8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 26, 2017

Lonestar Resources US Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-37670	81-0874035
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

600 Bailey Avenue, Suite 200

Fort Worth, Texas 76107

(Address of principal executive office) (Zip Code)

(817) 921-1889

(Registrants’ telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01. Entry into a Material Definitive Agreement

Battlecat Purchase Agreement

On May 26, 2017, Lonestar Resources US Inc. (the “Company”) entered into a purchase and sale agreement (the “Battlecat Agreement”) with Battlecat Oil & Gas, LLC ( “Battlecat”), pursuant to which the Company agreed to purchase certain oil and gas properties in Dewitt, Gonzales and Karnes Counties, Texas (the “Battlecat Assets”).

The unadjusted purchase price for the Battlecat Assets is approximately $60 million consisting of (i) $55 million to be paid in cash and (ii) approximately 1.2 million shares (the “Battlecat Shares”) of the Company’s Class A Voting Common Stock, $0.001 par value per share (“Class A Stock”), subject to customary purchase price adjustments including, among others, adjustments for revenues and expenses, the estimated cost of any environmental liabilities and title defects and title benefits.

Upon execution of the Battlecat Agreement, the Company paid 10% of the unadjusted purchase price, or $6 million, as a deposit (the “Battlecat Deposit”). The Battlecat Deposit is refundable to the Company if the Battlecat Agreement is terminated for certain reasons, including, but not limited to, closing of the transactions contemplated by the Battlecat Agreement (the “Battlecat Closing”) has not been consummated by August 9, 2017, material adjustments to the purchase price related to title defects and environmental liabilities and certain breaches of the Battlecat Agreement by Battlecat. Additionally, in connection with the Battlecat Closing, Battlecat and the Company will enter into a Registration Rights Agreement that will grant Battlecat customary registration rights for the Battlecat Shares.

The Battlecat Agreement contains representations and warranties, covenants, termination and indemnification provisions that are customary for this type of transaction. The representations and warranties and covenants in the Battlecat Agreement were made or agreed to, among other things, to provide the parties with specified rights and obligations and to allocate risk among the parties. Accordingly, the Battlecat Agreement should not be relied upon as constituting a description of the state of affairs of any of the parties or their affiliates at the time it was entered into or otherwise. The Battlecat Closing is expected to be consummated by late June 2017, subject to the satisfaction of customary closing conditions.

This summary of the Battlecat Agreement and the transactions contemplated thereby does not purport to be complete, and is qualified in its entirety by reference to the full text of the Battlecat Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.

Marquis Purchase Agreement

On May 26, 2017, the Company entered into a purchase and sale agreement (the “Marquis Agreement” and, together with the Battlecat Agreement, the “Purchase Agreements”) with SN Marquis LLC, a subsidiary of Sanchez Energy Corporation (“Marquis”), pursuant to which the Company agreed to purchase certain oil and gas assets in Fayette, Gonzales and Lavaca Counties, Texas (the “Marquis Assets” and, together with the Battlecat Assets, the “Assets”).

The unadjusted purchase price for the Marquis Assets is approximately $57,000,000 million consisting of (i) $50 million to be paid in cash and (ii) 1.5 million shares (“Marquis Shares”) of Class A Stock, subject to customary purchase price adjustments including, among others, adjustments for revenues and expenses, the estimated cost of any environmental liabilities and title defects and title benefits.

Upon execution of the Marquis Agreement, the Company paid 10% of the unadjusted purchase price, or $5.7 million, as a deposit (the “Marquis Deposit”). The Deposit is refundable to the Company if the Battlecat Agreement is terminated for certain reasons, including, but not limited to, closing has not been consummated as of July 14, 2017, material adjustments to the purchase price related to title defects or environmental liabilities or breach of the Marquis Agreement by Marquis. Additionally, in connection with the closing of the transactions contemplated by the Marquis Agreement, Marquis and the Company will enter into a Registration Rights Agreement that will grant Marquis customary registration rights for the Marquis Shares.

The Marquis Agreement contains representations and warranties, covenants, termination and indemnification provisions that are customary for this type of transaction. The representations and warranties and covenants in the Marquis Agreement were made or agreed to, among other things, to provide the parties with specified rights and obligations and to allocate risk among the parties. Accordingly, the Marquis Agreement should not be relied upon as constituting a description of the state of affairs of any of the parties or their affiliates at the time it was entered into or otherwise. The transactions contemplated by the Marquis Agreement are expected to close by late June 2017, subject to the satisfaction of customary closing conditions.

This summary of the Marquis Agreement and the transactions contemplated thereby does not purport to be complete, and is qualified in its entirety by reference to the full text of the Marquis Agreement, which is filed as Exhibit 2.2 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.

Securities Purchase Agreement

As part of the financing for the acquisition of the Assets, on May 26, 2017, the Company and Chambers Energy Capital III, LP (the “Purchaser”) entered into a Securities Purchase Agreement (the “SPA”), pursuant to which the Company agreed to sell to the Purchaser, in a private placement under the Securities Act of 1933, as amended (the “Securities Act”), (i) 20,000 shares of the Company’s Series A-1 Convertible Participating Preferred Stock, par value $0.001 per share (the “Series A-1 Stock”), and (ii) 60,000 shares of the Company’s Series A-2 Convertible Participating Preferred Stock, par value $0.001 per share (the “Series A-2 Stock” and, together with the Series A-1 Stock, the “Preferred Stock”), for an aggregate purchase price of approximately $78 million, pursuant to the terms of the SPA. The terms of the Series A-1 Stock and Series A-2 Stock will be set forth in the respective Certificate of Designations (together, the “Certificates of Designations”) for each series, a form of each is attached to the SPA.

Each series of Preferred Stock will rank senior to the Class A Stock with respect to dividend rights and rights upon the liquidation, winding-up or dissolution of the Company and each series will initially have a stated value of $1,000 per share (the “Stated Value”). Holders of Preferred Stock will be entitled to vote with the holders of Class A Stock on an as-converted basis.

Shares of Series A-1 Stock, once issued, are immediately convertible into shares of Class A Stock at the option of the holders. The rate (the “Conversion Rate”) each share of Series A-1 Stock would be convertible into Class A Stock is equal to the Stated Value of such shares to be converted divided six, subject to adjustment (the “Conversion Price”). The Company will be able to convert Series A-1 Stock to Class A Stock if the volume weighted average price of Class A Stock exceeds the following percentages of the Conversion Price for twenty out of thirty consecutive trading days: (i) 200% prior to the second anniversary of the closing of the transactions contemplated by the SPA (the “SPA Closing”), (ii) 175% after the second anniversary but before the third anniversary and (iii) 150% after the third anniversary. Upon the seventh anniversary of the SPA Closing, if the trailing 20-day volume weighted average price of Class A Stock (the “Prevailing Price”) is equal to or greater than the Conversion Price and upon certain other conditions, then each share of Series A-1 Stock would automatically convert to Class A Stock at the then applicable Conversion Rate. Upon approval of the Company Stockholders (“Stockholder Approval”) of the conversion of all shares of Preferred Stock issued or issuable pursuant to the SPA, as required by the rules of the NASDAQ Global Select Market, outstanding shares of the Series A-2 Stock will automatically convert into shares of Series A-1 Stock.

Holders of the Preferred Stock will be entitled to cumulative dividends payable quarterly at a rate of 9% per annum (the “Dividend Rate”) in cash, or, for any 12 quarters (“PIK Quarters”), at the Company’s option, (i) by paying additional shares of the respective series of Preferred Stock or (ii) by increasing Stated Value. Holders of Preferred Stock will also be entitled to receive dividends or distributions declared or paid on Class A Stock on an as-converted basis. After 12 PIK Quarters, (x) if the Company fails to fully declare and pay dividends in cash, then the dividend rate may increase by as much as 9.0% per annum and (y) if the Company fails to declare and pay all accrued dividends in cash, then the Preferred Stock’s Dividend Rate will increase by 5% per annum and an additional 1% for each successive dividend period until a maximum Dividend Rate of 20% per annum. If after the seventh anniversary of the SPA Closing the Prevailing Price is less than the Conversion Price, the Series A-1 Stock Dividend Rate shall automatically increase to 20% unless automatically converted as described above; however, the

Company, at its option, may instead elect to exchange each share of Series A-1 Stock for senior unsecured notes of the Company with a 2 year maturity, a 9% per annum coupon payable semi-annually in cash and governed by terms substantially similar to the Company’s most recent high yield indenture at that time. If Stockholder Approval is not obtained after six months after the SPA Closing, then the Series A-2 Dividend Rate shall automatically increase by 5% per annum and shall increase by an additional 0.5% each quarter thereafter until Stockholder Approval is obtained.

The Company may, as its option, redeem shares of the Preferred Stock in cash at (i) a premium of 100% of Stated Value after the third anniversary of the SPA Closing, (ii) a premium of 105% of Stated Value after the fourth anniversary and (iii) Stated Value after the fifth anniversary. If after the seventh anniversary the Company fails to fully declare and pay a quarterly dividend in cash, then the Company must redeem in cash all outstanding Series A-1 Stock at Stated Value. If Shareholder Approval is not obtained after the seventh anniversary, the Company must redeem all outstanding Series A-2 Stock at Stated Value.

The Purchaser will initially be able to designate one director to the board of directors (the “Board”) of the Company. After the first anniversary of the SPA Closing, so long as the Purchaser beneficially owns at least (a) 30% of the Preferred Stock or 20% of the Class A Stock on an as-converted basis (or a combination thereof) or (b) 15% of the Preferred Stock or 10% of Class A Stock on an as-converted basis (or a combination thereof), the Purchaser will have the right to designate two or one directors, respectively, to the Board.

The Purchaser will be subject to certain standstill restrictions pursuant to which the Purchaser will be restricted, among other things and subject to customary exceptions, from purchasing additional securities of the Company, proposing any merger or other extraordinary corporate transaction, initiating any shareholder proposal or soliciting proxies involving a change in the Company’s management until the later of (a) the two-year anniversary of after the date the Purchaser is no longer entitled to designate any director to the Board and (b) the Company fails to fully declare and pay all accrued dividends after there are no PIK Quarters remaining for either series of Preferred Stock.

In connection with the SPA Closing, the Company and the Purchaser will enter into (i) a Registration Rights Agreement (“Preferred Registration Rights Agreement”) that will grant the Purchaser certain customary registration rights for shares of Class A Stock issuable upon the conversion of Series A-1 Stock acquired pursuant to the PSA and (ii) a voting and support agreement that will provide for the Purchaser to vote in favor of the Stockholder Approval.

The SPA contains representations and warranties, covenants, termination and indemnification provisions that are customary for this type of transaction. The representations and warranties and covenants in the SPA were made or agreed to, among other things, to provide the parties with specified rights and obligations and to allocate risk among the parties. Accordingly, the SPA should not be relied upon as constituting a description of the state of affairs of any of the parties or their affiliates at the time it was entered into or otherwise. The SPA is expected to closing simultaneously with the closing of Purchase Agreements, subject to the satisfaction of customary closing conditions.

This summary of the SPA, the Preferred Registration Rights Agreement, the Certificates of Designations, the voting and support agreement and the transactions contemplated thereby does not purport to be complete, and is qualified in its entirety by reference to the full text of the SPA, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.

Item 3.02. Unregistered Sales of Equity Securities.

The information in Item 1.01 of this Current Report on Form 8-K regarding the contemplated issuances of Preferred Stock and Class A Stock is incorporated by reference into this Item 3.02. The securities will be, in each case, issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act as an issuance not involving a public offering. Battlecat, Marquis and the Purchaser represented to the Company that each is an “accredited investor” as defined in Rule 501 of the Securities Act, and appropriate legends will be affixed to any certificates evidencing the Preferred Shares.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit Number	Description
2.1*	Purchase and Sale Agreement by and between Lonestar Resources US Inc. and Battlecat Oil & Gas, LLC, dated as of May 26, 2017.
2.2*	Purchase and Sale Agreement by and between Lonestar Resources US Inc. and SN Marquis LLC, dated as of May 26, 2017.
10.1	Securities Purchase Agreement by and between Lonestar Resources US Inc., and Chambers Energy Capital III, LP, dated May 26, 2017.

* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Lonestar Resources US Inc.
Dated: June 2, 2017	By:	/s/ Frank D. Bracken III
		Name:	Frank D. Bracken III
		Title:	Chief Executive Officer

Exhibit Number	Description
2.1*	Purchase and Sale Agreement by and between Lonestar Resources US Inc. and Battlecat Oil & Gas, LLC, dated as of May 26, 2017.
2.2*	Purchase and Sale Agreement by and between Lonestar Resources US Inc. and SN Marquis LLC, dated as of May 26, 2017.
10.1	Securities Purchase Agreement by and between Lonestar Resources US Inc., and Chambers Energy Capital III, LP, dated May 26, 2017.

* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

EX-2.1

Exhibit 2.1

Execution Version

PURCHASE AND SALE AGREEMENT

BETWEEN

BATTLECAT OIL & GAS, LLC

AS SELLER

AND

LONESTAR RESOURCES US, INC.

AS PURCHASER

Dated May 26, 2017

TABLE OF CONTENTS

		Page
ARTICLE 1 PURCHASE AND SALE			1
Section 1.1	Purchase and Sale		1
Section 1.2	Assets		1
Section 1.3	Excluded Assets		4
Section 1.4	Effective Time; Proration of Costs and Revenues		5
Section 1.5	Delivery and Maintenance of Records and Retained Records		7
ARTICLE 2 PURCHASE PRICE			7
Section 2.1	Purchase Price		7
Section 2.2	Adjustments to Purchase Price		7
Section 2.3	Allocation of Purchase Price		9
Section 2.4	Deposit		10
ARTICLE 3 TITLE MATTERS			10
Section 3.1	Seller’s Title		10
Section 3.2	Certain Definitions		10
Section 3.3	Definition of Permitted Encumbrances		12
Section 3.4	Notice of Title Defects Defect Adjustments		14
Section 3.5	Consents to Assignment and Preferential Rights to Purchase		19
Section 3.6	Casualty or Condemnation Loss		21
Section 3.7	Limitations on Applicability		21
ARTICLE 4 ENVIRONMENTAL MATTERS			21
Section 4.1	Assessment		21
Section 4.2	NORM		22
Section 4.3	Notice of Violations of Environmental Laws		23
Section 4.4	Remedies for Violations of Environmental Laws		23
Section 4.5	Limitations		25
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER			26
Section 5.1	Disclaimers		26
Section 5.2	Existence and Qualification		28
Section 5.3	Power		28

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TABLE OF CONTENTS

(continued)

		Page
Section 5.4	Authorization and Enforceability		28
Section 5.5	No Conflicts		29
Section 5.6	Liability for Brokers’ Fees		29
Section 5.7	Litigation		29
Section 5.8	Taxes and Assessments		29
Section 5.9	Outstanding Capital Commitments		30
Section 5.10	Compliance with Laws		30
Section 5.11	Contracts		30
Section 5.12	Payments for Production		30
Section 5.13	Governmental Authorizations		30
Section 5.14	Consents and Preferential Purchase Rights		31
Section 5.15	Environmental Laws		31
Section 5.16	Bankruptcy		31
Section 5.17	Accredited Investors		31
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER			32
Section 6.1	Existence and Qualification		32
Section 6.2	Power		32
Section 6.3	Authorization and Enforceability		32
Section 6.4	No Conflicts		32
Section 6.5	Liability for Brokers’ Fees		32
Section 6.6	Litigation		33
Section 6.7	Financing		33
Section 6.8	Independent Investigation		33
Section 6.9	Bankruptcy		34
Section 6.10	Qualification		34
Section 6.11	Consents		34
Section 6.12	Capitalization; Representations as to Consideration Shares		34
Section 6.13	Investment Company		35
Section 6.14	Registration Rights		35
Section 6.15	SEC Documents		35

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TABLE OF CONTENTS

(continued)

		Page
ARTICLE 7 COVENANTS OF THE PARTIES			37
Section 7.1	Access		37
Section 7.2	Government Reviews		37
Section 7.3	Notification of Breaches		37
Section 7.4	Operatorship		38
Section 7.5	Operation of Business		38
Section 7.6	Indemnity Regarding Access		40
Section 7.7	Other Preferential Rights		40
Section 7.8	Tax Matters		41
Section 7.9	Special Warranty of Title		43
Section 7.10	Suspended Proceeds		43
Section 7.11	Sales or Use Tax, Recording Fees, and Similar Taxes and Fees		44
Section 7.12	Change of Name		44
Section 7.13	Replacement of Bonds and Guarantees		44
Section 7.14	Further Assurances		45
ARTICLE 8 CONDITIONS TO CLOSING			45
Section 8.1	Conditions of Seller to Closing		45
Section 8.2	Conditions of Purchaser to Closing		46
ARTICLE 9 CLOSING			47
Section 9.1	Time and Place of Closing		47
Section 9.2	Obligations of Seller at Closing		47
Section 9.3	Obligations of Purchaser at Closing		48
Section 9.4	Closing Payment and Post-Closing Purchase Price Adjustments		49
ARTICLE 10 TERMINATION			51
Section 10.1	Termination		51
Section 10.2	Effect of Termination		51
Section 10.3	Distribution of Deposit Upon Termination		51
ARTICLE 11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS AND WAIVERS			53
Section 11.1	Receipts		53
Section 11.2	Assumption and Indemnification		54

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TABLE OF CONTENTS

(continued)

		Page
Section 11.3	Indemnification Actions		57
Section 11.4	Limitation on Actions		58
Section 11.5	Recording		60
Section 11.6	Waivers		60
Section 11.7	Insurance		61
Section 11.8	Tax Treatment of Indemnification Payments		61
ARTICLE 12 MISCELLANEOUS			61
Section 12.1	Counterparts		61
Section 12.2	Notice		62
Section 12.3	Expenses		63
Section 12.4	Governing Law and Venue		63
Section 12.5	Jurisdiction; Waiver of Jury Trial		63
Section 12.6	Captions		64
Section 12.7	Waivers		64
Section 12.8	Assignment		64
Section 12.9	Entire Agreement		64
Section 12.10	Amendment		64
Section 12.11	No Third-Party Beneficiaries		65
Section 12.12	Public Announcements		65
Section 12.13	Invalid Provisions		65
Section 12.14	References		65
Section 12.15	Construction		66
Section 12.16	Limitation on Damages		66
Section 12.17	Non-Recourse Parties		66
ARTICLE 13 DEFINITIONS			67

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EXHIBITS AND SCHEDULES

Exhibit A	Leases
Exhibit A-1	Wells and Units
Exhibit A-2	Surface Property
Exhibit B	Conveyance
Exhibit C	Persons with Knowledge
Exhibit D	Registration Rights Agreement
Exhibit E	Form of Surface Deed
Schedule 1.2(d)	Contracts
Schedule 1.2(e)	Surface Contracts
Schedule 1.3(g)	Excluded Permits
Schedule 2.3	Allocated Value
Schedule 3.3(j)	Calls on Hydrocarbons
Schedule 3.3(n)	Other Permitted Encumbrances
Schedule 3.3(o)	Imbalances
Schedule 5.7	Litigation
Schedule 5.8	Taxes and Assessments
Schedule 5.9	Outstanding Capital Commitments
Schedule 5.10	Compliance With Laws
Schedule 5.11(a)	Defaults
Schedule 5.11(b)	Certain Contracts
Schedule 5.12	Payments For Production
Schedule 5.13	Governmental Authorizations
Schedule 5.14	Preferential Rights & Consents to Assign
Schedule 5.15	Environmental Laws
Schedule 6.12(a)	Buyer’s Capitalization Disclosure Schedule
Schedule 6.14	Registration Rights Agreements
Schedule 7.5	Operation of Business
Schedule 7.13(a)	Governmental Bonds
Schedule 7.13(b)	Guarantees
Schedule 9.4(c)	Seller’s Wiring Instructions

-v-

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (the “Agreement”), is executed on May 26, 2017, by and between Battlecat Oil & Gas, LLC, a Texas limited liability company (“Seller”), and Lonestar Resources US, Inc., a Delaware corporation (“Purchaser”). Seller and Purchaser may each be referred to herein as a “Party” and collectively as the “Parties”.

RECITALS:

A.    Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller the Assets (as defined below), in the manner and upon the terms and conditions hereafter set forth.

NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:

ARTICLE 1

PURCHASE AND SALE

Section 1.1    Purchase and Sale.

At the Closing, and upon the terms and subject to the conditions of this Agreement, Seller agrees to sell and convey to Purchaser and Purchaser agrees to purchase, accept and pay for the Assets and assume the Assumed Obligations. Capitalized terms used herein shall have the respective meanings ascribed to them in this Agreement as such terms are defined herein and/or identified or defined in Article 13 hereof.

Section 1.2    Assets.

As used herein, the term “Assets” means, subject to the terms and conditions of this Agreement, all of Seller’s right, title, interest and estate, real or personal, recorded or unrecorded, movable or immovable, tangible or intangible, in and to the following, excluding, however, the Excluded Assets:

(a)    All of the oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds, carried interests, mineral fee interests, overriding royalty interests, reversionary rights, farmout rights, options, and other properties and interests described on Exhibit A, subject to such depth limitations and other restrictions and limitations as may be set forth on Exhibit A or in the instruments that constitute the foregoing properties and interests (collectively, the “Leases”), together with, subject to such limitations and restrictions, each and every kind and character of right, title, claim, and interest that Seller has in and to the Leases, the lands covered by the Leases or the lands pooled, unitized, communitized or consolidated therewith (such lands covered by the Leases or pooled, unitized, communitized or consolidated therewith being hereinafter referred to as the “Lands”);

(b)    All oil, gas, water, CO2 or injection wells located on or within the geographical boundaries of the Lands, whether producing, shut-in, plugged or abandoned, and including the wells shown on Exhibit A-1 attached hereto (whether or not located on the Lands) (the “Wells”);

(c)    Any pooled or other units which include any portion of the Lands or all or a part of any Leases or any Wells, including those units referred to on Exhibit A-1 (the “Units”, such Units together with the Leases, Lands and Wells, or in cases when there is no Unit, the Leases together with the Lands and Wells, being hereinafter referred to collectively as the “Properties” and individually as a “Property”), and including all interest of Seller in Hydrocarbon production from any such Unit, whether such Unit Hydrocarbon production comes from Wells located on or off of a Lease, and all tenements, hereditaments and appurtenances belonging to the Leases and Units;

(d)    All contracts, agreements and instruments by which the Properties are bound, or that relate to or are otherwise applicable to the Properties (but in each case only to the extent applicable to the Properties and no other properties of Seller not included in the Assets), including operating agreements, unitization, pooling and communitization agreements, declarations and orders, joint venture agreements, farmin and farmout agreements, water rights agreements, exploration agreements, area of mutual interest agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons and processing agreements, and further including those agreements and instruments identified on Schedule 1.2(d) (hereinafter collectively referred to as the “Contracts”); provided that “Contracts” shall exclude (i) any master service agreements, (ii) any contracts, agreements and instruments to the extent transfer is (A) restricted by their respective terms or third-party agreement and the necessary consents to transfer are not obtained pursuant to Section 3.5, or (B) subject to payment of a fee or other consideration under any license agreement or other agreement with a Person other than an Affiliate of Seller, and for which no consent to transfer has been received or for which Purchaser has not agreed in writing to pay the fee or other consideration, as applicable, and (iii) the instruments constituting the Leases, Surface Contracts and the assignments or conveyances in Seller’s chain of title to the Leases;

(e)    All easements, permits, licenses, servitudes, rights-of-way, surface leases and other surface rights to the extent appurtenant to, and used or held for use primarily in connection with, the Properties, including those identified on Schedule 1.2(e) (hereinafter collectively referred to as the “Surface Contracts”);

(f)    All equipment, machinery, fixtures and other tangible personal property and improvements located on the Properties and used or held for use primarily in connection with the operation of the Properties, including any wells, tanks, boilers, buildings, fixtures, injection facilities, saltwater disposal facilities, compression facilities, pumping units and engines, flow lines, pipelines, gathering systems, gas and oil treating facilities, machinery, power lines, telephone and telegraph lines, roads, and other appurtenances, improvements and facilities (subject to such exclusions, the “Equipment”);

2

(g)    All field offices, real property or similar assets, including the tract of land described on Exhibit A-2, not designated as part of the Excluded Assets as referenced in Section 1.3 hereinafter;

(h)    All Hydrocarbons produced from or attributable to the Properties from and after the Effective Time and all inventories of Hydrocarbons produced from or attributable to the Properties that are in storage in tanks or pipelines on the Effective Time, in each case only to the extent that Seller receives an upward adjustment to the Unadjusted Purchase Price pursuant to Section 2.2(g) in respect of such Hydrocarbons;

(i)    Any geological, geophysical or seismic information related to the Leases or Wells except to the extent transfer is restricted by third-party agreement or applicable Law and the necessary consents to transfer are not obtained pursuant to Section 3.5, or subjected to payment of a fee or other consideration by any license agreement or other agreement with a Person other than an Affiliate of Seller, or by applicable Law, and for which no consent to transfer has been received or for which Purchaser has not agreed in writing to pay the fee or other consideration, as applicable;

(j)    All Imbalances; and

(k)    Copies of all of the following items, subject to Section 1.5, all lease files, land files, well files, gas and oil sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, non-confidential logs, maps, engineering data and reports, and files and all other books, records, data, files, maps, lease operating statements, and accounting records to the extent related to the Assets, or used or held for use primarily in connection with the maintenance or operation thereof, but excluding (i) any books, records, data, files, maps and accounting records to the extent disclosure or transfer is restricted by third-party agreement or applicable Law and the necessary consents to transfer are not obtained pursuant to Section 3.5, or subjected to payment of a fee or other consideration by any license agreement or other agreement with a Person other than an Affiliate of Seller, or by applicable Law, and for which no consent to transfer has been received or for which Purchaser has not agreed in writing to pay the fee or other consideration, as applicable; (ii) computer software; (iii) all legal records and legal files of Seller, work product of Seller’s legal counsel and records protected by attorney-client privilege, but excluding in each case Leases, Contracts, Surface Contracts and title opinions; (iv) records relating to the offer, negotiation or consummation of the sale of the Assets or any interest in the Properties; and (v) Seller’s reserve studies, estimates and evaluations, and engineering studies and economic studies (such copies, collectively, and subject to such exclusions, the “Records”).

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Section 1.3    Excluded Assets.

Notwithstanding the foregoing, the Assets shall not include, and there is excepted, reserved and excluded from the purchase and sale contemplated hereby (collectively, the “Excluded Assets”):

(a)    (i) All corporate, partnership, limited liability company, financial, tax and legal records of Seller that relate to Seller’s or its Affiliates’ businesses generally (whether or not relating to the Assets), (ii) all books, records and files that relate to the other Excluded Assets described in this Section 1.3, (iii) those records retained by Seller pursuant to Section 1.2(k) and (iv) copies of any other records retained by Seller pursuant to Section 1.5;

(b)    All claims for refunds of, or rights to receive funds from any Governmental Body, credits attributable to, or loss carry forwards with respect to, (i) Taxes related to the ownership or operation of the Assets which are attributable to any taxable period, or portion thereof, ending at or prior to the Effective Time, (ii) income or franchise Taxes of Seller, or (iii) any Taxes attributable to the Excluded Assets or to Seller’s businesses generally or (iv) any Taxes that were included as a downward adjustment to the Purchase Price pursuant Section 2.2;

(c)    All rights to any other costs or expenses borne by Seller or Seller’s predecessors in interest and title attributable to periods prior to the Effective Time;

(d)    All rights relating to existing claims and causes of action (including insurance claims, whether or not asserted, under policies of insurance or claims to the proceeds of insurance) that may be asserted against a third party, except those described in Schedule 5.7 hereto and except to the extent such rights and claims and causes of action arise from or by their terms cover obligations or liabilities assumed by Purchaser hereunder;

(e)    All rights of Seller under Contracts attributable to periods before the Effective Time insofar as such rights relate to Seller Indemnity Obligations or other liabilities of Seller retained under this Agreement;

(f)    Rights to initiate and conduct joint interest audits or other audits of Property Costs incurred before the Effective Time, and to receive costs and revenues in connection with such audits, in each case to the extent Seller is responsible for such Property Costs under this Agreement;

(g)    Seller’s area-wide bonds, permits and licenses or other permits, licenses or authorizations used in the conduct of Seller’s or its Affiliates’ business generally as reflected in Schedule 1.3(g);

(h)    All trade credits, account receivables, note receivables, take-or-pay amounts receivable, and other receivables attributable to the Assets (excluding Hydrocarbon inventories subject to Section 1.2(h) for which Seller receives an upward adjustment to the Unadjusted Purchase Price) with respect to any period of time prior to the Effective Time, as determined in accordance with GAAP;

(i)    Trademarks, patents and trade names;

(j)    Bonds, letters of credit and guarantees retained by Seller pursuant to Section 7.13;

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(k)    All tools, pulling machines, warehouse stock, equipment or material temporarily located on the Properties and not presently required for the operation of the Properties as currently operated;

(l)    All hedges, futures, swaps and other derivatives, including rights relating thereto, affecting the Assets;

(m)    All offices and office leases, and computers, phones, office supplies, furniture and related personal effects located off the Properties or only temporarily located on the Properties;

(n)    Assets retained by Seller or excluded from the Assets at Closing pursuant to Sections 3.4(d)(ii), 3.5, 4.4(b) or 7.7, subject to the terms of such Sections; and

(o)    All leased personal property (including leased vehicles).

Section 1.4    Effective Time; Proration of Costs and Revenues.

(a)    Possession of the Assets shall be transferred from Seller to Purchaser at the Closing, but certain financial benefits and obligations of the Assets shall be transferred effective as of 7:00 A.M., local time, where the respective Assets are located, on April 1, 2017 (the “Effective Time”), as further set forth in this Agreement.

(b)    Except to the extent accounted for in the adjustments to the Unadjusted Purchase Price made under Section 2.2, (i) Purchaser shall be entitled to all production from or attributable to the Properties at and after the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Assets at or after the Effective Time, and (ii) Seller shall be entitled to all production from or attributable to the Properties prior to the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Assets prior to the Effective Time. The terms “earned” and “incurred”, as used in this Agreement, shall be interpreted in accordance with GAAP and Council of Petroleum Accountants Society (“COPAS”) standards, as implemented by Seller in the ordinary course of business consistent with past practice. For purposes of allocating production (and accounts receivable with respect thereto), under this Section 1.4(b), (i) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Leases, Units and Wells when they pass through the pipeline connecting into the storage facilities into which they are transported from the lands covered by the applicable Lease, Unit or Well, or if there are no storage facilities, when they pass through the LACT meter or similar meter at the entry point into the pipelines through which they are transported from such lands and (ii) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Leases, Units and Wells when they pass through the delivery point sales meters or similar meters at the entry point into the pipelines through which they are transported from such lands. Seller shall utilize reasonable interpolative procedures to arrive at an allocation of production when exact meter readings or gauging and strapping data is not available.

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(c)    As used herein, “Property Costs” means (i) all costs attributable to the ownership, development, operation or maintenance of the Assets, including costs of insurance, lease bonus payments, renewals, extensions or amendments, and ad valorem, property, excise, sales, use, severance, production and similar Taxes (including any interest, fine, penalty or additions to Tax imposed by a Governmental Body in connection with such Taxes) based upon or measured by the ownership or operation of the Assets or the production of Hydrocarbons therefrom, but excluding any other Taxes, (ii) capital expenditures incurred in the ownership, development, operation and maintenance of the Assets in the ordinary course of business, (iii) where applicable, such costs and capital expenditures charged in accordance with the relevant operating agreement, unit agreement, pooling agreement, pre-pooling agreement, pooling order or similar instrument, or if none, charged to the Assets on the same basis as charged on the date of this Agreement, and (iv) overhead costs charged to the Assets under the relevant operating agreement, unit agreement, pooling agreement, pre-pooling agreement, pooling order or similar instrument by unaffiliated third parties, or if none, charged to the Assets on the same basis as charged on the date of this Agreement; provided that “Property Costs” shall exclude, without limitation, liabilities, losses, costs, and expenses attributable to (A) claims, investigations, administrative proceedings or litigation directly or indirectly arising out of or resulting from actual or claimed personal injury or death, property damage or violation of any Law (including private rights or causes of action under any Law), (B) title claims (including claims that the Leases have terminated), (C) obligations to plug wells, dismantle facilities, close pits and restore the surface or seabed around such wells, facilities and pits, (D) obligations to cure, address or remediate any contamination of groundwater, surface water, soil or Equipment under applicable Environmental Laws, (E) obligations to furnish make-up gas according to the terms of applicable gas sales, gathering or transportation contracts, (F) gas balancing obligations and similar obligations arising from Imbalances and (G) obligations to pay working interests, royalties, overriding royalties or other interests held in suspense, all of which are addressed in Section 11.2 or elsewhere in this Agreement. For the purposes of calculating the adjustments to the Unadjusted Purchase Price under Section 2.2 or implementing the terms of Section 7.8 or Article 11, (1) right-of-way fees, insurance premiums and Property Costs (excluding Taxes which are addressed in clauses (2), (3), and (4) of this sentence) delay rentals, lease bonuses, minimum royalties, option payments, lease extension payments and shut-in royalties) that are paid periodically shall be prorated based on the number of days in the applicable period falling before, or at and after, the Effective Time, (2) ad valorem, property, severance, production or similar Taxes which are based on the quantity of or the value of production of Hydrocarbons shall be apportioned between Seller and Purchaser based on the number of units or value of production actually produced, as applicable, before and after the Effective Time, respectively, (3) other ad valorem, property, severance, production or similar Taxes shall be prorated between Seller and Purchaser based on the number of days in the applicable period before and at and after the Effective Time, respectively, and (4) all other Taxes shall be apportioned between Seller and Purchaser based on an interim closing of the books of Seller as of the day before the day on which the Effective Time occurs.

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Section 1.5    Delivery and Maintenance of Records and Retained Records.

(a)    Seller, at Purchaser’s cost, shall use reasonable efforts to deliver the Records (FOB at Seller’s office) in Seller’s possession or control, to Purchaser within thirty (30) days following Closing. Seller may retain original Records and/or copies of any Records.

(b)    Purchaser, for a period of seven (7) years following the Closing, will (i) retain the Records, (ii) provide Seller, its Affiliates, and its and their respective officers, employees and representatives with access to the Records during normal business hours for review and copying at Seller’s expense and (iii) provide Seller, its Affiliates, and its and their respective officers, employees and legal counsel with access, during normal business hours, to materials received or produced after Closing relating to any claim for indemnification made under Section 11.2 of this Agreement (excluding, however, attorney work product and attorney-client communications protected by privilege and prepared with respect to any such claim being brought by Purchaser and information subject to an applicable confidentiality restriction in favor of third parties) for review and copying at Seller’s expense.

ARTICLE 2

PURCHASE PRICE

Section 2.1    Purchase Price.

The purchase price for the Assets (the “Unadjusted Purchase Price”) shall be Sixty Million Dollars ($60,000,000), and shall be adjusted as provided in Section 2.2 (as adjusted, the “Adjusted Purchase Price”). The Unadjusted Purchase Price shall be comprised of (i) an amount to be paid in cash equal to Fifty-Five Million Dollars ($55,000,000) (the “Cash Consideration”) and (ii) 1,231,527 Shares of Lonestar Resources US, Inc. Class A Voting Common Stock (such Shares the “Consideration Shares”) at a value of $4.06 per share (the “Share Price”) representing payment of the remaining Five Million Dollars ($5,000,000) of the Unadjusted Purchase Price (the “Stock Consideration”).

Section 2.2    Adjustments to Purchase Price.

The Unadjusted Purchase Price for the Assets shall be adjusted as follows with all such amounts being determined in accordance with GAAP and COPAS standards, as applicable (with such adjustments being made so as to not give duplicative effect):

(a)    Reduced by the aggregate amount of the following proceeds received and retained by Seller between the Effective Time and the Closing Date (with the period between the Effective Time and the Closing Date referred to as the “Adjustment Period”): proceeds from the sale of Hydrocarbons (net of any royalties, overriding royalties or other burdens on or payable out of production, gathering, processing and transportation costs and any production, severance, sales, use or excise Taxes not reimbursed to Seller by the purchaser of such production) produced from the Properties during the Adjustment Period;

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(b)    Reduced in accordance with Section 3.5 by an amount equal to the Allocated Value of those Properties (i) with respect to which preferential purchase rights have been exercised prior to Closing or (ii) that cannot be transferred due to unsatisfied and unwaived requirements for consent to the assignments contemplated hereby;

(c)    Reduced in accordance with Section 7.7 by an amount equal to the Allocated Value of those Properties that are subject to a suit, action or proceeding prior to Closing seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated hereby in connection with a claim to enforce preferential rights;

(d)    (i) Subject to Section 3.4(i), reduced by the applicable Title Defect Amount as a result of Title Defects for which the Title Defect Amount has been finally determined or agreed pursuant to Section 3.4 (or, for purposes of the Closing Payment, pursuant to Seller’s good faith estimate), and by the Allocated Value of any Title Defect Property retained by Seller pursuant to Section 3.4(d)(ii) and (ii) increased by the applicable Title Benefit Amount as a result of Title Benefits for which the Title Benefit Amount has been finally determined or agreed pursuant to Section 3.4;

(e)    Reduced by the Allocated Values of any Properties excluded by Seller pursuant to Section 3.6;

(f)    Reduced by (i) subject to Section 4.4, any amount agreed upon by Purchaser and Seller pursuant to Section 4.4(a) regarding the reasonable estimate of the cost of curing Environmental Liabilities for any affected Property not retained by Seller, and (ii) the Allocated Value of any Property retained by Seller pursuant to Section 4.4(b);

(g)    Increased by the amount equal to the value of all of Seller’s inventories of Hydrocarbons produced from or attributable to the Properties that are in storage above the load line or pipeline connection, as applicable, as of the Effective Time (which value shall be computed using the Index Price, less any applicable severance Taxes, royalties and similar burdens; provided, however, that the adjustment contemplated by this paragraph shall be made only to the extent that Seller does not receive and retain the proceeds, or portion thereof, attributable to the sale of such Hydrocarbons;

(h)    Increased by the amount of all Property Costs and other costs attributable to the ownership, development, operation and maintenance of the Assets that are paid by Seller and incurred on or after the Effective Time (or with respect to any period on or after the Effective Time), except any Property Costs and other such costs already deducted in the determination of proceeds in Section 2.2(a);

(i)    Increased by an amount equal to the value, as determined according to the COPAS 2005 Accounting Procedures, of all surplus tubular, goods and physical inventory to the extent such items are owned by Seller and included in the Assets at the Effective Time;

(j)    Increased by an overhead charge of $2,000.00 per well per month (pro- rated for any partial months as applicable) for the Adjustment Period; and

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(k)    Decreased by the amount of any Suspended Proceeds in accordance with Section 7.10, as applicable.

The adjustment described in Section 2.2(a) shall serve to satisfy, up to the amount of the adjustment, Purchaser’s entitlement under Section 1.4 to Hydrocarbon production from or attributable to the Properties during the Adjustment Period, and to the value of other income, proceeds, receipts and credits earned with respect to the Assets during the Adjustment Period, and Purchaser shall not have any separate rights to receive any production or income, proceeds, receipts and credits with respect to which an adjustment has been made.

Section 2.3    Allocation of Purchase Price.

(a)    For Title Defect purposes, concurrent with the execution of this Agreement, Purchaser and Seller will agree upon an allocation of the Unadjusted Purchase Price among the Wells, Leases and Units. Such allocation of value shall be attached to this Agreement as Schedule 2.3. The “Allocated Value” for any Well, Lease or Unit equals the portion of the Unadjusted Purchase Price allocated to such Well, Lease or Unit on Schedule 2.3, increased or decreased as described in Section 2.2.

(b)    For federal income tax purposes, Purchaser and Seller shall use reasonable efforts to agree on an allocation of the Unadjusted Purchase Price (and any adjustments thereto that are properly taken into account in determining amount realized and/or adjusted tax basis for federal income tax purposes) among the Assets within thirty (30) days after the determination of the Adjusted Purchase Price (any such allocation so agreed to by the parties, an “Agreed Allocation”). Seller and Purchaser agree (a) that the Agreed Allocation shall be used by Seller and Purchaser as the basis for reporting asset values and other items for purposes of all federal, state, and local Tax Returns, including Internal Revenue Service Form 8594 and (b) that, except as required by applicable Law, neither they nor their Affiliates will take positions inconsistent with the Agreed Allocation in any Tax Returns, in notices to Governmental Bodies, in audit or other proceedings with respect to Taxes, in notices to preferential purchase right holders, or in other documents or notices relating to the transactions contemplated by this Agreement without the consent of the other Party. Each Party shall promptly notify the other Party in writing upon receipt of notice of any pending or threatened Tax Audit or assessment challenging the Agreed Allocation, and neither party shall agree to any proposed adjustment to the Agreed Allocation by any Governmental Body without first giving to the other party prior written notice. However, nothing contained herein shall prevent a Party from settling any proposed deficiency or adjustment by any Governmental Body based upon or arising out of the Agreed Allocation, and no Party shall be required to litigate any proposed deficiency or adjustment by any Governmental Body challenging such Agreed Allocation. In the event that Purchaser and Seller are unable to reach an agreement on an allocation of the Unadjusted Purchase Price within thirty (30) days after the determination of the Adjusted Purchase Price, Purchaser and Seller may each adopt their own separate positions regarding the manner in which the Unadjusted Purchase Price is allocated among the Assets.

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Section 2.4    Deposit.

Within one (1) Business Day after the execution of this Agreement, Purchaser shall pay to Wells Fargo Bank, National Association as escrow agent (the “Escrow Agent”) Seller an earnest money deposit paid in cash in an amount equal to ten percent (10%) of the Unadjusted Purchase Price, which is Six Million Dollars ($6,000,000.00) (the “Deposit”), to be held in an escrow account (the “Escrow Account”) and pursuant to a mutually agreed upon escrow agreement (the “Escrow Agreement”) executed by the Parties and the Escrow Agent. The Deposit (including any interest earned thereon) shall be applied against the Unadjusted Purchase Price if the Closing occurs. If Closing does not occur, the Deposit shall be distributed in accordance with Section 10.3.

ARTICLE 3

TITLE MATTERS

Section 3.1    Seller’s Title.

(a)    This Article 3 and the Special Warranty in the Conveyance (subject to Section 7.9) shall, to the fullest extent permitted by applicable Law, be the exclusive right and remedy of Purchaser with respect to title to the Assets.

(b)    The conveyance of the Assets to be delivered by Seller to Purchaser shall be substantially in the form of Exhibit B (the “Conveyance”).

Section 3.2    Certain Definitions.

(a)    As used in this Agreement, the term “Defensible Title” means that title (whether record, contractual or other) of Seller to the Wells, Leases and Units that although not constituting perfect, merchantable or marketable title, is such that:

(i)    Entitles Seller to receive a share of the Hydrocarbons produced, saved and marketed from such Well, Lease or Unit and produced from the Eagle Ford Formation (after satisfaction of all royalties, overriding royalties, nonparticipating royalties, net profits interests or other similar burdens on or measured by production of Hydrocarbons) (a “Net Revenue Interest”) of not less than the “net revenue interest” share shown in Exhibit A-1 for such Well, Lease or Unit, except for decreases in connection with those operations permitted under Section 7.5 in which Seller may after the Effective Time be a non- consenting party, decreases resulting from the election to ratify or the establishment or amendment of pools or units on or after the date hereof (provided such elections or ratifications are consented to by Purchaser), decreases required to allow other working interest owners to make up past underproduction or pipelines to make up past under deliveries, and decreases resulting from reversionary interests, carried interests, horizontal or vertical severances or other matters or changes in interest stated in Exhibit A-1;

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(ii)    Obligates Seller to bear a percentage of the costs and expenses for the maintenance and development of, and operations relating to any Well, Lease or Unit not greater than the “working interest” shown in Exhibit A-1 without increase, (a “Working Interest”) except increases resulting from matters stated in Exhibit A-1, increases resulting from contribution requirements with respect to defaulting parties under applicable operating, unit, pooling, pre-pooling or similar agreements and increases that are accompanied by at least a proportionate increase in Seller’s Net Revenue Interest; and

(iii)    Is free and clear of Liens;

in each case excluding, subject to and determined without regard to matters constituting Permitted Encumbrances.

(b)    As used in this Agreement, the term “Title Benefit” shall mean any right, circumstance or condition that operates to increase the Net Revenue Interest of Seller in any Well, Lease or Unit shown on Exhibit A-1, without causing a greater than proportionate increase in Seller’s Working Interest above that shown in Exhibit A-1.

(c)    As used in this Agreement, the term “Title Defect” shall mean any lien, encumbrance, obligation or defect that causes Seller’s title to any Wells, Leases or Units shown on Exhibit A-1 to be less than Defensible Title; provided that “Title Defect” shall exclude the following:

(i)    defects based solely on a lack of information in Seller’s files or references to a document if such document is not in Seller’s files;

(ii)    defects arising out of lack of corporate or other entity authorization unless Purchaser provides affirmative evidence that the action was not authorized and results in another Person’s superior claim of title to the relevant Asset;

(iii)    defects in the chain of title consisting of the failure to recite marital status in a document unless Purchaser provides affirmative evidence that such failure or omission could reasonably be expected to result in another Person’s superior claim of title to the relevant Asset;

(iv)    defects that have been cured by applicable Laws of limitation or prescription;

(v)    defects arising out of a lack of survey, unless a survey is expressly required by applicable Laws;

(vi)    defects based on a gap in Seller’s chain of title in the applicable county records, unless such gap is affirmatively shown to exist in such records by an abstract of title, title opinion or landman’s title chain which documents shall be included in a Title Defect Notice;

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(vii)    defects based upon the failure to record any state or federal Leases or rights-of-way included in the Assets or any assignments of interests in such Leases or rights-of-way included in the Assets in any applicable county records;

(viii)    defects affecting ownership interests in any formation other than the Eagle Ford Formation;

(ix)    any encumbrance or loss of title resulting from Seller’s conduct of business in compliance with this Agreement;

(x)    encumbrances created under deeds of trust, mortgages and similar instruments by the lessor under a Lease covering the lessor’s surface and mineral interests in the land covered thereby that would customarily be accepted in taking or purchasing such Leases and for which the lessee would not customarily seek a subordination of such encumbrance to the oil and gas leasehold estate prior to conducting drilling activities on the Lease;

(xi)    encumbrances created under deeds of trust, mortgages and similar instruments by the grantor under a right-of-way that would customarily be accepted in taking or purchasing such rights-of-way; and

(xii)    defects disclosed herein (including on any Schedule or Exhibit).

Section 3.3    Definition of Permitted Encumbrances.

As used herein, the term “Permitted Encumbrances” means any or all of the following:

(a)    Royalties, nonparticipating royalty interests, net profits interests and any overriding royalties, reversionary interests and other burdens to the extent that they do not, individually or in the aggregate, reduce Seller’s Net Revenue Interest in a Well, Lease or Unit below that shown in Exhibit A-1 or increase Seller’s Working Interest in a Well, Lease or Unit above that shown in Exhibit A-1 without a corresponding increase in the Net Revenue Interest;

(b)    All leases, unit agreements, pooling agreements, pre-pooling agreements, operating agreements, production sales contracts, division orders and other contracts, agreements and instruments applicable to the Assets, to the extent that they do not, individually or in the aggregate: (i) reduce Seller’s Net Revenue Interest in a Well, Lease or Unit below that shown in Exhibit A-1 or increase Seller’s Working Interest in a Well, Lease or Unit above that shown in Exhibit A-1 without a corresponding increase in the Net Revenue Interest and (ii) materially interfere with the ownership and operation of the Assets as currently owned and operated;

(c)    Subject to compliance with Sections 3.5 and 7.7, third-party consents and preferential rights to purchase the Assets applicable to this or a future transaction involving the Assets;

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(d)    Third-party consent requirements and similar restrictions with respect to which waivers or consents are obtained by Seller from the appropriate Persons prior to the Closing Date or the appropriate time period for asserting the right has expired or which need not be satisfied prior to a transfer;

(e)    Liens for Taxes or assessments not yet delinquent or, if delinquent, being contested in good faith by appropriate actions;

(f)    Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s and other similar liens or charges arising in the ordinary course of business for amounts not yet delinquent (including any amounts being withheld as provided by Law), or if delinquent, being contested in good faith by appropriate actions;

(g)    All rights to consent, required notices to, filings with, or other actions by Governmental Bodies in connection with the sale or conveyance of the Assets if they are not required prior to the sale or conveyance or are of a type customarily obtained after Closing;

(h)    Rights of reassignment arising upon final intention to abandon or release all or any part of the Assets;

(i)    Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations to the extent that they do not, individually or in the aggregate, materially interfere with the ownership and operation of the Assets as currently owned and operated as of the Effective Time;

(j)    Calls on Hydrocarbon production under existing Contracts identified on Schedule 3.3(j);

(k)    All rights reserved to or vested in any Governmental Body to control or regulate any of the Assets in any manner and all obligations and duties under all applicable Laws, rules and orders of any such Governmental Body or under any franchise, grant, license or permit issued by any such Governmental Body;

(l)    Any encumbrance on or affecting the Assets which is expressly assumed, bonded or paid by Purchaser at or prior to Closing or which is discharged by Seller at or prior to Closing;

(m)    Any matters shown on Exhibit A-1;

(n)    Any matters shown on Schedule 5.7 or Schedule 3.3(n);

(o)    Imbalances associated with the Assets described on Schedule 3.3(o);

(p)    In the case of any Well on an undeveloped location or other operation that has not been commenced as of the Closing Date, any permits, easements, rights of way, unit designations or production or drilling units not yet obtained, formed or created;

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(q)    Any liens, charges, encumbrances, defects or irregularities (i) which affect a Property from which Hydrocarbons have been and are being produced (or to which production of Hydrocarbons is allocable) for the last ten (10) years and for which no adverse claim related to title has been made in writing by any Person during such ten (10) year period, (ii) which would be accepted by a reasonably prudent purchaser engaged in the business of owning and operating oil and gas properties or (iii) which do not, individually or in the aggregate, materially detract from the value of or materially interfere with the ownership and operation of the Assets subject thereto or affected thereby (as currently owned and operated), and do not reduce Seller’s Net Revenue Interest below that shown in Exhibit A-1, or increase Seller’s Working Interest above that shown in Exhibit A-1 without a corresponding increase in the Net Revenue Interest;

(r)    Any defect, irregularity or encumbrance to the extent impacting formations outside of the Eagle Ford Formation;

(s)    Such Title Defects or other defects as Purchaser has waived in writing; and

(t)    Liens to be released at Closing.

Section 3.4    Notice of Title Defects Defect Adjustments.

(a)    To assert a Title Defect, Purchaser must deliver claim notices to Seller (each a “Title Defect Notice”) on or before the date that is thirty (30) days from the date hereof (the “Title Claim Date”), except as otherwise provided under Section 3.5 or 3.6. Each Title Defect Notice shall be in writing and shall include (i) a description of the alleged Title Defect(s), (ii) the Wells, Leases and Units affected by the Title Defect (each a “Title Defect Property”), (iii) the Allocated Values of each Title Defect Property, (iv) supporting documents reasonably necessary for Seller (as well as any title attorney or examiner hired by Seller) to verify the existence of the alleged Title Defect(s) and (v) the amount by which Purchaser reasonably believes the Allocated Values of each Title Defect Property are reduced by the alleged Title Defect(s) and the computations and information upon which Purchaser’s belief is based. Purchaser shall be deemed to have waived for all purposes hereunder all Title Defects that were not included in a Title Defect Notice delivered to Seller on or before the Title Claim Date. To give Seller an opportunity to commence reviewing and curing alleged Title Defects, Purchaser agrees to provide Seller, on or before the end of each calendar week prior to the Title Claim Date, written notices of all Title Defects discovered by Purchaser during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Title Claim Date, however, the failure to provide such a preliminary notice of a defect as described in this sentence shall not be considered a waiver of Purchaser’s right to assert a Title Defect; provided that such Title Defect is asserted in a proper Title Defect Notice on or before the Title Claim Date.

(b)    Seller shall have the right, but not the obligation, to deliver to Purchaser with respect to each Title Benefit a written notice (a “Title Benefit Notice”) asserting such Title Benefit on or before the Title Claim Date. Each Title Benefit Notice shall

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include (i) a description of the Title Benefit(s), (ii) the Wells, Leases or Units affected by the Title Benefit (each a “Title Benefit Property”), (iii) the Allocated Values of the Title Benefit Property, (iv) supporting documents reasonably necessary for Purchaser (as well as any title attorney or examiner hired by Purchaser) to verify the existence of the alleged Title Benefit(s) and (v) the amount by which Seller reasonably believes the Allocated Values of those Wells, Leases or Units are increased by the Title Benefit, and the computations and information upon which Seller’s belief is based. Seller shall be deemed to have waived for all purposes hereunder all Title Benefits that were not included in a Title Benefit Notice delivered to Purchaser on or before the Title Claim Date.

(c)    Seller shall have the right, but not the obligation, upon delivering written notice to Purchaser, to attempt, at Seller’s sole cost, to cure or remove any Title Defects of which it has been advised by Purchaser on or before the expiration of 90 days counted from and after the Title Claim Date (the “Cure Period”), unless the Parties otherwise agree. If Seller has provided notice at or prior to the Closing Date of Seller’s intent to attempt to cure a Title Defect within the Cure Period, the affected Property will be conveyed to Purchaser at Closing and subject in each case to the application of the Individual Defect Threshold and the Defect Deductible:

(i)    Purchaser shall be entitled to retain at Closing an amount of Consideration Shares equal to the alleged Title Defects for which Seller has elected to Cure and once the applicable Title Defects and Seller’s attempted cure thereof are finally resolved, Purchaser will either (x) retain the applicable portion of the Consideration Shares retained at Closing with respect to such Title Defect if such Title Defect is not cured (or portion thereof in the event of a partial cure) or (y) issue the proportionate amount of such Consideration Shares attributable to the Title Defect to Seller if such Title Defect is totally or partially cured; and

(ii)    if and only if the Title Defects for which Seller has elected to cure exceed the Stock Consideration, the Cash Consideration paid at Closing shall be reduced in an amount equal to the amount of the alleged Title Defects for which Seller has elected to Cure that are in excess of the Stock Consideration and such amount by which the Cash Consideration is reduced shall be deposited into the Escrow Account, which amount shall be disbursed pursuant to the terms of this Agreement and the Escrow Agreement; provided further that in the event any portion of the Cash Consideration is deposited into the Escrow Account then upon resolution of any Title Defects (including any total or partial cures thereof) any amounts owed to Seller shall first be paid out of the Escrow Account and upon distribution of all amounts out of Escrow Account, any further amounts owed to Seller shall be satisfied through the issuance of any Consideration Shares retained by Purchaser at Closing.

If at the end of the Cure Period the Title Defect is not cured as agreed by Seller and Purchaser or if Seller and Purchaser cannot agree, and it is determined by the Title Arbitrators that such Title Defect is not cured at the end of the Cure Period, then in either case Seller shall elect one of the options set forth in Section 3.4(d)(i) or 3.4(d)(ii)(B) for such Title Defect, in which event the

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Unadjusted Purchase Price adjustment required in connection with the selected option under this Article 3 shall be made in the final statement of the Adjusted Purchase Price pursuant to Section 9.4(b). No action of Seller in electing or attempting to cure a Title Defect shall constitute a waiver of Seller’s right to dispute the existence, nature or value of, or cost to cure, the Title Defect.

(d)    In the event that (I) any Title Defect asserted by Purchaser in accordance with Section 3.4(a) is not waived by Purchaser and (II) Seller has not provided notice to Purchaser at or prior to the Closing Date of Seller’s intent to attempt to cure the given Title Defect, or Seller has provided such notice but the Title Defect is not cured before the expiration of the Cure Period, then Seller shall, at its sole election, elect to:

(i)    reduce the Unadjusted Purchase Price by the Title Defect Amount determined pursuant to Section 3.4(f);

(ii)    (A) at Closing, retain the Property that is associated with such Title Defect, in which event the Unadjusted Purchase Price shall be reduced by an amount equal to the Allocated Value of such Property or (B) if such Property was conveyed to Purchaser at Closing, promptly after expiration of the Cure Period have Purchaser reconvey the Property that is associated with such Title Defect to Seller, in which event the Unadjusted Purchase Price shall be reduced by an amount equal to the Allocated Value of such Property, adjusted as provided in Section 2.2; or

(iii)    if applicable, terminate this Agreement pursuant to Article 10.

(e)    In the event that any Title Benefit asserted by Seller in accordance with Section 3.4(b) is not waived by Seller, then:

(i)    to the extent Purchaser and Seller agree on the Title Benefit Amount as calculated pursuant to Section 3.4(g), the Unadjusted Purchase Price shall be increased by such amount but the increase shall not exceed the total amount of the reductions of the Purchase Price for Title Defects; and

(ii)    to the extent there is no agreement under Section 3.4(e)(i) on or before the Closing Date, the disagreement between Seller and Purchaser regarding the Title Benefit Property or the Title Benefit Amount, as applicable, shall be submitted to arbitration in accordance with Section 3.4(h).

(f)    The “Title Defect Amount” resulting from a Title Defect shall be determined as follows:

(i)    if Purchaser and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;

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

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(iii)    if the Title Defect represents a discrepancy between (A) the Net Revenue Interest for any Title Defect Property and (B) the Net Revenue Interest stated on Exhibit A-1, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the actual amount of the decrease in Net Revenue Interest from that stated on Exhibit A-1 and the denominator of which is the Net Revenue Interest stated on Exhibit A-1; provided, however, that if the Title Defect does not affect the Title Defect Property throughout its entire life, the Title Defect Amount shall be reduced to take into account the applicable time period only;

(iv)    if the Title Defect represents an obligation, encumbrance, burden or charge upon or other defect in title to the Title Defect Property of a type not described in Section 3.4(f)(i), Section 3.4(f)(ii) or Section 3.4(f)(iii), then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Purchaser and Seller and such other factors as are necessary to make a proper evaluation;

(v)    if the Title Defect represents (A) a discrepancy between (1) the Net Revenue Interest for any Title Defect Property and (2) the Net Revenue Interest stated on Exhibit A-1, and (B) an obligation, encumbrance, burden or charge upon or other defect in title to the Title Defect Property, then the Title Defect Amount shall be determined by applying both of Section 3.4(f)(iii) and Section 3.4(f)(iv) to such Title Defect, without duplication; and

(vi)    notwithstanding anything to the contrary in this Article 3, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property shall not exceed the Allocated Value of such Title Defect Property.

(g)    The “Title Benefit Amount” resulting from a Title Benefit shall be the product of the Allocated Value of the Title Benefit Property multiplied by a fraction, the numerator of which is the actual amount of the increase in Net Revenue Interest from that stated on Exhibit A-1 and the denominator of which is the Net Revenue Interest stated on Exhibit A-1; provided, however, that if the Title Benefit does not affect the applicable Title Benefit Property throughout its entire life, the Title Benefit Amount shall be reduced to take into account the applicable time period only.

(h)    With respect to Title Defect Notices and Title Benefit Notices provided and received on or before the Title Claim Date, Seller and Purchaser shall attempt to agree on all Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts on or before the day before the Closing Date, subject to Seller’s rights under

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Section 3.4(d)(ii). If Seller and Purchaser are unable to agree by that date, then subject to Section 3.4(c) and Seller’s rights under Section 3.4(d)(ii), Seller’s good faith estimate shall be used for purposes of calculating the Closing Payment pursuant to Section 9.4(a), and the Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and finally resolved by arbitration pursuant to this Section 3.4(h). Likewise, if Seller has provided notice at or prior to the Closing Date of Seller’s intent to attempt to cure a Title Defect and by the end of the Cure Period, Seller and Purchaser have been unable to agree upon whether such Title Defect has been cured, or Seller have failed to cure any Title Defects which Seller provided notice that Seller would attempt to cure and Seller and Purchaser have been unable to agree on the Title Defect Amounts for such Title Defects, then the cure and/or Title Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and finally resolved by arbitration pursuant to this Section 3.4(h), subject to Seller’s right under Section 3.4(d)(ii). There shall be a single arbitrator, who shall be a title attorney with at least ten (10) years’ experience in oil and gas titles in the State of Texas as selected by the mutual agreement of the Purchaser and Seller within fifteen (15) days after the end of the Cure Period (or such other time as mutually agreed) and absent such agreement on the selection of the arbitrator, the arbitrator shall be selected by the Houston, Texas office of the American Arbitration Association; provided, however, that in any case such attorney shall not have worked as an employee of or outside counsel for either Seller or Purchaser or any of their Affiliates during the five (5)-year period preceding the applicable arbitration or have any financial interest in the applicable dispute (such attorney, the “Title Arbitrator”). The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Title Arbitrator’s determination shall be made within twenty (20) days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal. In making his determination, the Title Arbitrators shall be bound by the rules set forth in Section 3.4(a), Section 3.4(b), Section 3.4(c), Section 3.4(d), Section 3.4(e), Section 3.4(f), Section 3.4(g) and Section 3.4(i) and may consider such other matters as in the opinion of the Title Arbitrator are necessary or helpful to make a proper determination. Additionally, the Title Arbitrator may consult with and engage disinterested third parties to advise the arbitrator, including petroleum engineers. The Title Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter. Each Party shall bear its own legal fees and other costs of presenting its case and shall bear one-half of the costs and expenses of the Title Arbitrator. Upon final resolution of all Title Defects for which amounts have been deposited with the Escrow Agent, including by way of Seller’s election under Section 3.4(c)(ii), the Parties shall jointly instruct the Escrow Agent to release such amounts held in escrow to the appropriate Party or Parties in accordance with such final determinations.

(i)    Notwithstanding anything herein to the contrary, (y) in no event shall there be any adjustments to the Unadjusted Purchase Price or other remedies provided by Seller for any individual Title Defect for which the Title Defect Amount does not exceed Fifty Thousand Dollars ($50,000) (the “Individual Defect Threshold”); and (z) in no

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event shall there be any adjustments to the Unadjusted Purchase Price or other remedies provided by Seller for Title Defects unless the sum of (I) the aggregate amount of all Title Defect Amounts for Title Defects covered by Section 3.4(d)(i) that exceed the Individual Defect Threshold, plus (II) the aggregate amount of all Environmental Liabilities covered by Section 4.4(a) that exceed the Individual Defect Threshold, exceeds a deductible in an amount equal to two and one-half percent (2.5%) of the Unadjusted Purchase Price (the “Defect Deductible”), after which point Purchaser shall be entitled to adjustments to the Unadjusted Purchase Price or other available remedies under this Article 3 with respect to all Title Defects in excess of the Defect Deductible, subject to the Individual Defect Threshold and Seller’s elections under Section 3.4(d). The provisions of this Section 3.4(i) shall not apply to Title Defects relating to consent to assignment and preferential rights to purchase which shall be handled or treated under Section 3.5. The Allocated Value of any Property retained by Seller in accordance with Section 3.4(d)(ii) may not be used in meeting the Defect Deductible.

Section 3.5    Consents to Assignment and Preferential Rights to Purchase.

Seller shall use commercially reasonable efforts to promptly prepare and send (i) notices to the third party holders (excluding Governmental Bodies, which are addressed elsewhere in this Agreement) of any required consents to assignment of any Assets to request such consents and (ii) notices to the holders of any applicable preferential rights to purchase any Asset requesting waivers of such preferential rights to purchase, in each case that would be triggered by the purchase and sale contemplated by this Agreement, and of which Seller has knowledge. The consideration payable under this Agreement for any particular Assets for purposes of preferential purchase right notices shall be the Allocated Value for such Assets (proportionately reduced if an Asset is only partially affected). Seller shall use commercially reasonable efforts to cause such consents and waivers of preferential rights to purchase (or the exercise thereof) to be obtained and delivered prior to Closing. Purchaser shall cooperate with Seller in seeking to obtain such consents to assignment and waivers of preferential rights. Notwithstanding anything contained herein to the contrary, Seller shall have no liability for failure to either send such notices or obtain such consents or waivers.

(a)    Consents. Seller shall notify Purchaser in writing at least five (5) Business Days prior to Closing of all required third-party consents to the assignment of the Assets to Purchaser which have not been obtained and the Assets to which they pertain. In no event shall there be included in the Conveyances at Closing any Asset subject to an unsatisfied Required Consent. In cases where the Asset subject to such a Required Consent is a Contract and Purchaser is assigned the Properties to which the Contract relates, but the Contract is not transferred to Purchaser due to the unwaived consent requirement, Seller shall continue after Closing to use commercially reasonable efforts to obtain such consent so that Seller’s right, title and interest in such Contract can be transferred to Purchaser upon receipt of such consent. In cases where the Asset subject to such a Required Consent is a Property and the third-party consent to the sale and transfer of the Property is not obtained prior to the Closing Date, Purchaser may elect to treat the unsatisfied Required Consent as a Title Defect by giving Seller notice thereof in accordance with Section 3.4(a), except that such notice must be given at least three (3) Business Days prior to the Closing Date; provided, however, the Allocated Value for

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such Property may not be used in meeting the Defect Deductible, and Seller may elect to cure such unsatisfied consent under Section 3.4(c), in which event the provisions of Section 3.4(c) shall apply (provided the affected Asset shall be excluded from the Assets for purposes of Closing until the Required Consent is waived or satisfied (unless otherwise agreed by Seller and Purchaser)). In cases where an Asset is subject to a third- party consent requirement that is not a Required Consent, the Asset shall be included in the Assets at Closing (unless excluded pursuant to the other provisions of this Agreement) and Purchaser shall be responsible after Closing for satisfying such consent requirement at its sole cost, risk and expense, to the extent the applicable consent was not obtained or waived on or prior to Closing. If an unsatisfied Required Consent with respect to which a Unadjusted Purchase Price adjustment is made under Section 3.4 is subsequently satisfied prior to the date of the final adjustment to the Unadjusted Purchase Price under Section 9.4(b), Seller shall receive an additional upward adjustment to the Purchase Price in the final adjustments made under Section 9.4(b) equal to the amount of the previous reduction in the Unadjusted Purchase Price on account of such Required Consent and the provisions of this Section 3.5 shall no longer apply except for the assignment made under the next sentence. Within five (5) Business Days of the date on which the final statement of the Adjusted Purchase Price is finally determined, whether by agreement between Seller and Purchaser or the determination of an Independent Expert under Section 9.4(b) (or both), Seller shall assign to Purchaser using the form attached as Exhibit B, to the extent previously unassigned, each Property subject to a Required Consent that was subsequently satisfied prior to the date of the final adjustment of the Unadjusted Purchase Price under Section 9.4(b).

(b)    Exercised Preferential Rights to Purchase. If any preferential right to purchase any Property that would be triggered by the purchase and sale contemplated by this Agreement is exercised prior to Closing, the Property transferred to a third party as a result of the exercise of such preferential right shall be treated as if it was subject to a Title Defect resulting in the complete loss of title and the Unadjusted Purchase Price shall be reduced under Section 2.2(b) by the Allocated Value for such Property (proportionately reduced if the preferential right affects only a portion of such Property). Seller shall retain the consideration paid by the third party pursuant to the exercise of such preferential right; provided, however, the adjustment made under this Section 3.5(b) for such Property may not be used in meeting the Defect Deductible. If, on or before one hundred eighty (180) days following the Closing Date, such holder of such preferential right fails to consummate the purchase of the Property (or portion thereof) covered by such preferential right then (A) Seller shall so notify Purchaser, (B) Purchaser shall purchase, on or before five (5) Business Days following receipt of such notice, such Property (or portion thereof) that was so excluded from the Properties to be assigned to Purchaser at Closing, under the terms of this Agreement and for a price equal to the amount by which the Unadjusted Purchase Price was reduced at Closing with respect to such excluded Property (or portion thereof) and (C) Seller shall assign to Purchaser the Property (or portion thereof) so excluded at Closing pursuant to an instrument in substantially the same form as the Conveyance. If any preferential right to purchase any Asset is not exercised and does not expire prior to Closing, then the terms of Section 7.7 shall apply to such right.

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Section 3.6    Casualty or Condemnation Loss.

Subject to the provisions of Sections 8.1(e) and 8.2(e), if, after the date of this Agreement but prior to the Closing Date, any portion of the Assets is destroyed by fire or other casualty or is taken in condemnation or under right of eminent domain, and the loss as a result of such individual casualty or taking exceeds One Hundred Thousand Dollars ($100,000) net to Seller’s interest, Seller shall elect by written notice to Purchaser prior to Closing either (i) to cause the Assets affected by any casualty to be repaired or restored prior to Closing to at least its condition prior to such casualty, at Seller’s sole cost (without an adjustment to the Unadjusted Purchase Price pursuant to Section 2.2 or otherwise), as promptly as reasonably practicable (which work may extend after the Closing Date), (ii) unless such casualty or taking is waived by Purchaser, to exclude the affected Property or Properties from the Assets and reduce the Unadjusted Purchase Price by the Allocated Value thereof; or (iii) to include the affected Property or Properties in the Assets to be conveyed at Closing (unless excluded pursuant to the other provisions of this Agreement) and assign to Purchaser or subrogate Purchaser to all of Seller’s right, title and interest in and to all rights of insurance and other claims against third parties to the extent that such rights and/or claims arise from or by their terms cover the affected Property or Properties; provided, however, that any adjustment to the Unadjusted Purchase Price pursuant to this Section 3.6 may not be used in meeting the Defect Deductible. In each case, Seller shall retain all of the aforementioned rights to insurance and other claims against third parties with respect to the casualty or taking except to the extent the Parties otherwise agree in writing.

Section 3.7    Limitations on Applicability.

The rights of Purchaser under Section 3.1(a) and Section 3.4(a) shall terminate as of the Title Claim Date and be of no further force and effect thereafter; provided there shall be no termination of Purchaser’s or Seller’s rights under Section 3.4 with respect to any bona fide Title Defect properly reported in a Title Defect Notice or bona fide Title Benefit properly reported in a Title Benefit Notice on or before the Title Claim Date. Except as provided in this Article 3 and for the Special Warranty in the Conveyance (subject to Section 7.9), Purchaser releases, remises and forever discharges the Seller Indemnitees from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, liabilities, interest or causes of action whatsoever, in Law or in equity, known or unknown, which Purchaser might now or subsequently may have, based on, relating to or arising out of, any Title Defect or other deficiency in or encumbrance on title to any Asset.

ARTICLE 4

ENVIRONMENTAL MATTERS

Section 4.1    Assessment.

From and after the date hereof and up to and including the Closing Date (or upon the earlier termination of this Agreement) but subject to the limitations set forth herein and in Section 7.1, Purchaser may, at its option, cause, or cause to be conducted by a reputable environmental consulting or engineering firm approved in advance in writing by Seller (the “Environmental Consultant”) an environmental assessment of all or any portion of the Assets

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and/or visual inspections and record reviews relating to the Properties, including their condition and their compliance with Environmental Laws (the “Assessment”). The Assessment shall be conducted at the sole risk, cost and expense of Purchaser, and all of Purchaser’s and the Environmental Consultant’s activity conducted under this Section 4.1 and Section 7.1 shall be subject to the indemnity provisions of Section 7.6. Purchaser’s right of access shall not entitle Purchaser or the Environmental Consultant to operate equipment or conduct testing or sampling of soil, groundwater or other materials (including any testing or sampling for hazardous substances, Hydrocarbons or NORM). Seller has the right to be present during any activities conducted on the Assets as part of the Assessment. Purchaser shall give Seller reasonable prior written notice before gaining physical access to the Assets. Purchaser shall coordinate the Assessment with Seller to minimize any inconvenience to or interruption of the conduct of business by Seller. Purchaser shall abide by Seller’s, and any third party operator’s, safety rules, regulations and operating policies while conducting its due diligence evaluation of the Assets including the Assessment. Purchaser shall promptly provide, but not later than the Environmental Claim Date, copies of all reports, results, and other documentation and data prepared or compiled by Purchaser and/or any of its representatives or agents in connection with the Assessment. Upon completion of the Assessment, Purchaser shall at its sole cost and expense and without any cost or expense to Seller or any of its Affiliates (i) repair all damages done to any Assets in connection the Assessment (including due diligence conducted by Purchaser’s environmental consulting or engineering firm), (ii) if applicable, restore the Assets to the approximate same condition as, or better condition than, they were prior to commencement of the Assessment, and (iii) remove all equipment, tools and other property brought onto the Assets in connection with the Assessment. Any disturbance to the Assets (including the leasehold associated therewith) resulting from the Assessment will be promptly corrected by Purchaser at Purchaser’s sole cost and expense. Seller shall not be deemed by its receipt of said documents or otherwise to have made any representation or warranty, expressed, implied or statutory, as to the condition of the Assets or the accuracy of said documents or the information contained therein. During all periods that Purchaser or any of its representatives or contractors are on the Assets, Purchaser shall maintain, at its sole expense and with reputable insurers, such insurance as is reasonably sufficient to support Purchaser’s indemnity obligations under Section 7.6 specifically naming Seller as an insured party. All information (including all reports, results and documentation containing such information) acquired by Purchaser, its agents or representatives, or the Environmental Consultant, in conducting the Assessment under this Section shall be subject to the Confidentiality Agreement.

Section 4.2    NORM.

Purchaser acknowledges the following:

(a)    The Assets have been used for exploration, development, and production of oil and gas and that there may be petroleum, produced water, wastes, or other materials located on or under the Properties or associated with the Assets.

(b)    Equipment and sites included in the Assets may contain asbestos, hazardous substances, or NORM.

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(c)    NORM may affix or attach itself to the inside of wells, materials, and equipment as scale, or in other forms.

(d)    The wells, materials, and equipment located on the Properties or included in the Assets may contain NORM and other wastes or hazardous substances.

(e)    NORM containing material and other wastes or hazardous substances may have come in contact with the soil.

(f)    Special procedures may be required for the remediation, removal, transportation, or disposal of soil, wastes, asbestos, hazardous substances, and NORM from the Assets.

Section 4.3    Notice of Violations of Environmental Laws.

Purchaser shall deliver any claim notices to Seller in writing (an “Environmental Defect Notice”), on or before thirty (30) days from the date hereof (the “Environmental Claim Date”), of each individual environmental matter disclosed by the Assessment that Purchaser reasonably believes in good faith may constitute or result in (including with notice or solely with the passage of time) Environmental Liabilities for which the Lowest Cost Response to address the matter exceeds the Individual Defect Threshold, including in the Environmental Defect Notice (i) a reasonably detailed description of the specific matter that is an alleged violation of Environmental Laws, including (A) the written conclusion of Purchaser or Purchaser’s Environmental Consultant that Environmental Liabilities exist, which conclusion shall be reasonably substantiated by the factual data gathered in Purchaser’s Assessment and (B) a separate specific citation of the provisions of Environmental Laws alleged to be violated and the related facts that substantiate such violation; (ii) the Wells or associated Assets affected; (iii) a detailed estimate of the Lowest Cost Response to cure or eliminate the alleged matter in question; and (iv) supporting documents reasonably necessary for Seller (as well as any consultant, inspector or expert hired by Seller) to verify the existence of the facts alleged in the Environmental Defect Notice. The failure of an Environmental Defect Notice to contain the information required by clauses (i) through (iv) of the prior sentence on or prior to the Environmental Claim Date shall render such notice ineffective. Purchaser shall furnish Seller, on or before the end of each calendar week prior to the Environmental Claim Date, Environmental Defect Notices with respect to any Environmental Liability that any of Purchaser’s or any of its Affiliate’s employees, representatives, attorney or other environmental personnel or contractors, including the Environmental Consultant, discover or become aware of during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Environmental Claim Date.

Section 4.4    Remedies for Violations of Environmental Laws.

If any individual matter described in an Environmental Defect Notice delivered pursuant to Section 4.3 may constitute or result in Environmental Liabilities for which the Lowest Cost

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Response to address the matter exceeds the Individual Defect Threshold, then Seller shall, at its sole election, elect to:

(a)    reduce the Unadjusted Purchase Price by an amount agreed upon in writing by Purchaser and Seller as being a reasonable estimate of the cost of curing the matter described in such Environmental Defect Notice;

(b)    retain the Property that is associated with such Environmental Defect Notice and affected by such matter, in which event the Unadjusted Purchase Price shall be reduced by an amount equal to the Allocated Value of such Property;

(c)    perform or cause to be performed prior to Closing, at the sole cost and expense of Seller, such operations as may be necessary to bring such affected Property into compliance with the applicable Environmental Law disclosed in such Environmental Defect Notice;

(d)    enter into an agreement with Purchaser in a form agreeable to Seller and Purchaser whereby Seller will as soon as reasonably practicable after Closing, at the sole cost and expense of Seller, perform or cause to be performed such operations as may be necessary to bring such affected Property into compliance with the applicable Environmental Law disclosed in such Environmental Defect Notice;

(e)    indemnify Purchaser against all Damages resulting from such Environmental Liability pursuant to an indemnity agreement in a form agreeable to Seller and Purchaser; or

(f)    if applicable, terminate this Agreement pursuant to Article 10.

In the event that (i) Seller elects to proceed under Section 4.4(a) and Purchaser and Seller have failed to agree by Closing on the reduction to the Unadjusted Purchase Price (which agreement Seller and Purchaser shall use good faith efforts to reach) or (ii) Purchaser and Seller cannot otherwise agree on the existence, extent or amount of Environmental Liabilities alleged in an Environmental Defect Notice before Closing, Seller shall then proceed with respect to such matter under any of Sections 4.4(b), (c), (d), (e) or (f) or submit such dispute to arbitration pursuant to this Section 4.4. In the event that Seller elects to proceed under Section 4.4(d) or (e) and Purchaser and Seller have failed to agree by Closing on the terms of the agreements contemplated thereby, Seller shall then proceed with respect to such matter under any of Sections 4.4(b), (c), or (f) or submit such dispute to arbitration pursuant to this Section 4.4.

For all matters submitted to arbitration pursuant to this Section 4.4, there shall be a single arbitrator, who shall be an environmental consultant with at least ten (10) years’ relevant environmental experience in the oil and gas industry as selected by the mutual agreement of Purchaser and Seller within fifteen (15) days of an election by Seller to submit such dispute to arbitration. Absent such agreement on the selection of the arbitrator, the arbitrator shall be selected by the Houston, Texas office of the American Arbitration Association (the “Environmental Arbitrator”). The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Environmental Arbitrator’s determination shall be made within twenty (20) days after submission of the matters in dispute and shall be final and binding upon both parties, without

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right of appeal. In making his determination, the Environmental Arbitrator shall be bound by the rules set forth in this Article 4 and may consider such other matters as in the opinion of the Environmental Arbitrator are necessary or helpful to make a proper determination. In connection with the determination of a matter submitted to the Environmental Arbitrator Purchaser may not assert any violation of Environmental Law that is not specified by Purchaser in the applicable Environmental Claim Notice. The Environmental Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Environmental Liability or the Lowest Cost Response for such Environmental Liability submitted by Seller and may not award damages, interest or penalties to either Party with respect to any matter nor may it award Purchaser a greater amount with respect to the applicable Environmental Liability than the Lowest Cost Response set forth by Purchaser in the applicable Environmental Claim Notice. Seller and Purchaser shall each bear its own legal fees and other costs of presenting its case. Each Party shall bear one-half of the costs and expenses of the Environmental Arbitrator. If the validity of any Environmental Liability or the Lowest Cost Response attributable thereto, is not determined prior to Closing by the Environmental Arbitrator pursuant to this Section 4.4, all affected Properties shall be conveyed to Purchaser at Closing and the purchase price paid by Purchaser at Closing shall not be reduced by virtue of such dispute and upon final resolution of such dispute the Lowest Cost Response for such Environmental Liability as determined by the Environmental Arbitrator shall, subject to the terms of this this Section 4.4, be promptly refunded by Seller to Purchaser.

Notwithstanding anything herein to the contrary, (i) in no event shall there be any adjustments to the Unadjusted Purchase Price or other remedies provided by Seller for individual Environmental Liabilities for which the Lowest Cost Response to address same does not exceed the Individual Defect Threshold; and (ii) in no event shall there be any adjustments to the Unadjusted Purchase Price or other remedies provided by Seller for Environmental Liabilities unless and until the sum of (i) the aggregate amount of all Title Defect Amounts for Title Defects covered by Section 3.4(d)(i) that exceed the Individual Defect Threshold, plus (ii) the aggregate amount of all Environmental Liabilities covered by Section 4.4(a) that exceed the Individual Defect Threshold, exceeds the Defect Deductible, after which point Purchaser shall be entitled to adjustments to the Unadjusted Purchase Price or other available remedies under this Section 4.4 with respect to Environmental Liabilities in excess of such Defect Deductible, subject to the Individual Defect Threshold and Seller’s elections under this Section 4.4 and the last sentence of this Section 4.4. The Allocated Value of any Property (or affected portion thereof) retained by Seller in accordance with Section 4.4(b) may not be used in meeting the Defect Deductible.

Notwithstanding anything to the contrary in this Article 4, there shall be no adjustment to the Unadjusted Purchase Price under this Agreement for Environmental Liabilities affecting a Property to the extent such Environmental Liabilities exceed the Allocated Value of the Property.

Section 4.5    Limitations.

Notwithstanding anything to the contrary in this Agreement, except for the indemnity provided under Section 11.2(c) as it relates to breaches of the representation in Section 5.15, this Article 4 is intended to be the sole and exclusive remedy that Purchaser Indemnitees shall have against Seller Indemnitees with respect to any matter or circumstance relating to Environmental Laws, the release of materials into the environment or protection of the

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environment or health. Except to the limited extent necessary to enforce the terms of this Article 4 and the indemnity provided under Section 11.2(c) as it relates to breaches of the representation in Section 5.15, Purchaser (on behalf of itself, each of the other Purchaser Indemnitees and their respective insurers and successors in interest) hereby releases and discharges any and all claims and remedies at Law or in equity, known or unknown, whether now existing or arising in the future, contingent or otherwise, against the Seller Indemnitees with respect to any matter or circumstance relating to Environmental Laws, Environmental Liabilities, the release or threatened release of materials into the environment or protection of the environment, natural resources, threatened or endangered species, or health EVEN IF SUCH CLAIMS OR DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT, EXCLUDING WILLFUL MISCONDUCT), STRICT LIABILITY OR OTHER LEGAL FAULT OF SELLER INDEMNITEES. Except as expressly provided in Section 5.15, Purchaser acknowledges that Seller has not made and will not make any representation or warranty regarding any matter or circumstance relating to Environmental Laws, Environmental Liabilities, the release or threatened release of materials into the environment or protection of the environment, natural resources, threatened or endangered species, or health, and that nothing in Article 5 or otherwise shall be construed as such a representation or warranty.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER

Section 5.1    Disclaimers.

(a)    EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 5 OF THIS AGREEMENT OR IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(F), OR FOR THE SPECIAL WARRANTY IN THE CONVEYANCE (SUBJECT TO SECTION 7.9), WITH RESPECT TO THE ASSETS AND THE TRANSACTIONS CONTEMPLATED HEREBY (i) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, STATUTORY, EXPRESS OR IMPLIED, AND (ii) PURCHASER HAS NOT RELIED UPON, AND SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR, ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR ANY OF ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY EMPLOYEE, AGENT, OFFICER, DIRECTOR, MEMBER, MANAGER, EQUITY OWNER, CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS AFFILIATES).

(b)    EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 5 OR IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(F), OR FOR THE SPECIAL WARRANTY IN THE CONVEYANCE (SUBJECT TO SECTION 7.9), WITHOUT LIMITING THE

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GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS, AND PURCHASER ACKNOWLEDGES AND AGREES THAT IT HAS NOT RELIED UPON, ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS OR IMPLIED, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS, (iii) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (v) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE ASSETS, (vi) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, OPERATION, OR PROJECT, (vii) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (viii) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (ix) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT PURCHASER HAS INSPECTED, OR WAIVED PURCHASER’S RIGHT TO INSPECT, THE ASSETS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES OR NORM, AND THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE ASSETS, INCLUDING THE EQUIPMENT, IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND DEFECTS, AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE, OR (x) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT.

(c)    Any representation “to the knowledge of Seller” or “to Seller’ knowledge” is limited to matters within the actual knowledge of the persons set forth on Exhibit C. “Actual knowledge” for purposes of this Agreement means information actually personally known.

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(d)    Inclusion of a matter on a Schedule to a representation or warranty which addresses matters having a Material Adverse Effect shall not be deemed an indication that such matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule to this Agreement for purposes of information only. Matters disclosed in each Schedule shall qualify the representation and warranty in which such Schedule is referenced and any other representation and warranty to which the matters disclosed reasonably relate.

(e)    From time to time prior to the Closing Date, Seller shall have the right (but not the obligation) to supplement or amend the Schedules hereto to correct any matter that would otherwise constitute a breach of any representation or warranty of Seller contained herein (each a “Schedule Supplement”), and each such Schedule Supplement shall be deemed to be incorporated into and supplement and amend the Schedules as of the Closing Date; provided, however, that any such Schedule Supplement shall be disregarded for purposes of, and shall not affect Purchaser’s conditions to Closing set forth in Section 8.2.

(f)    Subject to the foregoing provisions of this Section 5.1, and the other terms and conditions of this Agreement, Seller represents and warrants to Purchaser the matters set out in Section 5.2 through Section 5.17 as of the date of this Agreement.

Section 5.2    Existence and Qualification.

Seller is duly incorporated or organized, validly existing and in good standing under the Laws of the state of its formation and is duly qualified to do business in the jurisdictions where the Assets are located, except where the failure to so qualify would not have a Material Adverse Effect.

Section 5.3    Power.

Seller has the requisite power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.

Section 5.4    Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all documents required hereunder to be executed and delivered by Seller at Closing will be duly executed and delivered by Seller) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligation of Seller, enforceable in accordance with their terms, except that the enforcement hereof and thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).

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Section 5.5    No Conflicts.

The execution, delivery and performance of this Agreement by Seller, and the transactions contemplated by this Agreement, will not (i) violate any provision of the governing documents of Seller, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance, or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any promissory note, bond, mortgage, indenture, loan or similar financing instrument to which Seller is a party and which affects the Assets, (iii) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest or (iv) violate any Laws applicable to Seller or any of the Assets (except for rights to consent by, required notices to, and filings with or other actions by Governmental Bodies where the same are not required prior to the assignment of oil and gas interests), except any matters described in clauses (ii), (iii) or (iv) above which would not have, individually or in the aggregate, a Material Adverse Effect.

Section 5.6    Liability for Brokers’ Fees.

Purchaser shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Seller, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.

Section 5.7    Litigation.

Except as disclosed on Schedule 5.7, there are no actions, suits or proceedings pending for which Seller has received written notice, or to Seller’s knowledge threatened in writing, before any Governmental Body or arbitrator to which the Assets are subject except for any such actions, suits or proceedings which would not have, individually or in the aggregate, a Material Adverse Effect.

Section 5.8    Taxes and Assessments.

Except as set forth on Schedule 5.8, and subject to the limitation in the following sentence, Seller warrants and represents (a) all material reports, returns, statements (including estimated reports, returns or statements), and other similar filings with respect to Taxes (the “Tax Returns”) relating to the ownership or operation of the Assets required to be filed by Seller have been timely filed (taking into account all applicable extensions) with the appropriate Governmental Body in all jurisdictions in which such Tax Returns are required to be filed; (b) such Tax Returns are true and correct in all material respects, and all material Taxes reported and due on such Tax Returns have been paid. Each of the foregoing representations and warranties is limited to those Tax Returns whose non-filing, late filing or inaccuracy, and those Taxes whose nonpayment or underpayment, could result in a lien on the Assets or in liability to Purchaser as a transferee of or successor to the Assets.

Notwithstanding anything in this Agreement to the contrary, this Section 5.8 contains the exclusive representations and warranties with respect to Tax matters, and no other Section in this Article 5 shall apply to Tax matters.

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Section 5.9    Outstanding Capital Commitments.

As of the date of this Agreement, there is no individual outstanding authority for expenditure which is binding on the Assets, the value of which Seller reasonably anticipates exceeds One Hundred Thousand Dollars ($100,000) chargeable to Seller’s interests participating in the operation covered by such authority for expenditure after the Effective Time, other than those shown on Schedule 5.9 hereto.

Section 5.10    Compliance with Laws.

Except as disclosed on Schedule 5.10, to the knowledge of Seller, the Assets are and the operation of the Assets has been and currently is, in compliance in all material respects with the provisions and requirements of all Laws (excluding Environmental Laws, which are addressed in Section 5.15) of all Governmental Bodies having jurisdiction with respect to the Assets, or the ownership, operation, development, maintenance, or use of any thereof.

Section 5.11    Contracts.

Seller is not and, to Seller’s knowledge, no other party is, in default under any Contract except as disclosed on Schedule 5.11(a) and except such defaults as would not, individually or in the aggregate, have a Material Adverse Effect. Schedule 5.11(b) sets forth all of the following Contracts included in the Assets or to which any of the Assets will be bound as of the Closing: (i) any agreement with any Affiliate; (ii) any agreement or contract for the sale, exchange, or other disposition of Hydrocarbons produced from or attributable to Seller’s interest in the Assets that is not cancelable without penalty or other material payment on not more than ninety (90) days prior written notice; (iii) any agreement of or binding upon Seller to sell, lease, farmout, or otherwise dispose of any interest in any of the Assets after the Effective Time, other than conventional rights of reassignment arising in connection with Seller’s surrender or release of any of the Assets and (iv) joint operating agreements, area of mutual interest agreements and farmout and farmin agreements.

Section 5.12    Payments for Production.

Except as set forth on Schedule 5.12, Seller is not obligated under any contract or agreement containing a take-or-pay, advance payment, prepayment, or similar provision, or under any gathering, transmission, or any other contract or agreement with respect to any of the Assets to sell, gather, deliver, process, or transport any Hydrocarbons without then or thereafter receiving full payment therefor.

Section 5.13    Governmental Authorizations.

Except as disclosed on Schedule 5.13, to the knowledge of Seller, Seller has obtained and are maintaining all federal, state and local governmental licenses, permits, franchises, orders, exemptions, variances, waivers, authorizations, certificates, consents, rights, privileges and applications therefor (the “Governmental Authorizations”) that are presently necessary or required for the operation of the Seller Operated Assets as currently operated (excluding those required under Environmental Laws), the loss of which would have, individually or in the aggregate, a Material Adverse Effect.

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Section 5.14    Consents and Preferential Purchase Rights.

None of the Leases, Units or Wells, or any portion thereof, is subject to any (i) preferential rights to purchase, (ii) restrictions on assignment or required third-party consents to assignment that if not obtained in connection with an assignment to Purchaser would result in a termination of Seller’s title to such Asset or (iii) to the knowledge of Seller, other third-party consents to assignment, which are applicable to the transactions contemplated by this Agreement, except for (x) consents and approvals by Governmental Bodies of assignments that are customarily obtained after Closing, (y) preferential rights, consents and restrictions contained in easements, rights-of-way, Surface Contracts or equipment leases and (z) preferential rights, consents and restrictions as are set forth on Schedule 5.14.

Section 5.15    Environmental Laws.

Except as disclosed on Schedule 5.15, to the knowledge of Seller, the Properties and the operation thereof are in compliance with applicable Environmental Laws, except for incidents of noncompliance that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Notwithstanding anything to the contrary in this Section 5.15 or elsewhere in this Agreement, Seller makes no, and disclaims any, representation or warranty, express or implied, with respect to the presence or absence of NORM, asbestos, mercury, drilling fluids and chemicals, and produced waters and Hydrocarbons in or on the Properties or Equipment. The representation and warranty in this Section 5.15 constitutes the only representation and warranty with respect to Environmental Laws or Environmental Liabilities, the release or threatened release of materials into the environment or protection of the environment, natural resources, threatened or endangered species, or health and no other representation or warranty appearing in this Agreement shall be construed to cover Environmental Laws or Environmental Liabilities.

Section 5.16    Bankruptcy.

There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to the knowledge of Seller, threatened against Seller.

Section 5.17    Accredited Investors.

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

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ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller the following:

Section 6.1    Existence and Qualification.

Purchaser is a corporation organized, validly existing and in good standing under the Laws of the state of Delaware; and Purchaser is duly qualified to do business as a foreign corporation in every jurisdiction in which it is required to qualify in order to conduct its business except where the failure to so qualify would not have a material adverse effect on Purchaser or its properties; and Purchaser is or will be duly qualified to do business as a foreign corporation in the respective jurisdictions where the Assets to be transferred to it are located.

Section 6.2    Power.

Purchaser has the requisite power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.

Section 6.3    Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser (and all documents required hereunder to be executed and delivered by Purchaser at Closing will be duly executed and delivered by Purchaser) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Purchaser, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

Section 6.4    No Conflicts.

The execution, delivery and performance of this Agreement by Purchaser, and the transactions contemplated by this Agreement will not (i) violate any provision of the limited liability company agreement, bylaws, limited partnership agreement or other governing or charter documents of Purchaser, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance, or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any promissory note, bond, mortgage, indenture, loan or similar financing instrument to which Purchaser is a party or which affects Purchaser’s assets, (iii) violate any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest or (iv) violate any Laws applicable to Purchaser or any of its assets, except any matters described in clauses (ii), (iii) or (iv) above which would not have a material adverse effect on Purchaser.

Section 6.5    Liability for Brokers’ Fees.

Seller shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Purchaser, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.

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Section 6.6    Litigation.

As of the date of the execution of this Agreement, there are no actions, suits or proceedings pending, or to Purchaser’s knowledge, threatened in writing before any Governmental Body against Purchaser or any subsidiary of Purchaser which are reasonably likely to impair materially Purchaser’s ability to perform its obligations under this Agreement.

Section 6.7    Financing.

Purchaser has sufficient cash, available lines of credit or other sources of immediately available funds (in United States dollars) to enable it to pay the Closing Cash Payment to Seller at the Closing.

Section 6.8    Independent Investigation.

Purchaser (a) is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities and is aware of the risks associated with the purchase, ownership and operation of such properties and facilities, (b) is capable of evaluating, and hereby acknowledges that it has so evaluated, the merits and risks of the Assets, ownership and operation thereof and its obligations hereunder, and (c) is able to bear the economic risks associated with the Assets, ownership and operation thereof and its obligations hereunder. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser (i) has relied or shall rely solely on its own independent investigation and evaluation of the Assets and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and acknowledges and agrees that (A) it has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made at any time by Seller or any of its directors, officers, shareholders, employees, Affiliates, controlling persons, agents, advisors or representatives or any other Person, whether or not any such representations, warranties or statements were made in writing or orally, (B) neither Seller nor any of its directors, officers, shareholders, employees, Affiliates, controlling persons, agents, advisors or representatives or any other Person makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Purchaser or its directors, officers, employees, Affiliates, controlling persons, agents or representatives, including any information, document or material provided or made available, or statements made or provided to Seller (including its directors, officers, employees, Affiliates, controlling persons, agents or representatives) in connection with the transactions contemplated by this Agreement, including without limitation, any such information contained in or provided in “data rooms”, management presentations or supplemental due diligence information provided by Seller or discussions or access to management of Seller; and (C) the information referred to in (B) above may include certain projections, estimates and other forecasts and plans and that there are uncertainties inherent in attempting to make such projections, estimates and other forecasts and plans and Purchaser is familiar with such uncertainties and takes full responsibility for making its own evaluation of the adequacy and accuracy of all such projections, estimates and other forecasts and plans and any use or reliance by Purchaser on such information referred to in (B) above is (or the projections, estimates and other forecasts and plans that may be contained therein) at Purchaser’s sole risk; (ii) has satisfied or shall satisfy itself through its own due

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diligence as to the environmental and physical condition of and contractual arrangements and other matters affecting the Assets; and (iii) agrees to the fullest extent permitted by Law that neither Seller nor any of its directors, officers, employees, Affiliates, controlling persons, agents or representatives shall have any liability or responsibility whatsoever to Purchaser or its directors, officers, employees, Affiliates, controlling persons, agents or representatives on any basis (including in contract or tort, under Federal or state securities laws or otherwise) resulting from the distribution to Purchaser or Purchaser’s use of any of the information referred to in clause (i)(B) above. Purchaser acknowledges and affirms as of the Closing Date that (i) it has completed and relied solely upon its own independent investigation, verification, analysis and evaluation of the Assets, (ii) it has made all such reviews and inspections of the Assets as it has deemed necessary or appropriate and (iii) except for the express representations, warranties, covenants and remedies provided in this Agreement, it is acquiring the Assets on an as-is, where- is basis with all faults, and has not relied upon any other representations, warranties, covenants or statements of Seller in entering into this Agreement.

Section 6.9    Bankruptcy.

There are no bankruptcy, reorganization or receivership proceedings pending against, being contemplated by, or, to Purchaser’s knowledge, threatened against Purchaser.

Section 6.10    Qualification.

Purchaser shall be, at Closing, and thereafter for so long as Purchaser shall own the Assets, shall continue to be, qualified to own and assume operatorship of federal and state oil, gas and mineral leases in all jurisdictions where the Assets to be transferred to it are located, and the consummation of the transactions contemplated in this Agreement will not cause Purchaser to be disqualified as such an owner or operator. To the extent required by applicable Law, as of the Closing, Purchaser currently has, and will continue to maintain, lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership and operation of such leases.

Section 6.11    Consents.

Except for consents and approvals for the assignment of the Assets to Purchaser that are customarily and lawfully obtained after the assignment of properties similar to the Assets, there are no consents, approvals or other restrictions on assignment applicable to Purchaser that Purchaser is obligated to obtain or furnish, including requirements for consents from third parties to any assignment (in each case), that would be applicable in connection with the consummation of the transactions contemplated by this Agreement and perform and observe the covenants and obligations of Purchaser.

Section 6.12    Capitalization; Representations as to Consideration Shares.

(a)    As of the date of this Agreement, the authorized capital stock of Purchaser consists of 100,000,000 shares of Class A Voting Common Stock, $0.001 par value per share (“Class A Stock”), and 5,000 shares of Class B Non-Voting Common Stock, $0.001 par value per share (“Class B Stock” and, together with Class A Stock, the “Shares”). As of May 16, 2017, there were issued and outstanding 21,822,015 Shares of

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Class A Stock and 2,500 Shares of Class B Stock and no shares of preferred stock. The outstanding Shares have been duly authorized and are validly issued and outstanding, fully paid and non-assessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights). Except as disclosed in the Schedule 6.12(a) of the Buyer’s Capitalization Disclosure Schedule, as of the date of this Agreement, (i) there are no Shares or shares of preferred stock reserved for issuance, (ii) except for any derivative securities issued under Purchaser’s equity or other compensation plans, Purchaser does not have outstanding any securities providing the holder the right to acquire Shares or preferred stock, and (iii) Purchaser does not have any commitment to authorize, issue, or sell any Shares or preferred stock other than pursuant to this Agreement.

(b)    Upon consummation of the transactions contemplated by this Agreement and the issuance of the Consideration Shares in connection therewith, the Consideration Shares will be duly authorized, validly issued, fully paid and non-assessable, and free and clear of any Liens other than restrictions on transfer imposed by applicable federal or state securities Laws.

(c)    Upon issuance in accordance with this Agreement, the Consideration Shares issued in accordance with the terms of this Agreement will be issued in accordance with all applicable securities Laws and all such shares will be approved for listing on the NASDAQ Global Select Market (“NASDAQ”) subject only to official notice of issuance.

Section 6.13    Investment Company.

Purchaser is not, and, immediately following the Closing Date, Purchaser will not be, (a) an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended or (b) subject in any respect thereto.

Section 6.14    Registration Rights.

(a)    Schedule 6.14 lists all registration rights agreements to which Purchaser is a party and true and complete copies of such agreements have been provided to Seller. The consummation of the transactions contemplated by this Agreement and the agreements executed in connection with the transactions contemplated hereby will not conflict with, violate or breach any of the terms, conditions or provisions of the agreements listed on Schedule 6.14.

(b)    Except as set forth on Schedule 6.14, there are no outstanding demand registration rights, piggyback registration rights or other registration rights with respect to the Purchaser that would take seniority over the rights granted to Seller by Purchaser pursuant to the Registration Rights Agreement.

Section 6.15    SEC Documents.

(a)    Purchaser has timely filed with the U.S. Securities and Exchange Commission (the “SEC”) all reports and statements (including any amendments thereto)

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required to be so filed by it since July 5, 2016, pursuant to Sections 13(a), 14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and has made available to Seller each registration statement, report, proxy statement or information statement (other than preliminary materials) it has so filed, each in the form filed with the SEC (collectively, the “Reports”).

(b)    Purchaser represents that, as of the date it was filed with the SEC, each Report (i) complied in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder and (ii) did not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except for such statements, if any, as have been modified by subsequent filings with the SEC.

(c)    Each of the consolidated balance sheets included in or incorporated by reference into the Reports (including the related notes and schedules) fairly presents in all material respects the consolidated financial position of Purchaser and its subsidiaries as of its date, and each of the consolidated statements of operations, cash flows and changes in stockholders’ equity included in or incorporated by reference into the Reports (including any related notes and schedules) fairly presents in all material respects the results of operations, cash flows or changes in stockholders’ equity, as the case may be, of Purchaser and its subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to (i) such exceptions as may be permitted by Form 10-Q of the SEC and (ii) normal year-end audit adjustments), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein. Except as and to the extent set forth on the consolidated balance sheet of Purchaser and its subsidiaries included in the most recent Report filed prior to the date of this Agreement that includes such a balance sheet, including any related notes and schedules thereto, as of the date of such balance sheet, neither Purchaser nor any of its subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on, or reserved against in, a balance sheet of Purchaser or in the notes thereto prepared in accordance with GAAP consistently applied, other than liabilities or obligations that do not and are not reasonably likely to have, individually or in the aggregate, a material adverse effect on (a) Purchaser’s ability to consummate the transactions contemplated by, or to perform its obligations under, this Agreement and the agreements executed in connection with the transactions contemplated hereby to which it is or will be, as applicable, a party or (b) the value of Purchaser and its subsidiaries, taken as a whole, and/or any of Purchaser’s and its subsidiaries’ assets and properties, taken as a whole.

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ARTICLE 7

COVENANTS OF THE PARTIES

Section 7.1    Access.

Between the date of execution of this Agreement and continuing until the Closing Date, Seller will give Purchaser and its representatives reasonable access during normal business hours to Seller’s offices and the Records, including the right to copy, at Purchaser’s expense, the Records in Seller’s possession, for the sole purpose of conducting an investigation of the Assets, but only to the extent that Seller may do so without violating any applicable Law or obligations to any third party and to the extent that Seller has authority to grant such access without breaching any restriction binding on Seller. Such access by Purchaser shall be subject to applicable limitations in Section 4.1 and shall be limited to Seller’s normal business hours, and any weekends and after hours requested by Purchaser that can be reasonably accommodated by Seller, and Purchaser’s investigation shall be conducted in a manner that minimizes interference with the operation of the Assets. All information obtained by and access granted to Purchaser and its representatives under this Section shall be subject to the terms of Section 7.6 and the terms of the Confidentiality Agreement.

Section 7.2    Government Reviews.

Each Party shall in a timely manner (a) make all required filings, if any, with and prepare applications to and conduct negotiations with, each Governmental Body as to which such filings, applications or negotiations are necessary or appropriate for such Party to consummate the transactions contemplated hereby, and (b) provide such information as the other Party each may reasonably request to make such filings, prepare such applications and conduct such negotiations. Each Party shall cooperate with and use all commercially reasonable efforts to assist the other with respect to such filings, applications and negotiations.

Section 7.3    Notification of Breaches.

(a)    Until the Closing:

(i)    Purchaser shall notify Seller promptly after Purchaser obtains actual knowledge that any representation or warranty of Seller contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Seller prior to or on the Closing Date has not been so performed or observed in any material respect.

(ii)    Seller shall notify Purchaser promptly after Seller obtains actual knowledge that any representation or warranty of Purchaser contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Purchaser prior to or on the Closing Date has not been so performed or observed in a material respect.

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(b)    If any of Purchaser’s or Seller’s representations or warranties is untrue or shall become untrue in any material respect between the date of execution of this Agreement and the Closing Date, or if any of Purchaser’s or Seller’s covenants or agreements to be performed or observed prior to or on the Closing Date (other than on a specified date) shall not have been so performed or observed in any material respect, but if such breach of representation, warranty, covenant or agreement shall (if curable) be cured by the Closing (or, if the Closing does not occur, by the date set forth in Section 10.1), then such breach shall be considered not to have occurred for all purposes of this Agreement; provided that, notwithstanding anything to the contrary contained herein, if either Party elects to proceed with Closing with knowledge by such Party of any failure of any condition to be satisfied in its favor or the breach of any representation, warranty, agreement or covenant by the other Party, then the condition that is unsatisfied or the representation, warranty, agreement or covenant that is breached at the Closing Date shall be deemed waived by such Party and such Party shall be deemed to fully release and forever discharge the other Party on account of any and all claims, demands or charges, known or unknown, with respect to such condition, representation, warranty, agreement or covenant.

Section 7.4    Operatorship.

Seller will assist Purchaser in its efforts to succeed Seller as operator of any Wells included in the Seller Operated Assets. Seller makes no representation and does not warrant or guarantee that Purchaser will succeed in being appointed successor operator. Purchaser or its subsidiaries shall promptly, following Closing (or earlier to the extent provided under Section 7.13), file and diligently pursue until receipt of any acknowledgement, consent or confirmation by applicable agencies all appropriate or required forms, applications, permit transfers, declarations, guarantees, or bonds or other financial support with federal and state agencies relative to its assumption of operatorship. For all Seller Operated Assets, with respect to which Purchaser receives the necessary approvals to succeed Seller as operator, Seller shall execute and deliver to Purchaser, on forms to be prepared by Purchaser and acceptable to Seller, and Purchaser shall promptly file, the applicable forms transferring operatorship of Seller Operated Assets to Purchaser.

Section 7.5    Operation of Business.

(a)    Except as set forth on Schedule 7.5, as may be required to deal with an emergency, as required by applicable Law or any Contract, as otherwise contemplated or permitted by this Agreement, or for expenditures or operations set forth on Schedule 5.9, and except as otherwise consented to in writing by Purchaser, which consent shall not be unreasonably withheld or delayed, until the Closing, Seller (i) will operate the Seller Operated Assets in the ordinary course consistent with past practices, (ii) will not commit to any single operation, or series of related operations, reasonably anticipated by Seller to require future capital expenditures by the owner of the Assets in excess of One Hundred Thousand Dollars ($100,000) (net to Seller’s interest) or make any capital expenditures related to the Assets in excess of One Hundred Thousand Dollars ($100,000) (net to Seller’s interest), (iii) will not terminate, materially amend, execute or extend any material agreements affecting the Assets, (iv) will maintain its current insurance coverage

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on the Assets, if any, presently furnished by nonaffiliated third parties in the amounts and of the types presently in force, (v) will use commercially reasonable efforts to maintain in full force and effect all Leases, (vi) will maintain all material Governmental Authorizations necessary for the ownership or operation of the Assets as currently operated, (vii) will not transfer, farmout, sell, hypothecate, encumber or otherwise dispose of any material Assets except for sales and dispositions of Hydrocarbon production and Equipment made in the ordinary course of business consistent with past practices and (viii) will not commit to do any act prohibited by the foregoing clauses (i)-(vii) except to the extent any such commitment related to the transactions referred to in (vii) above is subordinate to Purchaser’s rights under this Agreement. Notwithstanding anything contained in this Agreement to the contrary, all proceeds received by Seller prior to Closing from the sale of surplus and inventoried Equipment shall be the property of Seller, and there shall be no adjustment to the Unadjusted Purchase Price for the same. Purchaser’s approval of any action restricted by this Section 7.5 shall be considered granted within five (5) days (unless a shorter time is reasonably required by the circumstances and such shorter time is specified in Seller’s written notice) of Seller’s notice to Purchaser requesting such consent unless Purchaser notifies Seller to the contrary during that period. In the event of an emergency, Seller may take such action as a prudent operator would take and shall notify Purchaser of such action promptly thereafter.

(b)    Notwithstanding anything to the contrary in this Agreement, Seller shall have no liability to Purchaser for the incorrect payment of delay rentals, royalties, overriding royalties, shut-in payment payments or similar payments made during the Adjustment Period or for failure to make such payments through mistake or oversight (including Seller’s negligence or other fault), except that, to the extent such incorrect payment causes Seller to have less than Defensible Title to a Property prior to Closing, Purchaser may, until the Title Claim Date and subject to Section 3.4(i), assert a Title Defect under Section 3.4(a) with respect to such matter.

(c)    Notwithstanding anything to the contrary contained in this Agreement, with respect to any Asset for which Seller is not the operator, Seller shall not be deemed to have breached or otherwise violated any of its covenants or agreements contained in this Agreement that are applicable to any such Assets so long as Seller exercises reasonable commercial efforts to cause any third-party operator of such Assets to comply with such covenant or agreement.

(d)    Purchaser acknowledges that Seller may own an undivided interest in certain of the Assets and Purchaser agrees that the acts or omissions of the other working interest owners who are not affiliated with Seller shall not constitute a violation of the provisions of this Article 7 nor shall any action required by a vote of working interest owners constitute such a violation so long as Seller has voted its interests in a manner consistent with the provisions of this Article 7.

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Section 7.6    Indemnity Regarding Access.

Purchaser, on behalf of itself and the Purchaser Indemnitees, hereby releases and agrees to indemnify, defend and hold harmless all Seller Indemnitees and the other owners of interests in the leases and wells described on Exhibit A or Exhibit A-1 from and against any and all claims, liabilities, losses, costs and expenses (including court costs, expert fees and reasonable attorneys’ fees), including claims, liabilities, losses, costs and expenses attributable to personal injuries, death, or property damage, arising out of or relating to access to the Assets by the Purchaser Indemnitees, the Records and other related activities or information prior to the Closing by Purchaser Indemnitees, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON EXCLUDING, HOWEVER, ANY CLAIMS, LIABILITIES, LOSSES, COSTS OR EXPENSES CAUSED BY THE WILLFUL MISCONDUCT OF ANY INDEMNIFIED PERSON.

Section 7.7    Other Preferential Rights.

(a)    Should a third party fail to exercise its preferential right to purchase as to any portion of the Assets prior to Closing and the time for exercise or waiver has not yet expired, subject to the remaining provisions of this Section 7.7, such Assets shall be included in the transaction at Closing, such preferential right to purchase shall be a Permitted Encumbrance hereunder, and the following procedures shall be applicable. If one or more of the holders of any such preferential right to purchase notifies Seller subsequent to the Closing that it intends to assert its preferential purchase right, Seller shall give notice thereof to Purchaser, whereupon Purchaser shall satisfy all such preferential purchaser right obligations of Seller to such holders and shall indemnify and hold harmless all Seller Indemnitees from and against any and all claims, liabilities, losses, damages, costs and expenses (including court costs, expert fees and reasonable attorney’s fees) in connection therewith, and Purchaser shall be entitled to receive (and Seller hereby assigns to Purchaser all of Seller’s rights to) all proceeds, received from such holders in connection with such preferential rights to purchase.

(b)    Prior to Closing, should any third party bring any suit, action or other proceeding seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated hereby in connection with a claim to enforce preferential rights, the Assets or portion thereof subject to such suit, action or other proceeding shall be excluded from the Assets transferred at Closing and the Unadjusted Purchase Price shall be reduced by the Allocated Value of such excluded Assets or portions thereof. Promptly after the suit, action or other proceeding is dismissed or settled or a judgment is rendered in favor of Seller, as applicable, Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, all such Assets or portions thereof not being sold to the third party for a purchase price equal to the Allocated Value of such Assets or portions thereof, adjusted as provided in Section 2.2; provided, that Seller shall have no obligation of sale under this paragraph if the applicable dismissal, settlement or judgment does not occur before the date of the final determination of the Unadjusted Purchase Price under Section 9.4(b).

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Section 7.8    Tax Matters.

(a)    Subject to the provisions of Section 7.11, Seller shall be responsible for (i) all Taxes related to the ownership or operation of the Assets that are attributable to any taxable period, or portion thereof, that ends at or prior to the Effective Time (determined in accordance with the rules set forth in the last sentence of Section 1.4(c)), (ii) income or franchise Taxes of Seller and (iii) any Taxes attributable to the Excluded Assets. Purchaser shall be responsible for all other Taxes related to the ownership or operation of the Assets. Regardless of which Party is responsible for Taxes pursuant to the preceding sentences of this Section 7.8(a), Seller shall handle payment to the appropriate Governmental Body of all Taxes related to the ownership or operation of the Assets which are required to be paid prior to Closing (and shall file all Tax Returns with respect to such Taxes); provided, that to the extent such Taxes relate to the periods after the Effective Time, as determined pursuant to Section 1.4(c), such payment shall be on behalf of Purchaser, and promptly following the Closing Date, following Seller’s request, Purchaser shall pay to Seller any such Taxes (but only to the extent that such amounts have not already been accounted for as an increase to the Unadjusted Purchase Price under Section 2.2). Purchaser shall handle payment to the appropriate Governmental Body of all Taxes related to the ownership or operation of the Assets which are required to be paid after Closing (and shall file all Tax Returns with respect to such Taxes); provided, that to the extent such Taxes relate to taxable periods, or portions thereof, ending at or prior to the Effective Time, as determined pursuant to Section 1.4(c), such payment shall be on behalf of Seller, and promptly following the Closing Date, following Purchaser’s request, Seller shall pay to Purchaser any such Taxes (but only to the extent that such amounts have not already been accounted for as a decrease to the Unadjusted Purchase Price under Section 2.2); provided further, that in the event that Seller is required by applicable Law to file a Tax Return with respect to such Taxes after the Closing Date which includes all or a portion of a Tax period for which Purchaser is liable for such Taxes, following Seller’s request, Purchaser shall promptly pay to Seller all such Taxes allocable to the period or portion thereof beginning at or after the Effective Time (but only to the extent that such amounts have not already been accounted for as an increase to the Unadjusted Purchase Price under Section 2.2). Notwithstanding the foregoing, this Section 7.8(a) shall not apply to income, franchise, corporate, business and occupation, business license and similar Taxes (including Taxes based on net profits, margin, revenues, gross receipts or similar measure), and Tax Returns therefor, which shall be borne, paid and filed by the Party responsible for such Taxes under applicable Law. If requested by Purchaser, Seller will assist Purchaser with preparation of all ad valorem and property Tax Returns due on or before thirty (30) days after Closing (including any extensions requested). Seller shall deliver to Purchaser within thirty (30) days of filing copies of all Tax Returns filed by Seller after the Closing Date relating to the Assets and any supporting documentation provided by Seller to Governmental Bodies.

(b)    If Seller or Purchaser (or an Affiliate of Seller or Purchaser) receives a refund of any Taxes (whether by payment, credit offset or otherwise, with any interest thereon) covered by Section 7.8(a) that are paid by and required to be borne by the other Party, the Party that received (or whose Affiliate that received) such refund shall

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promptly (but no later than thirty (30) days after receipt) remit payment to such other Party of an amount equal to the refund amount, with any interest thereon, including all relevant documentation. Each Party shall cooperate with the other and its Affiliates in order to take all reasonably necessary steps to claim any refund to which it is entitled. Purchaser agrees to notify Seller within ten (10) days following the discovery of a right to claim any refund to which Seller is entitled and upon receipt of any such refund.

(c)    Except to the extent required by applicable Laws, Purchaser shall not and shall not permit its Affiliates to amend any Tax Return with respect to Taxes for which Seller is liable under this Section 7.8 or for which Seller may be liable to indemnify Purchaser under Section 11.2. Any Tax Return prepared by Purchaser for a taxable period, or portion thereof, beginning before the Effective Time shall be prepared in accordance with Seller’s prior practice and shall not be filed without Seller’s written consent (not to be unreasonably withheld, conditioned or delayed) after providing Seller a copy thereof reasonably in advance of the due date for filing such Tax Returns. In the event that Seller is required by applicable Law to file any Tax Return with respect to Taxes for which Purchaser is responsible hereunder, Seller shall prepare and timely file such Tax Return but shall not file such Tax Return without Purchaser’s written consent (not to be unreasonably withheld, conditioned or delayed) after providing Purchaser a copy thereof reasonably in advance of the due date for filing such Tax Return. If Seller or Purchaser disputes any item on a Tax Return described in this Section 7.8(c), it shall notify the other Party of such disputed item (or items) and the basis for its objection. The Parties shall act in good faith to resolve any such dispute prior to the date on which the relevant Tax Return is required to be filed. Purchaser and Seller shall each provide the other with all information reasonably necessary to prepare any Tax Return described in this Section 7.8(c).

(d)    After the Closing, Purchaser shall notify Seller in writing promptly after the receipt of a notice of any proposed assessment, the commencement of any Tax audit or administrative or judicial proceeding or any Tax demand or claim that could reasonably be grounds for indemnification by Seller (collectively, a “Tax Audit”). Such notice shall contain factual information describing the asserted Tax liability in reasonable detail and shall include copies of any written materials received from any Governmental Body in respect of any such asserted Tax liability. Seller shall control any Tax Audit; provided, however, that Seller shall not settle any such Tax Audit in a way that would adversely affect Purchaser without Purchaser’s written consent, which such consent shall not be unreasonably withheld, delayed or conditioned.

(e)    If, prior to Closing, Seller has paid on behalf of other working interest owners, royalty interest owners, overriding royalty interest owners and other interest owners in the Assets, ad valorem, property, severance, production and similar Taxes imposed on the ownership of the Assets or the production of Hydrocarbons produced from such Assets for Tax periods or portions thereof after the Effective Time (such amounts, “Post-Effective Time Tax Advances”) and has not recouped such Post-Effective Time Tax Advances before the Closing Date from such working interest owners, royalty interest owners, overriding royalty interest owners and other interest owners in the Assets, such Post-Effective Time Tax Advances shall be treated as “Property Costs” and Seller shall receive an upward adjustment to the Unadjusted Purchase Price pursuant to Section 2.2(h) for such Post-Effective Time Tax Advances.

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Section 7.9    Special Warranty of Title.

(a)    The Conveyance shall contain a covenant of Seller to warrant Defensible Title to the Wells, Leases and Units after Closing from and against the lawful claims of third party arising by, through or under Seller, but not otherwise, that are not reflected or referred to of record in the counties where the lands covered by the Leases and Units are located or in the materials made available to Purchaser prior to the Title Claim Date (the “Special Warranty”).

(b)    Prior to the expiration of the period of time commencing as of the Closing Date and ending at 5:00 P.M. (central time) on the second anniversary thereof (the “Survival Period”), Purchaser shall be entitled to furnish Seller a Title Defect Notice meeting the requirements of Section 3.4(a) setting forth any and all matters which Purchaser intends to assert as a breach of the Special Warranty (collectively, the “Special Warranty Notices” and, individually, a “Special Warranty Notice”). Seller shall have a reasonable opportunity, but not the obligation, to cure any breach of the Special Warranty asserted by Purchaser pursuant to this Section 7.9(b). Purchaser shall reasonably cooperate with any attempt by Seller to cure any such breach. For all purposes of this Agreement, Purchaser shall be deemed to have waived, and Seller shall have no further liability for, any breach of the Special Warranty that Purchaser fails to assert by a Special Warranty Notice given to Seller before the expiration of the Survival Period.

(c)    Recovery by Purchaser for any breach by Seller of the Special Warranty shall be limited to an amount equal to the Allocated Value of the affected Well, Lease, or Unit.

(d)    Seller shall have no liability for breach of the Special Warranty for matters for which and to the extent Purchaser had knowledge prior to the Title Claim Date that such matters constituted a Title Defect hereunder and failed to assert the same under this Agreement prior to the Title Claim Date.

Section 7.10    Suspended Proceeds.

Seller shall transfer and remit to Purchaser, in the form of a post-Closing adjustment to the Unadjusted Purchase Price, all monies representing the value or proceeds of production removed or sold from the Properties and held by Seller at the time of the Closing for accounts from which payment has been suspended, such monies, net of applicable rights of set off or recoupment, being hereinafter called “Suspended Proceeds”. Purchaser shall be solely responsible for the proper distribution of such Suspended Proceeds to the Person or Persons which or who are entitled to receive payment of the same.

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Section 7.11    Sales or Use Tax, Recording Fees, and Similar Taxes and Fees.

Purchaser shall bear any sales, use, excise, real property transfer, gross receipts, goods and services, registration, capital, documentary, stamp or transfer Taxes, recording fees and similar Taxes and fees incurred and imposed upon, or with respect to, the property transfers or other transactions contemplated hereby (“Transfer Taxes”). Seller will determine, and Purchaser agrees to cooperate with Seller in determining, Transfer Taxes, if any, that applicable law requires Seller to collect from Purchaser in connection with the sale of Assets hereunder, and Purchaser agrees to pay any such tax to Seller at Closing; provided, however, that Seller’s failure to collect any such Transfer Taxes at Closing shall not absolve Purchaser from Purchaser’s responsibility for such Transfer Taxes. If such transfers or transactions are exempt from any such Taxes or fees upon the filing of an appropriate certificate or other evidence of exemption, Purchaser will timely furnish to Seller such certificate or evidence.

Section 7.12    Change of Name.

Unless otherwise authorized by Seller in writing, as promptly as practicable, but in any case within thirty (30) days after the Closing Date, Purchaser shall eliminate the name “Battlecat” and any variants thereof from the Assets acquired pursuant to this Agreement and, except with respect to such grace period for eliminating existing usage, shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.

Section 7.13    Replacement of Bonds and Guarantees.

(a)    Purchaser acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with any Governmental Bodies and/or relating to the Assets, including those set forth in Schedule 7.13(a) (the “Governmental Bonds”), are transferable to Purchaser. On or before Closing, Purchaser shall obtain, or cause to be obtained in the name of Purchaser, replacements for such Governmental Bonds to the extent such replacements are necessary (i) for Purchaser’s ownership of the Assets, and (ii) to permit the cancellation of the Governmental Bonds posted by Seller and/or any Affiliate of Seller with respect to the Assets. In addition, at or prior to Closing, Purchaser shall deliver to Seller evidence of the posting of bonds or other security with all applicable Governmental Bodies meeting the requirements of such Governmental Bodies to own and, if applicable, operate the Assets.

(b)    Purchaser shall cooperate with Seller in order to cause Seller and its Affiliates to be released, as of the Closing Date, from all guarantees, performance bonds, letters of credit, escrow accounts and other forms of financial assurance previously put in place by Seller with third parties that are not Governmental Bodies in connection with its ownership and operation of the Assets and which are as set forth in Schedule 7.13(b) (the “Guarantees”). Without limiting the foregoing, if required by a counterparty to any Guarantee, Purchaser shall, and, if applicable, shall cause its Affiliates to, provide, effective as of the Closing Date or such later date as may be required by such counterparty, substitute guarantee or similar arrangements for all periods covered by the Guarantees, which guarantee or similar arrangements shall (i) constitute a type of security, and (ii) be provided by a party whose creditworthiness is, in each case, equivalent to or better than that required by the counterparty to such Guarantee.

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(c)    In the event that any counterparty to any such Guarantee does not release Seller or any of its Affiliates or in the event that any Governmental Body does not permit the cancellation of any Governmental Bond posted by Seller and/or any Affiliate of Seller with respect to the Assets, then, from and after Closing, Purchaser shall indemnify Seller or any Affiliate of Seller, as applicable, against all amounts incurred by Seller or any Affiliate of Seller, as applicable, under such Guarantee or such Governmental Bond (and all costs incurred in connection with such Guarantee or such Governmental Bond) if applicable to the Assets acquired by Purchaser. Notwithstanding anything to the contrary contained in this Agreement, any cash placed in escrow by Seller or any Affiliate of Seller pursuant to the Guarantees must be returned to Seller as soon as practicable and shall be deemed an Excluded Asset for all purposes hereunder.

Section 7.14    Further Assurances.

After Closing, Seller and Purchaser each agrees to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

ARTICLE 8

CONDITIONS TO CLOSING

Section 8.1    Conditions of Seller to Closing.

The obligations of Seller to consummate the transactions contemplated by this Agreement are subject, at the option of Seller, to the satisfaction on or prior to Closing of each of the following conditions:

(a)    Representations. The representations and warranties of Purchaser set forth in Article 6 shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for such breaches, if any, as would not have a Material Adverse Effect (provided, that to the extent such representation or warranty is qualified by its terms by materiality or Material Adverse Effect, such qualification in its terms shall be inapplicable for purposes of this Section and the Material Adverse Effect qualification contained in this Section 8.1 shall apply in lieu thereof);

(b)    Performance. Purchaser shall have performed and observed, in all material respects, all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date;

(c)    Pending Litigation. No suit, action or other proceeding by any non- affiliated third party or Governmental Body shall have been instituted or threatened or

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claim or demand made against Seller or Purchaser seeking to restrain, enjoin or prohibit or to obtain substantial damages with respect to the consummation of the transactions contemplated by this Agreement, and there shall not be any order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;

(d)    Deliveries. Purchaser shall have delivered to Seller duly executed counterparts of the Conveyances and the other documents and certificates to be delivered by Purchaser under Section 9.3;

(e)    Title Defects, Casualty or Condemnation and Environmental Liabilities. The aggregate amount of (i) the sum of all Title Defect Amounts for actual Title Defects covered by Section 3.4(d)(i) (excluding unsatisfied consents or preferential rights of purchase treated as Title Defects under Section 3.5), less the sum of all Title Benefit Amounts for actual Title Benefits, as determined under Article 3, plus (ii) the sum of all adjustments to the Unadjusted Purchase Price for Environmental Liabilities covered by Section 4.4(a), plus (iii) the aggregate amount of the Allocated Values of all Properties excluded from the Properties to be conveyed to Purchaser at Closing pursuant to Section 3.6 shall not exceed an amount equal to fifteen percent (15%) of the Unadjusted Purchase Price; and

(f)    Payment. Purchaser shall be ready, willing and able to pay the Closing Payment.

Section 8.2    Conditions of Purchaser to Closing.

The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject, at the option of Purchaser, to the satisfaction on or prior to Closing of each of the following conditions:

(a)    Representations. The representations and warranties of Seller set forth in Article 5 shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for such breaches, if any, as would not have a Material Adverse Effect (provided, that to the extent such representation or warranty is qualified by its terms by materiality or Material Adverse Effect, such qualification in its terms shall be inapplicable for purposes of this Section and the Material Adverse Effect qualification contained in this Section 8.2 shall apply in lieu thereof);

(b)    Performance. Seller shall have performed and observed, in all material respects, all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date;

(c)    Pending Litigation. No suit, action or other proceeding by any non- affiliated third party or Governmental Body shall have been instituted or threatened or claim or demand made against Seller or Purchaser seeking to restrain, enjoin or prohibit or to obtain substantial damages with respect to the consummation of the transactions

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contemplated by this Agreement, and there shall not be any order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;

(d)    Deliveries. Seller shall be ready, willing and able to deliver to Purchaser duly executed counterparts of the Conveyances and the other documents and certificates to be delivered by Seller under Section 9.2; and

(e)    Title Defects, Casualty or Condemnation and Environmental Liabilities. The aggregate amount of (i) the sum of all Title Defect Amounts for actual Title Defects covered by Section 3.4(d)(i), less the sum (excluding unsatisfied consents or preferential rights of purchase treated as Title Defects under Section 3.5), less the sum of all Title Benefit Amounts for actual Title Benefits, as determined under Article 3, plus (ii) the sum of all adjustments to the Unadjusted Purchase Price for Environmental Liabilities covered by Section 4.4(a), plus (iii) the aggregate amount of the Allocated Values of all Properties excluded from the Properties to be conveyed to Purchaser at Closing pursuant to Section 3.6 shall not exceed an amount equal to fifteen percent (15%) of the Unadjusted Purchase Price.

ARTICLE 9

CLOSING

Section 9.1    Time and Place of Closing.

(a)    Consummation of the purchase and sale transaction as contemplated by this Agreement (the “Closing”), shall, unless otherwise agreed to in writing by Purchaser and Seller, take place at the offices of Baker Botts L.L.P., 910 Louisiana St., Houston, Texas 77002, at 9:00 A.M. local time, on the first Business Day that is sixty (60) days after the date hereof.

(b)    The date on which the Closing occurs is herein referred to as the “Closing Date.”

Section 9.2    Obligations of Seller at Closing.

At the Closing, upon the terms and subject to the conditions of this Agreement, Seller shall deliver or cause to be delivered to Purchaser, among other things, the following:

(a)    the Conveyance, in sufficient duplicate originals to allow recording in all appropriate jurisdictions and offices, duly executed by Seller;

(b)    the Preliminary Settlement Statement, duly executed by Seller;

(c)    to the extent applicable, assignments, on appropriate forms, of state and of federal leases comprising portions of the Assets, duly executed by Seller;

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(d)    to the extent required under any Law or Governmental Body, Seller and Purchaser shall deliver federal and state change of operator forms designating Purchaser as the operator of the Properties currently operated by Seller;

(e)    letters-in-lieu of division or transfer orders covering the Assets that are prepared and provided by Purchaser and reasonably satisfactory to Seller to reflect the transactions contemplated hereby, duly executed by Seller;

(f)    a certificate duly executed by an authorized officer of Seller, dated as of Closing, certifying on behalf of Seller that to the best of its knowledge the conditions set forth in Sections 8.2(a) and 8.2(b) have been fulfilled;

(g)    the Registration Rights Agreement, duly executed by Seller;

(h)    the Surface Deed, duly executed by Seller; and

(i)    an executed statement from Seller meeting the requirements of Treasury Regulation §1.1445-2(b)(2) and reasonably acceptable to Purchaser certifying that Seller is not a foreign person within the meaning of the Internal Revenue Code of 1986, as amended.

Section 9.3    Obligations of Purchaser at Closing.

At the Closing, upon the terms and subject to the conditions of this Agreement, Purchaser shall deliver or cause to be delivered to Seller, among other things, the following:

(a)    A letter to the Escrow Agent directing the Agent to deliver the Deposit to Seller;

(b)    a wire transfer of the Closing Cash Payment, less the Deposit, in same-day funds;

(c)    certificates or book entry shares representing the Closing Shares, duly endorsed for transfer to Seller (or accompanied by duly executed stock powers);

(d)    a copy of the listing of additional shares notification provided to NASDAQ with respect to the Closing Shares, if required under NASDAQ rules;

(e)    the Preliminary Settlement Statement, duly executed by Purchaser;

(f)    the Conveyance, in sufficient duplicate originals to allow recording in all appropriate jurisdictions and offices, duly executed by Purchaser;

(g)    to the extent applicable, assignments, on appropriate forms, of state and of federal leases comprising portions of the Assets, duly executed by Purchaser;

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(h)    to the extent required under any law or Governmental Body, federal and state change of operator forms designating Purchaser as the operator of the Properties currently operated by Seller, duly executed by Purchaser;

(i)    copies of all bonds, letters of credit and guarantees required to be obtained by Purchaser under Section 7.13 or other written evidence that Purchaser is not required under Section 7.13 to obtain such items;

(j)    letters-in-lieu of division and transfer orders covering the Assets, duly executed by Purchaser;

(k)    the Registration Rights Agreement, duly executed by Purchaser;

(l)    the Surface Deed, duly executed by Purchaser; and

(m)    a certificate by an authorized officer of Purchaser, dated as of Closing, certifying on behalf of Purchaser that the conditions set forth in Sections 8.1(a) and 8.1(b) have been fulfilled.

Section 9.4    Closing Payment and Post-Closing Purchase Price Adjustments.

(a)    Not later than two (2) Business Days prior to the Closing Date, Seller shall prepare and deliver to Purchaser, based upon the best information available to Seller, a preliminary settlement statement estimating the Adjusted Purchase Price after giving effect to all Unadjusted Purchase Price adjustments set forth in Section 2.2 and the Deposit (the “Preliminary Settlement Statement”). Notwithstanding anything to the contrary contained herein, to the extent that the Adjusted Purchase Price as reflected on the Preliminary Settlement Statement is (i) greater than the Unadjusted Purchase Price (the amount of such excess, the “Seller Credit”) then the Cash Consideration to be paid by Purchaser to Seller shall be increased by an amount equal to the Seller Credit or (ii) less than the Unadjusted Purchase Price (the amount of such shortfall, the “Purchaser Credit”) then such Purchaser Credit shall be allocated as follows: (A) reducing the Stock Consideration by reducing the number of Consideration Shares by the Shortfall Share Amount; and (B) if and only if the Shortfall Share Amount is greater than the Consideration Shares, then the Cash Consideration shall be reduced by the Shortfall Cash Amount (the Cash Consideration as adjusted by this Section 9.4(a)(ii) and Section 9.4(a)(i), the “Closing Cash Payment” and the Stock Consideration as adjusted by this Section 9.4(a)(ii), the “Closing Shares”). In the event that Purchaser objects to the Preliminary Settlement Statement and Seller and Purchaser cannot come to a resolution with respect to Purchaser’s objection, Seller’s Preliminary Settlement Statement shall be used for the purposes of Closing and the Closing Cash Payment and Closing Shares set forth therein shall constitute the Stock Consideration and Cash Consideration to be paid by Purchaser to Seller at the Closing (the “Closing Payment”).

(b)    As soon as reasonably practicable after the Closing but not later than one hundred and twenty (120) days following the Closing Date, Seller shall prepare and deliver to Purchaser a statement setting forth the final calculation of the Adjusted Purchase Price and showing the calculation of each adjustment, based, to the extent

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possible on actual credits, charges, receipts and other items before and after the Effective Time and taking into account all adjustments provided for in this Agreement. Seller shall at Purchaser’s request supply reasonable documentation available to support any credit, charge, receipt or other item. As soon as reasonably practicable but not later than the thirtieth (30th) day following receipt of Seller’s statement hereunder, Purchaser shall deliver to Seller a written report containing any changes that Purchaser proposes be made to such Statement. The Parties shall undertake to agree on the final statement of the Adjusted Purchase Price no later than one hundred and eighty (180) days after the Closing Date. In the event that the parties cannot agree on the Adjusted Purchase Price within one hundred and eighty (180) days after the Closing, such determination will be automatically referred to an independent expert panel of three independent experts, each with at least ten (10) years of oil and gas accounting experience for arbitration (the “Independent Experts”). Seller and Purchaser shall each select one independent expert and such independent experts shall, collectively, select the third independent experts. If Seller’s and Purchaser’s independent experts cannot agree then the third independent expert shall be selected by American Arbitration Association office in Houston, Texas. The burden of proof in the determination of the Adjusted Purchase Price shall be upon Purchaser. The Independent Experts shall conduct the arbitration proceedings in Houston, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Independent Experts’ determination shall be made within thirty (30) days after submission of the matters in dispute and shall be final and binding on both Parties, without right of appeal. In determining the proper amount of any adjustment to the Unadjusted Purchase Price, the Independent Experts shall not increase the Unadjusted Purchase Price more than the increase proposed by Seller nor decrease the Unadjusted Purchase Price more than the decrease proposed by Purchaser, as applicable. The Independent Experts shall act as an expert for the limited purpose of determining the specific disputed matters submitted by either Party and may not award damages or penalties to either Party with respect to any matter. Each Party shall each bear its own legal fees and other costs of presenting its case. Each Party shall bear one-half of the costs and expenses of the Independent Experts. Within ten (10) days after the date on which the Parties or the Independent Experts, as applicable, finally determines the disputed matters, (i) Purchaser shall pay to Seller the amount by which the Adjusted Purchase Price exceeds the Closing Payment in cash or (ii) Seller shall pay to Purchaser the amount by which the Closing Payment exceeds the Adjusted Purchase Price, as applicable; provided, however, that if Seller has an obligation to pay Purchaser under this Section 9.4(b), Seller shall have the option to satisfy all or a portion of such obligation by delivering a number of Closing Shares equal in value to such obligation or portion thereof, calculated by dividing the amount of Damages by the Share Price and rounded to the nearest whole share. Any post-closing payment pursuant to this Section 9.4 shall bear interest from the Closing Date to the date of payment at the Agreed Interest Rate.

(c)    All payments made or to be made hereunder to Seller shall be by electronic transfer of immediately available funds to the account of Seller pursuant to the wiring instructions reflected in Schedule 9.4(c) or as separately provided in writing. All payments made or to be made hereunder to Purchaser shall be by electronic transfer of immediately available funds to a bank and account specified by Purchaser in writing to Seller.

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ARTICLE 10

TERMINATION

Section 10.1    Termination.

Subject to Section 10.2, this Agreement may be terminated: (i) at any time prior to Closing by the mutual prior written consent of Seller and Purchaser; (ii) by Seller or Purchaser if Closing has not occurred on or before the date that is seventy-five (75) days from the date hereof (or in the event such date is not a Business Day then the next Business Day immediately following such date); (iii) by Purchaser if any condition set forth in Section 8.2 has not been satisfied or waived at Closing; (iv) by Seller if any condition set forth in Section 8.1 has not been satisfied or waived at Closing; or (v) by Seller if Purchaser has not paid the Deposit to the Escrow Agent within one (1) Business Day of the date hereof; provided, however, that termination under clauses (ii), (iii) or (iv) shall not be effective until the Party electing to terminate has delivered written notice to the other Party of its election to so terminate; provided, however, that no Party shall have the right to terminate this Agreement pursuant to clauses (ii), (iii) or (iv) above, if such Party or its Affiliates are at such time in material breach of this Agreement.

Section 10.2    Effect of Termination.

If this Agreement is terminated pursuant to Section 10.1, except as set forth in this Section 10.2 and in Section 10.3, this Agreement shall become void and of no further force or effect (except for the provisions of Sections 5.6, 6.5, 7.6, Section 7.12, 11.6, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8, 12.9, 12.10, 12.11, 12.12, 12.13, 12.14, 12.15, and 12.16 and of the Confidentiality Agreement, all of which shall continue in full force and effect in accordance with their terms) and Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement. Subject to Section 10.3, the termination of this Agreement under Section 10.1(ii), (iii), (iv) or (v) shall not relieve any Party from liability to the other Party at Law or in equity for any failure to perform or observe in any material respect any of its agreements or covenants contained herein which are to be performed or observed at or prior to Closing.

Section 10.3    Distribution of Deposit Upon Termination.

(a)    If this Agreement is terminated by Seller pursuant to Section 10.1(ii) (and Purchaser does not also have the right to terminate this Agreement under Section 10.1(ii)) or Section 10.1(iv) and Seller has performed or is ready, willing and able to perform all of its agreements and covenants contained herein which are to be performed or observed at or prior to Closing, then Seller:

(i)    may elect to (A) have the Escrow Agent pay the Deposit to Seller as liquidated damages as Seller’s sole and exclusive remedy for any breach or

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failure to perform by Purchaser under this Agreement, and all other remedies (except those under Section 7.6 and the Confidentiality Agreement, which shall remain in full force and effect) are hereby expressly waived by Seller and upon Seller’s election pursuant to this Sub-clause A, or (B) subject to an election by Seller under Section 10.3(a)(ii), direct the Escrow Agent to pay the Deposit to Purchaser and pursue any remedies available to Seller at law or equity and upon Seller’s election pursuant to this Sub-clause B. Subject to an election by Seller under Section 10.3(a)(ii), Seller and Purchaser agree upon the Deposit as liquidated damages due to the difficulty and inconvenience of measuring actual damages and the uncertainty thereof, and Seller and Purchaser agree that such amount would be a reasonable estimate of Seller’s loss in the event of any such breach or failure to perform by Purchaser. Upon such termination, Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement; or

(ii)    in lieu of termination of this Agreement, Seller shall be entitled to specific performance of this Agreement, it being specifically agreed that monetary damages will not be sufficient to compensate Seller if Seller determines the same in its sole discretion. If Seller elects to seek specific performance of this Agreement pursuant to this Section 10.3(a)(ii), the Escrow Agent shall retain the Deposit, until a non-appealable final judgment or award on Seller’s claim for specific performance is rendered, at which time the Deposit shall be applied as provided in Section 2.4 of this Agreement.

(b)    If this Agreement is terminated by Purchaser pursuant to Section 10.1(iii) and Purchaser has performed or is ready, willing and able to perform all of its agreements and covenants contained herein which are to be performed or observed at or prior to Closing, then at Purchaser’s option:

(i)    upon notice from Purchaser, the Escrow Agent shall pay the Deposit to Purchaser, as Purchaser’s sole and exclusive remedy for any breach or failure to perform by Seller under this Agreement, and all other remedies (except those under the Confidentiality Agreement, which shall remain in full force and effect) are hereby expressly waived by Purchaser, and Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement; or

(ii)    in lieu of termination of this Agreement, Purchaser, as its sole and exclusive remedy for any breach or failure to perform by Seller under this Agreement, shall be entitled to specific performance of this Agreement, it being specifically agreed that monetary damages will not be sufficient to compensate Purchaser. If Purchaser elects to seek specific performance of this Agreement pursuant to this Section 10.3(b)(ii), the Escrow Agent shall retain the Deposit, until a non-appealable final judgment or award on Purchaser’s claim for specific performance is rendered, at which time the Deposit shall be distributed as provided in the judgment or award resolving the specific performance claim or shall be applied as provided in Section 2.4 of this Agreement.

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(c)    If this Agreement terminates for reasons other than those set forth in Section 10.3(a) or Section 10.3(b), the Escrow Agent shall pay the Deposit to Purchaser, free of any claims by Seller or any other Person with respect thereto, and each Party shall have no further liability hereunder of any nature whatsoever to the other Party, including any liability for Damages (except for the provisions of Sections 5.6, 6.5, 7.6 and 12.3 and the Confidentiality Agreement which shall continue in full force and effect in accordance with their terms), and Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any Person without any restriction under this Agreement.

(d)    In each instance where a Party is entitled to payment of all or part of the Deposit, both Parties agree to give written instructions to the Escrow Agent to do so.

ARTICLE 11

POST-CLOSING OBLIGATIONS; INDEMNIFICATION;

LIMITATIONS; DISCLAIMERS AND WAIVERS

Section 11.1    Receipts.

(a)    Except as otherwise provided in this Agreement, any production from or attributable to the Assets (and all products and proceeds attributable thereto) and any other income, proceeds, receipts and credits attributable to the Assets which are not reflected in the adjustments to the Unadjusted Purchase Price following the final adjustment pursuant to Section 9.4(b) shall be treated as follows: (i) all production from or attributable to the Assets (and all products and proceeds attributable thereto) and all other income, proceeds, receipts and credits earned with respect to the Assets to which Purchaser is entitled under Section 1.4 shall be the sole property and entitlement of Purchaser, and, to the extent received by Seller, Seller shall fully disclose, account for and remit the same to Purchaser within ten (10) days, and (ii) all production from or attributable to the Assets (and all products and proceeds attributable thereto) and all other income, proceeds, receipts and credits earned with respect to the Assets to which Seller is entitled under Section 1.4 shall be the sole property and entitlement of Seller and, to the extent received by Purchaser, Purchaser shall fully disclose, account for and remit the same to Seller within ten (10) days.

(b)    Notwithstanding any other provisions of this Agreement to the contrary, Seller shall be entitled to retain (and Purchaser shall not be entitled to any decrease to the Unadjusted Purchase Price in respect of) all overhead charges it has collected, billed or which shall be billed later, relating to the Seller Operated Assets and relating to the period from the Effective Time to the date Seller relinquishes operatorship of the applicable Seller Operated Assets, even if after the date of Closing.

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Section 11.2    Assumption and Indemnification.

(a)    Without limiting Purchaser’s rights to indemnity under this Article 11, on the Closing Date, Purchaser shall assume and hereby agrees to timely fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid or discharged) all of the obligations and liabilities of Seller, known or unknown, with respect to the Assets, regardless of whether such obligations or liabilities arose prior to, on or after the Effective Time, including (1) obligations to furnish makeup gas according to the terms of applicable gas sales, gathering or transportation contracts, (2) gas balancing obligations and other obligations arising from Imbalances, (3) obligations to pay Property Costs and other costs and expenses attributable to the ownership or operation of the Assets, (4) obligations to pay working interests, royalties, overriding royalties and other interests held in suspense, including the Suspended Proceeds, (5) obligations to plug or abandon wells and associated equipment and dismantle structures, and to restore and/or remediate the Assets in accordance with applicable agreements, Leases or Laws (including Environmental Laws), (6) any claims regarding the general method, manner or practice of calculating or making royalty payments (or payments for overriding royalties or similar burdens on production) with respect to the Properties and (7) continuing obligations, if any, under any Contracts or other agreements pursuant to which Seller or its Affiliates purchased or acquired Assets prior to the Closing (all of said obligations and liabilities, subject to the exclusions below, herein being referred to as the “Assumed Obligations”); provided, however, that the Assumed Obligations do not include and Purchaser does not assume any obligations or liabilities of Seller to the extent that they are Seller Indemnity Obligations.

(b)    Except for Damages for which Seller is required to indemnify Purchaser Indemnitees under Section 11.2(c), at the time an applicable Claim Notice is provided to Seller, Purchaser shall indemnify, defend and hold harmless the Seller Indemnitees from and against all Damages incurred or suffered by the Seller Indemnitees:

(i)    caused by, arising out of, resulting from or relating to the Assumed Obligations;

(ii)    caused by, arising out of or resulting from Purchaser’s breach of any of Purchaser’s covenants or agreements that survive the Closing;

(iii)    caused by, arising out of or resulting from any breach of any representation or warranty made by Purchaser contained in Article 6 of this Agreement or in the certificate delivered by Purchaser at Closing pursuant to Section 9.3(m);

(iv)    caused by, arising out of or resulting from any claims or actions asserted by Persons (including Governmental Bodies) with respect to (1) any condition affecting any Asset that violates or requires remediation under Environmental Law, (2) any operations conducted on such Asset that violate any Environmental Law or (3) any remediation required for an Asset under any Environmental Law regardless of whether known or unknown, or whether attributable to periods of time before, on or after the Effective Time.

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EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF SELLER INDEMNITEES OR ANY INDEMNIFIED PERSON.

(c)    Seller shall indemnify, defend and hold harmless Purchaser Indemnitees against and from all Damages incurred or suffered by Purchaser Indemnitees to the extent (the “Seller Indemnity Obligations”):

(i)    caused by, arising out of or resulting from any breach asserted during the applicable survival period of any of Seller’s covenants or agreements that survive the Closing;

(ii)    caused by, arising out of or resulting from any breach asserted during the applicable survival period of any representation or warranty made by Seller contained in Article 5 of this Agreement or in the certificate delivered by Seller at Closing pursuant to Section 9.2(f);

(iii)    caused by, arising out of, resulting from or related to the Excluded Assets;

(iv)    caused by, arising out of, resulting from the litigation listed on Schedule 5.7;

(v)    caused by, arising out of, resulting from personal injury and wrongful death and property damage claims relating to events occurring during Seller’s ownership or operation of the Properties prior to the Closing;

(vi)    caused by, arising out of, resulting from claims arising from the offsite disposal of hazardous or toxic substances, pollutants, contamination solid wastes or Hydrocarbons occurring during Seller’s ownership or operation of the Properties prior to the Closing;

(vii)    associated with the payment of or failure to pay royalties, overriding royalties, or other disbursements of production or proceeds of production and escheat obligations to the extent relating to Seller’s ownership or operation of the Properties during the period prior to the Effective Time;

(viii)    arising from payment of taxes for which Seller is responsible pursuant to Section 7.8; or

(ix)    arising from, based upon, related to or associated with Seller’s gross negligence or willful misconduct in its ownership or operation of the Properties prior to the Closing.

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(d)    Notwithstanding anything to the contrary contained in this Agreement, except for the rights of the Parties under Article 3, Article 4, Article 10, Section 7.6 and the Special Warranty in the Conveyance (subject to Section 7.9), this Section 11.2 contains the Parties’ exclusive remedy against each other with respect to breaches of this Agreement, including breaches of the representations and warranties contained in Article 5 and Article 6, the covenants and agreements that survive the Closing pursuant to the terms of this Agreement and the affirmations of such representations, warranties, covenants and agreements contained in the certificates delivered by the Parties at Closing pursuant to Sections 9.2(f) or 9.3(m), as applicable. Except for the remedies contained in this Section 11.2 and for the rights of the Parties under Article 10, Section 7.6 and the Special Warranty in the Conveyance (subject to Section 7.9), Purchaser (on behalf of itself, each of the other Purchaser Indemnitees and their respective insurers and successors in interest) releases, remises and forever discharges the Seller Indemnitees from any and all suits, legal or administrative proceedings, claims, remedies, demands, damages, losses, costs, liabilities, interest, or causes of action whatsoever, in Law or in equity, known or unknown, which such parties might now or subsequently may have, based on, relating to or arising out of this Agreement, Seller’s, Seller’s predecessor’s or its respective co-owner’s ownership, use or operation of the Assets, or the condition, quality, status or nature of the Assets, including rights to contribution under CERCLA, as amended, and under other Environmental Laws, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages and common law rights of contribution, rights under agreements between and Seller and any Persons who are Affiliates of Seller, and rights under insurance maintained by Seller or any Person who is an Affiliate of Seller, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT, BUT EXCLUDING WILLFUL MISCONDUCT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON.

(e)    “Damages”, for purposes of this Agreement, shall mean the amount of any actual liability, loss, cost, diminution in value, expense, claim, demand, notice of violation, investigation by any Governmental Body, administrative proceeding, payment, charge, obligation, fine, penalty, deficiency, award or judgment incurred or suffered by any Indemnified Party arising out of or resulting from the indemnified matter, including reasonable fees and expenses of attorneys, consultants, accountants or other agents and experts reasonably incident to matters indemnified against, and the costs of investigation and/or monitoring of such matters, and the costs of enforcement of the indemnity; provided, however, that no Purchaser Indemnitee shall be entitled to indemnification under this Section 11.2 for Damages that constitute (i) loss of profits or other consequential, special or indirect damages suffered by Purchaser, or any punitive damages, or (ii) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or increased by the actions or omissions of any Purchaser Indemnitee after the Effective Time.

(f)    Notwithstanding any other provision of this Agreement or a document to be delivered hereto to the contrary, any claim for indemnity to which a Seller Indemnitee or Purchaser Indemnitee is entitled must be asserted by and through Seller or Purchaser, as applicable.

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Section 11.3    Indemnification Actions.

Except as otherwise provided in Section 7.8(d), all claims for indemnification under Section 11.2 shall be asserted and resolved as follows:

(a)    For purposes of this Article 11, the term “Indemnifying Party” when used in connection with particular Damages shall mean the Party having an obligation to indemnify another Person or Persons with respect to such Damages pursuant to this Article 11, and the term “Indemnified Party” when used in connection with particular Damages shall mean the Person or Persons having the right to be indemnified with respect to such Damages by another Party pursuant to this Article 11, subject to Section 11.2(f).

(b)    To make a claim for indemnification under Article 11, an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 11.3, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by a third party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim; provided, that the failure of any Indemnified Party to give notice of a Third Party Claim as provided in this Section 11.3 shall not relieve the Indemnifying Party of its obligations under Section 11.2 except to the extent such failure prejudices the Indemnifying Party’s ability to defend against the Third Party Claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached.

(c)    In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have fourteen (14) days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its liability to defend the Indemnified Party against such Third Party Claim at the sole cost and expense of the Indemnifying Party. The Indemnified Party is authorized, prior to and during such fourteen (14)-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party, all costs of which shall be included as Damages in respect of such claim for indemnification. The failure to provide notice to the Indemnified Party shall be deemed to be acceptance of liability.

(d)    If the Indemnifying Party admits its liability, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Party Claim. The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate, at the sole cost of the Indemnifying Party, in contesting any Third Party Claim which the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, at its sole cost without any right of reimbursement, any defense or settlement of any Third Party Claim controlled by the

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Indemnifying Party pursuant to this Section 11.3(d). Irrespective of whether the Indemnified Party elects to participate in contesting a Third Party Claim subject to this Section 11.3(d) in accordance with the foregoing sentence, the Indemnifying Party at its sole cost and expense shall provide to the Indemnified Party the following information with respect to the Third Party Claim: all filings made by any party; all written communications exchanged between any parties to the extent available to the Indemnifying Party and not subject to a restriction on disclosure to the Indemnified Party; and all orders, opinions, rulings or motions. The Indemnifying Party shall deliver the foregoing items to the Indemnified Party promptly after they become available to the Indemnifying Party. An Indemnifying Party shall not, without the written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed), (i) settle any Third Party Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the Indemnified Party from all liability in respect of such Third Party Claim or (ii) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages paid by the Indemnifying Party or covered fully by the indemnity).

(e)    If the Indemnifying Party does not admit its liability or admits its liability but fails to diligently prosecute or settle the Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing, subject to the right of the Indemnifying Party to admit its liability and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof. If the Indemnifying Party has not yet admitted its liability for a Third Party Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its liability for the Third Party Claim and (ii) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement. If Indemnifying Party fails to respond and admit in writing its liability during such ten (10) day period, the Indemnifying Party will be deemed to have approved such proposed settlement.

(f)    In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to (i) cure or remedy the Damages complained of, (ii) admit its liability for such Damages or (iii) dispute the claim for such Damages. If the Indemnifying Party does not notify the Indemnified Party within such 30-day period that it has cured or remedied the Damages or that it disputes the claim for such Damages, the Indemnifying Party shall be deemed to have disputed the claim for such Damages.

Section 11.4    Limitation on Actions.

(a)    All representations and warranties of Seller contained herein shall survive until the date that is one year counted from and after the Closing Date and expire thereafter. The covenants and other agreements of Seller set forth in this Agreement to be performed on or before Closing shall expire on the Closing Date and each other

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covenant and agreement of Seller shall, subject to this Section 11.4, survive the Closing until fully performed in accordance with its terms and expire thereafter. The affirmations of representations, warranties, covenants and agreements contained in the certificate delivered by each Party at Closing pursuant to Sections 9.2(f) and 9.3(m), as applicable, shall survive the Closing as to each representation, warranty covenant and agreement so affirmed for the same period of time that the specific representation, warranty, covenant or agreement survives the Closing pursuant to this Section 11.4, and shall expire thereafter. Representations, warranties, covenants and agreements shall terminate and be of no further force and effect after the respective date of their expiration, after which time no claim may be asserted thereunder by any Person, provided, that there shall be no termination of any bona fide claim timely asserted pursuant to Section 11.4(c).

(b)    The indemnities in Section 11.2(b)(ii) and Section 11.2(b)(iii) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Party on or before such termination date. Purchaser’s indemnities in Section 7.6, Section 11.2(b)(i), and Section 11.2(b)(iv) shall continue without time limit. The indemnities in Section 11.2(c) shall terminate on the date that is one year counted from and after the Closing Date.

(c)    Notwithstanding anything to the contrary contained elsewhere in this Agreement, except for claims for breaches of the Special Warranty and any payments in respect thereof:

(i)    Seller shall not be required to indemnify any Person under Section 11.2(c) for any individual liability, loss, cost, expense, claim, award or judgment that does not exceed Fifty Thousand Dollars ($50,000);

(ii)    Subject to Section 11.4(c)(i), Seller shall not have any liability for indemnification under Section 11.2(c) until and unless the aggregate amount of the liability for all Damages for which Claim Notices are timely delivered by Purchaser exceeds a deductible amount equal to two percent (2%) of the Unadjusted Purchase Price (the “Indemnity Deductible”), after which point Purchaser (or Purchaser Indemnitees) shall be entitled to claim Damages in excess of the Indemnity Deductible;

(iii)    Seller shall not be liable, nor required to indemnify Purchaser and Purchaser’s Indemnitees under Section 11.2(c)(ii) (except with regard to breaches of the representations in Section 5.2, Section 5.3, Section 5.4, Section 5.5, Section 5.6 and Section 5.8) for aggregate damages claimed by Purchaser and Purchaser Indemnitees in excess of ten percent (10%) of the Unadjusted Purchase Price; and

(iv)    Seller shall not be required to indemnify any Person under Section 11.2(c) unless Seller has received a Claim Notice with respect to such claim at or prior to the date that is one year counted from and after the Closing Date.

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(d)    The Indemnified Party shall take all reasonable steps to mitigate any Damages for which the Indemnified Party seeks indemnification under this Agreement and shall use reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to use reasonable efforts to minimize the amount thereof.

(e)    Seller and Purchaser acknowledge that after the Closing the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for breach of any representation, warranty, covenant or agreement contained in this Agreement or for any other claim arising in connection with or with respect to the transactions contemplated in this Agreement. As the payment of money shall be adequate compensation, Purchaser and Seller waive any right to rescind this Agreement or any of the transactions contemplated hereby. In the event that Seller has an obligation to pay Purchaser as a result of its indemnification obligations under Section 11.2(c), Seller shall have the option to satisfy all or a portion of such obligation by delivering a number of Closing Shares equal in value to such obligation or portion thereof, calculated by dividing the amount of such Damages by the Share Price and rounded to the nearest whole share.

Section 11.5    Recording.

As soon as practicable after Closing, Purchaser shall record the Conveyances in the appropriate counties as well as the appropriate governmental agencies and provide Seller with copies of all recorded or approved instruments.

Section 11.6    Waivers.

(a)    It is the intention of the Parties that Purchaser’s rights and remedies with respect to this transaction and with respect to all acts or practices of Seller, past, present or future, in connection with this transaction shall be governed by legal principles other than the Texas Deceptive Trade Practices-Consumer Protection Act, Subchapter E of Chapter 17, Sections 17.41 et seq., of the Texas Business and Commerce Code, as amended (the “DTPA”). As such, Purchaser hereby waives the applicability of the DTPA to this transaction and any and all duties, rights or remedies that might be imposed by the DTPA, whether such duties, rights and remedies are applied directly by the DTPA themselves or indirectly in connection with other statutes. Purchaser acknowledges, represents and warrants that it is purchasing the goods and/or services covered by this Agreement for commercial or business use; that it has assets of Five Million and No/100 Dollars ($5,000,000.00) or more according to its most recent financial statement prepared in accordance with GAAP; that it has knowledge and experience in financial and business matters that enable it to evaluate the merits and risks of a transaction such as this; that it is represented by legal counsel of its own choosing in seeking or acquiring the goods or services contemplated by this Agreement; and that it is not in a significantly disparate bargaining position with Seller.

(b)    Purchaser expressly recognizes that the price for which Seller has agreed to perform its obligations under this Agreement has been predicated upon the

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inapplicability of the DTPA and this waiver of the DTPA. Purchaser further recognizes that Seller, in determining to proceed with the entering into of this Agreement, has expressly relied on this waiver and the inapplicability of the DTPA.

(c)    The Parties do not intend that any implied obligation of good faith or fair dealing requires any Party to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement or any documents delivered in connection herewith and that it would be unfair, and that they do not intend, to increase any of the obligations of any Party under this Agreement or any documents delivered in connection herewith on the basis of any such implied obligation.

(d)    Purchaser acknowledges that plugging, abandonment, removal and restoration obligations for the Assets are material and significant. Purchaser acknowledges that Purchaser has conducted its own investigation and evaluation as to the cost and timing of such obligations and that, other than the representations and warranties set forth in this Agreement, Seller has made no representation or warranty as to the expected cost or timetable for incurring costs of plugging, abandonment, removal and restoration obligations for the Assets. Purchaser acknowledges that Seller is entering into this Agreement in reliance upon Purchaser’s agreement to assume such obligations and all other Assumed Obligations and that assumption of the Assumed Obligations constitutes material agreed consideration to Seller in consideration for the Assets.

Section 11.7    Insurance.

The amount of any liability for which Purchaser is entitled to indemnification under this Agreement or in connection with or with respect to the transactions contemplated by this Agreement shall be reduced by any corresponding insurance proceeds from insurance policies carried by Purchaser and realized or that could reasonably be expected to be realized by Purchaser if a claim were properly pursued under the relevant insurance arrangements.

Section 11.8    Tax Treatment of Indemnification Payments.

The Parties agree that any payments made by one Party to the other Party pursuant to this Article 11 shall be treated for all Tax purposes as an adjustment to the purchase price for the Assets unless otherwise required by applicable Law.

ARTICLE 12

MISCELLANEOUS

Section 12.1    Counterparts.

This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart signature page by facsimile or electronic transmittal (including PDF format) is as effective as executing and delivering this Agreement in the presence of other Parties to this Agreement.

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Section 12.2    Notice.

All notices which are required or may be given pursuant to this Agreement shall be sufficient in all respects if given in writing and delivered personally, by facsimile or by registered or certified mail, postage prepaid, as follows:

If to Seller:

Lime Rock Partners

Heritage Plaza, Suite 4600

1111 Bagby Street

Houston, Texas 77002

Attention: Anu Mehta

Telephone: 713-292-9500

Battlecat Oil & Gas

11391 Meadowglen Lane, Suite D

Houston, Texas 77082

Attention: Mark Lange

Telephone: 713-581-2121

WITH A COPY TO (which shall not constitute notice):

Baker Botts L.L.P.

910 Louisiana Street

Houston, Texas 77002

Attention: David Peterman

Telephone: 713-229-1735

Fax: 713-229-7935

If to Purchaser:

Lonestar Resources US, Inc.

600 Bailey Avenue, Suite 200

Fort Worth, TX 76107

Attention: Frank D. Bracken, III

Telephone: 817-858-6400

Fax: 817-546-8641

Either Party may change its address for notice by notice to the other in the manner set forth above. All notices shall be deemed to have been duly given (i) when physically delivered in person to the Party to which such notice is addressed, (ii) when transmitted to the Party to

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which such notice is addressed by confirmed facsimile transmission, or (iii) at the time of receipt by the Party to which such notice is addressed. Notwithstanding the foregoing, delivery by Seller or Purchaser (as applicable) of a Title Defect Notice, Title Benefit Notice or statement of the Unadjusted Purchase Price under Section 9.4, or a response to any of the foregoing, shall be deemed to have been duly given to the other Party when (i) transmitted via electronic mail to the address(es) of the representative(s) of such Party named above that were previously furnished to the delivering Party and (ii) the delivering Party has provided notice to the other Party of such electronic mail pursuant to the previous sentence.

Section 12.3    Expenses.

Except as provided in Section 7.11, all expenses incurred by Seller in connection with or related to the authorization, preparation or execution of this Agreement, the conveyances delivered hereunder and the Exhibits and Schedules hereto and thereto, and all other matters related to the Closing, including all fees and expenses of counsel, accountants and financial advisers employed by Seller, shall be borne solely and entirely by Seller, and all such expenses incurred by Purchaser shall be borne solely and entirely by Purchaser.

Section 12.4    Governing Law and Venue.

This Agreement and the legal relations between the Parties shall be governed by and construed in accordance with the Laws of the State of Texas without regard to principles of conflicts of Law that would direct the application of the Law of another jurisdiction. The venue for any action brought under this Agreement shall be Harris County, Texas.

Section 12.5    Jurisdiction; Waiver of Jury Trial.

EACH PARTY CONSENTS TO PERSONAL JURISDICTION IN ANY ACTION BROUGHT IN THE UNITED STATES FEDERAL COURTS LOCATED WITHIN HARRIS COUNTY, TEXAS (OR, IF JURISDICTION IS NOT AVAILABLE IN THE UNITED STATES FEDERAL COURTS, TO PERSONAL JURISDICTION IN ANY ACTION BROUGHT IN THE STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS) WITH RESPECT TO ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS AGREEMENT, AND EACH OF THE PARTIES AGREES THAT ANY ACTION INSTITUTED BY IT AGAINST THE OTHER WITH RESPECT TO ANY SUCH DISPUTE, CONTROVERSY OR CLAIM (EXCEPT TO THE EXTENT A DISPUTE, CONTROVERSY, OR CLAIM ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THE DETERMINATION OF A TITLE DEFECT AMOUNT OR TITLE BENEFIT AMOUNT PURSUANT TO SECTION 3.4(H), OR THE DETERMINATION OF UNADJUSTED PURCHASE PRICE ADJUSTMENTS PURSUANT TO SECTION 9.4(B) IS REFERRED TO AN EXPERT PURSUANT TO THOSE SECTIONS) WILL BE INSTITUTED EXCLUSIVELY THE UNITED STATES FEDERAL COURTS LOCATED WITHIN HARRIS COUNTY, TEXAS (OR, IF JURISDICTION IS NOT AVAILABLE IN THE UNITED STATES FEDERAL COURTS, TO PERSONAL JURISDICTION IN ANY ACTION BROUGHT IN THE STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS). THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST

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ANOTHER IN ANY MATTER WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS AGREEMENT. IN ADDITION, EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION IN THE RESPECTIVE JURISDICTIONS REFERENCED IN THIS SECTION.

Section 12.6    Captions.

The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

Section 12.7    Waivers.

Any failure by any Party to comply with any of its obligations, agreements or conditions herein contained may be waived in writing, but not in any other manner, by the party or parties to whom such compliance is owed. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

Section 12.8    Assignment.

Neither Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party and any assignment or delegation made without such consent shall be void, unless such assignment or delegation is to or with a subsidiary or affiliate of Seller or Purchaser; provided that in the event of such an assignment Purchaser or Seller, as applicable, shall remain liable for all of its obligations under this Agreement.

Section 12.9    Entire Agreement.

This Agreement and the documents to be executed hereunder and the Exhibits and Schedules attached hereto, together with the Confidentiality Agreement, constitute the entire agreement between the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof. In the event of a conflict between the Confidentiality Agreement and this Agreement, the terms and provisions of this Agreement shall prevail.

Section 12.10    Amendment.

(a)    This Agreement may be amended or modified only by an agreement in writing executed by both Parties.

(b)    No waiver of any right under this Agreement shall be binding unless executed in writing by the Party to be bound thereby.

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Section 12.11    No Third-Party Beneficiaries.

Nothing in this Agreement shall entitle any Person other than Purchaser and Seller to any claims, cause of action, remedy or right of any kind, except the rights expressly provided to the Persons described in Section 11.2(f).

Section 12.12    Public Announcements.

The Parties acknowledge and agree that no press release or other public announcement, or public statement or comment in response to any inquiry, or other disclosure that is reasonably expected to result in a press release or public announcement, relating to the subject matter of this Agreement shall be issued or made by Seller or Purchaser, or their respective Affiliates, without the joint written approval of Seller and Purchaser; provided, that, a press release or other public announcement, or public statement or comment made without such joint approval shall not be in violation of this Section if it is made in order for the disclosing Party or any of its Affiliates to comply with applicable Laws or stock exchange rules or regulations.

Section 12.13    Invalid Provisions.

If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future Laws effective during the term hereof, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.

Section 12.14    References.

In this Agreement:

(a)    References to any gender includes a reference to all other genders;

(b)    References to the singular includes the plural, and vice versa;

(c)    Reference to any Article or Section means an Article or Section of this Agreement;

(d)    Reference to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;

(e)    References to $ or Dollars means United States Dollars;

(f)    Unless expressly provided to the contrary, “hereunder”, “hereof”, “herein” and words of similar import are references to this Agreement as a whole and not any particular Section or other provision of this Agreement; and

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(g)    “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term and/or including but not limited to.

Section 12.15    Construction.

Seller and Purchaser have had substantial input into the drafting and preparation of this Agreement and have had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions.

Section 12.16    Limitation on Damages.

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, NONE OF PURCHASER, SELLER OR ANY OF ITS RESPECTIVE AFFILIATES OR INDEMNITEES SHALL BE ENTITLED TO EITHER PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND EACH OF PURCHASER AND SELLER, FOR ITSELF AND ON BEHALF OF ITS AFFILIATES AND INDEMNITEES, HEREBY EXPRESSLY WAIVES ANY RIGHT TO PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT TO THE EXTENT AN INDEMNIFIED PARTY IS REQUIRED TO PAY PUNITIVE, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES TO A THIRD PARTY THAT IS NOT AN INDEMNIFIED PARTY.

Section 12.17    Non-Recourse Parties.

Notwithstanding anything herein or in any agreement, instrument or document delivered in connection with this Agreement or any associated agreement contemplated herein (the “Associated Agreements”), Purchaser hereby acknowledges and agrees that no Person other than Seller, including any current or former director, officer, employee, member, manager, director, partner, investor, shareholder, agent, representative or Affiliate (the “Non-Recourse Parties”), shall have any liability to Purchaser, and Purchaser shall have no recourse against, any Person other than the Seller in connection with any Damages, claims or causes of action arising out of, or in relation to, this Agreement, the Associated Agreements, the transactions contemplated hereby and thereby and any instruments, documents or discussions in connection therewith, whether pursuant to any attempt to pierce the corporate veil, any claims for fraud, negligence or misconduct or any other claims otherwise available or asserted at Law or in equity it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, or be imposed on, or otherwise be incurred by any Non-Recourse Party, as such, for any obligations of Seller under this Agreement, the Associated Agreements, the transactions contemplated hereby and thereby and any instruments, documents or discussions in connection therewith. Purchaser acknowledges and agrees that the Non-Recourse Parties have participated in and will continue to participate in (directly or indirectly) investments in the oil and gas and exploration and production industry that may, are or will be competitive with the Assets and Purchaser’s business (“Other Investments”). Not in limitation of the foregoing, Purchaser

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hereby expressly waives any potential conflicts of interest, and none of the Non-Recourse Parties shall have any liability with respect to Damages to Purchaser under this Agreement or the transactions contemplated hereby in connection with such Other Investments.

ARTICLE 13

DEFINITIONS

“Adjusted Purchase Price” has the meaning set forth in Section 2.1.

“Adjustment Period” has the meaning set forth in Section 2.2(a).

“Affiliates” with respect to any Person, means any Person that directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of this definition, the term “control” (and correlative terms) means the power, whether by contract, equity ownership or otherwise, to direct the policies or management of a Person.

“Agreed Interest Rate” shall mean simple interest computed at the rate of the prime interest rate as published in the Wall Street Journal.

“Agreed Allocation” has the meaning set forth in Section 2.3(b).

“Agreement” has the meaning set forth in the first paragraph of this Agreement.

“Allocated Value” has the meaning set forth in Section 2.3(a).

“Assessment” has the meaning set forth in Section 4.1.

“Assets” has the meaning set forth in Section 1.2.

“Associated Agreements” has the meaning set forth in Section 12.17.

“Assumed Obligations” has the meaning set forth in Section 11.2(a).

“Business Day” means any day other than (a) a Saturday, Sunday or federal holiday or (b) a day on which commercial banks in Houston, Texas, are authorized or required to be closed.

“Cash Consideration” has the meaning set forth in Section 2.1.

“CERCLA” has the meaning set forth in the definition of Environmental Laws.

“Claim Notice” has the meaning set forth in Section 11.3(b).

“Class A Stock” has the meaning set forth in Section 6.12(a).

“Class B Stock” has the meaning set forth in Section 6.12(a).

“Closing” has the meaning set forth in Section 9.1(a).

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“Closing Cash Payment” has the meaning set forth in Section 9.4(a).

“Closing Date” has the meaning set forth in Section 9.1(b).

“Closing Payment” has the meaning set forth in Section 9.4(a).

“Closing Shares” has the meaning set forth in Section 9.4(a).

“Confidentiality Agreement” means the Confidentiality Agreement between Purchaser and Seller dated March 21, 2017.

“Consideration Shares” has the meaning set forth in Section 2.1.

“Contracts” has the meaning set forth in Section 1.2(d).

“Conveyance” has the meaning set forth in Section 3.1(b).

“COPAS” has the meaning set forth in Section 1.4(b).

“Cure Period” has the meaning set forth in Section 3.4(c).

“Damages” has the meaning set forth in Section 11.2(e).

“Defect Deductible” has the meaning set forth in Section 3.4(i).

“Defensible Title” has the meaning set forth in Section 3.2(a).

“Deposit” has the meaning set forth in Section 2.4.

“DTPA” has the meaning set forth in Section 11.6(a).

“Eagle Ford Formation” means the Eagle Ford formation, being defined as the stratigraphic equivalent of true vertical depth from 10,294 feet true vertical depth (TVD) to 10,580 feet TVD as shown on the log of the EOG Resources, Inc. – Milton Unit, Well No. 1 (API #42-255-31608), or such depths specifically identified as the “Eagle Ford Formation” in the instruments that constitute (or are assignments or conveyances in the chain of title to) the Leases.

“Effective Time” has the meaning set forth in Section 1.4(a).

“Environmental Arbitrator” has the meaning set forth in Section 4.4.

“Environmental Claim Date” has the meaning set forth in Section 4.3.

“Environmental Consultant” has the meaning set forth in Section 4.1.

“Environmental Defect Notice” has the meaning set forth in Section 4.3.

“Environmental Laws” means, as the same have been amended as of the Effective Time, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.

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§ 9601 et seq. (“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq. the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and all Laws as of the Effective Time of any Governmental Body having jurisdiction over the property in question addressing pollution or protection of the environment and all regulations implementing the foregoing. Notwithstanding the foregoing, the phrase “violation of Environmental Laws” and words of similar import used herein shall mean, as to any given Asset, the violation of or failure to meet specific objective requirements or standards that are clearly applicable to such Asset under applicable Environmental Laws where such requirements or standards are in effect as of the Effective Time. The phrase does not include good or desirable operating practices or standards that may be employed or adopted by other oil or gas well operators or recommended by a Governmental Body.

“Environmental Liabilities” shall mean any and all environmental response costs (including costs of remediation), Damages, natural resource damages, settlements, consulting fees, expenses, penalties, fines, orphan share, prejudgment and post-judgment interest, court costs, attorneys’ fees, and other liabilities incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Body to the extent arising out of any violation of any Environmental Law which is attributable to the ownership or operation of the Properties prior to the Effective Time or (ii) pursuant to any claim or cause of action by a Governmental Body or other Person for personal injury, property damage, damage to natural resources to the extent arising out of any violation of any Environmental Law to the extent attributable to the ownership or operation of the Properties prior to the Effective Time, provided, that Environmental Liabilities excludes any of the foregoing liabilities to the extent caused by or relating to NORM or otherwise disclosed in any Schedule.

“Equipment” has the meaning set forth in Section 1.2(f).

“Escrow Account” has the meaning set forth in Section 2.4.

“Escrow Agent” has the meaning set forth in Section 2.4.

“Escrow Agreement” has the meaning set forth in Section 2.4.

“Exchange Act” has the meaning set forth in Section 6.15(a).

“Excluded Assets” has the meaning set forth in Section 1.3.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authorizations” has the meaning set forth in Section 5.13.

“Governmental Body” means any federal, state, local, municipal, or other governments; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.

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“Governmental Bonds” has the meaning set forth in Section 7.13(a).

“Guarantees” has the meaning set forth in Section 7.13(b).

“Hydrocarbons” means oil, gas, condensate and other gaseous and liquid hydrocarbons or any combination thereof, including scrubber liquid inventory and ethane, propane, isobutene, nor-butane and gasoline inventories (excluding tank bottoms), and sulphur and other minerals extracted from or produced from the foregoing hydrocarbons.

“Imbalance” means any over-production, under-production, over-delivery, under- delivery or similar imbalance of Hydrocarbons produced from or allocated to the Assets, regardless of whether such imbalance arises at the platform, wellhead, pipeline, gathering system, transportation system, processing plant or other location.

“Indemnified Party” has the meaning set forth in Section 11.3(a).

“Indemnifying Party” has the meaning set forth in Section 11.3(a).

“Indemnity Deductible” has the meaning set forth in Section 11.4(c)(ii).

“Independent Experts” has the meaning set forth in Section 9.4(b).

“Index Price” means (i) with respect to gas, NYMEX Henry Hub natural gas futures prompt month contract settle price for the indicated business day, and (ii) with respect to oil, the NYMEX prompt month contract settle price for the indicated business day.

“Individual Defect Threshold” has the meaning set forth in Section 3.4(i).

“Lands” has the meaning set forth in Section 1.2(a).

“Law” or “Laws” means all statutes, rules, regulations, ordinances, orders, and codes of Governmental Bodies.

“Leases” has the meaning set forth in Section 1.2(a).

“Liens” means any mortgage, deed of trust, lien, pledge, option, or security interest, in each case put in place by Seller.

“Lowest Cost Response” means the response required or allowed under Environmental Laws that cures, remediates, removes or remedies the applicable present condition alleged pursuant to an Environmental Defect Notice at the lowest cost (considered as a whole taking into consideration any material negative impact such response may have on the operations of the relevant Assets and any potential material additional costs or liabilities that may likely arise as a result of such response) sufficient to comply with Environmental Laws as compared to any other response that is required or allowed under Environmental Laws. The Lowest Cost Response shall include taking no action, leaving the condition unaddressed, periodic monitoring or the recording of notices in lieu of remediation, if such responses are allowed under Environmental Laws.

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“Material Adverse Effect” means any adverse effect on the ownership, operation or value of the Assets, as currently operated, which is material to the ownership, operation or value of the Assets, taken as a whole; provided, however, that “Material Adverse Effect” shall not include any material adverse effects resulting from: (a) changes in, or conditions affecting, the economy or financial markets in the United States or any other country or region in the world; (b) changes in, or conditions affecting, the oil and gas industry, including changes in the prices of Hydrocarbons; (c) acts or failures to act by any Governmental Body; (d) hostilities, acts of war, sabotage, terrorism, military actions or other similar events or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway as of the date hereof; (e) natural disasters, including earthquakes, hurricanes, tornados, wild fires, floods, mud slides, tsunamis, storms and other similar force majeure events; (f) changes in Laws, generally accepted accounting principles or in regulatory policies or, in each case, interpretations thereof from and after the date of this Agreement; (g) entering into this Agreement or the announcement of the transactions contemplated by this Agreement; (h) any failure by any Person to meet any of its financial projections, forecasts, budgets or estimates, provided that the exception in this clause shall not prevent or otherwise affect a determination that any change, effect, event, matter or circumstance underlying such failure has resulted in, or contributed to, a Material Adverse Effect; (i) matters that are cured or no longer exist by the earlier of the Closing and the termination of this Agreement, without cost to Purchaser; (j) reclassification or recalculation of reserves in the ordinary course of business; and (k) natural declines in well performance.

“NASDAQ” has the meaning set forth in Section 6.12(c).

“Non-Recourse Parties” has the meaning set forth in Section 12.17.

“Net Revenue Interest” has the meaning set forth in Section 3.2(a)(i).

“NORM” means naturally occurring radioactive material.

“Other Investments” has the meaning set forth in Section 12.17.

“Party” or “Parties” has the meaning set forth in the Preamble to this Agreement.

“Permitted Encumbrances” has the meaning set forth in Section 3.3.

“Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, government or agency or subdivision thereof or any other entity.

“Post-Effective Time Tax Advances” has the meaning set forth in Section 7.8(e).

“Preliminary Settlement Statement” has the meaning set forth in Section 9.4(a).

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“Properties” and “Property” have the meanings set forth in Section 1.2(c).

“Property Costs” has the meaning set forth in Section 1.4(c).

“Purchaser” has the meaning set forth in the Preamble to this Agreement.

“Purchaser Indemnitees” means Purchaser, its Affiliates, and the officers, directors, managers, members, stockholders, general or limited partners, employees, agents, representatives, advisors, subsidiaries, successors and assigns of Purchaser or its Affiliates.

“Purchaser Credit” has the meaning set forth in Section 9.4(a).

“Records” has the meaning set forth in Section 1.2(k).

“Registration Rights Agreement” means a registration rights agreement substantially in the form attached hereto as Exhibit D.

“Reports” has the meaning set forth in Section 6.15(a).

“Required Consent” means a consent by a third party that, if not obtained prior to the assignment by Seller of a Lease or Well, either (a) makes the Conveyance with respect to such Asset void or voidable or (b) terminates Seller’s interest in the Asset subject to such consent.

“Schedule Supplement” has the meaning set forth in Section 5.1(e).

“SEC” has the meaning set forth in Section 6.15(a).

“Securities Act” has the meaning set forth in Section 5.17.

“Seller” has the meaning set forth in the first paragraph of this Agreement.

“Seller Credit” has the meaning set forth in Section 9.4(a).

“Seller Indemnitees” shall mean Seller, its Affiliates, and the officers, directors, managers, members, stockholders, general or limited partners, coventurers, employees, agents, representatives, advisors, subsidiaries, successors and assigns of Seller or its Affiliates.

“Seller Indemnity Obligations” has the meaning set forth in Section 11.2(c).

“Seller Operated Assets” shall mean Assets operated by Seller or its Affiliates as of the date of this Agreement.

“Shares” has the meaning set forth in Section 6.12(a).

“Share Price” has the meaning set forth in Section 2.1.

“Shortfall Share Amount” shall mean a number (rounded to the nearest whole number) of Shares determined by dividing (i) the Purchaser Credit by (ii) the Share Price.

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“Shortfall Cash Amount” shall mean an amount calculated by multiplying (i) the number of Shares by which the Shortfall Share Amount exceeds the Consideration Shares by (ii) the Share Price.

“Special Warranty” has the meaning set forth in Section 7.9(a).

“Special Warranty Notice” has the meaning set forth in Section 7.9(b).

“Stock Consideration” has the meaning set forth in Section 2.1.

“Surface Contracts” has the meaning set forth in Section 1.2(e).

“Surface Deed” means a surface deed conveying the surface property set forth on Exhibit A-2 in substantially the form of Exhibit E.

“Survival Period” has the meaning set forth in Section 7.9(b).

“Suspended Proceeds” has the meaning set forth in Section 7.10.

“Tax Audit” has the meaning set forth in Section 7.8(d).

“Tax Returns” has the meaning set forth in Section 5.8.

“Taxes” means all federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, or withholding Taxes or other governmental fees or charges imposed by any taxing authority, including any interest, penalties or additional amounts which may be imposed with respect thereto.

“Third Party Claim” has the meaning set forth in Section 11.3(b).

“Title Arbitrator” has the meaning set forth in Section 3.4(h).

“Title Benefit” has the meaning set forth in Section 3.2(b).

“Title Benefit Amount” has the meaning set forth in Section 3.4(g).

“Title Benefit Notice” has the meaning set forth in Section 3.4(b).

“Title Benefit Property” has the meaning set forth in Section 3.4(b).

“Title Claim Date” has the meaning set forth in Section 3.4(a).

“Title Defect” has the meaning set forth in Section 3.2(c).

“Title Defect Amount” has the meaning set forth in Section 3.4(f).

“Title Defect Notice” has the meaning set forth in Section 3.4(a).

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“Title Defect Property” has the meaning set forth in Section 3.4(a).

“Transfer Taxes” has the meaning set forth in Section 7.11.

“Unadjusted Purchase Price” has the meaning set forth in Section 2.1.

“Units” has the meaning set forth in Section 1.2(c).

“Wells” has the meaning set forth in Section 1.2(b).

“Working Interest” has the meaning set forth in Section 3.2(a)(ii).

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IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties on the date first above written.

SELLER
BATTLECAT OIL & GAS, LLC
By:	/s/ Kurt von Plonski
Name:	Kurt von Plonski
Title:	Co-Chief Executive Officer

[Signature Page to Purchase and Sale Agreement]

PURCHASER
LONESTAR RESOURCES US, INC.
By:	/s/ Frank D. Bracken, III
Name:	Frank D. Bracken, III
Title:	Chief Executive Officer

[Signature Page to Purchase and Sale Agreement]

EX-2.2

Exhibit 2.2

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

SN MARQUIS LLC,

as Seller

AND

LONESTAR RESOURCES US, INC.

as Buyer

Dated May 26, 2017

MARQUIS ASSETS SALE

FAYETTE, GONZALES AND LAVACA COUNTIES, TEXAS

TABLE OF CONTENTS

List of Exhibits
Exhibit A	Leases
Exhibit A-1	Target Formation Log
Exhibit B	Wells
Exhibit C	Form of Assignment
Exhibit D	Form of Affidavit of Non-Foreign Status
Exhibit E	Excluded Assets
Exhibit F	Form of Registration Rights Agreement
List of Schedules
Schedule 1.1(a)	Buyer’s Knowledge Representatives
Schedule 1.1(b)	Seller’s Knowledge Representatives
Schedule 4.1(c)(14)	Balancing Obligations
Schedule 6.3	Conflicts
Schedule 6.5	Consents
Schedule 6.6	Preferential Rights
Schedule 6.9	Litigation
Schedule 6.10	Material Agreements
Schedule 6.11	AFEs
Schedule 6.12	Taxes
Schedule 6.14	Compliance with Laws and Governmental Authorizations
Schedule 6.15	Environmental Matters
Schedule 6.17	Well Status and Abandonments
Schedule 6.18	Bonds and Credit Support
Schedule 6.19	Suspense Funds
Schedule 6.20	Imbalances
Schedule 6.21	Insurance
Schedule 6.22	Royalties
Schedule 6.23	Non-Consent Operations
Schedule 6.24	Undeveloped Leases
Schedule 7.14(a)	Buyer Capitalization Disclosure Schedule
Schedule 8.1	Conduct of Business

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (the “Agreement”), is dated this 26th day of May, 2017 (the “Execution Date”), by and between SN Marquis LLC, a Delaware limited liability company, (“Seller”), and Lonestar Resources US, Inc., a Delaware Corporation, (“Buyer”). Buyer and Seller are collectively referred to herein as the “Parties” and individually as, a “Party”.

RECITALS

WHEREAS, Seller owns certain oil and gas interests and associated assets located in Fayette, Gonzales and Lavaca Counties, Texas (collectively, as more fully defined in Section 1.1 the “Assets”); and

WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Assets upon the terms and conditions set forth in this Agreement.

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

ARTICLE 1

DEFINITIONS AND REFERENCES

1.1    Certain Defined Terms. Capitalized terms used herein and not otherwise defined herein have the respective meanings assigned to them in this Section 1.1:

“AAA” means the American Arbitration Association.

“Accounting Expert” has the meaning set forth in Section 13.1(b).

“AFE” has the meaning set forth in Section 6.11.

“Affected Asset” has the meaning set forth in Section 4.4(b)(1).

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of the immediately preceding sentence, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Aggregate Defect Deductible” means 3.0% of the unadjusted Purchase Price.

“Agreement” has the meaning set forth in the Preamble.

“Allocated Value” has the meaning set forth in Section 2.3(a).

“Applicable Contracts” means those Contracts to which Seller is a party or is bound, that relate to the Assets and that will be binding on Buyer or any of the Assets following Closing, only to the extent they relate to the Assets.

“Asset Taxes” means all ad valorem, property, production, excise, severance and all other similar Taxes assessed against the Assets or based on or measured by the value or ownership of the Assets, or the production of Hydrocarbons or the receipt of proceeds therefrom (but, for the avoidance of doubt, shall not include income, franchise or similar Taxes or Subject Transfer Taxes).

“Assets” means all of Seller’s right, title, and interest in and to the following (but specifically excluding the Excluded Assets):

(a)    (1) those oil, gas and mineral leases and fee mineral interests described in Exhibit A (collectively, the “Leases”), including all leasehold estates, royalty interests, overriding royalty interests, net profits interests, or similar interests associated with such oil, gas and mineral leases and fee mineral interests and (2) the lands covered by the Leases and all lands pooled, communitized or unitized with the lands covered by the Leases (collectively, the “Lands”);

(b)    the Hydrocarbons under the Lands and that may be produced and saved under or otherwise be allocated or attributed to the Lands;

(c)    the oil, gas, water, injection or disposal wells located on the Lands, whether producing, shut-in, or temporarily or permanently abandoned, including those described in Exhibit B (the “Wells” and, together with the Leases and Lands, the “Properties”);

(d)    all equipment, machinery, fixtures and other tangible personal property and improvements located on the Lands or primarily used or primarily held for use in connection with the operation of the Properties or the production, gathering, treatment, processing, storage, sale, disposal and other handling of Hydrocarbons attributable thereto, including any tanks, boilers, buildings, fixtures, injection facilities, saltwater disposal facilities, compression facilities, pumping units and engines, flow lines, pipelines, gathering systems, gas and oil treating facilities, the Control Systems, machinery, roads, and other appurtenances, improvements and facilities (all of the foregoing, excluding the Wells, collectively “Equipment”);

(e)    all surface leases, rights-of-way, licenses, easements and other surface rights agreements primarily used or primarily held for use in connection with the production, gathering, treatment, processing, storage, sale, disposal and other handling of Hydrocarbons or produced water from the Properties (collectively, the “Surface Contracts”);

(f)    all existing and effective Applicable Contracts, including purchase contracts, joint operating agreements, exploration agreements, development agreements, unitization agreements, unit operating agreements, balancing agreements, farmout agreements, drilling contracts, service agreements, transportation, processing, treatment or gathering agreements, equipment leases, other leases of personal property and other contracts, agreements and instruments;

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(g)    originals (to the extent in Seller’s possession) or copies of all files, records, and data relating to the Assets described in clauses (a) through (f) above, which records shall include: lease records; well records; division order records; well files; title records (including abstracts of title, title opinions and memoranda, and title curative documents); engineering records; geological and geophysical data (including seismic data) and all technical evaluations, interpretive data and technical data and information relating to the other Assets; maps; production records; electric logs; core data; pressure data; decline curves and graphical production curves; reserve reports; appraisals, joint interest billing decks and other partner details, lease operating statements and Asset Tax records; provided, however, that (1) those items referenced above in this sub-section (g) that are subject to a valid legal privilege or to disclosure or transfer restrictions owing by Seller to a Third Party, (2) those items referenced above in this sub-section (g) that are not transferable without payment of additional consideration (and Buyer has not agreed in writing to pay such additional consideration), and (3) all e-mails and other electronic files on Seller’s servers and networks relating to the foregoing items referenced in this sub-section (g) in each case, shall be excluded (the foregoing items, taking into account the exclusions listed above, collectively, the “Records”);

(h)    to the extent assignable, all Governmental Authorizations primarily used or primarily held for use in connection with the production, gathering, treatment, processing, storage, sale, disposal and other handling of Hydrocarbons or produced water from the Properties; and

(i)    to the extent assignable without the payment of fees or other penalties, unless Buyer has agreed in writing to pay the same, all geophysical and other seismic and related technical data and information primarily relating to the Properties.

“Assignment” has the meaning set forth in Section 12.3(a).

“Assumed Liabilities” has the meaning set forth in Section 14.1.

“Business Day” means a day other than a Saturday, Sunday or a day on which commercial banks in Houston, Texas are authorized or required by applicable Law to be closed for business.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Indemnified Parties” has the meaning set forth in Section 14.2(a).

“Buyer Taxes” means (a) all Subject Transfer Taxes, (b) all Taxes imposed on or asserted against Buyer in respect of its business or the acquisition of the Assets for any taxable period or portion thereof, whether before or after the Closing Date, (c) all Asset Taxes for any taxable period or portion thereof on and after the Effective Time, and (d) all other Taxes to the extent attributable to the obligations of Buyer hereunder.

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“Buyer’s Knowledge” means the actual knowledge, without any obligation of investigation or inquiry, of those Persons listed on Schedule 1.1(a).

“Buyer Material Adverse Effect” shall mean any Event, when taken together with other Events, that, individually or in the aggregate: (a) is, or is reasonably likely to become, materially adverse to the business, assets, financial condition, properties, liabilities or results of operations of the Buyer and its subsidiaries, taken as a whole; provided, however, that none of the following Events shall be deemed to constitute, and none of the following Events shall be taken into account in determining whether there has been, a “Buyer Material Adverse Effect”: (1) national, international, regional or local business, economic or political conditions, including the engagement by the United States of America in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States of America or any of its respective territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States of America; (2) events affecting the financial, banking or securities markets (including any disruption thereof or any decline in the price of securities or any market or index); (3) conditions (or changes in such conditions) generally affecting the oil and gas and/or gathering, processing or transportation industry whether as a whole or specifically in any area or areas where the Assets are located; (4) increases in energy, electricity, natural gas, oil, or other raw materials or operating costs; (5) changes or reinterpretations in GAAP or Law; (6) the taking of any action required by this Agreement; (7) changes as a result of the negotiation, announcement, execution or performance of this Agreement; (8) changes in prices of Hydrocarbons, including changes in price differentials; (9) orders, actions or inactions of any Governmental Entity; (10) earthquakes, hurricanes, floods, or other natural disasters.

“Cap” has the meaning set forth in Section 14.2(c)(2).

“Cash Consideration” has the meaning set forth in Section 2.2.

“Casualty Loss” has the meaning set forth in Section 8.3(b).

“Claim” means any claim, demand, cause of action, petition or similar notice.

“Claim Notice” has the meaning set forth in Section 14.3(a).

“Class A Common Stock” has the meaning set forth in Section 7.14(a).

“Class B Common Stock” has the meaning set forth in Section 7.14(a).

“Closing” has the meaning set forth in Section 12.1.

“Closing Amount” means the Preliminary Purchase Price, less the Performance Deposit.

“Closing Date” has the meaning set forth in Section 12.1.

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

“Condition” has the meaning set forth in Section 5.1(a).

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“Confidential Information” has the meaning set forth in Section 8.2(d).

“Consent” has the meaning set forth in Section 6.5.

“Contract” means any written contract or agreement, including farmin and farmout agreements; participation, exploration and development agreements; drilling contracts and service agreements; crude oil, condensate and natural gas purchase and sale, gathering, transportation and marketing agreements; joint operating agreements; balancing agreements; unitization agreements; unit operating agreements; processing agreements; facilities or equipment leases; and other similar Contracts, but excluding, however, master service agreements and any other blanket contracts, the Surface Contracts, the Leases and any other instrument creating or evidencing any real property included in Assets.

“Control Systems” means equipment, software licenses, communication equipment, computer hardware, computer software, servers, networks, network connections, Distributed Control System (DCS) equipment, Programmable Logic Controllers (PLC) and other associated equipment, to the extent, and only to the extent, the same are used primarily as part of the process control and safety system of the production facilities included in the Assets, including, for the avoidance of doubt, SCADA systems and the supporting equipment required to operate SCADA systems, but excluding any licenses required to be obtained from any Governmental Entity for the operation of any of the foregoing or any software proprietary to Seller or its Affiliates being used with the Control Systems.

“Cure Period” has the meaning set forth in Section 4.2(i).

“Customary Post-Closing Consents” means the consents, approvals and authorizations for the assignment of the Assets to another Person that are customarily obtained after the assignment of properties similar to the Assets, including consents, approvals and authorizations, the failure of which to have would not (i) cause the assignment of the Assets affected thereby to Buyer to be void, (ii) give the holder of such consent, authorization or approval the right to terminate the applicable underlying contract, agreement or other instrument under the express terms thereof or (iii) give the holder of such consent, authorization or approval a Claim for liquidated damages pursuant to the express terms of the applicable underlying contract, agreement or other instrument.

“Deductible” has the meaning set forth in Section 14.2(c)(1).

“Defect Notice Date” means 5:00 p.m. Central Time on the date that is 17 days after the first Business Day after the Execution Date.

“Defensible Title” has the meaning set forth in Section 4.1(b).

“Dispute” means any dispute, claim or controversy of any kind or nature related to, arising under, or connected with this Agreement or the transactions contemplated hereby (including disputes as to the creation, validity, interpretation, breach or termination of this Agreement).

“DOJ” means the U.S. Department of Justice.

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“Due Diligence Period” has the meaning set forth in Section 3.1.

“Due Diligence Review” has the meaning set forth in Section 3.1.

“Effective Time” means January 1, 2017, at 12:01 a.m. local time where the Assets are located.

“Environment” has the meaning set forth in Section 5.1(b).

“Environmental Adjustment Amount” has the meaning set forth in Section 5.3(c).

“Environmental Assessment” has the meaning set forth in Section 3.3(a).

“Environmental Defect” has the meaning set forth in Section 5.1(c).

“Environmental Defect Expert” has the meaning set forth in Section 5.3(f)(1).

“Environmental Defect Notice” has the meaning set forth in Section 5.3(a).

“Environmental Defect Property” has the meaning set forth in Section 5.3(a).

“Environmental Defect Value” has the meaning set forth in Section 5.3(a).

“Environmental Disputed Matters” has the meaning set forth in Section 5.3(f).

“Environmental Dispute Notice” has the meaning set forth in Section 5.3(f).

“Environmental Law” has the meaning set forth in Section 5.1(d).

“Environmental Liabilities” has the meaning set forth in Section 5.1(e).

“Equipment” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Event” has the meaning set forth in Section 1.1 under the defined term “Material Adverse Effect”.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” means (a) (1) all corporate, financial, income, Tax, legal and other records of Seller that relate to Seller’s business generally (whether or not relating to the Assets) and (2) all books, files and other records that relate to the Excluded Assets (whether or not also relating to any Asset); (b) all rights to any refunds for Taxes or other costs or expenses borne by Seller or Seller’s predecessors in interest and attributable to periods prior to the Effective Time in accordance with the principles of Section 9.1; (c) all production, trade credits, all accounts, receivables, note receivables, take or pay amounts receivable, other receivables, proceeds, income or revenues attributable to the Assets with respect to any period of time prior to the Effective Time; (d) any refunds due Seller by a Third Party for any overpayment of rentals, royalties, production payments or other amounts attributable to the Assets with respect to any period of time prior to the Effective Time; (e) any causes of action, claims and other rights

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(including for indemnification and defense) of Seller to the extent arising prior to the Effective Time; (f) all of Seller’s motor vehicles, trailers and associated personal property; (g) all of Seller’s radio equipment and associated licenses, other than the Control Systems; (h) all of Seller’s computers, computer hardware, software, servers, networks and network connections and associated information technology equipment, other than the Control Systems; (i) all of Seller’s proprietary technology, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property; (j) all data and Contracts that cannot be disclosed to Buyer as a result of confidentiality arrangements under agreements with Third Parties (provided that Seller shall use commercially reasonable efforts to obtain a waiver from such Third Party to disclose such data or Contract); (k) all geophysical and other seismic and related technical data and information primarily relating to the Properties to the extent that such geophysical and other seismic and related technical data and information is not transferable without payment of a fee or other penalty (unless Buyer agrees in writing to pay such fee or penalty); (l) office leases; and (m) those Contracts and other assets described on Exhibit E.

“Execution Date” has the meaning set forth in the Preamble.

“Final Purchase Price” has the meaning set forth in Section 13.1(a).

“Final Section 1060 Allocation Schedule” has the meaning set forth in Section 2.3(b).

“Final Settlement Date” has the meaning set forth in Section 13.1(a).

“Final Settlement Statement” has the meaning set forth in Section 13.1(a).

“Final Settlement Statement Due Date” has the meaning set forth in Section 13.1(a).

“FTC” means the Federal Trade Commission.

“Fundamental Representations” means the representations and warranties of (a) Seller contained in Section 6.1, Section 6.2, Section 6.4, Section 6.7, Section 6.12 and Section 6.13, and (b) Buyer contained in Section 7.1, Section 7.2, Section 7.4, Section 7.6, Section 7.9 and Section 7.10.

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

“Governing Documents” means the documents governing the formation and internal operation of a Person, including (a) in the instance of a corporation, the articles/certificate of incorporation and bylaws of such corporation, and (b) in the instance of a limited liability company, the certificate of formation and limited liability company agreement of such limited liability company.

“Governmental Authorizations” means any federal, state or local governmental license, permit, franchise, order, exemption, variance, waiver, authorization or certificate, or any application therefor.

“Governmental Entity” means any instrumentality, subdivision, court, administrative agency, commission, official or other authority of the United States or any other country or any

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state, province, prefect, municipality, locality or other government or political subdivision thereof, or any quasi-governmental or private body exercising any administrative, executive, judicial, legislative, police, regulatory, taxing, importing or other governmental or quasi-governmental authority.

“Hazardous Materials” has the meaning set forth in Section 5.1(f).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Hydrocarbons” means oil, gas, casinghead gas, coal bed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof.

“Imbalances” means, with respect to the Assets, any imbalance at (a) the wellhead between (1) the amount of Hydrocarbons produced from any of the Wells and allocated to the interests of Seller therein and (2) the shares of production from the relevant Well to which Seller was entitled, or (b) the pipeline flange (or inlet flange at a processing plant or similar location) between (1) the amount of Hydrocarbons nominated by or allocated to Seller and (2) the Hydrocarbons actually delivered on behalf of Seller.

“Indemnified Party” has the meaning set forth in Section 14.3(a).

“Indemnifying Party” has the meaning set forth in Section 14.3(a).

“Individual Environmental Threshold” has the meaning set forth in Section 5.3(b).

“Individual Title Threshold” has the meaning set forth in Section 4.2(f).

“Lands” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Law” means any statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ, injunction, or decree of any Governmental Entity.

“Leases” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Legal Right” means, to the extent arising from, or in any way related to the Assets, the legal authority and right, including through the exercise of voting, managerial or other similar authority or right, if any; provided, however, that a Legal Right shall be deemed not to exist with respect to any contemplated conduct unless Seller reasonably determines that such conduct would not constitute a violation, termination or breach of, or require any payment under, or permit any termination under, any Contract, applicable Law, duty or any other obligation.

“Lien” means any of the following: mortgage, lien (statutory or other), other security agreement or interest, hypothecation, pledge or other deposit arrangement, charge, levy, executory seizure, attachment, garnishment, encumbrance (including any easement, exception, reservation or limitation), conditional sale, title retention or other similar agreement, preemptive or similar right, or any option; provided, however, that the term “Lien” shall not include any of the foregoing to the extent created by this Agreement.

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“Losses” has the meaning set forth in Section 14.2.

“Material Adverse Effect” means, any state of facts, change, event, effect or occurrence (each, an “Event”), when taken together with all other Events, that has a material adverse effect on (a) the ability of Seller to consummate the transactions contemplated by this Agreement or (b) the ownership or operation condition of the Assets (as currently owned and operated), taken as a whole; provided, however, that none of the following Events shall be deemed to constitute, and none of the following Events shall be taken into account in determining whether there has been, a “Material Adverse Effect”: (1) national, international, regional or local business, economic or political conditions, including the engagement by the United States of America in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States of America or any of its respective territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States of America; (2) events affecting the financial, banking or securities markets (including any disruption thereof or any decline in the price of securities or any market or index); (3) conditions (or changes in such conditions) generally affecting the oil and gas and/or gathering, processing or transportation industry whether as a whole or specifically in any area or areas where the Assets are located; (4) increases in energy, electricity, natural gas, oil, or other raw materials or operating costs; (5) changes or reinterpretations in GAAP or Law; (6) the taking of any action required by this Agreement; (7) changes as a result of the negotiation, announcement, execution or performance of this Agreement, including by reason of the identity of Buyer or any communication by Buyer or any of its Affiliates of their plans or intentions regarding the operation of the Assets; (8) any actions taken or omitted to be taken by or at the request or with the written consent of Buyer; (9) changes in prices of Hydrocarbons, including changes in price differentials; (10) effects or changes that are cured or no longer exist by the earlier of the Closing or the termination of this Agreement pursuant to ARTICLE 11; (11) the exercise of a preferential right or failure to obtain a consent, approval or authorization affecting any of the Assets; (12) reclassifications or recalculations of reserves in the ordinary course of business; (13) natural declines in well performance; (14) earthquakes, hurricanes, floods, or other natural disasters;or (15) orders, actions or inactions of any Governmental Entity.

“Material Agreements” has the meaning set forth in Section 6.10(a).

“Net Imbalance” means an amount equal to (a) the sum of all Imbalances attributable to (1) Seller being underproduced with respect to any Well or (2) having overdelivered with respect to any Applicable Contract minus (b) the sum of all Imbalances attributable to (1) Seller being overproduced with respect to any Well or (2) having underdelivered with respect to any Applicable Contract.

“Net Revenue Interest” means, with respect to any Person, the interest of such Person in and to the Hydrocarbons produced and saved from, or otherwise attributable to, a Lease or Well, as applicable, after satisfaction of all royalties, overriding royalties, net profits interests and other similar burdens on or measured by production of Hydrocarbons therefrom.

“Notice of Defective Interests” has the meaning set forth in Section 4.2(c).

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“Outside Termination Date” means June 30, 2017.

“Party” or “Parties has the meaning set forth in the Preamble.

“Per Item Threshold” has the meaning set forth in Section 14.2(c)(1).

“Performance Deposit” has the meaning set forth in Section 2.2(a).

“Permitted Encumbrances” has the meaning set forth in Section 4.1(c).

“Person” means any individual or entity, including any corporation, limited liability company, partnership (general or limited), joint venture, association, joint stock company, trust, unincorporated organization or Governmental Entity.

“Phase I Environmental Site Assessment” means an environmental site assessment performed pursuant to the American Society for Testing and Materials E1527 - 05, or any similar environmental assessment.

“Plugging and Abandonment Obligations” has the meaning set forth in Section 5.1(g).

“Policies” has the meaning set forth in Section 6.21.

“Preferential Right” has the meaning set forth in Section 6.6.

“Preliminary Purchase Price” has the meaning set forth in Section 2.5.

“Preliminary Settlement Statement” has the meaning set forth in Section 2.5.

“Properties” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Property Expenses” has the meaning set forth in Section 2.4(b).

“Property Taxes” has the meaning set forth in Section 9.1.

“Property Valuation Expert” has the meaning set forth in Section 2.3(b).

“Proposed Section 1060 Allocation Schedule” has the meaning set forth in Section 2.3(b).

“Purchase Price” has the meaning set forth in Section 2.2.

“Records” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Registration Rights Agreement” means the Registration Rights Agreement to be entered into on the Closing Date between Seller and Buyer substantially in the form attached as Exhibit F hereto.

“Remediation” or “Remediate” has the meaning set forth in Section 5.1(h).

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“Representatives” means, with respect to each Party, such Party’s Affiliates and such Party’s and such Party’s Affiliates’ respective directors, officers, members, employees, agents, brokers, accountants, consultants, financial advisors, counsel, financing sources and other representatives.

“Retained Obligation” has the meaning set forth in Section 14.2(a).

“SEC” means the United States Securities and Exchange Commission.

“SEC Reports” has the meaning set forth in Section 7.15.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” has the meaning set forth in the Preamble.

“Seller Designee” has the meaning set forth in Section 12.3(e).

“Seller Indemnified Parties” has the meaning set forth in Section 14.2(b).

“Seller Taxes” means (a) all Taxes (other than Asset Taxes and Subject Transfer Taxes) imposed on or asserted against Seller in respect of its business or the disposition of the Assets for any taxable period or portion thereof, whether before or after the Closing Date, (b) all Asset Taxes for any taxable period or portion thereof ending immediately prior to the Effective Time, and (c) all other Taxes to the extent attributable to the obligations of Seller hereunder.

“Seller Transaction Costs” means all fees, costs and expenses of any brokers, financial advisors, consultants, accountants, attorneys or other professionals payable by Seller in connection with the structuring, negotiation or consummation of the transactions contemplated by this Agreement.

“Seller’s Knowledge” means the actual knowledge, without any obligation of investigation or inquiry, of the Persons listed on Schedule 1.1(b).

“Share Consideration” has the meaning set forth in Section 2.2.

“Subject Transfer Taxes” has the meaning set forth in Section 9.2.

“Surface Contracts” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Target Formation” means (a) with respect to a Well, the currently producing interval of such Well and (b) for all other purposes, the stratigraphic equivalent of that geological formation found in the Prost G Unit 5H Well (API # 42-285-33732) located in Lavaca County, Texas, with a top at 10,977’ and base at 11,079’, as shown on the log display attached as Exhibit A-1, recognizing that the depth of such formation will vary across the area in which the Assets are located.

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

“Tax Claim” has the meaning set forth in Section 13.4(a).

“Tax Partnership” has the meaning set forth in Section 6.13.

“Tax Proceeding” has the meaning set forth in Section 9.4.

“Tax Return” means any return, report or similar statement required to be filed with respect to any Taxes (including any attached schedules), including any information return, claim for refund, amended return and declaration of estimated Tax.

“Third Party” means any Person other than the Parties and their respective Affiliates.

“Third Party Claim” has the meaning set forth in Section 14.3(b).

“Third Party Proprietary Data” means all geological, geophysical, technical and other proprietary data and information, including as may be covered by any patent or other intellectual property right, that is owned or otherwise held by a Third Party and licensed to Seller, with no rights to transfer or disclose same to Buyer.

“Title Adjustment Amount” has the meaning set forth in Section 4.2(h).

“Title Benefit” has the meaning set forth in Section 4.2(b).

“Title Benefit Amount” has the meaning set forth in Section 4.2(g).

“Title Benefit Notice” has the meaning set forth in Section 4.2(d).

“Title Benefit Property” has the meaning set forth in Section 4.2(d).

“Title Defect” has the meaning set forth in Section 4.2(a).

“Title Defect Amount” has the meaning set forth in Section 4.2(e).

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“Title Defect Expert” has the meaning set forth in Section 4.3(a).

“Title Defect Property” has the meaning set forth in Section 4.2(c).

“Title Dispute Notice” has the meaning set forth in Section 4.3.

“Title Disputed Matter” has the meaning set forth in Section 4.3.

“Total Defect Amount” has the meaning set forth in Section 4.2(f).

“Wells” has the meaning set forth in Section 1.1 under the defined term “Assets.”

“Working Interest” means, with respect to any Person, the percentage of the costs and expenses to be borne by such Person for the maintenance, development and operation of a Lease or Well without regard to the effect of any and all royalties, overriding royalties, net profits interests and other similar burdens on or measured by production.

1.2    References, Construction and Joint Drafting.

(a)    References and Construction. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference will be to an Article, Section, Exhibit or Schedule to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” Unless the context otherwise requires, (1) words, terms and titles (including terms defined herein) in the singular include the plural and vice versa, (2) the words “herein,” “hereof,” “hereby,” “hereunder” and words of similar nature refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited, (3) the words “this Article,” “this Section” and “this subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur, (4) each accounting term not defined herein will have the meaning given to it under GAAP, (5) the use in this Agreement of a pronoun in reference to a Party hereto includes the masculine, feminine or neuter, as the context may require, (6) all references to “$” shall be deemed references to United States Dollars, (7) the headings of the Articles and Sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement, (8) the words “shall” and “will” are used interchangeably throughout this Agreement and shall accordingly be given the same meaning, regardless of which word is used, and (9) except as expressly provided otherwise in this Agreement, references to any Law or agreement means such Law or agreement as it may be amended from time to time.

(b)    Joint Drafting. The Parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties, and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

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ARTICLE 2

PURCHASE AND SALE

2.1    Purchase and Sale. Subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Seller at Closing, and Seller agrees to sell, assign and deliver to Buyer at Closing, the Assets for the consideration specified in this ARTICLE 2.

2.2    Purchase Price. The unadjusted purchase price for the Assets shall consist of (i) $50,000,000.00 in cash (the “Cash Consideration”), plus (ii) one million five hundred thousand (1,500,000) shares of Class A Common Stock in Buyer (the “Share Consideration”); the Cash Consideration and the Share Consideration together being the “Purchase Price”. For purposes of calculating the dollar amount of the Performance Deposit, Aggregate Defect Deductible and Allocated Values, the Share Consideration component of the Purchase Price shall be equal to one million five hundred thousand (1,500,000) multiplied by the closing price of the Class A Common Stock as reported by NASDAQ two (2) Business Days prior to the Execution Date. The Purchase Price shall be payable as follows:

(a)    On the date that this Agreement is fully executed by all Parties, Buyer shall pay, by wire transfer of immediately available funds to Seller’s designated account, an amount equal to 10% of the unadjusted Purchase Price (the “Performance Deposit”). The Performance Deposit shall be held by Seller in accordance with this Agreement in order to secure Buyer’s performance of this Agreement. All interest earned on the Performance Deposit shall be retained by Seller. For avoidance of doubt, this Agreement shall not be binding or effective until the Performance Deposit has been received by Seller.

(b)    At Closing, Buyer shall (i) pay to Seller the Closing Amount by wire transfer of immediately available funds to Seller’s designated account, and (ii) deliver to Seller the Share Consideration in book entry to Seller’s designated account in the name of Sanchez Energy Corporation.

(c)    After Closing, final adjustments to the Purchase Price shall be made (1) pursuant to the Final Settlement Statement to be delivered pursuant to Section 13.1(a) and the payments made by the owing Party as provided in Section 13.1(a), and (2) upon final resolution of any Title Disputed Matters and any Environmental Disputed Matters, in accordance with ARTICLE 4 and ARTICLE 5, respectively.

2.3    Allocation of the Purchase Price.

(a)    Solely for the purposes of ARTICLE 4 and ARTICLE 5, Buyer and Seller have agreed upon an allocation of the Purchase Price among (1) the Leases as set forth as part of Exhibit A and (2) the Wells as set forth as part of Exhibit B (collectively, the “Allocated Values”). Any adjustments to the Purchase Price, other than the adjustments provided for in Section 2.4, shall be applied on a pro rata basis to the amounts set forth on Exhibit A and Exhibit B, as applicable, for all Assets. After all such adjustments are made, any adjustments to the Purchase Price made pursuant to Section 2.4 shall be applied to the amounts set forth on Exhibit A and Exhibit B, as applicable, for the particular affected Assets. Seller makes no representation or warranty as to the accuracy of such Allocated Values.

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(b)    Seller may (but is not obligated to) prepare an allocation of the Final Purchase Price, as adjusted pursuant to ARTICLE 13, on a Schedule (the “Proposed Section 1060 Allocation Schedule”) for purposes of, and in accordance with, Section 1060 of the Code and the regulations promulgated thereunder, within 30 days after the Final Settlement Date. Within 60 days after delivery of such Proposed Section 1060 Allocation Schedule, if so prepared by Seller in accordance with the preceding sentence, Buyer and Seller shall reasonably endeavor to agree to a final allocation Schedule to be used for income Tax reporting purposes (the “Final Section 1060 Allocation Schedule”); provided that if the Parties are unable to reach agreement within such 60-day period, then, immediately after the expiration of such period, either Party may invoke the Dispute resolution provisions immediately below upon the delivery of written notice thereof to the other Party and, within ten days thereafter, the Parties shall mutually appoint an independent expert having the qualifications specified below (the “Property Valuation Expert”), failing which the Parties shall, within ten days after the expiration of such foregoing ten day period, request (and either Party may so request alone if the other Party refuses to jointly act in good faith to do so during such ten day period) that the AAA, acting through its offices in Houston, Texas, appoint the Property Valuation Expert. The Property Valuation Expert shall be a licensed petroleum engineer, having a minimum of ten years’ experience with regard to the types of oil and assets involved in the Proposed Section 1060 Allocation Schedule Dispute, shall be without any conflicts of interest as to the Parties, and shall not have been employed by or undertaken more than $50,000 of work, in the aggregate, for any Party (including its Affiliates) within the five year period preceding the submission of the Dispute. Within 15 days following the appointment of the Property Valuation Expert, Seller and/or Buyer shall provide the Property Valuation Expert with a copy of this Agreement, and each Party shall provide, both to the Property Valuation Expert and to each other, a summary of its position with regard to the Proposed Section 1060 Allocation Schedule in a written document of ten pages or less. The Parties shall instruct the Property Valuation Expert that, within 30 days after receiving the last of the Parties’ respective submissions or the expiration of such 15 day period if either Party fails to make a submission, the Property Valuation Expert shall render a written decision, choosing only either Buyer’s position or Seller’s position with respect to each Disputed matter. Any decision rendered by the Property Valuation Expert pursuant hereto shall be final, conclusive and binding on Seller and Buyer, and will be enforceable against each Party in any court having jurisdiction hereof or jurisdiction of either or both Parties, but is not reviewable by, or appealable to, any court except in the event of fraud. The Parties shall each bear one-half of the costs of the Property Valuation Expert and of the associated Dispute resolution process and proceedings, except the Parties shall each bear its own legal fees with respect to any Dispute. In the case of such a Dispute resolution process regarding Seller’s Proposed Section 1060 Allocation Schedule Dispute, Seller will issue the Final Section 1060 Allocation Schedule consistent with the Property Valuation Expert’s decision, within 30 days after receiving the Property Valuation Expert’s decision with respect thereto. For the avoidance of doubt, the Property Valuation Expert will function as an expert in accordance with the foregoing procedure, not as an arbitrator. Seller and Buyer shall file all Tax Returns (including Internal Revenue Service Form 8594) consistent with any such Final Section 1060 Allocation Schedule. Seller and Buyer shall take no position inconsistent with such allocations on any applicable Tax Return in any audit by or proceeding before any Governmental Entity related to Taxes, unless required by Law or with the written consent of the other Party (not to be unreasonably withheld, delayed or conditioned) provided, however, that nothing contained herein shall prevent Buyer or Seller from settling any

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proposed deficiency or adjustment by any Governmental Entity based upon or arising out of the allocation, and neither Buyer nor Seller shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Entity challenging such allocation. In the event that the allocation described herein is disputed by any Governmental Entity, then the Party receiving notice of the dispute shall promptly notify, consult with and obtain the consent (not to be unreasonably withheld, conditioned or delayed) of the other Party concerning resolution of the dispute. If a Final Section 1060 Allocation Schedule is not agreed by the Parties (or otherwise determined by a Dispute resolution process in accordance with the foregoing provisions of this Section 2.3(b)), then each Party shall be responsible for its reporting requirements under Code Section 1060 and any other provisions that may apply; provided that the Parties shall reasonably coordinate with each other regarding any such filings, in order to avoid any material inconsistencies.

2.4    Adjustments to Purchase Price. The Purchase Price shall be adjusted according to this Section 2.4 without duplication. For purposes of determining the amounts of the adjustments to the Purchase Price provided for in Section 2.4, and otherwise making the allocations described below, the principles set forth in Section 2.4(a) shall apply.

(a)    Proration of Costs and Revenues.

(1)    Buyer shall be (A) entitled to (i) all production of Hydrocarbons from or attributable to the Properties from and after the Effective Time (and all products and proceeds attributable thereto) and (ii) excluding overhead charges arising under applicable joint operating agreements related to those Assets operated by Seller or its Affiliates that are earned prior to Closing, all other income, proceeds, receipts and credits earned with respect to the Assets from and after the Effective Time, and (B) responsible for (and entitled to any refunds with respect to) all Property Expenses incurred from and after the Effective Time.

(2)    Seller shall be (A) entitled to (i) all Hydrocarbon production from or attributable to the Properties prior to the Effective Time (and all products and proceeds attributable thereto), (ii) all other income, proceeds, receipts and credits earned with respect to the Assets prior to the Effective Time, and (iii) all overhead charges arising under applicable joint operating agreements related to the Assets operated by Seller or its Affiliates that are earned prior to Closing, and (B) responsible for (and entitled to any refunds with respect to) all Property Expenses incurred prior to the Effective Time.

(3)    “Earned” and “incurred”, as used in this Agreement shall be interpreted in accordance with GAAP and Council of Petroleum Accountants Society standards, except as otherwise specified herein.

(4)    For purposes of allocating production (and proceeds and accounts receivable with respect thereto), under this Section 2.4, (A) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Properties when they pass through the pipeline connecting into the storage facilities into which they are run and (B) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Properties when they pass through the royalty measurement meters, delivery point sales meters or custody

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transfer meters on the gathering lines or pipelines through which they are transported (whichever meter is closest to the well). Seller shall utilize reasonable interpolative procedures, consistent with industry practice, to arrive at an allocation of production when exact meter readings or gauging and strapping data are not available.

(b)    Property Expenses. The term “Property Expenses” means all (1) capital expenses attributable to the Assets in the ordinary course of business, (2) Asset Taxes (as apportioned as of the Effective Time pursuant to ARTICLE 9), (3) operating expenses incurred in the ownership, development, operation and production of the Assets in the ordinary course of business and, where applicable, in accordance with any relevant joint operating agreement (including lease rentals), (4) overhead costs charged to the Assets under the applicable joint operating agreement and (5) extension and renewal payments with respect to the Leases, but excluding (in all cases) costs and expenses attributable to (A) obligations to pay an owner of any working interest, royalty, overriding royalty, net profits interests or other similar burdens on or measured by production any revenues or proceeds attributable to sales of Hydrocarbons relating to the Assets, including those held in suspense, (B) Losses for personal injury or death, property damage or loss (other than damage to structures, fences, irrigation systems and other fixtures, crops, livestock and other personal property in the ordinary course of business), torts, breach of Contract (other than failure to make payments due under the terms of a Contract) or violation of any Lease or Law (or private rights of action under any Law), (C) obligations to plug wells (including the Wells), dismantle or decommission facilities, close pits and restore the surface around such wells, facilities and pits, (D) Environmental Liabilities, including obligations to remediate any contamination of groundwater, surface water, soil, sediments or personal property under applicable Environmental Laws, (E) obligations with respect to Imbalances, and (F) claims for indemnification or reimbursement from any Third Party with respect to costs of the type described in preceding clauses (A) through (E), whether such claims are made pursuant to Contract or otherwise.

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

(1)    an amount equal to any proceeds received by Buyer (net of royalties, overriding royalties, net profit interests and other similar burdens on or measured by production) from the sale of any Hydrocarbons that were produced and saved from, or attributable to, the Assets prior to the Effective Time;

(2)    an amount equal to all Property Expenses and all royalties, overriding royalties, net profit interests and similar burdens on or measured by production, in each case, attributable to the Assets from and after the Effective Time and prior to Closing that were paid by Seller or its Affiliates;

(3)    an amount equal to the value of all Hydrocarbons that were produced and saved from, or attributable to, the Assets that are in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time, such value to be based upon the applicable Contract price in effect as of the Effective Time (or if there is no Contract price, then the market price in effect as of the Effective Time in the field in

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which such Hydrocarbons were produced), net of (A) all amounts payable as royalties, overriding royalties, net profit interests and other similar burdens on or measured by production and (B) all applicable severance Taxes;

(4)    an amount equal to all prepaid expenses (including pre-paid bonuses, rentals, cash calls and advances to Third Party operators for expenses not yet incurred, prepaid Taxes, and scheduled payments) paid by Seller or its Affiliates and attributable to the ownership or operation of the Assets from and after the Effective Time and prior to Closing, other than, in each case, any of the foregoing to the extent the same is an Excluded Asset;

(5)    an amount equal to the Subject Transfer Taxes paid by Seller or its Affiliates with respect to the transactions contemplated by this Agreement;

(6)    with respect to those Assets operated by Seller or its Affiliates an amount equal to all overhead charges arising under applicable joint operating agreements that are (A) attributable to such Seller or Seller Affiliate operated Assets and the period of time prior to Closing and (B) which have been paid by Third Parties and received by Buyer;

(7)    with respect to natural gas, if the Net Imbalance is positive, an amount equal to (A) (i) the Net Imbalance, multiplied by (ii) $3.00 per MMBtu;

(8)    with respect to crude oil, if the Net Imbalance is positive, an amount equal to (i) the Net Imbalance, multiplied by (ii) $50.00 per barrel; and

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

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

(1)    subject to Section 4.2(f), an amount equal to the Title Adjustment Amount attributable to Title Defects for which Seller has chosen the remedy set forth in Section 4.2(j)(1);

(2)    subject to Section 5.3(b), an amount equal to the Environmental Adjustment Amount attributable to Environmental Defects, if any, for which Seller has chosen the remedy set forth in Section 5.3(e)(1);

(3)    an amount equal to the Allocated Value of those Assets not transferred at Closing in accordance with Section 4.2(j)(2), Section 4.4(a), Section 4.4(b) or Section 5.3(e)(3);

(4)    an amount equal to all proceeds received by Seller or its Affiliates (net of royalties, overriding royalties, net profit interests and similar burdens on or measured by production and Asset Taxes), from the sale of any Hydrocarbons produced and saved from, or attributable to, the Assets from and after the Effective Time;

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(5)    an amount equal to the Allocated Value of any Asset affected by a Casualty Loss, to the extent Seller elects to retain such Asset and reduce the Purchase Price by the Allocated Value of such Asset pursuant to Section 8.3(b);

(6)    with respect to natural gas, if the Net Imbalance is negative, an amount equal to (A) (i) the Net Imbalance, multiplied by (ii) $3.00 per MMBtu;

(7)    with respect to crude oil, if the Net Imbalance is negative, an amount equal to (i) the Net Imbalance, multiplied by (ii) $50.00 per barrel;

(8)    all funds held in suspense by Seller with respect to the operation, ownership, production and developments of the Assets, including those amounts set forth in Schedule 6.19; and

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

2.5    Preliminary Settlement Statement. On or before the day that is two Business Days prior to Closing, Seller shall deliver to Buyer a statement (the “Preliminary Settlement Statement”) setting forth Seller’s calculations of the adjustments to the Purchase Price set forth in Section 2.4 (the Purchase Price, as so adjusted “Preliminary Purchase Price”), the resulting Preliminary Purchase Price and the Closing Amount, in each case, using the best information reasonably available to Seller at the Closing Date, along with such data in Seller’s possession as is reasonably necessary to support such calculations. The Preliminary Settlement Statement also shall set forth Seller’s designated account for purposes of Buyer’s payment of the Closing Amount. The Parties shall attempt to agree upon the Preliminary Purchase Price prior to Closing, and in the event the Parties cannot agree upon the Preliminary Purchase Price prior to Closing, Seller’s calculation of the Preliminary Purchase Price and the Closing Amount as set forth in the Preliminary Settlement Statement shall be used by the Parties for purposes of Closing.

ARTICLE 3

BUYER’S INSPECTION; DUE DILIGENCE REVIEW

3.1    Due Diligence. Subject to the provisions of this ARTICLE 3, from and after the execution of this Agreement up to the Defect Notice Date (the “Due Diligence Period”), Seller will make the Assets available to Buyer and its Representatives for inspection and review to permit Buyer, at Buyer’s sole cost, to perform its due diligence with respect to the Assets (“Due Diligence Review”).

3.2    Access to Records. For purposes of the Due Diligence Review, to the extent the Records are in Seller’s possession or reasonable control and are not (a) Excluded Assets or (b) subject to (1) a valid legal privilege or (2) disclosure or transfer restrictions owing by Seller to a Third Party, Seller will, upon reasonable (being no less than three Business Days’) advance notice from Buyer, make the Records available to Buyer at the offices of Seller during normal business hours.

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3.3    On-Site Inspection.

(a)    Seller hereby consents to Buyer conducting, during the Due Diligence Period and for purposes of the Due Diligence Review, upon reasonable (being no less than three Business Days’) advance notice to Seller and at Buyer’s sole risk and expense, on-site inspections of the Assets and a Phase I Environmental Site Assessment, (each such inspection or assessment, an “Environmental Assessment”); provided, however, that if the consent of any Third Party is required to provide Buyer such access, and such consent is not granted following the commercially reasonable efforts of Seller, Buyer shall not have access to such affected Assets. Buyer shall not conduct any sampling, boring or other invasive activities without prior written notice to, and the written consent of, Seller. Further, Buyer’s right of inspection shall not entitle Buyer to operate equipment. In connection with any Environmental Assessment or other inspection pursuant to this Section 3.3, Buyer agrees to comply with all safety policies and other requirements of Seller and the operator of the Assets (whether such operator is Seller, an Affiliate of Seller or a Third Party). Buyer shall coordinate its access rights and Environmental Assessments of the Assets with Seller and any Third Party operator of the Assets to reasonably minimize any inconvenience to or interruption of the conduct of business by Seller or any such Third Party operator of the Assets.

(b)    If Buyer or any of its Representatives prepares a written report with respect to any Environmental Assessment, Buyer will furnish a copy thereof to Seller as soon as practicable following the receipt thereof by Buyer, and in any event by the Defect Notice Date. The Parties shall maintain the confidentiality of any Environmental Assessments conducted hereunder, and any reports created with respect thereto, unless and only to the extent disclosure of the same is required by a Governmental Entity.

(c)    During all times during the Due Diligence Period that Buyer and/or any of its Representatives are on the Assets or conducting Buyer’s Due Diligence Review of the Records, Buyer shall maintain, at its sole expense and with insurers reasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller. Coverage under all insurance required to be carried by Buyer hereunder will (1) be primary insurance, (2) list the Seller Indemnified Parties as additional insureds, (3) waive subrogation against the Seller Indemnified Parties and (4) provide for five days prior notice to Seller in the event of cancellation or modification of the policy or reduction in coverage. Upon request by Seller, Buyer shall provide evidence of such insurance to Seller prior to entering the Assets.

(d)    EXCEPT TO THE EXTENT CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE SELLER INDEMNIFIED PARTIES, BUYER HEREBY WAIVES, RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER AND THE OTHER SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING IN ANY WAY OUT OF OR ATTRIBUTABLE TO THE ACCESS AFFORDED TO BUYER AND ITS REPRESENTATIVES PURSUANT TO THIS ARTICLE 3 OR THE ACTIVITIES (OR ACTS OF OMISSION) OF BUYER OR ITS REPRESENTATIVES RELATED TO SUCH ACCESS, INCLUDING WITH RESPECT TO ANY ENVIRONMENTAL ASSESSMENT, IN EACH CASE, EVEN IF SUCH LOSSES ARISE OUT OF OR ARE ATTRIBUTABLE TO, SOLELY OR IN PART, THE SOLE, ACTIVE, GROSS, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY OF THE SELLER INDEMNIFIED PARTIES.

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(e)    Upon completion of any Environmental Assessment, Buyer shall, at its sole cost and expense and without any cost or expense to Seller or its Affiliates (1) repair all physical damage done to the Assets or to the Environment in connection with Buyer’s Environmental Assessment, (2) restore the Assets to the approximate same or better physical condition than it was prior to commencement of Buyer’s Environmental Assessment and (3) remove all equipment, tools or other property brought onto, and any wastes generated on, the Assets in connection with Buyer’s Environmental Assessment. Any disturbance to the Assets (including the real property associated with the Assets) resulting from Buyer’s Environmental Assessment will be promptly corrected by Buyer.

ARTICLE 4

TITLE MATTERS

4.1    Seller’s Title.

(a)    Exclusive Remedy. Other than Buyer’s remedies for breaches of Section 8.1(b)(1) or Section 8.1(b)(3) respectively, Section 4.1, Section 4.2, Section 4.3 and the “special warranty” contained in the Assignment shall be the sole and exclusive rights and remedies of Buyer with respect to Seller’s failure to have Defensible Title with respect to the Assets or any other title matter with respect to the Assets. OTHER THAN THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT, SELLER MAKES NO, AND DISCLAIMS ALL, WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO ITS TITLE TO THE PROPERTIES AND OTHER ASSETS; AND BUYER HEREBY ACKNOWLEDGES AND AGREES THAT BUYER’S SOLE AND EXCLUSIVE REMEDY FOR ANY DEFECT OF TITLE WITH RESPECT TO THE PROPERTIES AND OTHER ASSETS (OTHER THAN FOR BREACHES OF SECTION 8.1(b)(1) OR SECTION 8.1(b)(3)), INCLUDING ANY TITLE DEFECT, SHALL BE AS PROVIDED FOR IN SECTION 4.1, SECTION 4.2, SECTION 4.3 AND THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT. Buyer will not assert any claim under the “special warranty” contained in the Assignment for any matters that do not exceed the Individual Title Threshold and Buyer will not be entitled to make a claim for an amount which, with respect to an individual Asset, exceed the Allocated Value of such Asset or, together with all claims of Buyer under this Agreement and any other agreement, contract or instrument contemplated herein, exceed the Cap.

(b)    Defensible Title. The term “Defensible Title” means such title of Seller to the Properties immediately prior to the Effective Time that, subject to and except for Permitted Encumbrances:

(1)    in the case of any Lease or Well, entitles Seller to receive a Net Revenue Interest with respect to the Target Formation of not less than the Net Revenue Interest shown on Exhibit A or Exhibit B, as applicable, with respect to the Target Formation for such Lease or Well, except (A) as otherwise specifically set forth in such Exhibit, (B) for decreases in connection with those operations from and after the Execution Date in which Seller may be a non-consenting co-owner as described on Schedule 6.23, and (C) for decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past underdeliveries;

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(2)    in the case of any Well, obligates Seller to bear a Working Interest with respect to the Target Formation not greater than the Working Interest shown on Exhibit B with respect to the Target Formation for such Well, without increase, except (A) as otherwise specifically set forth in such Exhibit, (B) for increases to the extent that they are accompanied by at least a proportionate increase in Seller’s Net Revenue Interest with respect to the Target Formation for such Well and (C) for increases resulting from contribution requirements with respect to defaults by co-owners under the applicable joint operating agreements; and

(3)    is free and clear of Liens.

In evaluating the significance of any fact, circumstance or condition for the purpose of determining Defensible Title or a Title Defect, due consideration shall be given to the length of time that the particular Asset has been producing Hydrocarbons and/or whether such fact, circumstance or condition is of the type expected to be encountered in the area involved and is usual and customarily acceptable to reasonable and prudent operators, interest owners, and/or purchasers engaged in the business of ownership, operation and development of oil and gas properties with knowledge of such facts and appreciation of their legal significance.

(c)    Permitted Encumbrances. The term “Permitted Encumbrances” means any and all of the following:

(1)    lessors’ royalties, overriding royalties, net profits interests, production payments, reversionary interests and similar burdens on or measured by production if the net cumulative effect of such burdens does not operate to: (A) reduce the Net Revenue Interest with respect to the Target Formation for any Lease or Well below the Net Revenue Interest set forth on Exhibit A or Exhibit B, as applicable, with respect to the Target Formation for such Lease or Well (unless the Working Interest with respect to the Target Formation for any such Well is less than the Working Interest with respect to the Target Formation set forth on Exhibit B in the same or greater proportion as any decrease in such Net Revenue Interest); or (B) obligate Seller to bear a Working Interest with respect to the Target Formation for any Well greater than the Working Interest set forth on Exhibit B with respect to the Target Formation for such Well (unless the Net Revenue Interest with respect to the Target Formation for such Well is greater than the Net Revenue Interest with respect to the Target Formation set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest);

(2)    preferential rights to purchase the Assets or similar rights;

(3)    Liens for Taxes that are not yet due and payable or that are being contested in good faith in the normal course of business;

(4)    all rights to consent by, required notices to, filings with, or other actions by Governmental Entities or other Persons in connection with the transfer of the Assets or the transactions contemplated hereby (including, for the sake of clarity, any Customary Post-Closing Consents);

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(5)    excepting circumstances where such rights have already been triggered, rights of reassignment upon final intention to surrender or abandon any Asset;

(6)    easements, rights-of-way, servitudes, permits, surface leases and other rights with respect to surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or the like, and easements for streets, alleys, highways, pipelines, telephone lines, power lines, distribution lines, railways and other easements and rights-of-way, on, over or in respect of any of the Assets or any restriction on access thereto, in each case, that do not materially interfere with operations currently conducted on the affected Asset;

(7)    the terms and conditions of the Leases or of any compulsory pooling or other order of the Texas Railroad Commission or any other Governmental Entity; provided, however, that the net cumulative effect of such items does not: (A) reduce the Net Revenue Interest with respect to the Target Formation for any Lease or Well below the Net Revenue Interest set forth on Exhibit A or Exhibit B, as applicable, with respect to the Target Formation for such Lease or Well (unless the Working Interest with respect to the Target Formation for any such Well is less than the Working Interest with respect to the Target Formation set forth on Exhibit B in the same or greater proportion as any decrease in such Net Revenue Interest); or (B) obligate Seller to bear a Working Interest with respect to the Target Formation for any Well greater than the Working Interest set forth on Exhibit B with respect to the Target Formation for such Well (unless the Net Revenue Interest with respect to such Well is greater than the Net Revenue Interest with respect to the Target Formation set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest);

(8)    materialmen’s, mechanics’, operators’ or other similar Liens arising (A) in the ordinary course of business or (B) incident to the construction or improvement of any property in the ordinary course of business, in each case for amounts not yet due and payable (including any amounts being withheld as provided by Law) or that are being contested in good faith in the normal course of business;

(9)    such Title Defects, Environmental Defects and/or breaches of the “special warranty” contained in the Assignment that Buyer has expressly waived in writing (or has been deemed to have waived);

(10)    Liens burdening the Assets that will be discharged or released at or before Closing (which includes, for the sake of clarity, Liens pursuant to debt facilities maintained by Seller or any Affiliate of Seller);

(11)    the Surface Contracts;

(12)    the Applicable Contracts;

(13)    calls on production under existing Contracts;

(14)    gas balancing and other production balancing obligations and obligations to balance or furnish make-up Hydrocarbons under Hydrocarbon sales, gathering, processing or transportation Contracts described on Schedule 4.1(c)(14);

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(15)    all rights reserved to or vested in any Governmental Entities to control or regulate any of the Assets in any manner or to assess Tax with respect to the Assets, the ownership, use or operation thereof, or revenue, income or capital gains with respect thereto, and all obligations and duties under all applicable Laws of any such Governmental Entity or under any franchise, grant, license or permit issued by any Governmental Entity;

(16)    zoning and planning ordinances and municipal regulations;

(17)    the terms and conditions of this Agreement;

(18)    Liens of landowners (regardless of whether or not such Liens are subordinate to the applicable Leases) that (A) do not materially interfere with the use or ownership of the Assets subject thereto or affected thereby (as currently used or owned); and (B) secure amounts not yet due and payable;

(19)    all other Liens, Contracts, obligations, defects and irregularities affecting the Assets that do not: (A) reduce the Net Revenue Interest with respect to the Target Formation for any Lease or Well below the Net Revenue Interest set forth on Exhibit A or Exhibit B, as applicable, with respect to the Target Formation for such Lease or Well (unless the Working Interest with respect to the Target Formation for any such Well is less than the Working Interest with respect to the Target Formation set forth on Exhibit B in the same or greater proportion as any decrease in such Net Revenue Interest); (B) obligate Seller to bear a Working Interest with respect to the Target Formation for any Well greater than the Working Interest set forth on Exhibit B with respect to the Target Formation for such Well (unless the Net Revenue Interest with respect to the Target Formation for such Well is greater than the Net Revenue Interest set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest); or (C) materially interfere with operations currently conducted on the Assets; and

(20)    following the Defect Notice Date, any matter that could have been claimed as a Title Defect pursuant to Section 4.2(c) or an Environmental Defect pursuant to Section 5.3(a), but for which Buyer failed to deliver a Notice of Defective Interests or Environmental Defect Notice, as applicable, in accordance with such Sections prior to the Defect Notice Date.

4.2    Title Defects and Title Benefits.

(a)    Title Defect. The term “Title Defect” means any Lien, obligation, defect, or other matter that causes Seller not to have Defensible Title to any Property, provided, however, that none of the following shall be considered Title Defects:

(1)    defects in the chain of title consisting of the failure to recite marital status in a document;

(2)    defects arising out of lack of survey or lack of metes and bounds description;

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(3)    defects asserting a change in Working Interest or Net Revenue Interest based on a change in drilling and spacing units, tract allocation or other changes in pool or unit participation occurring after the Effective Time by a Person other than Seller;

(4)    defects arising out of lack of corporate or other entity authorization;

(5)    defects that have been cured by applicable Laws of limitations, prescription, laches or otherwise;

(6)    defects arising as a result of non-consent interests in any Well not being held of record by Seller as described on Schedule 6.23;

(7)    defects based on a gap in Seller’s chain of title in the State of Texas’ records as to any applicable Leases where the State of Texas or its agent is the lessor thereunder, or in the applicable county records in the State of Texas as to the other Leases, unless (a) such gap is affirmatively shown to exist in such records by an abstract of title, title opinion or landman’s title chain or runsheet, which documents shall be provided with delivery of a Notice of Defective Interest with respect to such defects, and (b) Buyer provides affirmative evidence that such gap in title results in another Person’s superior claim of title to the relevant Assets, which evidence shall be included with such Notice of Defective Interest;

(8)    defects as a consequence of cessation of production, insufficient production, or failure to conduct operations on any of the Properties held by production, or lands pooled, communitized or unitized therewith, unless Buyer provides affirmative evidence that causes Buyer to reasonably believe the cessation of production, insufficient production or failure to conduct operations would give rise to a right to terminate the Lease in question, which evidence shall be provided with delivery of a Title Defect Notice with respect to such defects;

(9)    defects arising from prior oil and gas leases relating to the Lands that are terminated, expired or invalid but not surrendered of record;

(10)    any defect that affects only which Person has the right to receive royalty payments (rather than the amount of such royalty) and that does not affect the validity of the underlying Lease;

(11)    any defect or irregularity that would customarily be waived by a reasonable purchaser of oil and gas properties; and

(12)    defects based on references to lack of information (unless such information (A) is not reflected in the records of the applicable county and (B) is not in the Records made available to Buyer).

(b)    Title Benefit. The term “Title Benefit” means any right, circumstance or condition that operates to increase the Net Revenue Interest of Seller with respect to the Target

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Formation in any Lease or Well above that shown on Exhibit A or Exhibit B, as applicable, with respect to the Target Formation for such Lease or Well, to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest with respect to the Target Formation for any such Well above that shown on Exhibit B with respect to the Target Formation for such Well.

(c)    Notice of Defective Interest. On or before the Defect Notice Date, Buyer shall notify Seller in writing of any matters that, in Buyer’s reasonable opinion, constitute a Title Defect (such notice, a “Notice of Defective Interests”). To be effective, each Notice of Defective Interests shall be in writing and contain the following: (1) a clear description of the alleged Title Defect, (2) each Property (and the applicable intervals therein) affected by the alleged Title Defect (each such Property, a “Title Defect Property”), (3) the Allocated Value of each Title Defect Property, (4) supporting documents reasonably necessary for Seller (as well as any title attorney or examiner hired by Seller) to verify the existence of the alleged Title Defect, and (5) the amount which Buyer reasonably believes to be the Title Defect Amount as provided for in Section 4.2(e), and the computations and information upon which Buyer’s beliefs are based. To give Seller an opportunity to commence reviewing and curing Title Defects, prior to the Defect Notice Date, Buyer agrees to use its reasonable efforts to give Seller weekly notices of all Title Defects discovered by Buyer during the preceding week; provided that any such notice may be preliminary in nature and supplemented prior to the Defect Notice Date. Other than with respect to Buyer’s remedies for breaches of Section 8.1(b)(1) and Section 8.1(b)(3), any matters that may otherwise constitute a Title Defect, but of which Seller has not been notified by Buyer in a Notice of Defective Interests delivered in accordance with this Section 4.2(c) prior to the Defect Notice Date, shall be deemed to have been waived by Buyer for all purposes, except, Buyer’s rights under the “special warranty” contained in the Assignment shall only be deemed waived by Buyer to the extent Buyer had Knowledge of such matter as of the Closing Date.

(d)    Notice of Title Benefits. On or before the Defect Notice Date, Seller shall advise Buyer in writing of any matters that, in Seller’s reasonable opinion, constitute a Title Benefit (each such notice, a “Title Benefit Notice”). Each Title Benefit Notice shall be in writing and contain the following: (1) a clear description of the Title Benefit, (2) each Property (and the applicable intervals therein) affected by the Title Benefit (each such Property, a “Title Benefit Property”), (3) the Allocated Value of each Title Benefit Property, (4) supporting documents reasonably necessary for Buyer (as well as any title attorney or examiner hired by Buyer) to verify the existence of the Title Benefit, and (5) the amount which Seller reasonably believes to be the Title Benefit Amount for each Title Benefit Property and the computations and information upon which Seller’s belief is based. Subject to Seller’s remedy for a breach of this Section 4.2(d) by Buyer, Seller shall be deemed to have waived all Title Benefits of which it has not given, or received, notice on or before the Defect Notice Date.

(e)    Title Defect Amount. Subject to the provisions of Section 4.2(f), the “Title Defect Amount” means the amount by which the Allocated Value of a Title Defect Property affected by a Title Defect is reduced as a result of the existence of such Title Defect, which amount shall be determined in accordance with the following methodology, terms and conditions:

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

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(2)    if the Title Defect is a Lien that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount of the payment necessary to remove such Title Defect from the Title Defect Property;

(3)    in the event that the Title Defect for any Lease or Well is the actual failure of Seller to own the represented Net Revenue Interest with respect to the Target Formation for such Lease or Well set forth on Exhibit A or Exhibit B, as applicable, then the Title Defect Amount shall be equal to the Allocated Value of the Title Defect Property multiplied by a fraction, (A) the numerator of which is the difference between (i) the actual Net Revenue Interest with respect to the Target Formation for the Title Defect Property, and (ii) the Net Revenue Interest with respect to the Target Formation for such Title Defect Property as set forth on Exhibit A or Exhibit B, as applicable, and (B) the denominator of which is the Net Revenue Interest with respect to the Target Formation for such Title Defect Property as set forth on Exhibit A or Exhibit B, as applicable; and

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

Notwithstanding anything to the contrary in this ARTICLE 4, if a Title Defect is reasonably susceptible to being cured, the Title Defect Amount attributable to such Title Defect shall not exceed the cost and expense to cure such Title Defect.

(f)    Title Deductibles. Notwithstanding anything to the contrary in this Agreement, (1) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller in connection with the transactions contemplated hereby for any Title Defect affecting a Title Defect Property for which the Title Defect Amount attributable thereto does not exceed $50,000 (“Individual Title Threshold”); and (2) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller in connection with the transactions contemplated hereby for any Title Defect Amount attributable to a Title Defect affecting a Title Defect Property that exceeds the Individual Title Threshold unless (A) the sum of (i) the aggregate Title Defect Amounts of all such Title Defects exceeding the Individual Title Threshold, excluding any Title Defects cured by Seller, plus (ii) the aggregate Environmental Defect Values of all Environmental Defects that exceed the Individual Environmental Threshold,

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excluding any Environmental Defects Remediated by Seller, minus (iii) all Title Benefit Amounts (the amount obtained pursuant to clauses (i) – (iii) above, the “Total Defect Amount”), exceeds (B) the Aggregate Defect Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other remedies only with respect to the amount by which the Total Defect Amount exceeds the Aggregate Defect Deductible. For the avoidance of doubt and notwithstanding anything to the contrary, in no event will Buyer be entitled to claim any remedies under Section 4.2(f), Section 4.2(j), Section 5.3(b), Section 5.3(e) or the “special warranty” contained in the Assignment for any Title Defects, Environmental Defects and/or claims under such “special warranty” to the extent any Title Defect Amounts, Environmental Defect Values or “special warranty” claims attributable thereto, in the aggregate (I) exceed the Total Defect Amount minus the Aggregate Defect Deductible or (II) with respect to an Asset, exceed the Allocated Value of such Asset. If any Asset is excluded pursuant to Section 4.2(j)(2), any Title Defect Amount relating to such excluded Asset will not be counted towards the Aggregate Defect Deductible.

(g)    Title Benefit Amount. The “Title Benefit Amount” means the amount by which the Allocated Value of a Title Benefit Property affected by a Title Benefit is increased as a result of the existence of such Title Benefit. Each Title Benefit Amount shall be determined in accordance with the same methodology, terms and conditions for determining each Title Defect Amount. With respect to any Title Benefits reported under Section 4.2(d), the Title Benefit Amount attributable to such Title Benefits shall be used to reduce the amount of the aggregate Title Defect Amounts and Environmental Defect Values attributable to Title Defects and Environmental Defects properly and timely raised by Buyer after taking into account the Individual Title Threshold and the Individual Environmental Threshold, as applicable. If the Parties cannot reach an agreement on alleged Title Benefits or Title Benefit Amounts by the scheduled Closing, then (1) the average of Seller’s and Buyer’s good faith estimate of such disputed Title Benefit Amount shall be used in calculating the reduction to the Title Defect Amounts and Environmental Defect Values pursuant to this Section 4.2(g) to the extent applicable, and (2) the provisions of Section 4.3 shall apply.

(h)    Title Adjustment Amount. The amount by which the Purchase Price is to be adjusted in accordance with this ARTICLE 4 for Title Defect Amounts (after, for the avoidance of doubt, taking into account any offsetting Title Benefit Amounts) shall be referred to as the “Title Adjustment Amount”.

(i)    Seller’s Right to Cure. Continuing until five days prior to Closing (such period of time, the “Cure Period”), Seller shall have the right, but not the obligation, to attempt, at its sole cost, to cure or remove any Title Defects timely asserted by Buyer pursuant to Section 4.2(c). If Seller believes that it has cured any applicable Title Defect, Seller shall deliver written notice thereof to Buyer, together with supporting documents available to Seller and reasonably necessary for Buyer (as well as any title attorney or examiner hired by Buyer) to verify the cure of such Title Defect. Buyer shall, within five Business Days following Buyer’s receipt of written notice from Seller that it has cured the applicable Title Defect, but in any event, no later than Closing, advise Seller in writing whether it agrees or (pursuant to a Title Defect Notice, as described in Section 4.3) Disputes that any such Title Defect has been so cured; provided that Buyer’s failure to timely respond to Seller’s notice of cure shall be deemed Buyer’s agreement that such Title Defect has been cured and Buyer’s waiver of its Claim with respect to such Title Defect. If Buyer timely notifies Seller of a Dispute as to Seller’s attempted cure of any Title Defect, then (subject to Section 4.2(j)), the provisions of Section 4.3 shall apply to such Title Defect.

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(j)    Remedies for Title Defects. Subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto and subject to Section 4.2(f), in the event that any Title Defect timely asserted by Buyer in accordance with Section 4.2(c) is not waived in writing by Buyer or cured by Seller prior to the end of the Cure Period, then Seller shall elect one of the following remedies with respect to such Title Defect:

(1)    reduce the Purchase Price by the Title Defect Amount applicable to such Title Defect;

(2)    retain the entirety of the Title Defect Property that is subject to such Title Defect (together with all related Assets) and reduce the Purchase Price by an amount equal to the Allocated Value of the Assets so retained; or

(3)    indemnify Buyer against all Losses (up to the Allocated Value of the applicable Title Defect Property) resulting from such Title Defect with respect to the applicable Title Defect Property based on the current use of such Title Defect Property pursuant to an indemnity agreement mutually acceptable to the Parties.

As to any Title Defect timely asserted by Buyer in accordance with Section 4.2(c) which is not waived in writing by Buyer or cured by Seller at Closing, and for which a corresponding Title Defect Amount is included in the Title Adjustment Amount at Closing (including, for the avoidance of doubt, any Title Defect which Seller has chosen to dispute pursuant to Section 4.3), Seller also shall retain the right, but not the obligation, to attempt to cure each such Title Defect after Closing at Seller’s sole cost and expense; provided that Seller shall furnish notice to Buyer of Seller’s belief that it has cured any such Title Defect (together with supporting documents available to Seller and reasonably necessary for Buyer, as well as any title attorney or examiner hired by it, to verify the cure of any such Title Defect), by no later than 165 days after Closing. If Buyer disagrees that the Title Defect has been cured, it shall so advise Seller in writing within five Business Days after receipt of Seller’s notice as provided above, following which the provisions of Section 4.3 will apply to resolve such Dispute, and the Final Settlement Statement Due Date shall be extended to the extent necessary to complete the Dispute resolution procedure as provided for in Section 4.3. Should Buyer (A) fail to respond to Seller’s notice of cure in such five Business Day period, then Buyer shall be deemed to have (i) agreed that the Title Defect has been cured and (ii) waived its Claim with respect to such Title Defect, or (B) agree that the Title Defect has been cured, then, in each case, the Title Defect Amount attributable thereto and included in the Title Adjustment Amount used to adjust the Purchase Price at Closing shall be credited to Seller in the Final Settlement Statement.

4.3    Title Dispute Resolution. If prior to the Closing or, with respect to the adequacy of Seller’s Title Defect curative actions after Closing, after the Closing, the Parties are unable to resolve any Title Disputed Matter, then either Party shall have the right, upon the delivery of written notice to the other Party (each, a “Title Dispute Notice”), to Dispute such Title Disputed

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Matter and to invoke the Dispute resolution provisions below in this Section 4.3 in order to resolve any such Dispute. As used herein, the term “Title Disputed Matter” means a Dispute regarding any of the following: (w) the existence and scope of a Title Defect or Title Benefit; (x) any Title Defect Amount or Title Benefit Amount, as the case may be; (y) the Title Adjustment Amount, if any; and (z) the adequacy of Seller’s Title Defect curative actions. As to any Dispute regarding the adequacy of Seller’s Title Defect curative actions after Closing as provided for in Section 4.2(j), the Final Settlement Statement Due Date shall be extended to the extent necessary to complete the Dispute resolution procedure as provided for below in this Section 4.3. Any Title Dispute Notice relating to any of Seller’s Title Defect curative actions conducted taken during the Cure Period must be delivered within five Business Days following Buyer’s receipt of notice from Seller that it has cured the applicable Title Defect, but in any event, no later than Closing. Any Title Dispute Notice relating to any of Seller’s Title Defect curative actions conducted post-Closing must be delivered within five Business Days following Buyer’s receipt of notice from Seller that it has cured the applicable Title Defect. In no event will Closing be delayed on account of any Title Disputed Matter and, if the Title Defect Property affected thereby is transferred to Buyer at Closing, the average of the Parties’ respective good faith estimates of the Title Defect Amounts attributable to such Title Defect Property shall be used in the calculation and determination of the Title Adjustment Amount to be used at Closing.

(a)    The Parties shall attempt to resolve all Title Disputed Matters through good faith negotiations for a period of 20 days after the delivery of a Title Dispute Notice by either Party. Following such negotiation period, if the Title Disputed Matter at issue should remain in Dispute, such Title Disputed Matter shall be resolved pursuant to this Section 4.3 and the Parties shall mutually appoint an independent expert within five business days after such negotiation period having the qualifications specified below (the “Title Defect Expert”). If the Parties are unable to mutually agree upon the Title Defect Expert, then the Parties shall, within ten days after the expiration of such negotiation period, request (and either Party may so request alone if the other Party refuses to jointly act in good faith to do so during such ten day period) that the AAA, acting through its offices in Houston, Texas, appoint the Title Defect Expert. The Title Defect Expert shall be a licensed title attorney having a minimum of ten years’ experience with regard to the types of title defects affecting the Properties involved in the Title Disputed Matter, shall be without any conflicts of interest as to the Parties, and shall not have been employed by any Party or its Affiliates within the five year period preceding the submission of the Dispute. For the avoidance of doubt, the Title Defect Expert will function as an expert in accordance with the procedures set forth in this Section 4.3, not as an arbitrator.

(b)    Within 30 days following the appointment of the Title Defect Expert, Seller and/or Buyer shall provide the Title Defect Expert with a copy of this Agreement, and each Party shall provide, both to the Title Defect Expert and each other, a summary of its position with regard to each such outstanding Title Disputed Matter in a written document of five pages or less per Title Disputed Matter. The Parties shall instruct the Title Defect Expert that, within 30 days after receiving the Parties’ respective submissions, the Title Defect Expert shall render a written decision. In rendering its decision, the Title Defect Expert shall not award (1) a higher Title Defect Amount than the lower of (A) the Allocated Value of the applicable Property or (B) the amount claimed by Buyer in its summary, (2) a higher Title Benefit Amount than the amount claimed by Seller in its summary, (3) a lower Title Benefit Amount than the amount claimed by Buyer in its summary or (4) a lower Title Defect Amount than that amount claimed by Seller in

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its summary, as applicable. The Title Defect Expert shall determine the specific disputed Title Defect, Title Benefit, Title Defect Amount, Title Benefit Amount or the adequacy of Seller’s Title Defect curative actions, as the case may be, submitted by either Party and may not award damages, interest or penalties to either Party with respect to any other matter. Any decision rendered by the Title Defect Expert pursuant hereto shall be final, conclusive, and binding on Seller and Buyer, and will be enforceable against each Party in any court having jurisdiction hereof or jurisdiction of either or both Parties, but is not reviewable by, or appealable to, any court except in the event of fraud. The Parties shall each bear one-half of the costs of the Title Defect Expert and of any associated dispute resolution process and proceedings, except the Parties shall each bear its own legal fees with respect to any Dispute.

(c)    If the Title Defect Expert determines that a Title Defect did not exist or that a Title Defect existed but was cured by Seller, then any Title Defect Amount attributable thereto that was included in the Title Adjustment Amount used at Closing, if any, shall be credited to Seller in the Final Settlement Statement.

(d)    If the Title Defect Expert determines that a Title Defect exists, but that the Title Defect Amount attributable thereto is a lesser amount than any Title Defect Amount with respect thereto that was included in the Title Adjustment Amount used at Closing, if any, then the difference thereof shall be credited to Seller in the Final Settlement Statement.

(e)    If the Title Defect Expert determines that a Title Defect exists, such Title Defect has not been cured by Seller and the Title Defect Amount attributable thereto is a greater amount than any Title Defect Amount with respect thereto that was included in the Title Adjustment Amount used at Closing, if any, then the difference thereof shall be credited to Buyer in the Final Settlement Statement.

(f)    Any such adjustments to the amount of the Purchase Price will be reflected in the Final Settlement Statement as applicable.

4.4    Preferential Rights and Consents.

(a)    Preferential Purchase Rights. Promptly following the Execution Date, and in any event within ten Business Days following the Execution Date, Seller shall send notices to the holder of each Preferential Right listed on Schedule 6.6 (if applicable) in accordance with the terms of the instruments giving rise to such Preferential Rights. Seller shall provide a copy of each such notice to Buyer following the delivery thereof by Seller. Seller shall use commercially reasonable efforts to cause waivers of such Preferential Rights to be obtained and delivered prior to Closing; provided that Seller shall not be required to make payments or undertake other obligations to or for the benefit of the holders of such Preferential Rights in order to obtain the required waivers. Buyer shall cooperate with Seller in seeking to obtain such waivers of Preferential Rights; provided that Buyer shall not be required to make payments or undertake other obligations to or for the benefit of the holders of such Preferential Rights in order to obtain the required waivers. Any Preferential Rights must be exercised subject to all terms and conditions set forth in this Agreement (including all thresholds, deductibles and other amounts except for the cash consideration, which shall equal the Allocated Value for such Asset), including the successful Closing of this Agreement pursuant to ARTICLE 12 as to those Assets

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for which Preferential Rights have not been exercised. The consideration payable under this Agreement for any particular Asset for purposes of Preferential Rights notices shall be the Allocated Value for such Asset, subject to adjustment pursuant to Section 2.4 and Section 13.1. If, prior to the Closing Date, any Party discovers any required Preferential Right for which notices have not been delivered pursuant to the first sentence of this Section 4.4(a), then (x) the Party making such discovery shall provide the other Party with written notification of such Preferential Right, (y) Seller, following delivery or receipt of such written notification, as applicable, will promptly send notices to the holders of such Preferential Rights in accordance with the terms of the instrument giving rise to such Preferential Right, and (z) the terms and conditions of this Section 4.4(a) shall apply to the Assets subject to such Preferential Right.

(1)    If, prior to Closing, any holder of a Preferential Right notifies Seller that it intends to consummate the purchase of the Assets to which its Preferential Right applies or if the time for exercising such Preferential Right has not expired, then the Assets subject to such Preferential Right (together with all related Assets) shall be excluded from the Assets to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the sum of the Allocated Values of such Assets so excluded.

(2)    Seller shall be entitled to all proceeds paid by any Person exercising a Preferential Right prior to Closing. If such holder of such Preferential Right thereafter fails to consummate the purchase of the Assets subject to such Preferential Right (together with all related Assets) on or before the end of the time period for closing such sale or the time for exercising such Preferential Right expires without exercise by the holder thereof, then (A) Seller shall so notify Buyer, (B) Seller shall assign to Buyer, on the tenth Business Day following the end of such time period or termination of such right without exercise, such Assets that were so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment, and (C) Buyer shall pay to Seller, by wire transfer of immediately available funds, the amount by which the Purchase Price was reduced at Closing with respect to such excluded Assets, as adjusted pursuant to Section 2.4 and Section 13.1.

(3)    All Assets for which any applicable Preferential Right has been waived, or as to which the time for exercising the applicable Preferential Right has expired, in each case, prior to Closing, shall be transferred to Buyer at Closing, subject to the other provisions of this Agreement.

(b)    Consents. Promptly following the execution of this Agreement, and in any event within ten Business Days following the Execution Date, Seller shall send notices to the holder of each Consent listed on Schedule 6.5 requesting such holder’s applicable Consent to the transactions contemplated hereby. Seller shall use commercially reasonable efforts to cause such Consents to be obtained and delivered prior to Closing; provided that Seller shall not be required to make payments or undertake other obligations to or for the benefit of the holders of such Consents in order to obtain the required Consents. Buyer shall cooperate with Seller in seeking to obtain such Consents to assignment; provided that Buyer shall not be required to make payments or undertake other obligations to or for the benefit of the holders of such Consents in order to obtain the required Consents. If, prior to the Closing Date, any Party discovers any Consents for which notices have not been delivered pursuant to the first sentence of this

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Section 4.4(b), then (x) the Party making such discovery shall provide the other Party with written notification of such Consents, (y) Seller, following delivery or receipt of such written notification, as applicable, will promptly send notices to the holders of Consents requesting such Consents, and (z) the terms and conditions of this Section 4.4(b) shall apply to the Assets subject to such Consents.

(1)    If (A) Seller fails to obtain any such Consent prior to Closing and the failure to obtain such Consent would (i) cause the assignment of the Assets affected thereby to Buyer to be void, (ii) give the holder of such Consent the right to terminate the applicable underlying Lease, Surface Contract, Applicable Contract or other instrument under the express terms thereof or (iii) give the holder of such Consent a Claim for liquidated damages pursuant to the express terms of the applicable underlying Lease, Surface Contract or Applicable Contract or (B) Seller fails to obtain a Consent held by a Governmental Entity prior to Closing, then, in each case, the Assets affected by such un-obtained Consent (together with all related Assets, the “Affected Assets”) shall be excluded from the Assets to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the sum of the Allocated Value of such Affected Assets.

(2)    If any such Consent relating to Affected Assets that was not obtained prior to Closing is obtained within 60 days following the Closing, then (A) on the fifteenth Business Day after such Consent is obtained, Seller shall assign such Affected Assets to Buyer pursuant to an instrument in substantially the same form as the Assignment, and (B) Buyer shall pay to Seller, by wire transfer of immediately available funds, the amount by which the Purchase Price was reduced at Closing with respect to such Affected Assets, as adjusted pursuant to Section 2.4 and Section 13.1, and as would be further adjusted for such Affected Asset pursuant to Section 2.4 and Section 13.1 as if the Closing had occurred on the date of such assignment such that Buyer shall receive the benefit of such transferred asset and bear the burden of such transferred asset from the Effective Time.

(3)    If Seller fails to obtain any such Consent prior to Closing and (A) the failure to obtain such Consent would not (i) cause the assignment of the Assets affected thereby to Buyer to be void, (ii) give the holder of such Consent the right to terminate the applicable underlying Lease, Surface Contract, Applicable Contract or other instrument under the express terms thereof or (iii) give the holder of such Consent a Claim for liquidated damages pursuant to the express terms of the applicable underlying Lease, Surface Contract or Applicable Contract and (B) the holder of such Consent is not a Governmental Entity, then (I) the Assets subject to such un-obtained Consent shall nevertheless be assigned by Seller to Buyer at Closing as part of the Assets and Seller (for a period of 60 days following Closing) and Buyer shall each use their commercially reasonable efforts following Closing to obtain such Consent, (II) Buyer shall have no claim against Seller, and Seller shall have no liability for, the failure to obtain any such Consent and (III) Buyer shall be responsible from and after the Closing for any and all Losses arising from the failure to obtain such Consent.

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ARTICLE 5

ENVIRONMENTAL MATTERS

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

(a)    “Condition” means any circumstance, status or defect that, with notice to the Governmental Entity with jurisdiction, would currently require Remediation under Environmental Laws.

(b)    “Environment” means all or any of the following media: land (whether on or below the surface of the earth or beneath the surface of any waters); air or water, whether on or below the surface of the earth or whether contained within buildings or other natural or man-made structures above or below ground or below any waters; and any living organism (including man) supported by the foregoing media.

(c)    “Environmental Defect” means a Condition of or affecting the Environment in, on, under or relating to a particular Asset (including air, land, soil, surface and subsurface strata, surface water, groundwater, or sediments), but excluding any Plugging and Abandonment Obligations (which shall not constitute an Environmental Defect).

(d)    “Environmental Law” or “Environmental Laws” means any federal, tribal, state, local or foreign law (including common law), statute, rule, regulation, requirement, ordinance and any writ, decree, bond, authorization, approval, license, permit, registration, binding criteria, standard, consent decree, settlement agreement, judgment, order, directive or binding policy issued by or entered into with a Governmental Entity pertaining or relating to: (1) pollution or pollution control, including, without limitation, storm water; (2) protection of the Environment or of human health, including from exposure to Hazardous Materials; (3) employee safety in the workplace; or (4) the management, presence, use, generation, processing, extraction, treatment, recycling, refining, reclamation, labeling, transport, storage, collection, distribution, disposal or release or threat of release of Hazardous Materials. “Environmental Laws” shall include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq., the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act, 16 U.S.C. § 1531 et seq., the National Historic Preservation Act, 16 U.S.C. §470 et seq. and the regulations and orders respectively promulgated thereunder, each as amended, or any equivalent or analogous state or local statutes, laws or ordinances, any regulation promulgated thereunder and any amendments thereto.

(e)    “Environmental Liabilities” means all Losses involving any pollution of or other harm to or destruction of the Environment or any natural resources, including the payment of natural resource damages that are assessed by any Governmental Entity and any Losses

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attributable to the Remediation of any such damage, brought or assessed by or in favor of any Persons, including any Governmental Entity, to the extent any of the foregoing directly or indirectly involves the Assets or the presence, disposal or release of any Hazardous Materials of any kind in, on or under the Assets or any other premises to the extent directly or indirectly relating to operations involving the Assets or the transportation, disposal or other handling of Hazardous Materials generated by or otherwise attributable to operations involving the Assets, whether any of the foregoing is created, arises or otherwise relates or is attributable to any period of time, whether before or after Seller acquired ownership of the Assets and whether before, on or after the Effective Time.

(f)    “Hazardous Materials” means, without limitation, any waste, substance, product, or other material (whether solid, liquid, gas or mixed), which is or becomes identified, listed, published, or defined as a hazardous substance, hazardous waste, hazardous material, toxic substance, radioactive material, oil, or petroleum waste, or which is regulated by, or the use or disposal of which is otherwise governed under, any Environmental Law.

(g)    “Plugging and Abandonment Obligations” means any and all responsibility and liability, in accordance with all applicable Laws, Leases, Surface Contracts and other Contracts, permits or any orders, directives or other requirements of any applicable Governmental Entities or otherwise as required for reasonable and prudent oilfield operations, for all of the following, arising out of or otherwise relating to the ownership or operation of the Assets, directly or indirectly, whether attributable to any period of time before, on or after the Effective Time: (1) the necessary and proper plugging, replugging and abandonment of the Wells described on Exhibit B; (2) the necessary and proper removal, closure, abandonment, decontamination and disposal, as applicable, of all structures, facilities, pits, pipelines, Equipment, operating inventory, abandoned property, trash, refuse, wastes and junk located on, comprising part of or otherwise attributable to the Assets in connection with any activities referenced in this item (2) or the foregoing item (1); (3) the necessary and proper capping and burying of all associated flow lines and other pipelines located on or comprising part of the Assets, including in connection with any of the activities referenced in the foregoing items (1) or (2); and (4) the necessary and proper restoration of the surface and subsurface of the Properties to the condition as required pursuant to all applicable Laws, Leases, Surface Contracts and Contracts, in connection with any of the activities referenced in the foregoing items (1), (2) or (3).

(h)    “Remediation” or “Remediate” means investigation, assessment, characterization, delineation, monitoring, sampling, analysis, response action, removal, corrective action, mitigation, decontamination, treatment, cleanup and disposal of Hazardous Materials and restoration of any harm or damage to, or replacement of any destruction of, the Environment or any natural resources (including the payment of natural resource damages that are assessed by any Governmental Entity, including for the loss of use thereof), in each case, to the minimum extent required by applicable Environmental Laws.

5.2    Exclusive Remedy. Other than Buyer’s remedies for breaches of Section 6.15, Section 5.3 shall constitute the sole and exclusive rights and remedies of Buyer with respect to any Environmental Defect, the existence of any Condition with respect to the Assets, the Remediation of any such Environmental Defect or Condition, or Seller’s or its predecessors’ failure to comply with Environmental Laws.

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5.3    Environmental Defects.

(a)    Environmental Defect Notices. On or before the Defect Notice Date, Buyer shall notify Seller in writing of any matters that, in Buyer’s reasonable opinion, constitute an Environmental Defect (such notice, an “Environmental Defect Notice”). To be effective, each Environmental Defect Notice shall be in writing and contain the following: (1) a clear description of the alleged Environmental Defect, (2) each Asset affected by the alleged Environmental Defect (each such Asset, an “Environmental Defect Property”), (3) the Allocated Value, if any, of each Environmental Defect Property, (4) supporting documents reasonably necessary for Seller (as well as any environmental consultant hired by Seller) to verify the existence of the alleged Environmental Defect, and (5) the amount that Buyer reasonably believes is the cost to Remediate each alleged Environmental Defect, net to Seller’s interest in the applicable Assets (the “Environmental Defect Value”), and the computations and information upon which Buyer’s belief is based. To give Seller an opportunity to commence reviewing and curing Environmental Defects, prior to the Defect Notice Date Buyer agrees to use its reasonable efforts to give Seller weekly notices of all Environmental Defects discovered by Buyer during the preceding week; provided that any such notice may be preliminary in nature and supplemented prior to or on the Defect Notice Date. Other than with respect to Buyer’s remedies for breaches of Section 6.15, any matters that may otherwise constitute an Environmental Defect, but of which Seller has not been notified by Buyer in an Environmental Defect Notice delivered in accordance with this Section 5.3(a) prior to the Defect Notice Date, shall be deemed to have been waived by Buyer for all purposes.

(b)    Environmental Deductibles. Other than with respect to Buyer’s remedies for breaches of Section 6.15, notwithstanding anything to the contrary in this Agreement, (1) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller in connection with the transactions contemplated hereby for any Environmental Defect affecting an Environmental Defect Property for which the Environmental Defect Value attributable thereto does not exceed $50,000 (“Individual Environmental Threshold”); and (2) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller in connection with the transactions contemplated hereby for any Environmental Defect Value attributable to an Environmental Defect affecting an Environmental Defect Property that exceeds the Individual Environmental Threshold unless the Total Defect Amount exceeds the Aggregate Defect Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other remedies only with respect to the amount by which the Total Defect Amount exceeds the Aggregate Defect Deductible. If any Asset is excluded pursuant to Section 5.3(e)(3), any Environmental Defect Value relating to such excluded Asset will not be counted towards the Aggregate Defect Deductible. For the avoidance of doubt and notwithstanding anything to the contrary, in no event will Buyer be entitled to claim any remedies under Section 4.2(f), Section 4.2(j), Section 5.3(b), Section 5.3(e) or the “special warranty” contained in the Assignment for any Title Defects, Environmental Defects and/or claims under such “special warranty” to the extent any Title Defect Amounts, Environmental Defect Values or “special warranty” claims attributable thereto, in the aggregate (I) exceed the Total Defect Amount minus the Aggregate Defect Deductible or (II) with respect to an Asset, exceed the Allocated Value of such Asset. If any Asset is excluded pursuant to Section 5.3(e)(3), any Environmental Defect Value relating to such excluded Asset will not be counted towards the Aggregate Defect Deductible.

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(c)    Environmental Adjustment Amount. The amount by which the Purchase Price is to be adjusted in accordance with this ARTICLE 5 for Environmental Defect Values shall be referred to as the “Environmental Adjustment Amount”.

(d)    Seller’s Right to Remediate. Continuing until the end of the Cure Period, Seller shall have the right, but not the obligation, to attempt, at its sole cost, to Remediate any Environmental Defects timely asserted by Buyer pursuant to Section 5.3(a). If Seller believes that it has Remediated any applicable Environmental Defect, Seller shall deliver written notice thereof to Buyer, together with supporting documents available to Seller and reasonably necessary for Buyer (as well as any environmental consultant hired by Buyer) to verify the Remediation of the Environmental Defects. Buyer shall, at or prior to the end of the Cure Period, advise Seller in writing whether it agrees or Disputes that the Environmental Defect has been so Remediated; provided that Buyer’s failure to timely respond to Seller’s notice of Remediation shall be deemed Buyer’s agreement that the Environmental Defect has been Remediated and Buyer’s waiver of its Claim with respect to such Environmental Defect. If Buyer timely notifies Seller of a Dispute as to Seller’s attempted Remediation of any Environmental Defect, then (subject to Section 5.3(e)) the provisions of Section 5.3(f) shall apply to such Environmental Defect.

(e)    Remedies for Environmental Defects. Subject to Seller’s continuing right to dispute the existence of an Environmental Defect and/or the Environmental Defect Value asserted with respect thereto and subject to Section 5.3(b), in the event that any Environmental Defect timely asserted by Buyer in accordance with Section 5.3(a) is not waived in writing by Buyer or Remediated by Seller prior to the end of the Cure Period, then Seller shall elect one of the following remedies with respect to such Environmental Defect:

(1)    reduce the Purchase Price by the Environmental Defect Value applicable to such Environmental Defect;

(2)    indemnify Buyer against all Losses (up to the Allocated Value of the applicable Environmental Defect Property) resulting from such Environmental Defect and associated Remediation pursuant to an indemnity agreement mutually agreed by the Parties; or

(3)    retain the entirety of the Asset that is subject to such Environmental Defect (together with all related Assets), and reduce the Purchase Price by an amount equal to the sum of the Allocated Value of the Assets so retained.

If Seller elects the option set forth in clause (1) above, then Buyer shall be deemed to have assumed responsibility for all costs and expenses attributable to the Remediation of the applicable Environmental Defect and all Losses with respect thereto, and Buyer’s obligations with respect thereto shall be deemed to constitute Assumed Obligations. If Seller elects the option set forth in clause (2) above, Seller shall have the right to elect to assume responsibility for the Remediation of such Environmental Defect following Closing and, if Seller so elects (A) Seller shall use its reasonable efforts to implement such Remediation in a manner which is consistent with the requirements of Environmental Laws in a timely fashion for the type of Remediation that Seller elects to undertake and (B) Buyer, effective as of the Closing, hereby grants to Seller and its Representatives access to the Assets to conduct such Remediation.

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(f)    Environmental Dispute Resolution Procedure. If prior to the Closing the Parties are unable to resolve any Environmental Disputed Matter, then either Party shall have the right, upon the delivery of written notice to the other Party (each, an “Environmental Dispute Notice”), to Dispute such Environmental Disputed Matter and to invoke the Dispute resolution provisions below in this Section 5.3(f) in order to resolve any such Dispute. As used herein, the term “Environmental Disputed Matter” means a Dispute regarding any of the following: (w) the existence and scope of an Environmental Defect; (x) any Environmental Defect Value; (y) the Environmental Adjustment Amount, if any; and (z) the adequacy of Seller’s Environmental Defect Remediation actions. Any Environmental Dispute Notice must be delivered on or before the tenth Business Day after Closing. In no event will Closing be delayed on account of any Environmental Disputed Matter and if the Environmental Defect Property affected thereby is transferred to Buyer at Closing, the average of the Parties’ respective good faith estimates of the Environmental Defect Values attributable to such Environmental Defect Property shall be used in the calculation and determination of the Environmental Adjustment Amount to be used at Closing

(1)    The Parties shall attempt to resolve all Environmental Disputed Matters through good faith negotiations for a period of 20 days after the delivery of an Environmental Dispute Notice by either Party. Following such negotiation period, if the Environmental Disputed Matter at issue should remain in Dispute, such Environmental Disputed Matter shall be resolved pursuant to this Section 5.3(f) and the Parties shall mutually appoint an independent expert within five business days after such negotiation period having the qualifications specified below (the “Environmental Defect Expert”). If the Parties are unable to mutually agree upon the Environmental Defect Expert, then the Parties shall, within ten days after the expiration of such negotiation period, request (and either Party may so request alone if the other Party refuses to jointly act in good faith to do so during such ten day period) that the AAA, acting through its offices in Houston, Texas, appoint the Environmental Defect Expert. The Environmental Defect Expert shall be a certified environmental professional having a minimum of ten years’ experience with regard to the types of environmental defects affecting the Properties involved in the Environmental Disputed Matter, shall be without any conflicts of interest as to the Parties, and shall not have been employed by or undertaken more than $50,000 of work, in the aggregate, for any Party or its Affiliates within the five year period preceding the submission of the Dispute. For the avoidance of doubt, the Environmental Defect Expert will function as an expert in accordance with the procedures set forth in this Section 5.3(f), not as an arbitrator.

(2)    Within 30 days following the appointment of the Environmental Defect Expert, Seller and/or Buyer shall provide the Environmental Defect Expert with a copy of this Agreement, and each Party shall provide, both to the Environmental Defect Expert and each other, a summary of its position with regard to each such outstanding Environmental Disputed Matter in a written document of five pages or less per Environmental Disputed Matter. The Parties shall instruct the Environmental Defect Expert that, within 30 days after receiving the Parties’ respective submissions, the

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Environmental Defect Expert shall render a written decision. In rendering its decision, the Environmental Defect Expert shall not award a higher Environmental Defect Value than the good faith amount claimed by Buyer in its summary or a lower Environmental Defect Value than the good faith amount claimed by Seller in its summary, as applicable. Any decision rendered by the Environmental Defect Expert pursuant hereto shall be final, conclusive, and binding on Seller and Buyer, and will be enforceable against each Party in any court having jurisdiction hereof or jurisdiction of either or both Parties, but is not reviewable by, or appealable to, any court except in the event of fraud. The Parties shall each bear one-half of the costs of the Environmental Defect Expert and of any associated Dispute resolution process and proceedings, except the Parties shall each bear its own legal fees with respect to any Dispute.

(3)    If the Environmental Defect Expert determines that an Environmental Defect did not exist or that an Environmental Defect existed but was Remediated by Seller, then any Environmental Defect Value attributable thereto that was included in the Environmental Adjustment Amount used at Closing, if any, shall be credited to Seller in the Final Settlement Statement.

(4)    If the Environmental Defect Expert determines that an Environmental Defect exists, but that the Environmental Defect Value attributable thereto is a lesser amount than any Environmental Defect Value with respect thereto that was included in the Environmental Adjustment Amount used at Closing, if any, then the difference thereof shall be credited to Seller in the Final Settlement Statement.

(5)    If the Environmental Defect Expert determines that an Environmental Defect exists, such Environmental Defect has not been Remediated by Seller and the Environmental Defect Value attributable thereto is a greater amount than the any Environmental Defect Value with respect thereto that was included in the Environmental Adjustment Amount used at Closing, if any, then the difference thereof shall be credited to Buyer in the Final Settlement Statement.

(6)    Any such adjustments to the amount of the Purchase Price will be reflected in the Final Settlement Statement as applicable.

ARTICLE 6

SELLER’S REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Buyer as follows:

6.1    Status. Seller is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware and is qualified to carry on its business in such other jurisdictions as may be necessary, except where the failure to be so qualified would not be reasonably expected to have a Material Adverse Effect.

6.2    Power. Seller has all requisite company power and authority to carry on its business as presently conducted, to enter into this Agreement and the other documents to be delivered by Seller at Closing pursuant to this Agreement and to perform its obligations hereunder and thereunder.

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6.3    No Conflicts. Except as disclosed in Schedule 6.3 and assuming the receipt of all Consents and the waiver of all Preferential Rights, the execution, delivery and performance by Seller of this Agreement and the other documents to be delivered by Seller at Closing pursuant to this Agreement and the consummation of the transactions contemplated herein and therein does not and will not (a) conflict with or result in a breach of any provisions of the Governing Documents of Seller, (b) result in a default or the creation of any Lien (other than a Permitted Encumbrance), or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions, or provisions of any Lease, Surface Contract, or Applicable Contract to which Seller is a party or, to the Knowledge of Seller, by which Seller or the Assets may be bound or (c) violate any Law applicable to Seller or any of the Assets, except in the case of clauses (b) and (c) where such default, Lien, termination, cancellation, acceleration or violation would not have a Material Adverse Effect.

6.4    Authorization and Enforceability. Assuming the due authorization, execution and delivery by Buyer of this Agreement and the other documents to be delivered by Buyer at Closing pursuant to this Agreement, this Agreement constitutes, and the other documents to be delivered by Seller at Closing pursuant to this Agreement will constitute, Seller’s legal, valid and binding obligations, enforceable in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

6.5    Consents. Except as set forth on Schedule 6.5 and for Customary Post-Closing Consents, no consent, approval or authorization of any applicable Governmental Entity or other Third Party is required to be obtained in connection with the consummation of the transactions contemplated by this Agreement (each such required consent, a “Consent”) by Seller.

6.6    Preferential Rights. Except as set forth on Schedule 6.6, there are no preferential rights to purchase or similar rights with respect to the Assets that are applicable to the transactions contemplated by this Agreement (each such applicable preferential right, a “Preferential Right”).

6.7    Liability for Brokers’ Fees. Seller has not incurred any liability, contingent or otherwise, for investment bankers’, brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any Affiliate of Buyer shall have any responsibility whatsoever.

6.8    Bankruptcy. There are no bankruptcy or insolvency proceedings pending by or against, being contemplated by or, to the Knowledge of Seller, threatened against Seller or its Affiliates, and Seller is not insolvent or generally not paying its debts as they become due.

6.9    Litigation. Except as set forth on Schedule 6.9, as of the Execution Date there are no (a) actions, suits or proceedings by or against Seller with respect to the Assets, or, to Seller’s Knowledge, threatened or (b) to Seller’s Knowledge, investigations by Governmental Entities, in each case, against Seller with respect to the Assets, and in each case, in any court, arbitration proceeding or other Dispute resolution venue by or before any Governmental Entity.

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6.10    Material Agreements.

(a)    Schedule 6.10 lists the following types of Applicable Contracts in effect as of the Execution Date to Seller’s Knowledge (the “Material Agreements”):

(1)    any Applicable Contract between Seller, on the one hand, and any Affiliate of Seller, on the other hand;

(2)    any Applicable Contract for (A) the sale, exchange, or other disposition of Hydrocarbons produced from or attributable to the Assets or (B) the purchase, sale, processing, transportation or other disposal of any such Hydrocarbons, in each case, that is not cancelable without penalty or other payment on not more than 60 days’ prior written notice, other than terms of joint operating agreements or gas balancing agreements which permit an operator or other co-owner to take or market production of a non-taking co-owner;

(3)    any Applicable Contract requiring Seller to sell, lease, farmout, or otherwise dispose of any interest in any of the Properties after the Execution Date, other than non-consent penalties for non-participation in operations under joint operating agreements or conventional rights of reassignment arising in connection with Seller’s surrender or release of any of the Properties;

(4)    any Applicable Contract that creates any area of mutual interest or similar provision with respect to the Assets or contains any material restrictions on the ability of Seller to compete with any other Person;

(5)    any Applicable Contract that can reasonably be expected to result in aggregate payments by, or revenues to, Seller, in each case, only with respect to the Assets, of more than $200,000 during the current fiscal year or $500,000 in the aggregate over the term of such Contract;

(6)    any Applicable Contract that is a drilling contract, service agreement, unitization agreement, unit operating agreement, joint operating agreement, exploration agreement, development agreement, participation agreement, joint venture agreement or similar agreement (excluding any Tax partnership agreement);

(7)    any Applicable Contract that contains any rights allowing a Third Party to participate in any sales or purchases of any of the Assets that are triggered by or applicable to the transactions contemplated by this Agreement; and

(8)    any Applicable Contract that constitutes a lease under which Seller is the lessor or the lessee of personal property which lease (A) cannot be terminated by such Person without penalty upon 60 days or less notice and (B) involves an annual base rental of more than $100,000.

(b)    To Seller’s Knowledge, it is not in default in any material respect under any Material Agreement. During the Due Diligence Period for purposes of the Due Diligence Review, Seller has or will make available to Buyer prior to Closing, true and complete copies of the Material Agreements.

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6.11    AFEs. As of the Execution Date, all outstanding authorities for expenditures or other similar capital commitments relating to the Assets to drill or rework Wells or build gathering systems or other facilities (“AFEs”), that in each case, will be binding upon Buyer or the Assets as of the Effective Time, are set forth in Schedule 6.11, other than any AFEs that, individually, do not exceed $500,000, net to the applicable Assets. For the avoidance of doubt, the amounts shown on Schedule 6.11 with respect to such AFEs are estimates.

6.12    Taxes. Except as disclosed on Schedule 6.12, (a) all Tax Returns relating to or in connection with Seller’s acquisition, ownership, or operation of the Assets required to be filed have been timely filed and all such Tax Returns are correct and complete in all material respects; (b) subject to any Taxes which Seller disputes in good faith, all Taxes relating or applicable to Seller’s acquisition, ownership or operation of the Assets that are or have become due have been timely paid in all material respects, and Seller is not delinquent in the payment of any such Taxes; (c) there is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Tax of Seller relating to Seller’s acquisition, ownership or operation of the Assets; (d) there are no administrative or judicial proceedings pending against the Assets or against Seller relating to or in connection with the Assets by any taxing authority with respect to Taxes; (e) there are no Liens on any of the Assets that arose in connection with Seller’s failure (or alleged failure) to pay any Tax other than Permitted Encumbrances; (f) Seller is not a foreign person within the meaning of Section 1445(f) of the Code; and (g) all Tax withholding and deposit requirements imposed by applicable Law with respect to any of the Assets or the business of Seller have been satisfied in all material respects.

6.13    Tax Partnerships. None of the Assets is held by or is subject to any arrangement between Seller and any other Persons, whether owning undivided interests therein or otherwise, that is treated as or constitutes a partnership for purposes of Subchapter K of Chapter 1 of Subtitle A of the Code (a “Tax Partnership”).

6.14    Compliance with Law and Government Authorizations.

(a)    Except as would not have a Material Adverse Effect, to Seller’s Knowledge, the operator of the Assets has obtained (or has filed to obtain) and is maintaining all Governmental Authorizations that are presently necessary or required by it to own and operate the Assets as the Assets are presently owned and operated.

(b)    Except as provided on Schedule 6.14, no written notice of violation of Law or a Governmental Authorization has been received by Seller nor any of its Affiliates from a Governmental Entity with respect to the Assets.

(c)    Except as would not have a Material Adverse Effect, the Assets operated by Seller or its Affiliates are being operated in compliance with all applicable Laws.

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Notwithstanding the foregoing, this Section 6.14 does not relate to any Tax matters, which are exclusively addressed in Section 6.12 and Section 6.13, or Environmental Laws, which are exclusively addressed in ARTICLE 5 and in Section 6.15.

6.15    Environmental Matters. Except as referenced in Schedule 6.15 or as would not have a Material Adverse Effect:

(a)    Neither Seller nor any of its Affiliates has entered into any agreements, orders, decrees, judgments, license or permit conditions, or other directives of any Governmental Entity in existence as of the Execution Date based on any prior violations of Environmental Laws that materially impairs the future ownership or use of any of the Assets or that currently requires any Remediation as to any of the Assets.

(b)    As of the Execution Date, neither Seller nor any of its Affiliates has received written notice from any Governmental Entity of any Condition concerning any Asset that (1) materially interferes with or prevents compliance by Seller or the Assets with any Environmental Law or the terms of any Governmental Authorization relating to Environmental Laws, or (2) gives rise to or results in common Law or other material liability of Seller to any Person.

6.16    Payments for Production; Calls on Production.

(a)    Seller has not: (1) received any advance, “take-or-pay” or other similar payments under production sales Contracts applicable to the Assets that entitle the purchasers to “make up” or otherwise receive deliveries of Hydrocarbons without paying at such time the contract price therefor; or (2) other than in accordance with gas balancing arrangements and non-consent provisions in Contracts, received any advance payment or other similar payment to deliver Hydrocarbons produced from, or attributable to, the Assets, or proceeds from the sale thereof, at some future time, without receiving payment therefor at or after the time of delivery.

(b)    To Seller’s Knowledge, no Person has any call upon, option to purchase or similar rights with respect to the Hydrocarbon production from the Assets, except as may be provided in the Material Agreements.

6.17    Well Status and Abandonments. Except as referenced on Schedule 6.17 and as would not have a Material Adverse Effect (a) to Seller’s Knowledge, all Wells that have been permanently abandoned were abandoned in accordance with all applicable Laws; and (b) neither Seller nor its Affiliates have received any written notices from any applicable Government Entity that: (1) any such permanently abandoned Wells were not abandoned in accordance with all applicable Laws; or (2) there are any Wells for which permanent abandonment is presently required for compliance with applicable Laws.

6.18    Bonds and Credit Support. Except as referenced on Schedule 6.18, there are no bonds, letters of credit and other similar credit support instruments maintained by Seller or its Affiliates with respect to Seller’s ownership and operation of the Assets.

6.19    Suspense Funds. Except as set forth in Schedule 6.19, as of the date set forth on such Schedule, Seller and its Affiliates do not hold any Third Party funds in suspense with respect to production of Hydrocarbons from any of the Properties other than amounts less than the statutory minimum amount that Seller or its Affiliates is permitted to accumulate prior to payment.

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6.20    Imbalances. Schedule 6.20 sets forth all material Imbalances associated with the Assets operated by Seller or its Affiliates as of the Effective Time.

6.21    Insurance. Schedule 6.21 lists each material insurance policy maintained by Seller that relate or provide coverage to the Assets (the “Policies”). Except as set forth on Schedule 6.21, there are no claims pending with respect to any such Policies with respect to the Assets or the operation thereof. Each Policy is in full force and effect.

6.22    Royalties. Except as disclosed on Schedule 6.22 and for such items that are not yet due or are being held in suspense as permitted pursuant to applicable Law, Seller has paid, in all material respects, all royalties, overriding royalties and other burdens on production due by Seller with respect to the Properties.

6.23    Non-Consent Operations. Seller has not elected not to participate in any operation or activity proposed with respect to the Properties which could result in any of Seller’s interest in such Properties becoming subject to a penalty or forfeiture as a result of such election not to participate in such operation or activity. Schedule 6.23 accurately reflects all payout balances attributable to Seller’s interest in the Wells operated by Seller or its Affiliates as of the date set forth with respect to each payout balance on Schedule 6.23. The interest of Seller in the Leases or Wells does not include any interest to which it may be entitled by virtue of another party electing or being deemed to have elected to go Non-Consent to a proposed operation except as described on Schedule 6.23.

6.24    Leases. All of the Leases are beyond their primary terms except as described on Schedule 6.24. Except for those undeveloped Leases described in Schedule 6.24, Buyer is not subject to a continuous drilling provision requiring the drilling of an additional Well or Wells to maintain any of the Leases as to any of the Land covered thereby which has been included in a pooled unit for as long as the Wells described on Exhibit B produce in paying quantities.

ARTICLE 7

BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to Seller as follows:

7.1     Organization and Standing. Buyer is a Corporation, duly organized, validly existing and in good standing under the Laws of the State of Delaware, and is duly qualified to carry on its business in such other jurisdictions as may be necessary, except where the failure to be so qualified would not be reasonably expected to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement and perform its obligations hereunder.

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7.2    Power. Buyer has all requisite corporate power and authority to carry on its business as presently conducted, to enter into this Agreement and the other documents to be delivered by Buyer at Closing pursuant to this Agreement and to perform its obligations hereunder and thereunder.

7.3    No Conflicts. The execution, delivery and performance by Buyer of this Agreement and the other documents to be delivered by Buyer at Closing pursuant to this Agreement and the consummation of the transactions contemplated herein and therein does not and will not (a) conflict with or result in a breach of any provisions of the Governing Documents of Buyer, (b) result in a default or the creation of any Lien or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions, or provisions of any note, bond, mortgage or indenture to which Buyer is a party or by which Buyer or any of its property may be bound or (c) violate any Law applicable to Buyer or any of its property, except in the case of clauses (b) and (c) where such default, Lien, termination, cancellation, acceleration or violation would not, individually or in the aggregate, have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement or perform its obligations hereunder.

7.4    Authorization and Enforceability. Assuming the due authorization, execution and delivery by Seller of this Agreement and the other documents to be delivered by Seller at Closing pursuant to this Agreement, this Agreement constitutes, and the other documents to be delivered by Buyer at Closing pursuant to this Agreement will constitute, Buyer’s legal, valid and binding obligations, enforceable in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

7.5    Consent. No Consent is required to be obtained with respect to the consummation of the transactions contemplated by this Agreement by Buyer.

7.6    Liability for Brokers’ Fees. Buyer has not incurred any liability, contingent or otherwise, for investment bankers’, brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Seller or any Affiliate of Seller shall have any responsibility whatsoever.

7.7    Bankruptcy. There are no bankruptcy or insolvency proceedings pending by or against, being contemplated by or, to the Knowledge of Buyer, threatened against Buyer or its Affiliates, and Buyer is not insolvent or generally not paying its debts as they become due.

7.8    Litigation. There is no action, suit, proceeding, Claim or investigation by any Governmental Entity, court, arbitral authority or other Person pending by or against Buyer or, to Buyer’s Knowledge, threatened against Buyer, in each case, in any court, arbitration proceeding or other Dispute resolution venue by or before any Governmental Entity that impedes or is likely to impede Buyer’s ability to consummate the transactions contemplated by this Agreement and to perform its obligations hereunder.

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7.9    Financial Resources and other Capability. Buyer has the financial resources available to consummate the transactions contemplated by this Agreement, to pay the Purchase Price and to pay any and all fees and expenses incurred by Buyer in connection with the transactions contemplated by this Agreement. Buyer has the financial, technical and other capabilities to perform all of Buyer’s other obligations under this Agreement and all of the obligations assumed from Seller under the Assets.

7.10    Buyer’s Evaluation.

(a)    Review. Buyer is an experienced and knowledgeable investor in the oil and gas industry and is aware of the possibility of risks in the acquisition of oil and gas assets. Buyer acknowledges that Seller has not made any representations or warranties as to the Assets except as expressly and specifically provided in ARTICLE 6, the affirmations of such representations and warranties contained in the certificate to be delivered by Seller at Closing pursuant to Section 10.3(c) and the “special warranty” contained in the Assignment, and that Buyer may not rely on any other representations or warranties made by Seller or Seller’s Representatives or on any of Seller’s estimates with respect to reserves or the value of the Assets, or any projections as to future events or other analyses or forward looking statements.

(b)    Independent Evaluation. In entering into this Agreement, except for the representations and warranties expressly and specifically provided in ARTICLE 6, the affirmations of such representations and warranties contained in the certificate to be delivered by Seller at Closing pursuant to Section 10.3(c) and the “special warranty” contained in the Assignment, Buyer acknowledges and affirms that it has relied and will rely solely on the terms of this Agreement and the Assignment and upon its independent analysis, evaluation and investigation of, and judgment with respect to, the business, economic, legal, tax or other consequences of this transaction, including its own estimate and appraisal of the extent and value of the Hydrocarbon reserves or other value of the Assets.

7.11    Securities Law Compliance. Buyer is acquiring the Assets for its own account for use in its trade or business, and not with a view toward or for sale associated with any distribution thereof, nor with any present intention of making a distribution thereof within the meaning of the Securities Act and applicable state securities Laws. Buyer is an “accredited investor” within the meaning of Regulation D of the Securities Act.

7.12    Valid Issuance of Share Consideration. The shares of Class A Common Stock to be issued as the Share Consideration have been duly authorized for issuance by Buyer and, when issued and delivered to Seller in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable, and will not be subject to any preemptive or similar rights. Upon Closing and the transfer of the Share Consideration to Seller, the Share Consideration will be free of any and all liens and restrictions on transfer, other than restrictions on transfer under applicable state and federal securities laws. The issuance of the Share Consideration to Seller shall not, whether with or without the giving of notice, the passage of time or both, require any consent, approval or notice under, or constitute a breach or violation of the organization documents of Buyer, conflict with or constitute a material breach of, or default under, or result in the creation or imposition of any Lien upon the property or assets of Buyer pursuant to any contract to which Buyer is a party, or result in a violation of any applicable material Law, judgment, order, writ or decree of any Governmental Entity with jurisdiction over Buyer or its assets.

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7.13    Listing Compliance. Buyer’s shares included in the Share Consideration are quoted on the Nasdaq Global Select Market (“NASDAQ”), Buyer has complied with all listing requirements of the NASDAQ, has not taken any action designed to, or likely to have the effect of, delisting the shares of Class A Common Stock to be issued as the Share Consideration from the NASDAQ and Buyer has not received any notice of delisting.

7.14    Capitalization.

(a)    The authorized capital stock of Buyer consists solely of 100,000,000 shares of Class A voting common stock, $0.001 par value per share (the “Class A Common Stock”), and 5,000 shares of Class B non-voting common stock, par value $0.001 per share (the “Class B Common Stock”). As of May 10, 2017, 21,822,015 shares of Class A Common Stock were issued and outstanding and 2,500 shares of Class B Common Stock were issued and outstanding. Except as disclosed in Schedule 7.14(a) of the Buyer Capitalization Disclosure Schedule, as of May 10, 2017, there were no outstanding and unvested award issuances under Buyer’s long-term incentive plan, there were no shares of buyer Class A Common Stock underlying outstanding but unexercised warrants issued under Buyer’s Securities Purchase Agreement entered into on August 2, 2016 with Juneau Energy, LLC and Jefferies, LLC and an additional 87,375 shares of Class A Common Stock available for issuance under Buyer’s long-term incentive plan. Other than the obligations described in the previous sentence related to Buyer’s long-term incentive plan and outstanding warrants, Buyer does not have outstanding any securities convertible into or exchangeable for any capital stock of, or membership interests or other ownership interests in Buyer, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock of, or membership interests or other ownership interests in Buyer, or any stock or securities convertible into or exchangeable for any capital stock of, or membership interests or other ownership interests in Buyer.

(b)    All of the outstanding shares of capital stock, or membership interests or other ownership interests of, each subsidiary of Buyer, as applicable, are validly issued, fully paid and non-assessable and are owned of record and beneficially by Buyer, directly or indirectly. Buyer has, as of the date hereof and shall have on the Closing Date, valid and marketable title, directly or indirectly, to all of the shares of capital stock of, or membership interests or other ownership interests in, each subsidiary of Buyer, free and clear of any Liens except for such Liens as would not, in the aggregate, reasonably be expected to have a material adverse effect. Such outstanding shares of capital stock of, or membership interests or other ownership interests in, the subsidiaries of Buyer, as applicable, are the sole outstanding securities of such subsidiaries; the subsidiaries of Buyer do not have outstanding any securities convertible into or exchangeable for any capital stock of, or membership interests or other ownership interests in, such subsidiaries, any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any other character relating to the issuance of, any capital stock of, or membership interests or other ownership interests in, such subsidiaries, or any stock or securities convertible into or

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exchangeable for any capital stock of, or membership interests or other ownership interests in, such subsidiaries; and neither Buyer nor any of its subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any capital stock of, or membership interests or other ownership interests in, any subsidiary of Buyer.

(c)    Buyer has no rights plan, “poison-pill” or other similar agreement or arrangement or any anti-takeover provision in its organizational documents that is, or at the Closing Date shall be, applicable to the Seller, Buyer’s capital stock, or the transactions contemplated by this Agreement.

7.15    SEC Reports; Financial Statements.

(a)    Buyer has filed all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) required to be filed by Buyer with the SEC since Buyer first became subject to the SEC’s Exchange Act reporting requirements on July 5, 2016 (such documents being collectively referred to as the “SEC Reports”). Each SEC Report (i) at the time filed or, if amended, as of the date of such amendment, complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Report and (ii) did not, at the time it was filed (or, if amended or superseded by a filing or amendment prior to the date hereof, then at the time of such filing or amendment) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b)    The financial statements contained in the SEC Reports (i) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods presented thereby (except as may be indicated in the notes thereto or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC), and (ii) fairly present, in all material respects, the consolidated financial position and operating results, equity and cash flows of Buyer and its subsidiaries, on a consolidated basis, as of, and for the periods ended on, the respective dates thereof, subject, however, in the case of unaudited financial statements, to normal, recurring and year-end audit adjustments.

(c)    Buyer, and its subsidiaries, have established and maintain disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Buyer and its subsidiaries in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Buyer’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

7.16    Absence of Undisclosed Liabilities. There are no liabilities or obligations of Buyer or any subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute,

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determined, determinable or otherwise, other than (A) liabilities or obligations disclosed, reflected or reserved against and provided for in the consolidated balance sheet of Buyer as of December 31, 2016 included in Buyer’s SEC Reports filed prior to the date hereof or referred to in the notes thereto, (B) liabilities or obligations incurred in the ordinary course of business consistent with past practice since December 31, 2016, (C) liabilities or obligations that would not, individually or in the aggregate, have a Buyer Material Adverse Effect, or (D) liabilities or obligations incurred pursuant to this Agreement.

7.17    Seller Is Not an Affiliate. To the knowledge of Buyer, Seller is not an affiliate of Buyer for purposes of the Securities Act or the Exchange Act and will not become an affiliate of Buyer for such purposes upon issuance of the Share Consideration.

7.18    Absence of Certain Changes or Events.

(a)    Since December 31, 2016, there has not been any Buyer Material Adverse Effect.

(b)    Since December 31, 2016, through the date hereof, there has not been any material loss, damage, destruction or other casualty to the assets or properties of either of Buyer or any of its subsidiaries (other than (x) any for which insurance awards have been received or guaranteed and (y) for such failures as would not individually or in the aggregate have a Parent Material Adverse Effect).

(c)    Since December 31, 2016 through the date hereof, except as reported in the Buyer’s Exchange Act filings with the SEC, each of the Buyer and its subsidiaries has operated in the ordinary course of business and has not:

(1)    (A) lent money to any Person (other than to any of its wholly owned subsidiaries) or incurred or guaranteed any indebtedness for borrowed money in excess of $1,000,000 in the aggregate, or (B) entered into any capital lease obligation, other than with any of its wholly owned subsidiaries;

(2)    failed to discharge or satisfy any material Lien or pay or satisfy any obligation or liability or accounts payable (whether absolute, accrued, contingent or otherwise) in excess of $1,000,000, other than obligations and liabilities being contested in good faith and for which adequate reserves have been provided in accordance with GAAP;

(3)    mortgaged, pledged or subjected to any Lien any of its assets, properties or rights in excess of $1,000,000;

(4)    sold or transferred any of its material assets in excess of $1,000,000;

(5)    declared, paid, or set aside for payment any dividend or other distribution in respect of shares of its capital stock, membership interests or other securities, or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of its capital stock, membership interests or other securities, or agreed to do so;

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(6)    (A) changed any of its material accounting principles or practices, except as required by GAAP or by the SEC, or (B) changed its material Tax elections, or entered into any material closing agreement or settled or compromised any material claim or assessment, in each case in respect of material Taxes;

(7)    Entered or committed to enter into any arrangement or agreement that could result in the dilution of the Buyer’s capital stock; or

(8)    Entered into any agreement or made any commitment to do any of the foregoing.

ARTICLE 8

COVENANTS AND AGREEMENTS

8.1    Covenants and Agreements of Seller. Except (w) as set forth in Schedule 8.1, (x) for and in connection with the operations pursuant to any AFE listed on Schedule 6.11, (y) as required pursuant to the terms of any Material Agreement or Lease or to the extent Seller does not have the Legal Right, or (z) as consented to in writing by Buyer (such consent not to be unreasonably withheld, delayed or conditioned):

(a)    Operations Prior to Closing. From the Execution Date until the Closing, Seller shall:

(1)    use its commercially reasonable efforts to cause the Assets to be operated in a manner consistent in all material respects with past practice; provided, however, if Seller cures any non-compliance with respect to any of the foregoing matters prior to Closing, Seller shall be deemed to have complied with this Section 8.1(a)(1); and

(2)    notify Buyer if Seller receives written notice of any Third Party Claim affecting the Assets or written notice of any default by Seller under any Material Agreement, Lease or Surface Contract.

(b)    Restriction on Operations. From the Execution Date until the Closing, Seller shall not:

(1)    convey, sell, transfer or abandon any part of the Assets except (A) Leases that have terminated in the ordinary course of business based upon the expiration of the primary terms of such Leases, (B) Leases that are no longer capable of production in paying quantities, (C) sales of Equipment or facilities in the ordinary course of business, (D) sales of Hydrocarbons produced from, or attributable to, the Assets in the ordinary course of business or (E) for Permitted Encumbrances;

(2)    approve or propose any operations anticipated in any instance to cost the owner of the Assets more than $100,000, net to the Assets, per activity or per any series of related activities, except for (A) emergency operations, (B) any operations required under applicable Laws, or (C) any operations necessary to avoid a material monetary penalty or forfeiture provision under any applicable Lease, Surface Contract, Applicable Contract or Law; provided, however, that Seller shall forward to Buyer the applicable AFE with respect to any operation that does not require approval pursuant to this Section 8.1(b)(2);

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(3)    enter into any farm-out, farm-in or other similar Contract affecting the Assets;

(4)    let lapse any of Seller’s insurance now in force with respect to the Assets;

(5)    modify or terminate any Material Agreement, other than any such Material Agreement that terminates according to its terms;

(6)    enter into any Contract that, if in existence as of the Execution Date, would be a Material Agreement;

(7)    waive, release, assign, settle or compromise any claim, action or proceeding relating to the Assets, other than waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages not in excess of $100,000 individually or in the aggregate, net to the Assets, (excluding amounts to be paid under insurance policies); or

(8)    authorize or agree, in writing or otherwise, to take any of the actions prohibited by this Section 8.1(b).

(c)    Consents. For the purposes of obtaining the written consents for AFEs required in Section 8.1(b)(2), Buyer designates the following contact Person: John Evans, at the address and telephone number for Buyer set forth in Section 15.3. Such consents may be obtained in writing by overnight courier or given by .pdf via email or facsimile transmission. Buyer agrees that it will (1) timely respond to any written request for consent pursuant to Section 8.1(b)(2), and (2) consent to any written request for approval of any AFE that the officers of Seller reasonably consider to be economically viable. Buyer’s consent shall be considered granted within ten days (unless a shorter time, not to be less than 48 hours, is reasonably required by the circumstances and the applicable joint operating agreement and such shorter time is specified in Seller’s request for consent) after Buyer’s receipt of such request for such consent, unless Buyer notifies Seller to the contrary during that period.

(d)    Disclaimer. Buyer acknowledges that Seller may own interests in Assets with respect to which it is not the operator, and therefore, for the sake of clarity , it is acknowledged that Seller does not have the “Legal Right” with respect to the acts or omissions of the other Working Interest owners (including the operators) who are not Seller or any of Seller’s Affiliates and which Seller does not have the contractual right to control and no action required by a vote of Working Interest owners in and of itself shall constitute a breach of this Section 8.1 so long as Seller has voted its interest in a manner that complies with the provisions of this Section 8.1.

8.2    Covenants and Agreements of Buyer.

(a)    Buyer covenants and agrees with Seller that Buyer shall use commercially reasonable efforts to assure that, as of the Closing Date, it will not be under any material legal, contractual or other restriction that would prohibit or delay the timely consummation of the transactions contemplated hereby.

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(b)    Change of Name. As promptly as practicable, but in any case within 30 days after the Closing Date, Buyer shall (1) eliminate the name “Sanchez” or “SN Marquis” and any variants thereof from the Assets, (2) cease using in any way the word “Sanchez” or “SN Marquis” with respect to the Assets, and (3) remove and cease to use all trademarks associated with Seller or its Affiliates with respect to the Assets. Except with respect to such grace period for eliminating existing usage, for the avoidance of doubt, Buyer shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates. FROM AND AFTER THE CLOSING, BUYER HEREBY WAIVES, RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER AND THE OTHER SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY LOSSES ARISING OUT OF, OR IN ANY WAY ATTRIBUTABLE TO, THE USE OF THE WORD “SANCHEZ” OR “SN MARQUIS” WITH RESPECT TO THE ASSETS OR OTHERWISE IN RELATION TO ANY BREACH BY BUYER OF ITS OBLIGATIONS UNDER THIS SECTION 8.2(b), EVEN IF SUCH LOSSES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, GROSS, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY OF THE SELLER INDEMNIFIED PARTIES.

(c)    Governmental Bonds. Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with Governmental Entities and relating to the Assets are transferable to Buyer. On or before the Closing Date, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for such bonds, letters of credit and guarantees to the extent such replacements are necessary (1) for Buyer’s ownership and, as applicable, operation of the Assets and (2) to permit the cancellation of the bonds, letters of credit and guarantees posted by Seller and/or its Affiliates with respect to the Assets. In addition, at or prior to Closing, Buyer shall deliver to Seller evidence of the posting of bonds or other security with all applicable Governmental Entities meeting the requirements of such authorities to own and, where appropriate, operate, the Assets.

(d)    Confidentiality. As used herein, the term “Confidential Information” means all proprietary information of whatever nature, in whatever form (including written, graphic, digital, electronic or otherwise), which may be disclosed by Seller or its Representatives to Buyer or its Representatives, or otherwise obtained by Buyer or its Representatives, regarding the Assets (whether pursuant to Buyer’s Due Diligence Review or otherwise), including the following types of information, documents and other materials: (w) geological, geophysical, drilling, engineering, production, operational, reserve, reservoir and other technical, leasehold, land, environmental, financial, commercial and other data, plats, models, plans, analyses, reports, contracts and other materials; (x) the existence and contents of any proposal, discussion, negotiation, understanding or agreement involving the Parties in respect of the Assets, including with respect to the transactions contemplated by this Agreement; (y) all reproductions, transcriptions, reports, summaries, extracts, restatements, analyses, interpretations, sketches, notes and other materials, in whatever form, which may be generated by Buyer any Confidential Information previously received by Buyer; and (z) Third Party Proprietary Data.

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(1)    Subject to Section 8.2(d)(2) and Section 8.2(d)(3), Buyer agrees that all Confidential Information shall be kept strictly confidential and shall not be sold, traded, published, transferred or otherwise disclosed to any other Person in any manner whatsoever, including electronically or by any other means of reproduction or transmittal, without Seller’s specific prior written consent. Without limiting the scope of Buyer’s obligations under the immediately preceding sentence, Buyer shall take protective measures for the Confidential Information which are at least as stringent as for its own confidential and proprietary information.

(2)    Except as otherwise provided in this Agreement, Buyer may disclose Confidential Information without Seller’s specific prior written consent only to the extent that such disclosed Confidential Information: (A) at the time disclosed, is part of the public domain other than through the act or omission of Buyer or its Representatives in violation of the provisions of this Section 8.2(d); (B) was, prior to the Effective Time, acquired independently by Buyer from a Third Party who (i) lawfully obtained such Confidential Information, (ii) did not derive such Confidential Information directly or indirectly from Seller or its Representatives and Confidential Information and (iii) represented that it had the right to disseminate such information to Buyer; (C) is developed by Buyer or any of its Affiliates independently, and without the use of or reference to, any of the Confidential Information; or (D) is required to be disclosed by Buyer under applicable Law, including any recognized securities exchange on which the shares of Buyer or any of its Affiliates are actively traded; provided that Buyer will make all reasonable efforts to give Seller prior written notice of any such required disclosure and the opportunity to seek a protective order if Seller wishes, all to the extent permitted by applicable Law; provided further, if Seller wishes, but is unable, to obtain such protective order, then (I) Buyer may disclose to the appropriate Governmental Entity or other authority only that portion of the Confidential Information which Buyer is legally required to disclose and Buyer shall use all reasonable efforts to obtain assurances that confidential treatment will be accorded to the Confidential Information and (II) Buyer shall not be liable to Seller for such disclosure to the extent made in accordance with this Section.

(3)    Notwithstanding the foregoing, Buyer may disclose Confidential Information to any of its Affiliates and other Representatives without Seller’s prior written consent, provided that Buyer shall remain liable hereunder for any failure of such Affiliate or other Representative to maintain such Confidential Information as strictly confidential in accordance with the terms of this Section 8.2(d). Buyer shall ensure that each such Affiliate and other Representative is aware of Buyer’s obligations under this Section 8.2(d) and shall ensure compliance by each such Affiliate and other Representative with all such obligations. After Closing, Buyer may disclose Confidential Information acquired with the Assets except as may be prohibited by agreements with Third Parties.

8.3    Covenants and Agreements of the Parties.

(a)    Communication Between the Parties Regarding Breach. If Buyer or Seller obtains Knowledge prior to Closing that leads either Party to believe that the other Party has

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breached a representation or warranty or failed to perform a covenant or agreement under this Agreement, the non-breaching Party shall inform the alleged breaching Party in writing of such potential breach as soon as reasonably practicable so that the breaching Party may attempt to remedy or cure such breach prior to the Closing. If such breach or failure is thereafter cured to the reasonable satisfaction of the non-breaching Party by the Closing (or, if the Closing does not occur, by the date this Agreement terminates), then such breach or failure shall be deemed not to have occurred for all purposes of this Agreement. Should any Party fail to inform the other Party of any such breach or failure by such other Party pursuant to this Section 8.3(a), the Party with Knowledge of such breach or failure shall be deemed to have waived, for all purposes hereunder, the breach or failure for which it has not provided the other Party with notification pursuant to this Section 8.3(a).

(b)    Casualty Loss. Prior to Closing, if a portion of the Assets is destroyed or materially damaged by fire or other casualty or if a material portion of the Assets is taken or threatened to be taken in condemnation or under the right of eminent domain (each, a “Casualty Loss”), Seller shall promptly advise Buyer in writing of such Casualty Loss and shall elect, by the delivery of written notice to Buyer at least five Business Days prior to the Closing Date (or, if the Casualty Loss occurs after such date and prior to Closing, as soon as reasonably practicable prior to the Closing Date), either of the following: (1) to retain the Asset affected by the Casualty Loss and reduce the Purchase Price by the Allocated Value of such Asset; or (2) to assign such Asset to Buyer without any reduction of the Purchase Price, subject to the assignment to Buyer of all insurance proceeds received by Seller (net of any Taxes and collection costs incurred thereon by Seller) as to such Casualty Loss.

(c)    Operatorship. To the extent Seller or one of its Affiliates is designated as operator of certain Assets pursuant to joint operating agreements with Third Parties included in the Applicable Contracts, Buyer acknowledges that such Third Parties may not agree to allow Buyer to succeed Seller or its Affiliate as operator under such joint operating agreements or may exercise other rights that they may have which would preclude Buyer from succeeding Seller or its Affiliate as operator. Buyer specifically acknowledges and agrees that Seller has made no representation, warranty or other guarantee that Buyer will succeed Seller or its Affiliate as operator under any joint operating agreement; provided that Seller shall use its commercially reasonably efforts to support Buyer’s succession as operator as to any of the Assets operated by Seller or its Affiliates (subject to the provisions of any applicable joint operating agreement), including soliciting the written vote of any co-working interest owner of the Assets to Buyer’s succession as operator. Prior to Closing, Seller shall not, and shall cause its Affiliates to not, voluntarily resign as operator under any joint operating agreements and unit operating agreements covering the Assets.

(d)    Employees of Seller. Buyer agrees that, without Seller’s prior written consent and excepting only as expressly otherwise provided below, until one year after the Closing Date, Buyer will not, directly or indirectly, solicit for employment any employee of Seller or any of its Affiliates who have provided services in relation to the Assets or with whom Buyer has had contact or who became known to Buyer in connection with Buyer’s consideration of the transactions contemplated by this Agreement; provided that, so long as Buyer has not breached its obligations hereunder, Buyer shall not be precluded from hiring any such employee or other Person who (1) responds to any advertisement to the public or the industry generally that is not

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directly or indirectly targeted at employees of Seller or any of its Affiliates, or (2) has been terminated (and not rehired) by Seller or any of its Affiliates prior to commencement of employment discussions between Buyer and such employee or other Person.

(e)    Government Reviews. In a timely manner and at least 30 days prior to Closing, the Parties shall (1) make all required filings, prepare all required applications and conduct negotiations with each Governmental Entity as to which such filings, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby and (2) provide such information as each may reasonably request to make such filings, prepare such applications and conduct such negotiations. Each Party shall reasonably cooperate with and use all commercially reasonable efforts to assist the other with respect to such filings, applications, and negotiations. Without limiting the foregoing, if the Parties determine that a filing under the HSR Act is required, then, within ten Business Days following the Execution Date, the Parties will prepare and file with the DOJ and the FTC the notification and report form required by the HSR Act for the transactions contemplated by this Agreement, and request early termination of the waiting period thereunder. Each of the Parties agree to respond promptly to any inquiries from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act. The Parties shall cooperate with each other and shall promptly furnish all information to the other Parties that is necessary in connection with Buyer’s compliance with the HSR Act. The Parties shall use their commercially reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to consummate the transactions consummated hereby. All filing fees incurred in connection with the HSR Act filings made pursuant to this Section 8.3(e) shall be borne by Buyer.

(f)    Amendment of Schedules. Buyer agrees that Seller shall have the continuing right until Closing to add, supplement or amend the Schedules and Exhibits with respect to any matter hereafter arising or discovered which, if existing or known as of the Execution Date or thereafter, would have been required to be set forth or described in such Schedules and Exhibits. For purposes of determining whether the conditions set forth in ARTICLE 10 have been fulfilled, the Schedules and Exhibits to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto; provided, however, that if Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to Closing shall be waived and deemed part of the Schedules and Exhibits for all purposes and Buyer shall not be entitled to make any Claim with respect thereto pursuant to the terms of this Agreement or otherwise.

ARTICLE 9

TAX MATTERS

9.1    Asset Tax Liability. Subject to the treatment of real property Taxes, personal property Taxes and similar ad valorem Taxes (“Property Taxes”) provided below, all Asset Taxes for Tax periods that begin before and end on or after the Effective Time shall be allocated between Buyer and Seller as of the Effective Time for all taxable periods that include the Effective Time. All Asset Taxes that are not Property Taxes shall be allocated to Seller to the extent they relate to Hydrocarbon production prior to the Effective Time and to Buyer to the extent they relate to Hydrocarbon production on or after the Effective Time. No liability for

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Asset Taxes shall duplicate an adjustment to Purchase Price made pursuant to Section 2.4. Property Taxes for each assessment period shall be allocated to Seller based on the percentage of the assessment period occurring before the Effective Time and to Buyer based on the percentage of the assessment period occurring on or after the Effective Time. Each Party shall promptly furnish to the other Party copies of any Asset Tax assessments and statements (or invoices therefor from any applicable Third Party operator of the Assets) received by it, to the extent such assessment, statement, or invoice relates to an Asset Tax allocable to the other Party under this Section 9.1. Seller shall estimate all Asset Taxes asserted against it that are attributable to the ownership or operation of the Assets to the extent relating to the period on and after the Effective Time and through the Closing Date, together with all Subject Transfer Taxes, and incorporate such estimates into the Preliminary Settlement Statement. The actual amounts (to the extent the actual amounts differ from the estimates included in the Preliminary Settlement Statement and are known at the time of the Final Settlement Statement) shall be accounted for in the Final Settlement Statement. If the actual amounts are not known at the time of the Final Settlement Statement, the amounts shall be re-estimated, as necessary, based on the best information available at the time of the Final Settlement Statement.

9.2    Transfer Taxes. All sales, use, transfer, stamp, documentary, registration, value-added and other similar Taxes (including all applicable real estate transfer Taxes but excluding Taxes on gross income, net income or gross receipts), duties, levies, recording fees or other governmental charges incurred by or imposed with respect to the property transfers undertaken pursuant to this Agreement (“Subject Transfer Taxes”) shall be the responsibility of, and shall be paid by, Buyer. The Parties shall reasonably cooperate in taking steps that would minimize or eliminate any Subject Transfer Taxes. Buyer agrees to file all Subject Transfer Tax Returns relating to such Subject Transfer Taxes and to reasonably consult with Seller regarding any such filing.

9.3    Asset Tax Returns. Seller shall provide Buyer with any information Seller has that is reasonably necessary for Buyer to file any required Tax Return with respect to Asset Taxes that are due after the Closing Date. All such Tax Returns shall be prepared by Buyer in a manner consistent with the prior practice of Seller, to the extent permitted by Law and in a manner consistent with the allocation described in Section 2.3(a), Section 2.3(b) and, if applicable, the final Section 1060 Allocation Schedule. Buyer shall provide Seller with copies of completed drafts of such Tax Returns at least 20 days prior to the due date for filing thereof, to the extent reasonably practicable, along with supporting work papers, for Seller’s review. Buyer shall consider in good faith any comment that Seller submits to Buyer no less than ten days prior to the due date of such Tax Returns. Buyer shall file all such Tax Returns and, subject to the provisions of Section 9.1, pay all Asset Taxes due and payable with respect to such Tax Returns. To the extent Buyer makes any payment of Asset Taxes pursuant to this Section 9.3 for which Seller is liable pursuant to Section 9.1 and which exceeds the amount taken into account in the Final Settlement Statement, Seller shall reimburse Buyer for such excess amount no later than ten days after Buyer delivers a statement to Seller setting forth the amount of reimbursement to which Buyer is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement.

9.4    Tax Cooperation. Buyer and Seller shall each cooperate fully as and to the extent reasonably requested by the other Party, in connection with the filing of any Tax Returns and any

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audit, litigation or other proceeding (each, a “Tax Proceeding”) with respect to Taxes relating to or in connection with the Assets. Such cooperation shall include the retention and (upon the other Party’s request) the provision of such Records and information which are reasonably relevant to any such Tax Return or Tax Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

9.5    Like Kind Exchange. Buyer and Seller agree to use commercially reasonable efforts and cooperation (without risk, expense or extraordinary commitment of personnel or other resources) in any attempt to qualify (a) the transfer of the Assets by Seller with respect to this transaction or (b) the purchase of the Assets by Buyer, with respect to a separate transaction whereby Buyer transfers other oil and gas properties to a Third Party, as part of a like-kind exchange of property within the meaning of Section 1031 of the Code, through a trust, escrow or other reasonable means; provided, however, that (1) Seller shall defend, indemnify and hold Buyer harmless for any cost, expense, obligation or other liability, without limitation, which Buyer may suffer in connection with or arising out of Buyer’s cooperation with Seller’s treatment of the sale of the Assets as part of a like-kind exchange and on account of Buyer’s cooperation with Seller’s attempt to qualify the transfer of the Assets by Seller with respect to this transaction as a like-kind exchange, and (2) Buyer shall defend, indemnify and hold Seller harmless from any cost, expense, obligation or other liability, without limitation, which Seller may suffer in connection with or arising out of Seller’s cooperation with Buyer’s treatment of the purchase of the Assets as part of a separate like-kind exchange and on account of Seller’s cooperation with Buyer’s attempt to qualify the purchase of the Assets by Buyer with respect to this transaction as a like-kind exchange. Each Party shall have the right to assign its rights, but not its obligations, under this Agreement, in whole or in part, to a “qualified intermediary” (as defined in Treasury Regulations Section 1.1031(k)-l(g)(4)) or as otherwise necessary or appropriate to effectuate a like-kind exchange, and each other Party agrees to recognize said qualified intermediary. Each Party shall be solely responsible for assuring the effectiveness of any exchange for its Tax purposes, and each other Party makes no representation or undertaking with regard to such effectiveness. In no event shall any like-kind exchange contemplated by this provision cause an extension of the Closing Date set forth in this Agreement, except as may otherwise be mutually agreed by the Parties in writing.

ARTICLE 10

CONDITIONS PRECEDENT TO CLOSING

10.1    Conditions to Obligations of Both Parties. The obligations of each Party at the Closing are subject to the satisfaction (or waiver by both Parties) at or prior to the Closing of the following conditions precedent:

(a)    Governmental Entity Consents. All consents and approvals of any Governmental Entity (including those required by the HSR Act, if applicable) required for the consummation of the transactions contemplated hereby, except for Customary Post-Closing Consents and Consents addressed by Section 4.4(b), shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.

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(b)    No Governmental Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction, or other legal restraint, prohibition or order issued by any court of competent jurisdiction or Governmental Entity preventing the consummation of the transactions contemplated by this Agreement will be in effect; and

(c)    No Action. No action will have been taken, nor any statute, rule, or regulation will have been enacted and become effective, by any Governmental Entity that makes the consummation of the transactions contemplated by this Agreement illegal.

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

(a)    All representations and warranties of Buyer contained in ARTICLE 7 will be true and correct in all material respects (other than those representations and warranties qualified with respect to materiality, which shall be true and correct in all respects) as of the Closing Date as though made on and as of the Closing Date (except to the extent that such representations and warranties are made as of another specified date, in which case such representations and warranties shall be true and correct in all material respects as of such specified date);

(b)    Buyer shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed and satisfied by Buyer (individually or as to its share of any joint obligations with Seller) at or prior to the Closing;

(c)    Buyer shall deliver to Seller a certificate to be executed by an authorized officer of Buyer certifying to the satisfaction of the foregoing conditions contained in Section 10.2(a) and Section 10.2(b); and

(d)    Buyer shall have delivered, or be ready, willing and able to deliver, to Seller the deliverables set forth in Section 12.3.

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

(a)    All representations and warranties of Seller contained in ARTICLE 6 will be true and correct in all material respects (other than those representations and warranties qualified with respect to materiality, which shall be true and correct in all respects) as of the Closing Date as though made on and as of the Closing Date (except to the extent that such representations and warranties are made as of another specified date, in which case such representations and warranties shall be true and correct in all material respects as of such specified date); provided, that the foregoing condition shall be deemed to have been satisfied unless the individual or aggregate impact of all inaccuracies of such representations and warranties would constitute a Material Adverse Effect;

(b)    Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed and satisfied by Seller (individually or as to its share of any joint obligations with Buyer) at or prior to the Closing;

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(c)    Seller shall deliver to Buyer a certificate to be executed by an authorized officer of Seller certifying to the satisfaction of the foregoing conditions contained in Section 10.3(a) and Section 10.3(b);

(d)    Seller shall deliver to Buyer releases with respect to any Assets encumbered by recorded mortgages or financing statements relating to debt facilities maintained by Seller or any Affiliate of Seller (provided that Seller shall not be obligated to provide releases with respect to “all assets” and other filings to the extent such filings do not specifically list the Assets); and

(e)    Seller shall have delivered, or be ready, willing and able to deliver, to Buyer the deliverables set forth in Section 12.3.

ARTICLE 11

RIGHT OF TERMINATION

11.1    Termination. This Agreement may be terminated prior to Closing as follows:

(a)    by the mutual written agreement of Seller and Buyer;

(b)    by Buyer, if any of the conditions set forth in Section 10.1 or Section 10.3 have not been satisfied by Seller on or before the Outside Termination Date;

(c)    by Seller, if any of the conditions set forth in Section 10.1 or Section 10.2 have not been satisfied by Buyer on or before the Outside Termination Date;

(d)    by Buyer, if all of the conditions set forth in Section 10.1, Section 10.2 and Section 10.3 of this Agreement have been satisfied (or, with respect to the conditions set forth in Section 10.3, waived in writing by Buyer), in each case, on or before the Outside Termination Date, or waived, as applicable, and Seller nevertheless refuses or fails to consummate the transactions contemplated by this Agreement; provided, Seller shall first be entitled to 10 days’ notice and the reasonable opportunity to cure and provided further that Buyer shall not be in breach at such time;

(e)    by Seller, if all of the conditions set forth in Section 10.1, Section 10.2 and Section 10.3 of this Agreement have been satisfied (or, with respect to the conditions set forth in Section 10.3, waived in writing by Seller), in each case, on or before the Outside Termination Date, or waived, as applicable, and Buyer nevertheless refuses or fails to consummate the transactions contemplated by this Agreement; provided, Buyer shall first be entitled to 10 days’ notice and the reasonable opportunity to cure and provided further that Seller shall not be in breach at such time;

(f)    by Seller or Buyer if Closing has not occurred on or before the Outside Termination Date through no breach of this Agreement by the terminating Party; or

(g)    by either Seller or Buyer, if the sum of (1) the Title Adjustment Amount, (2) the Environmental Adjustment Amount and (3) the Allocated Value of any Assets removed from the transactions contemplated by this Agreement pursuant to Section 4.2(j)(2), Section 4.4(a), Section 4.4(b), Section 5.3(e)(3) or Section 8.3(b), without duplication, exceeds, in the aggregate (i.e. collectively as to clauses (1), (2), and (3) above), 30% of the unadjusted Purchase Price;

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provided, however, that neither Buyer nor Seller shall have the right to terminate this Agreement pursuant to Section 11.1(b) or Section 11.1(c) if such Party is at such time in material breach of any provision of this Agreement.

11.2    Liabilities Upon Termination. If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 11.1, then, except for the provisions of Sections 1.1, 1.2, 3.3(b), 3.3(d), 3.3(e), 8.2(d), 11.2, 11.3, and 14.2(e) and ARTICLE 15, this Agreement shall forthwith terminate and become void and, except as otherwise set forth in this Section 11.2, the Parties shall have no further liability or obligation hereunder and each Party waives all remedies available at law or in equity on account of the termination of this Agreement pursuant to Section 11.1.

(a)    If Seller has the right to terminate this Agreement pursuant to Section 11.1(c) due to a willful breach of this Agreement by Buyer or Section 11.1(e), then, in each case, Seller shall be entitled to (1) terminate this Agreement and retain the Performance Deposit, free and clear of any Claims thereon by Buyer or its Affiliates, as liquidated damages, or (2) enforce specific performance of this Agreement and other equitable remedies. Buyer and Seller each agrees to waive any requirement for the posting of a bond in connection with any such equitable relief in favor of the other Party.

(b)    If this Agreement is terminated for any reason other than as set forth in Section 11.2(a), then Seller shall return the Performance Deposit to Buyer, without interest, free and clear of any claims thereon by Seller or its Affiliates.

11.3    Return of Documentation and Confidentiality. Upon termination of this Agreement, Buyer shall return to Seller or destroy all title, engineering, geological and geophysical data, environmental assessments and/or reports, maps and other information whatsoever furnished by Seller to Buyer or prepared by or on behalf of Buyer in connection with the Due Diligence Review or the transactions contemplated hereby. An officer of Buyer shall certify same to Seller in writing.

ARTICLE 12

CLOSING

12.1    Date of Closing. Subject to the conditions stated in this Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”) shall occur on (a) June 17, 2017, provided that if the conditions set forth in Section 10.1, Section 10.2, and Section 10.3 (other than any such conditions that by their nature cannot be satisfied until the Closing Date) have not been satisfied or waived as of such date, then on the fifth Business Day after satisfaction (or waiver) of such conditions, or (b) such other date as Buyer and Seller may agree upon in writing. The date Closing occurs shall be the “Closing Date”.

12.2    Place of Closing. The Closing shall be held at the offices of Seller at 10:00 a.m. Houston, Texas time or at such other time and place as Buyer and Seller may agree in writing.

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

(a)    Seller and Buyer shall each execute, acknowledge and deliver counterparts of the Assignment, Bill of Sale and Conveyance of the Assets, effective as of the Effective Time, substantially in the form of Exhibit C (the “Assignment”), for recordation in each appropriate jurisdiction in which the Assets are located;

(b)    Seller and Buyer shall each execute, acknowledge and deliver counterparts of such other assignments, bills of sale, certificates of title, or deeds necessary to transfer the Assets to Buyer, including any federal and state forms of assignment, as applicable;

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

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

(e)    Buyer shall deliver to Seller the Share Consideration in book entry to Seller’s designated account in the name of Sanchez Energy Corporation or, at the election of Seller, to the designated account of an Affiliate of Seller in the name of such Seller Affiliate (the “Seller Designee”).

(f)    Seller or the Seller Designee, if any, and Buyer shall each execute, acknowledge and deliver counterparts of the Registration Rights Agreement, dated as of the Closing Date, substantially in the Form of Exhibit F (the “Registration Rights Agreement”).

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

(h)    Seller shall, or shall cause its applicable Affiliates to, execute and deliver to Buyer (and to the other Working Interest owners of the Assets which Seller or any Affiliate of Seller or any contractor of any such Person operates, if any) all documents necessary for Seller or its Affiliates (as applicable) to resign as operator of all the Assets operated by Seller or its Affiliates and for Buyer or an Affiliate thereof to succeed Seller or its Affiliates as operator of all such Assets, including Railroad Commission of Texas Form P-4s executed by Seller or its Affiliates, as applicable;

(i)    Seller shall execute and deliver to Buyer an affidavit of non-foreign status under Section 1445 of the Code in the form of Exhibit D; and

(j)    Seller and Buyer shall take such other actions and deliver such other documents as are contemplated by this Agreement.

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ARTICLE 13

POST-CLOSING OBLIGATIONS

13.1    Post-Closing Adjustments.

(a)    Final Settlement Statement. As soon as practicable after the Closing, but in no event earlier than 90 days or later than 180 days after Closing except as may be otherwise expressly provided herein, (the “Final Settlement Statement Due Date”), Seller will cause to be prepared and delivered to Buyer, in accordance with GAAP and customary industry accounting practices, a settlement statement setting forth each adjustment to the Purchase Price in accordance with Section 2.4 and showing the calculation of such adjustments and the resulting final purchase price (the “Final Purchase Price” and such statement, the “Final Settlement Statement”). Within 30 days after its receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes to make to the Final Settlement Statement. Buyer’s failure to deliver to Seller a written report detailing proposed changes to the Final Settlement Statement by such date shall be deemed to be an acceptance by Buyer of the Final Settlement Statement delivered by Seller. The Parties shall endeavor to agree with respect to the changes proposed by Buyer, if any, by no later than 60 days after Buyer’s receipt of Seller’s proposed Final Settlement Statement. Should the Parties fail to agree on the Final Settlement Statement and Final Purchase Price by such date, either Party may invoke the Dispute resolution procedures provided for in Section 13.1(b). The date upon which such agreement is reached or upon which the Final Purchase Price is determined pursuant to Section 13.1(b) shall be herein called the “Final Settlement Date.” If such agreed or determined Final Purchase Price is more than the Preliminary Purchase Price, Buyer shall pay to Seller the amount of such difference by wire transfer in immediately available funds no later than five Business Days after the Final Settlement Date. If such agreed or determined Final Purchase Price is less than the Preliminary Purchase Price, Seller shall pay the amount of such difference to Buyer by wire transfer in immediately available funds no later than five Business Days after the Final Settlement Date.

(b)    Dispute Resolution. Within ten days after either Party invokes the Dispute resolution procedures of this Section 13.1(b) pursuant to Section 13.1(a), the Parties shall mutually appoint (and either Party may on its own appoint such expert if the other Party refuses to act in good faith to jointly appoint such expert during such ten day period) an independent expert having the qualifications specified below (the “Accounting Expert”). If the Parties are unable to mutually agree upon the Accounting Expert within such ten day period, then the Parties shall, within ten days after the expiration of such foregoing ten day period, request that the AAA, acting through its offices in Houston, Texas, appoint the Accounting Expert. The Accounting Expert shall be a certified public accountant having a minimum of ten years’ experience with regard to the types of matters involved in the Dispute, shall be without any conflicts of interest as to the Parties, and shall not have been employed by or undertaken more than $50,000 of work, in the aggregate, for any Party or its Affiliates within the five year period preceding the submission of the Dispute. For the avoidance of doubt, the Accounting Expert will function as an expert in accordance with the foregoing procedure, not as an arbitrator. Within 15 days following the appointment of the Accounting Expert, Seller and/or Buyer shall provide the Accounting Expert with a copy of this Agreement, and each Party shall provide, both to the Accounting Expert and to each other, a summary of its position with regard to each such outstanding matter involving

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the Final Settlement Statement in a written document of five pages or less per outstanding Disputed matter. The Parties shall instruct the Accounting Expert that, within 30 days after receiving the last of the Parties’ respective submissions or the expiration of such 15 day period if either Party fails to make a submission, the Accounting Expert shall render a decision, choosing only either Buyer’s position or Seller’s position with respect to each Disputed matter. Any decision rendered by the Accounting Expert pursuant hereto shall be final, conclusive and binding on Seller and Buyer, and will be enforceable against each Party in any court having jurisdiction hereof or jurisdiction of either or both Parties, but is not reviewable by, or appealable to, any court except in the event of fraud. The Parties shall each bear one-half of the costs of the Accounting Expert and of any associated Dispute resolution proceedings, except the Parties shall each bear its own legal fees with respect to any Dispute. The Final Settlement Statement shall be re-issued by Seller if and as necessary to conform to the Accounting Expert’s decision.

13.2    Records. Seller shall make the Records available for pick up by Buyer within 75 days following the Closing Date. Seller may retain copies of the Records, and Seller shall have the right to review and copy the original Records during standard business hours and upon reasonable notice to Buyer for so long as Buyer retains the Records, which shall be a minimum of six years after the Closing Date. Buyer agrees that the Records will be maintained in compliance with all applicable Laws governing document retention.

13.3    Further Assurances. From time to time after Closing, Seller and Buyer shall each execute, acknowledge and deliver to the other such further instruments and take such other action as may be reasonably requested by the other Party, at such requesting Party’s cost, and as are commercially reasonable to be performed in order to accomplish more effectively the purposes of the transactions contemplated by this Agreement, including those post-Closing actions contemplated by Section 4.4(a) and Section 4.4(b). Promptly after Closing, Buyer shall: (a) record the Assignments of the Assets and all state and federal assignments executed at the Closing in all applicable real property records and/or, if applicable, all state and federal Governmental Entities and Buyer shall provide to Seller copies of such recorded documents; (b) actively pursue the approval of all Customary Post-Closing Consents from the applicable Governmental Entities; and (c) subject to the preceding sentence and Section 4.4(a) and Section 4.4(b) actively pursue all other consents and approvals that may be required in connection with the assignment of the Assets to Buyer and the assumption of the rights, interests, obligations and liabilities assumed by Buyer hereunder that have not been obtained prior to Closing, provided that Seller shall reasonably cooperate with Buyer in obtaining such other consents and approvals, at Buyer’s cost.

13.4    Tax Claims.

(a)    If notice of any action, suit, investigation, audit or other Claim is received by Buyer with respect to Taxes for which Seller may reasonably be expected to be liable under this Agreement or applicable Law (a “Tax Claim”), Buyer shall notify Seller in writing of such Tax Claim within ten days after it is received by Buyer. Such notice shall contain factual information describing the asserted Tax liability in reasonable detail and shall include copies of any notice or other document received from any Governmental Authority in respect of any such asserted Tax liability.

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(b)    Buyer shall have the right (but not the obligation), at its sole cost and liability and subject to releasing Seller from all obligations and to defending, indemnifying and holding Seller harmless from all liabilities under and with respect to any such Tax Claim, to elect to represent the interests of Seller in defending, settling, compromising, admitting, or acknowledging any Tax Claim received by Buyer as described in Section 13.4(a); provided, that Buyer shall keep Seller fully and currently apprised of all developments relating to such Tax Claim, and that Buyer shall not settle such Tax Claim without the consent of Seller, which consent shall not be unreasonably withheld, conditioned, or delayed; and also provided that if Buyer so elects to represent the interests of Seller in any such Tax Claim, at the further election of Seller (in the event Buyer elects to so represent the interests of Seller as to any such Tax Claim), Buyer and Seller shall jointly control (and shall share the costs and liabilities on a 50/50 several basis) any defense, settlement, compromise, admission, or acknowledgment of any Tax Claim, in which event no Tax Claim shall be settled or compromised without the prior written approval of each of Buyer and Seller, which shall not be unreasonably withheld, conditioned or delayed by either Party. In the event Buyer does not so elect to represent the interests of Seller in any Tax Claim, the provisions of Section 14.3(b) shall govern the conduct of any such Tax Claim. Buyer and Seller shall each provide the other with all information reasonably necessary to conduct a Tax Claim with respect to Taxes or the transactions contemplated by this Agreement.

(c)    Buyer shall not file an amended Tax Return relating to or in connection with the Assets with respect to any period or partial period ended on or before the Closing Date without the prior written consent of Seller, if such amendment would have, or would reasonably be expected to have, an adverse effect on Seller under this Agreement or under applicable Law.

ARTICLE 14

ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION; DISCLAIMERS

14.1    Buyer’s Assumption of Liabilities and Obligations. Upon Closing, but (i) subject to and without limiting Buyer’s rights to indemnification pursuant to Section 14.2(a) and (ii) without limiting the amounts or benefits to Buyer with respect to the downward adjustments to the Purchase Price contemplated by Section 2.4(d) to which Buyer is entitled, Buyer shall assume and pay, perform, fulfill and discharge all Claims, costs, expenses, and other obligations and liabilities whatsoever accruing or relating to (a) the ownership and operation of the Assets, including owning, developing, exploring, operating and maintaining the Assets and the production, transportation and marketing of Hydrocarbons from the Assets, the payment of Property Expenses and the make-up and balancing obligations for overproduction of Hydrocarbons from the Wells; (b) all Plugging and Abandonment Obligations attributable to the Wells described on Exhibit B and Environmental Liabilities involving the Assets; and (c) all liabilities for royalty and all overriding royalty payments with respect to the Assets, in each case with respect to clauses (a), (b) and (c) above, whether such Claims, costs, expenses or other obligations and liabilities relate to, arise from or are attributable to the period of time prior to, on or after the Effective Time (all of the foregoing, collectively, the “Assumed Liabilities”).

14.2    Indemnification. For purposes hereof, “Losses” shall mean any and all costs (including court costs, reasonable fees and expenses of attorneys, technical experts and expert witnesses and the costs of investigation), expenses (including interest), charges, judgments,

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awards, settlements, damages, penalties, fines, prosecutions, duties, obligations and other liabilities of any type, including those incurred pursuant to or otherwise involving any Claim, and including those pertaining to or in any way derivative from any personal injury, illness or death, damage, loss or destruction of real or personal property or of any natural resources, any pollution of other harm to or destruction of the Environment or infringement upon or other impairment of any intellectual property rights.

(a)    Seller’s Indemnification of Buyer. Effective as of Closing, Seller hereby defends, indemnifies, and saves and holds harmless Buyer, Buyer’s Affiliates and Buyer’s and Buyer’s Affiliates’ respective officers, directors, members, managers, employees, representatives and agents (the “Buyer Indemnified Parties”) from and against all Losses related to the Assets, to the extent attributable to or arising out of (1) (i) existing litigation; (ii) personal injury and wrongful death and property damage claims relating to events occurring prior to the Closing; (iii) claims arising from the offsite disposal of hazardous or toxic substances, pollutants, contamination solid wastes or Hydrocarbons occurring prior to the Closing; (iv) Plugging and Abandonment Obligations attributable to Wells other than those described on Exhibit B; (v) liabilities associated with the payment of or failure to pay royalties, overriding royalties, or other disbursements of production or proceeds of production and escheat obligations to the extent relating to periods prior to the Effective Date; (vi) liabilities for payment of taxes attributable to periods prior to the Effective Date; (vii) liabilities for joint interest billings related to Properties operated by Seller for periods prior to the Closing; (viii) liabilities arising from, based upon, related to or associated with ownership, use or operation of the Excluded Assets; (2) any breach by Seller of any of Seller’s representations and warranties contained in ARTICLE 6 (or the corresponding affirmations of such representations and warranties made by Seller in the certificate delivered pursuant to Section 10.3); (3) any breach by Seller of its covenants and agreements hereunder; or (4) Seller Taxes (all of the foregoing, collectively, the “Retained Obligation”).

(b)    Buyer’s Indemnification of Seller. Effective as of Closing, Buyer hereby releases, defends, indemnifies, and saves and holds harmless Seller, Seller’s Affiliates and Seller’s and Seller’s Affiliates’ respective officers, directors, members, managers, employees, representatives and agents (the “Seller Indemnified Parties”) from and against all Losses to the extent attributable to or arising out of: (1) the Assumed Liabilities; (2) any breach by Buyer of any of Buyer’s representations or warranties in ARTICLE 7 (or the corresponding affirmations of such representations and warranties made by Buyer in the certificate delivered pursuant to Section 10.2(c)); (3) any breach by Buyer of its covenants and agreements hereunder; or (4) Buyer Taxes, EVEN, IN EACH AND ANY CASE, IF SUCH LOSSES ARE ATTRIBUTABLE TO OR ARISE OUT OF, SOLELY OR IN PART, THE SOLE, ACTIVE, GROSS, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY OF THE SELLER INDEMNIFIED PARTIES.

(c)    Limitations on Indemnity.

(1)    Notwithstanding anything in this Agreement to the contrary, Seller shall have no liability for defense and indemnification hereunder or for any Loss pursuant to Section 14.2(a) unless (A) the amount of an applicable indemnifiable Loss exceeds

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$200,000 (the “Per Item Threshold”) and (B) the total value of all such Losses in excess of the Per Item Threshold, in the aggregate, exceeds 4% of the unadjusted Purchase Price (the “Deductible”), after which point the Buyer Indemnified Parties shall be entitled to defense and indemnification pursuant to Section 14.2(a) only to the incremental extent of the value of any such Losses in excess of the Deductible.

(2)    The maximum liability of Seller for all of its obligations hereunder and under any other agreement, contract or instrument contemplated herein, including for Title Defects, Environmental Defects and defense and indemnification pursuant to Section 14.2(a) with respect to Losses suffered by the Buyer Indemnified Parties (including Losses for which the Deductible applies), shall not exceed, in the aggregate, 15% of the unadjusted Purchase Price (the “Cap”).

(3)    Notwithstanding the foregoing or anything to the contrary in this Section 14.2(c), the Per Item Threshold, Deductible and Cap will not apply, to (A) any breach by Seller of any of its Fundamental Representations or (B) any breach by Seller of obligations under Section 14.2(a)(3); provided, however, that in no event shall Seller’s aggregate liability under the aforementioned provisions, together with all other liabilities of Seller under this Agreement and any other agreement, contract or instrument contemplated herein (including with respect to the “special warranty” contained in the Assignment), exceed 100% of the Purchase Price.

(4)    Notwithstanding anything in this Agreement to the contrary, in no event shall Seller have any obligation to provide indemnification for any matters to the extent accounted for in the Preliminary Settlement Statement or the Final Settlement Statement. Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges that it has had the opportunity to conduct due diligence and investigation with respect to the Assets and the Companies, and in no event shall Seller have any liability to Buyer with respect to any breach of any representation, warranty or covenant under this Agreement to the extent that Buyer was aware of such breach as of the Closing Date.

(d)    Sole Remedy. Notwithstanding anything in this Agreement to the contrary or in any other agreement, contract or instrument contemplated herein, from and after Closing, Seller’s and Buyer’s sole and exclusive remedies against each other with respect to any and all Claims for breaches of the representations, warranties, covenants and agreements contained in this Agreement or under any other agreement, contract or instrument contemplated herein (including the affirmations of the representations and warranties contained in the certificates delivered by each Party at Closing pursuant to Section 10.2(c) and Section 10.3(c), as applicable) or otherwise in connection with the transactions contemplated hereby, are exclusively set forth in Section 3.3(d), Section 8.2(b), Section 9.3, Section 9.5, this Section 14.2 and the “special warranty” contained in the Assignment, and if no such right of defense or indemnification or to be held harmless is expressly provided in Section 3.3(d), Section 8.2(b), Section 9.3, Section 9.5, this Section 14.2 or the “special warranty” contained in the Assignment, then such Claims are hereby waived by the Parties to the fullest extent permitted by Law. Except for the remedies contained in Section 3.3(d), Section 8.2(b), Section 9.3, Section 9.5, this Section 14.2 and the “special warranty” contained in the Assignment, each Party (including as to its respective Indemnified Parties) releases, remises, and forever discharges the other Party (including as to its

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respective Indemnified Parties) from any and all suits, legal or administrative proceedings, Claims, demands, damages, Losses, costs, liabilities, interest, causes of action and other obligations whatsoever, in Law or in equity, known or unknown, which such Parties might now or subsequently may have, based on, relating to, or arising out of this Agreement or any other agreement, contract or instrument contemplated herein, Seller’s ownership, use, or operation of the Assets, or the condition, quality, status, or nature of the Assets, INCLUDING RIGHTS TO CONTRIBUTION OR COST RECOVERY UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY AND IMPLIED WARRANTIES, NUISANCE OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES, COMMON LAW RIGHTS OF CONTRIBUTION, ANY RIGHTS UNDER INSURANCE POLICIES ISSUED OR UNDERWRITTEN BY THE OTHER PARTY OR ANY OF ITS AFFILIATES (IN EACH CASE) EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE, SIMPLE, SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON, INVITEE OR THIRD PERSON, OR BY A PREEXISTING CONDITION.

(e)    Waiver of Non-Compensatory Damages. None of the Buyer Indemnified Parties or Seller Indemnified Parties shall be entitled to recover from Seller, Buyer, or their respective Affiliates or other Representatives, any special, indirect, consequential, punitive, exemplary, remote or speculative damages, including damages for lost profits of any kind, arising under or in connection with this Agreement, any other agreement, contract or instrument contemplated herein or the transactions contemplated hereby, except to the extent any such Party suffers such damages (including costs of defense and reasonable attorney’s fees incurred in connection with defending of such damages) to a Third Party, which damages (including costs of defense and reasonable attorney’s fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder. Subject to the preceding sentence, Buyer, on behalf of each of the Buyer Indemnified Parties, and Seller, on behalf of each of Seller Indemnified Parties, waive any right to recover any special, indirect, consequential, punitive, exemplary, remote or speculative damages, including damages for lost profits of any kind, arising in connection with or with respect to this Agreement, any other agreement, contract or instrument contemplated herein or the transactions contemplated hereby.

14.3    Claims Procedure. The defense, indemnification and hold harmless obligations contained in Section 3.3(d), Section 8.2(b), Section 9.5, this Section 14.2 and the “special warranty” contained in the Assignment shall be implemented as follows:

(a)    Claim Notice. The Party seeking defense and indemnification under the terms of this Agreement (“Indemnified Party”) shall submit a written “Claim Notice” to the other Party (“Indemnifying Party”) which, to be effective, must be delivered prior to the end of the survival period applicable under Section 14.4 to the particular Loss that is the subject of such Claim Notice and must state, to the extent of the information reasonably available to the Indemnified Party: (1) the amount of each payment or other obligation claimed by an Indemnified Party to be owing or other Loss for which the Indemnified Party is seeking defense, indemnification and to be held harmless, (2) the basis for such Claim, with supporting documentation if available, and (3) a list identifying, to the extent reasonably possible, each separate item of Loss for which

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payment or any other obligation is so claimed. Within 30 days of receipt of a Claim Notice, the Indemnifying Party may provide written notice to the Indemnified Party that it accepts, contests or rejects the Losses identified in such Claim Notice or its responsibility for same. Any failure of the Indemnifying Party to provide such notice within such time period shall be deemed to be a rejection by such Indemnifying Party of such Losses and its responsibility for same. If the Indemnifying Party objects to a Claim Notice on the basis that it lacks sufficient information, it shall promptly request from the Indemnified Party any specific additional information reasonably necessary for it to assess such indemnification Claim, and the Indemnified Party shall provide the additional information reasonably requested to the extent reasonably available to it. Upon receipt of such additional information, the Indemnifying Party shall notify the Indemnified Party of any withdrawal or modification of the objection. All disputed defense, indemnification and hold harmless Claims shall be resolved by Buyer and Seller in accordance with either (A) a mutual agreement between Buyer and Seller, which shall be memorialized in writing, or (B) Section 15.8(b), which may be invoked by either Party at any time when it reasonably believes that the Parties are unable to reach mutual agreement as to any defense, indemnification and hold harmless Claim arising under this Agreement.

(b)    Information. Promptly after the Indemnified Party receives notice of a Claim or legal action by a Third Party that may result in a Loss for which defense, indemnification and the right to be held harmless may be sought under this ARTICLE 14 (a “Third Party Claim”), the Indemnified Party shall give written notice of such Third Party Claim to the Indemnifying Party. If the Indemnifying Party or its counsel so requests, the Indemnified Party shall furnish the Indemnifying Party with copies of all pleadings and other material information reasonably available to the Indemnified Party with respect to such Third Party Claim. Except as otherwise provided in Section 13.4(b), at the election of the Indemnifying Party, made within 30 days after receipt of such notice, the Indemnified Party shall permit the Indemnifying Party to assume sole management and control of such Third Party Claim (to the extent only that such Third Party Claim relates to a Loss for which the Indemnifying Party is liable), including the determination of all appropriate actions, the negotiation of settlements on behalf of the Indemnified Party, and the conduct of litigation through attorneys of the Indemnifying Party’s choice; provided, however, that no such settlement can result in any cost or other liability to the Indemnified Party for which it is entitled to be defended, indemnified or held harmless hereunder, without its consent. If the Indemnifying Party elects to assume such control, (i) any and all expense incurred by the Indemnified Party thereafter for investigation, defense or other handling of the matter shall be borne by the Indemnified Party, except as to those reasonable expenses incurred in responding to any request or instruction by the Indemnifying Party and (ii) the Indemnified Party shall give all reasonable information and assistance, other than pecuniary, that the Indemnifying Party shall reasonably request as necessary for the proper defense of such Third Party Claim. In the absence of such an election, the Indemnified Party will reasonably endeavor to defend, at the Indemnifying Party’s expense, any Third Party Claim to which such Indemnifying Party’s defense, indemnification and hold harmless obligation under this ARTICLE 14 applies until the Indemnifying Party assumes such defense, and, if the Indemnifying Party fails to assume such defense within the time period provided above, the Indemnified Party may settle or otherwise resolve the same in the Indemnified Party’s reasonable discretion at the Indemnifying Party’s expense and liability, subject to the Indemnifying Party’s consent, which shall not be unreasonably withheld, conditioned or delayed; provided, further, that if the Indemnifying Party fails to grant such consent, it shall immediately assume such

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defense, indemnification and hold harmless obligation from the Indemnified Party and reimburse the Indemnified Party for all expenses and other obligations and liabilities incurred by it prior to such point in time. If any such Third Party Claim requires immediate action, both the Indemnified Party and the Indemnifying Party will cooperate in good faith to take appropriate action so as not to jeopardize the defense of such Third Party Claim or either Party’s position with respect to such Third Party Claim. If the Indemnifying Party is entitled to, and does, assume the defense of any such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel at its own expense and to participate in the defense thereof, subject to the Indemnifying Party’s sole management and control of the defense of any such Third Party Claim in its sole good faith judgment; provided, however, that, notwithstanding the foregoing, the Indemnifying Party shall pay the reasonable attorneys’ fees of the Indemnified Party if the Indemnified Party’s counsel shall have advised the Indemnified Party in writing that there is a conflict of interest that could make it inappropriate under applicable standards of professional conduct to have common counsel for the Indemnifying Party and the Indemnified Party (provided that the Indemnifying Party shall not be responsible for paying for more than one separate firm of attorneys and one local counsel to represent all of the Indemnified Parties subject to such Third Party Claim). In the event that the Indemnifying Party has any Dispute regarding whether it is obligated to defend, indemnify and hold harmless the Indemnified Party as to any Third Party Claim or other Claim or any Dispute as to the scope of any such defense, indemnity and hold harmless obligation as to a Third Party Claim or other Claim, such Dispute shall be resolved in accordance with either (A) a mutual agreement between Buyer and Seller, which shall be memorialized in writing, or (B) Section 15.8(b), which may be invoked by either Party at any time when it reasonably believes that the Parties are unable to reach mutual agreement as to any defense, indemnification and hold harmless Claim arising under this Agreement.

14.4    Survival of Warranties, Representations and Covenants.

(a)    Subject to Section 14.4(c), (1) the representations and warranties of the Parties in ARTICLE 6 and ARTICLE 7 (other than the Fundamental Representations and the representations and warranties contained in Section 7.12, Section 7.13, Section 7.14, Section 7.15, Section 7.16 and Section 7.17), the affirmations of such representations and warranties contained in the certificates to be delivered at Closing pursuant to Section 10.2(c) and Section 10.3(c), as applicable) shall, in each case, survive the Closing for a period of one year, (2) the Fundamental Representations and the representations and warranties contained in Section 7.12, Section 7.13, Section 7.14, Section 7.15, Section 7.16 and Section 7.17 (and the affirmations of such representations and warranties contained in the certificate to be delivered at Closing pursuant to Section 10.2(c)) shall survive the Closing until 30 days after the expiration of the statute of limitations applicable thereto, (3) the covenants of Seller contained in Section 8.1(c) shall survive the Closing for a period of one year after the Closing Date, (4) the covenants of Buyer contained in Section 8.2(d) shall terminate at Closing, (5) the covenants of Buyer contained in Section 14.1 shall survive without time limit, (6) the covenants of the Parties contained in Section 14.2 shall survive as specified in Section 14.4(c) and (7) the remainder of this Agreement, including the other covenants and agreements of the Parties contained herein, shall survive until the first anniversary of the Closing Date or such shorter time as expressed in such covenant or agreement. It is the intent of the Parties to shorten the application of statute of limitations as set forth in this Section 14.4(a).

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(b)    Representations, warranties, covenants and agreements (and any certificate related thereto) shall be of no further force and effect after the date of their expiration; provided that there shall be no termination of any bona fide Claim asserted through a Claim Notice delivered pursuant to Section 14.3 with respect to such a representation, warranty, covenant or agreement prior to its expiration date.

(c)    The indemnities in (1) Section 14.2(a) shall survive the Closing for one year; (2) Section 14.2(b)(2) and Section 14.2(b)(3) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification, except in each case as to matters for which a Claim Notice has been delivered to the Indemnifying Party on or before such termination date; (3) Section 14.2(b)(4) shall survive the Closing until 30 days after the expiration of the statute of limitations applicable thereto, and (4) Section 14.2(b)(1) shall survive the Closing without time limit.

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

14.6    Tax Treatment of Indemnity Payments. Any payment pursuant to this ARTICLE 14 shall be treated for Tax purposes as an adjustment to the Purchase Price, except to the extent otherwise required by applicable Law.

ARTICLE 15

MISCELLANEOUS

15.1    Schedules and Exhibits. The Schedules and Exhibits hereto constitute a part of this Agreement. The disclosure of any matter or item in the Schedules shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed or is material or that such matter would or would reasonably be expected to result in a Material Adverse Effect.

15.2    Expenses. Except as may be otherwise specifically provided herein, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the Party incurring the same, including engineering, land, title, legal and accounting fees, costs and expenses. Notwithstanding any other provision of this Agreement, Seller shall pay all Seller Transaction Costs and Buyer shall pay all Buyer Transaction Costs.

15.3    Notices. All notices and communications required or permitted under this Agreement shall be in writing and addressed as set forth below. Any communication or delivery hereunder shall be deemed to have been duly made and the receiving Party charged with notice as follows: (a) if personally delivered, when received; (b) if sent by facsimile, with electronic confirmation of delivery, if sent during normal business hours on a Business Day, and if not sent during normal business hours on a Business Day, on the next subsequent Business Day; (c) if mailed certified mail, return receipt requested, on the day such notice is received, and if such day

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is not a Business Day, on the next subsequent Business Day, or (d) if sent by overnight courier, the next Business Day after placement into the custody of the overnight courier. All notices shall be addressed as follows:

If to Buyer:	If to Seller:
SN Marquis LLC	Lonestar Resources US, Inc.
1000 Main Street, Suite 3000	600 Bailey Ave, Suite 200
Houston, TX 77002	Fort Worth, Texas, 76107
Attn: Business Development, Daniel Furbee	Attn: Frank D. Bracken, III
Phone: 713-783-8000_	Phone: 817.546.6400
	Fax: 817.546.8641
With a copy to:	With a copy to:
(which shall not constitute notice hereunder)	(which shall not constitute notice hereunder)
SN Marquis LLC 1000 Main Street, Suite 3000 Houston, TX 77002Attn: General Counsel, Gregory Kopel Phone: 713-783-8000	Lonestar Resources, Inc. 600 Bailey Ave, Suite 200 Fort Worth, Texas 76107 Attn: John K. Evans, Phone: 817.546.6391 Fax: 817.806.5112

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

15.4    Amendments. This Agreement may not be amended except by an instrument expressly modifying this Agreement signed by each of the Parties. Except for waivers specifically provided for in this Agreement, no waiver by either Party of any breach of any provision of this Agreement shall be binding unless made expressly in writing. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision hereof (regardless of whether similar), and no such waiver shall constitute a continuing waiver unless expressly so provided. Delay in the exercise, or non-exercise, of any such right is not a waiver of that right.

15.5    Assignment. Except as otherwise provided in Section 9.5 and this Section 15.5, neither Party shall assign all or any portion of its respective rights or delegate all or any portion of its respective duties and obligations hereunder without the prior written consent of the other Party. Any attempted assignment which does not comply with the foregoing provisions shall be deemed null and void. Notwithstanding the foregoing, Seller may assign any or all of its rights or obligations hereunder to any of its Affiliate at any time, subject to the provision of prior written notice thereof to Buyer and to the undertaking by such Affiliate to assume all of Seller’s rights, duties and obligations hereunder.

15.6    DISCLAIMERS.

(a)    EXCEPT FOR THE SPECIFIC REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CERTIFICATE TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 10.3(c) AND THE “SPECIAL WARRANTY”

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CONTAINED IN THE ASSIGNMENT, SELLER MAKES NO, AND DISCLAIMS ALL, WARRANTIES OR REPRESENTATIONS OF ANY KIND AS TO ANY INFORMATION OBTAINED BY BUYER OR ITS REPRESENTATIVES PURSUANT TO THIS ARTICLE 3, INCLUDING THE RECORDS AND ANY INFORMATION CONTAINED THEREIN. BUYER AGREES THAT ANY CONCLUSIONS DRAWN FROM, OR ANY ACTIONS (OR INACTIONS) OF BUYER FOLLOWING, ITS DUE DILIGENCE REVIEW SHALL BE THE RESULT OF ITS OWN INDEPENDENT REVIEW AND JUDGMENT AND SHALL BE AT BUYER’S SOLE RISK AND LIABILITY.

(b)    EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CERTIFICATE TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 10.3(c) AND THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT, NEITHER SELLER NOR ANY OTHER PERSON MAKES (AND BUYER IS NOT RELYING UPON) ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE ASSETS (INCLUDING THE VALUE, CONDITION OR USE OF ANY ASSET) OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND SELLER DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES (WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) OR OTHER UNDERTAKINGS NOT CONTAINED IN THIS AGREEMENT, WHETHER MADE BY SELLER, ANY AFFILIATE OF SELLER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AGENTS, CONSULTANTS OR OTHER REPRESENTATIVES.

(c)    EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CERTIFICATE TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 10.3(c) AND THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT, SELLER DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES OR ANY OF ITS REPRESENTATIVES, INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO BUYER BY ANY REPRESENTATIVE OF SELLER OR ANY OF ITS AFFILIATES.

(d)    EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CERTIFICATE TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 10.3(c) AND THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO (1) SELLER’S TITLE TO ANY OF THE ASSETS, (2) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING OR OTHER CONSULTANT, ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, OR ANY OTHER TECHNICAL, FINANCIAL, COMMERCIAL OR

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OTHER ANALYSIS OR EVALUATION RELATING TO THE ASSETS, (3) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (4) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR PAST, PRESENT OR FUTURE REVENUES OR PROFITS GENERATED BY THE ASSETS, (5) THE PRODUCTION OF HYDROCARBONS FROM THE ASSETS, OR WHETHER PRODUCTION FROM THE ASSETS HAS BEEN CONTINUOUS OR IN PAYING QUANTITIES, (6) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, OR (7) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN OR THAT MAY BE MADE AVAILABLE OR COMMUNICATED TO BUYER OR ITS AFFILIATES, OR ITS OR THEIR RESPECTIVE REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO.

(e)    EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE CERTIFICATE TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 10.3(c) AND THE “SPECIAL WARRANTY” CONTAINED IN THE ASSIGNMENT, SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE ASSETS, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT BUYER SHALL BE DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS”, WITH ALL FAULTS AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.

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

15.8    Governing Law.

(a)    THIS AGREEMENT, ALL ISSUES ARISING HEREUNDER, ALL TRANSACTIONS CONTEMPLATED HEREBY AND ANY EXPERT DISPUTE RESOLUTION PROCEDURE CONDUCTED PURSUANT HERETO SHALL BE CONSTRUED EXCLUSIVELY IN ACCORDANCE WITH, AND EXCLUSIVELY

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GOVERNED BY, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY CONFLICTS OF LAWS OR CHOICE OF LAW PRINCIPLES OR RULES WHICH MAY REFER ANY MATTER TO ANOTHER JURISDICTION FOR RESOLUTION.

(b)    EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED IN HARRIS COUNTY, THE STATE OF TEXAS, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE LITIGATED IN SUCH COURTS EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.3(b), SECTION 4.3, SECTION 5.3(f) AND SECTION 13.1(b). EACH PARTY HERETO (I) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (II) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURTS. EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES HERETO SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY HERETO REFUSES TO ACCEPT SERVICE, EACH PARTY HERETO AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(c)    EACH PARTY ACKNOWLEDGES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY ACKNOWLEDGES, AGREES AND CERTIFIES THAT: (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR DELAY ENFORCEMENT OF SUCH WAIVER; (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (III) IT MAKES SUCH WAIVER VOLUNTARILY; AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.8(c).

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15.9    Entire Agreement. This Agreement, the Exhibits, the Schedules, the Confidentiality Agreement and the documents delivered at Closing by or on behalf of each Party and its Affiliates constitutes the entire agreement and understanding between the Parties and their respective members, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all prior negotiations, discussions, agreements and understandings relating to such subject matter.

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

15.11    No Third-Party Beneficiaries. This Agreement is intended to benefit only the Parties and their respective Indemnified Parties and their respective successors and permitted assigns; provided that only each of the Parties will have the right (but not the obligation) to enforce the provisions of this Agreement on its own behalf or on behalf of any of its respective Indemnified Parties.

15.12    Publicity. Subject to any exception in Section 8.2(d), neither Buyer nor Seller nor any of their respective Representatives shall issue or cause the publication of any press release or other announcement with respect to the transactions contemplated by this Agreement without the prior written consent of the other Party (which shall not be unreasonably withheld, conditioned, or delayed), except as may be required by applicable Law or by the applicable rules, regulations or orders of any Governmental Entity or stock exchange, in which case, each Party shall to the extent practicable provide the other Party a draft of such release or other announcement prior to the issuance thereof, and give reasonable consideration to such comments as the other Party may have, prior to such release or other announcement. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement restricts a Party from disclosing information or making any other announcement consistent with any information in any disclosure made in compliance with this Agreement.

[Signature page follows]

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

SELLER:
SN MARQUIS LLC
By:	/s/ Antonio R. Sanchez, III
Name:	Antonio R. Sanchez, III
Title:	Chief Executive Officer
BUYER:
LONESTAR RESOURCES US, INC.
By:	/s/ Frank D. Bracken, III
Name:	Frank D. Bracken, III
Title:	Chief Executive Officer

[SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT]

EX-10.1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

dated as of May 26, 2017

by and among

Lonestar Resources US Inc.,

and

The Investors Listed on Schedule 1

TABLE OF CONTENTS

		Page
ARTICLE I.
PURCHASE; CLOSING
Section 1.1	Purchase		2
Section 1.2	Closing		2
Section 1.3	Closing Conditions		3
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.1	Representations and Warranties of the Company		5
Section 2.2	Representations and Warranties of the Initial Investor		14
ARTICLE III.
COVENANTS
Section 3.1	Filings; Other Actions		18
Section 3.2	Reasonable Best Efforts to Close		18
Section 3.3	Corporate Actions		18
Section 3.4	Use of Proceeds		19
Section 3.5	Company Stockholder Approvals		19
Section 3.6	Financial Statements, Information Rights and Inspection		20
Section 3.7	NASDAQ Listing of Shares		21
Section 3.8	Negative Covenants		22
Section 3.9	Confidentiality		22
Section 3.10	State Securities Laws		23
Section 3.11	PSAs		23
ARTICLE IV.
ADDITIONAL AGREEMENTS
Section 4.1	Standstill		23
Section 4.2	Transfer Restrictions		24
Section 4.3	Legend		25
Section 4.4	Board Representation Rights		25
Section 4.5	Investor Consent		28
Section 4.6	Tax Matters		30
Section 4.7	Short Selling		31

i

ARTICLE V.
INDEMNITY
Section 5.1	Indemnification by the Company	31
Section 5.2	Indemnification by the Initial Investor	31
Section 5.3	Indemnification Procedure	32
ARTICLE VI.
MISCELLANEOUS
Section 6.1	Survival	33
Section 6.2	Expenses	33
Section 6.3	Amendment; Waiver	33
Section 6.4	Counterparts	33
Section 6.5	Governing Law	34
Section 6.6	WAIVER OF JURY TRIAL	34
Section 6.7	Notices	34
Section 6.8	Entire Agreement	35
Section 6.9	Assignment	35
Section 6.10	Interpretation; Other Definitions	35
Section 6.11	Captions	43
Section 6.12	Severability	43
Section 6.13	No Third Party Beneficiaries	43
Section 6.14	Public Announcements	43
Section 6.15	Specific Performance	44
Section 6.16	Termination	44
Section 6.17	Effects of Termination	44
Section 6.18	Non-Recourse	44

Schedule 1:	Initial Investors; Purchased Stock
Schedule 2:	Significant Holders
Exhibit A:	Form of Series A-1 Convertible Participating Preferred Stock Certificate of Designations
Exhibit B:	Form of Series A-2 Convertible Participating Preferred Stock Certificate of Designations
Exhibit C:	Form of Registration Rights Agreement
Exhibit D:	Form of Voting and Support Agreement
Exhibit E:	Form of Legal Opinion of Latham & Watkins LLP

ii

INDEX OF DEFINED TERMS

Term	Location of Definition
ASC 815	6.10(i)
“as-converted basis”	6.10(g)
Adjusted EBITDAX	6.10(h)
Affiliate	6.10(f)
Aggregate Purchase Price	1.1
Agreement	Preamble
Approved Holder Majority	4.4(b)
Approved Holders	4.4(b)
Acquisitions	Recitals
Beneficial Ownership	6.10(j)
Beneficially Own	6.10(j)
Board of Directors	2.1(c)(1)
Business Day	6.10(d)
Bylaws	2.1(c)(2)(A)(i)
Capitalization Date	2.1(b)(1)
Capital Leases	6.10(k)
Certificate of Incorporation	2.1(c)(2)(A)(i)
Class A Common Stock	Recitals
Class B Common Stock	2.1(b)(1)
Closing	1.2(a)
Closing Date	1.2(a)
Code	2.1(s)
Common Stock	6.10(l)
Company	Preamble
Company Competitor	6.10(m)
Company Indemnified Parties	5.2
Company Material Adverse Effect	6.10(n)
Company Proprietary Information	3.9
Company Stock Awards	2.1(b)(1)(i)
Company Stock Options	2.1(b)(1)(i)
Company Stockholders	6.10(o)
Company Subsidiary	2.1(a)(2)
control/controlled by/under common control with	6.10(f)
Debt	6.10(p)
Disqualification Events	2.2(f)
Disqualified Capital Stock	6.10(q)
Effect	6.10(r)
Equity Securities	6.10(s)
ERISA	2.1(s)

iii

Term	Location of Definition
ERISA-Subject Plan	2.1(s)
Exchange Act	2.1
Existing Notes	4.5(e)
FCPA	2.1(u)
GAAP	2.1(f)(3)(b)
Governmental Entity	2.1(c)(3)(v)
herein/hereof/hereunder	6.10(c)
including/includes/included/include	6.10(b)
Investor Indemnified Parties	5.1
Indemnified Party	5.3
Indemnifying Party	5.3
Initial Investor	Preamble
Investors	4.2(b)
Investor Director	4.4(a)
Investor Observer	4.4(a)
Investor Representative	6.10(u)
Knowledge of the Company	6.10(v)
Law	6.10(w)
Lien	6.10(x)
Material Acquisition	5.10(y)
Material Contract	6.10(y)
Material Disposition	5.10(aa)
Money Laundering Laws	2.1(v)
Multiemployer Plan	2.1(s)
Non-Recourse Party	6.18
OFAC	2.1(w)
or	6.10(a)
Permits	2.1(k)
Person or person	6.10(e)
Preferred Stock	2.1(b)(1)
Property	5.10(bb)
Proxy Statement	3.5
PSAs	Recitals
Purchased Stock	1.1
RBL	4.5(e)
RBL Amendment or Replacement	1.3(a)(3)
Receiving Party	3.9
Reference Period	5.10(h)
Registration Rights Agreement	Recitals
Registration Rights Amendments	1.2(b)(1)
Requisite Stockholder Approval	3.5
Sanctions	2.1(w)
SEC	2.1(f)(1)

iv

Term	Location of Definition
SEC Documents	2.1(f)(1)
Second Lien Notes	2.1(n)
Securities	2.2(c)(1)(ii)
Securities Act	2.1
Series A Preferred Stock	Recitals
Series A-1 Certificate	Recitals
Series A-1 Preferred Stock	Recitals
Series A-2 Certificate	Recitals
Series A-2 Preferred Stock	Recitals
Significant Holders	Recitals
Specified Party	4.4(l)
Stockholder Meeting	3.5
Subsidiary	2.1(a)(2)
Synthetic Leases	6.10(z)
Transaction Documents	6.10(z)
Transfer	6.10(ee)
Utilization Restriction	3.9
Voting and Support Agreement	Recitals
Voting Debt	2.1(b)(2)

v

SECURITIES PURCHASE AGREEMENT, dated as of May 26, 2017 (this “Agreement”), between Lonestar Resources US Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule 1 (each, an “Initial Investor” and collectively, the “Initial Investors”).

RECITALS

WHEREAS, the Company has entered into (i) that certain Purchase and Sale Agreement, dated as of May 26, 2017, by and between the Company and Battlecat Oil & Gas, LLC and (ii) that certain Purchase and Sale Agreement, dated as of May 26, 2017, by and between the Company and SN Marquis LLC (collectively, the “PSAs”), pursuant to which the Company will acquire certain oil and gas properties from the respective sellers party thereto (the “Acquisitions”);

WHEREAS, on the terms and conditions set forth in this Agreement, the Company proposes to issue and sell to the Initial Investors (i) shares of its preferred stock, par value $0.001 per share, designated as “Convertible Participating Preferred Stock, Series A-1” (the “Series A-1 Preferred Stock”), having the terms set forth in the Certificate of Designations in respect thereof (the “Series A-1 Certificate”) in the form attached hereto as Exhibit A, and (ii) shares of its preferred stock, par value $0.001 per share, designated as “Convertible Participating Preferred Stock, Series A-2” (the “Series A-2 Preferred Stock” and, together with the Series A-1 Preferred Stock, the “Series A Preferred Stock”), having the terms set forth in the Certificate of Designations in respect thereof (the “Series A-2 Certificate”) in the form attached hereto as Exhibit B;

WHEREAS, the Series A-1 Preferred Stock will be convertible into shares of Class A Voting Common Stock, par value of $0.001 per share, of the Company (the “Class A Common Stock”) in accordance with the terms of the Series A-1 Certificate and the Series A-2 Preferred Stock will be automatically convertible into shares of Series A-1 Preferred Stock upon receipt of the Requisite Stockholder Approval in accordance with the terms of the Series A-2 Certificate;

WHEREAS, in connection with the consummation of the purchase and sale of Series A Preferred Stock, the Company and the Initial Investors will enter into the Registration Rights Agreement in the form attached hereto as Exhibit C (the “Registration Rights Agreement”);

WHEREAS, in connection with the consummation of the purchase and sale of Series A Preferred Stock, the Company and certain Company Stockholders set forth on Schedule 2 (the “Significant Holders”) will enter into the Voting and Support Agreement in the form attached hereto as Exhibit D (the “Voting and Support Agreement”); and

WHEREAS, capitalized terms used in this Agreement have the meanings set forth in Section 6.10 or such other Section indicated in the preceding Index of Defined Terms.

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

ARTICLE I.

PURCHASE; CLOSING

Section 1.1    Purchase. On the terms and subject to the conditions herein, on the Closing Date, the Initial Investors shall purchase from the Company, and the Company shall issue, sell and deliver to the Initial Investors in the amounts, and to the Initial Investors, as set forth on Schedule 1, an aggregate of (i) 20,000 shares of Series A-1 Preferred Stock and (ii) 60,000 shares of Series A-2 Preferred Stock, in each case at a purchase price of $975 per share, for an aggregate purchase price of $78,000,000 in cash (the “Aggregate Purchase Price”) to be paid in full to the Company on the Closing Date. The shares of Series A-1 Preferred Stock and Series A-2 Preferred Stock to be issued and sold by the Company to the Initial Investors pursuant to this Agreement are collectively referred to as the “Purchased Stock.”

Section 1.2    Closing.

(a)    The closing of the purchase and sale of the Purchased Stock (the “Closing”) shall be held at the offices of Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, Texas 77002, at 10:00 a.m. local time, on the same day the Acquisitions are consummated, or at such other time and place as the Company and the Initial Investors shall mutually agree (the “Closing Date”). The Company will (i) deliver written notice to the Investors of the projected Closing Date at least ten (10) Business Days prior to such projected date and of the actual Closing Date at least two (2) Business Days prior to such actual Closing Date and (ii) keep the Initial Investors reasonably apprised of any anticipated changes in the projected Closing Date.

(b)    Subject to the satisfaction or waiver on the Closing Date of the conditions to the Closing in Section 1.3, at the Closing:

(1)    the Company will deliver to the Initial Investors (i) certificates evidencing (A) the purchased Series A-1 Preferred Stock and (B) the purchased Series A-2 Preferred Stock, (ii) the executed Registration Rights Agreement, in the form of Exhibit C hereto, (iii) the Voting and Support Agreement executed by the Company and the Significant Holders, in the form of Exhibit D hereto, (iv) a legal opinion of Latham & Watkins LLP, in the form of Exhibit E hereto, (v) executed waivers or amendments to the Company’s existing registration rights agreements, in form and substance reasonably acceptable to the Initial Investors, permitting the full exercise of the Investors’ rights as set forth in the Registration Rights Agreement (the “Registration Rights Amendments”) and (vi) all other documents, instruments and writings required to be delivered by the Company to the Initial Investors pursuant to this Agreement; and

(2)    the Initial Investors will deliver or cause to be delivered (i) to a bank account (which such account shall be designated by the Company in writing at least two (2) Business Days prior to the Closing Date), the Aggregate Purchase Price by wire transfer of immediately available funds, (ii) the Registration Rights Agreement executed by each of the Initial Investors and (iii) all other documents, instruments and writings required to be delivered by the Initial Investors to the Company pursuant to this Agreement.

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Section 1.3    Closing Conditions.

(a)    The obligation of the Initial Investors, on the one hand, and the Company, on the other hand, to effect the Closing is subject to the satisfaction or waiver by the Initial Investors and the Company at or prior to the Closing of the following conditions:

(1)    no temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any Governmental Entity and no Law shall be in effect restraining, enjoining, making illegal or otherwise prohibiting the consummation of the transactions contemplated by this Agreement;

(2)    the Acquisitions shall have been consummated or shall be consummated substantially simultaneously with the Closing on the terms and conditions contemplated by the PSAs as in effect as of the date hereof (subject to any amendments, supplements or waivers consented to by the Initial Investors at least two (2) Business Days prior to Closing) (i) for aggregate cash consideration no greater than $105,000,000 (including, for the sake of clarity, any payments or concessions made to obtain consent to assignment of any properties or interests) and (ii) subject to all non-cash consideration paid to the sellers party to the PSAs being in the form of Class A Common Stock; and

(3)    the RBL has been amended, amended and restated or otherwise replaced, as of, or in advance of, the Closing in a manner that, in the reasonable determination of the Initial Investors, is sufficient to permit the consummation of transactions contemplated by this Agreement and the other Transaction Documents (the “RBL Amendment or Replacement”).

(b)    The obligation of the Initial Investors to effect the Closing is also subject to the satisfaction or waiver by the Initial Investors at or prior to the Closing of the following conditions:

(1)    (i) the representations and warranties of the Company set forth in Section 2.1 hereof shall be true and correct (disregarding all qualifications or limitations as to materiality or Company Material Adverse Effect) in all material respects as of the date of this Agreement and as of the Closing Date (except to the extent that such representation or warranty speaks to an earlier date, in which case each of such earlier date);

(2)    the Company shall have performed in all material respects its obligations required to be performed by it pursuant to this Agreement at or prior to the Closing;

(3)    the Company shall have adopted and filed the Series A-1 Certificate and the Series A-2 Certificate, with the Secretary of the State of Delaware, and the Series A-1 Certificate and the Series A-2 Certificate shall be in full force and effect;

3

(4)    any shares of Class A Common Stock that could potentially be issued upon conversion of the Series A-1 Preferred Stock (including any shares of Class A Common Stock or Series A-1 Preferred Stock that could potentially be issued as dividends (whether directly or as an increase to “Stated Value”)) shall have been approved for listing on the NASDAQ Global Select Market;

(5)    the Company shall have executed and delivered the Registration Rights Agreement and the Voting and Support Agreement and delivered the Registration Rights Amendments executed by all parties thereto;

(6)    the Initial Investors shall have received (i) a certificate, dated as of the Closing Date, signed on behalf of the Company by a senior executive officer certifying to the effect that the conditions set forth in Section 1.3(b)(1) and (2) have been satisfied, and (ii) a certificate, dated as of the Closing Date and executed on behalf of the Company by its Secretary, certifying the Company’s (A) Certificate of Incorporation, Certificates of Designations and the Bylaws currently in effect, (B) resolutions adopted by the Board of Directors approving this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, and (C) the signatures and authority of persons signing this Agreement, the certificates, the Registration Rights Agreement, the Registration Rights Amendments and the Voting and Support Agreement on behalf of the Company;

(7)    the Initial Investors shall have received from Latham & Watkins LLP, special counsel for the Company, an opinion, dated as of the Closing Date, in substantially the form attached as Exhibit E hereto;

(8)    the Initial Investors shall have received a copy of the Company’s most recent reserve reports from W.D. Von Gonten & Co. and LaRoche Petroleum Consultants, Ltd.;

(9)    the Company shall have provided a summary of its current hedging positions, and the Company and the Initial Investors shall have agreed, acting in good faith, upon any incremental hedging in light of the Acquisitions to be entered into at, prior to or after the Closing;

(10)    the Company shall have provided a pro forma consolidated balance sheet of the Company as of March 31, 2017 prepared in good faith and in form and substance reasonably acceptable to the Initial Investors, adjusted to give effect to the consummation of the Acquisition (including any other financing transactions related thereto) and the transactions contemplated hereby as if such transactions had occurred on such date; and

(11)    substantially simultaneously with the Closing, the Company shall have reimbursed the Initial Investors (or paid at the direction of the Initial Investors) for up to $300,000 of their reasonable and documented out-of-pocket fees and expenses incurred on or before the Closing Date in connection with the due diligence of the Company and the Acquisitions, the negotiation and execution of this Agreement and the purchase by the Initial Investors of the Purchased Stock pursuant to this Agreement (including fees and expenses of counsel and other advisors in connection therewith).

4

(c)    The obligation of the Company to effect the Closing is also subject to the satisfaction or waiver by the Company at or prior to the Closing of the following conditions:

(1)    (i) the representations and warranties of the Initial Investors set forth in Section 2.2 hereof shall be true and correct (disregarding all qualifications or limitations as to materiality) as of the date of this Agreement and as of the Closing Date (except to the extent that such representation or warranty speaks of an earlier date, in which case each of such earlier date), except where the failure of such representation and warranties to be so true and correct would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated by this Agreement or the ability of the Initial Investors to fully perform its covenants and obligations under this Agreement;

(2)    the Initial Investors shall have performed in all material respects their obligations required to be performed by them pursuant to this Agreement at or prior to the Closing;

(3)    the Initial Investors shall have paid to the Company the Aggregate Purchase Price;

(4)    the Initial Investors shall have executed and delivered the Registration Rights Agreement; and

(5)    the Company shall have received a certificate signed by or on behalf of each of the Initial Investors certifying to the effect that the condition set forth in Section 1.3(c)(1) and (2) have been satisfied.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

Section 2.1    Representations and Warranties of the Company. Except as set forth in the SEC Documents filed by the Company with the SEC, which were publicly available prior to the date of this Agreement, excluding any disclosures set forth in risk factors or any “forward looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company represents and warrants to the Initial Investors that:

(a)    Organization and Authority.

(1)    The Company is a corporation duly organized and validly existing under the laws of the State of Delaware, has all requisite power and authority to own its properties and conduct its business as presently conducted, is duly qualified to do

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business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would, individually or in the aggregate, reasonably be expected to have Company Material Adverse Effect. True and accurate copies of the Certificate of Incorporation and Bylaws, each as in effect as of the date of this Agreement, have been made available to the Initial Investors prior to the date hereof.

(2)    Each material Company Subsidiary is duly organized and validly existing under the laws of its jurisdiction of organization, has all requisite power and authority to own its properties and conduct its business as presently conducted, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. As used herein, “Subsidiary” means, with respect to any person, any corporation, partnership, joint venture, limited liability company or other entity (x) of which such person or a subsidiary of such person is a general partner or (y) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect to such entity, is directly or indirectly owned by such person and/or one or more subsidiaries thereof; and “Company Subsidiary” means any Subsidiary of the Company.

(b)    Capitalization.

(1)    The authorized capital stock of the Company consists of 100,000,000 shares of Class A Common Stock, 5,000 shares of Class B Non-Voting Common Stock, par value $0.001 per share (the “Class B Common Stock”) and 10,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). As of the close of business on March 31, 2017 (the “Capitalization Date”), there were 21,822,015 shares of Class A Common Stock outstanding, 2,500 shares of Class B Common Stock outstanding and zero shares of Preferred Stock outstanding. As of the close of business on the Capitalization Date, (i) 100,625 shares of Class A Common Stock were reserved for issuance upon the exercise or payment of stock options outstanding on such date (“Company Stock Options”), and 1,399,375 shares of Class A Common Stock were reserved for issuance upon the exercise or payment of stock units (including deferred stock units, restricted stock and restricted stock units) or other equity-based incentive awards granted pursuant to any plans, agreements or arrangements of the Company and outstanding on such date (collectively, the “Company Stock Awards”), (ii) 760,000 shares of Class A Common Stock were reserved for issuance upon the exercise or payment of outstanding warrants and (iii) zero shares of Class A Common Stock and zero shares of Class B Common Stock were held by the Company in its treasury. All of the issued and outstanding shares of Class A Common Stock and Class B Common Stock have been duly authorized and validly issued in accordance with applicable securities laws and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. From the Capitalization Date through and as

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of the date of this Agreement, no other shares of Common Stock or Preferred Stock have been issued other than shares of Class A Common Stock issued in respect of the exercise of Company Stock Options or Company Stock Awards in the ordinary course of business. The Company does not have outstanding shareholder purchase rights or “poison pill” or any similar arrangement in effect.

(2)    No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the Company Stockholders may vote (“Voting Debt”) are issued and outstanding. As of the date of this Agreement, except (i) pursuant to any cashless exercise provisions of any Company Stock Options or pursuant to the surrender of shares to the Company or the withholding of shares by the Company to cover tax withholding obligations under Company Stock Options or Company Stock Awards, (ii) as set forth in Section 2.1(b)(1), and (iii) as provided in this Agreement or any other Transaction Document, the Company does not have and is not bound by any outstanding options, preemptive rights, rights of first offer, warrants, calls, commitments or other rights or agreements calling for the purchase or issuance of, or securities or rights convertible into, or exchangeable for, any shares of Class A Common Stock or Class B Common Stock or any other equity securities of the Company or Voting Debt or any securities representing the right to purchase or otherwise receive any shares of capital stock of the Company (including any rights plan or agreement).

(c)    Authorization.

(1)    The Company has the corporate power and authority to enter into this Agreement and the other Transaction Documents and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the board of directors of the Company (the “Board of Directors”). This Agreement has been, and as of the Closing each of the other Transaction Documents will be, duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Initial Investors, is, and as of the Closing each of the other Transaction Documents will be, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles). No other corporate proceedings are necessary for the execution and delivery by the Company of this Agreement or the other Transaction Documents, the performance by it of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby or thereby.

(2)    Neither the execution and delivery by the Company of this Agreement or the other Transaction Documents nor the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof (including the conversion or exercise provisions of the Series A Preferred Stock) will, subject only to the receipt of the Requisite Stockholder Approval if required,

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(A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the material properties or assets of the Company or any Company Subsidiary under any of the terms, conditions or provisions of (i) the certificate of incorporation of the Company (as amended and restated, the “Certificate of Incorporation”) or bylaws of the Company (as amended and restated, the “Bylaws”) or the certificate of incorporation, charter, bylaws or other governing instrument of any Company Subsidiary or (ii) assuming the consummation of the RBL Amendment or Replacement in satisfaction of the conditions of Section 1.3(a)(3), any note, bond, credit facility, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which it may be bound, or to which the Company or any Company Subsidiary or any of the properties or assets of the Company or any Company Subsidiary may be subject or (B) materially violate any law, statute, ordinance, rule, regulation, permit, franchise or any judgment, ruling, order, writ, injunction or decree applicable to the Company or any Company Subsidiary or any of their respective properties or assets.

(3)    Other than (i) the securities or blue sky laws of the various states and approval, (ii) the filing of the Series A-1 Certificate and the Series A-2 Certificate with the Secretary of State of the State of Delaware, (iii) the filing with the SEC of such reports under the Exchange Act, as may be required in connection with this Agreement and the transactions contemplated by this Agreement and the other Transaction Documents, (iv) such notice or filings as may be required by the NASDAQ Global Select Market as contemplated by Section 3.7 and (v) those which have already been made or granted, no notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of, any court, administrative agency or commission or other governmental or arbitral body or authority or instrumentality, whether federal, state, local or foreign, and any applicable industry self-regulatory organization (each, a “Governmental Entity”), nor expiration or termination of any statutory waiting period, is necessary for the consummation by the Company of the transactions contemplated by this Agreement or the other Transaction Documents, subject only to the receipt of the Requisite Stockholder Approval.

(d)    Sale of Securities. Assuming the Initial Investors’ representations in Section 2.2 are true and correct, the offer, sale, and issuance of the shares of Series A Preferred Stock in conformity with the terms of this Agreement are exempt from the registration requirements of Section 5 of the Securities Act, and all applicable state securities laws, and the Company will not take any action hereafter that would cause the loss of such exemptions.

(e)    Status of Securities. The shares of Series A Preferred Stock to be issued pursuant to this Agreement, and the shares of Class A Common Stock or Series A-1 Preferred Stock to be issued upon conversion of the Series A-1 Preferred Stock or the Series A-2 Preferred Stock, respectively, have been duly authorized by all necessary corporate action. When issued and sold

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against receipt of the consideration therefor as provided in this Agreement or the Series A-1 Certificate or Series A-2 Certificate, as applicable, the shares of Series A Preferred Stock being purchased by the Initial Investors hereunder will be validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, will not be subject to preemptive rights of any other stockholder of the Company, and will be free and clear of all Liens, except restrictions imposed by this Agreement, the Registration Rights Agreement, the Securities Act and any applicable state or foreign securities laws. Upon any conversion of any shares of Series A-1 Preferred Stock into Class A Common Stock pursuant to the Series A-1 Certificate, or, upon the receipt of the Requisite Stockholder Approval, the conversion of any shares of Series A-2 Preferred Stock into Series A-1 Preferred Stock pursuant to the Series A-2 Certificate, the shares of Class A Common Stock or Series A-1 Preferred Stock issued upon such conversion will be validly issued, fully paid and nonassessable, will not be subject to preemptive rights of any other stockholder of the Company, and will be free and clear of all Liens, except restrictions imposed by this Agreement, the Registration Rights Agreement, the Securities Act and any applicable state or foreign securities laws. The respective rights, preferences, privileges, and restrictions of the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Common Stock are as stated in the Certificate of Incorporation (including the Series A-1 Certificate and the Series A-2 Certificate). The shares of Class A Common Stock to be issued upon any conversion of shares of Series A Preferred Stock into Class A Common Stock have been duly reserved for such issuance. The shares of Series A-1 Preferred Stock to be issued upon any conversion of shares of Series A-2 Preferred Stock into Series A-1 Preferred Stock have been duly reserved for such issuance.

(f)    SEC Documents; Financial Statements.

(1)    The Company has filed all required reports, proxy statements, forms, and other documents with the Securities and Exchange Commission (the “SEC”) since July 5, 2016 (collectively, the “SEC Documents”). Each of the SEC Documents, as of its respective date complied in all material respects with the requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and, except to the extent that information contained in any SEC Document has been revised or superseded by a later SEC Document filed and publicly available prior to the date of this Agreement, none of the SEC Documents contained any untrue statement of a material fact or omitted a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(2)    The Company (i) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are reasonably designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the individuals responsible for the preparation of the Company’s filings with the SEC and (ii) has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the Board of Director’s audit committee (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably

9

likely to materially adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

(3)    The financial statements of the Company and its consolidated Subsidiaries included in the SEC Documents (a) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, in each case as of the date such SEC Document was filed, and (b) have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except as may be indicated in such financial statements or the notes thereto and, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows of the Company and its consolidated subsidiaries for the periods then ended (subject, in the case of unaudited statements, to normal recurring audit adjustments).

(g)    Undisclosed Liabilities. Except for (i) those liabilities that are reflected or reserved for in the consolidated financial statements of the Company included on its Annual Report on Form 10-K for the year ended December 31, 2016, its Quarterly Report on Form 10-Q for the three-months period ended March 31, 2017 or any subsequent SEC Document filed prior to the date hereof, (ii) liabilities incurred since December 31, 2016 in the ordinary course of business (including incremental borrowings under the RBL), (iii) liabilities incurrent pursuant to the Acquisitions or this Agreement and the transactions contemplated hereby, the Company and its Subsidiaries do not have any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise) that are required to be reflected in the Company’s financial statements in accordance with GAAP, and there are no transactions, arrangements or other relationships between the Company and/or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its SEC Documents and is not so disclosed.

(h)    Brokers and Finders. Except for Intrepid Partners, LLC, the fees and expenses of which will be paid by the Company, neither the Company nor its Subsidiaries or any of their respective officers, directors, employees or agents has employed any broker or finder or incurred any liability for any advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Company, in connection with this Agreement or the transactions contemplated hereby.

(i)    Litigation. There is no action, suit, proceeding or investigation pending or, to the Knowledge of the Company, threatened against, nor any outstanding judgment, order or decree against, the Company or any of its Subsidiaries before or by any Governmental Entity which in the aggregate have, or if adversely determined, would reasonably be expected to have, a liability in excess of $500,000, or which challenges the validity of any of the Transaction Documents or the right of the Company to enter into any of the Transaction Documents or to consummate the transactions contemplated hereby and thereby.

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(j)    Taxes. To the Knowledge of the Company, since January 1, 2010, each of the Company and its Subsidiaries has filed all tax returns required to have been filed and paid all material taxes due and payable by them.

(k)    Permits and Licenses. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by each Governmental Entity necessary to conduct their respective businesses (the “Permits”). To the Knowledge of the Company, the Company and its Subsidiaries have materially fulfilled and performed all of their respective obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder of any such Permits. Neither the Company nor any of its Subsidiaries has received notice of any revocation or modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course.

(l)    Compliance with Laws. Neither the Company nor any of its Subsidiaries is in material violation of any applicable Law. To the Knowledge of the Company as of the date of this Agreement, neither the Company nor any of its Subsidiaries is being investigated with respect to any applicable Law.

(m)    Compliance with Sarbanes-Oxley. There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated in connection therewith, in each case, as applicable to the Company. To the Knowledge of the Company, there is no reason that its outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 401 of the Sarbanes-Oxley Act of 2002, without qualification, when next due.

(n)    Title to Interests. The Company and its Subsidiaries have (i) generally satisfactory title to all of their interests in their producing oil and gas properties and to all of their material interests in non-producing oil and gas properties, title investigations having been carried out by the Company and its Subsidiaries, as applicable, in accordance with the general practice in the oil and gas industry, (ii) good and indefeasible title to all other real property owned by them that is material to the Company and its Subsidiaries, taken as a whole, and (iii) good and valid title to all personal property owned by them that is material to the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens, except Liens in favor of the lenders pursuant to the RBL and, until the Company’s repayment, redemption or repurchase in full of its 12.0% senior secured second lien notes due 2021 (the “Second Lien Notes”) in accordance with the terms of the indenture governing such Second Lien Notes as contemplated by Section 3.4(ii) hereof, the Second Lien Notes, and defects and other Liens as do not materially diminish the value of such property or materially interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries.

(o)    Absence of Changes. Since December 31, 2016, there has not been any action or omission of the Company or any of its Subsidiaries that, individually or in the aggregate, has had a Company Material Adverse Effect.

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(p)    Material Contracts. Neither the Company nor any of its Subsidiaries is in default under or in violation or breach of any Material Contract to which any of them is a party. All Material Contracts, including employment agreement, required to be filed with the SEC have been filed. To the Knowledge of the Company, the representations and warranties of the counterparties in the PSAs are true and correct in all material respects. The Initial Investors have been provided with true, correct and complete copies of the PSAs.

(q)    Intellectual Property. The Company and its Subsidiaries own or have obtained valid and enforceable licenses for, or other legal and valid rights to use, the material Intellectual Property necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted.

(r)    Insurance. Each of the Company and its Subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is reasonably adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All material policies of insurance of the Company and its Subsidiaries are in full force and effect; the Company and its Subsidiaries are in compliance with the terms of such policies in all material respects; there are no material claims by the Company or any of its Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and none of the Company or any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business.

(s)    ERISA Compliance. (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) for which the Company or any of its Subsidiaries would have any liability (each an “ERISA-Subject Plan”) has been maintained in material compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Internal Revenue Code of 1986, as amended (the “Code”); (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any ERISA-Subject Plan excluding transactions effected pursuant to a statutory or administrative exemption; (iii) with respect to each ERISA-Subject Plan subject to Title IV of ERISA. (A) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, (B) no ERISA-Subject Plan is or is reasonably expected to be “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA), (C) there has been no filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any ERISA-Subject Plan or the receipt by the Company or any of its Subsidiaries from the PBGC or the plan administrator of any notice relating to the intention to terminate any ERISA-Subject Plan or ERISA-Subject Plans or to appoint a trustee to administer any ERISA-Subject Plan, (D) no conditions contained in Section 303(k)(1)(A) of ERISA for imposition of a lien shall have been met with respect to any ERISA-Subject Plan and (E) neither the Company nor any of its Subsidiaries has incurred, or reasonably expects to incur, any liability under Title IV of ERISA

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(other than contributions to the ERISA-Subject Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of an ERISA-Subject Plan (including a “multiemployer plan,” within the meaning of Section 4001(c)(3) of ERISA) (“Multiemployer Plan”); (iv) no Multiemployer Plan is, or is expected to be, “insolvent” (within the meaning of Section 4245 of ERISA), in “reorganization” (within the meaning of Section 4241 of ERISA), or in “endangered” or “critical” status (within the meaning of Section 432 of the Code or Section 304 of ERISA); and (v) each ERISA-Subject Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

(t)    No Foreign Business. Other than Lonestar Resources, Ltd., which does not hold any material assets, the Company does not have operations or conduct any business outside of the United States.

(u)    Illegal Payments. None of the Company or any of its Subsidiaries, nor, to the Knowledge of the Company, any director, officer, agent, employee or other person acting on behalf of the Company or any of its Subsidiaries, has in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries: (i) used any corporate funds for any unlawful contribution, gift, or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any “foreign official” (as defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (collectively, the “FCPA”)) or domestic government official; or (iii) violated, or is in violation of, any provision of the FCPA, or any other applicable anti-bribery statute or regulation. The Company and its Subsidiaries have conducted their respective businesses in compliance with the FCPA, and all other applicable anti-bribery statutes and regulations.

(v)    Anti-Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, that have been issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or Governmental Entity, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened.

(w)    Sanctions. None of the Company or any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its Subsidiaries is currently subject to or the target of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), the U.S. Department of State or other relevant sanctions authority (collectively, “Sanctions”); and the Company and its Subsidiaries are not located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Cuba, Iran, North Korea, Sudan, Syria and Crimea); and the Company will not directly or indirectly use the proceeds of the Purchase, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture

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partner or other person or entity, for the purpose of financing the activities of any person, or in any country or territory, that currently is the subject or target of Sanctions or in any other manner that will result in a violation by any person (including any person participating in the Purchase whether as an advisor, investor or otherwise) of Sanctions. The Company and its Subsidiaries have not knowingly engaged in for the past five years, and are not now knowingly engaged in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction, is or was the subject or target of Sanctions.

(x)    Listing and Maintenance Requirements. The Class A Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate, or which to the Knowledge of the Company is reasonably likely to have the effect of terminating, the registration of the Class A Common Stock under the Exchange Act nor has the Company received as of the date of this Agreement any notification that the SEC is contemplating terminating such registration.

(y)    Customers and Suppliers. To the Knowledge of the Company, no material customer or material supplier of goods and services of the Company and its Subsidiaries has threatened to cancel or otherwise terminate, or has materially modified or decreased, its relationship with the Company or any of its Subsidiaries.

(z)    No Additional Representations. Except for the representations and warranties made by the Company in this Section 2.1, neither the Company nor any other Person makes any express or implied representation or warranty with respect to the Company or any Subsidiaries or their respective businesses, operations, assets liabilities, condition or prospects, and the Company hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company nor any other Person makes or has made any representation or warranty to the Initial Investors, or any of their respective Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to the Company or any of its Subsidiaries or their respective business, or (ii) except for the representations and warranties made by the Company in this Section 2.1, any oral or written information presented to the Initial Investors, or any of their respective Affiliates or representatives, in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course of the transactions contemplated hereby. Notwithstanding anything to the contrary herein, nothing in this Agreement shall limit the right of the Initial Investors to rely on the representations, warranties, covenants and agreements made to the Initial Investors expressly set forth in the Transaction Documents or in any certificate delivered thereunder, nor will anything in this Agreement operate to limit any claim by the Initial Investors for fraud.

Section 2.2    Representations and Warranties of the Initial Investor. Each Initial Investor hereby, severally and not jointly, represents and warrants to the Company, that:

(a)    Organization and Authority. Such Initial Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so

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qualified would be reasonably expected to materially and adversely affect such Initial Investor’s ability to perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis, and such Initial Investor has the corporate or other power and authority and governmental authorizations to own its properties and assets and to carry on its business as it is now being conducted.

(b)    Authorization.

(1)    Such Initial Investor has the corporate or other power and authority to enter into this Agreement and to carry out its obligations hereunder and under the Registration Rights Agreement. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by such Initial Investor and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of such Initial Investor, and no further approval or authorization by any of its stockholders, partners, members or other equity owners, as the case may be, is required. This Agreement has been, and the Registration Rights Agreement will be, duly and validly executed and delivered by such Initial Investor and assuming due authorization, execution and delivery by the Company, this Agreement is, and the Registration Rights Agreement will be, a valid and binding obligation of such Initial Investor enforceable against such Initial Investor in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

(2)    Neither the execution, delivery and performance by such Initial Investor of this Agreement and the Registration Rights Agreement, nor the consummation of the transactions contemplated hereby and thereby, nor compliance by such Initial Investor with any of the provisions hereof and thereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the properties or assets of such Initial Investor under any of the terms, conditions or provisions of (i) its governing instruments or (ii) any note, bond, credit facility, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which such Initial Investor is a party or by which it may be bound, or to which such Initial Investor or any of the properties or assets of such Initial Investor may be subject, or (B) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any law, statute, ordinance, rule or regulation, permit, concession, grant, franchise or any judgment, ruling, order, writ, injunction or decree applicable to such Initial Investor or any of their respective properties or assets, except in each case for such violations, conflicts and breaches as would not reasonably be expected to materially and adversely affect such Initial Investor’s ability to perform its respective obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis.

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(3)    Other than the securities or blue sky laws of the various states, no notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of, any Governmental Entity, nor expiration or termination of any statutory waiting period, is necessary for the consummation by such Initial Investor of the transactions contemplated by this Agreement, subject only to the receipt of the Requisite Stockholder Approval if required.

(c)    Purchase for Investment.

(1)    Such Initial Investor is (i) an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, (ii) aware that the sale of the Series A Preferred Stock and the Common Stock issuable upon conversion of the Series A Preferred Stock being issued and sold to it pursuant to this Agreement and, upon obtaining the receipt of the Requisite Stockholder Approval, the Series A-1 Preferred Stock issuable upon conversion of the Series A-2 Preferred Stock issued and sold pursuant to this Agreement (collectively, the “Securities”) is being made in reliance on a private placement exemption from registration under the Securities Act, and (iii) acquiring the Securities for its own account.

(2)    Such Initial Investor understands and agrees that the Securities are being offered in a transaction not involving any public offering within the meaning of the Securities Act, that such Securities have not been and, except as contemplated by the Registration Rights Agreement, will not be registered under the Securities Act and that such Securities may be offered, resold, pledged or otherwise transferred only (i) in a transaction not involving a public offering, (ii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), (iii) pursuant to an effective registration statement under the Securities Act or (iv) to the Company or one of its Subsidiaries, in each of cases (i) through (iv) in accordance with any applicable state and federal securities laws, and that it will notify any subsequent purchaser of Securities from it of the resale restrictions referred to above, as applicable.

(3)    Such Initial Investor understands that, unless sold pursuant to a registration statement that has been declared effective under the Securities Act or in compliance with Rule 144 thereunder, the Company may require that the Securities will bear a legend or other restriction substantially in the form set forth in Section 4.3.

(4)    Such Initial Investor (i) is able to fend for itself in the transactions contemplated by this Agreement; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Securities; and (iii) has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment.

(5)    Such Initial Investor acknowledges that (i) it has conducted its own investigation of the Company and the terms of the Securities, (ii) it has had access to the Company’s public filings with the SEC and to such financial and other information as it deems necessary to make its decision to purchase the Securities and (iii) it has been

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offered the opportunity to conduct such review and analysis of the business, assets, condition, operations and prospects of the Company and its Subsidiaries and to ask questions of the Company and received answers thereto, each as it deemed necessary in connection with the decision to purchase the Securities. Such Initial Investor further acknowledges that it has had such opportunity to consult with its own counsel, financial and tax advisors and other professional advisers as it believes is sufficient for purposes of the purchase of the Securities.

(6)    Such Initial Investor understands that the Company will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

(7)    Except for the representations and warranties contained in Section 2.1 of this Agreement, such Initial Investor acknowledges that neither the Company nor any Person on behalf of the Company makes, and such Initial Investor has not relied upon, any other express or implied representation or warranty with respect to the Company or any of its Subsidiaries or with respect to any other information provided to the Initial Investors in connection with the transactions contemplated by this Agreement. Notwithstanding anything to the contrary herein, nothing in this Agreement shall limit the right of the Initial Investors to rely on the representations, warranties, covenants and agreements made to the Initial Investors expressly set forth in the Transaction Documents or in any certificate delivered thereunder, nor will anything in this Agreement operate to limit any claim by the Initial Investors for fraud.

(d)    Financial Capability. Such Initial Investor currently has capital commitments sufficient to, and at Closing will have, available funds necessary to consummate the Closing on the terms and conditions contemplated by this Agreement. Such Initial Investor is not aware of any reason why the funds sufficient to fulfill its obligations under Section 1.1 will not be available on the Closing Date.

(e)    Brokers and Finders. Neither such Initial Investor nor its Affiliates or any of their respective officers, directors, employees or agents has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for such Initial Investor, in connection with this Agreement or the transactions contemplated hereby.

(f)    No Disqualification Events. Such Initial Investor represents that neither (1) such Initial Investor, (2) to such Initial Investor’s knowledge, any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (3) any beneficial owner of the Purchased Stock to be held by such Initial Investor is subject to any Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed reasonably in advance of the Closing in writing in reasonable detail to the Company.

(g)    Ownership. As of the date of this Agreement, neither such Initial Investor nor any of its Affiliates (other than any portfolio company with respect to which such Initial Investor is not the party exercising control over investment decisions) are the owners of record or the Beneficial Owners of shares of Class A Common Stock, Class B Common Stock or securities convertible into or exchangeable for Class A Common Stock or Class B Common Stock.

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(h)    Short Sales. Prior to the Closing, neither such Initial Investor nor its Affiliates have, directly or indirectly, sold “short” the Common Stock or any securities convertible into, or exercisable or exchanged for, Common Stock.

ARTICLE III.

COVENANTS

Section 3.1    Filings; Other Actions. Following the execution of this Agreement, the Initial Investors, on the one hand, and the Company, on the other hand, will cooperate and consult with the other and use commercially reasonable efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Governmental Entities, and the expiration or termination of any applicable waiting period, necessary or advisable to consummate the transactions contemplated by this Agreement, and to perform the covenants contemplated by this Agreement. Each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other parties may reasonably request to consummate or implement such transactions or to evidence such events or matters. Each party hereto agrees to keep the other party apprised of the status of matters referred to in this Section 3.1. The Initial Investors shall promptly furnish the Company, and the Company shall promptly furnish the Initial Investors, to the extent permitted by applicable law, with copies of written communications received by it or its Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement.

Section 3.2    Reasonable Best Efforts to Close. The Company and each Initial Investor agree to use reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the transactions contemplated hereby as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall cooperate fully with the other party hereto to that end, including in relation to the satisfaction of the conditions to Closing set forth in Section 1.3(a), (b) and (c) and cooperating in seeking to obtain any consent required from Governmental Entities.

Section 3.3    Corporate Actions.

(a)    Authorized Common Stock. At any time that any Series A Preferred Stock is outstanding, the Company shall from time to time take all lawful action within its control to cause the authorized capital stock of the corporation to include a sufficient number of authorized but unissued shares of Class A Common Stock and Series A-1 Preferred Stock to satisfy the conversion requirements of all shares of Series A Preferred Stock then outstanding, or issuable as a dividend, or upon the conversion of Series A-2 Preferred Stock then outstanding (assuming for

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the purposes of this calculation that the Requisite Stockholder Approval has been obtained). All shares of Class A Common Stock and Series A-1 Preferred Stock delivered upon conversion of the Series A Preferred Stock issued hereunder or issuable as a dividend shall be newly issued shares or shares held in treasury by the Company, shall have been duly authorized and validly issued and shall be fully paid and nonassessable, and free of any Lien.

(b)    Certificate. Prior to the Closing, the Company shall file in the office of the Secretary of State of the State of Delaware the Series A-1 Certificate in the form attached to this Agreement as Exhibit A and the Series A-2 Certificate in the form attached to this Agreement as Exhibit B, with such changes thereto as the parties may agree.

(c)    Certain Adjustments. If any occurrence since the date of hereof until the Closing would have resulted in an adjustment to the Conversion Rate (as defined in the Series A-1 Certificate) pursuant to Section 9 of the Series A-1 Certificate if the Series A-1 Preferred Stock had been issued and outstanding since the date hereof or the Series A-2 Preferred Stock had been issued and outstanding since the date hereof, the Company shall adjust such Conversion Rate, as applicable, effective as of the Closing, in the same manner as would have been required by Section 9 of the Series A-1 Certificate if the Series A-1 Preferred Stock or the Series A-2 Preferred Stock, as applicable, had been issued and outstanding since the date hereof.

Section 3.4    Use of Proceeds. The Company shall use the proceeds from the sale of the Purchased Stock (i) to partially finance the Acquisitions and (ii) to repay, redeem or repurchase its Second Lien Notes in full, including any prepayment premiums in connection therewith, in accordance with the terms of the indenture governing such notes and, only to the extent of any excess, (x) to fund development of the Company’s existing and acquired oil and gas assets in Texas and (y) for general corporate purposes, including the payment of fees and expenses in connection with the transactions contemplated by this Agreement and the Registration Rights Agreement.

Section 3.5    Company Stockholder Approvals. Following the Closing, the Company agrees to use commercially reasonable efforts to obtain, at a special or annual meeting of Company Stockholders (at which a quorum is present) no later than six months following the Closing Date (the “Stockholder Meeting”), the approval by the Company Stockholders of the conversion of all shares of Series A Preferred Stock issued or issuable pursuant to this Agreement (assuming maximum conversion rates as set forth in the Series A-1 Certificate and the Series A-2 Certificate and that the Company elects to pay 12 quarters of dividends in kind or otherwise accrues to stated value in accordance with the terms of each of the Series A-1 Certificate and the Series A-2 Certificate) into shares of Class A Common Stock (such approval, the “Requisite Stockholder Approval”) in accordance with the Certificate of Incorporation and the Bylaws of the Company. The Company will prepare and file with the SEC a proxy statement to be sent to the Company’s stockholders in connection with the Stockholder Meeting (the “Proxy Statement”). Subject to the directors’ fiduciary duties, the Proxy Statement shall include the Board of Directors’ recommendation that the holders of shares of Class A Common Stock vote in favor of the Requisite Stockholder Approval. Each Initial Investor agrees to furnish to the Company information concerning such Initial Investor and its Affiliates as the Company, on the advice of outside counsel, reasonably determines is necessary for the Proxy Statement, the

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Stockholder Meeting or any subsequent proxy solicitation, provided, however, that the Initial Investor shall not be obligated to provide (i) any information subject to confidentiality, non-disclosure, or similar agreements or which cannot be disclosed under applicable Law, (ii) personally identifiable information, (iii) information regarding the limited partners of such Initial Investor and (iv) financial information that the Initial Investor reasonably deems to be material to its business, as determined in good faith in its sole discretion.

Section 3.6    Financial Statements, Information Rights and Inspection.

(a)    If at any time while any shares of Series A Preferred Stock are outstanding, the Company ceases filing annual, quarterly and other reports required to be filed with the SEC under the Exchange Act, the Company shall provide to the Investors who hold shares of Series A Preferred Stock:

(1)    unaudited quarterly financial statements prepared in accordance with GAAP as soon as such financial statements become available but no later than forty-five (45) days after the end of each fiscal quarter of the Company, in form and substance reasonably acceptable to the Investor Representative;

(2)    quarterly production reports within forty-five (45) days after the end of each fiscal quarter displaying volumes of crude oil, natural gas liquids, residue natural gas, and other relevant hydrocarbons sold or produced by the Company; and

(3)    audited annual financial statements prepared in accordance with GAAP within ninety (90) days after the end of each fiscal year of the Company, certified by an accounting firm mutually acceptable to the Company and the Investor Representative.

(b)    In addition to the information rights set forth in Section 3.6(a), following the Closing and regardless of whether or not the Company ceases filing reports with the SEC, for as long as any shares of Series A Preferred Stock are outstanding, the Company shall provide to the Investors, when requested by such Investor:

(1)    twice per year, as soon as reasonably practicable, but no later than thirty (30) days before (i) the end of each fiscal year of the Company or (ii) the end of the first two (2) quarters of each fiscal year of the Company, a consolidated budget (including operating and capital budgets presented on a monthly basis) for the subsequent 24-months; provided that the Board of Directors shall make a good faith effort to confirm an annual budget for the subsequent year by the end of each fiscal year;

(2)    annually, by August 15 of each year, a reserve report prepared as of June 30 of each year, which may be prepared internally by petroleum engineers who are employees of the Company;

(3)    annually, as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year, a reserve report prepared or audited by a third party engineering firm reasonably acceptable to the Investor Representative and the Company with an “as of” date of the end of such fiscal year; and

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(4)    such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as the Investor Representative may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.6(b) to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless the Investor Representative and such Investor has agreed in writing to keep such information confidential (which shall be satisfied by agreeing to the confidentiality provisions of Section 3.9 of this Agreement)) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel in a manner that cannot be reasonably mitigated.

(c)    At the sole expense of the Investor Representative, for as long as any shares of Series A Preferred Stock are outstanding, the Company shall permit the Investor Representative to visit and inspect the Company’s properties, examine its books of account and records, and discuss the Company’s affairs, finances, and accounts with the officers of the Company with such responsibility, during normal business hours of the Company and upon prior written request by the Investor Representative at least two (2) Business Days in advance, and the Investor Representative shall be permitted to share the results of its inspection and discussions with the Investors; provided, however, that the Company shall not be obligated pursuant to this Section 3.6(c) to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless the Investor Representative and Investor receiving such information has agreed in writing to keep such information confidential (which shall be satisfied by agreeing to the confidentiality provisions of Section 3.9 of this Agreement)) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel in a manner that cannot be reasonably mitigated.

Notwithstanding anything else in this Section 3.6 to the contrary, the Company may cease providing the information set forth in this Section 3.6 during the period starting with the date thirty (30) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.6 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

Section 3.7    NASDAQ Listing of Shares. The Company shall have applied for listing on the NASDAQ Global Select Market as of the Closing Date any shares of Class A Common Stock that could potentially be issued upon conversion of Series A-1 Preferred Stock (including any shares of Class A Common Stock or Series A-1 Preferred Stock that could potentially be issued as dividends (whether directly or as an increase to “Stated Value”)). Following the Requisite Stockholder Approval and prior to the effectiveness of the conversion of Series A-2 Preferred Stock into Series A-1 Preferred Stock, the Company shall apply and cause to be approved for listing on the NASDAQ Global Select Market the shares of Class A Common

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Stock that could potentially be issued upon conversion of the Series A-1 Preferred Stock into which the Series A-2 Preferred Stock will be converted (including any shares of Class A Common Stock or Series A-1 Preferred Stock that could potentially be issued as dividends (whether directly or as an increase to “Stated Value”)), subject to official notice of issuance.

Section 3.8    Negative Covenants. From the date of this Agreement through the Closing, the Company and its Subsidiaries shall not, without the prior written approval of the Initial Investors:

(a)    declare, or make payment in respect of, any dividend or other distribution upon any shares of capital stock of the Company;

(b)    amend the Certificate of Incorporation or Bylaws in a manner that would affect the Investors in an adverse manner as holders of Series A Preferred Stock;

(c)    authorize, issue or reclassify any capital stock, or debt securities convertible into capital stock, of the Company other than the authorization and issuance of the Series A Preferred Stock, Class A Common Stock and Class B Common Stock; or

(d)    take any other action that would require the consent of Approved Holders hereunder or under the Series A-1 Certificate or Series A-2 Certificate if such action were to occur after the Closing.

Section 3.9    Confidentiality. Each Initial Investor hereby agree to keep confidential, to cause their respective employees, officers, directors and Affiliates to keep confidential and to instruct their respective representatives to keep confidential, any and all confidential information of the Company, including non-public information relating to the Company’s finances and results, trade secrets, know-how, customers, business plans, marketing activities, financial data and other business affairs that was disclosed by the Company on or prior to the date of this Agreement or that is disclosed on or after the date of this Agreement by the Company or any of its Subsidiaries to such Initial Investor, any Investor or their respective Affiliates or representatives (each a “Receiving Party”), (collectively, the “Company Proprietary Information”), and to utilize the Company Proprietary Information only for purposes related to its investment or other purpose for which such information was disclosed (the “Utilization Restriction”); provided, however, that the Utilization Restriction shall not restrict the sale of any securities (including the Series A Preferred Stock or Common Stock) so long as such Initial Investor complies, to the extent applicable, with the confidentiality restrictions of this Section 3.9, the Company’s insider trading policy and applicable securities laws; provided, further, that Company Proprietary Information shall not include any information that (i) is or subsequently becomes publicly available without breach of this Section 3.9 or (ii) is or subsequently becomes known or available to a Receiving Party from a source other than the Company unless such Receiving Party knows such source was prohibited from disclosing such Company Proprietary Information to the Receiving Party by a contractual, legal or fiduciary obligation owed by such other third party to the Company. For the avoidance of doubt, subject to the terms of this Section 3.9, any Initial Investor may disclose Company Proprietary Information to its employees, officers, directors, advisors and other representatives (including the Investor Representative). Each Investor shall be responsible for any failure of its employees, officers, directors, advisors and other representatives to keep confidential the Company Proprietary Information.

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Section 3.10    State Securities Laws. The Company shall use commercially reasonable efforts to timely (i) obtain all necessary permits and qualifications, if any, or secure an exemption therefrom, required by any state or country prior to the offer and sale of the Series A Preferred Stock and (ii) cause such authorization, approval, permit or qualification to be effective as of the Closing and as of any conversion of Series A Preferred Stock.

Section 3.11    PSAs. The Company shall consult in good faith with the Initial Investors in connection with (i) any amendment or modification to any provision of, or waive any termination right or closing condition under, a PSA, (ii) the Company’s actions or any of its Affiliates’ actions relating to each of the title and environmental defect processes under the PSAs, including with respect to reviewing any interim and final defect notices, exercise of elections regarding curative matters, arbitration and settlement title and environmental disputes and with respect to the settlement of any defect dispute after the consummation of the “Closing” of the PSAs and (iii) any contemplated termination of a PSA.

ARTICLE IV.

ADDITIONAL AGREEMENTS

Section 4.1    Standstill. Until the date that is the earlier of (i) two (2) years after the date the Approved Holders are no longer entitled to designate any Investor Directors pursuant to Section 4.4 and (ii) the date the Company fails to fully declare and pay all accrued dividends in cash on a “Dividend Payment Date” after there are no “PIK Quarters” remaining under either the Series A-1 Certificate or Series A-2 Certificate (as applicable), each Initial Investor agrees that such Initial Investor and Affiliates who holds any shares of Purchased Stock or any shares of Class A Common Stock or Series A Preferred Stock acquired upon a conversion of (or as a dividend on) the Series A Preferred Stock issued under this Agreement will not, without the prior approval of the Board of Directors, directly or indirectly, through their subsidiaries or any other Persons, or in concert with any Person, or as a “group” (as defined in Section 13 of the Exchange Act) with any Person:

(a)    purchase, offer to purchase, or agree to purchase or otherwise acquire “beneficial ownership” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of any Common Stock, or any securities convertible or exchangeable into Common Stock, excluding any shares of Common Stock, Series A-1 Preferred Stock or other securities acquired (i) pursuant to a conversion of the Series A Preferred Stock or otherwise pursuant to the Transaction Documents or (ii) pursuant to an offering of such securities by the Company;

(b)    make, or in any way participate in, any solicitation of proxies to vote, or seek to advise or influence any person with respect to the voting of, any voting securities of the Company or any of its Subsidiaries, or seek or propose to influence, advise, change or control the management, board of directors, policies, affairs or strategy of the Company by way of any public communication or other communications to securityholders intended for such purpose, except, in each case, with respect to any Requisite Stockholder Approval;

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(c)    make a proposal for, or offer of (with or without conditions) any acquisition of or extraordinary transaction involving the Company or any of the Company’s Subsidiaries or any of their respective securities or assets;

(d)    effect or seek to effect (including, without limitation, by entering into discussions, negotiations, agreements or understandings with any third person), offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way assist or facilitate any other person to effect or seek, offer or propose (whether public or otherwise) to effect or participate (except as a holder of Common Stock or Series A Preferred Stock) in a merger, consolidation, division, acquisition or exchange of substantially all assets or equity, change of control transaction, recapitalization, restructuring, liquidation or similar transaction involving the Company or any of its Subsidiaries; or

(e)    enter into any discussions, negotiations, arrangements or understandings with or form a group with, any third party in connection with such third party’s taking, planning to take, or seeking to take any of the actions prohibited by clauses (a) through (d) of this Section 4.1 or otherwise act, alone or in concert with others, to seek to control or influence the Board of Directors or the management or policies of the Company, including its Subsidiaries; provided, however, that nothing in this Section 4.1 will limit (i) any Initial Investor’s ability to vote or Transfer its Common Stock or Series A Preferred Stock or otherwise exercise rights under its Series A Preferred Stock, or (ii) the ability of any director designated by the Investor Representative or the Approved Holders pursuant to Section 4.4, the Series A-1 Certificate and the Series A-2 Certificate to vote or otherwise exercise its fiduciary duties as a member of the Board of Directors, (iii) the ability of any observer appointed by the Investor Representative pursuant to Section 4.4, the Series A-1 Certificate and the Series A-2 Certificate to seek (but solely in such capacity as observer) to participate fully as an observer to the Board of Directors, or (iv) the ability of the Investor Representative or the Approved Holders to exercise their rights to appoint directors and observers pursuant to Section 4.4, the Series A-1 Certificate and the Series A-2 Certificate.

Section 4.2    Transfer Restrictions.

(a)    The Initial Investors may Transfer to any Person any portion of their Series A Preferred Stock issued pursuant to this Agreement or any Class A Common Stock or Series A-1 Preferred Stock, as applicable, issued upon conversion of (or as dividends on) the Series A Preferred Stock issued pursuant to this Agreement; provided, that no Investor (other than the Initial Investors) shall have the right to participate in the appointment of Investor Directors as set forth in Section 4.4 and Section 19 of the Series A-1 Certificate and Series A-2 Certificate unless they have qualified as Approved Holders.

(b)    Notwithstanding Section 4.2(a), the transferees of such stock (together with the Initial Investors, the “Investors”) will not at any time knowingly Transfer any Series A Preferred Stock or any Class A Common Stock issued upon conversion of the Series A Preferred Stock pursuant to this Agreement, held by such Investor to a Company Competitor; provided, however, that this Section 4.2(b) shall not restrict any Transfer into the public market.

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Section 4.3    Legend.

(a) The Initial Investors agree that all certificates or other instruments representing the Series A Preferred Stock or Class A Common Stock subject to this Agreement will bear a legend substantially to the following effect:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF MAY 26, 2017, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER AND WILL BE PROVIDED WITHOUT COST, UPON WRITTEN REQUEST TO THE SECRETARY OF THE ISSUER.

(b)    Upon request of a holder of Series A Preferred Stock or Class A Common Stock subject to this Agreement, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause the legend to be removed from any certificate for any Series A Preferred Stock issued or Class A Common Stock to be issued pursuant to the terms of this Agreement. Each Initial Investor acknowledges that the Series A Preferred Stock issued pursuant to this Agreement and the Class A Common Stock or Series A Preferred Stock issuable upon conversion of (or as dividends on) such stock have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Series A Preferred Stock issued pursuant to this Agreement or any Class A Common Stock or Series A-1 Preferred Stock issuable upon conversion of (or as dividends on) such stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

Section 4.4    Board Representation Rights. Further to (and, for so long as such certificates remain outstanding and effective, and not in duplication of) Section 19 of the Series A-1 Certificate and the Series A-2 Certificate:

(a)    At or prior to the Closing, the Board of Directors shall take all actions necessary to increase the size of the Board of Directors by one director (to nine total directors) and to cause Phillip Z. Pace (in such capacity, the “Investor Director” and together with any successors or other directors designated by the Investors pursuant to this Section 4.4, the “Investor Directors”)

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to be appointed to the Board of Directors. Additionally, at or prior to the Closing, Matthew B. Ockwood shall be appointed as a non-voting observer to the Board of Directors (in such capacity, the “Investor Observer”). Effective as of the earlier of the first anniversary of the Closing Date and obtaining the Requisite Stockholder Approval, the Board of Directors shall take all actions necessary to further increase the size of the Board of Directors by one director (to ten total directors) and to cause the Investor Observer to be appointed as a director on the Board of Directors.

(b)    From and after the Closing Date, for as long as the Approved Holders Beneficially Own any one of the percentages of Series A Preferred Stock or Common Stock set forth below, the holders of a majority of the total number of outstanding shares of Common Stock (on an “as-converted basis”) held by such Approved Holders (the “Approved Holder Majority”) shall have the exclusive right (but not the obligation), voting separately as a class, to designate to the Board of Directors, the following number of Investor Directors:

(1)    two Investor Directors (subject to increase pursuant to Section 4.5(j)), for as long as the Approved Holders Beneficially Own at least (i) 20% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (ii) at least 30% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (in the case of this clause (1), as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction); and

(2)    one Investor Director (subject to increase pursuant to Section 4.5(j)), for as long as the Approved Holders Beneficially Own at least (i) 10% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (ii) at least 15% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (in the case of this clause (2), as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction)

(c)    The rights to designate directors pursuant to Section 4.4(b) shall be held by the Approved Holder Majority, and any subsequent Investor designated by an Approved Holder who is approved by the Company in the Company’s sole and absolute discretion (such holders collectively, the “Approved Holders”).

(d)    The Company and the Board of Directors shall consider in good faith designating at least one (1) Investor Director to committees of the Board of Directors, as appropriate, and to the extent permitted by applicable SEC and stock exchange requirements.

(e)    The Company shall take all actions within its power to cause all designees designated pursuant to Section 4.4(b) to be included in the slate of nominees recommended by the Board of Directors to the holders of Class A Common Stock for election as directors at each meeting of the Company Stockholders called for the purpose of electing directors (and/or in connection with any election by written consent) and the Company shall use commercially reasonable efforts to cause the election of each such designated Investor Directors, including (i)

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voting or providing a written consent or proxy with respect to Common Stock, and soliciting proxies in favor of the election of such nominees, (ii) causing the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing required agreements and instruments, (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result and (v) for so long as the Approved Holders retain the rights described under Section 4.4(b), not nominating or recommending the election of any other candidates against or in replacement of such designated Investor Directors.

(f)    Each Investor Director and Investor Observer designated pursuant to Section 4.4(b) shall serve until his or her successor is designated or his or her earlier death, disability, resignation or removal; any vacancy or newly created directorship in the position of an Investor Director may be filled only by the Approved Holder Majority, subject to the fulfillment of the requirements set forth in Section 4.4(g); and each Investor Director and Investor Observer may, during his or her term of office, be removed at any time, without cause, by and only by the Approved Holder Majority.

(g)    At all times while an Investor Director or Investor Observer is serving as a member or observer of the Board of Directors, and following any such Investor Director’s or Investor Observer’s death, disability, resignation or removal, such Investor Director or Investor Observer shall be entitled to all rights to indemnification and exculpation as are then made available to any other member or observer of the Board of Directors.

(h)    Notwithstanding anything to the contrary, any Investor Director or Investor Observer shall be reasonably acceptable to the Board of Directors and the Nominating and Corporate Governance Committee thereof acting in good faith and satisfy all applicable SEC and stock exchange requirements regarding service as a regular director or a board observer of the Company and shall comply in all material respects with the Company’s corporate governance guidelines as in effect from time to time. The Approved Holder Majority shall notify the Company of any proposed Investor Director or Directors in writing no later than the latest date on which the Company Stockholders may make nominations to the Board of Directors in accordance with the Company’s Certificate of Incorporation and Bylaws, together with all information concerning such designee required to be delivered to the Company by the Bylaws and such other information reasonably required by the Company for such purpose.

(i)    The right to designate directors pursuant to Section 4.4(b) shall automatically terminate at such time as the Approved Holders no longer Beneficially Own a sufficient number of shares required to designate an Investor Director set forth in Section 4.4(b)(2), and at such time, if requested in writing by the Company, any Investor Directors or Investor Observer then serving on the Board of Directors in excess of the entitled amount (if less than all then Investor Directors or Investor Observers, then as selected by the Approved Holder Majority) shall promptly resign from the Board of Directors.

(j)    Nothing in this Section 4.4 shall be deemed to require that any party hereto, or any Affiliate thereof, act or be in violation of any applicable provision of law, regulation, legal duty or requirement or stock exchange or stock market rule.

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(k)    If, after termination of the Series A-1 Certificate and Series A-2 Certificate or such time as no shares of Series A Preferred Stock remain outstanding, the Approved Holder Majority continues to satisfy the ownership percentages set forth in Section 4.4(b) and Section 4.5, the Approved Holder Majority may request the Company to enter into a shareholders agreement reflecting the rights set forth in such sections, which the Company and the Approved Holders shall enter into as promptly as practicable after such request (but, in any event, no later than 30 days after such request).

(l)    To the fullest extent permitted by applicable law, the Company, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Company and its subsidiaries in, or in being offered an opportunity to participate in, any business opportunities that are from time to time presented to the Investors or any of their respective affiliates or any of their respective agents, shareholders, members, partners, directors, officers, employees, affiliates or subsidiaries (other than the Company and its subsidiaries), including any director or officer of the Company who is also an agent, shareholder, member, partner, director, officer, employee, affiliate or subsidiary of any Investor (each, a “Specified Party”), even if the business opportunity is one that the Company or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no Specified Party shall have any duty to communicate or offer any such business opportunity to the Company or be liable to the Company or any of its subsidiaries or any stockholder, including for breach of any fiduciary or other duty, as a director or officer or controlling stockholder or otherwise, and the Company shall indemnify each Specified Party against any claim that such person is liable to the Company or its stockholders for breach of any fiduciary duty, by reason of the fact that such person (i) participates in, pursues or acquires any such business opportunity, (ii) directs any such business opportunity to another person or (iii) fails to present any such business opportunity, or information regarding any such business opportunity, to the Company or its subsidiaries, unless, in the case of a person who is a director or officer of the Company, such business opportunity is expressly offered to such director or officer in writing solely in his capacity as a director or officer of the Company.

Section 4.5    Investor Consent. Further to (and, for so long as such certificates remain outstanding and effective, and not in duplication of) Section 20 of the Series A-1 Certificate and Series A-2 Certificate, for so long as the Approved Holders Beneficially Own at least (i) 10% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (ii) at least 15% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction), without the prior affirmative vote or written consent of the Approved Holder Majority, the Company shall not, and (to the extent applicable) shall not permit any Subsidiary to (directly or indirectly, by the way of merger, consolidation, reclassification or otherwise):

(a)    amend, change, alter or otherwise modify the rights, preferences, privileges or voting powers of the Series A Preferred Stock;

(b)    increase the authorized amount of Series A Preferred Stock or issue Series A Preferred Stock except the (i) 20,000 shares of Series A-1 Preferred Stock and 60,000 shares of

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Series A-2 Preferred Stock issued at the Closing, (ii) in-kind dividends payable pursuant to Section 4(d) of the Series A-1 Certificate and Series A-2 Certificate and (iii) Series A-1 Preferred Stock issuable upon conversion of Series A-2 Preferred Stock pursuant to Section 7 of the Series A-2 Certificate;

(c)    authorize or issue any other preferred equity instruments (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such preferred equity instruments) other than (i) those that are (x) expressly made subordinate to the Series A Preferred Stock, (y) not entitled to receive cash dividends and (z) not mandatorily redeemable until after the seventh anniversary of the Closing Date and payment of any applicable redemption on the Preferred Stock or (ii) those, the proceeds of which, are used to immediately redeem all of the outstanding shares of Series A Preferred Stock;

(d)    authorize, issue or transfer any equity (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such equity) in any subsidiary of the Company other than (i) equity issued or transferred to the Company or another wholly-owned subsidiary of the Company or (ii) equity, the proceeds of which, are used to immediately redeem all of the outstanding shares of Series A Preferred Stock;

(e)    incur or refinance any Debt that would result in a ratio of total outstanding Debt (net of up to $10.0 million of unrestricted cash and cash equivalents on hand immediately after such incurrence or refinancing) to trailing four fiscal quarters Adjusted EBITDAX for the Company and its consolidated subsidiaries greater than (i) for any fiscal quarter ending after the date hereof through and including December 31, 2017, 4.50 to 1.00 and (ii) for any fiscal quarter thereafter, 4.00 to 1.00, and calculated in good faith on a pro forma basis with respect to any acquisitions (as set forth in the definition of Adjusted EBITDAX) and any repayments or refinancing of Debt; provided, that until the first anniversary of the Closing Date, the Company may issue or borrow up to $250,000,000 in unsecured notes, the proceeds of which are substantially contemporaneously used to (i) first, wholly refinance, repay or retire the Company’s outstanding 8.750% senior unsecured notes due 2019 (the “Existing Notes”), issued pursuant to that certain Indenture, dated as of April 4, 2014, by and among Lonestar Resources America Inc., Wells Fargo Bank, National Association, as trustee, and the guarantors party thereto and, for any proceeds in excess of the Existing Notes, (ii) second, reduce amounts outstanding under the Credit Agreement, dated July 28, 2015, among Lonestar Resources America Inc., Citibank, N.A., as Administrative Agent, and the lenders party thereto from time to time (as amended and as the same may be amended, restated, amended and restated and otherwise modified from time to time, the “RBL”) and (iii) third, to the extent any excess remains, to fund development of the Company’s existing and acquired oil and gas assets in Texas;

(f)    amend, change, alter, modify or repeal the Company’s Certificate of Incorporation or Bylaws in a manner that would materially and adversely affect the rights, preferences, privileges or voting powers of the Preferred Stock or its holders;

(g)    liquidate or dissolve the Company or any of its material Subsidiaries;

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(h)    pay any cash dividends to the Company Stockholders or holders of any other existing and future equity securities (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such equity securities) of the Company that are junior in rights to the Series A Preferred Stock, or redeem or repurchase any such Common Stock or other junior equity securities (except redemptions or repurchases in connection with the administration of any employee benefit plan in the ordinary course of business);

(i)    enter into any material new line of business or fundamentally change the nature of the Company’s business; or

(j)    modify the size of the Board of Directors, other than to increase the size of the Board of Directors up to a maximum of 12 directors, provided that for so long as the Approved Holders maintain the right to appoint one or more directors to the Board of Directors, the Investor Director(s) shall maintain the same proportionate share of the Board of Directors after the increase in size as they had prior to the increase in size, rounded up to the nearest whole director.

Section 4.6    Tax Matters.

(a)    The Company and its paying agent shall be entitled to withhold taxes on all payments on the Series A Preferred Stock or other securities issued upon conversion of the Series A Preferred Stock to the extent required by law. Prior to the date of any such payment, the Initial Investors (or any transferee thereof, if applicable) shall deliver to the Company or its paying agent a duly executed, valid, accurate and properly completed Internal Revenue Service Form W-9 or an appropriate Internal Revenue Service Form W-8, as applicable.

(b)    Absent a change in law or Internal Revenue Service practice, or a contrary determination (as defined in Section 1313(a) of the Code, the Investors and the Company agree not to treat the Series A Preferred Stock (based on their terms as set forth in the Series A-1 Certificate or the Series A-2 Certificate, as applicable) as “preferred stock” within the meaning of Section 305 of the Code, and Treasury Regulation Section 1.305-5 for United States federal income tax and withholding tax purposes and shall not take any position inconsistent with such treatment.

(c)    The Company shall pay any and all documentary, stamp or similar issue or transfer tax due on (x) the issue of the Series A Preferred Stock and (y) the issue of shares of Class A Common Stock or Series A-1 Preferred Stock, as applicable, upon conversion of the Preferred Stock. However, in the case of conversion of Series A Preferred Stock, the Company shall not be required to pay any tax or duty that may be payable in respect of any transfer involved in the issue and delivery of shares of Class A Common Stock or Series A-1 Preferred Stock in a name other than that of the holder of the shares to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid.

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Section 4.7    Short Selling. During the period beginning on the date hereof through and including the date that is the third anniversary of the Closing Date, each Initial Investor agrees that such Initial Investor and its Affiliates will not, directly or indirectly, sell “short” the Common Stock or any securities convertible into, or exercisable or exchanges for, Common Stock held by it.

ARTICLE V.

INDEMNITY

Section 5.1    Indemnification by the Company. The Company agrees to indemnify the Initial Investors, its Affiliates and its and their its employees, officers, directors, advisors and other representatives (including the Investor Representative) (collectively, “Investor Indemnified Parties”) from, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred (collectively, “Losses”) in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of the Company contained herein or in any certificate, instrument or document delivered pursuant hereto, provided that such claim for indemnification relating to a breach of the representations or warranties is asserted prior to the expiration of such representations or warranties (to the extent such representations or warranties are subject to expiration). No Investor Indemnified Party shall be entitled to recover special, consequential (including lost profits) or punitive damages, provided that any losses recovered by a third party against Investor Indemnified Parties as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of the Company contained herein shall be included in such Investor Indemnified Party’s losses, regardless of the form of such third party’s losses and whether components of such awards relate to special, consequential or punitive damages. Notwithstanding anything to the contrary, consequential damages shall not be deemed to include diminution in value of the Series A Preferred Shares, which is specifically included in damages covered by Investor Indemnified Parties’ indemnification above.

Section 5.2    Indemnification by the Initial Investor. Each Initial Investor agrees, severally and not jointly, to indemnify the Company, its Affiliates and its and their its employees, officers, directors, advisors and other representatives (collectively, “Company Indemnified Parties”) from, and hold each of them harmless against, any and all Losses in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of such Initial Investor contained herein or in any certificate, instrument or document delivered pursuant hereto, provided that such claim for indemnification relating to a breach of the representations or warranties is asserted prior to the expiration of such representations or warranties (to the extent such representations or warranties are subject to expiration). No Company Indemnified Party

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shall be entitled to recover special, consequential (including lost profits) or punitive damages, provided that any losses recovered by a third party against Company Indemnified Parties as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of such Initial Investor contained herein shall be included in such Company Indemnified Party’s losses, regardless of the form of such third party’s losses and whether components of such awards relate to special, consequential or punitive damages.

Section 5.3    Indemnification Procedure. Promptly after any Investor Indemnified Party or Company Indemnified Party, as applicable (the “Indemnified Party”), has received notice of any indemnifiable claim hereunder, or the commencement of any action, suit or proceeding by a third Person, which such Indemnified Party believes in good faith is an indemnifiable claim under this Agreement, such Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”) written notice of such claim or the commencement of such action, suit or proceeding, but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. Such notice shall state the nature and the basis of such claim to the extent then known. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel who shall be reasonably acceptable to the Indemnified Party, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith and makes an unqualified acknowledgment in writing of its obligation to provide indemnification to the Indemnified Party with respect to such matter. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and the settlement thereof. Such cooperation shall include furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party’s possession or control. Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled (a) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (b) if (i) the Indemnifying Party has failed to assume the defense or employ counsel reasonably acceptable to the Indemnified Party or (ii) if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not include any admission of wrongdoing or malfeasance by, the Indemnified Party.

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ARTICLE VI.

MISCELLANEOUS

Section 6.1    Survival. The representations and warranties of the parties contained in this Agreement shall survive until the first anniversary of the Closing, except (i) the representations and warranties contained in Section 2.1(a), Section 2.1(b), Section 2.1(c) and Section 2.1(e), which will survive indefinitely and (ii) the representations and warranties contained in Section 2.2(a), Section 2.2(b)(1) and Section 2.2(c), which will survive until the expiration of the applicable statute of limitations. All of the covenants or other agreements of the parties contained in this Agreement shall survive until fully performed or fulfilled, unless and to the extent that non-compliance with such covenants or agreements is waived in writing by the party entitled to such performance.

Section 6.2    Expenses. Except as set forth in Section 1.3(b)(11), Section 4.6(c) and this Section 5.2, each of the parties will bear and pay all other costs and expenses incurred by it or on its behalf in connection with the transactions contemplated pursuant to this Agreement and the other Transaction Documents and the purchase by the Initial Investors of the Purchased Stock; provided that, in the event this Agreement is terminated other than pursuant to Section 5.16(b), the Company shall promptly reimburse the Initial Investors for up to $300,000 of their reasonable and documented out-of-pocket fees and expenses incurred on or before such termination in connection with the due diligence of the Company and the Acquisitions and the negotiation, execution and termination of this Agreement (including fees and expenses of counsel and other advisors in connection therewith).

Section 6.3    Amendment; Waiver. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The conditions to each party’s obligation to consummate the Closing are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. No waiver of any party to this Agreement, as the case may be, will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.4    Counterparts. For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Agreement may be delivered by facsimile or other means of electronic transmission and such facsimiles or other means of electronic transmission will be deemed as sufficient as if actual signature pages had been delivered.

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Section 6.5    Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to any choice of laws or conflict of laws provisions that would require the application of the laws of any other jurisdiction. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Texas) for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. Each party to this Agreement hereby irrevocably waives any defense in any such action, suit or proceeding that it is not personally subject to the jurisdiction of the above named courts and to the fullest extent permitted by applicable law, that the action, suit or proceeding in any such court is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.

Section 6.6    WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

Section 6.7    Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by telecopy or facsimile or by electronic mail, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the third Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

(a)    If to Initial Investors:

c/o Chambers Energy Management, LP

600 Travis St., Suite 4700

Attn:    Matt Ockwood

Email:  mockwood@chambersenergy.com

and

c/o Chambers Energy Operations

600 Travis St., Suite 4700

Attn:    Operations

Email:  ops@chambersenergy.com

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with an additional copy to (which copy alone shall not constitute notice):

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attn:     Matt Pacey

Email:   Matt.Pacey@kirkland.com

(b)    If to the Company:

Lonestar Resources US Inc.

600 Bailey Avenue, Suite 200

Fort Worth, Texas 76107

Attn:    Frank D. Bracken, III

Email:  fbracken@lonestarresources.com

with a copy to (which copy alone shall not constitute notice):

Latham & Watkins LLP

811 Main Street, Suite 3700

Houston, Texas 77002

Attn:    David Miller

Email:  David.Miller@lw.com

Section 6.8    Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof.

Section 6.9    Assignment. Neither this Agreement, nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties, provided, however, that (a) the Initial Investors may assign its rights, interests and obligations under this Agreement, in whole or in party, to one or more Affiliates that are “United States persons” within the meaning of Section 7701(a)(30) of the Code in accordance with this Agreement, and in order for such assignment to be effective, the assignee shall agree in writing to be bound by the provisions of this Agreement, provided, that no such assignment shall relieve the Initial Investor of its obligations hereunder prior to the Closing.

Section 6.10    Interpretation; Other Definitions. Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time. All article, section, paragraph or clause

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references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex and schedule references not attributed to a particular document shall be references to such exhibits, annexes and schedules to this Agreement. In addition, the following terms are ascribed the following meanings:

(a)    the word “or” is not exclusive;

(b) the words “including,” “includes,” “included” and “include” are deemed to be followed by the words “without limitation”;

(c) the terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;

(d) the term “Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Texas generally are authorized or required by law or other governmental action to close; and

(e) the term “person” or “Person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

(f) “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person; provided, however, that (a) other than in the case of Section 2.2(g), portfolio companies in which the Investor Representative or its Affiliates have an investment, or (b) the Company, any of its Subsidiaries, or any of the Company’s other controlled Affiliates, in each case, will not be deemed to be Affiliates of the Investor Representative for purposes of this Agreement; provided, further, that for the purposes of Section 3.9, any portfolio company of the Investor Representative or its Affiliates that (but for clause (a) of this definition) would be an Affiliate of the Investor Representative will be an Affiliate if the Initial Investors or any of their respective Affiliates (or any representative on behalf of the Investor Representative or any of its Affiliates) has provided, directly or indirectly, such portfolio company with Information subject to the restrictions in Section 3.9. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities, by contract or otherwise.

(g) “as-converted basis” means, with respect to the outstanding shares of Common Stock, all outstanding shares of Common Stock calculated on a basis in which all shares of Common Stock issuable upon conversion of the Series A-1 Preferred Stock that is either (x) then outstanding or (y) issuable upon conversion of Series A-2 Preferred Stock then outstanding, in each case, whether or not the Series A Preferred Stock is then convertible, exchangeable or exercisable by the holder (including assuming full convertibility into Series A-1 Preferred Stock and then into Common Stock), are assumed to be then outstanding.

(h) “Adjusted EBITDAX” means net income,

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(1)    less non-cash revenue or expense associated with Swap Agreements resulting from ASC 815,

(2)    less income or plus loss from discontinued operations and extraordinary items,

(3)    less cash received for the early termination of any swap, collar or other hedging or derivatives arrangements not otherwise attributable to monthly settlements or expirations in the ordinary course of business,

(4)    plus income taxes (including franchise taxes to the extent based upon that income),

(5)    plus interest expense,

(6)    plus depreciation, accretion of asset retirement obligations, depletion and amortization,

(7)    plus Intangible Drilling and Development Costs (as defined in Section 263 of the Code) and other exploration expenses deducted in determining net income under successful efforts accounting.

For the purposes of calculating Adjusted EBITDAX for any period of four consecutive fiscal quarters (each, a “Reference Period”), (i) if during such Reference Period the Company or any Subsidiary shall have made a Material Disposition, Adjusted EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Disposition occurred on the first day of such Reference Period, and (ii) if during such Reference Period the Company or any Subsidiary shall have made a Material Acquisition, Adjusted EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Acquisition occurred on the first day of such Reference Period.

(i)    “ASC 815” means the Accounting Standards Codification No. 815 (Derivatives and Hedging), as issued by the Financial Accounting Standards Board.

(j)    “Beneficial Ownership” or “Beneficially Own” shall have the meaning given such term in Rule 13d-3 under the Exchange Act and a person’s Beneficial Ownership of securities shall be calculated in accordance with the provisions of such Rule; provided, however, that for purposes of determining any person’s Beneficial Ownership, such person shall be deemed to be the Beneficial Owner of any Equity Securities which may be acquired by such person, whether within sixty (60) days or thereafter, upon the conversion, exchange, redemption or exercise of any warrants, options, rights or other securities issued by the Company or any Company Subsidiary.

(k)    “Capital Leases” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder.

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(l)    “Common Stock” means the Class A Common Stock and the Class B Common Stock.

(m)    “Company Competitor” means any exploration and production company primarily operating in the Eagle Ford Shale in Texas.

(n)    “Company Material Adverse Effect” shall mean, with respect to the Company, any Effect that, individually or taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, assets, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole or; provided, however, that in no event shall any of the following occurring after the date hereof, alone or in combination, be deemed to constitute, or be taken into account in determining whether a Company Material Adverse Effect has occurred: (i) any change in the Company’s stock price or trading volume, (ii) any failure by the Company to meet revenue or earnings projections, (iii) any Effect that results from changes affecting the oil and gas industry generally, or the United States economy generally, or any Effect that results from changes affecting general worldwide economic or capital market conditions, in each case except to the extent such change disproportionately affects the Company and its Subsidiaries taken as a whole, relative to other oil and gas exploration and production companies operating in the United States, (iv) any Effect caused by the announcement or pendency of the Acquisitions, (v) any Effect caused by the announcement or pendency of the transactions contemplated by this Agreement, or the identity of the Initial Investors or any of its Affiliates in connection with the transactions contemplated by this Agreement, (vi) acts of war or terrorism or natural disasters, (vii) the performance of this Agreement, the PSAs and the transactions contemplated hereby and thereby, including compliance with the covenants set forth herein and therein, or any action taken or omitted to be taken by the Company at the request or with the prior consent of the Investor Representative or the Initial Investors, (viii) in and of itself, the commencement of any suit, action or proceeding (provided that such exclusion shall not apply to any underlying fact, event or circumstance that may have caused or contributed to such action, suit or proceeding), or any liability, sanction or penalty arising from any governmental proceeding or investigation that was commenced prior to the date of this Agreement and disclosed by the Company in this Agreement or in a correspondingly identified schedule attached hereto, (ix) changes in GAAP or other accounting standards (or any interpretation thereof) or (x) changes in any Laws or other binding directives issued by any Governmental Entity or interpretations or enforcement thereof, provided, however, that (A) the exceptions in clause (i) - (iii) shall not prevent or otherwise affect a determination that any Effect underlying such change or failure has resulted in, or contributed to, a Company Material Adverse Effect, (B) without limiting clause (iii), with respect to clauses (vi), (ix) and (x), such Effects, alone or in combination, may be deemed to constitute, or be taken into account in determining whether a Company Material Adverse Effect has occurred, but only to the extent that such Effects disproportionately affect the Company and its Subsidiaries, taken as a whole, relative to other oil and gas exploration and production companies operating in the United States.

(o)    “Company Stockholders” means the holders of shares of Class A Common Stock and the Class B Common Stock in their respective capacities as such.

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(p)    “Debt” means for any Person, the sum of the following (without duplication):

(1)    all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments;

(2)    all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments;

(3)    all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of property or services;

(4)    all obligations under Capital Leases;

(5)    all obligations under Synthetic Leases;

(6)    all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any property of such Person, whether or not such Debt is assumed by such Person;

(7)    all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss;

(8)    all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or property of others;

(9)    obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business;

(10)    obligations to pay for goods or services, even if such goods or services are not actually received or utilized by such Person;

(11)    any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a governmental requirement but only to the extent of such liability;

(12)    Disqualified Capital Stock;

(13)    the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; and

39

(14)    the Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP, provided that the following will not be considered Debt for purposes of Section 4.5(e):

• the issuance of preferred stock among the Company and its Subsidiaries;

• the incurrence of hedging obligations not incurred for speculative purposes;

• the incurrence of Debt in respect of unemployment, self-insurance, health, disability, public liability or other benefits obligations or bid, plugging or abandonment, appeal, reimbursement, performance, surety and similar bonds and completion guarantees in the ordinary course of business and any guarantees or letters of credit functioning as or supporting any of the foregoing bonds or obligations and workers’ compensation claims in the ordinary course of business;

• the incurrence of Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Debt is covered within five Business Days;

• any obligation in respect of a farm-in agreement or similar arrangement including the obligation to pay all or a share of the drilling, completion or other expenses of an exploratory or development well or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or natural gas property;

• the incurrence of in-kind obligations relating to net oil or natural gas balancing positions arising in the ordinary course of business, or any final settlement thereof in cash if required pursuant to the terms thereof;

• the incurrence of Debt consisting of the financing of insurance premiums in customary amounts in the ordinary course of business not to exceed $100,000 in the aggregate;

• the incurrence of Debt arising from agreements providing for customary indemnification, adjustment of purchase price, holdbacks, earn outs, or similar obligations, in each case incurred or assumed in connection with the disposition or acquisition of any business, assets or capital stock of a Subsidiary;

• the guarantee by the Company or by any of its Subsidiaries of any Debt of the Company or any of its Subsidiaries, to the extent such Debt is included in the calculation contemplated by Section 4.5(e) hereof;

• non-cash obligations under ASC 815;

40

• accounts payable and other accrued liabilities (for the deferred purchase price of property or services) from time to time incurred in the ordinary course of business which are not greater than 90 days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves are maintained in accordance with GAAP; and

• Debt associated with bonds or surety obligations required by governmental requirements in connection with the operation of the Company’s and its Subsidiaries’ oil and gas properties that is secured by cash or cash equivalents in amounts equal to such Debt.

(q)    “Disqualified Capital Stock” means any equity interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other equity interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in the case of each of the foregoing, on or prior to the date that is one year after the earlier of the seventh anniversary of the Closing Date. For the avoidance of doubt, Disqualified Capital Stock shall not include the Preferred Stock issued or issuable pursuant to this Agreement.

(r)     “Effect” means any change, event, effect or circumstance.

(s)    “Equity Securities” means the equity securities of the Company, including shares of Class A Common Stock, Class B Common Stock and Series A Preferred Stock.

(t)     “Intellectual Property” means any of the following, as they exist anywhere in the world, whether or not registered: (a) patents, patent applications and statutory invention registrations; (b) trademarks, service marks, trade dress, trade names, logos, corporate names, domain names and other source identifiers and all goodwill related thereto; (c) copyrights and mask works; (d) trade secrets under applicable law, including confidential and proprietary information and know-how; (e) computer software programs, including all source code, designs and documentation related thereto; and (f) any and all other intellectual or industrial property rights recognized by any Governmental Entity.

(u)    “Investor Representative” means Chambers Energy Management, LP or any Investor that is designated to the Company in writing by Investors representing a majority of the Series A Preferred Stock as the successor Investor Representative.

(v)    “Knowledge of the Company” means the actual knowledge of one or more of Frank D. Bracken, Barry D. Schneider and Douglas W. Bannister.

(w)    “Law” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule,

41

regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity, including without limitation, any international, foreign, national, state, provincial, regional, or local authority, relating to pollution, the protection of occupational health and workplace safety, the environment, or natural resources, or to use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes, pollutants or containments acceptable to such entity, which compliance includes, without limitation, obtaining, maintaining and complying with all permits and authorizations and approvals required by such to conduct its business.

(x)    “Lien” means any mortgage, pledge, security interest, encumbrance, lien, charge or other restriction of any kind, whether based on common law, statute or contract.

(y)    “Material Acquisition” means any acquisition of Property or series of related acquisitions of Property that involves the payment of consideration by the Company and its Subsidiaries in excess of $5,000,000.

(z)    “Material Contract” means any contract, instrument or other agreement to which the Company or any of its Subsidiaries is a party or by which it is bound which is material to the business of the Company and its Subsidiaries, taken as a whole.

(aa)    “Material Disposition” means any disposition of Property or series of related dispositions of property that yields gross proceeds to the Company or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $5,000,000.

(bb)    “Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

(cc)    “Synthetic Lease” means, as to any Person, any lease (including a lease that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. Federal income tax purposes, other than any such lease under which such Person is the lessor.

(dd)    “Transaction Documents” means this Agreement, the Series A-1 Certificate, the Series A-2 Certificate, the Voting and Support Agreement and the Registration Rights Agreement.

(ee)    “Transfer” by any person means directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Equity Securities Beneficially Owned by such person or of any interest (including any voting interest) in

42

any Equity Securities Beneficially Owned by such person. For the avoidance of doubt, a transfer of control of the direct or indirect Beneficial Owner of Equity Securities is a Transfer of such Equity Securities for purposes of this Agreement; provided, however, that, notwithstanding anything to the contrary in this Agreement, a Transfer shall not include (i) the conversion of one or more shares of Series A Preferred Stock, (ii) the redemption or other acquisition of Common Stock or Series A Preferred Stock by the Company or (iii) the transfer (other than by the Initial Investors or an Affiliate of the Initial Investors) of any equity interests in the Initial Investors or any direct or indirect parent entity of the Initial Investors, in each case, unless the transferor or transferee were formed for the purpose of holding any Equity Securities; provided, that if any transferor or transferee referred to in this clause (iii) ceases to be controlled by the Person controlling such Person immediately prior to such transfer, such event shall be deemed to constitute a “Transfer”.

Section 6.11    Captions. The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

Section 6.12    Severability. If any provision of this Agreement or the application thereof to any person (including the officers and directors the parties hereto) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

Section 6.13    No Third Party Beneficiaries. Except with respect to Article V and as otherwise expressly provided with respect to the Investor Representative and the Approved Holders, nothing contained in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto (and their permitted assigns), any benefit right or remedies. None of the provisions of this Agreement or the Transaction Documents shall be for the benefit of or enforceable by any creditors of the Company or by any creditors of any Subsidiary or Affiliate of the Company

Section 6.14    Public Announcements. Subject to each party’s disclosure obligations imposed by law or regulation or the rules of any stock exchange upon which its securities are listed, each of the parties hereto will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement and any of the transactions contemplated by this Agreement, and neither the Company nor any Initial Investor will make any such news release without first consulting with the other parties, and, in each case, also receiving the other parties’ consent (which shall not be unreasonably withheld or delayed) and each party shall coordinate with the party whose consent is required with respect to any such news release or public disclosure.

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Section 6.15    Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement and the transactions contemplated hereby were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that, without the necessity of posting bond or other undertaking, the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity, and in the event that any action or suit is brought in equity to enforce the provisions of this Agreement, no party will allege, and each party hereby waives the defense or counterclaim, that there is an adequate remedy at law.

Section 6.16    Termination. This Agreement will survive the Closing so long as any shares of Series A Preferred Stock are outstanding. Prior to the Closing, this Agreement may only be terminated:

(a)    by mutual written agreement of the Company and the Initial Investors;

(b)    by notice given by the Company to the Initial Investors, if any of the conditions set forth in Section 1.3(c) shall have become incapable of fulfillment and shall not have been waived by the Company, or if there have been one or more inaccuracies in or breaches of one or more representations, warranties, covenants or agreements made by the Initial Investors in this Agreement such that the conditions in Section 1.3(c)(1) and (2) would not be satisfied and have not been cured by the Initial Investors thirty (30) days after receipt by the Initial Investors of written notice from the Company requesting such inaccuracies or breaches to be cured;

(c)    by notice given by the Initial Investors to the Company, if (i) the Closing has not occurred by July 15, 2017 or (ii) any of the conditions set forth in Section 1.3(b) shall have become incapable of fulfillment and shall not have been waived by the Initial Investors, or if there have been one or more inaccuracies in or breaches of one or more representations, warranties, covenants or agreements made by the Company in this Agreement such that the conditions in Section 1.3(b)(1) or (2) would not be satisfied and which have not been cured by the Company within thirty (30) days after receipt by the Company of written notice from the Initial Investors requesting such inaccuracies or breaches to be cured.

Section 6.17    Effects of Termination. In the event of any termination of this Agreement in accordance with Section 6.16, neither party (or any of its Affiliates) shall have any liability or obligation to the other (or any of its Affiliates) under or in respect of this Agreement, except to the extent of (A) any liability arising from any breach by such party of its obligations of this Agreement arising prior to such termination and (B) any fraud or intentional or willful breach of this Agreement. In the event of any such termination, this Agreement shall become void and have no effect, and (if such termination is prior to the Closing) the transactions contemplated hereby shall be abandoned without further action by the parties hereto, in each case, except (x) as set forth in the preceding sentence and (y) that the provisions of Article V, Section 6.2 to Section 6.15, Section 6.18 and Section 3.9 shall survive the termination of this Agreement.

Section 6.18    Non-Recourse. Notwithstanding anything that may be expressed or implied in this Agreement or any document, agreement, or instrument delivered contemporaneously herewith, and notwithstanding the fact that any party may be a partnership or

44

limited liability company, each party hereto, by its acceptance of the benefits of this Agreement and the other Transaction Documents, covenants, agrees and acknowledges that no Persons other than the parties shall have any obligation hereunder and that it has no rights of recovery hereunder against, and no recourse hereunder or under any documents, agreements, or instruments delivered contemporaneously herewith or in respect of any oral representations made or alleged to be made in connection herewith or therewith shall be had against, any former, current or future director, officer, agent, Affiliate, manager, assignee, incorporator, controlling Person, fiduciary, representative or employee of any party (or any of their successors or permitted assignees), against any former, current, or future general or limited partner, manager, stockholder or member of any party (or any of their successors or permitted assignees) or any Affiliate thereof or against any former, current or future director, officer, agent, employee, Affiliate, manager, assignee, incorporator, controlling Person, fiduciary, representative, general or limited partner, stockholder, manager or member of any of the foregoing, but in each case not including the parties, whether by or through attempted piercing of the corporate veil, by or through a claim (whether in tort, contract or otherwise) by or on behalf of such party against such Persons and entities, by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise; it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on, or otherwise be incurred by any such Persons, as such, for any obligations of the applicable party under this Agreement or the transactions contemplated hereby, under any documents or instruments delivered contemporaneously herewith, in respect of any oral representations made or alleged to be made in connection herewith or therewith, or for any claim (whether in tort, contract or otherwise) based on, in respect of, or by reason of, such obligations or their creation. Notwithstanding anything in the Transaction Documents to the contrary, the liability of the Investors shall be several, not joint.

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.

LONESTAR RESOURCES US INC.
By:	/s/ Frank D. Bracken, III
	Name:	Frank D. Bracken, III
	Title:	Chief Executive Officer
CHAMBERS ENERGY CAPITAL III, LP
By:	CEC Fund III GP, LLC, its general partner
By:	/s/ J. Robert Chambers
	Name:	J. Robert Chambers
	Title:	Partner

[Signature Page to Securities Purchase Agreement]

Schedule 1

Initial Investors; Purchased Stock

Chambers Energy Capital III, LP - 100%

Schedule 2

Significant Holders

EFR Guernsey Holding Limited

EF Realisation Company Limited

Leucadia National Corporation

Juneau Energy LLC

Exhibit A

Form of Series A-1 Convertible

Participating Preferred Stock Certificate of Designations

CERTIFICATE OF DESIGNATIONS

OF

CONVERTIBLE PARTICIPATING PREFERRED STOCK, SERIES A-1

OF

LONESTAR RESOURCES US INC.

Pursuant to Sections 151 and 103 of the

General Corporation Law

of the State of Delaware

Lonestar Resources US Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Company”), in accordance with the provisions of Sections 103 and 151 thereof,

DOES HEREBY CERTIFY:

First: The Certificate of Incorporation of the Company authorizes the issuance of 10,000,000 shares of preferred stock, par value $0.001 per share, of the Company (“Preferred Stock”) in one or more series, and expressly authorizes the Board of Directors to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to fix the number of shares constituting and the designation of each series of Preferred Stock, the powers (including voting power if any) of the shares of such series, and the preferences and other rights, and the qualifications, limitations or restrictions thereof.

Second: The Board of Directors, in accordance with the provisions of the Certificate of Incorporation, the Bylaws of the Company and applicable law, adopted the following resolution on [●], 2017, providing for the issuance of a series of [●] shares of Preferred Stock of the Company designated as “Convertible Participating Preferred Stock, Series A-1.”

Resolved, that pursuant to the provisions of the Certificate of Incorporation, the Bylaws of the Company and applicable law, a series of Preferred Stock, par value $0.001 per share, of the Company be and hereby is created, and that the number of shares of such series, and the voting and other powers, designations, preferences and other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

RIGHTS AND PREFERENCES

Section 1. Designation. There is hereby created out of the authorized and unissued shares of Preferred Stock a series of preferred stock designated as the “Convertible Participating Preferred Stock, Series A-1” (the “Series A-1 Preferred Stock”). The number of shares constituting such series shall be [●]¹; provided that the Company may decrease such number from time to time, but not below a number equal to the sum of the number of shares of Series A-1 Preferred Stock then outstanding.

¹  NTD: To equal the total preferred amounts plus potential PIK.

A-1

Section 2. Ranking.

(a)    Subject to the terms of this Certificate of Designations and the Series A-2 Certificate of Designations, the Series A-1 Preferred Stock will rank, with respect to dividend rights and with respect to rights on liquidation, winding-up and dissolution, (i) on a parity with the Series A-2 Preferred Stock and with each other class or series of capital stock of the Company the terms of which expressly provide that such class or series will rank on a parity with the Series A-1 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company, and (ii) senior to the Class A Common Stock and Class B Common Stock and each other existing and future class or series of capital stock of the Company the terms of which do not expressly provide that it ranks on a parity with or senior to the Series A-1 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company.

(b)    The Series A-2 Preferred Stock and each other class or series of capital stock of the Company the terms of which expressly provide that such class or series will rank on a parity with the Series A-1 Preferred Stock are herein referred to as “Parity Securities.” The Class A Common Stock, the Class B Common Stock and each other class or series of capital stock of the Company that ranks junior to the Series A-1 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company are herein referred to as “Junior Securities.”

Section 3. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the Securities Purchase Agreement. Unless the context or use indicates another meaning or intent, the following terms shall have the following meanings, whether used in the singular or the plural:

“Adjusted EBITDAX” means net income,

(1) less non-cash revenue or expense associated with Swap Agreements resulting from ASC 815,

(2) less income or plus loss from discontinued operations and extraordinary items,

(3) less cash received for the early termination of any swap, collar or other hedging or derivatives arrangements not otherwise attributable to monthly settlements or expirations in the ordinary course of business,

(4) plus income taxes (including franchise taxes to the extent based upon that income),

(5) plus interest expense,

(6) plus depreciation, accretion of asset retirement obligations, depletion and amortization,

A-2

(7) plus Intangible Drilling and Development Costs (as defined in Section 263 of the Internal Revenue Code of 1986, as amended) and other exploration expenses deducted in determining net income under successful efforts accounting.

For the purposes of calculating Adjusted EBITDAX for any period of four consecutive fiscal quarters (each, a “Reference Period”), (i) if during such Reference Period the Company or any Subsidiary shall have made a Material Disposition, Adjusted EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Disposition occurred on the first day of such Reference Period, and (ii) if during such Reference Period the Company or any Subsidiary shall have made a Material Acquisition, Adjusted EBITDAX for such Reference Period shall be calculated on a pro forma basis as if such Material Acquisition occurred on the first day of such Reference Period.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Approved Holder Majority” has the meaning set forth in Section 19(b).

“Approved Holders” has the meaning set forth in Section 19(c).

“as-converted basis” means, with respect to the outstanding shares of Common Stock, all outstanding shares of Common Stock calculated on a basis in which all shares of Common Stock issuable upon conversion of the Series A-1 Preferred Stock that is either (i) then outstanding or (ii) issuable upon conversion of Series A-2 Preferred Stock then outstanding, in each case, whether or not the Series A Preferred Stock is then convertible, exchangeable or exercisable by the holder, are assumed to be then outstanding.

“Automatic Conversion Date” has the meaning set forth in Section 7(c).

“Beneficially Own” has the meaning ascribed to it in the Securities Purchase Agreement.

“Board of Directors” means the board of directors of the Company or any duly authorized committee thereof.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banks in Fort Worth, Texas are generally required or authorized by law to be closed.

“Certificate of Incorporation” means the Certificate of Incorporation of the Company, as amended from time to time, including this Series A-1 Certificate of Designations and the Series A-2 Certificate of Designations incorporated therein under the Delaware General Corporation Law, each as amended from time to time in accordance therewith.

A-3

“Class A Common Stock” means the Company’s Class A Voting Common Stock, par value $0.001 per share.

“Class B Common Stock” means the Company’s Class B Non-Voting Common Stock, par value $0.001 per share.

“Close of Business” means (i) with respect to the Record Date for any issuance, dividend, or distribution declared, paid or made on or with respect to any capital stock of the Company, the closing of the Company’s stock register on such date, for the purpose of determining the holders of capital stock entitled to receive such issuance, dividend or distribution, and (ii) in all other cases, 5:00 pm, Fort Worth, Texas time, on the date in question.

“Closing Price” of the Class A Common Stock (or other relevant capital stock or equity interest) on any date of determination means the closing sale price (or, if no closing sale price is reported, the last reported sale price) on such date of the shares of the Class A Common Stock (or other relevant capital stock or equity interest) on the NASDAQ Global Select Market. If the Class A Common Stock (or other relevant capital stock or equity interest) is not traded on the NASDAQ Global Select Market on any date of determination, the Closing Price of the Class A Common Stock (or other relevant capital stock or equity interest) on such date of determination means the closing sale price on such date as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Class A Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Class A Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or if the Class A Common Stock (or other relevant capital stock or equity interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price on such date for the Class A Common Stock (or other relevant capital stock or equity interest) in the over-the-counter market as reported by OTC Markets Group or similar organization, or, if that bid price is not available, the market price of the Class A Common Stock (or other relevant capital stock or equity interest) on that date as determined in good faith by the Board of Directors.

“Common Stock” means the Class A Common Stock and the Class B Common Stock.

“Common Stock Outstanding” has the meaning set forth in Section 9(a).

“Common Stock VWAP” means, as of any Trading Day, the per share volume-weighted average price displayed under the heading “Bloomberg VWAP” on Bloomberg page “LONE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such Trading Day or, if such price is not available on any Trading Day, the “Common Stock VWAP” shall be the fair market value as determined in good faith by the Board of Directors.

“Company” means Lonestar Resources US Inc., a Delaware corporation, and any successor thereto.

A-4

“Company Competitor” means any exploration and production company primarily operating in the Eagle Ford Shale in Texas.

“Constituent Person” has the meaning set forth in Section 17(a).

“Conversion Price” means $6.00 per share of Series A-1 Preferred Stock, subject to adjustment in accordance with the provisions of this Series A-1 Certificate of Designations.

“Conversion Rate” means an amount equal to the Stated Value per share of the Series A-1 Preferred Stock as of the date of determination, divided by the applicable Conversion Price as of such date of determination.

“Debt” means for any Person, the sum of the following (without duplication):

(1)    all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments;

(2)    all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments;

(3)    all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of property or services;

(4)    all obligations under Capital Leases;

(5)    all obligations under Synthetic Leases;

(6)    all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any property of such Person, whether or not such Debt is assumed by such Person;

(7)    all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss;

(8)    all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or property of others;

(9)    obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business;

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(10)    obligations to pay for goods or services, even if such goods or services are not actually received or utilized by such Person;

(11)    any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a governmental requirement but only to the extent of such liability;

(12)    Disqualified Capital Stock;

(13)    the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; and

(14)    the Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP, provided that the following will not be considered Debt for purposes of Section 20:

• the issuance of preferred stock among the Company and its Subsidiaries;

• the incurrence of hedging obligations not incurred for speculative purposes;

• the incurrence of Debt in respect of unemployment, self-insurance, health, disability, public liability or other benefits obligations or bid, plugging or abandonment, appeal, reimbursement, performance, surety and similar bonds and completion guarantees in the ordinary course of business and any guarantees or letters of credit functioning as or supporting any of the foregoing bonds or obligations and workers’ compensation claims in the ordinary course of business;

• the incurrence of Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Debt is covered within five Business Days;

• any obligation in respect of a farm-in agreement or similar arrangement including the obligation to pay all or a share of the drilling, completion or other expenses of an exploratory or development well or perform the drilling, completion or other operation on such well in exchange for an ownership interest in an oil or natural gas property;

• the incurrence of in-kind obligations relating to net oil or natural gas balancing positions arising in the ordinary course of business, or any final settlement thereof in cash if required pursuant to the terms thereof;

• the incurrence of Debt consisting of the financing of insurance premiums in customary amounts in the ordinary course of business not to exceed $100,000 in the aggregate;

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• the incurrence of Debt arising from agreements providing for customary indemnification, adjustment of purchase price, holdbacks, earn outs, or similar obligations, in each case incurred or assumed in connection with the disposition or acquisition of any business, assets or capital stock of a Subsidiary;

• the guarantee by the Company or by any of its Subsidiaries of any Debt of the Company or any of its Subsidiaries, to the extent such Debt is included in the calculation contemplated by Section 20 hereof;

• non-cash obligations under ASC 815;

• accounts payable and other accrued liabilities (for the deferred purchase price of property or services) from time to time incurred in the ordinary course of business which are not greater than 90 days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves are maintained in accordance with GAAP; and

• Debt associated with bonds or surety obligations required by governmental requirements in connection with the operation of the Company’s and its Subsidiaries’ oil and gas properties that is secured by cash or cash equivalents in amounts equal to such Debt.

“Dividend Payment Date” has the meaning set forth in Section 4(c).

“Dividend Period” has the meaning set forth in Section 4(c)(ii).

“Dividend Rate” means 9.00% per annum, subject to adjustment pursuant to Section 4(e); provided, however, with respect to any Dividend Period in which the Dividend Rate is adjusted, the applicable Dividend Rate for such Dividend Period will be calculated by determining the sum, for each day during such Dividend Period, of the product of the Dividend Rate in effect on such day (without giving effect to this proviso but giving effect to any other adjustments) multiplied by the Stated Value and, without duplication, Unpaid Dividends, per share of Series A-1 Preferred Stock on such day.

“Equity Conditions” means (a) the Company shall have duly honored all conversions scheduled to occur or occurring by virtue of one or more Holder conversion notices pursuant to Section 7(a) of the applicable Holder on or prior to the dates so requested or required, if any; (b) (i) there is an effective registration statement pursuant to which either (A) the Company may issue the underlying shares of Class A Common Stock to be issued upon conversion or the dividend or (B) the Holders are permitted to utilize the prospectus thereunder to resell all of the underlying shares of Class A Common Stock to be issued upon conversion or the dividend; (ii) all of the underlying shares of Class A Common Stock to be issued upon conversion or the dividend may be resold pursuant to Rule 144 under the Securities Act; or (iii) all of the shares of Class A Common Stock to be issued may be issued to the Holder pursuant to Section 3(a)(9) of the Securities Act and, in each case such Class A Common Stock may be immediately resold without restrictions under the Securities Act; (c) the Class A Common Stock is trading on a National Securities Exchange and all of the shares issuable are listed or quoted for trading on

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such National Securities Exchange (subject, if applicable, to notice of issuance); (d) there is a sufficient number of authorized, but unissued, shares of Class A Common Stock for the issuance of all of the underlying shares of Class A Common Stock to be issued upon conversion or the dividend; and (e) if there has been a public announcement of, or entry into an agreement providing for, a pending or proposed Reorganization Event or change of control, the underlying Class A Common Stock issued upon conversion or the dividend will not be subject to a trading “lock-up” under an agreement entered into with or at the request of the Company or this Certificate of Designations which restricts the sale or transfer of such Class A Common Stock.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Property” has the meaning set forth in Section 17(a).

“Exchange Property Unit” has the meaning set forth in Section 17(a).

“Expiration Date” has the meaning set forth in Section 9(c).

“Holder” or “Investor” means the Person in whose name the shares of the Series A-1 Preferred Stock are registered, which may be treated by the Company and the Company’s transfer agent and registrar as the absolute owner of the shares of Series A-1 Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

“Investor Directors” has the meaning set forth in Section 19(a).

“Investor Observer” has the meaning set forth in Section 19(a).

“Investor Representative” has the meaning ascribed to it in the Securities Purchase Agreement.

“Issue Date” means the date upon which the shares of Series A-1 Preferred Stock are first issued.

“Junior Securities” has the meaning set forth in Section 2(b).

“Mandatory Conversion Date” means, with respect to the shares of Series A-1 Preferred Stock of any Holder, a Business Day that is designated in a Mandatory Conversion Notice.

“Mandatory Conversion Notice” has the meaning set forth in Section 7(b).

“Material Acquisition” means any acquisition of Property or series of related acquisitions of Property that involves the payment of consideration by the Company and its Subsidiaries in excess of $5,000,000.

“Material Disposition” means any disposition of Property or series of related dispositions of property that yields gross proceeds to the Company or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $5,000,000.

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“NASDAQ Listing Rules” means the rules and regulations of the NASDAQ Stock Market, as amended from time to time, or the applicable rules of any successor stock exchange.

“National Securities Exchange” shall mean an exchange registered with the SEC under Section 6(a) of the Exchange Act.

“Note Conversion Date” has the meaning set forth in Section 4(e)(ii).

“Notes” has the meaning set forth in Section 4(e)(ii).

“Optional Conversion Date” has the meaning set forth in Section 7(a).

“Parity Securities” has the meaning set forth in Section 2(b). For the avoidance of doubt, the term “Parity Securities” does not mean or include the Common Stock.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

“PIK Quarter” has the meaning set forth in Section 4(d).

“Preferred Stock” has the meaning set forth in the recitals.

“Prevailing Market Price” means the arithmetic average of the Common Stock VWAP on each of the 20 consecutive Trading Days ending on and including the Trading Day immediately preceding the date as of which the Prevailing Market Price is to be determined.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities, accounts and contract rights.

“Purchased Shares” has the meaning set forth in Section 9(c).

“Record Date” means, with respect to any issuance, dividend, or distribution declared, paid or made on or with respect to any capital stock of the Company, the date fixed for the determination of the stockholders entitled to receive such issuance, dividend or distribution.

“Redemption Notice” has the meaning set forth in Section 10(b).

“Reorganization Event” has the meaning set forth in Section 17(a).

“SEC” shall mean the Securities and Exchange Commission.

“Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of May 26, 2017, by and among the Company, Chambers Energy Management, LP, as Investor Representative, and the Investors party thereto.

“Series A Preferred Stock” means the Series A-1 Preferred Stock and the Series A-2 Preferred Stock.

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“Series A-1 Certificate of Designations” means this Series A-1 Certificate of Designations of Lonestar Resources US Inc., dated [●], 2017, as it may be amended from time to time in accordance herewith.

“Series A-1 Preferred Stock” has the meaning set forth in Section 1.

“Series A-2 Certificate of Designations” means the Certificate of Designations of Lonestar Resources US Inc. relating to Series A-2 Preferred Stock, dated [●], 2017, as it may be amended from time to time in accordance therewith.

“Series A-2 Preferred Stock” means a series of Preferred Stock designated as the “Convertible Participating Preferred Stock, Series A-2,” having the terms set forth in the Series A-2 Certificate of Designations.

“Specified Party” has the meaning set forth in Section 19(l).

“Stated Value” initially means $1,000 per share of the Series A-1 Preferred Stock, as adjusted for any stock splits, stock dividends, recapitalizations or similar transactions with respect to the Series A-1 Preferred Stock and, if applicable, as adjusted pursuant to Section 4(d).

“Tender Offer” means a broad solicitation by a Person to purchase a substantial percentage of a company’s equity securities.

“Trading Day” means a Business Day on which the shares of Class A Common Stock:

(i)    are not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the Close of Business; and

(ii)    have traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Class A Common Stock.

“Unpaid Dividends” means, as of any date with respect to any one or more shares of Series A-1 Preferred Stock, the amount, as of such date, of any accrued and unpaid dividends or distributions on such one or more shares. For the avoidance of doubt, “Unpaid Dividends” do not include any dividends added to the Stated Value pursuant to Section 4(d).

Section 4. Dividends.

(a)    Dividends in General. From and after the Issue Date, Holders shall be entitled to receive, when, as and if declared by the Board of Directors out of any funds legally available therefor, cumulative dividends of the type and in the amount determined as set forth in this Section 4, and no more. Notwithstanding anything to the contrary in this Series A-1 Certificate of Designations, cash dividends shall be paid only to the extent the Company has funds legally available for such payment, and the Board of Directors declares such dividend payable.

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(b)    Participating Dividends. For so long as any shares of Series A-1 Preferred Stock are outstanding, no cash dividend may be declared or paid on the Common Stock, and no other distributions may be made to holders of Common Stock, during a Dividend Period unless a cash dividend or such distribution, if applicable, is also declared and paid on the Series A-1 Preferred Stock to Holders for such dividend in the same form and in an amount per share of Series A-1 Preferred Stock equal to the product of (i) the per share dividend or distribution declared and paid in respect of each share of Class A Common Stock and (ii) the number of shares of Class A Common Stock into which such share of Series A-1 Preferred Stock is then convertible on the Record Date for such dividend or distribution. For purposes of this Section 4(b), “distribution” means the transfer of cash, property or securities without consideration, whether by way of dividend or otherwise, or the purchase of shares of the Company.

(c)    Regular Dividends. In addition to participation in cash dividends on, or distributions to, Common Stock as set forth in Section 4(b), and subject to Section 4(d), commencing on the Issue Date, dividends on Series A-1 Preferred Stock shall accrue daily and shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”) or, if any such day is not a Business Day, the preceding Business Day. Dividends payable pursuant to this Section 4(c), if, when and as declared by the Board of Directors, will be, for each outstanding share of Series A-1 Preferred Stock, payable, subject to Section 4(d), in cash as follows:

(i)    Dividends at amount equal to an annual rate equal to the Dividend Rate multiplied by the sum of (A) the Stated Value and (B), without duplication, the amount of Unpaid Dividends, on such share of Series A-1 Preferred Stock, payable in cash.

(ii)    Dividends payable pursuant to this Section 4(c) will be computed on the basis of a 360-day year of twelve 30-day months and, for any Dividend Period greater or less than a full Dividend Period, will be computed on the basis of the actual number of days elapsed in the period divided by 90. The period from the Issue Date to and including [June 30, 2017]/[the Dividend Payment Date next succeeding the Issue Date] and each period from, but excluding, a Dividend Payment Date to, and including, the following Dividend Payment Date is herein referred to as a “Dividend Period.” Dividends payable pursuant to this Section 4(c) are cumulative. Such dividends shall begin to accrue and be cumulative from the Issue Date, shall compound at the relevant rate on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on another dividend unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date, in which case dividends will accrue on such Unpaid Dividends) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date.

(iii)    If the Optional Conversion Date, Automatic Conversion Date or Mandatory Conversion Date with respect to any share of Series A-1 Preferred Stock is prior to the Record Date for any dividend, the Holder of such shares will not be entitled to any such dividend, subject to any Unpaid Dividends being taken into account in Section 7. If the Optional Conversion Date, Automatic Conversion Date or Mandatory Conversion Date with respect to any share of Series A-1 Preferred Stock is after the

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Record Date for any dividend but before the corresponding Dividend Payment Date, the Holder of such share of Series A-1 Preferred Stock shall have the right to receive such dividend, notwithstanding the conversion of such shares prior to the Dividend Payment Date.

(d)    PIK Dividends.

(i)    Notwithstanding anything to the contrary in Section 4(c), for no more than 12 Dividend Periods (whether consecutive or non-consecutive) prior to [●], 2024 (a “PIK Quarter”), the Company may, at its option and in its sole discretion as exercised by the Board of Directors, with respect to all or any portion of the accrued, declared and payable dividends for such Dividend Period, elect to (A) pay such dividends in the form of additional shares of Series A-1 Preferred Stock at a per share price equal to $975.00 or, (B) in lieu of paying such dividends, increase the Stated Value of the applicable shares of Series A-1 Preferred Stock by an amount equal to the accrued and payable dividends on such shares for such applicable PIK Quarter. If the Company fails to fully declare and pay in cash by the Dividend Payment Date, or is unable to fully pay in cash by such date, the accrued dividends with respect to a Dividend Period then, with respect to any unpaid portion but subject to Section 4(e), (x) to the extent any of the 12 PIK Quarters remain available, the Company shall be deemed to have made an election under Section 4(d)(i)(B) and (y) to the extent none of the 12 PIK Quarters remain available, the Stated Value shall be automatically increased by an amount equal to the lesser of (i) a Dividend Rate of 9.0% per annum and (ii) the unpaid portion of any such accrued dividends (provided that any amounts which increase the Stated Value hereby shall no longer be considered Unpaid Dividends), with any remaining unpaid portion in excess of such increase in Stated Value remaining Unpaid Dividends.

(ii)    For the avoidance of doubt, any portion of a declared dividend not paid as provided in the foregoing clauses will be paid in cash.

(e)    Adjustments to Dividend Rate.

(i)    Except as permitted by Section 4(d)(i), and unless the Dividend Rate is already adjusted pursuant to Section 4(e)(ii), if, at any time, the Company fails to fully declare and pay all accrued dividends in cash on a Dividend Payment Date, then the Dividend Rate on the Series A-1 Preferred Stock shall automatically increase by (A) 5.0% per annum effective as of the first day of the applicable Dividend Period and (B) an additional 1.0% for each successive Dividend Period in which the Company so fails to fully declare and pay, up to the maximum Dividend Rate of 20.0% per annum,. Dividends on the Series A-1 Preferred Stock shall accrue at the increased Dividend Rate for so long until the Company shall have paid dividends at such increased Dividend Rate fully in cash in accordance with Section 4(c) for two consecutive Dividend Periods, upon which time the Dividend Rate on Series A-1 Preferred Stock shall automatically decrease and revert to 9.0% per annum to the extent dividends continue to be paid fully in cash.

(ii)    If, on [●], 2024, the Prevailing Market Price per share of the Common Stock, is less than the Conversion Price then in effect, or the terms of the automatic

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conversion in Section 7(c) are not satisfied, then the Dividend Rate shall automatically increase to 20.0% per annum as of such date, payable only in cash; provided, however, that, the Company, at its option and in its sole discretion (but only exercisable on such date in lieu of the Dividend Rate increase), may, by notice to the Holders, instead elect to exchange each share of outstanding Series A-1 Preferred Stock for senior unsecured obligations of the Company (the “Notes”) on such date (the “Note Conversion Date”) as follows:

• each Holder shall receive a Note, which shall be a senior unsecured obligation of the Company, in the aggregate principal amount equal to the Stated Value of all such Holders’ outstanding shares of Series A-1 Preferred Stock plus, without duplication, any Unpaid Dividends;

• the Notes shall bear an interest rate of 9.00% per annum, payable semi-annually in cash, with a principal maturity date of two years following the issuance of the Notes; and

• the Notes shall be governed by terms substantially similar to the Company’s most recent, as of the Note Conversion Date, widely-marketed high yield indenture at such time; provided that in no event shall such terms be more restrictive than the indenture of Lonestar Resources America Inc., dated April 4, 2014, governing its 8.750% senior notes due 2019.

(f)    Each dividend will be payable to Holders of record as they appear in the records of the Company on the applicable Record Date, which shall be on the fifteenth (15th) day of the month in which the relevant Dividend Payment Date occurs.

Section 5. Liquidation.

(a)    In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled to receive out of the assets of the Company or proceeds thereof legally available for distribution to stockholders of the Company, after satisfaction of all liabilities, if any, to creditors of the Company and subject to Section 5(b) and to the rights of holders of any shares of capital stock of the Company then outstanding ranking senior to the Series A-1 Preferred Stock in respect of distributions upon liquidation, dissolution or winding up of the Company, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other Junior Securities, a liquidating distribution in an amount equal to the greater of (i) the Stated Value plus, without duplication, Unpaid Dividends, per share and (ii) the amount of the liquidating distributions, as determined by the Board of Directors (or the trustee or other Person or Persons administering the liquidation, dissolution or winding-up of the Company in accordance with applicable law), that would be made on the number of shares of Class A Common Stock into which such shares of Series A-1 Preferred Stock are convertible immediately before such liquidation, dissolution or winding-up of the Company. After payment of the full amount of such liquidation distribution, the Holders shall not be entitled to any further participation in any distribution of assets by the Company.

(b)    In the event the assets of the Company available for distribution to stockholders upon any liquidation, dissolution or winding-up of the affairs of the Company,

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whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to all outstanding shares of the Series A-1 Preferred Stock and the corresponding amounts payable on any Parity Securities, Holders and the holders of such Parity Securities shall share ratably in any distribution of assets of the Company in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled.

(c)    The Company’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into the Company, or the sale of all or substantially all of the Company’s property or business or other assets will not constitute its liquidation, dissolution or winding up, but instead shall be subject to Section 17.

Section 6. Maturity. The Series A-1 Preferred Stock shall be perpetual unless converted or redeemed in accordance with this Series A-1 Certificate of Designations.

Section 7. Conversion.

(a)    Optional Conversion. Each share of Series A-1 Preferred Stock shall be convertible, at the option of the Holder thereof, in minimum increments of 5,000 shares and even multiples thereof (or, if the aggregate amount of shares of Series A-1 Preferred Stock any such Holders is less than 5,000 shares, then all of such shares), at any time, and from time to time, into (i) the number of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock equal to the Conversion Rate in effect as of the Optional Conversion Date plus (ii) cash in lieu of fractional shares, as set forth in Section 12(b); provided that in no event shall additional shares of Class A Common Stock be issued if doing so would result in a violation of applicable NASDAQ Listing Rules; provided, further, that in such instance, the Company shall take commercially reasonable efforts to effect the issuance in compliance with applicable NASDAQ Listing Rules. Any Unpaid Dividends on such shares of Series A-1 Preferred Stock as of such Optional Conversion Date will be paid (A) in cash or, (B) at the option and in the sole discretion of the Company, in the form of additional shares of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock at the Conversion Price then in effect; provided that such issuance of additional shares of Class A Common Stock would not result in a violation by the Company of any applicable NASDAQ Listing Rules. In order to convert shares of Series A-1 Preferred Stock into shares of Class A Common Stock pursuant to this Section 7(a), the Holder must surrender the certificates representing such shares of Series A-1 Preferred Stock (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Company), accompanied by transfer instruments reasonably satisfactory to the Company, to the principal office of the Company (or such other place mutually acceptable to the Holder and the Company), together with written notice that such Holder elects to convert all or such number of shares represented by such certificates as specified therein. With respect to a conversion pursuant to this Section 7(a), the date of receipt of such certificates, together with such notice by the Company or (in accordance with the immediately preceding sentence) its authorized agent will be the date of conversion (the “Optional Conversion Date”).

(b)    Mandatory Conversion. Subject to the conditions in this Section 7(b), the Company shall have the right, at its option and in its sole discretion, at any time or from time to

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time, to cause some or all shares of Series A-1 Preferred Stock to be converted, in minimum increments of 5,000 shares and even multiples thereof (or, if the aggregate amount of shares of Series A-1 Preferred Stock held by any Holder is less than 5,000 shares, then all of the shares held by such Holder), into (i) that number of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock equal to the Conversion Rate in effect as of the Mandatory Conversion Date plus (ii) cash in lieu of fractional shares, as set forth in Section 12(b). Any Unpaid Dividends on such shares of Series A-1 Preferred Stock as of such Optional Conversion Date will be paid (A) in cash or, (B) at the option and in the sole discretion of the Company, in the form of additional shares of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock at the Conversion Price then in effect; provided that such issuance of additional shares of Class A Common Stock would not result in a violation by the Company of any applicable NASDAQ Listing Rules. The right to mandatorily convert the Series A-1 Preferred Stock pursuant to this Section 7(b) is subject to the following conditions:

(i)    the Common Stock VWAP shall have exceeded 200% of the Conversion Price for 20 Trading Days (whether or not consecutive) during any 30 consecutive Trading Day period, if such mandatory conversion occurs on or prior to [●], 2019;

(ii)    the Common Stock VWAP shall have exceeded 175% of the Conversion Price for 20 Trading Days (whether or not consecutive) during any 30 consecutive Trading Day period, if such mandatory conversion occurs on or after [●], 2019 but prior to [●], 2020;

(iii)    the Common Stock VWAP shall have exceeded 150% of the Conversion Price for 20 Trading Days (whether or not consecutive) during any 30 consecutive Trading Day period, if such mandatory conversion occurs after [●], 2020; and

(iv)    in all cases, (x) the Company shall have declared and paid all Unpaid Dividends up to and including the Mandatory Conversion Date and (y) the Equity Conditions are satisfied at the time of the Mandatory Conversion Notice and the time of conversion.

If the Company elects to exercise the Company’s rights under this Section 7(b), for such conversion to be effective, the Company shall deliver to each Holder a written notice (a “Mandatory Conversion Notice”) no later than five (5) Business Days after the applicable 30-Trading Day period, specifying (A) the Mandatory Conversion Date (which shall be no earlier than the date such Mandatory Conversion Notice is delivered to such Holder), (B) that the conversion will occur on such Mandatory Conversion Date and (C) with respect to such Holder, the number of shares of Class A Common Stock (and cash in lieu of fractional shares) into which such Holder’s shares of Series A-1 Preferred Stock will convert. If the Company elects to cause less than all the shares of the Series A-1 Preferred Stock to be converted, the Company shall select the Series A-1 Preferred Stock to be converted from each Holder on a pro rata basis unless agreed upon otherwise by the Holders. If the Company selects a portion of a Holder’s Series A-1 Preferred Stock for partial conversion and such Holder converts a portion of its shares of Series A-1 Preferred Stock, both converted portions will be deemed to be from the portion selected for conversion at the option and in the sole discretion of the Company under this Section 7.

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(c)    Automatic Conversion. If on [●], 2024, the Prevailing Market Price per share of the Common Stock, is equal to or greater than the Conversion Price then in effect, and the Equity Conditions are satisfied, then each share of Series A-1 Preferred Stock shall automatically convert into (i) that number of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock equal to the Conversion Rate then in effect on such date (the “Automatic Conversion Date”) plus (ii) cash in lieu of fractional shares, as set forth in Section 12(b). Any Unpaid Dividends on such shares of Series A-1 Preferred Stock as of such Automatic Conversion Date will be paid (A) in cash or, (B) at the option and in the sole discretion of the Company, in the form of additional shares of duly authorized, validly issued, fully paid and nonassessable shares of Class A Common Stock at the Conversion Price then in effect; provided that such issuance of additional shares of Class A Common Stock would not result in a violation by the Company of any applicable NASDAQ Listing Rules.

Section 8. Conversion Procedures.

(a)    On the Optional Conversion Date, the Mandatory Conversion Date or the Automatic Conversion Date, as applicable, with respect to any share of Series A-1 Preferred Stock, uncertificated book-entry shares representing the number of shares of Class A Common Stock into which the applicable shares of Series A-1 Preferred Stock are converted shall be promptly issued and delivered, and in the case of the Note Conversion Date, a promissory note evidencing the Note(s) shall be promptly issued and delivered, to the Holder thereof or such Holder’s designee upon presentation and surrender of the certificate evidencing the Series A-1 Preferred Stock, if any (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Company), to the Company and, if required, the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes, if any, allocable to the Holder pursuant to Section 18(b).

(b)    From and after the Optional Conversion Date, the Mandatory Conversion Date, the Automatic Conversion Date or Note Conversion Date, as applicable, the shares of Series A-1 Preferred Stock to be converted on such Optional Conversion Date, the Mandatory Conversion Date, the Automatic Conversion Date or Note Conversion Date, as applicable, will cease to be entitled to any dividends that may thereafter be declared on such Series A-1 Preferred Stock; such shares of Series A-1 Preferred Stock will no longer be deemed to be outstanding for any purpose; and all rights (except the right to receive from the Company the Class A Common Stock (and cash in lieu of fractional shares, if applicable) upon conversion thereof and any dividends previously declared or otherwise accrued on the Series A-1 Preferred Stock but not paid) of the Holder of such shares of Series A-1 Preferred Stock to be converted shall cease and terminate with respect to such shares. Prior to the Optional Conversion Date, the Automatic Conversion Date or the Mandatory Conversion Date, as applicable, except as otherwise provided herein, Holders shall have no rights as owners of the Class A Common Stock (or other relevant capital stock or equity interest into which the Series A-1 Preferred Stock may then be convertible in accordance herewith) (including voting powers, and rights to receive any dividends or other distributions on the Class A Common Stock or other securities issuable upon conversion) by virtue of holding shares of Series A-1 Preferred Stock.

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(c)    Shares of Series A-1 Preferred Stock duly converted in accordance with this Series A-1 Certificate of Designations, or otherwise reacquired by the Company.

(d)    The Person or Persons entitled to receive the Class A Common Stock and/or cash issuable upon conversion of Series A-1 Preferred Stock shall be treated for all purposes as the record holder(s) of such shares of Class A Common Stock and/or securities as of the Close of Business on the Optional Conversion Date, the Automatic Conversion Date or the Mandatory Conversion Date, as applicable, with respect thereto. In the event that a Holder shall not by written notice designate the name in which shares of Class A Common Stock and/or cash to be issued or paid upon conversion of shares of Series A-1 Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Company shall be entitled to register and deliver such shares, and make such payment, in the name of the Holder and in the manner shown on the records of the Company.

(e)    In the event that fewer than all of the shares of Series A-1 Preferred Stock held by any Holder who have requested to have a certificate representing its shares of Series A-1 Preferred Stock are converted pursuant to Section 7, then a new certificate representing the unconverted shares of Series A-1 Preferred Stock shall be issued to such Holder concurrently with the issuance of book-entry shares representing the applicable Class A Common Stock.

Section 9. Anti-Dilution Adjustments.

(a)    The Conversion Price shall be subject to adjustment from time to time (successively and for each event described) in accordance with this Section 9. The term “Common Stock Outstanding” at any given time shall mean the aggregate number of shares of Class A Common Stock and Class B Common Stock issued and outstanding at such time.

(b)    If the Company, at any time or from time to time while any of the Series A-1 Preferred Stock is outstanding, shall (i) subdivide the then outstanding shares of Common Stock into a greater number of shares of Class A Common Stock, or (ii) combine the then outstanding shares of Common Stock into a smaller number of shares of Common Stock (other than a dividend, distribution, subdivision or combination in connection with a transaction to which Section 5 applies), then the Conversion Price in effect at the Close of Business on the Record Date for such dividend or distribution, or immediately preceding the effective time and date of such subdivision or combination shall be adjusted, effective at such time, so that the Holder of each share of the Series A-1 Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number and kind of shares of Common Stock that such holder would have owned or been entitled to receive immediately following such action had such shares of Series A-1 Preferred Stock been converted immediately prior to such time.

(c)    In the case that a Tender Offer made by the Company or any Subsidiary of the Company for all or any portion of the Common Stock shall expire and such Tender Offer (as amended through the expiration thereof) shall require the payment to holders of the Class A Common Stock (based on the acceptance (up to any maximum specified in the terms of the

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tender or exchange offer) of Purchased Shares) of aggregate consideration having a fair market value (as determined in good faith by the Board of Directors) per share of Common Stock that exceeds the Closing Price of the Common Stock on the last date on which tenders may be made pursuant to such Tender Offer (as amended through the expiration thereof) (the “Expiration Date”) or, if such date is not a Trading Day, the immediately preceding Trading Day, then, immediately prior to the opening of business on the day after the Expiration Date, the Conversion Price shall be reduced by multiplying the Conversion Price as of immediately prior to the Close of Business on the Expiration Date by a fraction (i) the numerator of which shall be equal to the product of (A) the Prevailing Market Price on the Expiration Date and (B) the number of shares of Common Stock Outstanding (including any tendered shares) on the Expiration Date, and (ii) the denominator of which shall be equal to (A) the product of (x) the Prevailing Market Price on the Expiration Date and (y) the number of shares of Common Stock Outstanding (including any tendered shares) on the Expiration Date less the number of all shares validly tendered, not withdrawn and accepted for payment on the Expiration Date (such validly tendered shares, up to any such maximum, being referred to as the “Purchased Shares”) plus (B) the amount of cash plus the fair market value (as determined in good faith by the Board of Directors) of the aggregate consideration payable to stockholders of the Company pursuant to the Tender Offer (assuming the acceptance, up to any maximum specified in the terms of the tender or exchange offer, of Purchased Shares).

(d)    Whenever the Conversion Price is to be adjusted in accordance with Section 9(b), the Company shall (i) compute the Conversion Price in accordance with Section 9(b) in good faith; (ii) as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Price pursuant to Section 9(b) (or if the Company is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of the occurrence of such event; and (iii) as soon as practicable following the determination of the revised Conversion Price in accordance with Section 9(b) hereof, provide, or cause to be provided, a written notice to the Holders setting forth in reasonable detail the method by which the adjustment to the Conversion Price was determined and setting forth the revised Conversion Price.

(e)    Rights Plans. If the Company has a rights plan in effect with respect to the Common Stock on the Optional Conversion Date, the Mandatory Conversion Date or the Automatic Conversion Date, upon conversion of any shares of the Series A-1 Preferred Stock, Holders of such shares will receive, in addition to the shares of Class A Common Stock, the rights under the rights plan relating to such Common Stock, unless, prior to such Optional Conversion Date, Mandatory Conversion Date or Automatic Conversion Date, as applicable, the rights have (i) become exercisable or (ii) separated from the shares of Common Stock.

Section 10. Redemption.

(a)    After [●], 2020, the Company may, at its option and in its sole discretion, redeem shares of Series A-1 Preferred Stock, in minimum increments of 5,000 shares and even multiples thereof (or such lesser amount in the event that fewer than 5,000 shares remain outstanding), for cash as follows:

(i)    prior to [●], 2021, in an amount equal to 110% of the Stated Value plus, without duplication, any Unpaid Dividends;

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(ii)    prior to [●], 2022, in an amount equal to 105% of the Stated Value plus, without duplication, any Unpaid Dividends; and

(iii)    after [●], 2022, in an amount equal to the Stated Value plus, without duplication, any Unpaid Dividends.

(b)    The Company shall provide written notice (the “Redemption Notice”) to the Holders at least 30 calendar days prior to any optional redemption in accordance with Section 10(a); provided that nothing in the Redemption Notice shall prohibit the Holders from converting Series A-1 Preferred Stock into Common Stock prior to the Company’s proposed redemption date. If the Company elects to redeem fewer than all of the outstanding shares of Preferred Stock pursuant to this Section 10, the Series A-1 Preferred Stock will be redeemed on a pro rata basis across all Holders based on their respective ownership of Series A-1 Preferred Stock unless agreed upon otherwise by the Holders. The shares of Series A-1 Preferred Stock Preferred Stock not redeemed shall remain outstanding.

(c)    If, after [●], 2024, the Company fails to fully declare and pay in cash by the Dividend Payment Date, or is unable to fully declare and pay in cash by such date, all accrued dividends with respect to a Dividend Period, the Company shall, automatically and immediately redeem in cash all of the Series A-1 Preferred Stock, in whole and not in part, plus without duplication, any Unpaid Dividends.

(d)    Any shares of Series A-1 Preferred Stock that are redeemed or otherwise acquired by the Company shall be cancelled upon payment therefor and will resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series, and will be available for future issuance, but shall not be reissued as shares of Series A-1 Preferred Stock. If only a portion of the shares of Series A-1 Preferred Stock represented by a certificate shall have been called for redemption, upon surrender of the certificate to the Company, the Company shall issue and deliver to the Holders a new certificate representing the number of shares of Series A-1 Preferred Stock represented by the surrendered certificate that have not been called for redemption.

Section 11. Voting Powers.

(a)    The Holders shall be entitled to (i) vote with the holders of the Class A Common Stock on all matters submitted for a vote of holders of Class A Common Stock, (ii) when voting with the Class A Common Stock, a number of votes equal to the number of shares of Class A Common Stock such Holder would hold on an “as-converted basis” on the Record Date for the determination of the holders of Class A Common Stock entitled to vote on the matter in question and (iii) notice of all stockholders’ meetings in accordance with the Certificate of Incorporation and Bylaws of the Company, and applicable law or regulation or stock exchange rule, as if the Holders of Series A-1 Preferred Stock were holders of Class A Common Stock.

(b)    Each Holder will have one vote per share on any matter on which Holders of Series A-1 Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent.

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(c)    So long as any shares of Series A-1 Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or the Certificate of Incorporation, the affirmative vote or consent of Holders of at least a majority of the outstanding shares of Series A-1 Preferred Stock, voting together as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating any amendment, modification or alteration of, or supplement to, the Certificate of Incorporation or this Series A-1 Certificate of Designations that would materially and adversely affect the relative rights, preferences, privileges or voting powers of the Series A-1 Preferred Stock or any Holder.

Section 12. Fractional Shares.

(a)    No fractional shares of Class A Common Stock will be issued as a result of any conversion of, or as a dividend on, shares of Series A-1 Preferred Stock.

(b)    In lieu of any fractional share of Class A Common Stock otherwise issuable in respect of any conversion pursuant to Section 7 hereof or any dividends issued pursuant to Section 4(d) hereof, the Company shall pay (concurrently with the issuance of the shares of Class A Common Stock) an amount in cash (computed to the nearest cent) equal to the same fraction of the Closing Price of the Class A Common Stock determined as of the second Trading Day immediately preceding the Optional Conversion Date, the Mandatory Conversion Date, the Automatic Conversion Date or the Dividend Payment Date, as applicable.

(c)    If more than one share of the Series A-1 Preferred Stock is surrendered for conversion at one time by or for the same Holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Series A-1 Preferred Stock so surrendered.

Section 13. Reservation of Common Stock.

(a)    The Company shall at all times reserve and keep available out of its authorized and unissued Class A Common Stock or shares of Class A Common Stock acquired by the Company and not retired, solely for issuance upon the conversion of shares of Series A-1 Preferred Stock as provided in this Series A-1 Certificate of Designations, such number of shares of Class A Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A-1 Preferred Stock then outstanding. The Company shall take all such corporate and other actions as from time to time may be necessary to ensure that all shares of Class A Common Stock issuable upon conversion of shares of Series A-1 Preferred Stock will, upon issue, be duly and validly authorized and issued, fully paid and nonassessable. For purposes of this Section 13, the number of shares of Class A Common Stock that shall be deliverable upon the conversion of all outstanding shares of Series A-1 Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b)    Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of shares of Series A-1 Preferred Stock, as herein provided, shares of Class A

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Common Stock acquired and not retired by the Company (in lieu of the issuance of authorized and unissued shares of Class A Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

(c)    All shares of Class A Common Stock delivered upon conversion of the Series A-1 Preferred Stock or paid as a dividend pursuant to Section 7(c) shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

Section 14. Certificated Shares; Replacement Certificates.

(a)    Shares of Series A-1 Preferred Stock shall be evidenced by certificates, which shall bear a legend substantially to the following effect:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF MAY 26, 2017, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER AND WILL BE PROVIDED WITHOUT COST, UPON WRITTEN REQUEST TO THE SECRETARY OF THE ISSUER.

(b)    Upon request of a holder of Series A Preferred Stock or Class A Common Stock subject to this Series A-1 Certificate of Designations, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause the legend to be removed from any certificate for any Series A Preferred Stock issued or Class A Common Stock to be issued pursuant to the terms of this Series A-1 Certificate of Designations. Each Initial Investor acknowledges that the Series A Preferred Stock issued pursuant to this Series A-1 Certificate of Designations and the Class A Common Stock or Series A Preferred Stock issuable upon conversion of (or as dividends on) such stock have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Series A Preferred Stock issued pursuant to this Series A-1 Certificate of Designations or any Class A Common Stock or Series A-1 Preferred Stock issuable upon conversion of (or as dividends on) such stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

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Each Series A-1 Preferred Stock certificate shall be dated the date of its authentication.

(c)    The Company shall replace any mutilated Series A-1 Preferred Stock certificate at the Holder’s expense upon surrender of that certificate to the Company. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may reasonably be required by the Company.

(d)    Notwithstanding anything to the contrary herein, unless requested in writing by a Holder to the Company, shares of Common Stock issued upon conversion of shares of Preferred Stock shall be in uncertificated, book entry form as permitted by the Bylaws of the Company and the Delaware General Corporation Law.

Section 15. Transfer Restrictions.

(a)    Subject to Section 4.2 of the Securities Purchase Agreement and Section 15(b) hereof, the Holders may Transfer to any Person any portion of their Series A-1 Preferred Stock issued pursuant to this Series A-1 Certificate of Designations or any Class A Common Stock or Series A-1 Preferred Stock, as applicable, issued upon conversion of (or as dividends on) the Series A-1 Preferred Stock issued pursuant to this Series A-1 Certificate of Designations; provided, that no Investor (other than the Initial Investors) shall have the right to participate in the appointment of Investor Directors as set forth in Section 4.4 of the Securities Purchase Agreement and Section 19 herein and Section 19 of the Series A-2 Certificate of Designations unless they have qualified as Approved Holders.

(b)    Notwithstanding Section 15(a), the Holders will not at any time knowingly Transfer any Series A-1 Preferred Stock or any Class A Common Stock issued upon conversion of the Series A Preferred Stock pursuant to this Series A-1 Certificate of Designations, held by such Investor to a Company Competitor; provided, however, that this Section 15(b) shall not restrict any Transfer into the public market.

Section 16. Short-Selling. Prior to [●], 2020, no Holder or any Affiliates of such Holder may, directly or indirectly, sell “short” the Common Stock or securities convertible into or exercisable or exchangeable for Common Stock held by it.

Section 17. Reorganization Event.

(a)    If there occurs:

(i)    any reclassification, statutory exchange, merger, amalgamation, consolidation or other similar business combination of the Company with or into another Person, in each case, pursuant to which Class A Common Stock (but not the Series A-1 Preferred Stock) are changed or converted into, or exchanged for, or represent solely the right to receive, cash, securities or other property;

(ii)    any sale, transfer, lease or conveyance to another Person of all or substantially all the property and assets of the Company, in each case pursuant to which Class A Common Stock (but not Series A-1 Preferred Stock) are converted into cash, securities or other property; or

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(iii)    any statutory exchange of securities of the Company with another Person (other than in connection with a merger or amalgamation) or reclassification, recapitalization or reorganization of the Class A Common Stock (but not the Series A-1 Preferred Stock) into other securities,

(each of which is referred to as a “Reorganization Event,” and such cash, securities or other property, the “Exchange Property,” and the kind and amount of Exchange Property that a holder of one share of Class A Common Stock would be entitled to receive on account of such Reorganization Event (without giving effect to any arrangement not to issue fractional shares of securities or other property), an “Exchange Property Unit”), then, at the effective time of such Reorganization Event, without the consent of the Holders, and subject to Section 17(b), the consideration due upon conversion of Series A-1 Preferred Stock, the adjustments to the Conversion Price and the determination of the kind and amount of dividends that Holders will be entitled to receive pursuant to Section 4(b), will be determined in the same manner as if each reference to any number of shares of Class A Common Stock in this Series A-1 Certificate of Designations were instead a reference to the same number of Exchange Property Units. If such Reorganization Event provides for different treatment of shares of Class A Common Stock held by Affiliates of the Company and non-Affiliates or by the Person with which the Company amalgamated or consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (any such Person, a “Constituent Person”), or an Affiliate of a Constituent Person, then the composition of the Exchange Property and the Exchange Property Unit will be determined based on the cash, securities or other property that were distributed in such Reorganization Event to holders of Class A Common Stock that are not Constituent Persons or Affiliates of the Company or Constituent Persons. In addition, if the kind or amount of cash, securities or other property receivable upon a Reorganization Event is not the same for each share of Class A Common Stock held immediately prior to such Reorganization Event by a Person other than a Constituent Person or an Affiliate of the Company or a Constituent Person, then for the purpose of this Section 17(a), the composition of the Exchange Property and the Exchange Property Unit will be determined based on the weighted average, as determined by the Company in good faith, of the types and amounts of consideration received by the holders of Class A Common Stock.

(b)    In the event that the holders of Class A Common Stock have the opportunity to elect the form of consideration to be received in a Reorganization Event, the Exchange Property that the Holders shall be entitled to receive shall be determined by Holders of a majority of outstanding shares of Series A-1 Preferred Stock on or before the earlier of (i) the deadline for elections by holders of Class A Common Stock and (ii) two Business Days before the anticipated effective date of such Reorganization Event.

(c)    The above provisions of Section 17(a) and Section 17(b) shall similarly apply to successive Reorganization Events.

(d)    The Company (or any successor) shall, no less than 20 Business Days prior to the occurrence of any Reorganization Event, provide written notice to the Holders of

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such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property and the Exchange Property Unit, and shall provide such other information related to the Reorganization Event as Holders may reasonably request. Failure to deliver such notice shall not affect the operation of this Section 17.

(e)    The Company shall not enter into any agreement for a transaction constituting a Reorganization Event unless (i) such agreement provides for or does not interfere with or prevent (as applicable) conversion of the Series A-1 Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section 17, and (ii) to the extent that the Company is not the surviving Company in such Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements governing such Reorganization Event for the conversion of the Series A-1 Preferred Stock into Exchange Property and, in the case of a Reorganization Event described in Section 17(a)(ii), an exchange of shares of Series A Preferred Stock for the shares of the Person to whom the Company’s assets are conveyed or transferred, having voting powers, preferences, and relative, participating, optional or other special rights as nearly equal as possible to those provided in this Series A-1 Certificate of Designations.

Section 18. [Intentionally Omitted]

Section 19. Board Representation Rights.

(a)    As of the Issue Date, the Board of Directors has increased the size of the Board of Directors by one director (to nine total directors) and caused Phillip Z. Pace (in such capacity, the “Investor Director” and together with any successors or other directors designated by the Investors pursuant to this Section 19, the “Investor Directors”) to be appointed to the Board of Directors. Additionally, Matthew B. Ockwood has been appointed as a non-voting observer to the Board of Directors (in such capacity, the “Investor Observer”). Effective as of the earlier of the first anniversary of the Closing Date and obtaining the Requisite Stockholder Approval, the Board of Directors shall take all actions necessary to further increase the size of the Board of Directors by one director (to ten total directors) and to cause the Investor Observer to be appointed as a director on the Board of Directors.

(b)    From and after the Closing Date, for as long as the Approved Holders Beneficially Own any one of the percentages of Series A Preferred Stock or Common Stock set forth below, the holders of a majority of the total number of outstanding shares of Common Stock represented (on an “as-converted basis”) held by such Approved Holders (the “Approved Holder Majority”) shall have the exclusive right (but not the obligation), voting separately as a class, to designate to the Board of Directors, the following number of Investor Directors:

(i)    two Investor Directors (subject to increase pursuant to Section 20(a)(x)), for as long as the Approved Holders Beneficially Own at least (x) 20% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (y) at least 30% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (in the case of this clause (i), as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction); and

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(ii)    one Investor Director (subject to increase pursuant to Section 20(a)(x)), for as long as the Approved Holders Beneficially Own at least (x) 10% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (y) at least 15% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (in the case of this clause (ii), as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction).

(c)    The rights to designate directors pursuant to Section 19(b) shall be held by the Approved Holder Majority, the Initial Investors, and any subsequent Investor designated by an Approved Holder who is approved by the Company in the Company’s sole and absolute discretion (such holders, collectively, the “Approved Holders”).

(d)    The Company and the Board of Directors shall consider in good faith designating at least one (1) Investor Director to committees of the Board of Directors, as appropriate, and to the extent permitted by applicable SEC and stock exchange requirements.

(e)    The Company shall take all actions within its power to cause all designees designated pursuant to Section 19(b) to be included in the slate of nominees recommended by the Board of Directors to the holders of Class A Common Stock for election as directors at each meeting of the Company Stockholders called for the purpose of electing directors (and/or in connection with any election by written consent) and using commercially reasonable efforts to cause the election of each such designated Investor Directors, including (i) voting or providing a written consent or proxy with respect to Common Stock, and soliciting proxies in favor of the election of such nominees, (ii) causing the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing required agreements and instruments, (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result and (v) for so long as the Approved Holders retain the right described under Section 19(b), not nominating or recommending the election of any other candidates against or in replacement of such designated Investor Directors.

(f)    Each Investor Director and Investor Observer designated pursuant to Section 19(b) shall serve until his or her successor is designated or his or her earlier death, disability, resignation or removal; any vacancy or newly created directorship in the position of an Investor Director may be filled only by the Approved Holder Majority, subject to the fulfillment of the requirements set forth in Section 19(g); and each Investor Director and Investor Observer may, during his or her term of office, be removed at any time, with or without cause, by and only by the Approved Holder Majority.

(g)    At all times while an Investor Director or Investor Observer is serving as a member or observer of the Board of Directors, and following any such Investor Director’s or Investor Observer’s death, disability, resignation or removal, such Investor Director or Investor Observer shall be entitled to all rights to indemnification and exculpation as are then made available to any other member or observer of the Board of Directors.

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(h)    Notwithstanding anything to the contrary, any Investor Director or Investor Observer shall be reasonably acceptable to the Board of Directors and the Nominating and Corporate Governance Committee thereof acting in good faith and satisfy all applicable SEC and stock exchange requirements regarding service as a regular director or a board observer of the Company and shall comply in all material respects with the Company’s corporate governance guidelines as in effect from time to time. The Approved Holder Majority shall notify the Company of any proposed Investor Director or Directors in writing no later than the latest date on which the Company Stockholders may make nominations to the Board of Directors in accordance with the Company’s Certificate of Incorporation and Bylaws, together with all information concerning such designee required to be delivered to the Company by the Bylaws and such other information reasonably required by the Company for such purpose.

(i)    The right to designate directors pursuant to Section 19(b) shall automatically terminate at such time as the Approved Holders no longer Beneficially Own a sufficient number of shares required to designate an Investor Director set forth in Section 19(b)(ii), and at such time, if requested in writing by the Company, any Investor Directors or Investor Observer then serving on the Board of Directors in excess of the entitled amount (if less than all then Investor Directors or Investor Observers, then as selected by the Approved Holder Majority) shall promptly resign from the Board of Directors.

(j)    Nothing in this Section 19 shall be deemed to require that any party hereto, or any Affiliate thereof, act or be in violation of any applicable provision of law, regulation, legal duty or requirement or stock exchange or stock market rule.

(k)    If, after termination of this Series A-1 Certificate of Designation and the Series A-2 Certificate of Designations or such time as no shares of Series A Preferred Stock remain outstanding, the Approved Holder Majority continues to satisfy the ownership percentages set forth in Section 19(b) and Section 20, the Approved Holder Majority may request the Company to enter into a shareholder agreement reflecting the rights set forth in such sections, which the Company and the Approved Holders shall enter into as promptly as practicable after such request (but, in any event, no later than 30 days after such request).

(l)    To the fullest extent permitted by applicable law, the Company, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Company and its subsidiaries in, or in being offered an opportunity to participate in, any business opportunities that are from time to time presented to the Investors or any of their respective Affiliates or any of their respective agents, shareholders, members, partners, directors, officers, employees, Affiliates or subsidiaries (other than the Company and its subsidiaries), including any director or officer of the Company who is also an agent, shareholder, member, partner, director, officer, employee, Affiliate or subsidiary of any Investor (each, a “Specified Party”), even if the business opportunity is one that the Company or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and no Specified Party shall have any duty to communicate or offer any such business opportunity to the Company or be liable to the Company or any of its subsidiaries or any stockholder, including for breach of any fiduciary or other duty, as a director or officer or controlling stockholder or otherwise, and the Company shall indemnify each Specified Party against any claim that such Person is liable to the Company or its stockholders for breach of any fiduciary

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duty, by reason of the fact that such Person (i) participates in, pursues or acquires any such business opportunity, (ii) directs any such business opportunity to another Person or (iii) fails to present any such business opportunity, or information regarding any such business opportunity, to the Company or its subsidiaries, unless, in the case of a Person who is a director or officer of the Company, such business opportunity is expressly offered to such director or officer in writing solely in his capacity as a director or officer of the Company.

Section 20. Investor Consent.

(a)    For so long as the Approved Holders Beneficially Own at least (i) 10% of the total number of outstanding shares of Common Stock (on an “as-converted basis”) or (ii) at least 15% of the number of shares of Series A Preferred Stock Beneficially Owned by the Initial Investors as of the Closing (as adjusted to appropriately reflect any stock split, combination, reclassification, recapitalization or similar transaction), without the prior affirmative vote or written consent of the Approved Holder Majority, the Company shall not, and (to the extent applicable) shall not permit any Subsidiary to (directly or indirectly, by the way of merger, consolidation, reclassification or otherwise):

(i)    amend, change, alter or otherwise modify the rights, preferences, privileges or voting powers of the Series A Preferred Stock;

(ii)    increase the authorized amount of Series A Preferred Stock or issue Series A Preferred Stock except the (x) 20,000 shares of Series A-1 Preferred Stock and 60,000 shares of Series A-2 Preferred Stock issued at the Closing, (y) in-kind dividends payable pursuant to Section 4(d)(i) herein and Section 4(d)(i) in the Series A-2 Certificate of Designations and (z) Series A-1 Preferred Stock issuable upon conversion of Series A-2 Preferred Stock pursuant to Section 7 of the Series A-2 Certificate of Designations;

(iii)    authorize or issue any other preferred equity instruments (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such preferred equity instruments) other than (A) those that are (x) expressly made subordinate to the Series A Preferred Stock, (y) not entitled to receive cash dividends and (z) not mandatorily redeemable until after the seventh anniversary of the Closing Date and payment of any applicable redemption on the Preferred Stock or (B) those, the proceeds of which, are used to immediately redeem all of the outstanding shares of Series A Preferred Stock;

(iv)    authorize, issue or transfer any equity (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such equity) in any subsidiary of the Company other than (A) equity issued or transferred to the Company or another wholly-owned subsidiary of the Company or (B) equity, the proceeds of which, are used to immediately redeem all of the outstanding shares of Series A Preferred Stock;

(v)    incur or refinance any Debt that would result in a ratio of total outstanding Debt (net of up to $10.0 million of unrestricted cash and cash equivalents on hand immediately after such incurrence or refinancing) to trailing four fiscal quarters Adjusted

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EBITDAX for the Company and its consolidated subsidiaries greater than (A) for any fiscal quarter ending after the date hereof through and including December 31, 2017, 4.50 to 1.00 and (B) for any fiscal quarter thereafter, 4.00 to 1.00, and calculated in good faith on a pro forma basis with respect to any acquisitions (as set forth in the definition of Adjusted EBITDAX) and any repayments or refinancing of Debt; provided, that until the first anniversary of the Closing Date, the Company may issue or borrow up to $250,000,000 in unsecured notes, the proceeds of which are substantially contemporaneously used to (A) first, wholly refinance, repay or retire the Company’s outstanding 8.750% senior unsecured notes due 2019 (the “Existing Notes”), issued pursuant to that certain Indenture, dated as of April 4, 2014, by and among Lonestar Resources America Inc., Wells Fargo Bank, National Association, as trustee, and the guarantors party thereto and, for any proceeds in excess of the Existing Notes, (B) second, reduce amounts outstanding under the Credit Agreement, dated July 28, 2015, among Lonestar Resources America Inc., Citibank, N.A., as Administrative Agent, and the lenders party thereto from time to time, as amended and as the same may be amended, restated, amended and restated and otherwise modified from time to time, (the “RBL”) and (C) third, to the extent any excess remains, to fund development of the Company’s existing and acquired oil and gas assets in Texas;

(vi)    amend, change, alter, modify or repeal the Company’s Certificate of Incorporation or Bylaws in a manner that would materially and adversely affect the rights, preferences, privileges or voting powers of the Preferred Stock or its holders;

(vii)    liquidate or dissolve the Company or any of its material Subsidiaries;

(viii)    pay any cash dividends to the Company Stockholders or holders of any other existing and future equity securities (including any obligation or security convertible into, exchangeable for or evidencing the right to purchase any such equity securities) of the Company that are junior in rights to the Series A Preferred Stock, or redeem or repurchase any such Common Stock or other junior equity securities (except redemptions or repurchases in connection with the administration of any employee benefit plan in the ordinary course of business);

(ix)    enter into any material new line of business or fundamentally change the nature of the Company’s business; or

(x)    modify the size of the Board of Directors, other than to increase the size of the Board of Directors up to a maximum of 12 directors, provided that for so long as the Approved Holders maintain the right to appoint one or more directors to the Board of Directors, the Investor Director(s) shall maintain the same proportionate share of the Board of Directors after the increase in size as they had prior to the increase in size, rounded up to the nearest whole director.

Section 21. Miscellaneous.

(a)    All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of

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receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail with postage prepaid, addressed: (i) if to the Company, to its office at 600 Bailey Avenue, Suite 200, Fort Worth, Texas 76107 or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company, or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.

(b)    The Company shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series A-1 Preferred Stock or shares of Class A Common Stock or other securities issued on account of Series A-1 Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series A-1 Preferred Stock or Class A Common Stock or other securities in a name other than that in which the shares of Series A-1 Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the reasonable satisfaction of the Company, that such tax has been paid or is not payable. To the extent any Holder shall become liable for or subject to any taxes, levies, imposts, duties, fees, assessments, withholding or other charges of whatever nature resulting from the exchange into the Notes pursuant to Section 4(e)(ii), the Company shall promptly indemnify and hold harmless such Holder against any such amounts at the highest maximum combined marginal federal, state and local income tax rates to which any such Holder may be subject.

(c)    No share of Series A-1 Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Company, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated issued or granted.

(d)    The shares of Series A-1 Preferred Stock shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law or the Securities Purchase Agreement.

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IN WITNESS WHEREOF, LONESTAR RESOURCES US INC. has caused this Series A-1 Certificate of Designations to be signed by its authorized corporate officer this [●] day of [●], 2017.

LONESTAR RESOURCES US INC.

By:

Name:

Title:

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Exhibit B

Form of Series A-2 Convertible

Participating Preferred Stock Certificate of Designations

CERTIFICATE OF DESIGNATIONS

OF

CONVERTIBLE PARTICIPATING PREFERRED STOCK, SERIES A-2

OF

LONESTAR RESOURCES US INC.

Pursuant to Sections 151 and 103 of the

General Corporation Law

of the State of Delaware

Lonestar Resources US Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Company”), in accordance with the provisions of Sections 103 and 151 thereof,

DOES HEREBY CERTIFY:

First: The Certificate of Incorporation of the Company authorizes the issuance of 10,000,000 shares of preferred stock, par value $0.001 per share, of the Company (“Preferred Stock”) in one or more series, and expressly authorizes the Board of Directors to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to fix the number of shares constituting and the designation of each series of Preferred Stock, the powers (including voting power if any) of the shares of such series, and the preferences and other rights, and the qualifications, limitations or restrictions thereof.

Second: The Board of Directors, in accordance with the provisions of the Certificate of Incorporation, the Bylaws of the Company and applicable law, adopted the following resolution on [●], 2017, providing for the issuance of a series of [●] shares of Preferred Stock of the Company designated as “Convertible Participating Preferred Stock, Series A-2.”

Resolved, that pursuant to the provisions of the Certificate of Incorporation, the Bylaws of the Company and applicable law, a series of Preferred Stock, par value $0.001 per share, of the Company be and hereby is created, and that the number of shares of such series, and the voting and other powers, designations, preferences and other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

RIGHTS AND PREFERENCES

Section 1. Designation. There is hereby created out of the authorized and unissued shares of Preferred Stock a series of preferred stock designated as the “Convertible Participating Preferred Stock, Series A-2” (the “Series A-2 Preferred Stock”). The number of shares constituting such series shall be [●]²; provided that the Company may decrease such number from time to time, but not below a number equal to the sum of the number of shares of Series A-2 Preferred Stock then outstanding.

²  NTD: To equal the total Series A-2 Preferred plus potential PIK.

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Section 2. Ranking.

(a)    Subject to the terms of this Series A-2 Certificate of Designations and the Series A-1 Certificate of Designations, the Series A-2 Preferred Stock will rank, with respect to dividend rights and with respect to rights on liquidation, winding-up and dissolution, (i) on a parity with the Series A-1 Preferred Stock and with each other class or series of capital stock of the Company the terms of which expressly provide that such class or series will rank on a parity with the Series A-2 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company, and (ii) senior to the Class A Common Stock and Class B Common Stock and each other existing and future class or series of capital stock of the Company the terms of which do not expressly provide that it ranks on a parity with or senior to the Series A-2 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company.

(b)    The Series A-1 Preferred Stock and each other class or series of capital stock of the Company the terms of which expressly provide that such class or series will rank on a parity with the Series A-2 Preferred Stock are herein referred to as “Parity Securities.” The Class A Common Stock, the Class B Common Stock and each other class or series of capital stock of the Company that ranks junior to the Series A-2 Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company are herein referred to as “Junior Securities.”

Section 3. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the Securities Purchase Agreement. Unless the context or use indicates another meaning or intent, the following terms shall have the following meanings, whether used in the singular or the plural:

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Approved Holders” has the meaning set forth in the Series A-1 Certificate of Designations.

“as-converted basis” means, with respect to the outstanding shares of Common Stock, all outstanding shares of Common Stock calculated on a basis in which all shares of Common Stock issuable upon conversion of the Series A-2 Preferred Stock that is either (i) then outstanding or (ii) issuable upon conversion of Series A-1 Preferred Stock then outstanding, in each case, whether or not the Series A Preferred Stock is then convertible, exchangeable or exercisable by the holder, are assumed to be then outstanding.

“Beneficially Own” has the meaning ascribed to it in the Securities Purchase Agreement.

“Board of Directors” means the board of directors of the Company or any duly authorized committee thereof.

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“Business Day” means any day other than a Saturday, Sunday or any other day on which banks in Fort Worth, Texas are generally required or authorized by law to be closed.

“Certificate of Incorporation” means the Certificate of Incorporation of the Company, as amended from time to time, including this Series A-2 Certificate of Designations and the Series A-1 Certificate of Designations incorporated therein under the Delaware General Corporation Law, each as amended from time to time in accordance therewith.

“Class A Common Stock” means the Company’s Class A Voting Common Stock, par value $0.001 per share.

“Class B Common Stock” means the Company’s Class B Non-Voting Common Stock, par value $0.001 per share.

“Close of Business” means (i) with respect to the Record Date for any issuance, dividend, or distribution declared, paid or made on or with respect to any capital stock of the Company, the closing of the Company’s stock register on such date, for the purpose of determining the holders of capital stock entitled to receive such issuance, dividend or distribution, and (ii) in all other cases, 5:00 pm, Fort Worth, Texas time, on the date in question.

“Common Stock” means the Class A Common Stock and the Class B Common Stock.

“Company” means Lonestar Resources US Inc., a Delaware corporation, and any successor thereto.

“Company Competitor” means any exploration and production company primarily operating in the Eagle Ford Shale in Texas.

“Constituent Person” has the meaning set forth in Section 17(a).

“Conversion Date” has the meaning set forth in Section 7.

“Conversion Price” has the meaning set forth in the Series A-1 Certificate of Designations.

“Dividend Payment Date” has the meaning set forth in Section 4(c).

“Dividend Period” has the meaning set forth in Section 4(c)(ii).

“Dividend Rate” means 9.00% per annum, subject to adjustment pursuant to Section 4(e); provided, however, with respect to any Dividend Period in which the Dividend Rate is adjusted, the applicable Dividend Rate for such Dividend Period will be calculated by determining the sum, for each day during such Dividend Period, of the product of the Dividend Rate in effect on such day (without giving effect to this proviso but giving effect to any other adjustments) multiplied by the Stated Value and, without duplication, Unpaid Dividends, per share of Series A-2 Preferred Stock on such day.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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“Exchange Property” has the meaning set forth in Section 17(a).

“Exchange Property Unit” has the meaning set forth in Section 17(a).

“Holder” or “Investor” means the Person in whose name the shares of the Series A-2 Preferred Stock are registered, which may be treated by the Company and the Company’s transfer agent and registrar as the absolute owner of the shares of Series A-2 Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

“Issue Date” means the date upon which the shares of Series A-2 Preferred Stock are first issued.

“Junior Securities” has the meaning set forth in Section 2(b).

“Parity Securities” has the meaning set forth in Section 2(b). For the avoidance of doubt, the term “Parity Securities” does not mean or include the Common Stock.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

“PIK Quarter” has the meaning set forth in Section 4(d).

“Preferred Stock” has the meaning set forth in the recitals.

“Record Date” means, with respect to any issuance, dividend, or distribution declared, paid or made on or with respect to any capital stock of the Company, the date fixed for the determination of the stockholders entitled to receive such issuance, dividend or distribution.

“Redemption Notice” has the meaning set forth in Section 10(b).

“Reorganization Event” has the meaning set forth in Section 17(a).

“SEC” shall mean the Securities and Exchange Commission.

“Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of May 26, 2017, by and among the Company and the Investors party thereto.

“Series A Preferred Stock” means the Series A-2 Preferred Stock and the Series A-1 Preferred Stock.

“Series A-1 Certificate of Designations” means the Certificate of Designations of Lonestar Resources US Inc. relating to Series A-1 Preferred Stock, dated [●], 2017, as it may be amended from time to time in accordance therewith.

“Series A-2 Certificate of Designations” means this Series A-2 Certificate of Designations of Lonestar Resources US Inc., dated [●], 2017, as it may be amended from time to time in accordance herewith.

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“Stated Value” initially means $1,000 per share of the Series A-2 Preferred Stock, as adjusted for any stock splits, stock dividends, recapitalizations or similar transactions with respect to the Series A-2 Preferred Stock and, if applicable, as adjusted pursuant to Section 4(d).

“Unpaid Dividends” means, as of any date with respect to any one or more shares of Series A-2 Preferred Stock, the amount, as of such date, of any accrued and unpaid dividends or distributions on such one or more shares. For the avoidance of doubt, “Unpaid Dividends” do not include any dividends added to the Stated Value pursuant to Section 4(d).

Section 4. Dividends.

(a)    Dividends in General. From and after the Issue Date, Holders shall be entitled to receive, when, as and if declared by the Board of Directors out of any funds legally available therefor, cumulative dividends of the type and in the amount determined as set forth in this Section 4, and no more. Notwithstanding anything to the contrary in this Series A-2 Certificate of Designations, cash dividends shall be paid only to the extent the Company has funds legally available for such payment, and the Board of Directors declares such dividend payable.

(b)    Participating Dividends. For so long as any shares of Series A-2 Preferred Stock are outstanding, no cash dividend may be declared or paid on the Common Stock, and no other distributions may be made to holders of Common Stock, during a Dividend Period unless a cash dividend or such distribution, if applicable, is also declared and paid on the Series A-2 Preferred Stock to Holders for such dividend in the same form and in an amount per share of Series A-2 Preferred Stock equal to the product of (i) the per share dividend or distribution declared and paid in respect of each share of Class A Common Stock and (ii) the number of shares of Class A Common Stock underlying the shares of Series A-1 Preferred Stock into which each share of Series A-2 Preferred Stock is then convertible on the Record Date for such dividend or distribution. For purposes of this Section 4(b), “distribution” means the transfer of cash, property or securities without consideration, whether by way of dividend or otherwise, or the purchase of shares of the Company.

(c)    Regular Dividends. In addition to participation in cash dividends on, or distributions to, Common Stock as set forth in Section 4(b), and subject to Section 4(d), commencing on the Issue Date, dividends on Series A-2 Preferred Stock shall accrue daily and shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”) or, if any such day is not a Business Day, the preceding Business Day. Dividends payable pursuant to this Section 4(c), if, when and as declared by the Board of Directors, will be, for each outstanding share of Series A-2 Preferred Stock, payable, subject to Section 4(d), in cash as follows:

(i)    Dividends at an amount equal to an annual rate equal to the Dividend Rate multiplied by the sum of (A) the Stated Value and (B), without duplication, the amount of Unpaid Dividends, on such share of Series A-2 Preferred Stock, payable in cash.

(ii)    Dividends payable pursuant to this Section 4(c) will be computed on the basis of a 360-day year of twelve 30-day months and, for any Dividend Period greater or

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less than a full Dividend Period, will be computed on the basis of the actual number of days elapsed in the period divided by 90. The period from the Issue Date to and including [June 30, 2017]/[the Dividend Payment Date next succeeding the Issue Date] and each period from, but excluding, a Dividend Payment Date to, and including, the following Dividend Payment Date is herein referred to as a “Dividend Period.” Dividends payable pursuant to this Section 4(c) are cumulative. Such dividends shall begin to accrue and be cumulative from the Issue Date, shall compound at the relevant rate on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on another dividend unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date, in which case dividends will accrue on such Unpaid Dividends) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date.

(iii)    If the Conversion Date with respect to any share of Series A-2 Preferred Stock is prior to the Record Date for any dividend, the Holder of such shares will not be entitled to any such dividend, subject to any Unpaid Dividends being taken into account in Section 7. If the Conversion Date with respect to any share of Series A-2 Preferred Stock is after the Record Date for any dividend but before the corresponding Dividend Payment Date, the Holder of such share of Series A-2 Preferred Stock shall have the right to receive such dividend, notwithstanding the conversion of such shares prior to the Dividend Payment Date.

(d)    PIK Dividends.

(i)    Notwithstanding anything to the contrary in Section 4(c), for no more than 12 Dividend Periods (whether consecutive or non-consecutive) prior to [●], 2024 (a “PIK Quarter”), the Company may, at its option and in its sole discretion as exercised by the Board of Directors, with respect to all or any portion of the accrued, declared and payable dividends for such Dividend Period, elect to (A) pay such dividends in the form of additional shares of Series A-2 Preferred Stock at a per share price equal to $975.00 or, (B) in lieu of paying such dividends, increase the Stated Value of the applicable shares of Series A-2 Preferred Stock by an amount equal to the accrued and payable dividends on such shares for such applicable PIK Quarter. If the Company fails to fully declare and pay in cash by the Dividend Payment Date, or is unable to fully pay in cash by such date, the accrued dividends with respect to a Dividend Period then, with respect to any unpaid portion but subject to Section 4(e), (x) to the extent any of the 12 PIK Quarters remain available, the Company shall be deemed to have made an election under Section 4(d)(i)(B) and (y) to the extent none of the 12 PIK Quarters remain available, the Stated Value shall be automatically increased by an amount equal to the lesser of (i) a Dividend Rate of 9.0% per annum and (ii) the unpaid portion of any such accrued dividends (provided that any amounts which increase the Stated Value hereby shall no longer be considered Unpaid Dividends), with any remaining unpaid portion in excess of such increase in Stated Value remaining Unpaid Dividends.

(ii)    For the avoidance of doubt, any portion of a declared dividend not paid as provided in the foregoing clauses will be paid in cash.

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(e)    Adjustments to Dividend Rate.

(i)    Except as permitted by Section 4(d)(i), if, at any time, the Company fails to fully declare and pay all accrued dividends in cash on a Dividend Payment Date, then the Dividend Rate on the Series A-2 Preferred Stock shall automatically increase by (A) 5.0% per annum effective as of the first day of the applicable Dividend Period and (B) an additional 1.0% for each successive Dividend Period in which the Company so fails to fully declare and pay, up to the maximum Dividend Rate of 20.0% per annum (including any adjustments pursuant to Section 4(e)(ii)). Dividends on the Series A-2 Preferred Stock shall accrue at the increased Dividend Rate for so long until the Company shall have paid dividends at such increased Dividend Rate fully in cash in accordance with Section 4(c) for two consecutive Dividend Periods, upon which time the Dividend Rate on Series A-2 Preferred Stock shall automatically decrease and revert to 9.0% per annum to the extent dividends continue to be paid fully in cash.

(ii)    If the Requisite Stockholder Approval is not obtained on or prior to [●], 2017, then the Dividend Rate shall automatically increase by 5.0% commencing on the first day of the Dividend Period ended on [●], 2017/2018, and thereafter, shall increase by an additional 0.5% each subsequent Dividend Period until such Requisite Stockholder Approval is obtained, at which point the Dividend Rate shall be reduced to 9.00% (subject to any adjustment pursuant to Section 4(e)(i)); provided, that in no event shall the applicable Dividend Rate exceed 20.0% per annum (including any adjustments pursuant to Section 4(e)(i)).

(f)    Each dividend will be payable to Holders of record as they appear in the records of the Company on the applicable Record Date, which shall be on the fifteenth (15th) day of the month in which the relevant Dividend Payment Date occurs.

Section 5. Liquidation.

(a)    In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled to receive out of the assets of the Company or proceeds thereof legally available for distribution to stockholders of the Company, after satisfaction of all liabilities, if any, to creditors of the Company and subject to Section 5(b) and to the rights of holders of any shares of capital stock of the Company then outstanding ranking senior to the Series A-2 Preferred Stock in respect of distributions upon liquidation, dissolution or winding up of the Company, and before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other Junior Securities, a liquidating distribution in an amount equal to the greater of (i) the Stated Value plus, without duplication, Unpaid Dividends, per share and (ii) the amount of the liquidating distributions, as determined by the Board of Directors (or the trustee or other Person or Persons administering the liquidation, dissolution or winding-up of the Company in accordance with applicable law), that would be made on the number of shares of Class A Common Stock underlying shares of Series A-1 Preferred Stock into which such shares of Series A-2 Preferred Stock are convertible immediately before such liquidation, dissolution or winding-up of the Company. After payment of the full amount of such liquidation distribution, the Holders shall not be entitled to any further participation in any distribution of assets by the Company.

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(b)    In the event the assets of the Company available for distribution to stockholders upon any liquidation, dissolution or winding-up of the affairs of the Company, whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to all outstanding shares of the Series A-2 Preferred Stock and the corresponding amounts payable on any Parity Securities, Holders and the holders of such Parity Securities shall share ratably in any distribution of assets of the Company in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled.

(c)    The Company’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into the Company, or the sale of all or substantially all of the Company’s property or business or other assets will not constitute its liquidation, dissolution or winding up, but instead shall be subject to Section 17.

Section 6. Maturity. The Series A-2 Preferred Stock shall be perpetual unless converted or redeemed in accordance with this Series A-2 Certificate of Designations.

Section 7. Conversion. Upon obtaining the Requisite Stockholder Approval, each share of Series A-2 Preferred Stock shall automatically convert into that number of duly authorized, validly issued, fully paid and nonassessable shares of Series A-1 Preferred Stock (which such Series A-1 Preferred Stock, shall, for the avoidance of doubt, have a Conversion Price equal to the outstanding Series A-1 Preferred Stock) (such date, the “Conversion Date”) equal to (A) (1) the sum of the Stated Value of a share of Series A-2 Preferred Stock plus, to the extent payable to the Holder pursuant to Section 4(c)(iii) and without duplication, Unpaid Dividends thereon (whether or not declared) divided by (2) the sum of the Stated Value of a share of Series A-1 Preferred Stock plus, without duplication, accrued and unpaid dividends thereon (whether or not declared) plus (B) cash in lieu of fractional shares, if any. For the avoidance of doubt and notwithstanding anything in this Series A-2 Certificate of Designations to the contrary, at no time shall Holders of Series A-2 Preferred Stock have the right to convert any share of their Series A-2 Preferred Stock, and no shares of Series A-2 Preferred Stock are convertible into, Common Stock.

Section 8. Conversion Procedures.

(a)    On the Conversion Date, certificates representing the number of shares of Series A-1 Preferred Stock into which the applicable shares of Series A-2 Preferred Stock are converted shall be promptly issued and delivered to the Holder thereof or such Holder’s designee upon presentation and surrender of the certificate evidencing the Series A-2 Preferred Stock, if any (or, if such certificate or certificates have been lost, stolen, or destroyed, a lost certificate affidavit and indemnity in form and substance reasonably acceptable to the Company), to the Company and, if required, the furnishing of appropriate endorsements and transfer documents and the payment of all transfer and similar taxes, if any, allocable to the Holder pursuant to Section 18(b).

(b)    From and after the Conversion Date, the shares of Series A-2 Preferred Stock to be converted on the Conversion Date, as applicable, will cease to be entitled to any dividends that may thereafter be declared on such Series A-2 Preferred Stock; such shares of Series A-2 Preferred Stock will no longer be deemed to be outstanding for any purpose; and all

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rights (except the right to receive from the Company the Series A-1 Preferred Stock or Class A Common Stock (and cash in lieu of fractional shares, if applicable) upon conversion thereof and any dividends previously declared or otherwise accrued on the Series A-2 Preferred Stock but not paid) of the Holder of such shares of Series A-2 Preferred Stock to be converted shall cease and terminate with respect to such shares. Prior to the Conversion Date, except as otherwise provided herein, Holders shall have no rights as owners of the Series A-1 Preferred Stock (or other relevant capital stock or equity interest into which the Series A-2 Preferred Stock may then be convertible in accordance herewith) (including voting powers, conversion rights and rights to receive any dividends or other distributions on the Series A-1 Preferred Stock or other securities issuable upon conversion) by virtue of holding shares of Series A-2 Preferred Stock.

(c)    Shares of Series A-2 Preferred Stock duly converted in accordance with this Series A-2 Certificate of Designations, or otherwise reacquired by the Company.

(d)    The Person or Persons entitled to receive the Series A-1 Preferred Stock and/or cash issuable upon conversion of Series A-2 Preferred Stock shall be treated for all purposes as the record holder(s) of such shares of Series A-1 Preferred Stock and/or securities as of the Close of Business on the Conversion Date with respect thereto. In the event that a Holder shall not by written notice designate the name in which shares of Series A-1 Preferred Stock and/or cash to be issued or paid upon conversion of shares of Series A-2 Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Company shall be entitled to register and deliver such shares, and make such payment, in the name of the Holder and in the manner shown on the records of the Company.

(e)    In the event that fewer than all of the shares of Series A-2 Preferred Stock held by any Holder who have requested to have a certificate representing its shares of Series A-2 Preferred Stock are converted pursuant to Section 7, then a new certificate representing the unconverted shares of Series A-2 Preferred Stock shall be issued to such Holder concurrently with the issuance of the certificates representing the applicable Series A-1 Preferred Stock.

Section 9. [Intentionally Omitted].

Section 10. Redemption.

(a)    After [●], 2020, the Company may, at its option and in its sole discretion, redeem shares of Series A-2 Preferred Stock, in minimum increments of 5,000 shares and even multiples thereof (or such lesser amount in the event that fewer than 5,000 shares remain outstanding), for cash as follows:

(i)    prior to [●], 2021, in an amount equal to 110% of the Stated Value plus, without duplication, any Unpaid Dividends;

(ii)    prior to [●], 2022, in an amount equal to 105% of the Stated Value plus, without duplication, any Unpaid Dividends; and

(iii)    after [●], 2022, in an amount equal to the Stated Value plus, without duplication, any Unpaid Dividends.

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(b)    The Company shall provide written notice (the “Redemption Notice”) to the Holders at least 30 calendar days prior to any optional redemption in accordance with Section 10(a); provided that nothing in the Redemption Notice shall prohibit the conversion into Series A-1 Preferred Stock pursuant to Section 7 prior to the Company’s proposed redemption date. If the Company elects to redeem fewer than all of the outstanding shares of Preferred Stock pursuant to this Section 10, the Series A-2 Preferred Stock will be redeemed on a pro rata basis across all Holders based on their respective ownership of Series A-2 Preferred Stock unless agreed upon otherwise by the Holders. The shares of Series A-2 Preferred Stock Preferred Stock not redeemed shall remain outstanding.

(c)     If the Requisite Stockholder Approval is not obtained and the Series A-2 Preferred Stock not converted to Series A-1 Preferred Stock, on or prior to the seventh anniversary of the Issue Date, then the Company shall, on such seventh anniversary of the Issue Date, redeem all of the outstanding shares of Series A-2 Preferred Stock for a cash amount per share equal to the Stated Value plus, without duplication, any Unpaid Dividends.

(d)    Any shares of Series A-2 Preferred Stock that are redeemed or otherwise acquired by the Company shall be cancelled upon payment therefor and will resume the status of authorized and unissued shares of Preferred Stock, undesignated as to series, and will be available for future issuance, but shall not be reissued as shares of Series A-2 Preferred Stock. If only a portion of the shares of Series A-2 Preferred Stock represented by a certificate shall have been called for redemption, upon surrender of the certificate to the Company, the Company shall issue and deliver to the Holders a new certificate representing the number of shares of Series A-2 Preferred Stock represented by the surrendered certificate that have not been called for redemption.

Section 11. Voting Powers.

(a)    The Holders shall be entitled to (i) vote with the holders of the Class A Common Stock on all matters submitted for a vote of holders of Class A Common Stock, (ii) when voting with the Class A Common Stock, a number of votes equal to the number of shares of Class A Common Stock such Holder would hold on an “as-converted basis” (as if each such shares of Series A-2 Preferred Stock have been converted into shares of Series A-1 Preferred Stock pursuant to the terms of this Series A-2 Certificate of Designations) on the Record Date for the determination of the holders of Class A Common Stock entitled to vote on the matter in question and (iii) notice of all stockholders’ meetings in accordance with the Certificate of Incorporation and Bylaws of the Company, and applicable law or regulation or stock exchange rule, as if the Holders of Series A-2 Preferred Stock were holders of Class A Common Stock.

(b)    Each Holder will have one vote per share on any matter on which Holders of Series A-2 Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent.

(c)    So long as any shares of Series A-2 Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or the Certificate of Incorporation, the affirmative vote or consent of Holders of at least a majority of the

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outstanding shares of Series A-2 Preferred Stock, voting together as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating any amendment, modification or alteration of, or supplement to, the Certificate of Incorporation or this Series A-2 Certificate of Designations that would materially and adversely affect the relative rights, preferences, privileges or voting powers of the Series A-2 Preferred Stock or any Holder.

Section 12. [Intentionally Omitted].

Section 13. Reservation of Stock.

(a)    The Company shall at all times reserve and keep available out of its authorized and unissued Series A-1 Preferred Stock and Class A Common Stock or shares of Series A-1 Preferred Stock and Class A Common Stock acquired by the Company and not retired, solely for issuance upon the conversion of shares of Series A-2 Preferred Stock as provided in this Series A-2 Certificate of Designations and the further conversion of shares of Series A-1 Preferred Stock resulting from such conversion as provided in the Series A-1 Certificate of Designations, such number of shares of Series A-1 Preferred Stock and such number of shares of Class A Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A-2 Preferred Stock then outstanding and upon the conversion of all the shares of Series A-1 Preferred Stock resulting from such conversion. The Company shall take all such corporate and other actions as from time to time may be necessary to ensure that all shares of Series A-1 Preferred Stock issuable upon conversion of shares of Series A-2 Preferred Stock and all shares of Class A Common Stock issuable upon conversion of shares of Series A-1 Preferred Stock resulting from such conversion will, upon issue, be duly and validly authorized and issued, fully paid and nonassessable. For purposes of this Section 13, the number of shares of Series A-1 Preferred Stock and the number of shares of Class A Common Stock that shall be deliverable upon the conversion of all outstanding shares of Series A-2 Preferred Stock and the further conversion of all resulting Series A-1 Preferred Stock into Class A Common Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b)    Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of shares of Series A-2 Preferred Stock, as herein provided, shares of Series A-1 Preferred Stock acquired and not retired by the Company (in lieu of the issuance of authorized and unissued shares of Series A-1 Preferred Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

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(c)    All shares of Series A-1 Preferred Stock delivered upon conversion of the Series A-2 Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

Section 14. Certificated Shares; Replacement Certificates.

(a)    Shares of Series A-2 Preferred Stock shall be evidenced by certificates, which shall bear a legend substantially to the following effect:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF MAY 26, 2017, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER AND WILL BE PROVIDED WITHOUT COST, UPON WRITTEN REQUEST TO THE SECRETARY OF THE ISSUER.

(b)    Upon request of a holder of Series A Preferred Stock or Class A Common Stock subject to this Series A-2 Certificate of Designations, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause the legend to be removed from any certificate for any Series A Preferred Stock issued or Class A Common Stock to be issued pursuant to the terms of this Series A-2 Certificate of Designations. Each Initial Investor acknowledges that the Series A Preferred Stock issued pursuant to this Series A-2 Certificate of Designations and the Class A Common Stock or Series A Preferred Stock issuable upon conversion of (or as dividends on) such stock have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Series A Preferred Stock issued pursuant to this Series A-2 Certificate of Designations or any Class A Common Stock or Series A-2 Preferred Stock issuable upon conversion of (or as dividends on) such stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

Each Series A-2 Preferred Stock certificate shall be dated the date of its authentication.

(c)    The Company shall replace any mutilated Series A-2 Preferred Stock certificate at the Holder’s expense upon surrender of that certificate to the Company. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may reasonably be required by the Company.

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Section 15. Transfer Restrictions.

(a)    Subject to Section 4.2 of the Securities Purchase Agreement and Section 15(b) hereof, the Holders may Transfer to any Person any portion of their Series A-2 Preferred Stock issued pursuant to this Series A-2 Certificate of Designations or any Class A Common Stock or Series A-2 Preferred Stock, as applicable, issued upon conversion of (or as dividends on) the Series A-2 Preferred Stock issued pursuant to this Series A-2 Certificate of Designations; provided, that no Investor (other than the Initial Investors) shall have the right to participate in the appointment of Investor Directors as set forth in Section 4.4 of the Securities Purchase Agreement and Section 19 herein and Section 19 of the Series A-1 Certificate of Designations unless they have qualified as Approved Holders.

(b)    Notwithstanding Section 15(a), the Holders will not at any time knowingly Transfer any Series A-2 Preferred Stock or any Class A Common Stock issued upon conversion of the Series A Preferred Stock pursuant to this Series A-2 Certificate of Designations, held by such Investor to a Company Competitor; provided, however, that this Section 15(b) shall not restrict any Transfer into the public market.

Section 16. Short-Selling. Prior to [●], 2020, no Holder or any Affiliates of such Holder may, directly or indirectly, sell “short” the Common Stock or securities convertible into or exercisable or exchangeable for Common Stock held by it.

Section 17. Reorganization Event.

(a)    If there occurs:

(i)    any reclassification, statutory exchange, merger, amalgamation, consolidation or other similar business combination of the Company with or into another Person, in each case, pursuant to which Series A-1 Preferred Stock (but not the Series A-2 Preferred Stock) are changed or converted into, or exchanged for, or represent solely the right to receive, cash, securities or other property;

(ii)    any sale, transfer, lease or conveyance to another Person of all or substantially all the property and assets of the Company, in each case pursuant to which Series A-1 Preferred Stock (but not Series A-2 Preferred Stock) are converted into cash, securities or other property; or

(iii)    any statutory exchange of securities of the Company with another Person (other than in connection with a merger or amalgamation) or reclassification, recapitalization or reorganization of the Series A-1 Preferred Stock (but not the Series A-2 Preferred Stock) into other securities,

(each of which is referred to as a “Reorganization Event,” and such cash, securities or other property, the “Exchange Property,” and the kind and amount of Exchange Property that a holder of one share of Class A Common Stock would be entitled to receive on account of such Reorganization Event (without giving effect to any arrangement not to issue fractional shares of

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securities or other property), an “Exchange Property Unit”), then, at the effective time of such Reorganization Event, without the consent of the Holders, and subject to Section 17(b), the consideration due upon conversion of Series A-2 Preferred Stock, the adjustments to the Conversion Price and the determination of the kind and amount of dividends that Holders will be entitled to receive pursuant to Section 4(b), will be determined in the same manner as if each reference to any number of shares of Class A Common Stock in this Series A-2 Certificate of Designations were instead a reference to the same number of Exchange Property Units. If such Reorganization Event provides for different treatment of shares of Class A Common Stock held by Affiliates of the Company and non-Affiliates or by the Person with which the Company amalgamated or consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (any such Person, a “Constituent Person”), or an Affiliate of a Constituent Person, then the composition of the Exchange Property and the Exchange Property Unit will be determined based on the cash, securities or other property that were distributed in such Reorganization Event to holders of Class A Common Stock that are not Constituent Persons or Affiliates of the Company or Constituent Persons. In addition, if the kind or amount of cash, securities or other property receivable upon a Reorganization Event is not the same for each share of Class A Common Stock held immediately prior to such Reorganization Event by a Person other than a Constituent Person or an Affiliate of the Company or a Constituent Person, then for the purpose of this Section 17(a), the composition of the Exchange Property and the Exchange Property Unit will be determined based on the weighted average, as determined by the Company in good faith, of the types and amounts of consideration received by the holders of Class A Common Stock.

(b)    In the event that the holders of Class A Common Stock have the opportunity to elect the form of consideration to be received in a Reorganization Event, the Exchange Property that the Holders shall be entitled to receive shall be determined by Holders of a majority of outstanding shares of Series A-2 Preferred Stock on or before the earlier of (i) the deadline for elections by holders of Class A Common Stock and (ii) two Business Days before the anticipated effective date of such Reorganization Event.

(c)    The above provisions of Section 17(a) and Section 17(b) shall similarly apply to successive Reorganization Events.

(d)    The Company (or any successor) shall, no less than 20 Business Days prior to the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property and the Exchange Property Unit, and shall provide such other information related to the Reorganization Event as Holders may reasonably request. Failure to deliver such notice shall not affect the operation of this Section 17.

(e)    The Company shall not enter into any agreement for a transaction constituting a Reorganization Event unless (i) such agreement provides for or does not interfere with or prevent (as applicable) conversion of the Series A-2 Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section 17, and (ii) to the extent that the Company is not the surviving Company in such Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements governing such Reorganization Event for the conversion of the Series A-2 Preferred

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Stock into Exchange Property and, in the case of a Reorganization Event described in Section 17(a)(ii), an exchange of shares of Series A Preferred Stock for the shares of the Person to whom the Company’s assets are conveyed or transferred, having voting powers, preferences, and relative, participating, optional or other special rights as nearly equal as possible to those provided in this Series A-2 Certificate of Designations.

Section 18. [Intentionally Omitted].

Section 19. Board Representation Rights. The Approved Holders shall be entitled to the rights set forth in Section 19 of the Series A-1 Certificate of Designations, if and as applicable, even if such Series A-1 Certificate of Designations is then no longer in effect.

Section 20. Investor Consent. The Approved Holders shall be entitled to the rights set forth in Section 20 of the Series A-1 Certificate of Designations even if such Series A-1 Certificate of Designations is then no longer in effect.

Section 21. Miscellaneous.

(a)    All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail with postage prepaid, addressed: (i) if to the Company, to its office at 600 Bailey Avenue, Suite 200, Fort Worth, Texas 76107 or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company, or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.

(b)    The Company shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Series A-2 Preferred Stock or shares of Series A-1 Preferred Stock or other securities issued on account of Series A-2 Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series A-2 Preferred Stock or Series A-1 Preferred Stock or other securities in a name other than that in which the shares of Series A-2 Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the reasonable satisfaction of the Company, that such tax has been paid or is not payable.

(c)    No share of Series A-2 Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Company, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated issued or granted.

(d)    The shares of Series A-2 Preferred Stock shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable law or the Securities Purchase Agreement.

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IN WITNESS WHEREOF, LONESTAR RESOURCES US INC. has caused this Series A-2 Certificate of Designations to be signed by its authorized corporate officer this [●] day of [●], 2017.

LONESTAR RESOURCES US INC.

By:

Name:

Title:

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Exhibit C

Form of Registration Rights Agreement

FORM OF

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of [            ], 2017 by and among LONESTAR RESOURCES US INC., a Delaware corporation (the “Company”), and each of the Persons listed on Schedule 1 hereto (the “Initial Holders”).

WHEREAS, in connection with the Company’s entry into the Securities Purchase Agreement (as defined below), the Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Initial Holder and each of their respective transferees and assigns.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.01    Definitions. The terms set forth below are used herein as so defined:

“Adverse Effect” has the meaning given to such term in Section 2.02(c).

“Affiliate” means, with respect to a specified Person, directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning given to such term in the introductory paragraph.

“Battlecat Registration Rights Agreement” means that certain Registration Rights Agreement, dated the date hereof, between the Company and Battlecat Oil & Gas, LLC.

“Commission” has the meaning given to such term in Section 1.02.

“Common Stock” means the Class A Voting Common Stock, par value $0.001 per share, of the Company.

“Company” has the meaning given to such term in the introductory paragraph.

“Convertible Preferred Stock” means the shares currently or hereafter existing of the Company’s Series A-1 Convertible Participating Preferred Stock, par value $0.001.

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“EF Registration Rights Agreement” means that certain Registration Rights Agreement, dated October 26, 2016, between the Company and EF Realisation Company Limited.

“Effectiveness Deadline” has the meaning given to such term in Section 2.01(a).

“Effectiveness Period” has the meaning given to such term in Section 2.01(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Registration Rights Agreements” means (i) the Battlecat Registration Rights Agreement, (ii) that certain Registration Rights Agreement, dated the date hereof, between the Company and SN Marquis LLC, (iii) the EF Registration Rights Agreement and (iv) the Leucadia Registration Rights Agreement.

“Filing Deadline” has the meaning given to such term in Section 2.01(a).

“Holder” means the Initial Holder and each of its transferees and assigns, in each case, for so long as each such Person is a record holder of any Registrable Securities.

“Initial Holder” has the meaning given to such term in the introductory paragraph.

“Leucadia Registration Rights Agreement” means that certain Registration Rights Agreement, dated August 2, 2016, among the Company, Leucadia National Corporation and Juneau Energy, LLC.

“Losses” has the meaning given to such term in Section 2.07(a).

“Person” means any individual, corporation, partnership, voluntary association, partnership, joint venture, trust, limited liability partnership, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

“Piggyback Notice” has the meaning given to such term in Section 2.03(a).

“Piggyback Registration Statement” has the meaning given to such term in Section 2.03(a).

“Primary Managing Underwriter” means, with respect to any Underwritten Offering pursuant to Section 2.03, the lead book-running manager of such Underwritten Offering.

“Registrable Securities” means, subject to Section 1.02, (i) the aggregate number of shares of Common Stock hereafter acquired by the Initial Holders or any Holder pursuant to the conversion of the Convertible Preferred Stock, (ii) any shares of Common Stock issuable pursuant to the terms of the Convertible Preferred Stock and (iii) any shares of Common Stock issued or issuable with respect to any shares described in subsection (i) above by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation,

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other reorganization or other similar event with respect to the Common Stock (it being understood that, for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected).

“Registration Expenses” has the meaning given to such term in Section 2.06(b).

“Registration Statement” means a Shelf Registration Statement, Secondary Offering Registration Statement, Piggyback Registration Statement or other registration statement required pursuant hereto, as applicable.

“Secondary Managing Underwriter” means, with respect to any Underwritten Offering pursuant to Section 2.02, the lead book-running manager of such Underwritten Offering.

“Secondary Offering” has the meaning given to such term in Section 2.02(a).

“Secondary Offering Registration Statement” has the meaning given to such term in Section 2.02(a).

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Purchase Agreement” means that certain Securities Purchase Agreement by and among the Company and the Initial Holders dated as of May [26], 2017.

“Selling Expenses” has the meaning given to such term in Section 2.06(b).

“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement.

“Shelf Registration Statement” has the meaning given to such term in Section 2.01(a).

“Underwritten Offering” means an offering in which shares of Common Stock are sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.

Section 1.02    Registrable Securities. Any Registrable Security will cease to be a Registrable Security (a) at the time a Registration Statement covering such Registrable Security has been declared effective by the Securities and Exchange Commission (the “Commission”), or otherwise has become effective, and such Registrable Security has been sold or disposed of pursuant to such Registration Statement; (b) at the time such Registrable Security has been disposed of pursuant to Rule 144 (or any similar provision then in effect) under the Securities Act; (c) if such Registrable Security is held by the Company or one of its subsidiaries; or (d) at the time such Registrable Security has been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities.

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ARTICLE II.

REGISTRATION RIGHTS

Section 2.01    Shelf Registration.

(a)    The Company shall prepare and file with the Commission a registration statement under the Securities Act providing for the resale of the Registrable Securities as permitted by Rule 415 of the Securities Act with respect to all of the Holders (the “Shelf Registration Statement”) no later than the earlier of (i) the one year anniversary of this Agreement and (ii) 30 days after the date the Company first becomes eligible to use a Form S-3 (the “Filing Deadline”). The Company shall use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective by the Commission as soon as reasonably practicable after the initial filing of the Shelf Registration Statement, but in any event no later than one hundred twenty (120) days after the Filing Deadline (the “Effectiveness Deadline”). The Shelf Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of any and all Registrable Securities covered by such Shelf Registration Statement. The Company shall use its commercially reasonable efforts to cause the Shelf Registration Statement filed pursuant to this Section 2.01 to be continuously effective, supplemented and amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holders until all Registrable Securities covered by such Shelf Registration Statement have ceased to be Registrable Securities (the “Effectiveness Period”). The Shelf Registration Statement when effective (and the documents incorporated therein by reference) shall comply as to form in all material respects with all applicable requirements of the Securities Act and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As soon as practicable following the date that the Shelf Registration Statement becomes effective, but in any event within two (2) business days of such date, the Company shall provide the Holders with written notice of the effectiveness of the Shelf Registration Statement. Once a Holder’s Registrable Securities become eligible for resale without restriction and without the need for current public information pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act, assuming the Holder of such Registrable Securities is not an affiliate (as defined in Rule 144(a)(1) under the Securities Act) of the Company, such Holder may, at any time, request that the Company take such steps as are reasonably necessary to deregister such Holder’s Registrable Securities and in connection therewith, such Holder’s rights under this Agreement shall all be terminated, including without limitation the right to demand an Underwritten Offering and the right to participate in a Piggyback Registration Statement and, further, such Holder shall no longer be subject to any obligations under this Agreement, including specifically but not limited to the obligation to enter into letter agreements with underwriters pursuant to Section 2.02.

(b)    Notwithstanding anything to the contrary contained herein, the Company may, upon written notice to any Selling Holder whose Registrable Securities are included in a Shelf Registration Statement, suspend such Selling Holder’s use of any prospectus that is a part of such Shelf Registration Statement (in which event the Selling Holder shall suspend sales of the Registrable Securities pursuant to such Shelf Registration Statement) if (i) the Company is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the

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Company determines in good faith that the Company’s ability to pursue or consummate such a transaction would be materially and adversely affected by any required disclosure of such transaction in such Shelf Registration Statement or (ii) the Company has experienced some other material non-public event, the disclosure of which at such time, in the good faith judgment of the Company, would materially and adversely affect the Company; provided, however, that in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to such Shelf Registration Statement for a period that exceeds an aggregate of forty-five (45) days in any 90-day period or ninety (90) days in any 365-day period. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice to the Selling Holders whose Registrable Securities are included in such Shelf Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other actions necessary or appropriate to permit registered sales of Registrable Securities as contemplated in this Agreement.

Section 2.02    Secondary Offering.

(a)    Request for a Secondary Offering.

(i)    Following the Effectiveness Deadline, if the Holders of at least thirty percent (30%) of the then outstanding Registrable Securities elect to dispose of all or any portion of their Registrable Securities pursuant to an Underwritten Offering, the anticipated aggregate offering price, net of underwriting discounts and commissions, of which is in excess of $30,000,000, the Company shall, upon the written request by such Holders, use its commercially reasonable efforts to (A) retain underwriters in order to permit such Holders to effect such sale through an Underwritten Offering (a “Secondary Offering”); (B) if a registration statement is not then already available and effective, prepare and file with the Commission a registration statement under the Securities Act providing for a Secondary Offering as permitted by Rule 415 of the Securities Act with respect to such Registrable Securities (a “Secondary Offering Registration Statement”); and (C) cause such Secondary Offering Registration Statement to be declared effective as soon as reasonably practicable after the initial filing thereof. In addition, the Company shall give prompt written notice (including notice by electronic mail) to each other Holder (and to the Holders under the Existing Registration Rights Agreements) regarding such proposed Secondary Offering, and such notice shall offer such Holders the opportunity to include in such Secondary Offering Registration Statement such number of Registrable Securities as each such Holder may request. Each such notice shall specify, at a minimum, the number and type of securities proposed to be registered, the proposed date of filing of such Secondary Offering Registration Statement with the Commission, the proposed means of distribution, the proposed Secondary Managing Underwriter and other underwriters (if any and if known) and a good faith estimate by the Company of the proposed minimum offering price of such securities (if known). Each such Holder shall make such request in writing to the Company (including by electronic mail) within five (5) business days after the receipt of any such notice from the Company, which request shall specify the number of Registrable Securities intended to be disposed of by such Holder, and, subject to the terms and conditions of this Agreement, including Section 2.02, the Company shall use its reasonable best efforts to include in such Secondary Offering Registration Statement all Registrable Securities held by such Holders.

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(ii)    The obligation of the Company to retain underwriters shall include the preparation and entry into an underwriting agreement, in customary form, with the Secondary Managing Underwriter and other underwriters, if any, which shall include, among other provisions, indemnities to the effect and to the extent provided in Section 2.07 and customary lock-up provisions for the Company and its directors and officers. The Company shall take all reasonable actions as requested by the Secondary Managing Underwriter or other underwriters (if any) to expedite or facilitate the disposition of such Registrable Securities, including causing its management to participate in a “roadshow” or similar marketing efforts.

(b)    Limitation on Offerings. In no event shall the Company be required hereunder to participate in more than four (4) Secondary Offerings pursuant to the terms hereof; provided, that should the Holder or Holders requesting such Secondary Offering be unable to sell at least eighty percent (80%) of the Registrable Securities requested to be included therein pursuant to Section 2.02(c), the Company shall be required to participate in an additional Secondary Offering pursuant to the terms hereof; provided, further, that if a Secondary Offering is commenced but terminated prior to the pricing thereof for any reason, the Company shall be required to participate in an additional Secondary Offering pursuant to the terms hereof.

(c)    Priority. If in connection with a Secondary Offering pursuant to this Section 2.02, the Secondary Managing Underwriter shall advise the Company that, in its reasonable opinion, the number of securities requested and otherwise proposed to be included in such Underwritten Offering, including pursuant to the Existing Registration Rights Agreements, exceeds the number that can be sold in such offering without having an adverse effect on the price, timing or distribution of the securities to be offered (an “Adverse Effect”), then the Company shall include in such Underwritten Offering the number of Registrable Securities that such Secondary Managing Underwriter advises the Company can be sold without having such Adverse Effect, with such number to be allocated (i) first, to the Selling Holders, as defined in and pursuant to the Leucadia Registration Rights Agreement, to the Selling Holders, as defined in and pursuant to the Battlecat Registration Rights Agreement, and to the Selling Holders hereunder, pro rata based on the relative number of Registrable Securities (as defined herein or in the Leucadia Registration Rights Agreement or the Battlecat Registration Rights Agreement, as applicable) proposed to be offered and sold by such Selling Holders, and (ii) second, to the Selling Holders, as defined in and pursuant to, the EF Registration Rights Agreement.

(d)    Selection of Secondary Managing Underwriter. In connection with any Secondary Offering under this Agreement, the Secondary Managing Underwriter shall be selected by the Holders holding a majority of the Registrable Securities proposed to be sold in such Underwritten Offering, which underwriter shall be reasonably acceptable to the Company.

(e)    Withdrawal. If any Selling Holder disapproves of the terms of a Secondary Offering, such Person may elect to withdraw its request that the Company undertake such offering by written notice to the Company; provided, however, that such withdrawal must be made at a time prior to the time of pricing of such offering. No such withdrawal shall affect the Company’s obligation to pay Registration Expenses, if applicable.

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Section 2.03    Piggyback Rights.

(a)    Participation. So long as any Holder has Registrable Securities, if the Company proposes to file, whether for its own account or for the account of the Holders, (i) a shelf registration statement (other than a Shelf Registration Statement contemplated by Section 2.01(b)), or (ii) a registration statement (other than a registration statement on Form S-4 or S-8 or any successor forms thereto) (each of (i) and (ii), a “Piggyback Registration Statement”), then the Company shall give prompt written notice (a “Piggyback Notice”) (including notice by electronic mail) to each Holder regarding such proposed registration, and such notice shall offer such Holders the opportunity to include in such Piggyback Registration Statement such number of Registrable Securities as each such Holder may request. Each Piggyback Notice shall specify, at a minimum, the number and type of securities proposed to be registered, the proposed date of filing of such Piggyback Registration Statement with the Commission, the proposed means of distribution, the proposed Primary Managing Underwriter and other underwriters (if any and if known) and a good faith estimate by the Company of the proposed minimum offering price of such securities. Each such Holder shall make such request in writing to the Company (including by electronic mail) within five (5) business days (or one (1) business day in connection with any overnight or bought Underwritten Offering) after the receipt of any such Piggyback Notice, which request shall specify the number of Registrable Securities intended to be disposed of by such Holder, and, subject to the terms and conditions of this Agreement, the Company shall use its commercially reasonable efforts to include in such Piggyback Registration Statement all Registrable Securities held by such Holders; provided, that if, at any time after giving written notice of its intention to file a Piggyback Registration Statement and prior to the effective date of such Piggyback Registration Statement, the Company shall determine for any reason not to have such Piggyback Registration Statement be declared effective, the Company may, at its election, give written notice of such determination within five (5) business days thereof to each Holder of Registrable Securities and, thereupon, shall not be obligated to register any Registrable Securities in connection with such Piggyback Registration Statement (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Holders of Registrable Securities that a registration be effected under Section 2.01 or Section 2.02.

(b)    Selection of Primary Managing Underwriter. In connection with any Underwritten Offering under this Section 2.03, the Primary Managing Underwriter shall be selected by the Company, which Primary Managing Underwriter shall be reasonably acceptable to the Selling Holders.

(c)    Priority. If in connection with an Underwritten Offering pursuant to this Section 2.03, the Primary Managing Underwriter shall advise the Company that, in its reasonable opinion, the number of securities requested and otherwise proposed to be included in such Underwritten Offering, including pursuant to the Existing Registration Rights Agreements, exceeds the number that can be sold in such offering without having an Adverse Effect, then the Company shall include in such Underwritten Offering the number of Registrable Securities that such Primary Managing Underwriter advises the Company can be sold without having such

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Adverse Effect, with such number to be allocated (i) first, to the Company, (ii) second, to the Selling Holders, as defined in and pursuant to the Leucadia Registration Rights Agreement, to the Selling Holders, as defined in and pursuant to the Battlecat Registration Rights Agreement, and to the Selling Holders hereunder, pro rata based on the relative number of Registrable Securities (as defined herein or in the Leucadia Registration Rights Agreement or the Battlecat Registration Rights Agreement, as applicable) proposed to be offered and sold by such Selling Holders, and (iii) thereafter, to any holders of registration rights; and fourth, second, and if any, the number of included Registrable Securities that, in the opinion of such Primary Managing Underwriter, can be sold without having such Adverse Effect, with such number to be allocated pro rata among the Holders that have requested to participate in such Underwritten Offering based on the relative number of Registrable Securities then held by each such Holder (provided that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining requesting Holders in like manner).

Section 2.04    Sale Procedures. In connection with its obligations under this Article II, the Company will, as expeditiously as possible:

(a)    prepare and file with the Commission such amendments and supplements to any Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement;

(b)    if a prospectus supplement, offering memorandum or similar marketing document will be used in connection with the marketing of a Secondary Offering and the Secondary Managing Underwriter notifies the Company in writing that, in the sole judgment of such Secondary Managing Underwriter, inclusion of detailed information in such prospectus supplement is of material importance to the success of such offering, the Company shall use its commercially reasonable efforts to include such information in such prospectus supplement, offering memorandum or similar marketing document;

(c)    furnish to each Selling Holder (i) as far in advance as reasonably practicable before filing any Registration Statement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing the Registration Statement or supplement or amendment thereto or use of a similar marketing instrument, and (ii) such number of copies of the Registration Statement and the prospectus included therein and any supplements and amendments thereto or similar marketing instrument as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by the Registration Statement;

(d)    if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Registration Statement under the securities or blue sky

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laws of such jurisdictions as the Selling Holders or, in the case of a Secondary Offering, the Secondary Managing Underwriter, shall reasonably request; provided, however, that the Company will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any jurisdiction where it is not then so subject;

(e)    promptly notify each Selling Holder and, if applicable, any Secondary Managing Underwriter, at any time when a prospectus is required to be delivered under the Securities Act, of (i) the filing of the Registration Statement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or any post-effective amendment thereto, when the same has become effective; and (ii) any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for amendments or supplements to the Registration Statement or any prospectus or prospectus supplement thereto;

(f)    immediately notify each Selling Holder and, if applicable, any Secondary Managing Underwriter, at any time when a prospectus is required to be delivered under the Securities Act, of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Registration Statement or any post-effective amendment thereto, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained therein, in the light of the circumstances under which a statement is made); (ii) the issuance or threat of issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, or the initiation of any proceedings for that purpose; or (iii) the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Company agrees to, as promptly as practicable, amend or supplement the prospectus or prospectus supplement or take other appropriate action so that the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other reasonable action as is necessary to remove a stop order, suspension, threat thereof or proceedings related thereto;

(g)    upon a Selling Holder’s request and subject to appropriate confidentiality obligations, furnish to each Selling Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to any offering of Registrable Securities;

(h)    in the case of an Underwritten Offering, including a Secondary Offering, furnish upon request, (i) an opinion of counsel for the Company dated the date of the closing under the underwriting agreement or purchase agreement, as applicable and (ii) a “comfort” letter, dated the pricing date of such offering (to the extent available) and a letter of like kind dated the date of the closing under the underwriting agreement or purchase agreement, as applicable, in each case, signed by the independent public accountants who have certified the Company’s financial statements included or incorporated by reference into the applicable Registration Statement, and

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each of the opinion and the “comfort” letter shall be in customary form and covering substantially the same matters with respect to such Registration Statement (and the prospectus and any prospectus supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters or placement agents in public offerings or private placements, as applicable, of securities by the Company and such other matters as the Secondary Managing Underwriter or Selling Holders, as applicable, may reasonably request;

(i)    otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(j)    make available to the appropriate representatives of the Selling Holders or the Secondary Managing Underwriter, if any, access to such information and Company personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act;

(k)    cause all Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Company are then listed;

(l)    use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders to consummate the disposition of the Registrable Securities;

(m)    provide a transfer agent and registrar for all Registrable Securities covered by any Registration Statement not later than the effective date of such Registration Statement; and

(n)    enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders or the Secondary Managing Underwriter, if any, in order to expedite or facilitate the disposition of the Registrable Securities.

Each Selling Holder, upon receipt of notice from the Company of the happening of any event of the kind described in subsection (f) of this Section 2.04, shall forthwith discontinue disposition of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (f) of this Section 2.04 or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings incorporated by reference in the prospectus.

Section 2.05    Cooperation by Holders. The Company shall have no obligation to include in a Registration Statement Registrable Securities of a Selling Holder who has failed to timely furnish such information that, in the opinion of counsel to the Company, is reasonably required in order for a registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

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Section 2.06    Expenses.

(a)    Expenses. The Company will pay all reasonable Registration Expenses of any Registration Statement, any Underwritten Offering or any Secondary Offering, regardless of whether any sale of Registrable Securities is consummated. Each Selling Holder shall pay its pro rata shall of all Selling Expenses in connection with any sale of its Registrable Securities hereunder. For the avoidance of doubt, each Selling Holder’s pro rata allocation of Selling Expenses shall be the percentage derived by dividing (i) the number of Registrable Securities sold by such Selling Holder in connection with such sale by (ii) the aggregate number of Registrable Securities sold by all Selling Holders in connection with such sale.

(b)    Certain Definitions. “Registration Expenses” means all expenses incident to the Company’s performance under or compliance with this Agreement to effect the registration of Registrable Securities on any Registration Statement and the disposition of Registrable Securities covered thereby, including, without limitation, all registration, filing, securities exchange listing and securities exchange fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, fees of transfer agents and registrars, all word processing, duplicating and printing expenses, any transfer taxes, any fees and disbursements of counsel and independent public accountants for the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, any expenses of any “road shows.” “Selling Expenses” means all underwriting discounts and selling commissions or placement agency fees applicable to the sale of Registrable Securities, and all attorneys’ fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder.

Section 2.07    Indemnification.

(a)    By the Company. In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each Selling Holder participating therein, its directors, officers, employees and agents, and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act and the Exchange Act, and its directors, officers, employees or agents, against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “Losses”), joint or several, to which such Selling Holder, director, officer, employee, agent or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in the Registration Statement, any preliminary prospectus, prospectus supplement, free writing prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling Holder, its directors, officers, employee and agents, and each such controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions or proceedings as such expenses are incurred; provided,

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however, that the Company will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder, its directors, officers, employees and agents or such controlling Person in writing specifically for use in the Registration Statement, or prospectus or any amendment or supplement thereto, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder or any such directors, officers, employees agents or controlling Person, and shall survive the transfer of such securities by such Selling Holder.

(b)    By Each Holder. Each Selling Holder agrees severally and not jointly to indemnify and hold harmless the Company and each other Holder, its directors, officers, employees and agents and each Person, if any, who controls the Company or such Holder within the meaning of the Securities Act or of the Exchange Act, and its directors, officers, employees and agents, to the same extent as the foregoing indemnity from the Company to the Selling Holders, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in the Registration Statement, any preliminary prospectus, prospectus supplement, free writing prospectus or final prospectus contained therein, or any amendment or supplement thereto; provided, that no Selling Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Selling Holder, its ownership and title to the Registrable Shares and its intended method of distribution. The liability of each Selling Holder under this Section 2.07 shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registrable Securities giving rise to such indemnification.

(c)    Notice. Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission to so notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party other than under this Section 2.07. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.07 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, (i) if the indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded that there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to

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be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnified party shall settle any action brought against it with respect to which such indemnified party is entitled to indemnification hereunder without the consent of the indemnifying party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnifying party and further, no indemnifying party shall settle any action brought against any indemnified party with respect to which such indemnified party is entitled to indemnification hereunder without the consent of such indemnified party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnified party.

(d)    Contribution. If the indemnification provided for in this Section 2.07 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold them harmless in respect of any Losses, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall the Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Selling Holder. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of fraudulent misrepresentation.

(e)    Other Indemnification. The provisions of this Section 2.07 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise.

Section 2.08    Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

(a)    make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the date hereof;

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(b)    file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act at all times from and after the date hereof; and

(c)    so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration.

Section 2.09    Transfer or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities granted to an Initial Holder by the Company under this Agreement may be transferred or assigned by such Initial Holder to one or more transferees or assignees of such Registrable Securities; provided, however, that (a) (i) such transferee or assignee is an Affiliate of such Holder, or (ii) upon such transfer or assignment, such transferee or assignee will hold at least ten percent (10%) of the total issued and outstanding shares of Common Stock, (b) the Company is given written notice prior to any said transfer or assignment, stating the name and address of each such transferee or assignee and identifying the Registrable Securities with respect to which such registration rights are being transferred or assigned, and (c) each such transferee or assignee agrees to be bound by this Agreement.

Section 2.10    Restrictions on Public Sale by Holders of Registrable Securities. Each Holder who, along with its Affiliates, holds at least five percent (5%) of the then-outstanding shares of Common Stock (on an as-converted basis giving effect to the conversion of the Convertible Preferred Stock into Common Stock) agrees to enter into a customary letter agreement with underwriters providing such Holder will not effect any public sale or distribution of the Registrable Securities during the 60 calendar day period beginning on the date of a prospectus or prospectus supplement filed with the Commission with respect to the pricing of an Underwritten Offering, provided that (i) the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the underwriters on the Company or the officers, directors or any other shareholder of the Company on whom a restriction is imposed; and (ii) the restrictions set forth in this Section 2.10 shall not apply to any Registrable Securities that are otherwise sold in connection with an Underwritten Offering pursuant to this Agreement.

ARTICLE III.

MISCELLANEOUS

Section 3.01    Communications. All notices and other communications provided for or permitted hereunder shall be made in writing by electronic mail, courier service or personal delivery:

(a) if to the Initial Holders:

c/o Chambers Energy Management, LP

600 Travis St., Suite 4700

Houston, Texas 77002

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Attn:      Matt Ockwood

Email:    Mockwood@chambersenergy.com

With a copy to (which copy shall not constitute notice):

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attn:      Matt Pacey

Email:    Matt Pacey@kirkland.com

(b)    if to a transferee of the Holders, to such Holder at the address provided pursuant to Section 2.09; and

(c)    if to the Company:

Lonestar Resources US Inc.

600 Bailey Avenue, Suite 200

Fort Worth, TX 76107

Attention: Frank D. Bracken III, Chief Executive Officer

With a copy to (which copy shall not constitute notice):

Latham & Watkins LLP

811 Main Street

Suite 3700

Houston, TX 77002

Attention: David Miller

All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or sent via electronic mail; and when actually received, if sent by courier service or any other means.

Section 3.02    Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

Section 3.03    Assignment of Rights. All or any portion of the rights and obligations of the Holders under this Agreement may be transferred or assigned by the Holders in accordance with Section 2.09 hereof.

Section 3.04    Recapitalization, Exchanges, Etc.Affecting the Registrable Securities. The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, splits, recapitalizations, pro rata distributions and the like occurring after the date of this Agreement.

Section 3.05    Specific Performance. Damages in the event of breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that

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each party, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such party from pursuing any other rights and remedies at law or in equity that such party may have.

Section 3.06    Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

Section 3.07    Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 3.08    Governing Law. The laws of the State of Delaware shall govern this Agreement.

Section 3.09    Severability of Provisions. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

Section 3.10    Scope of Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Company set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

Section 3.11    Amendment. This Agreement may be amended only by means of a written amendment signed by both the Company and the Holders of a majority of the then outstanding Registrable Securities; provided, however, that no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.

Section 3.12    No Presumption. If any claim is made by a party relating to any conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

Section 3.13    Aggregation of Registrable Securities. All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

C-16

Section 3.14    Obligations Limited to Parties to Agreement. Each of the parties hereto covenants, agrees and acknowledges that no Person other than the Company and the Holders shall have any obligation hereunder and that, notwithstanding that one or more of the Holders may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Holders or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise by incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the Holders or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of the Holders under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any assignee of the Holders hereunder.

Section 3.15    Independent Nature of Purchaser’s Obligations. The obligations of each Holder under this Agreement are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder under this Agreement. Nothing contained herein, and no action taken by any Holder pursuant thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

Section 3.16    Interpretation. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.” Whenever any determination, consent or approval is to be made or given by the Holders under this Agreement, such action shall be in the Holders’ sole discretion unless otherwise specified.

Section 3.17    Limitation on Subsequent Registration Rights. From and after the date hereof, the Company shall not enter into any agreement with any current or future holder of any securities of the Company that would allow such current or future holder to require the Company to include securities in any Registration Statement on a basis other than expressly subordinate to the rights of, the Holders of Registrable Securities hereunder.

[Signature pages follow.]

C-17

IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

INITIAL HOLDER
CHAMBERS ENERGY CAPITAL III, LP
BY:	[●], ITS GENERAL PARTNER
By:
Name:
Title:

THE COMPANY

LONESTAR RESOURCES US INC.

By:

Name:

Title:

C-18

SCHEDULE 1

LIST OF INITIAL HOLDERS

Chambers Energy III, LP

C-19

Exhibit D

Form of Voting and Support Agreement

[See attached]

Voting and Support Agreement

[●], 2017

Lonestar Resources US Inc.

600 Bailey Avenue, Suite 200

Fort Worth, Texas 76107

Re:     Securities Purchase Agreement, dated as of May 26, 2017, by and among Lonestar Resources US Inc. (the “Company”) and each of the investors listed on Schedule 1 thereto (each, an “Initial Investor” and collectively, the “Initial Investors”)

Ladies and Gentlemen:

In order to induce the Initial Investors to execute the Securities Purchase Agreement, dated as of May 26, 2017 (as the same may be amended, amended and restated or otherwise modified from time to time, the “Securities Purchase Agreement”), the undersigned agrees as follows:

1.    The undersigned (the “Stockholder”) represents and warrants to the Company that, as of the date of this letter agreement, it has the sole power to vote or direct the voting of [●] shares of Class A Common Stock (such shares, together with any shares of Class A Common Stock that the Stockholder may acquire (but, for the avoidance of doubt, only to the extent the Stockholder has sole voting power with respect to such shares), and excluding any shares of Class A Common Stock the Stockholder may dispose of, otherwise transfer or with respect to which the Stockholder ceases to have sole power to vote or direct the voting of, in each case, from and after the date hereof, the “Shares”) with respect to the matters and solely in the manner set forth in, and solely to the extent provided in, this letter agreement.

2.    Following the Closing, at the Stockholder Meeting called in accordance with Section 3.5 of the Securities Purchase Agreement, or at any adjournment or postponement thereof, or in any other circumstance in which the vote, consent or other approval of the stockholders of the Company is sought in connection with obtaining the Requisite Stockholder Approval, the undersigned shall, with respect to the Shares, (i) appear at each such meeting, in person or by proxy, and (ii) vote (or cause to be voted), or execute and deliver a written consent (or cause a written consent to be executed and delivered) covering, the Shares in favor of adopting the Requisite Stockholder Approval.

3.    The undersigned represents, warrants and covenants to the Company:

(a)    The undersigned has full power and authority to make, enter into and carry out the terms of this letter agreement and to perform its obligations hereunder.

(b)    This letter agreement has been duly and validly executed and delivered by the undersigned and constitutes a valid and binding agreement of the undersigned, enforceable against the undersigned in accordance with its terms and no other action is necessary to authorize the execution and delivery by the undersigned or the performance of its obligations hereunder.

4.    This letter agreement shall be binding upon and inure solely to the benefit of the parties hereto. Nothing contained in this letter agreement, expressed or implied, is intended to confer upon any person other than the parties hereto (and their permitted assigns), any benefits, rights or remedies.

5.    This letter agreement shall terminate and shall have no further force or effect as of the date on which the Requisite Stockholder Approval is obtained. For the avoidance of doubt, if the Securities Purchase Agreement is terminated, this letter agreement shall immediately terminate and have no further force or effect except with respect to any breach occurring prior to such termination.

6.    Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to such terms in the Securities Purchase Agreement.

7.    Neither this letter agreement, nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. This letter agreement may not be amended or waived except in writing.

8.    This letter agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

9.    The undersigned acknowledges that the Company will be irreparably harmed by and that there will be no adequate remedy at law for a violation by the undersigned hereof. Without limiting other remedies, the Company shall have the right to enforce this letter agreement by specific performance or injunctive relief.

10.    This letter agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to any choice of laws or conflict of laws provisions that would require the application of the laws of any other jurisdiction. The parties hereto hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Texas) for any actions, suits or proceedings arising out of or relating to this letter agreement and the transactions contemplated hereby.

[STOCKHOLDER]
By:
	Name:
	Title:

[Signature Page to Voting and Support Agreement]

Accepted and Agreed:

LONESTAR RESOURCES US INC.
By:
	Name:
	Title:

Exhibit E

Form of Legal Opinion of Latham & Watkins LLP

[See Attached]

[Signature Page to Voting and Support Agreement]