ASSET PURCHASE AGREEMENT

Exhibit 2.2

ASSET PURCHASE AGREEMENT

Among

Redley Company, Burris Run Company

and Red Clay Minerals,

Collectively as Seller,

and

Petrohawk Energy Corporation,

as Buyer

December 14, 2005

TABLE OF CONTENTS

EXHIBITS AND SCHEDULES

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of December 14, 2005, by and among Redley Company, a Delaware general partnership, Burris Run Company, a Delaware general partnership, and Red Clay Minerals, a Delaware general partnership (hereafter collectively referred to as “ Seller ”), and Petrohawk Energy Corporation, a Delaware corporation (“ Buyer ”).

RECITALS:

     WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain assets of Seller; and

     WHEREAS, capitalized terms used but not otherwise defined shall have the meaning given such terms in Article XI ;

     NOW, THEREFORE, in consideration of the premises, the respective representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
PURCHASE AND SALE

     1.1 Agreement to Sell and to Purchase .

          (a) On the Closing Date, upon the terms and subject to the conditions contained herein, Seller shall transfer, sell, assign and convey to Buyer, and Buyer shall purchase from Seller, the Assets, and Buyer shall assume the Assumed Liabilities. The Excluded Assets are excluded from the terms of this Agreement and shall remain the sole property of Seller.

          (b) Subject to the conditions set forth in this Agreement, the closing of such sale and purchase (“ Closing ”) shall take place at the offices of Wiener, Weiss and Madison, A Professional Corporation, 333 Texas Street, Suite 2350, Shreveport, Louisiana, on January 6, 2006; provided, however, that Buyer shall have the right to extend (one or more times) the date for Closing to a date not later than February 10, 2006, by giving Seller written notice at least two (2) Business Days prior to the date then scheduled for Closing. Title to, ownership of and control over the Assets shall pass to Buyer at Closing. At the Closing, Seller and Buyer shall deliver the items set forth in Section 6.3 and Section 7.2 , respectively. Wiener, Weiss and Madison, A Professional Corporation, shall serve as closing agent under this Agreement.

     1.2 Purchase Price and Deposit .

          (a) In consideration of the transfer to Buyer of the Assets, and in accordance with this Agreement, Buyer shall pay to Seller EIGHTY SIX MILLION SIX HUNDRED SEVENTY THOUSAND AND 00/100 DOLLARS ($86,670,000.00) (the “ Purchase Price ”), as adjusted pursuant to the terms of this Agreement, including without limitation Section 1.3 , Section 1.4 and Section 1.5 hereof.

          (b) Concurrently with the execution of this Agreement, Buyer shall make a deposit with AmSouth Bank. (“ Escrow Agent ”) in the amount of Seven Million Five Hundred Thousand Dollars ($7,500,000), to be held by Escrow Agent as the “ Deposit ” pursuant to the terms of the Escrow Agreement and this Agreement. The Deposit shall be considered earnest money (as that term is defined in La. Civ. Code art. 2624), but as more specifically set forth hereinbelow. All fees payable to the Escrow Agent under the Escrow Agreement shall be borne and paid one-half by Buyer and one-half by Seller.

          (c) If the transactions contemplated by this Agreement are consummated, then the Deposit and any interest earned thereon shall be distributed to Seller and shall be considered as payment of a portion of the Purchase Price, and the Purchase Price payable by Buyer at Closing shall be reduced by the amount of the Deposit and any interest earned thereon.

          (d) If (i) all conditions precedent to the obligations of Buyer set forth in Article VI have been met and Seller is not in material breach of any provisions of this Agreement; and (ii) the transactions contemplated by this Agreement are not consummated solely because the conditions to Seller’s obligation to close set forth in Section 7.1 and Section 7.2 of this Agreement are not satisfied as of the Closing Date; then Seller shall have the option to terminate this Agreement pursuant to Section 10.1(c) and be paid the Deposit and any interest earned thereon as liquidated damages as its sole and exclusive remedy; and such payment to Seller shall constitute full and complete satisfaction of any and all damages Seller may have as a result of the transactions not being consummated in accordance with this Agreement. Seller and Buyer shall execute and deliver joint written instructions to the Escrow Agent to accomplish the foregoing.

          (e) If (i) all conditions precedent to the obligations of Seller set forth in Article VII have been met and Buyer is not in material breach of any provisions of this Agreement; and (ii) the transactions contemplated by this Agreement are not consummated solely because the conditions to Buyer’s obligation to close set forth in Section 6.2 and Section 6.3 of this Agreement are not satisfied as of the Closing Date or Seller has willfully and materially breached its covenants and agreements hereunder; then Buyer shall be entitled to terminate this Agreement pursuant to Section 10.1(b) and as its sole remedy have the Deposit, any interest earned thereon returned to Buyer, plus have Seller pay (and Seller shall be obligated to pay) to Buyer an additional amount equal to the Deposit; and such remedy shall constitute full and complete satisfaction of any and all damages Buyer may have as a result of the transactions not being consummated in accordance with this Agreement.

          (f) If this Agreement is terminated under any circumstance other than as described in Section 1.2(d) or Section 1.2(e) , then Buyer shall be entitled to the delivery of the Deposit and any interest earned thereon, free of any claims by Seller with respect thereto. In such event, Seller and Buyer shall execute and deliver joint written instructions to the Escrow Agent to accomplish the foregoing. Buyer and Seller shall thereupon have the rights and obligations set forth in Section 10.2 .

          (g) At Closing, Buyer shall deliver to Escrow Agent in cash in immediately available funds by wire transfer (a) the Purchase Price, adjusted as set forth in Section 1.3 and Section 1.4 , less the Deposit (and any interest earned thereon) and less the Warranties Escrow

and the Title/Environmental Escrow, to be disbursed at Closing to Seller, (b) the Warranties Escrow for the Escrow Agent to hold pursuant to this Agreement and the Post-Closing Escrow Agreement; and (c) the Title/Environmental Escrow for the Escrow Agent to hold pursuant to this Agreement and the Title/Environmental Escrow Agreement.

     1.3 Agreed Adjustments to Purchase Price . The Purchase Price shall be adjusted as follows:

          (a) The Purchase Price shall be adjusted upward by the following:

               (i) the value of all Hydrocarbons in storage or in transit owned by Seller above the pipeline connection at the Effective Time, and not previously sold by Seller, that is credited to Seller, such value to be the contract price, or if no contract is in effect, the actual sales price, less severance and production taxes or gravity adjustments deducted by the purchaser of such oil or other liquids;

               (ii) an amount equal to all proceeds (net of royalty and Taxes not otherwise accounted for hereunder) received by Buyer from the sale of all Hydrocarbons produced from or credited to the Assets prior to the Effective Time;

               (iii) an amount equal to all direct and actual expenses attributable to the Assets including, without limitation, the Property Expenses, incurred and paid by Seller that are attributable to the period of time after the Effective Time;

               (iv) to the extent not covered in the preceding paragraph, an amount equal to all prepaid expenses attributable to the Assets after the Effective Time that were paid by or on behalf of Seller including, without limitation, prepaid drilling and/or completion costs, applicable insurance costs, and prepaid utility charges; and

               (v) any other amount agreed upon by Buyer and Seller.

          (b) The Purchase Price shall be adjusted downward by the following:

               (i) proceeds received and retained by Seller (net of applicable Taxes and royalties and overriding royalties, if royalties and Taxes are retained and distributed by Seller) that are attributable to production from the Assets after the Effective Time;

               (ii) the amount of all direct and actual expenses attributable to the Assets including, without limitation, the Property Expenses, that remain unpaid by Seller, or that have been paid by Buyer, that are attributable to the period of time prior to the Effective Time;

               (iii) any adjustment agreed upon by Seller and Buyer, or determined by the Consultant, pursuant to Section 6.1 ;

               (iv) any adjustments agreed upon by Seller and Buyer, or determined by the Title/Environmental Expert, pursuant to Section 2.5 ;

               (v) any amount paid to Buyers by the Escrow Agent out of the Title/Environmental Escrow pursuant to Section 2.5(c) to the extent not already accounted for pursuant to item (vii) above; and

               (vi) any other amounts agreed upon by Buyer and Seller.

     1.4 Adjustments to Purchase Price at Closing . On or before five (5) Business Days prior to the Closing, Seller will prepare and deliver to Buyer, in accordance with the provisions of this Agreement, a proposed statement (the “ Closing Adjustments Statement ”) setting forth each adjustment to the Purchase Price required under this Agreement and showing the calculation of adjustments, as estimated in good faith by Seller, required pursuant to Section 1.3. In preparing the Closing Adjustments Statement, Seller shall communicate with Buyer and provide underlying data to Buyer relating to the Closing Adjustments Statement. Within three (3) Business Days of receipt of the Closing Adjustments Statement, Buyer will deliver to Seller a written report containing any proposed changes, together with an explanation of each change that Buyer proposes to be made to the Closing Adjustments Statement. The Closing Adjustments Statement, as mutually agreed upon by the parties, will be used to adjust the Purchase Price at Closing, provided if no agreement can be reached, Seller’s adjusted Closing Adjustments Statement shall be used for Closing, subject to further adjustment as provided in paragraph 1.5 below.

1.5 Post-Closing Adjustment to Purchase Price; Final Settlement .

          (a) Determination of Adjustment . Except with respect to adjustments to the Purchase Price for indemnification payments pursuant to Article VIII , within one hundred twenty (120) days after the Closing Date, Buyer will prepare and deliver to Seller, in accordance with this Agreement, a proposed statement (the “ Final Adjustments Statement ”) setting forth each adjustment to the Purchase Price required under this Agreement and showing the calculation of such adjustments and the resulting final Purchase Price (as set forth in the Final Adjustments Statement or otherwise determined pursuant to this Section 1.5, the “ Final Price ”). As soon as practicable, and in any event within thirty (30) days after receipt of the preliminary Final Adjustments Statement, Seller shall return a written report containing any proposed changes to the preliminary Final Adjustments Statement and an explanation of any such changes and the reasons therefor (the “ Dispute Notice ”). If the Final Price set forth in the Final Adjustments Statement is mutually agreed upon by Seller and Buyer, the Final Adjustments Statement and the Final Price, as mutually agreed upon by Seller and Buyer, shall be final and binding on the parties hereto. Failure of Seller to timely respond in writing to the Final Adjustments Statement shall be deemed to constitute Seller’s agreement to such statement and the Final Price.

          (b) Disputes . If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice, each of Buyer and Seller shall within three (3) Business Days after the delivery of such Dispute Notice, summarize its position with regard to such dispute in a written document of twenty-five pages or less and submit such summaries to the Shreveport, Louisiana office of KPMG , or such other party as the parties may mutually select (the “ Accounting Arbitrator ”), together with the Dispute Notice, the Final Adjustments Statement and any other documentation such party may desire to submit. Within twenty (20) Business Days after receiving the parties’ respective submissions but in no event later than three (3) days prior to the

Final Settlement Date (defined below), the Accounting Arbitrator shall render in writing a decision choosing either Seller’s position or Buyer’s position or a position in between those (but in no event higher or lower than the amounts proposed in the Final Adjustments Statement or the Dispute Notice) with respect to each matter addressed in any Dispute Notice, based on the materials described above and based upon the books and records of Seller, and the Accounting Arbitrator shall deliver to Seller and Buyer with such decision the calculation of the Final Price based on such decision. Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding on Seller and Buyer and will be enforceable against any of the parties in any court of competent jurisdiction. The fees of the Accounting Arbitrator shall be borne and paid one-half by Seller and one-half by Buyer.

          (c) Payment of Final Settlement . Any difference in the Purchase Price as paid at Closing pursuant to the Closing Adjustments Statement and the Final Price as determined pursuant to Subsections (a) and (b) above shall be paid (the “ Final Payment ”) one hundred eighty (180) days after the Closing Date or the next Business Day if such date is not a Business Day (the “ Final Settlement Date ”) by wire transfer or other immediately available funds to Escrow Agent, with such payments to be disbursed by Escrow Agent to Buyer or Seller, as applicable.

     1.6 Allocation of the Purchase Price . The Purchase Price shall be allocated among the Assets as set forth in Schedule 1.6. Buyer and Seller shall not take any position on their respective income tax returns that is inconsistent with the allocation of the Purchase Price as agreed to in Schedule 1.6 or as adjusted as a result of a subsequent increase or decrease in the Purchase Price.

ARTICLE II

ACCESS, CERTAIN ACKNOWLEDGEMENTS, DISCLAIMERS AND
REMEDIES FOR TITLE DEFECTS

     2.1 Access .

          (a) From and after the date hereof and up to and including the Closing Date (or earlier termination of this Agreement) but subject to the other provisions of this Section 2.1 and obtaining any required consents of Third-Parties, including Third-Party operators of the Assets (with respect to which consents Seller shall use commercially reasonable efforts to obtain), Seller shall afford to Buyer and its officers, employees, agents, accountants, attorneys, investment bankers and other authorized representatives (“ Buyer’s Representatives ”) full access during normal business hours to the Assets and all Records and other documents in the possession of Seller relating to the Assets. Seller shall also make available to Buyer and Buyer’s Representatives, upon reasonable notice during normal business hours, Seller’s officers and employees having personal knowledgeable with respect to the Assets in order that Buyer may make such due diligence investigation as Buyer considers necessary or appropriate. All investigations and due diligence conducted by Buyer or any Buyer’s Representative shall be conducted at Buyer’s sole cost and expense and any conclusions made from any examination done by Buyer or any Buyer’s Representative shall result from Buyer’s own independent review and judgment.

          (b) Buyer shall be entitled to conduct a Phase I environmental property assessment with respect to the Assets that satisfies the basic assessment requirements set forth under the current American Society for Testing and Material Standard Practice for Phase I environmental property assessments (Designation E1527-00) but, except as set forth below in this Section 2.1 , such Phase I environmental property assessment shall not include on-site testing of any non-scope issues as such issues are described in Article 12 of such Standard Practice. Seller or its designee shall have the right to accompany Buyer and Buyer’s Representatives whenever they are on site on Assets and also to collect split test samples if any are collected. Notwithstanding anything herein to the contrary, Buyer shall not have access to, and shall not be permitted to conduct any environmental due diligence (including any Phase I environmental property assessments) with respect to any Assets where Seller does not have the authority to grant access for such due diligence ( provided, however , Seller shall use commercially reasonable efforts to obtain permission from any Third Party to allow Buyer and Buyer’s Representatives such access). In the event that Buyer’s Phase I environmental property assessments identify actual or potential “recognized environmental concerns,” then Buyer may request Seller’s consent to conduct additional Phase II environmental property assessments, which consent shall not be unreasonably withheld. The additional Phase II environmental property assessment procedures relating to any additional investigation shall be submitted to Seller in a Phase II environmental property assessment plan, and shall be reasonable based on the recognized environmental concerns identified by the Phase I assessment. Thereafter, Seller may, in its reasonable discretion, approve said Phase II environmental property assessment plan, in whole or in part, and Buyer shall not have the right to conduct any activities set forth in such plan until such time that Seller has approved such plan in writing, provided, however, if such plan is not approved, Buyer may terminate this Agreement and such termination shall be considered a termination by mutual consent under Section 10.1 (a) of this Agreement. Any such approved Phase II environmental property assessment plan shall be performed in accordance with this Section 2.1 and in compliance with all Laws.

          (c) Buyer shall coordinate its environmental property assessments and physical inspections of the Assets to minimize any inconvenience to or interruption of the conduct of business by Seller, the other operators and co-owners of the Assets, and surface owners. Buyer 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 any environmental or other inspection or assessment of the Assets. Buyer hereby agrees to defend, indemnify and hold each of Seller Group, Seller and the surface owners, operators and working interest owners of the Assets, and their owners, officers, directors, partners, employees, agents and representatives, successors and assigns, harmless from and against any and all Losses arising out of, resulting from or relating to any field visit, environmental property assessment, or other due diligence activity conducted by Buyer or any Buyer’s Representative with respect to the Assets, even if such Losses arise out of or result from the sole, active, passive, concurrent or comparative negligence, strict liability or other fault or violation of Law of or by Seller, excepting only Losses actually resulting on the account of the gross negligence or willful misconduct of a member of Seller Group.

          (d) Buyer agrees to promptly provide Seller, but in no event more than five (5) days after receipt or creation, copies of all final reports and test results, prepared by Buyer and/or any of Buyer’s Representatives and which contain data collected or generated from

Buyer’s due diligence with respect to the Assets. Seller shall not be deemed by its receipt of said documents or otherwise to have made any representation or warranty, expressed, implied or statutory, as to the condition of the Assets or to the accuracy of said documents or the information contained therein.

          (e) Upon completion of Buyer’s due diligence, Buyer shall at its sole cost and expense and without any cost or expense to Seller or its Affiliates (i) close all bore holes from its environmental property assessment and any approved work with respect to a Phase II environmental property assessment in accordance with recognized industry standards, (ii) repair all damage done to the Assets in connection with Buyer’s due diligence, (iii) restore the Assets to the approximate same or better condition than it was prior to commencement of Buyer’s due diligence, and (iv) remove all equipment, tools or other property brought onto the Assets in connection with Buyer’s due diligence. Any disturbance to the Assets (including, without limitation, the real property associated with such Assets) resulting from Buyer’s due diligence will be promptly corrected by Buyer.

          (f) During all periods that Buyer, and/or any of Buyer’s Representatives are on the Assets, Buyer shall maintain, at its sole expense and with its current insurers, policies of insurance of the types and in the amounts that exist under Buyer’s current policies. Upon request by Seller, Buyer shall provide evidence of such insurance to Seller prior to entering upon the Assets.

     2.2 Produced Materials and Wastes . Buyer acknowledges that the Assets have been utilized for the purposes of exploration, development and production of oil, gas and other minerals. Hazardous materials and waste materials therefrom, including, without limitation, asbestos, crude oil, and gases with associated wastes and chemicals, produced water and injected waters with associated chemicals, compounds and by-products and drilling fluids and associated chemicals, compounds and drill cuttings, paints, solvents and other chemicals may have been spilled or disposed of on-site or off-site through methods such as, but not limited to, pit closures, burial, line or well failures, land farming, land spreading, surface pits, underground injection and other releases. Buyer acknowledges that such activities may have produced conditions regarded as environmentally adverse. In addition, some production equipment may contain asbestos or naturally occurring radioactive material (hereinafter referred to as “ NORM ”). In this regard, Buyer expressly understands and agrees that NORM may affix or attach itself to the inside of wells, materials and equipment as scale or in other forms, and that said wells, materials and equipment located on the properties may contain NORM and that NORM-containing material may be buried or otherwise disposed of on the properties. Further, Buyer acknowledges that, as a result of the historic operations of the Assets, NORM may be present in air, water or soil on or near the sites and that Seller may be unaware of the presence of some or all of such NORM. Effective upon the Closing, Buyer hereby releases, and shall defend, indemnify and hold harmless, each member of the Seller Group from any liability with respect to any adverse environmental condition related to or arising out of the ownership or operation at any time of the Assets after the Effective Time, including, without limitation, any and all Environmental Defects and Environmental Claims. Buyer agrees that after the Closing it shall store, transport, dispose of, discharge, remediate and otherwise handle all waste (including but not limited to produced water, crude oil, drilling fluids, NORM, solvents, asbestos and other waste) generated in connection with the ownership or operation of the Assets in accordance with all applicable Laws.

     2.3 Acknowledgment of Responsibility .

          (a) Buyer acknowledges Buyer’s responsibilities following Closing, and hereby agrees, following Closing, to plug and abandon each and every well included in the Assets and to reclaim and remediate the Assets in accordance with applicable Laws and as may be required under any Lease, Contract or other agreement affecting the Assets (whether or not the plugging or reclamation obligation arose or relates to periods of time prior to or after the Effective Time).

          (b) Except to the extent (and only to the extent) that Seller is obligated to indemnify the Buyer Group pursuant to Section 8.2 , and except as set forth in Section 1.5, Buyer expressly acknowledges that Buyer is responsible, and none of Buyer or its Affiliates shall have recourse against any member of the Seller Group, for the debts, liabilities, commitments, duties and obligations arising under, related to, or in connection with the ownership, operation or use of the Assets, and whether or not such debts, liabilities, commitments, duties or obligations arise or relate to periods of time prior to or after the Effective Time.

     2.4 Disclaimers . Buyer acknowledges and agrees that, except as otherwise expressly set forth in Article III of this Agreement, none of Seller or any Affiliate of Seller makes any representation or warranty, express, statutory, implied or otherwise with respect to the Assets. Except as otherwise expressly set forth in Article III of this Agreement, Seller, for itself and its Affiliates, hereby expressly disclaims any and all representations and warranties associated with the Assets, express, statutory, implied or otherwise, including any representation or warranty regarding: (a) title to the Assets, (b) costs, expenses, revenues, receipts, accounts receivable or accounts payable associated with the Assets, (c) contractual, economic or financial information associated with the Assets, (d) the continued financial viability or productivity of the Assets, or transportability of product, (e) the environmental or physical condition of the Assets, (f) federal, state, local or tribal income or other Tax consequences associated with the Assets, (g) the absence of redhibitory, patent or latent defects, (h) the state of repair of the Assets, (i) any warranty regarding merchantability or conformity to models, (j) any rights of any member of Buyer Group under appropriate Laws to claim diminution of consideration or return of the purchase price, (k) any warranty of freedom from patent, copyright or trademark infringement, (l) warranties existing under applicable Law now or hereafter in effect, (m) any warranty regarding fitness for a particular purpose, (n) production rates, recompletion opportunities, decline rates, gas balancing information or the quality, quantity or volume of the reserves of Hydrocarbons, if any, attributable to the Assets, or (o) the quality, accuracy, completeness or materiality of the information, data and materials furnished (whether electronically, orally, by video, in writing, by compact disk, or in any other medium, at the offices of Seller, in any data room or otherwise) at any time to Buyer Group associated with transactions contemplated by this Agreement, including, without limitation, information, data or materials regarding items (a) through (n) of this Section 2.4.

     2.5 Title and Environmental Matters .

          (a) After the execution hereof, Buyer shall have the right to conduct such title examination of the Assets as Buyer deems necessary or appropriate. If Buyer determines in good

faith that any Title Defect and/or Environmental Defect exists, then Buyer may give Seller written notice on or prior to the Defect Notice Date of any claimed Title Defect and/or Environmental Defect (each such Title Defect and/or Environmental Defect is referred to as a “ Pre-Closing Title/Environmental Defect ”). To be effective, each such notice shall set forth (a) a description of the matter constituting the claimed Pre-Closing Title/Environmental Defect, and (b) the proposed Purchase Price reduction for the cost of curing the Pre-Closing Title/Environmental Defect in question. Seller shall have the right, but not the obligation, to cure any claimed Pre-Closing Title/Environmental Defect on or before Closing. The parties shall reduce the Purchase Price to reflect the mutually agreed upon estimated cost of curing all Pre-Closing Title/Environmental Defects not cured by Seller prior to Closing (or if no cure is possible, the mutually agreed upon diminution of the value of the affected Assets from the Allocated Value of such Asset); provided, however , that if the estimated costs to cure such Pre-Closing Title/Environmental Defects and/or diminution in the value in the aggregate exceed the Materiality Threshold, either Buyer or Seller may terminate this Agreement by giving notice to the other party prior to Closing; further provided, however, that Buyer shall have until Closing to notify Seller that it waives such amount which exceeds the Materiality Threshold and in such event Seller will no longer have an option to terminate. Notwithstanding anything herein to the contrary, no adjustment to the Purchase Price for any Pre-Closing Title/Environmental Defects will be made unless the aggregate adjustments for all Pre-Closing Title/Environmental Defects exceeds $750,000 (the “ Title/Environmental Threshold ”), but if such Title/Environmental Threshold is met, the adjustment to the Purchase Price for such Pre-Closing Title/Environmental Defects shall be from the first dollar of such defects.

          (b) If Seller and Buyer cannot agree on the existence of a Pre-Closing Title/Environmental Defect or the adjustment, if any, therefor on or before five (5) days prior to Closing, , then the dispute will be submitted to a title attorney selected by Seller and Buyer (such title attorney hereinafter, the “ Title/Environmental Expert ”). The Title/Environmental Expert will have expertise in title matters in Louisiana and the costs of the Title/Environmental Expert will be borne and paid one-half by Seller and one-half by Buyer. The Title/Environmental Expert may engage the assistance of an environmental consultant to assist in evaluating any environmental issues; and the cost of such consultant shall be borne and paid one-half by Seller and one-half by Buyer. Seller and Buyer will each present the Title/Environmental Expert a written statement of its position on the defect and/or adjustment in question not later than the third (3rd) day after the dispute has been submitted to the Title/Environmental Expert. By the third (3rd) day following the submission of a matter to the Title/Environmental Expert, the Title/Environmental Expert shall make a determination of the dispute, choosing either Seller’s position or Buyer’s position with respect to each Pre-Closing Title/Environmental Defect, and issuing a final calculation of the purchase price reduction for all such defects; provided, however , that the Title/Environmental Expert’s Purchase Price reduction shall not be higher than Buyer’s originally proposed Purchase Price reduction. The decision of the Title/Environmental Expert will be final, conclusive and binding on Seller and Buyer and will be enforceable against any of the parties in any court of competent jurisdiction.

          (c) In addition to the procedures set forth in (a) and (b) above, Buyer and Seller may agree to have any one or more uncured Pre-Closing Title/Environmental Defect be subject to the provisions of this Section 2.5(c) . If such election is made, then the portion of the Purchase Price equal to the value of the Pre-Closing Title/Environmental Defect (as determined

in (a) and (b) above) (the “ Title/Environmental Escrow ”) shall be paid over to the Escrow Agent and shall be subject to the Title/Environmental Escrow Agreement. Such amount shall no longer be considered a Pre-Closing Title/Environmental Defect for purposes of the Materiality Threshold and shall be thereafter referred to as a “ Post-Closing Defect .” Seller shall use reasonable efforts to cure all Post-Closing Defects as quickly as possible. Buyer shall use reasonable efforts (including, without limitation, promptly giving consents when necessary or desirable and entering into reasonable agreements curing such defects, including, without limitation, commingling agreements customary in the field in question) to assist Seller in curing such defects.

     The Title/Environmental Escrow Agreement shall provide that on the earlier of (i) the satisfaction of (i) the satisfaction of Post-Closing Defects comprising 50% of the Title/Environmental Escrow, as determined by Buyer in its reasonable discretion, or (ii) the thirtieth (30 ^th ) day following the Closing Date (the “Interim Release Date”), Buyer and Seller shall instruct the Title/Environmental Escrow Agent to release from the escrow such portion of the Title/Environmental Escrow that is attributable to Post-Closing Defects that have been cured. Seller shall have until 150 days from Closing (the “Final Release Date”) to attempt to cure all Post-Closing Defects. The value of any remaining Post Closing Defects (and a determination of the amount of the Title/Environmental Escrow to be released to each of Seller and Buyer) shall be resolved by using the procedures set forth in this Section 2.5 for valuing Pre-Closing Title/Environmental Defects. Such amounts shall be paid to Buyer or Seller, as the case may be, promptly after the Final Release Date. Interest earned on the principal amount of the Post-Title/Environmental Escrow shall be distributed to the party that receives the principal upon which the interest is earned. The Escrow Agent’s fees under the Title/Environmental Escrow Agreement shall be paid one-half by Buyer and one-half by Seller.

          (d) Except for Buyer’s remedies under this Agreement for a breach of Seller’s representation contained in Section 3.19 , the Purchase Price adjustment mechanism set forth in this Section 2.5 shall be the exclusive remedy for Buyer and its Affiliates with respect to any Title Defects and/or Environmental Defects, including Post-Closing Defects. Any Title Defect and/or Environmental Defect for which Buyer does not notify Seller on or prior to the Defect Notice Date shall be deemed and is hereby waived by Buyer on its own behalf and on behalf of its Affiliates. Nothing contained in this Section 2.5 shall be construed to be a waiver or release by Buyer or its Affiliates of Buyer’s remedies for a breach by Seller of the representations contained in Section 3.19 .

ARTICLE III
REPRESENTATIONS AND WARRANTIES
AS TO SELLER AND THE ASSETS

     Each entity of those that are herein collectively referred to as Seller hereby represents and warrant to Buyer as follows:

     3.1 Organizational Matters . Seller is a general partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware, with full power to carry on its business as it is conducted, and to own, lease and operate its assets. Seller is duly authorized to do business and is in good standing in such other jurisdictions in which Seller is

required to be so authorized. The Organizational Documents of Seller furnished to Buyer for review are accurate and complete.

     3.2 Authorization; Validity of Agreement. Seller has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Seller of this Agreement and the consummation by the Seller of the transactions contemplated herein have been duly authorized by the partners of the Seller in accordance with Delaware law. No other partnership proceedings on the part of the Seller are necessary to authorize the execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller, and assuming due authorization, execution and delivery of this Agreement by Buyer, is a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforcement may be subject to or limited by (i) bankruptcy, insolvency or other similar Laws, now or hereafter in effect, affecting creditors’ rights generally and (ii) the effect of general principles of equity.

     3.3 Conflicts . Subject to the receipt of all Third Party Consents and except as set forth in Schedule 3.3 , the execution, delivery and performance by Seller of this Agreement and each other agreement or instrument to which it is a party executed in connection herewith or delivered pursuant hereto and the consummation of the transactions contemplated herein and therein will not, with or without the giving of notice or the passage of time, or both, (a) conflict with, or result in a violation or breach of, right to accelerate or loss of rights under, or result in the creation of any Encumbrance under or pursuant to, any provision of (i) the Organizational Documents of Seller, (ii) any franchise, mortgage, deed of trust, lease, license, Permit, instrument, agreement, consent, approval, waiver or understanding to which Seller is a party or by which Seller may be bound or affected or (iii) any Law or any order, judgment, writ, injunction or decree to which Seller is a party or by which Seller may be bound or affected, or (b) require the approval, consent or authorization of, prior notice to or filing or registration with, any Governmental Entity or any other Person, except in the case of clauses (a)(ii), (a)(iii) and (b) above, where such conflicts, violations, breaches, acceleration, loss of rights, Encumbrance or failure to obtain approvals, consents, authorizations or give notice or file or register would not have a Material Adverse Effect on the Assets.

     3.4 Bankruptcy . There are no bankruptcy, reorganization, or arrangement proceedings pending, being contemplated by, or threatened against Seller.

     3.5 Foreign Person . Seller is not a “foreign person” within the meaning of Section 1445(b)(2) of the Code.

     3.6 Violations of Laws . Except as set forth in Schedule 3.6 , to Seller’s Knowledge, there exist no violations by Seller of any applicable Laws. This Section 3.6 does not cover or include any matters with respect to Environmental Laws (such matters being addressed exclusively in Section 3.17 ).

     3.7 Litigation . Except as set forth in Schedule 3.7 , there is no written claim, suit, action, investigation or other proceeding (including any arbitration proceeding) pending, or to

Seller’s Knowledge, threatened, by or before any Governmental Entity, against Seller or any of the Assets.

     3.8 Taxes . Except as set forth in Schedule 3.8 , all Taxes related to taxable periods or portions thereof ending prior to or on the Closing Date, including without limitation governmental charges, assessments and required contributions of Seller with respect to its business that may result in the filing of a lien on the Assets or that may result in the imposition of transferee or other liability on Buyer for the payment of such Taxes, have been accurately recorded and duly paid, collected or withheld and remitted to the appropriate governmental agency, except for current Taxes not due and payable prior to or on the Closing Date (such Taxes to be paid when due by Buyer in accordance with Section 5.8 hereof).

     3.9 Leases . To Seller’s Knowledge, Seller has not received notice of and is not aware of any material default under the terms and provisions of the Leases. To Seller’s Knowledge, the Leases have produced continuously, and in paying quantities (or otherwise maintained by drilling operations, payment of delay rentals or shut-in royalties), for the respective periods of time, for each Lease, since such Lease was acquired.

     3.10 Contracts .

          (a) Excluding any Leases and Contracts contemplated by actions taken as permitted under Section 5.2 , Schedule 3.10(a) contains a complete list, and Seller has made available to Buyer in the office of Seller true and complete copies, of all Contracts of the type described below to which Seller is a party, together with all amendments of such Contracts (collectively, all of such contracts, the “ Material Contracts ”):

               (i) any Contract that can reasonably be expected to result in aggregate payments by Seller of more than Two Hundred Fifty Thousand Dollars ($250,000) during the current or any subsequent fiscal year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

               (ii) any Contract that can reasonably be expected to result in aggregate revenues to Seller of more than Two Hundred Fifty Thousand Dollars ($250,000) during the current or any subsequent fiscal year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

               (iii) any indenture, mortgage, loan, note, credit or sale-leaseback or similar Contract to which Seller is bound or to which the Assets are subject (whether Seller is the borrower, lender or guarantor) and all related security agreements or similar agreements associated therewith;

               (iv) any Contract that constitutes a lease (other than an oil and gas lease or similar lease), under which Seller is the lessor or the lessee of real or personal property which lease (A) cannot be terminated by Seller without penalty upon sixty (60) days or less notice and (B) involves an annual base rental of more than Two Hundred Fifty Thousand Dollars ($250,000);

               (v) any Contract pending for the acquisition or disposition, directly or indirectly (by merger or otherwise), of the Assets with a value in excess of One Hundred Thousand Dollars ($100,000) (other than inventory or sales of Hydrocarbons);

               (vi) any Contract granting any power of attorney with respect to the Assets; and

               (vii) any contract which is an exploration agreement, area of mutual interest agreement, farm-out agreement or farm-in agreement and which relates to the Assets.

          (b) Except as set forth in Schedule 3.10(b) , there exist no defaults under the Material Contracts by Seller or, to Seller’s Knowledge, by any other Person that is a party to such Material Contracts, and no event has occurred that (with or without notice or lapse of time) would constitute any default under any such Material Contract by Seller or, to Seller’s Knowledge, any other Person who is a party to such Material Contract.

          (c) Except as set forth in Schedule 3.9(c) , Seller has not received from any other Person any written notice regarding an alleged default under any Material Contract.

          (d) The Material Contracts relating to the sale or purchase of products or services by Seller have been entered into without any consideration having been paid or promised that would be in violation of any Law.

     3.11 Payables . Except as set forth in Schedule 3.11 and except for revenues held in suspense that are not material, all oil and gas production proceeds payable by Seller to others from the Assets have been paid in accordance with all of the terms and conditions of the applicable Leases and other applicable instruments. To the Knowledge of Seller, there are no outstanding, unpaid bills or claims for the furnishing labor, materials and/or services for work upon and in the operations of the Assets other than for such labor, materials and/or services for which no bill (or invoice) has been received or for which such payment is not yet due in the ordinary course of Seller’s businesses.

     3.12 No Suspense . Except as set forth in Schedule 3.12, to Seller’s Knowledge, proceeds from the sale of all oil, condensate and gas produced from the Assets are being received by Seller in a timely manner and are not being held in suspense for any reason.

     3.13 Imbalances . Except as set forth in Schedule 3.13 , there exists no imbalance regarding production taken or marketed from any Lease, nor any unsettled pipeline imbalance, which could result in (a) a portion of Seller’s interest in production therefrom (in the case of any Lease) to be taken or delivered after the Closing Date without Seller receiving payment therefor and at the price Seller would have received absent such imbalance; (b) Seller being obligated to make payment to any Person as a result of such imbalance; or (c) production being shut-in or curtailed after the Closing Date due to non-compliance with allowables, production quotas, proration rules, or similar orders or regulations of Governmental Entities; and Buyer will not be obligated, by virtue of any prepayment arrangement, take-or-pay agreement, or similar arrangement arising by, through or under Seller, to deliver hydrocarbons produced from the Assets at some future time without then receiving full payment therefor.

     3.14 Transfer Restrictions . Except as set forth in Schedule 3.14 , there are no preferential rights of purchase, rights of first refusal or similar rights, or consents to assign in favor of Third Parties with respect to any of the Assets that are applicable to the transactions contemplated hereby, including the consummation of such transactions.

     3.15 AFEs . Except as disclosed in Schedule 3.15 , to Seller’s Knowledge, there are no outstanding authorities for expenditures as of the date of this Agreement with respect to the Assets that are in excess of Fifty Thousand Dollars ($50,000).

     3.16 Equipment Condition . Except as set forth in Schedule 3.16 , to Seller’s Knowledge, all of the personal property, fixtures, equipment, and improvements included in the Assets are in compliance with all applicable Laws and are in a condition adequate for the uses to which they are being put, except where any non-compliance and/or inadequate condition would not have a Material Adverse Effect on the Assets.

     3.17 Environmental .

          (a) Except as set forth in Schedule 3.17 , to Seller’s Knowledge, the Assets are free of any Environmental Defect, except where any such Environmental Defect, individually or in the aggregate with other Environmental Defects, would not have a Material Adverse Effect on the Assets.

          (b) With respect to the Assets, Seller has not entered into, or is not subject to, any agreements, consents, orders, decrees, judgments, licenses or permit conditions, or other directives of Governmental Entities in existence at this time based on any Environmental Laws that relate to the future use of the Assets and that require any change in the present conditions of any of the Assets.

          (c) Except as set forth in Schedule 3.17 , Seller has not received written notice from any Person of any release, disposal, event, condition, circumstance, activity, practice or incident concerning any land, facility, asset or property that: (i) interferes with or prevents compliance with any Environmental Law or the terms of any license or permit issued pursuant thereto or (ii) gives rise to or results in any liability to any Person.

     3.18 Licenses and Permits .

          (a) Except as set forth in Schedule 3.18 , to Seller’s Knowledge, Seller or the operators of the Assets hold all Permits necessary to carry on operations connected with the Assets as currently conducted.

          (b) Except as set forth in Schedule 3.18 , to Seller’s Knowledge, Seller is in compliance with the terms, provisions and conditions of each of the Permits of Seller, except where the failure to be in compliance would not have a Material Adverse Effect on the Assets.

          (c) Seller has made available to Buyer in the offices of Seller true and complete copies of (i) all material Permits of Seller and (ii) any and all pending applications of additional Permits that have been submitted to any Governmental Entity by or on behalf of Seller.

     3.19 Brokers’ Fees . Seller has not incurred nor will Seller incur any liability, contingent or otherwise, for brokers’ or finders’ fees in respect of transactions contemplated hereby, except for brokers’ fees to Albrecht & Associates, Inc. Neither Seller nor any Affiliate of Seller has incurred or will incur any liability, contingent or otherwise, for brokers’ or finders’ fees in respect of the transactions contemplated hereby for which Buyer or any Affiliate of Buyer is or will be responsible.

     3.20 Title to Assets . Except as set forth in Schedule 3.20 , and except for any Pre-Closing Title/Environmental Defects identified by Buyer in a defect notice delivered by Buyer pursuant to Section 2.5 on or prior to the Defect Notice Date, Seller’s title to the Assets is free of any Title Defects, except where any such Title Defect, individually or in the aggregate with other Title Defects, would not have a Material Adverse Effect on the Assets. Seller shall make available to Buyer in the offices of Seller all deeds, leases, bills of sale, documents of title, abstracts, surveys, plats and maps in the possession of Seller that relate to any real property or personal property in which Seller has an interest.

     3.21 Operations . Except as set forth in Schedule 3.21 , to Seller’s Knowledge, all Wells in which Seller owns a Working Interest on the Assets have been drilled and (if completed) completed, operated and produced and, where applicable, plugged and abandoned, within the boundaries of the applicable real property or within the limits otherwise permitted by Contract, pooling, unitization agreement or force pooling order, and are in compliance in all respects with applicable Leases.

     3.22 P&A Obligations . Except as set forth in Schedule 3.22, to Seller’s Knowledge:

          (a) there is no Well in which Seller owns a Working Interest that has not been plugged and abandoned that Seller is currently obligated by Law or Contract to plug and abandon, or that Seller will be obligated by Law or Contract to plug and abandon with the lapse of time or notice or both, because such Well is not currently capable of producing Hydrocarbons in commercial quantities, and there is no Well in which Seller owns a Working Interest that is subject to exceptions to a requirement to plug and abandon issued by a Governmental Entity having jurisdiction over such Well; and

          (b) all Wells in which Seller owns a Working Interest have been produced in material compliance with allowables allocated thereto by the applicable Governmental Entity.

     3.23 Government Leases . Seller has both federal Leases and Leases with the State of Louisiana and subdivisions thereof.

     3.24 Seismic Data . Seller does not own any seismic or similar data on terms pursuant to which the transactions contemplated by this Agreement will trigger a payment or other transfer penalty.

     3.25 Operations. Seller is not aware of any efforts by any Person to remove the current operator on any of the Leases.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to Seller as follows:

     4.1 Organization . Buyer is a corporation, duly organized, validly existing and in good standing under the Laws of the State of Delaware, with full power to carry on its business as it is conducted and to own, lease, and operate its assets.

     4.2 Authorization; Enforceability . Buyer has the legal capacity to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance of Buyer’s obligations hereunder have been duly and validly authorized by Buyer. This Agreement and all other agreements and instruments to be executed by Buyer in connection herewith have been duly executed and delivered by Buyer, and assuming due authorization, execution an delivery of this Agreement by Seller, constitutes legal, valid and binding obligations of Buyer, enforceable against Buyer, in accordance with their terms, except as such enforcement may be subject to or limited by bankrup