ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

TABLE OF CONTENTS

(continued)

APPENDICES

EXHIBITS

SCHEDULES

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of May 15, 2009, is by and among QUICKSILVER RESOURCES INC., a Delaware corporation (“ Seller ”), and ENI US OPERATING CO. INC., a Delaware corporation (“ Eni Operating ”), and ENI PETROLEUM US LLC, a Delaware limited liability company (“ Eni Petroleum ”; Eni Petroleum together with Eni Operating being hereinafter referred to as “ Buyers ”).  Seller and each of the Buyers are hereinafter referred to individually as a “ Party ” and collectively as the “ Parties ”.

WHEREAS, Seller owns undivided interests in certain oil and gas leases, royalty interests, mineral interests and related assets located in the Fort Worth Basin in the State of Texas; and

WHEREAS, Seller desires to sell to Buyers, and Buyers desire to purchase from Seller, an undivided twenty-seven and five-tenths percent (27.5%) of such interests in such oil and gas leases, royalty interests, mineral interests and related assets upon the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the Parties agree as follows:

Section 1.1                                 Certain Defined Terms .  Unless the context otherwise requires, the respective terms defined in Appendix A attached hereto and incorporated herein shall, when used herein, have the respective meanings therein specified, with each such definition to be equally applicable both to the singular and the plural forms of the term so defined.

Section 1.2                                 References, Gender, Number .  All references in this Agreement to an “Article,” “Section,” “subsection,” “Exhibit” or “Schedule” shall be to an Article, Section, subsection, Exhibit or Schedule of this Agreement, unless the context requires otherwise.  Unless the context otherwise requires, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof.  Whenever the context requires, the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural.

Section 2.1                                 Sale and Purchase .  On and subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Buyers, and Buyers agree to purchase from Seller, the Assets.

Section 3.1                                 Purchase Price .  The purchase price for the sale and conveyance of the Assets to Buyers is Two Hundred Eighty Million and No/100 Dollars ($280,000,000.00) (the “ Purchase Price ”), subject to adjustment in accordance with the terms of this Agreement.  The “ Adjusted Purchase Price ” shall be the Purchase Price (a) as adjusted by the Initial Adjustment Amount determined pursuant to Section 3.4, (b) as adjusted for payments of portions of the Purchase Price received by Seller from holders of Preference Rights contemporaneously with Closing in accordance with and as contemplated by Section 7.3, (c) as adjusted downward for Title Defects, if any, in accordance with Section 6.2(e), (d) as adjusted for gas imbalances, if any, pursuant to Section 3.6 and (e) as adjusted downward on account of an Option Failure occurring prior to the Closing Date as set forth in Section 8.10.

Section 3.2                                 Payment .  Contemporaneously with the execution of this Agreement, Buyers have deposited an amount equal to ten percent (10%) of the Purchase Price with the Escrow Agent pursuant to the Escrow Agreement as a deposit hereunder (the “ Deposit ”).  If the Closing occurs, Buyers and Seller agree that they will direct the Escrow Agent to pay the Deposit together with all interest earned thereon to Seller at the Closing and that the Deposit (but not the interest earned thereon), when received by Seller, shall be credited against the Adjusted Purchase Price.  Buyers acknowledge and agree that the interest earned on the Deposit shall not be credited against the Adjusted Purchase Price, but shall be paid and belong to Seller.  At the Closing, Buyers shall assume the Assumed Liabilities and, subject to the second sentence of this Section 3.2, shall wire transfer the Adjusted Purchase Price in immediately available funds to Quicksilver Resources Inc., JPMorgan Chase Bank, N.A., ABA No. 021000021 for the account of Seller, Account No. 08806377907, or such other account or accounts specified by Seller to Buyers on or prior to the Business Day immediately preceding the Closing Date.

Section 3.3                                 Allocation of Purchase Price .  As soon as reasonably practicable after the Closing, the Parties shall agree to allocate, in accordance with Section 1060 of the Code, the Adjusted Purchase Price (plus other capitalized costs) among the Assets.  For purposes of such allocation, the Parties shall use, to the extent possible, the Allocated Values.  Buyers shall provide a proposed allocation to Seller, and thereafter, Buyers and Seller will act in good faith and reasonably cooperate with each other to agree on the final allocation (as finalized, the “ Tax Allocation Schedule ”).  Each of the Parties (or its applicable Affiliate) shall file a Form 8594 (Asset Acquisition Statement Under Section 1060) on a timely basis, reporting the allocation of the Adjusted Purchase Price (plus other capitalized costs) consistent with the Tax Allocation Schedule.  Each of the Parties (or its applicable Affiliate) shall file, on a timely basis, any amendments required to such Form 8594 as a result of a subsequent increase or decrease in the Adjusted Purchase Price pursuant to this Agreement.  Except as required by Law, none of the Parties (or their applicable Affiliates) shall take any position on its Tax Returns that is inconsistent with the allocation of the Adjusted Purchase Price (plus other capitalized costs) as so agreed or as adjusted.

Section 3.4                                 Adjustment Period Cash Flow .

(a)            Initial Adjustment Amount .  Without limitation of Buyers’ rights pursuant to Section 14.2, the Purchase Price shall be increased or decreased, as the case may be, by an amount equal to the Net Cash Flow with respect to the Assets for the time period beginning at the Effective Time through but excluding the Closing Date (the “ Adjustment Period ”).  Seller shall deliver to Buyers on or prior to the fifth (5th) Business Day preceding the Closing Date a statement (the “ Adjustment Statement ”) setting forth Seller’s preliminary determination (the “ Initial Adjustment Amount ”) of the Net Cash Flow.  If the Initial Adjustment Amount shown on the Adjustment Statement is a positive number, then the Purchase Price shall be increased by such amount.  If the Initial Adjustment Amount shown on the Adjustment Statement is a negative number, then the Purchase Price shall be decreased by such amount.

(b)            Basis of Adjustments .  Except with respect to any costs and expenses of drilling and completing any Well by Seller as more fully described in Section 3.4(c), the Adjustment Statement shall be based upon actual information available to Seller at the time of its preparation.  There shall be attached to the Adjustment Statement such supporting documentation and other data as is reasonably necessary to provide a basis for the Net Cash Flow or as may be reasonably requested by Buyers.

(c)            Net Cash Flow .  The “ Net Cash Flow ” shall be the algebraic sum of (i) a positive amount equal to the aggregate amount incurred and paid by Seller as Seller’s share of the costs of acquisition, exploration, development, construction, maintenance, operation, abandonment and production of the Assets with respect to the Adjustment Period, including, but not limited to, royalties, overriding royalties, net profit interests and other similar burdens on production; Production Taxes; the cost of maintaining leaseholds, easements, rights-of-way or other interests included in the Assets; option payments; the cost of acquiring new leasehold, easements, rights-of-way and other interests that shall, upon acquisition, become part of the Assets; the cost of extension or renewal of any interest included in the Assets; the cost of treating, processing, storing, compressing, transporting, selling, marketing and otherwise handling and dealing with Hydrocarbon production with respect to the Assets; the cost of any exploration, development or construction activities on the Assets; costs of insurance coverage (including prepayments of any of the foregoing costs, which prepayments shall be prorated in the manner contemplated by Section 3.4(d)); provided , however , (i) any costs and expenses associated with the drilling and/or completion by Seller of any Well (other than the Wells addressed in item (ii) of this provision) during the Adjustment Period, or which are otherwise included in the Turnkey Drilling Rate or Turnkey Completion Rate, will be calculated in the manner contemplated by Section 4.1 of the Joint Development Agreement irrespective of the actual costs and expenses paid by Seller, and (ii) $201,140 of the costs and expenses associated with the drilling of the Alliance D-6H Well and the Alliance Saratoga A-10H Well shall be included in the calculation of Net Cash Flow irrespective of the actual costs and expenses incurred by Seller to drill same or when such costs are paid by Seller (the “ Property Costs ”); (ii) a negative amount equal to the aggregate gross proceeds received by Seller from the sale of Hydrocarbons produced from or attributable to the Assets during the Adjustment Period or from the sale, salvage or other disposition of any Assets during the Adjustment Period; provided , however , that, for the purposes of determining Net Cash Flow, gaseous Hydrocarbons shall be

deemed to have been sold for an amount per MMBtu equal to the Guaranteed Rate, whether actually sold for more or less; and (iii) a negative amount equal to the aggregate amount of any costs incurred under clause (i) above and reimbursed to Seller by any third Person (unless such reimbursement is accounted for under clause (ii) above); provided , however , the amounts held by Seller for the account or benefit of any third Person joint interest owners shall not be included in the calculation of Net Cash Flow, and therefore, shall not have an effect on the Purchase Price.  If an operating agreement is not in place during any part of the Adjustment Period with respect to any Asset for which Seller or an Affiliate of Seller is acting as operator, then overhead charges of the operator for such Asset with respect to such part of the Adjustment Period shall be Seven Hundred Dollars ($700) per producing Well per month, (y) deemed incurred by Seller and (z) charged and allocated to such Asset for purposes of determining Net Cash Flow; provided , however , that no other general and administrative costs and other indirect expenses shall be included in the calculation of Net Cash Flow, except if and to the extent charged pursuant to an applicable existing operating agreement, and, to the extent that any overhead costs are included in the Turnkey Drilling Rate or Turnkey Completion Rate, such overhead costs shall not be charged to Buyers and shall not be included in the determination of Net Cash Flow, except insofar as such costs are included in the Turnkey Drilling Rate or Turnkey Completion Rate.

(d)            Interpretation .  The term “incurred,” as used in this Section 3.4 and with respect to Article 12, and the amount of each adjustment to the Purchase Price, shall be interpreted in accordance with accounting recognition guidance under the Accounting Principles.  Surface use fees, insurance premiums and other Property Costs that are paid periodically shall be prorated based upon the number of days in the applicable period falling before, or on or after, the Effective Time.  Production Taxes shall be prorated based on the amount of Hydrocarbons actually produced, purchased or sold, as applicable, before and on or after the Effective Time.

Section 3.5                                 Post Closing Review .  After the Closing, Seller shall review the Adjustment Statement and determine the actual Net Cash Flow.  On or prior to the ninetieth (90 ^th ) day after the Closing Date, Seller shall present Buyers with a statement of the actual Net Cash Flow and such supporting documentation as is reasonably necessary (and as may be reasonably requested by Buyers) to support the Net Cash Flow shown therein (the “ Final Adjustment Statement ”).  Buyers will give personnel, accountants and representatives of Seller reasonable access to Buyers’ premises and to its books and records to the extent relating to the Assets for purposes of preparing the Final Adjustment Statement and will cause appropriate personnel of Buyers to assist Seller and Seller’s personnel, accountants and representatives, at no cost to Seller, in the preparation of the Final Adjustment Statement; provided, however , that Buyers shall not be required to provide such access (or assistance with respect thereto) to the extent related to information concerning Buyers that is not publicly available unless and until the Parties have executed an amendment to the Confidentiality Agreement (or other agreement), in form and substance reasonably satisfactory to Buyers, providing that any such non-publicly available information to which Seller (or any employee, contractor, accountant or other representative thereof) is given access shall be confidential and shall not be disclosed or otherwise used except in furtherance of the transactions contemplated by this Agreement, and except as may be required pursuant to applicable Law.  Seller will give personnel, accountants and representatives of Buyers reasonable access to Seller’s premises and to its books and records to the extent relating to the Assets for purposes of reviewing the calculation of Net Cash Flow and will cause appropriate personnel of Seller to assist Buyers and Buyers’ personnel,

accountants and representatives, at no cost to Buyers, in verification of such calculation.  The Final Adjustment Statement shall become final and binding on Seller and Buyers as to the Net Cash Flow (subject, however, to Article 12) thirty (30) days following the date the Final Adjustment Statement is received by Buyers, except to the extent that prior to the expiration of such 30-day period Buyers shall deliver to Seller one or more notices, as hereinafter required, of its disagreement with the contents of the Final Adjustment Statement.  Such notices shall be in writing and set forth all of Buyers’ disagreements with respect to any portion of the Final Adjustment Statement, together with Buyers’ proposed changes thereto, and shall include an explanation in reasonable detail of, and such supporting documentation as is reasonably necessary to support, such changes.  Any disagreements with or changes to the Final Adjustment Statement not included in such notices shall be waived by Buyers.  If Buyers have timely delivered one or more notices of disagreement to Seller in the manner required above, then, upon written agreement between Buyers and Seller resolving all disagreements of Buyers set forth in such notices, the Final Adjustment Statement (including any revisions thereto as are so agreed) will become final and binding on Buyers and Seller as to the Net Cash Flow.  If the Final Adjustment Statement has not become final and binding by the one hundred fiftieth (150th) day following the Closing Date, then Buyers or Seller may submit any unresolved disagreements of Buyers set forth in the aforesaid notices to the Houston office of PricewaterhouseCoopers, LLP or, if such firm is not able or willing to serve, a nationally-recognized independent accounting firm or consulting firm mutually acceptable to both Seller and Buyers, or, if Buyers and Seller are unable to agree upon a firm within ten (10) days after being notified of Pricewaterhouse Coopers, LLP’s inability or unwillingness to serve, a firm selected by the Houston, Texas office of the American Arbitration Association (the “ Accounting Arbitrator ”) for final and binding determination.  The fees and expenses of the Accounting Arbitrator in making such determination shall be shared fifty percent (50%) by Buyers and fifty percent (50%) by Seller.  The Accounting Arbitrator shall conduct the arbitration proceedings in Fort Worth, 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 3.5.  Upon resolution of such unresolved disagreements of Buyers, the Final Adjustment Statement (including any revisions thereto as are so resolved or agreed), shall be conclusive, final and binding on Buyers and Seller as to the Net Cash Flow.  The Accounting Arbitrator’s determination shall be made within forty-five (45) days after submission of the matters in dispute and shall be final and binding on all Parties, without right of appeal.  In determining the proper amount of any adjustment to the Purchase Price, the Accounting Arbitrator shall be bound by the terms of this Agreement and may not increase the Purchase Price by more than the increase proposed by Seller nor decrease the Purchase Price by more than the decrease proposed by Buyers, as applicable.  The Accounting Arbitrator shall act as an expert for the limited purpose of determining the specific disputed aspects of Purchase Price adjustments submitted by any Party and may not award damages, interest (except as expressly provided for in this Section 3.5), or penalties to any Party with respect to any matter.  Seller and Buyers shall each bear their own legal fees and other costs of presenting their case to the Accounting Arbitrator.  If the final amount of Net Cash Flow is more or less than the Initial Adjustment Amount, the Adjusted Purchase Price shall be redetermined under Section 3.1 using such final amount of Net Cash Flow.  If such redetermination under Section 3.1 results in a reduction in the Adjusted Purchase Price, Seller shall pay Buyers the amount of such reduction.  If such redetermination results in an increase in the Adjusted Purchase Price, Buyers shall pay Seller the amount of such increase.  Within three

(3) Business Days after the Final Adjustment Statement (as so resolved or agreed) becomes final and binding, Seller or Buyers, as appropriate, shall pay to the other Party the amount of such increase or reduction, if any, in the Adjusted Purchase Price, together with interest on the amount of such increase or reduction from the Closing Date until paid at the Agreed Rate.

Section 3.6                                 Gas Imbalance Adjustments .  The Purchase Price shall be:

(a)           reduced by the product obtained by multiplying the aggregate volume of MMBtu owed by Seller to a third Person as of the Effective Time for production imbalances or overlifts attributable to the Properties by the Guaranteed Rate; and

(b)           increased by the product obtained by multiplying the aggregate volume of MMBtu owed by a third Person to Seller as of the Effective Time for production imbalances or overlifts attributable to the Properties by the Guaranteed Rate.

Section 4.1                                 Representations and Warranties of Seller .  Seller represents and warrants to Buyers as follows:

(a)            Organization and Qualification .  Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as it is now being conducted.  Seller is duly qualified to do business, and is in good standing, in each jurisdiction in which the Assets owned or leased by it makes such qualification necessary.

(b)            Authority .  Seller has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder (and under all documents required to be executed and delivered and actions to be performed by Seller pursuant hereto).  The execution, delivery and performance of this Agreement and the agreements contemplated hereby and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of Seller.

(c)            Enforceability .  This Agreement constitutes a valid and binding agreement of Seller enforceable against Seller in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

(d)            No Conflict or Violation .  Except for any exceptions set forth in Section 4.1(e) (or referenced in Schedule 4.1(e) ), neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller will (i) conflict with or result in a violation or breach of or default under any provision of the certificate of incorporation, by-laws or other similar governing documents of Seller, (ii) conflict with or result in a violation or breach of or default (whether currently or 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 agreement,

indenture or other instrument under which Seller is bound and to which any Asset is subject, or (iii) violate or conflict with any Law applicable to Seller or any Asset (or Seller’s ownership or operation thereof), other than, in the case of the matters described in clauses (ii) and (iii) of this Section 4.1(d), such conflicts, breaches, violations or defaults as will not have a Material Adverse Effect.

(e)            Consents .  Except for (i) consents or approvals of, or filings with, any applicable Governmental Authorities in connection with assignments of the Assets which are not customarily obtained prior to the assignment of the Assets, (ii) Preference Rights and Transfer Requirements, and (iii) other consents, approvals, authorizations, permits, filings or notices described in Schedule 4.1(e) , no consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Seller or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller.

(f)            Actions .  Except as set forth in Schedule 4.1(f) , (i) there is no Action pending (with service of process therein having been made on Seller) or, to the knowledge of Seller, threatened (or pending without service of process therein having been made on Seller) to which Seller is (or is threatened to be made) a party and which relates to the Assets, other than Actions which are not reasonably expected to have a Material Adverse Effect; and (ii) without limiting the foregoing, to the knowledge of Seller, no written or electronic notice from any third Person has been received by Seller claiming or calling attention to any violation of Law which relates to the Assets, or, in the case of a Governmental Authority, claiming or calling attention to any possible violation of Law which relates to the Assets, other than any such violation or possible violation which is not reasonably expected to have a Material Adverse Effect.

(g)            Compliance with Laws .  Except as set forth in Schedule 4.1(g) , (i) Seller has no knowledge of any violation by Seller of any Law with respect to the Assets, other than violations of Law which are not reasonably expected to have a Material Adverse Effect and (ii) to the knowledge of Seller, all necessary permits, licenses, approvals, consents, certificates, and other authorizations with respect to the ownership or operation of the Assets are in full force and effect, and no violations exist in respect thereof, other than those, the failure of which to obtain or maintain or the violation of which, would not have a Material Adverse Effect; provided, that , no representation or warranty made in this Section 4.1(g), shall apply with respect to (x) violations of Environmental Law, (y) violations of Law relating to Tax, except as set forth in Section 4.1(k), or (y) Seller’s title to the Assets.

(h)            Brokerage Fees and Commissions .  Neither Seller nor any Affiliate of Seller has incurred any obligation or entered into any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplated by this Agreement for which Buyers shall incur any liability, whether directly or indirectly.

(i)            Insolvency .

(i)           There are no bankruptcy, reorganization, receivership or arrangement proceedings pending against, being contemplated by, or, to the knowledge of Seller, threatened against Seller or any Affiliate of Seller.

(ii)           The Assets are not being, and to the knowledge of Seller, have not been, assigned, transferred, conveyed, pledged, disposed of, delegated or otherwise alienated, in whole or in part, in any manner (whether by assignment, merger, change of control, sale of stock, assignment for the benefit of creditors, receivership, bankruptcy or otherwise), and whether by Seller or any Affiliate of Seller or any other Person, with the actual intent to hinder, delay, or defraud any creditor.

(iii)           Immediately prior to and immediately subsequent to the Closing, neither Seller nor any Affiliate of Seller will have incurred, nor does such Person intend to or believe that it will incur, debts or obligations (including, without limitation, contingent obligations, and including the obligations of Seller under or with respect to this Agreement), beyond such Person’s ability to pay such debts and obligations as they mature or come due.

(iv)           Seller agrees for and on behalf of itself and its Affiliates that the Purchase Price (as adjusted pursuant to this Agreement) constitutes reasonable value for the Assets, and Seller has not paid less than reasonable value for the purchase, sale, or other transfer of the Assets.  The transactions contemplated by this Agreement are not in satisfaction of any antecedent or preexisting debt owed by Seller to Buyers.

(j)            Material Contracts .

(i)            Schedule 4.1(j) sets forth a list of all Material Contracts that exist as of the date of this Agreement.  Prior to the Closing Date, Seller will provide or cause to be provided to Buyers access to true, correct, and complete copies of such Material Contracts, together with any amendments and supplements thereto.

(ii)           Except as set forth in Schedule 4.1(j) , Seller is not in breach of, or default under, and to the knowledge of Seller, no other Person is in breach of, or default under, any Material Contract, and there does not exist under any provision thereof, to the knowledge of Seller, any event that, with the giving of notice or the lapse of time or both, would constitute such a breach or default by any Person, except for such breaches, defaults and events as to which requisite waivers or consents have been or are being obtained or which would not, individually or in the aggregate, have a Material Adverse Effect.

(k)            Tax Matters .

(i)           Except for Taxes being contested in good faith in connection with the matters set forth in Schedule 4.1(k) , each material Tax Return required to be filed with respect to the Assets has been timely and properly filed and all material Taxes with

respect to the Assets have been timely and properly paid.  All such Tax Returns are correct and complete in all material respects.

(ii)           Except for Taxes not yet due and payable, Seller has not received written notice of any claim from any applicable Governmental Authority for the assessment of any Taxes with respect to the Assets.  There is not currently in effect any extension or waiver of any statute of limitation of any jurisdiction regarding the assessment or collection of Taxes with respect to the Assets.  There are no administrative proceedings or lawsuits pending against the Assets by any applicable Governmental Authority with respect to Taxes.

(iii)           No lien or encumbrance (other than Tax liens contested in good faith and for which adequate reserves are maintained in accordance with the Accounting Principles) exists (whether or not filed in the real property records of any applicable Governmental Authority) on or with respect to any Assets as a result of a failure to pay Taxes; provided , however , that, to the extent notice of any such Tax lien or encumbrance is not filed in the real property records of an applicable Governmental Authority, this representation shall be deemed to be qualified by the knowledge of Seller.

(iv)           None of the Assets are subject to any Tax partnership agreement requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.

(l)            Wells .  There is no Well (including, without limitation, any “orphan well”) or piece of Equipment included in the Assets that:

(i)           Seller is obligated on the date of this Agreement by applicable Law or agreement to plug and abandon, abandon, decommission, remove, or otherwise dispose of;

(ii)           to the knowledge of Seller, has been plugged and abandoned, abandoned, decommissioned, removed, or otherwise disposed of other than in compliance in all material respects with applicable Law or agreement; and

(iii)           is subject to penalties on allowables after the Effective Time because of any overproduction.

(m)            Equipment .  To the knowledge of Seller, all Wells and Equipment are in an operable state of repair adequate to maintain normal operations in accordance with past practices, ordinary wear and tear excepted, other than any non-operable state of repair that would not have a Material Adverse Effect.

(n)            Outstanding Capital Commitments .  Except as set forth on Schedule 4.1(n) , as of the date of this Agreement, there are no outstanding authorities for expenditure or other commitments, whether oral or written, to conduct any operations or expend any amount of money on or with respect to the Assets which are binding on Seller or the Assets and will be binding on Buyers after Closing and which Seller reasonably anticipates will require

the expenditure of money in excess of Five Hundred Thousand Dollars ($500,000) (net to the interest being conveyed to Buyers pursuant to this Agreement) per item.

(o)            Payments for Production .  Except as set forth on Schedule 4.1(o) , Seller is not obligated by virtue of a take-or-pay payment, advance payment, make-whole payment, or other similar payment (other than royalties, overriding royalties, and similar arrangements established in the Leases or reflected on the Property Schedule), to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to Seller’s interest in the Assets at some future time without receiving payment therefor at or after the time of delivery, except as would not, individually or in the aggregate, have a Material Adverse Effect.

(p)            Suspense .  Except as set forth on Schedule 4.1(p) , proceeds from the sale of Hydrocarbons produced from or attributable to the Assets are being paid by or on behalf of Seller in compliance with the terms of the Leases, Surface Agreements and other applicable instruments and applicable Law without suspension or indemnity other than standard division order suspensions or indemnities, except as would not, individually or in the aggregate, have a Material Adverse Effect.

(q)            Status of Seller .  Seller is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(r)            Records and Reserve Report .  The historical factual information provided to Schlumberger by Seller regarding the Assets for the preparation of the Reserve Report (including, without limitation, historical costs of operation and production volumes), was accurate in all material respects when furnished.

(s)            Environmental .  Except as set forth on Schedule 4.1(s) and except as would not have a Material Adverse Effect:

(i)           to the knowledge of Seller, the Assets and Seller with respect to the Assets are in compliance with the requirements of all Environmental Laws;

(ii)           to the knowledge of Seller, all permits, licenses, approvals, consents, certificates and other authorizations required by Environmental Laws with respect to the ownership or operation of the Assets (the “ Environmental Permits ”) have been properly obtained and are in full force and effect, and the Assets are in compliance with the Environmental Permits;

(iii)           no written claims have been received by Seller with respect to the Assets that relate to Hazardous Materials or to matters covered by Environmental Laws or Environmental Permits;

(iv)           to the knowledge of Seller, there are no facts, conditions, or circumstances in connection with, related to or associated with the Assets, the ownership or operation of any thereof, or the disposal or removal of Hazardous Materials from the Assets that could reasonably be expected to give rise to any Action or other assertion that

Seller, the Assets, or the ownership or operation of any thereof gives rise to any liability under or in connection with any Environmental Law or Environmental Permit; and

(v)           to the knowledge of Seller, there are and have been no Hazardous Materials that have been disposed of or released on, in, from or under the Assets that could reasonably be expected to result in a violation of any Environmental Law, any claim of exposure to or damage from any such Hazardous Material, or in a liability or obligation under any Environmental Law to perform any remediation, removal, response, restoration, abatement, investigation or monitoring.

Section 4.2                                 Representations and Warranties of Buyers .  Buyers represent and warrant to Seller as follows:

(a)            Organization and Qualification .  Eni Petroleum is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite limited liability company power and authority to carry on its business as it is now being conducted.  Eni Operating is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as it is now being conducted.  Each Buyer is duly qualified to do business, and is in good standing, in each jurisdiction in which the Assets to be acquired by it makes such qualification necessary.

(b)            Authority .  Buyers have all requisite limited liability company, in the case of Eni Petroleum, and corporate, in the case of Eni Operating, power and authority to execute and deliver this Agreement and to perform each of their respective obligations under this Agreement (and under all documents required to be executed and delivered and actions to be performed by any Buyer pursuant hereto).  The execution, delivery and performance of this Agreement and the agreements contemplated hereby and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite limited liability company, in the case of Eni Petroleum, and corporate, in the case of Eni Operating, action on the part of Buyers.

(c)            Enforceability .  This Agreement constitutes a valid and binding agreement of each Buyer enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

(d)            No Conflict or Violation .  Except for any exceptions set forth in Section 4.2(e), neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyers will (i) conflict with or result in a violation or breach of or default under any provision of the certificate of incorporation, by-laws, operating agreement or other similar governing documents of either Buyer or any material agreement, indenture or other instrument under which either Buyer is bound or (ii) violate or conflict with any Law applicable to either Buyer or the Assets.

(e)            Consents .  No consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Buyers or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyers.

(f)            Actions .  There is no Action pending (with service of process therein having been made on either Buyer) or, to the knowledge of either Buyer, threatened (or pending without service of process therein having been made on either Buyer) to which either Buyer is (or is threatened to be made) a party, other than Actions which are not reasonably expected by either Buyer to have a material adverse effect on either Buyer.

(g)            Brokerage Fees and Commissions .  Neither Buyers nor any respective Affiliate of either Buyer has incurred any obligation or entered into any agreement for any investment banking, brokerage or finder’s fee or commission in respect of the transactions contemplated by this Agreement for which Seller shall incur any liability.

(h)            Qualified Owner .  Each Buyer (i) is, or as of the Closing Date will be, qualified under Law to own the Assets and (ii) has, or as of the Closing Date will have, complied with any necessary governmental bonding requirements required for its ownership of the Assets.

(i)            Funds .  Buyers have, and at all times prior to Closing will have, sufficient funds available to enable Buyers to consummate the transactions contemplated hereby and to pay the Adjusted Purchase Price and all related fees and expenses of Buyers.

(j)            Buyers’ Knowledge .  Neither Buyer has any knowledge that Seller is currently in breach of any representation or warranty of Seller in Section 4.1.

(k)            No Distribution .  Buyers are experienced and knowledgeable investors in the oil and gas business, Buyers are able to bear the economic risks of their acquisition and ownership of the Assets, and Buyers are capable of evaluating (and have evaluated) the merits and risks of the Assets and Buyers’ acquisition and ownership thereof.  Prior to entering into this Agreement, Buyers were advised by their counsel and such other persons they have deemed appropriate concerning this Agreement and have relied solely on an independent investigation and evaluation of, and appraisal and judgment with respect to, the geologic and geophysical characteristics of the Properties, the estimated reserves recoverable therefrom, and the price and expense assumptions applicable thereto.  Buyers are each an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire the Assets for their own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky laws or any other applicable securities Laws.

(l)            Insolvency .

(i)           There are no bankruptcy, reorganization, receivership or arrangement proceedings pending against, being contemplated by, or, to the knowledge of each Buyer, threatened against any Buyer or any Affiliate of any Buyer.

(ii)           Immediately prior to and immediately subsequent to the Closing, no Buyer or any Affiliate of any Buyer will have incurred, nor does such Person intend to or believe that it will incur, debts or obligations (including, without limitation, contingent obligations, and including the obligations of the Buyers under or with respect to this Agreement), beyond such Person’s ability to pay such debts and obligations as they mature or come due.

(iii)           Buyers agree for and on behalf of themselves and their respective Affiliates that the Purchase Price (as adjusted pursuant to this Agreement) constitutes reasonable value for the Assets.  The transactions contemplated by this Agreement are not in satisfaction of any antecedent or preexisting debt owed by Buyers to Seller.

Section 5.1                                 General Access .  Subject to Section 5.3 (which shall govern all environmental reviews, inspections and audits), Seller has, and until the Closing Date (or earlier termination of this Agreement), Seller shall:

(a)           permit Buyers and their respective representatives to have reasonable access during normal business hours in Seller’s offices, and in a manner so as not to interfere unduly with the business operations of Seller, to (and the ability to copy in Seller’s offices) the Records insofar as Seller may do so without (i) violating any contractual restriction or applicable Laws or (ii) waiving any attorney/client, work product or like privilege (except insofar as such privileges relate to title opinions); and

(b)           subject to any required consent of any third Person, permit Buyers and their respective representatives at reasonable times and at Buyers’ sole risk, cost and expense, to conduct, in the presence of Seller’s representatives, reasonable inspections of the Assets;

provided , however , Buyers shall repair any damage to the Assets resulting from such inspections and do hereby indemnify and hold harmless, release and agree to defend the Seller Indemnified Persons from and against any and all Covered Liabilities to the extent arising from Buyers’ inspection of the Assets, REGARDLESS OF ANY CONCURRENT NEGLIGENCE OR STRICT LIABILITY ON THE PART OF THE SELLER INDEMNIFIED PERSONS AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT COMMON LAW, STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR REGULATION, EXCLUDING, HOWEVER, THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED PERSON .  Nothing in this Agreement shall be construed to permit Buyers or their respective representatives to have access to any files, records, contracts or documents of Seller prepared in connection with this transaction or relating to any offers received by Seller for the sale of the Assets in competition with the Buyers’ offer, it being agreed that all such competing offers shall be the sole property of Seller.

Section 5.2                                 Confidential Information .  Buyers agree to maintain all information made available to them pursuant to this Agreement confidential and to cause their respective directors, officers, employees, agents, representatives, consultants and advisors to

maintain all information made available to them pursuant to this Agreement confidential, all as provided in that certain confidentiality agreement dated December 3, 2008, by and between Seller and Eni Operating, as amended by that certain First Amendment to Confidentiality Agreement dated as of April 8, 2009, by and between Seller and Eni Operating (the “ Confidentiality Agreement ”), which shall continue in full force and effect and the terms of which are incorporated herein by reference and made a part of this Agreement.

Section 5.3                                 Environmental Review and Audit .  

(a)            Environmental Access .  Commencing on the execution of this Agreement and continuing until the Closing Date (or earlier termination of this Agreement), subject to the restrictions contained in this Agreement and any required consent or waiver of any third Person, Seller shall (i) permit Buyers and their respective representatives to have access during normal business hours in the Seller’s offices, and in a manner so as not to interfere unduly with the business operations of Seller, to Seller’s environmental files and records (including the ability to copy same in Seller’s offices, including field offices) in the possession or control of Seller (whether now or prior to the Closing Date), to the extent relating to the Assets and insofar as Seller may do so without waiving any attorney/client, work product or like privilege  and (ii) permit Buyers and the Environmental Consultant to have reasonable access during normal business hours to the Assets for the purpose of allowing Buyers and the Environmental Consultant to conduct an environmental inspection and audit of the Assets (collectively, the “ Environmental Review ”), all at Buyers’ sole risk, cost and expense.

(b)            Conduct of Review .  Prior to conducting the Environmental Review, Buyers shall furnish Seller with a proposed scope of the Environmental Review, including a description of the activities to be conducted and the approximate locations of such activities.  No Person other than the Environmental Consultant, the employees of each Buyer, and, to the extent related to the review of Seller’s environmental files and records related to the Assets, Buyers’ outside legal counsel, may conduct the Environmental Review.  Buyers shall not commence any activity proposed to be included in the Environmental Review unless and until such activity (including the approximate location thereof) has been approved in writing by Seller, which approval shall not be unreasonably withheld or delayed.  Seller shall have the right to be present during any inspection (including the Environmental Review) of the Assets and shall have the right, at its option and expense, to split samples with Buyers; provided , however , that, so long as Buyers have provided Seller with reasonable advance written notice of when they desire to conduct a proposed activity, Seller shall not withhold or delay its consent to any activity proposed to be conducted pursuant to the Environmental Review due solely to the inability of a representative of Seller to be present at such activity.  It is understood and agreed by the Parties that the proposed scope and list of activities provided to Seller pursuant to which Buyers will perform the Environmental Review may be modified during the course of the Environmental Review pursuant to the approval of Seller (including the oral approval of any on-site representative of Seller), which approval shall not be unreasonably withheld or delayed; provided however , that Buyers shall not conduct any sampling boring, drilling or operation of machinery without first obtaining the prior written consent of Seller, which consent shall not be unreasonably withheld or delayed.

Section 5.4                                 Buyers’ Responsibility for Review .  In connection with the Environmental Review, Buyers agree that Buyers, the Environmental Consultant and the employees, agents and contractors of each Buyer shall comply with all Laws and shall exercise reasonable care with respect to the Assets and their condition, taking into consideration the characteristics of any wastes or substances found thereon, and in light of all relevant facts and circumstances.  Specifically, but without limitation, when handling solid waste or hazardous substances, if any, discovered during the inspection of the Assets, Buyers, the Environmental Consultant and the employees, agents and contractors of each Buyer shall handle such waste or substances in accordance with all Laws.  Any soil or water samples taken by Buyers from the Assets shall become the sole property and responsibility of Buyers and will be managed consistent with the applicable rules and regulations of the U.S. Environmental Protection Agency and any other applicable Governmental Authority with regulatory authority.  Promptly after completing the Environmental Review, Buyers shall, at their sole cost and expense, restore the Assets to their original condition, in accordance with good engineering practice, if damaged due to the Environmental Review.  Failure by Buyers to comply with the requirements of this subsection within a reasonable time period will entitle (but shall not obligate) Seller to take any action reasonably necessary to correct such failure, all at Buyers’ expense.  Buyers shall maintain and shall cause their respective officers, directors, employees, agents, representatives, contractors, consultants and advisors to maintain all information obtained pursuant to the Environmental Review strictly confidential and shall not disclose the same to any third Person without the prior written consent of Seller, except to the extent required by Law.  Buyers shall provide Seller’s counsel with copies of any reports prepared and analytical test results received by Buyers or the Environmental Consultant promptly following Buyers’ preparation or receipt of the same.  Buyers do hereby indemnify and hold harmless, release and agree to defend the Seller Indemnified Persons from and against any and all Covered Liabilities, including all Environmental Liabilities, to the extent arising out of any violation by Buyers, Buyers’ outside legal counsel, the Environmental Consultant, or Buyers’, Buyers’ outside legal counsel’s or the Environmental Consultant’s officers, directors, employees, agents, representatives, contractors, consultants and advisors of the provisions of this Section or, in whole or in part, from Buyers’ or the Environmental Consultant’s inspection or testing of the Assets or handling any substances or samples in connection therewith, REGARDLESS OF ANY CONCURRENT NEGLIGENCE OR STRICT LIABILITY ON THE PART OF ANY SELLER INDEMNIFIED PERSON AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT COMMON LAW, STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR REGULATION, BUT EXCLUDING THE GROSS NEGLIGENCE AND WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED PERSON .  Notwithstanding any other provision hereof, under no circumstances shall Buyers’ discovery during the Environmental Review of any Hazardous Materials or violations of Environmental Law that may be present at any location assessed hereunder be deemed to have caused or given rise to any Environmental Liabilities simply because such Hazardous Materials were discovered by Buyers or brought to Seller’s attention in connection with the Environmental Review.

Section 6.1                                 General Disclaimer of Warranties and Representations .  Without limiting Buyers’ right to adjust the Purchase Price by operation of this Article 6 or

Section 8.10 and subject to the provisions of Section 8.12 and Section 10.2(f), and except for the special warranty of Defensible Title to be made in the Conveyance, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to Seller’s title to any of the Assets, and Buyers hereby acknowledge and agree that, except as provided above, Buyers’ sole remedy for any Title Defect with respect to any of the Assets shall be pursuant to the procedures set forth in this Article 6.  Buyers shall not be entitled to protection under the special warranty of Defensible Title to be contained in the Conveyance against any Option Failure (which failure is addressed in Section 8.10 and in the Joint Development Agreement), any Title Defect asserted by Buyers under this Article 6 or for any other Title Defect of which Buyers had knowledge prior to the expiration of the Examination Period.

Section 6.2                                 Buyers’ Title Review .  

(a)            Buyers’ Assertion of Title Defects .  Commencing on the execution of this Agreement and continuing until 5:00 p.m., Central Daylight Time, on June 1, 2009 (the “ Examination Period ”), Buyers may furnish Seller written notice meeting the requirements of this Section 6.2(a) (a “ Title Defect Notice ”) setting forth any matters which, in Buyers’ reasonable opinion, constitute Title Defects.  For all purposes of this Agreement, Buyers shall be deemed to have waived any Title Defect which Buyers fail to assert as a Title Defect by a Title Defect Notice given to Seller on or before the expiration of the Examination Period.  To be effective, Buyers’ Title Defect Notice of a Title Defect must include (i) a brief description of the matter constituting the asserted Title Defect, (ii) the claimed Title Defect Amount attributable thereto, and (iii) supporting documents reasonably necessary for Seller (as well as any title attorney or examiner hired by Seller) to verify the existence of such asserted Title Defect.  The Parties acknowledge and agree that any dispute between the Parties as to the effectiveness of any notice furnished by Buyers to Seller pursuant to this Section 6.2(a) may be submitted for resolution by the Title Arbitrator pursuant to the arbitration procedures set forth in Section 6.5.  To give Seller an opportunity to commence reviewing and curing Title Defects, Buyers agree to give Seller written notice of any Title Defect which Buyers determine exist promptly following Buyers’ determination of the existence of same, which notice may be preliminary in nature and supplemented prior to the end of the Examination Period.  Buyers shall also promptly furnish Seller with written notice of any Seller Title Credit which is discovered by any employee or representative of either Buyer while conducting Buyers’ title review, due diligence or investigation with respect to the Assets.

(b)            Purchase Price Allocations .  A portion of the Purchase Price has been allocated to the various Property Subdivisions in the manner and in accordance with the respective values set forth in Part II of the Property Schedule.  The “ Allocated Value ” for any Property Subdivision equals the portion of the Purchase Price that is allocated to such Property Subdivision on Part II of the Property Schedule, increased or decreased (a) as set forth in Section 3.1(b), (c) and (d) with respect to such Property Subdivision, and (b) by a share of each adjustment to the Purchase Price under Section 3.1(a) (with respect to Net Cash Flow) and Section 3.1(e).  The share of each adjustment allocated to a particular Property Subdivision pursuant to item (b) of the immediately preceding sentence shall be obtained by allocating that adjustment among the various Property Subdivisions on a pro-rata basis in proportion to the Purchase Price allocated to such Property Subdivision on Part II of the Property Schedule.

(c)            Seller’s Assertion of Seller Title Credits .  Commencing on the execution of this Agreement and continuing until the expiration of the Examination Period, Seller may furnish Buyers written notice meeting the requirements of this Section 6.2(c) (a “ Seller Title Credit Notice ”) setting forth any matters which, in Seller’s reasonable opinion, constitute Seller Title Credits.  To be effective, a Seller Title Credit Notice must include (i) a brief description of the matter constituting the asserted Seller Title Credit, (ii) the claimed Seller Title Credit Amount attributable thereto, and (iii) supporting documents reasonably necessary for Buyers (as well as any title attorney or examiner hired by Buyers) to verify the existence of such asserted Seller Title Credit.  The Parties acknowledge and agree that any dispute between the Parties as to the effectiveness of any notice furnished by Seller to Buyers pursuant to this Section 6.2(c) may be submitted for resolution by the Title Arbitrator pursuant to the arbitration procedures set forth in Section 6.5.   SELLER SHALL BE DEEMED TO HAVE WAIVED FOR ALL PURPOSES (INCLUDING, WITHOUT LIMITATION, FOR THE PURPOSES OF THE JOINT DEVELOPMENT AGREEMENT AND ANY JOINT OPERATING AGREEMENT ATTACHED THERETO OR OTHERWISE APPLICABLE TO THE PROPERTIES) ANY SELLER TITLE CREDIT WHICH SELLER FAILS TO ASSERT AS A SELLER TITLE CREDIT BY A SELLER TITLE CREDIT NOTICE GIVEN TO BUYERS ON OR BEFORE THE EXPIRATION OF THE EXAMINATION PERIOD .

(d)            Seller’s Opportunity to Cure .

(i)           Without limiting Seller’s rights provided in Section 6.2(d)(ii) to cure asserted Title Defects following the Closing, Seller shall have until two (2) days prior to the Closing Date, at its cost and expense, if it so elects but without obligation, to cure all or a portion of such asserted Title Defects.  Any asserted Title Defects which are expressly waived in writing by Buyers or cured to Buyers’ reasonable satisfaction on or before the Closing Date shall be deemed “Permitted Encumbrances” hereunder.  Subject to Section 6.2(d)(ii) and Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto, if Seller within such time fails to cure any Title Defect of which Buyers have given timely written notice as required above, and Buyers have not and do not waive same on or before the day immediately preceding the Closing Date, any Property Subdivision affected by such uncured and unwaived Title Defect shall be a “ Title Defect Property ”.

(ii)           If Buyers furnish to Seller timely Title Defect Notice(s) of one or more Title Defects and the same are not waived or cured as provided in Section 6.2(d)(i), Seller shall close the transactions contemplated hereby and retain the right to cure any of such Title Defects after Closing, and Seller’s election to cure such Title Defects shall not affect the calculation of the Adjusted Purchase Price to be paid at Closing pursuant to Section 3.2.  In such event, but subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto, the Purchase Price shall be adjusted pursuant to Section 6.2(e).  Seller shall have one hundred twenty (120) days after the Closing Date in which to attempt to cure any such Title Defects.  The election by Seller to cure a Title Defect after the Closing shall not affect the Title Defect Amounts and Seller Title Credit Amounts used to determine the Adjusted Purchase Price to be paid at Closing pursuant to Section 3.2 or the rights and obligations of the Parties under Section 6.5 with respect to dispute resolution.  If Seller

cures any such Title Defect, then Buyers shall promptly pay Seller the Title Defect Amount with respect to the Title Defect that is so cured, but not exceeding the aggregate amount of the reductions in the Purchase Price which Buyers received as a result of the applicable Title Defects, together with interest on the amount due Seller from the Closing Date through and including the date of payment at the Agreed Rate.  Furthermore, the Aggregate Deductible Amount shall be restored to the extent any portion of the Aggregate Deductible Amount was applied as a credit against the Title Defect Amount attributable to such cured Title Defect.  If a positive balance exists in the Aggregate Deductible Amount after any restorations or increases thereof pursuant to the foregoing, and Seller has suffered a reduction in the Purchase Price as a result of any one or more uncured Title Defects, Buyers shall pay to Seller an amount (together with interest thereon from the Closing Date through and including the date of payment at the Agreed Rate) equal to the lesser of (i) the amount by which the Purchase Price was reduced as a result of such uncured Title Defects and (ii) the then existing balance of the Aggregate Deductible Amount.

(iii)           Any dispute relating to whether and to what extent a Title Defect has been cured after Closing shall be resolved as set forth in Section 6.5, except that any such matter shall be submitted to the Title Arbitrator on or before ten (10) Business Days after the date described in Section 6.2(d)(ii).

(e)            Buyers’ Title Adjustments .  As Buyer’s sole and exclusive remedy with respect to Title Defects, Buyers shall be entitled to reduce the Purchase Price by the amount, if any, by which the aggregate amount of Title Defect Amounts which otherwise generate an adjustment to the Purchase Price exceed the Aggregate Deductible Amount.  The Aggregate Deductible Amount shall be restored to the extent that any portion thereof is applied as a credit against a Title Defect Amount attributable to a Title Defect which is subsequently cured by Seller or determined not to constitute a Title Defect.  As used herein, the term “ Title Defect Amount ” shall mean, with respect to a Title Defect Property, the amount by which the value of such Title Defect Property is impaired as a result of the existence of one or more uncured and unwaived Title Defects, which amount shall be determined as follows and subject to the following conditions:

(i)           if the Title Defect results from Seller (or Buyers, as successors in interest to Seller) having a lesser Net Revenue Interest in such Title Defect Property than the Net Revenue Interest specified therefor in Part II of the Property Schedule, the Title Defect Amount shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Title Defect Property in Part II of the Property Schedule by a fraction, the numerator of which is the reduction in the Net Revenue Interest and the denominator of which is the Net Revenue Interest specified for such Title Defect Property in Part II of the Property Schedule;

(ii)           if the Title Defect results from Seller (or Buyers, as successors in interest to Seller) having a greater Working Interest in a Title Defect Property than the Working Interest specified therefor in Part II of the Property Schedule, the Title Defect Amount shall be equal to the present value (discounted at 10% compounded annually) of the increase in the costs and expenses forecasted in the Reserve Report with respect to

such Title Defect Property for the period from and after the Effective Time which is attributable to such increase in Seller’s Working Interest; provided , however , that no Title Defect Amount shall be allowed on account of and to the extent that an increase in Seller’s Working Interest in a Property Subdivision has the effect of proportionately increasing Seller’s Net Revenue Interest in such Property Subdivision;

(iii)           if the Title Defect results from the existence of a lien, the Title Defect Amount shall be an amount necessary to unconditionally discharge such lien.

(iv)           if the Title Defect results from any matter not described in paragraphs (i), (ii) or (iii) above, the Title Defect Amount shall be an amount equal to the difference between the value of the Title Defect Property affected by such Title Defect with such Title Defect and the value of such Title Defect Property without such Title Defect (taking into account the portion of the Purchase Price allocated in Part II of the Property Schedule to such Title Defect Property); provided, that if such Title Defect is reasonably susceptible of being cured, the Title Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect;

(v)           if a Title Defect is not effective or does not affect a Title Defect Property throughout the entire remaining productive life of such Title Defect Property, such fact shall be taken into account in determining the Title Defect Amount;

(vi)           the Title Defect Amount with respect to a Title Defect shall be determined without duplication of any costs or losses included in another Title Defect Amount;

(vii)           the adjustment to the Purchase Price attributable to Title Defects upon a given Title Defect Property shall not exceed the Allocated Value of the affected Property Subdivision; provided , however , that the foregoing shall not limit any adjustment to the Purchase Price pursuant to this Article 6 if and to the extent that any applicable Title Defect would constitute a Title Defect upon another Property Subdivision set forth in Part II of the Property Schedule;

(viii)                      if a Title Defect affects only a portion of a Property Subdivision (as contrasted with an undivided interest in the entirety of such Property Subdivision) and a portion of the Purchase Price has not been allocated specifically to such portion of a Property Subdivision in Part II of the Property Schedule, then for purposes of computing the Title Defect Amount, the portion of the Purchase Price allocated to such Property Subdivision shall be further allocated among the portions of such Property Subdivision in the proportion that the net acreage (or net acre feet, as appropriate) of such Property Subdivision affected by such Title Defect bears to the net acreage (or net acre feet, as appropriate) in the entire Property Subdivision.  In the event such Property Subdivision is subject to a unitization agreement, the foregoing allocation shall be made in a manner which is consistent with the allocation of production or productive acreage in such unitization agreement; and

(ix)           notwithstanding the foregoing, if the Title Defect Amount determined pursuant to the foregoing with respect to a Title Defect Property is $100,000.00 or less, then the Title Defect Amount with respect to such Title Defect Property shall be deemed zero.

Section 6.3                                 Determination of Title Defects .  A Property Subdivision shall be deemed to have a “ Title Defect ” if Seller does not have Defensible Title thereto as of the Effective Time and as of the Closing Date.  Notwithstanding any other provision in this Agreement to the contrary, the following matters shall be deemed to be Permitted Encumbrances and shall not be asserted as, and shall not constitute Title Defects:  (i) defects arising out of lack of survey, (ii) defects arising out of lack of corporate authorization, unless Buyers provide affirmative evidence that such corporate action was not authorized and results in another Person’s superior claim of title to the relevant Property Subdivision or portion thereof, (iii) defects based solely on (A) lack of information in Seller’s files or (B) references to a document(s) if such document(s) is not in Seller’s files, (iv) defects in the chain of title prior to January 1, 1950, unless Buyers provide affirmative evidence that the defect results in another Person’s superior claim of title to the relevant Property Subdivision or portion thereof, (v) defects relating to matters for which the applicable statute of limitations (including any extension thereof due to the failure of a Person to discover the facts or circumstances giving rise to such defect) has expired and (vi) defects which result from any Option Failure (which defects are addressed in Section 8.10).

Section 6.4                                 Seller Title Credits .  A “ Seller Title Credit ” shall mean, with respect to a Property Subdivision, the amount by which the value of such Property Subdivision is enhanced by virtue of (a) Seller having a greater Net Revenue Interest in such Property Subdivision than the Net Revenue specified therefor in Part II of the Property Schedule or (b) Seller having a lesser Working Interest in such Property Subdivision than the Working Interest specified therefor in Part II of the Property Schedule, which amount  (the “ Seller Title Credit Amount ”) shall be determined as follows:

(i)           if the Seller Title Credit results from Seller (and Buyers, as successors in interest to Seller) having a greater Net Revenue Interest in such Property Subdivision than the Net Revenue Interest specified therefor in Part II of the Property Schedule, the Seller Title Credit Amount shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Property Subdivision in Part II of the Property Schedule by a fraction, the numerator of which is the increase in the Net Revenue Interest and the denominator of which is the Net Revenue Interest specified for such Property Subdivision in Part II of the Property Schedule;

(ii)           if the Seller Title Credit results from Seller (and Buyers, as successors in interest to Seller) having a lesser Working Interest in a Property Subdivision than the Working Interest specified therefor in Part II of the Property Schedule, the Seller Title Credit shall be equal to the present value (discounted at 10% compounded annually) of the decrease in the costs and expenses forecasted in the Reserve Report with respect to such Property Subdivision for the period from and after the Effective Time which is attributable to such decrease in Seller’s Working Interest;

(iii)           in determining the Seller Title Credit Amount, the principles and methodology set forth in paragraphs (v), (vi), (vii), and (viii) of Section 6.2(e) shall be applied, mutatis mutandis ;

(iv)           no Seller Title Credit shall be allowed on account of and to the extent that a decrease in Seller’s Working Interest in a Property Subdivision has the effect of proportionately decreasing Seller’s Net Revenue Interest in such Property Subdivision; and

(v)           Notwithstanding the foregoing:

(1)           if a Seller Title Credit Amount determined pursuant to the foregoing with respect to a Property Subdivision is $100,000.00 or less, then such Seller Title Credit shall be deemed zero; and

(2)           there shall be no increase to the Aggregate Deductible Amount for Seller Title Credits which would otherwise generate an increase to the Aggregate Deductible Amount unless and until the aggregate amount of such Seller Title Credits exceeds Seven Million Dollars ($7,000,000), and then only to the extent that such aggregate amount exceeds such amount.

Section 6.5                                 Dispute Resolution .  

(a)            Determination of Title Defects and Seller Title Credits for Closing .  Seller and Buyers shall attempt to agree upon all Title Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit Amounts on or before the Closing Date.  If Seller and Buyers are unable to agree by that date, then Buyers’ good faith estimate shall be used to determine the Adjusted Purchase Price to be paid by Buyers at Closing pursuant to Section 3.2, and the Title Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit Amounts in dispute shall be exclusively and finally resolved by arbitration pursuant to Section 6.5(b).

(b)            Title Arbitration .  On or before a date that is ten (10) Business Days following the Closing Date (or the period described in Section 6.2(d)(iii), with respect to Title Defects that Seller has elected to cure pursuant to Section 6.2(d)(ii), or as contemplated by Section 15.1(a)(iii), with respect to the disputes which are described therein and subject to the limitations stated therein), Title Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit Amounts in dispute shall be submitted to Terry I. Cross of McClure & Cross LLP, or, if such Person in unwilling or unable to serve, a title attorney with at least ten (10) years’ experience in oil and gas titles in Texas as selected by mutual agreement of Buyers and Seller, or, absent such agreement during such ten (10) Business Day period, by the Houston office of the American Arbitration Association (the “ Title Arbitrator ”).  The Title Arbitrator shall not have worked as an employee or outside counsel for any Party or its Affiliates during the five (5) year period preceding the arbitration or have any financial interest in the dispute.  The arbitration proceeding shall be held in Fort Worth, 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 6.5(b).  The Title Arbitrator’s determination shall be made within forty-five (45) days after submission of the matters in dispute (or, with respect to

disputes which are the subject of Section 15.1(a)(iii), the later of (1) ten (10) days after submission of the matters in dispute or (2) the second Business Day preceding the Termination Date) and shall be final and binding upon the Parties, without right of appeal.  In making his determination, the Title Arbitrator shall be bound by the provisions of this Article 6 and may consider such other matters as in the opinion of the Title Arbitrator are reasonably necessary or helpful to make a proper determination.  Additionally, the Title Arbitrator may consult with and engage disinterested third Persons to advise the Title Arbitrator, including petroleum engineers.  The Title Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Title Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit Amounts submitted by any Party and may not award damages, interest, or penalties to any Party with respect to any matter.  Seller and Buyers shall each bear their own legal fees and other costs of presenting their cases.  Buyers shall bear one-half of the costs and expenses of the Title Arbitrator, and Seller shall be responsible for the remaining one-half of the costs and expenses.  Any disputes relating to Title Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit Amounts not submitted to the Title Arbitrator pursuant to the first sentence of this Section 6.5(b) shall be deemed to be waived.

Section 6.6                                 No Duplication .  Notwithstanding anything herein provided to the contrary, if a Title Defect results from any matter which could also result in the breach of any representation or warranty of Seller set forth in Section 4.1, then Buyers shall only be entitled to assert such matter as a Title Defect pursuant to this Article 6 and shall be precluded from also asserting such matter as the basis of the breach of any such representation or warranty.

Section 6.7                                 Operational Defects .  As of the date hereof, Buyers have identified defects (the " Operational Defects ") affecting certain of the Assets, which Operational Defects are more particularly described in Schedule 6.7 .  The Parties acknowledge and agree that (a) the rights and obligations of the Parties with respect to the Operational Defects shall be as set forth in the Joint Development Agreement and shall not be subject to the remainder of this Article 6 (including without limitation, Section 6.2(e)(ix)), and no amounts asserted by Buyers with respect thereto shall be taken into account in determining whether the Aggregate Deductible Amount has been exceeded and (b) Buyers shall not have the right to assert any additional matters similar to the Operational Defects as Title Defects pursuant to this Article 6 or the Conveyance.

Section 7.1                                 Compliance .  Buyers’ purchase of the Assets is expressly subject to all validly existing and applicable Preference Rights and Transfer Requirements.  To Seller’s knowledge, all agreements containing (a) a Preference Right which is triggered as a result of the transactions contemplated by this Agreement are set forth in Part I of Schedule 7.1 and (b) a Transfer Requirement which is triggered as a result of the transactions contemplated by this Agreement are set forth in Part II of Schedule 7.1 .  Promptly after the date hereof, Seller shall prepare and send notices to the holders of any such Preference Rights and rights with respect to such Transfer Requirements (and the holders of any other Transfer Requirements or Preference Rights that Seller discovered prior to the Closing Date, or, with respect to Preference Rights, before, on or after the Closing Date), which notices shall comply with the terms of the applicable

Preferential Right or Transfer Requirement and shall be in form and substance reasonably satisfactory to Buyers, requesting consents, approvals and waivers, as applicable, of such rights with respect to the transactions contemplated by this Agreement.  Seller shall not be obligated to pay any consideration to (or incur any cost or expense for the benefit of) the holder of any Preference Right or Transfer Requirement in order to obtain the waiver thereof or compliance therewith.

Section 7.2                                 Allocations .  The portion of the Purchase Price to be allocated to any Asset or portion thereof affected by a Preference Right (a “ Preference Property ”) shall be the Allocated Value therefor.  If a Preference Right affects only a portion of a Property Subdivision and a portion of the Purchase Price has not been allocated specifically to such portion of a Property Subdivision in Part II of the Property Schedule, then the portion of the Purchase Price to be allocated to such Preference Property shall be determined in the same manner as provided in Section 6.2(e)(viii) when a Title Defect affects only a portion of a Property Subdivision.

Section 7.3                                 Preference Rights .  If a third Person who has been offered a Preference Property pursuant to Section 7.1 elects prior to Closing to purchase such Preference Property in accordance with the terms of such Preference Right, and Seller and Buyers receive written notice of such election prior to the Closing Date, such Preference Property will be eliminated from the Assets and the Purchase Price shall be reduced by the portion of the Purchase Price allocated to such Preference Property pursuant to Section 7.2.  If a third Person who has been offered a Preference Property or who has been requested to waive its Preference Right pursuant to Section 7.1 does not elect to purchase such Preference Property or waive such Preference Right with respect to the transactions contemplated by this Agreement prior to the Closing Date and the time for the exercise or waiver of such Preference Right has not expired, such Preference Property shall be held back from the Assets to be transferred and conveyed to Buyers at Closing, the Purchase Price to be paid at Closing shall be reduced by the portion of the Purchase Price which would be allocated to such Preference Property pursuant to Section 7.2. Seller shall continue to use commercially reasonable efforts to obtain the waiver of such Preference Right and, to the extent not prohibited by actions or inaction of Buyer, shall continue to be responsible for the compliance therewith.  If a third Person elects to purchase any such Preference Property, Seller shall convey said Preference Property to such third Person and shall be entitled to the consideration for the sale of such Preference Property. If the holder of a Preference Right that affects a Preference Property that is held back from the Assets that are conveyed to Buyers at Closing waives such Preference Right after Closing, or if the time period for the exercise by such holder of its right to purchase such Preference Property expires and such holder has not exercised its right to purchase same, then such Preference Property shall be conveyed to Buyers at a delayed Closing (which shall become the new Closing Date with respect to such Preference Property), within ten (10) days following the date on which Seller obtains such waiver or the time period for the holder to exercise such Preference Right expires, for a purchase price equal to the amount by which the Purchase Price was reduced on account of the holding back of such Preference Property (as adjusted pursuant to Section 3.1 through the new Closing Date therefor).  In connection with any subsequent conveyance of a Preference Property, appropriate adjustments in Net Cash Flow and proration of revenues and costs contemplated by Section 3.1 will be made to account for any delayed Closing with respect to such Preference Property.

Section 7.4                                 Transfer Requirements .  Seller shall notify Buyers in writing on a date that is one (1) Business Day prior to the Closing of any Transfer Requirements which have not been obtained and the Assets to which they pertain or which are affected thereby.  If a Transfer Requirement applicable to the transactions contemplated by this Agreement is not obtained, complied with or otherwise satisfied prior to the Closing Date, then, unless otherwise mutually agreed by Seller and Buyers, any Asset or portion thereof affected by such Transfer Requirement (a “ Retained Asset ”) shall be held back from the Assets to be transferred and conveyed to Buyers at Closing, the Purchase Price to be paid at Closing shall be reduced by the portion of the Purchase Price which would be allocated to such Retained Asset pursuant to Section 7.2 if such Retained Asset were a Preference