in principle, stock purchase agreement, asset purchase agreement or exchange agreement, option agreement or other similar agreement relating to an Acquisition Proposal (an “Acquisition Agreement”); provided, however, that Lynden may respond to a bona fide request for information that did not result from a breach of this Section 4.5 that would reasonably be expected to lead to an Acquisition Proposal in respect of Lynden by advising that no information can be provided unless a bona fide Acquisition Proposal is made prior to providing any information and then only in compliance with this Section 4.5; or (iii) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Earthstone, the Lynden Board Recommendation or publicly recommend the approval or adoption of, or publicly approve or adopt, or propose to publicly recommend, approve or adopt, any Acquisition Proposal (the taking of any action described in clause (iii) being referred to as an “Adverse Recommendation Change”).  Without limiting the foregoing, it is understood that any violation of the foregoing restrictions by Lynden’s Representatives shall be deemed to be a breach of this Section 4.5 by Lynden unless such violation is committed without the knowledge of Lynden and Lynden uses commercially reasonable efforts to promptly cure such violation once Lynden is made aware of such violation.

(b)

Notwithstanding anything to the contrary contained in Section 4.5(a), if at any time prior to obtaining the Lynden Shareholder Approval, (i) Lynden has received an Acquisition Proposal that the Lynden Board believes is bona fide, (ii) the Lynden Board, after consultation with its financial advisors and outside legal counsel, determines in good faith that such Acquisition Proposal constitutes or could reasonably be expected to lead to or result in a Superior Proposal and (iii) such Acquisition Proposal did not result from a material breach of this Section 4.5, then Lynden may (A) furnish information, including confidential information, with respect to Lynden and its Subsidiaries to the Person making such Acquisition Proposal and its Representatives and afford such Person and its Representatives access to the business, properties, assets, Contracts, officers, employees, books and records with respect to Lynden and its Subsidiaries, and (B) participate in discussions or negotiations regarding such Acquisition Proposal; provided that Lynden will not, and will use commercially reasonable efforts to cause its Representatives not to, disclose any non-public information to such Person unless Lynden has, or first enters into, a confidentiality agreement with such Person with confidentiality provisions that are not less restrictive to such Person than the provisions of the confidentiality agreement are to Earthstone (provided that such confidentiality agreement need not include “standstill” provisions or similar restrictions).

(c)

In addition to the other obligations of Lynden set forth in this Section 4.5, Lynden shall promptly advise Earthstone, orally and in writing, and in no event later than three (3) calendar days after receipt, if any proposal, offer, inquiry or other contact is received by, any information is requested from, or any discussions or negotiations are sought to be initiated with, Lynden in respect of any Acquisition Proposal, and shall, in any such notice to Earthstone, indicate the identity of the Person making such proposal, offer, inquiry or other contact and the terms and conditions of any proposals or offers or the nature of any inquiries or contacts (and shall include with such notice copies of any written materials received from or on behalf of such Person relating to such proposal, offer, inquiry or request), and thereafter shall promptly keep Earthstone reasonably informed of all material developments affecting the status and terms of any such proposals, offers, inquiries or requests (and Lynden shall promptly provide Earthstone with copies of any additional written materials received by Lynden or that Lynden has delivered to any third party making an Acquisition Proposal that relate to such proposals, offers, inquiries or requests) and of the status of any such discussions or negotiations.

(d)

Notwithstanding the foregoing, if Lynden receives a written Acquisition Proposal that the Lynden Board believes is bona fide and the Lynden Board, after consultation with its financial advisors and outside legal counsel, concludes that such Acquisition Proposal constitutes a Superior Proposal, then the Lynden Board may, at any time prior to obtaining the Lynden Shareholder Approval, if it determines in good faith, after consultation with outside counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable Law, effect an Adverse Recommendation Change or terminate this Agreement and enter into an Acquisition Agreement; provided, however, that Lynden shall not be entitled to exercise its right to make any Adverse Recommendation Change in response to a Superior Proposal or terminate this Agreement and enter into an Acquisition Agreement for a Superior Proposal (x) until four (4) Business Days after Lynden provides written notice to Earthstone (an “Lynden Notice”) advising Earthstone that the Lynden Board or a committee thereof has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal, and identifying the Person or group making such Superior Proposal and, at the request of Earthstone, Lynden shall negotiate in good faith

with Earthstone during such four (4) Business Day period, with respect to any alternative transaction (including any modifications to the terms of this Agreement) that would allow the Lynden Board not to make such Adverse Recommendation Change consistent with its fiduciary duties (it being understood that any change in the financial or other material terms of a Superior Proposal shall require a new Lynden Notice and a new four (4) Business Day period under this Section 4.5(d)).

(e)

Nothing contained in this Agreement shall prevent Lynden or the Lynden Board from issuing a “stop, look and listen” communication pursuant to Rule 14d-9(f) under the U.S. Exchange Act or complying with Rule 14d-9 and Rule 14e-2 under the U.S. Exchange Act or other Laws with respect to an Acquisition Proposal if the Lynden Board determines in good faith (after consultation with outside legal counsel) that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under Applicable Law; provided that any Adverse Recommendation Change may only be made in accordance with Section 4.5(d).  For the avoidance of doubt, a public statement that describes Lynden’s receipt of an Acquisition Proposal and the operation of this Agreement with respect thereto shall not be deemed an Adverse Recommendation Change.

4.6

Resignation and Mutual Releases

4.7

Privacy Matters

(a)

Earthstone and Lynden acknowledge and agree that certain information provided by Lynden to Earthstone, and certain information provided by Earthstone to Lynden, in each case relating to the officers, consultants and employees of the party (the “Providing Party”) providing the information and provided in connection with the transactions contemplated hereunder, constitutes personal information (the “Disclosed Personal Information”) which is necessary for the purposes of determining if the party (the “Receiving Party”) receiving the Disclosed Personal Information will proceed with the Arrangement, that the disclosure of the Disclosed Personal Information relates solely to the carrying on of the business of Lynden or Earthstone, as applicable, and the completion of the Arrangement and that such Disclosed Personal Information: