ASSET PURCHASE AND SALE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AND SALE AGREEMENT

by and between

NGS SUB. CORP.

(SELLER)

and

MWM ENERGY, LLC

(BUYER)

Dated: FEBRUARY 15, 2008

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EXHIBITS

SCHEDULES

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ASSET PURCHASE AND SALE AGREEMENT

This Asset Purchase and Sale Agreement ( “ Agreement ” ), dated as of February 15, 2008, is by and between NGS Sub. Corp. , a Delaware corporation, whose address is 2500 City West Boulevard, Suite 1300, Houston, Texas 77042 ( “ Seller ” ), and MWM Energy, LLC, a Texas limited liability company ( “ Buyer ” ), whose address is 114 30 ^th Avenue South, Nashville, Tennessee  37212 .  Seller and Buyer are sometimes together referred to herein individually as a “ Party ” or collectively as “ Parties. ”

R E C I T A L S

WHEREAS, Seller owns certain oil and gas leasehold interests and related assets more fully described on the exhibits hereto;

WHEREAS, Seller owns all of the shares of Four Star Development Corporation as more fully described herein;

WHEREAS, Seller desires to sell and Buyer desires to acquire these interests, related assets, and shares on the terms and conditions hereinafter provided;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, Seller and Buyer hereby agree as follows:

ARTICLE 1. - DEFINITIONS

1.1.                             “ Definitions ”   In this Agreement, capitalized terms have the meanings provided in this Section, unless defined elsewhere in this Agreement.  All defined terms include both the singular and the plural of such terms.  All references to Sections refer to Sections in this Agreement and all references to Exhibits or Schedules refer to Exhibits or Schedules attached to and made a part of this Agreement.  When the term “herein” is used in this Agreement, reference is made to the entire Agreement and not to any particular Section or subparagraph of a Section.  The word “including” shall mean including without limitation.

1.2.                             “ Accounting Referee ”   means the accounting firm of KPMG, or such other nationally recognized United States based accounting firm as is mutually agreed upon by the Parties, together with any experts such firm may require in order to settle a particular dispute.

1.3.                             “ Aggregate Defect Basket ” shall be as defined in Section 7.4 .

1.4.                             “ Agreement ” shall mean this Asset Purchase and Sale Agreement between Seller and Buyer.

1.5.                             “ Allocated Value ” shall mean the dollar amount allocated to each Scheduled Interest as set forth on Exhibit “C.”

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1.6.                             “ Assets ” shall mean the following described assets and properties (except to the extent constituting Excluded Assets):

(a)                                   the Leases;

(b)                                  the Real Property, Personal Property and Incidental Rights;

(c)                                   the Inventory Hydrocarbons; and

(d)                                  the Shares.

1.7.                             “ Assumed Obligations ” shall mean with respect to the Assets:

(a)                                   the Plugging and Abandonment Obligations;

(b)                                  all Environmental Obligations, whether related to, or arising from, events occurring before or after the Effective Date, except those specifically included in the definition of “Retained Obligations”;

(c)                                   all obligations with respect to gas production, sales or imbalances with third parties;

(d)                                  except as otherwise provided in this Agreement, including the Seller’s obligations to indemnify, all other liabilities, duties, and obligations that arise out of the ownership, operation or use of the Assets after the Effective Time, including, but not limited to, the payment of all operating expenses and capital expenditures relating to the Assets, all liabilities, duties, and obligations, express or implied, imposed upon Seller herein under the provisions of the Leases and any and all assignments, subleases, farmout agreements, assignments of overriding royalty, joint operating agreements, easements, rights-of-way, and all other contracts, agreements and instruments affecting the Leases, or the premises covered thereby, whether recorded or unrecorded, whether or not identified on the Exhibits or schedules attached hereto and under all applicable laws, rules, regulations, orders and ordinances.

1.8.                             “ Benefit Plan ” means: (a) each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, (b) each plan that would be an “employee benefit plan”, as such term is defined in Section 3(3) of ERISA, if it were subject to ERISA, such as foreign plans and plans for directors, (c) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock, or other equity-based plan, and (d) each bonus or incentive compensation plan, or other compensation agreement, contract or arrangement.

1.9.                             “ Business Day ” means a Day, except Saturday, Sunday and Days when federally chartered banks in the United States are required to be closed.

1.10.                      “ Buyer ” “Buyer” has the meaning set forth in the introductory paragraph.

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1.11.                      “ Buyer Group ” “Buyer Group” means Buyer and its officers, directors, agents, representatives, consultants and employees.

1.12.                      “ Buyer’s Credits ” shall be as defined in Section 3.3(b) .

1.13.                      “ Casualty Loss ” shall be as defined in Article 15 .

1.14.                      “ Certificate ” means a document in the form of Exhibit “J” .

1.15.                      “ Claims ” shall be as defined in Section 17.2 .

1.16.                      “ Closing ” shall be as defined in Section 13.1 .

1.17.                      “ Closing Date ” shall be as defined in Section 13.1 .

1.18.                      “ Company ” shall mean Four Star Development Corporation, a Louisiana corporation.

1.19.                      “ Confidentiality Agreement ” shall be as defined in Section 6.3 .

1.20.                      “ Defect Value ” shall be as defined in Section 8.4 .

1.21.                      “ Defensible Title ” shall be as defined in Section 8.1(b) .

1.22.                      “ Effective Time ” shall mean 7:00 a.m., Central Standard Time, on February 1, 2008.

1.23.                      “ Encumbrance ” shall mean any lien, security interest, pledge, charge or encumbrance.

1.24.                      “Environmental Deductible” shall mean any lien, security interest, pledge, charge or encumbrance.

1.25.                      “ Environmental Defect ” shall mean:

(a)                                   a condition or activity with respect to a Scheduled Interest that is in material violation, or reasonably likely to materially violate, any federal, state or local statute, or any rule, order, ruling or regulation entered, issued or made by any court, administrative agency, or other governmental body or entity, federal, state, or local, or any arbitrator (“ Environmental Law ”), or surface or mineral lease obligation, whether an express or implied obligation, relating to natural resources, conservation, the environment, or the emission, release, storage, treatment, disposal, transportation, handling or management of industrial or solid waste, hazardous waste, hazardous or toxic substances, chemicals or pollutants, petroleum, including crude oil, natural gas, natural gas liquids, or liquefied natural gas, and any wastes associated with the exploration and production of oil and gas (“ Regulated Substances ”); or

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(b)                                  the presence of Regulated Substances in the soil, groundwater, or surface water in, on, at or under a Scheduled Interest in any manner or quantity which is required to be remediated by Environmental Law or by any applicable action or guidance levels or other standards published by any governmental agency with jurisdiction over the Assets, or by a surface or mineral lease obligation, whether an express or implied obligation.  Buyer and Seller agree that for a condition to be in violation of any statute or regulation it shall not be necessary that Seller shall be under notice of violation from a federal or state regulatory agency or lessor.

The Parties agree and acknowledge that (i) Buyer will be provided an opportunity to examine the Assets for potential naturally occurring radioactive materials ( “ NORM ” ), and any potential obligations with respect to NORM, and (ii) that the presence of NORM on any of the Assets may not be raised by Buyer as the subject of an Environmental Defect.

1.26.                      “ Environmental Defect Notice Date ” shall be as defined in Section 7.1 .

1.27.                      “ Environmental Obligations ” shall mean all liabilities, obligations, expenses (including, without limitation, all attorneys’ fees), fines, penalties, costs, claims, suits or damages (including natural resource damages) of any nature, associated with the Assets, and attributable to or resulting from:

(a)                                   pollution or contamination of soil, surface water, groundwater or air, on, in, by, from or under the Assets or lands in the vicinity thereof, and any other contamination of or adverse effect upon the environment;

(b)                                  underground injection activities and waste disposal;

(c)                                   clean-up responses, remedial, control or compliance costs, including the required cleanup or remediation of spills, pits, lakes, ponds, or lagoons, including any subsurface or surface pollution caused by such spills, pits, lakes, ponds, or lagoons;

(d)                                  noncompliance with applicable land use, permitting, surface disturbance, licensing or notification requirements, including those in a surface or mineral lease, whether an express or implied obligation;

(e)                                   violation of any federal, state or local Environmental Law or land use law, or surface or mineral lease obligation, whether an express or implied obligation;

(f)                                     any other violation which could qualify as an Environmental Defect (without being limited to Scheduled Interests); and

(g)                                  any and all indemnity obligations of Seller with respect to the above, along with any and all Claims against Seller for indemnity with respect to the above, under, pursuant to or arising from any acquisition, purchase and sale or other agreement.

Notwithstanding any provision of this Agreement to the contrary, “Environmental

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Obligations” shall not include Plugging and Abandonment Obligations (including with respect to NORM).

1.28.                      “ Escrow Agreement ” shall be defined in Section 3.2.

1.29.                      “ Escrow Deposit ” shall be as defined in Section 3.2 .

1.30.                      “ Excluded Assets ” shall mean the following:

(a)                                   (i) all trade credits, accounts receivable, notes receivable and other receivables attributable to Seller’s interest in the Assets with respect to any period of time prior to the Effective Time; (ii) all deposits, cash, checks in process of collection, cash equivalents and funds attributable to Seller’s interest in the Assets with respect to any period of time prior to the Effective Time; and (iii) all proceeds, benefits, income or revenues accruing with respect to the Assets prior to the Effective Time;

(b)                                  all corporate, financial, and tax records of Seller, and those records subject to attorney/client privilege; however, Buyer shall be entitled to receive copies of any tax records which directly relate to any Assumed Obligations, or which are necessary for Buyer’s ownership, administration, or operation of the Assets;

(c)                                   all claims and causes of action of Seller arising from acts, omissions or events, or damage to or destruction of the Asset, occurring prior to the Effective Time; provided, however, Seller shall transfer to Buyer all claims and causes of action of Seller against prior owners of the Assets or third parties for Environmental Obligations that are not Retained Obligations;

(d)                                  except as otherwise provided in Article 15 , all rights, titles, claims and interests of Seller relating to the Assets prior to the Effective Time (i) under any policy or agreement of insurance or indemnity; (ii) under any bond; or (iii) to any insurance or condemnation proceeds or awards;

(e)                                   all Hydrocarbons produced from or attributable to the Assets with respect to all periods prior to the Effective Time, together with all proceeds from or of such Hydrocarbons, except the Inventory Hydrocarbons and the unsold inventory of gas plant products, if any, attributable to the Leases as of the Effective Time;

(f)                                     claims of Seller for refund of or loss carry forwards with respect to production, windfall profit, severance, ad valorem or any other taxes attributable to any period prior to the Effective Time, or income or franchise taxes;

(g)                                  all amounts due or payable to Seller as adjustments or refunds under any contracts or agreements (including take-or-pay claims) affecting the Assets with respect to any period prior to the Effective Time;

(h)                                  all amounts due or payable to Seller as adjustments to insurance premiums

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related to the Assets with respect to any period prior to the Effective Time;

(i)                                      all proceeds, benefits, income or revenues accruing (and any security or other deposits made) with respect to the Assets, and all accounts receivable attributable to the Assets, prior to the Effective Time; and

(j)                                      all of Seller’s intellectual property, including, but not limited to, proprietary computer software, patents, trade secrets, copyrights, names, marks and logos.

(k)                                   the Assets identified on Schedule 1.28(j) .

1.31.                      “ Final Settlement ” and “ Final Settlement Statement ” shall be as defined in Section 3.5 .

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

1.33.                      “ Hydrocarbons ” shall mean crude oil, natural gas, casinghead gas, condensate, sulphur, natural gas liquids and other liquid or gaseous hydrocarbons, and shall also refer to all other minerals of every kind and character which may be covered by or included in the Leases and Assets.

1.34.                      “ Inventory Hydrocarbons ” shall mean all merchantable oil and condensate (for oil or liquids in storage tanks, being only that oil or liquids physically above the top of the inlet connection into such tanks) produced from or attributable to the Leases prior to the Effective Time which have not been sold by Seller and are in storage at the Effective Time.

1.35.                      “ Leases ” shall mean, except to the extent constituting Excluded Assets, any and all interests owned by Seller in and to the oil, gas and/or mineral leases set forth on Exhibit “A-1,” including any overriding royalty interests, net profit interests, working interests, reversionary interests, and any other interests of Seller in said oil, gas and/or mineral leases, or the lands covered by said Leases.

1.36.                      “ Material ” shall be as defined in Section 7.1 .

1.37.                      “ Material Adverse Effect ” “Material Adverse Effect” means an event or circumstance that (a) results in a material adverse effect on the business, Assets, financial condition, or results of operations of the Company taken as a whole or (b) makes impossible the consummation of the transactions contemplated by this Agreement; provided, however, that any actual change or changes in reserves (including any reclassification or recalculation of reserves in the ordinary course of business) or in the prices of Hydrocarbons, ordinary wear and tear and any change in condition of the Assets for production of Hydrocarbons through normal depletion or other mechanical failure (including the watering-out of any well,

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collapsed casing or sand infiltration of any well), general economic conditions or local, regional, national or international industry or economic conditions (including changes in applicable Laws and changes in financial or market conditions) shall be deemed not to constitute a “Material Adverse Effect.”

1.38.                      “ Material Contracts ” “Material Contracts” has the meaning set forth in Section 4.23 .

1.39.                      “ Permitted Encumbrances ” shall be as defined in Section 8.1(e) .

1.40.                      “ Person ”  means an individual, group, partnership, corporation, limited liability company, trust or other entity.

1.41.                      “ Plugging and Abandonment Obligations ” shall mean the responsibility and liability, including but not limited to Claims for damages and/or other relief, for the following plugging and abandonment obligations related to the Assets, regardless of whether they are attributable to the ownership or operation of the Assets before or after the Effective Time:

(a)                                   the necessary and proper plugging, replugging and abandonment of all Wells, whether plugged and abandoned before or after the Effective Time;

(b)                                  the necessary and proper removal, abandonment, and disposal of all platforms, structures, pipelines, equipment, movables, immovables, abandoned property and junk located on or comprising part of the Assets;

(c)                                   to the extent allowed by the applicable authorized governmental body and the owners of the property affected, the necessary and proper capping and burying of all associated flow lines located on or comprising part of the Assets;

(d)                                  the necessary and proper restoration of the Assets and/or the property covered by the Assets or upon which the Assets are located, both surface, surface water, groundwater, waterbottom and subsurface, to such condition as may be required by applicable laws, regulation or contract;

(e)                                   any necessary clean-up or disposal of Assets contaminated by NORM as may be required by applicable laws, regulation or contract;

(f)                                     all obligations arising from contractual requirements and demands made by authorized governmental bodies or parties claiming an interest in the Assets and/or the property covered by the Assets or upon which the Assets are located; and

(g)                                  any and all indemnity obligations of Seller with respect to the above, along with any and all Claims against Seller for indemnity with respect to the above, under, pursuant to or arising from any acquisition, purchase and sale or other agreement.

1.42.                      “ Preferential Purchase Rights ” shall be as defined in Section 10.1(b) .

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1.43.                      “ Purchase Price ” shall be as defined in Section 3.1 .

1.44.                      “ Real Property, Personal Property and Incidental Rights ” shall mean all right, title and interest of Seller in and to or derived from the following insofar as the same do not constitute Excluded Assets and are attributable to, appurtenant to, incidental to, or used for the operation of the Leases:

(a)                                   all fee interests and surface estate interests described on Exhibit “A-5” ;

(b)                                  all easements, rights-of-way, surface leases, permits, licenses, servitudes or other interests relating to the use of the surface, including but not limited to those described on Exhibit “A-4,” or in instruments described in Exhibit “A-3” ;

(c)                                   all Wells, along with all equipment and other personal property, inventory, spare parts, tools, fixtures, pipelines, dehydration facilities, platforms, tank batteries, appurtenances, and improvements situated upon the Leases or lands pooled or unitized therewith as of the Effective Time and used or held for use in connection with the development or operation of the Leases or the production, treatment, storage, compression, processing or transportation of Hydrocarbons from or in the Wells or the Leases or lands pooled or unitized therewith including, but not limited to those described on Exhibit “A-2” ;

(d)                                  all unit agreements, orders and decisions of state and federal regulatory authorities establishing units, joint operating agreements, enhanced recovery and injection agreements, farmout agreements and farmin agreements, options, drilling agreements, exploration agreements, assignments of operating rights, working interests, subleases and rights above or below certain footage depths or geological formations, to the extent same is attributable to the Assets, as of the Effective Time, including but not limited to those described on Exhibit “A-3” ;

(e)                                   all contracts, agreements, and title instruments to the extent attributable to and affecting the Assets in existence at Closing, including all Hydrocarbon sales, purchase, gathering, transportation, treating, marketing, exchange, processing, disposal and fractionating contracts, joint operating agreements, including but not limited to those described on Exhibit “A-3” ;

(f)                                     originals of all lease files, land files, well files, production records, division order files (including paysheets and supporting files), abstracts, title opinions, and contract files, insofar as the same are directly related to the Leases, including, without limitation, all geological , information and data, to the extent that such data is not subject to any third party restrictions, but excluding Seller’s proprietary interpretations of same; and

(g)                                  the Company books, records and files of Four Star Development Corporation, including but not limited to, permits, licenses, corporate records, minute book, contracts, title records, tax records relating solely to the business of the Company, financial, engineering and safety records.

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1.45.                      “ Retained Obligations ” shall mean:

(a)                                   any Environmental Obligation of any nature related to the Excluded Assets;

(b)                                  all Environmental Obligations of any nature that relate to or arise from events occurring as of the date NGS acquired the Assets through the Closing Date.

(c)                                   Claims for personal injury or wrongful death occurring prior to the Effective Time;

(d)                                  responsibility to any governmental agency for any offsite storage and disposal by Seller, prior to the Effective Time, of hazardous materials produced from the Assets, and stored or disposed of, on, in or below any property which does not form a part of the Assets, for which and to the extent that remediation is required by any environmental or conservation law in effect as of the Effective Time; for purposes of this subpart “(d),” “offsite storage and disposal” shall not include the seepage, leakage or other migration of hazardous materials from the property forming part of the Assets to other lands;

(e)                                   responsibility and liability for the litigation and threatened litigation listed on Exhibit “F,” and the Claims thereunder; and

(f)                                     except as otherwise provided in this Agreement, all other liabilities, duties, and obligations that arise out of the ownership, operation or use of the Assets prior to the Effective Time, including, but not limited to, the payment of all operating expenses and capital expenditures relating to the Assets, all liabilities, duties, and obligations, express or implied, imposed upon Seller herein under the provisions of the Leases and any and all assignments, subleases, farmout agreements, assignments of overriding royalty, joint operating agreements, easements, rights-of-way, and all other contracts, agreements and instruments affecting the Leases, or the premises covered thereby, whether recorded or unrecorded, whether identified or not on the Exhibits or Schedules attached hereto and under all applicable laws, rules, regulations, orders and ordinances.

1.46.                      “ Seller’s Credits ” shall be as defined in Section 3.3(a) .

1.47.                      “ Seller Group ” means (a) Seller and its officers, directors, agents, representatives, consultants and employees, and (b) Seller’s Parent and Affiliates and their officers, directors, agents, representatives, consultants and employees.

1.48.                      “ Shares ” shall mean all of the issued and outstanding capital stock of Four Star Development Corporation, a Louisiana Corporation.

1.49.                      “ Scheduled Interests ” or “ Scheduled Interest” shall mean that portion of the Assets attributable to the Leases or Wells identified on Exhibits “A-1” and “A-2” and having a value greater than $0.00.

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1.50.                      “ Tax” or “Taxes ” means all income, profits, franchise, withholding, ad valorem, employment, social security, disability, occupation, property, severance and excise taxes, together with any interest and penalties with respect thereto, imposed by or on behalf of any Taxing Authority.

1.51.                      “ Taxing Authority ” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

1.52.                      “ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto.

1.53.                      “ Third Party Interests ” shall be as defined in Section 10.1(c).

1.54.                      “ Title Defect” shall be as defined in Section 8.1(c).

1.55.                      “ Title Defect Deductible” shall be as defined in Section 8.3(a).

1.56.                      “ Title Defect Notice Date” shall be as defined in Section 8.2.

1.57.                      “ Title Defect Property” shall be as defined in Section 8.1(d) .

1.58.                      “ Well” or “Wells” shall refer to all wells located on the Assets, or lands pooled or unitized therewith, including but not limited to those listed on Exhibit “A-2” attached hereto, whether or not such wells are producing, active or inactive, plugged and abandoned, temporarily abandoned, shut-in, injection, disposal, water supply or otherwise.

ARTICLE 2. - AGREEMENT TO PURCHASE AND SELL

Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey to Buyer and Buyer agrees to purchase and pay for the Assets and to assume the Assumed Obligations.

ARTICLE 3. - PURCHASE PRICE AND PAYMENT

3.1.                             Purchase Price.

Subject to adjustment as set forth below, the Purchase Price for the Assets shall be Four Million Five Hundred Thousand and No/100 dollars ($4,500,000.00), allocated among the Scheduled Interests as provided in Section 3.8 .

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3.2.                             Escrow Deposit.

Immediately upon the execution hereof, Buyer shall tender to Wells Fargo Bank, N.A. (the “Bank ”) , by wire transfer, the Escrow Deposit in the amount of One Hundred Thousand and No/100 dollars ($100,000.00) (the “Escrow Deposit”). The Escrow Deposit will be placed in an interest-bearing account with the Bank in accordance with the escrow agreement that is attached hereto as Exhibit “B” (the “ Escrow Agreement ”).  In the event the transaction contemplated hereby is consummated in accordance with the terms hereof, the Escrow Deposit and any accrued interest, shall be applied to the Purchase Price to be paid by Buyer at Closing, in accordance with Section 3.3(b).   In the event this Agreement is terminated by the Buyer or Seller in accordance with Article 16 below, the Escrow Deposit and any accrued interest, shall be returned to Buyer or retained by the Seller as provided for herein. In the event the Escrow Deposit is not received by the Bank by the close of business on the first Business Day after the execution of this Agreement, this Agreement shall be null and void, and the Parties shall have no further obligation to each other hereunder.

3.3.                             Adjustments to Purchase Price.

The Purchase Price for the Assets shall be adjusted as follows with all such amounts being determined in accordance with generally accepted accounting principals and Council of Petroleum Accountants Society (COPAS) standards:

(a)                                   The Purchase Price shall be adjusted upward by the following ( “ Seller’s Credits ” ):

(1)                                   the value of (i) all Inventory Hydrocarbons, such value to be based upon the existing contract price for crude oil in effect as of the Effective Time, less severance taxes, transportation fees and other fees deducted by the purchaser of such oil, such oil to be measured at the Effective Time by the operators of the Assets;

(2)                                   the amount of all direct expenditures, production expenses, operating expenses, capital expenses, and all other expenditures attributable to the Assets and incurred and paid by or on behalf of Seller in the ordinary course of owning and/or operating the Assets and attributable to the period from the Effective Time to the Closing Date, provided, however , this provision shall be subject to Section 11.1 after the execution of the Agreement through the Closing Date;

(3)                                   an amount equal to all prepaid expenses that are actually paid by or on behalf of Seller prior to the Initial Closing Date in the ordinary course of owning and/or operating the Assets as heretofore owned and/or operated and attributable to the Assets and allocable to any period after the Effective Time;

(4)                                   an amount equal to the sum of any upward adjustments provided elsewhere in this Agreement; and

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(5)                                   any other amount agreed upon by Seller and Buyer in writing prior to Closing.

(b)                                  The Purchase Price shall be adjusted downward by the following ( “ Buyer’s Credits ” ):

(1)                                   the amount of gross proceeds received by or credited to Seller that are attributable to the sale of any Hydrocarbon production from the Assets for any period of time after the Effective Time net of all applicable production related taxes and royalties paid by or on behalf of Seller;

(2)                                   the amount of all unpaid ad valorem, property, production, excise, severance and similar taxes and assessments (but not including income taxes), which taxes and assessments become due and payable or accrue to the Assets prior to the Effective Time, which amount shall, where possible, be computed based upon the tax rate and values applicable to the tax period in question; otherwise, the amount of the adjustment under this paragraph shall be computed based upon such taxes assessed against the applicable portion of the Assets for the immediately preceding tax period just ended;

(3)                                   the Escrow Deposit, and all accrued interest thereon;

(4)                                   an amount equal to the sum of any downward adjustments provided elsewhere in this Agreement; and

(5)                                   any other amount agreed upon by Seller and Buyer in writing prior to Closing.

(c)                                   Seller shall prepare and deliver to Buyer, at least five (5) business days prior to Closing, Seller’s estimate of the adjusted Purchase Price to be paid at Closing, together with a preliminary statement setting forth Seller’s estimate of the amount of each adjustment to the Purchase Price to be made pursuant to this Section 3.3 .  The Parties shall negotiate in good faith and attempt to agree on such estimated adjustments prior to Closing.  In the event any estimated adjustment amounts are not agreed upon prior to Closing, the estimate of the adjusted Purchase Price for purposes of Closing shall be calculated based on Seller’s and Buyer’s agreed upon estimated adjustments and Seller’s good faith estimate of any disputed amounts (and any such disputes shall be resolved by the Parties in connection with the resolution of the Final Settlement Statement).

3.4.                             Manner of Payment .

At Closing, Buyer shall pay Seller the Adjusted Purchase Price by wire transfer of immediately available funds pursuant to Seller’s written instructions.  At Closing, the Buyer and Seller shall give joint instructions to the Bank to disburse the Escrow Deposit to the Buyer, together with all accrued interest, in payment of the Purchase Price as adjusted hereinabove.

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3.5.                             Final Settlement Statement .

As soon as reasonably practicable, but in no event later than ninety (90) days after the Closing Date, Seller will deliver to Buyer a final settlement statement (the “Final Settlement Statement”) setting forth the actual adjustments to the Purchase Price pursuant to Section 3.3 .  As soon as reasonably practicable, but in no event later than thirty (30) Days after Buyer receives the Final Settlement Statement, Buyer may deliver to Seller a written report containing any changes that Buyer proposes to be made to such statement.  Such changes shall be specified in reasonable detail with reasonable supporting documentation.  Any changes not so specified shall be deemed waived, and Seller’s determinations shall prevail.  If Buyer fails to timely deliver the written report to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the statement as delivered by Seller will be deemed to be correct and will be final and binding on the Parties and not subject to further audit or arbitration.  As soon as reasonably practicable, but in no event later than fifteen (15) Days after Seller receives Buyer’s written report, the Parties shall meet and undertake to agree on the final adjustments to the Final Settlement Statement.  If the Parties fail to agree on the final adjustments within the fifteen (15) Day period, either Party may submit the disputed items to the Accounting Referee for resolution.  The Parties shall direct the Accounting Referee to resolve the disputes within thirty (30) Days after having the relevant materials submitted for review.  The decision of the Accounting Referee will be binding on and non-appealable by the Parties.  The fees and expenses associated with the Accounting Referee will be borne equally by the Parties.  Any amounts owed by one Party to the other as a result of the Final Settlement Statement will be paid within five (5) Business Days after the date when the amounts are agreed upon by the Parties or the Parties receive a decision of the Accounting Referee, and the items included in the Final Settlement Statement will be final and binding between the Parties and not subject to further audit or arbitration.

3.6.                             Post-Closing Revenues .

Except as expressly provided otherwise in this Agreement, Buyer will promptly pay to Seller any and all amounts received after Closing (but prior to the finalization of the Final Settlement Statement) by Buyer or the Company (to the extent not accounted for in the Preliminary Settlement Statement) that are attributable to the Assets or the business or the operations of the Company prior to the Effective Time or that are attributable to the Excluded Assets.  Except as expressly provided otherwise in this Agreement, Seller will pay to Buyer any and all amounts received after Closing (but prior to the finalization of the Final Settlement Statement) by Seller (to the extent not accounted for in the Preliminary Settlement Statement) that are attributable to the Assets or the business or the operations of the Company on and after the Effective Time.  The Party responsible for the payment of amounts received shall reimburse the other Party within five (5) Business Days after the end of the month in which such amounts were received by the Party responsible for payment and such amounts shall not be taken into account for purposes of the Final Settlement Statement.  Notwithstanding the foregoing, this Section 3.6 shall not apply to amounts received prior to Closing if such amounts are included in the Preliminary Settlement Statement.  Such amounts

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(to the extent the same differ from estimates in the Preliminary Settlement Statement) will be accounted for in the Final Settlement Statement.

3.7.                             Post-Closing Expenses .

Except as expressly provided otherwise in this Agreement, Seller will promptly reimburse Buyer for any and all costs and expenses paid after Closing (but prior to the finalization of the Final Settlement Statement) by Buyer or the Company (to the extent not accounted for the Preliminary Settlement Statement) that are attributable to the Assets or the business or the operations of the Company prior to the Effective Time or that are attributable to the Excluded Assets.  Except as provided otherwise in this Agreement, Buyer will reimburse Seller for any and all costs and expenses paid after Closing (but prior to the finalization of the Final Settlement Statement) by Seller (to the extent not accounted for in the Preliminary Settlement Statement) that are attributable to the Assets or the business or the operations of the Company on and after the Effective Time.  The Party responsible for the payment of such costs and expenses shall reimburse the other Party within five (5) Business Days after the end of the month in which the applicable invoice and proof of payment of such invoice were received by the Party responsible for payment and such amounts shall not be taken into account for purposes of the Final Settlement Statement.  Notwithstanding the foregoing, this Section 3.7 shall not apply to amounts paid prior to Closing if such amounts are included, in whole or in part, in the Preliminary Settlement Statement.  Such amounts (to the extent the same differ from the estimates in the Preliminary Settlement Statement) will be accounted for in the Final Settlement Statement.

3.8.                             Purchase Price Allocations .

Seller and Buyer agree to (i) allocate the Purchase Price as to the Scheduled Interests in accordance with the allocation schedule attached as Exhibit “C” hereto (the “Allocated Values”), (ii) treat and report the transactions contemplated by this Agreement in all respects consistent with Exhibit “C” for purposes of any Taxes, and (iii) not take any action inconsistent with such obligations.  Seller and Buyer shall duly prepare and timely file such reports and information returns as may be prescribed under Section 1060 of the Code, including Form 8594, and any similar returns or reports required under other applicable Law, to report the allocation of the Purchase Price in accordance with Exhibit “C.”

ARTICLE 4. - SELLER’S REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Buyer as of the date hereof, and the Closing Date that:

4.1.                             Seller is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and has all requisite corporate power and authority to own the Assets owned by Seller.  Seller is duly licensed or qualified to do business as a foreign corporation and is in good standing in the State of Louisiana.

4.2.                             Seller has all requisite power and authority to carry on its business as

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presently conducted, to enter into this Agreement and the other documents and agreements contemplated hereby, and to perform its obligations under this Agreement and the other documents and agreements contemplated hereby. Effective as of Closing, the consummation of the transactions contemplated by this Agreement will not violate, nor be in conflict with, any provision of its governing documents or any agreement or instrument to which it is a party or by which it is bound (except any provision contained in agreements customary in the oil and gas industry relating to (1) the Preferential Purchase Rights (defined below) as to all or any portion of the Assets; (2) required consents to transfer and related provisions; (3) any other third-party approvals or consents contemplated herein), or any judgment, decree, order, statute, rule, or regulation applicable to Seller.

4.3.                             This Agreement, and all documents and instruments required hereunder to be executed and delivered by Seller at Closing, constitute legal, valid and binding obligations of Seller in accordance with its respective terms, subject to applicable bankruptcy and other similar laws of general application with respect to creditors.

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

4.5.                             The execution, delivery and performance (effective as of Closing) of this Agreement, and the transaction contemplated hereunder has been duly and validly authorized by all requisite authorizing action, corporate, partnership or otherwise, on the part of Seller.

4.6.                             Except for a) any consents or approvals contained on any Leases, and b) any change of control provisions or other applicable transfer restrictions in any contracts to which the Company is a party or is bound, Seller’s execution and delivery of this Agreement and the other documents and agreements contemplated hereby, to which it is a party and the consummation of the transactions contemplated by this Agreement by it shall not:

(i)                                      conflict with or require the consent of any Person under any of the terms, conditions or provisions of the organizational documents of Seller or of the Company;

(ii)                                   violate any provision of, or require any filing, consent or approval under, any Laws applicable to Seller or the Company except (in each case) where such violation or the failure to make or obtain such filing, consent or approval would not have a Material Adverse Effect;

(iii)                                conflict with, result in a breach of, constitute a default under or constitute an event that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the acceleration of the performance required by, or require any consent, authorization, approval, or change of control or similar payment under any Material Contract, except where such conflict, breach or default would not have a Material Adverse Effect; or

(iv)                               result in the creation or imposition of any lien or Encumbrance upon one or more of the Scheduled Interests or Shares except for the Permitted Encumbrances and except where such lien or Encumbrance would not have a Material Adverse Effect.

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4.7.                             Seller has not incurred any obligation or liability, contingent or otherwise, for brokers’ or finders’ fees in connection with this Agreement and the transaction provided herein.

4.8.                             Other than as set forth in Exhibit “F,” there are no claims, investigations, demands, actions, suits, or administrative, legal or arbitration proceedings (including condemnation, expropriation, or forfeiture proceedings) pending or, to the knowledge of Seller, threatened against Seller, the Company, or any Asset: (i) seeking to prevent the consummation of the transactions contemplated hereby, or (ii) which, individually or in the aggregate, would have a Material Adverse Effect on the Assets.

4.9.                             The transfer of the Assets to Buyer will not violate at the Closing Date any covenants or restrictions imposed on Seller by any bank or other financial institution in connection with a mortgage or other instrument, and will not result in the creation or imposition of a lien on any portion of the Assets.

4.10.                      The authorized equity securities of the Company consist of the Shares.  The Shares constitute all of the issued and outstanding capital stock of the Company.  The Shares have been duly authorized and validly issued and are fully paid and, to the extent provided by applicable Law, nonassessable.  Seller owns all of the Shares free and clear of any security interests, Claims, restrictions on transfer, options, warrants, purchase rights, conversion rights, and exchange rights, and there are no other contracts or commitments that could require Seller to sell, transfer, or otherwise dispose of the Shares, other than this Agreement.  There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the Shares.

4.11.                      Except as disclosed by Seller in writing, to Seller’s knowledge, it is in material compliance with all laws, rules, regulations and orders pertaining to such Scheduled Interest, including Environmental Laws.

4.12.                      To Seller’s knowledge, the Company has all governmental permits necessary for the operation of the Scheduled Interest and is not in material default under any permit, license or agreement relating to the operation and maintenance of the Scheduled Interest.

4.13.                      (a)                                   The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana.  The Company has full corporate power and authority to own, lease or otherwise hold the any assets it owns, leases or otherwise holds and conduct its business in the manner presently conducted

(b)                                  Seller has delivered to Buyer true and complete copies of the organizational documents of the Company.

(c)                                   Except as set forth on Schedule 4.13(e) , as of the Closing Date, the Company has no liabilities that would be required to be reflected on a balance sheet (including the footnotes thereto) of the Company prepared in accordance with GAAP, other than current liabilities incurred in the ordinary course of business with respect to the Assets.

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(d)                                  The books of account, minute books, and other records of the Company, which have been or will be made available to Buyer prior to Closing, are complete and correct and accurately reflect all meetings held of, and Company action taken by, the directors, officers and any committees thereof.

(e)                                   The Company is an Operator in good standing with the Louisiana Office of Conservation, Department of Natural Resources, with full authority to carry on its business as it is currently conducted, and as it will be conducted as of the Closing Date.

4.14.                      (a)                                   Effective as of the Closing Date, Seller warrants Defensible Title to the Scheduled Interests shown in Exhibits “A-1” and “A-2” and to the other Assets unto Buyer against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Seller, but not otherwise, subject, however, to the Permitted Encumbrances and to any matters properly filed of record in the Parish wherein the property is located.

(b)                                  The tangible personal property comprising the Assets is in a condition generally sufficient to operate the Assets as currently operated.  The Assets are free and clear of all encumbrances other than Permitted Encumbrances.

4.15.                      Except as set forth on Exhibit “H,” to Seller’s knowledge, there are no waivers, consents to assign, approvals or similar rights owned by third parties and required in connection with the conveyance of the Assets from Seller to Buyer.

4.16.                      Except as set forth on Exhibit “H,” to Seller’s knowledge, there are no rights of first refusal, preferential rights, preemptive rights or contracts, or other commitments or understandings of a similar nature to which Seller is a part or to which the Assets are subject.

4.17.                      No Hydrocarbons produced or to be produced from the Leases are subject to any gas sales contracts other than those identified on Exhibit “A-4” and, no third party has any call upon, option to purchase, take-or-pay obligations, dedication rights or similar rights with respect to the Hydrocarbons produced to be produced from Seller’s interest in the Leases, except as described on Exhibit “A-4” .

4.18.                      Except as set forth on Exhibit “G,” there are no oil or gas production imbalances with respect to the Leases.

4.19.                      Schedule 4.19 sets forth the name of each financial institution in which the Company has borrowing or investment agreements, deposit or checking accounts or safe deposit boxes and the types of those arrangements and accounts, including, as applicable, names in which accounts or boxes are held, the account or box numbers and the name of each Person authorized to draw thereon or have access thereto.

4.20.                      The Company does not have any employees.  On and after the Closing, the Company will not have any severance arrangements, change in control payments or agreements, termination agreements or employment agreements, in each case with respect to employees to the extent employed prior to the Closing.

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4.21.                      On and after the Closing, the Company shall not sponsor, maintain, contribute to or have any liability to or with respect to any Benefit Plan that existed prior to the Closing or any former employee to the extent employed prior to the Closing.

4.22.                      (a)                                   With respect to the Assets, Seller has not entered into, or is not subject to, any agreements, consents, orders, decrees, judgments, license or permit conditions, or other directives of any Governmental Authority in existence as of the date of this Agreement based on any Environmental Laws that relate to the future use of any of the Assets and that require any change in the present conditions of any of the Assets.

(b)                                  Except as set forth in Exhibit “F” , 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 included in the Assets that interferes with or prevents compliance by Seller with any Environmental Law or the terms of any license or permit issued pursuant thereto which would have a Material Adverse Effect.

(c)                                   To Seller’s knowledge, all material reports, studies, written notices from environmental Governmental Authorities, tests, analyses, and other documents specifically addressing environmental matters related to Seller’s ownership or operation of the Assets, which are in Seller’s possession, have been made available to Buyer.

4.23.                      Material Contracts.

(a)                             Each of the contracts of the type described below to which the Company is a party other than any such Contracts constituting Excluded Assets (collectively, the “Material Contracts”) are set forth on Schedule 4.23 :

(i)                                      any Contract that can reasonably be expected to result in aggregate payments by the Company of more than Ten Thousand Dollars ($10,000) during the current or any subsequent fiscal year of the Company (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 the Company of more than Ten Thousand Dollars ($10,000) during the current or any subsequent fiscal year of the Company (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

(iii)                                any indenture, mortgage, loan, credit or sale-leaseback or similar Contract that can reasonably be expected to result in aggregate payments by the Company of more than Ten Thousand Dollars ($10,000) during the current or any subsequent fiscal year of the Company;

(iv)                               any Contract that constitutes a lease (other than an oil and gas lease), under which the Company is the lessor or the lessee of real or personal property which lease cannot be terminated by the Company without penalty upon sixty (60) Days or less notice and involves an annual base rental of more than Ten Thousand Dollars ($10,000); and

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(v)                                  any Contract with the Parent or an Affiliate of Seller that will not be terminated prior to Closing.

(b)                                  Except as set forth on Schedule 4.23 and except for such matters that would not have a Material Adverse Effect, the Material Contracts are in full force and effect in accordance with their respective terms, there exist no defaults thereunder by Seller or the Company or, to Seller’s Knowledge, by any other Person that is a party to such Material Contracts and no event has occurred that with notice or lapse of time or both would constitute any default under any such Contract by the Company or, to Seller’s Knowledge, any other Person who is a party to such Material Contract.  Prior to the execution of this Agreement, Seller has furnished or made available to Buyer copies of each Material Contract and all amendments thereto.

ARTICLE 5. - BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to Seller as of the date hereof, and the Closing Date that:

5.1                                Buyer is a Texas limited liability company duly organized, validly existing and in good standing under the Laws of the State of Texas and has all requisite corporate power and authority to own the Assets.  Buyer as of the Closing Date will be duly licensed or qualified to do business as a foreign corporation and is in good standing in the State of Louisiana.

5.2                                Buyer has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement and the other documents and agreements contemplated hereby, and to perform its obligations under this Agreement and the other documents and agreements contemplated hereby.  The consummation of the transactions contemplated by this Agreement will not violate, nor be in conflict with, any provision of Buyer’s articles of incorporation, partnership agreement(s), by-laws or governing documents or any agreement or instrument to which it is a party or by which it is bound, or any judgment, decree, order, statute, rule, or regulation applicable to Buyer;

5.3                                The execution, delivery and performance of this Agreement and the transactions contemplated hereunder have been duly and validly authorized by all requisite authorizing action, corporate, partnership or otherwise, on the part of Buyer;

5.4                                This Agreement, and all documents and instruments required hereunder to be executed and delivered by Buyer at Closing, constitute legal, valid and binding obligations of Buyer in accordance with their respective terms, subject to applicable bankruptcy and other similar laws of general application with respect to creditors;

5.5                                There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by, or to the actual knowledge of Buyer threatened against Buyer;

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5.6                                Buyer has not incurred any obligation or liability, contingent or otherwise, for brokers’ or finders’ fees in connection with this Agreement and the transaction provided herein;

5.7                                Buyer has, or by Closing will have, the financial resources to close the transaction contemplated by this Agreement, and pay to Seller the Purchase Price;

5.8                                Buyer acknowledges the existence of the claims and suits described in Exhibit “F” and that these claims and suits are Permitted Encumbrances as set forth in Section 8.1(e) .  Buyer further acknowledges that Buyer has, or by Closing will have, legal counsel of its choice fully review those claims and suits identified on Exhibit “F.”   Buyer further acknowledges to Seller that Buyer has inspected the Real Property and Personal Property, as defined in Section1.44 , and that any operating deficiencies present have been incorporated into the negotiated Purchase Price .

5.9                                Buyer is acquiring the Interests for its own account for use in its trade or business and not with a view toward any sale or distribution thereof, nor with any present intention of making a distribution thereof within the meaning of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or other applicable securities Laws; and

5.10                         Buyer is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities.  In making its decision to enter into this Agreement and to consummate the transaction contemplated herein, Buyer has relied or shall rely solely on its own independent investigation and evaluation of the Assets including the environmental and physical condition of the Assets.  Prior to entering into this Agreement, Buyer was advised by and has relied solely on its own expertise and legal, tax, reservoir engineering, accounting, and other professional counsel concerning this Agreement, the Assets and the value thereof; Buyer has no Knowledge of any fact that results in the breach of any representation, warranty or covenant of Seller given hereunder.

ARTICLE 6. - ACCESS TO INFORMATION AND INSPECTIONS

6.1.                             Title Files .

Promptly after the execution of this Agreement and until the Closing Date, Seller shall permit Buyer and its representatives at reasonable times during normal business hours to examine, in Seller’s offices at their actual location, all abstracts of title, title opinions, title files, ownership maps, lease files, assignments, division orders, payout statements, title curative, other title materials and agreements pertaining to the Assets as requested by Buyer, insofar as the same may now be in existence and in the possession of Seller.  No warranty of any kind is made by Seller as to the information so supplied, and Buyer agrees that any conclusions drawn therefrom are the result of its own independent review and judgment.

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6.2.          Other Files .

Promptly after the execution of this Agreement and until the Closing Date, Seller shall permit Buyer and its representatives at reasonable times during normal business hours to examine, in Seller’s offices at their actual location, all production, well, regulatory, engineering and geological information, accounting information, environmental information, inspections and reports, and other information, files, books, records, and data pertaining to the Assets as requested by Buyer, insofar as the same may now be in existence and in the possession of Seller, excepting economic evaluations and Seller’s proprietary interpretations of same, reserve reports and any such information that is subject to confidentiality agreements or to the attorney/client and work product privileges.  No warranty of any kind is made by Seller as to the information so supplied, and Buyer agrees that any conclusions drawn therefrom are the result of its own independent review and judgment.

6.3.          Confidentiality Agreement .

All information made available to Buyer by Seller pursuant to the terms of this Agreement shall be maintained confidential by Buyer until Closing. The information protected by such confidentiality obligation does not include any information that (i) at the time of disclosure is generally available to and known by the public (other than as a result of a disclosure by Buyer), or which after such disclosure comes into the public domain through no fault of Buyer or its representatives, or (ii) is or was available to Buyer on a nonconfidential basis, or (iii) is already known to Buyer, as evidenced by Buyer’s written records, at the time of its disclosure by Seller to Buyer.  Buyer may disclose the information or portions thereof to those employees, agents or representatives of Buyer who need to know such information for the purpose of assisting Buyer in connection with its performance of this Agreement. Further, in the event that Buyer is requested or required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the information, Buyer shall provide Seller with prompt written notice of such request or requirement, so that Seller may seek such protective order or other appropriate remedy as it may desire.  Buyer shall further take reasonable steps to ensure that Buyer’s employees, consultants and agents comply with the provisions of this Section 6.3.

6.4.          Inspections .

Promptly after the execution of this Agreement and until Closing, Seller, subject to any necessary third-party operator approval, shall permit Buyer and its representatives at reasonable times and at their sole risk, cost and expense, to conduct reasonable inspections of the Assets for all purposes, including any Environmental Defects.  The provisions of the Confidentiality Agreement are hereby incorporated herein and adopted by reference and shall apply to any such inspections of the Assets.

6.5.          No Warranty or Representation on Seller’s Information .

EXCEPT AS SET FORTH IN THIS AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT

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TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF THE INFORMATION, RECORDS, AND DATA NOW, HERETOFORE, OR HEREAFTER MADE AVAILABLE TO BUYER IN CONNECTION WITH THE ASSETS OR THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS, QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION, ALLOWABLES OR OTHER REGULATORY MATTERS, POTENTIAL FOR PRODUCTION OF HYDROCARBONS FROM THE ASSETS, OR ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY OTHER MATERIAL FURNISHED TO BUYER BY SELLER.  ANY AND ALL SUCH DATA, INFORMATION AND MATERIAL FURNISHED BY SELLER IS PROVIDED AS A CONVENIENCE ONLY AND ANY RELIANCE ON OR USE OF SAME IS AT BUYER’S SOLE RISK.

ARTICLE 7. - ENVIRONMENTAL MATTERS AND ADJUSTMENTS

7.1.          Upon execution of and pursuant to the terms of this Agreement, Buyer shall have the right, at reasonable times during normal business hours, to conduct its investigation into the status of the physical and environmental condition of the Assets.  If, in the course of conducting such investigation, Buyer discovers that any Scheduled Interest is subject to a material Environmental Defect, Buyer may raise such material Environmental Defect in the manner set forth hereafter.  For purposes hereof, the term “material” shall mean that the Buyer’s good faith estimate, supported by documentation, of the cost of remediating any single Environmental Defect, or the net reduction in value of the Scheduled Interest affected by such Environmental Defect, whichever is lesser, exceeds a Ten Thousand And No/100 dollars ($10,000.00) threshold amount, and the sum of all material Environmental Defects in excess of each threshold exceeds Fifty Thousand And No/100 dollars ($50,000.00) (the “ Environmental Deductible” ). No later than 5:00 p.m. Central Standard Time on Friday, February 22, 2008 (the “ Environmental Defect Notice Date ” ), Buyer shall notify Seller in writing specifying such Environmental Defects, if any, the Scheduled Interests affected thereby, and Buyer’s good faith estimate of the costs of remediating such defects, or the net reduction in value of the Scheduled Interests affected by such defects, whichever is lesser, together with supporting documentation.  Seller may, but shall be under no obligation to, correct at its own cost and expense such defects on or before the Closing Date, in which case there shall be no reduction to the Purchase Price.  Prior to Closing, Buyer and Seller shall treat all information regarding any environmental conditions as confidential, whether material or not, and shall not make any contact with any governmental authority or third party regarding same without the written consent of the other party unless required by law.

7.2.          If Buyer fails to notify Seller prior to or on the Environmental Defect Notice Date of any Environmental Defects, all defects, whether known or unknown, will be deemed waived for purposes of adjustments pursuant to this Article 7 , the Parties shall proceed with Closing, Seller shall be under no obligation to correct the defects, and Buyer shall assume the risks, liability and obligations associated with such defects.

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7.3.          In the event any Environmental Defect, for which notice has been timely given as provided hereinabove, remains uncured as of Closing, Seller, at its sole option, shall, (i) agree to cure or remediate any Environmental Defect within a reasonable time after Closing not to exceed one hundred eighty (180) and without any reduction to the Purchase Price in a manner acceptable to both Parties, or (ii) reduce the Purchase Price by the amount of the Defect Value as determined pursuant to Section 8.4 , subject to application of the Environmental Deductible described in Section 7.1 and the Aggregate Defect Basket described in Section 7.4 .

7.4.          The Parties agree that adjustments to the Purchase Price under this Article 7 and Article 8 shall only occur to the extent that the aggregate Defect Value for the Environmental Defects and Title Defects, collectively, exceed One Hundred Thirty Five Thousand and No/100 dollars ($135,000.00) (the “ Aggregate Defect Basket ” ) after taking the applicable Environmental or Title Deductible into account.  For the avoidance of doubt and by way of example only, if the sum of the material Environmental Defects less the aggregate threshold for each Environmental Defect is One Hundred Fifty Thousand dollars ($150,000.00) and the sum of all Title Defects less the aggregate threshold for each Title Defect is One Hundred Thousand dollars ($100,000.00), the total adjustment to the Purchase Price would be One Hundred Fifteen Thousand dollars ($115,000.00) [being One Hundred Fifty Thousand dollars ($150,000.00) for the Environmental Defects, plus One Hundred Thousand dollars ($100,000.00) for the Title Defects, minus One Hundred Thirty Five Thousand And No/100 dollars ($135,000.00) for the Aggregate Defect Basket].

7.5.          In the event any adjustment to the Purchase Price is made due to an Environmental Defect raised by Buyer, the Parties shall proceed with Closing, Seller shall be under no obligation to correct the Environmental Defect, and the Environmental Defect shall become an Assumed Obligation of Seller.

ARTICLE 8. - TITLE DEFECTS AND ADJUSTMENTS

8.1.          Definitions .

For purposes hereof, the terms set forth below shall have the meanings assigned thereto.

(a)            “ Allocated Value ” shall mean the dollar amount allocated to each Scheduled Interest as set forth on Exhibit “C.”

(b)            “ Defensible Title ” , subject to and except for the Permitted Encumbrances (as hereinafter defined), means:

(1)            As to the Leases, such title held by Seller and reflected by appropriate documentation properly filed in the official records of the parish in which the Lease or Leases are located that (a) entitles Seller and will entitle Buyer, after Closing, to own and receive and retain, without suspension, reduction or termination, payment of revenues for not less than a net revenue interest of at least that reflected on

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Exhibit “A-2” of all oil and gas produced, saved and marketed from or attributable to the Wells listed, excluding Permitted Encumbrances; (b) obligates Seller, and will obligate Buyer after Closing, to bear not more than the working interest percentage of the costs and expenses reflected on Exhibit “A-2” as to the Wells listed, without a corresponding proportionate increase in the net revenue interest for such Well; (c) the Leases are free and clear of any liens, claims or encumbrances of any kind or character as of the Closing, except Permitted Encumbrances; and (d) the Seller is not in default under a material provision of any Lease or other contract or agreement affecting the Leases;

(2)            As to personal property included in the Assets, record title to such property is free and clear of any liens, claims or encumbrances of any kind or character as of the Closing, except Permitted Encumbrances; and

(3)            As to all other Assets, (a) such Assets are free and clear of any liens, claims or encumbrances of any kind or character as of the Closing; and (b) the Seller is not in default under a material provision of any Lease, operating agreement, or other contract or agreement affecting the Assets.

(c)            “ Title Defect ” shall mean (i) any matter which causes Seller to have less than Defensible Title to any of the Scheduled Interests as of the Closing Date, or (ii) any matter that causes one or more of the following statements to be untrue, except for Permitted Encumbrances:

(1)            Seller has not received written notice from any governmental authority or any other person (including employees) claiming any violation of any law, rule, regulation, ordinance, order, decision or decree of any governmental authority with respect to the Scheduled Interests.

(2)            Seller, or the Operator of a Scheduled Interest, has complied in all material respects with the provisions and requirements of all orders, regulations and rules issued or promulgated by governmental authorities having jurisdiction with respect to the Scheduled Interests and has filed for and obtained all governmental certificates, permits and other authorizations necessary for Seller’s current operation of the Scheduled Interests other than permits, consents and authorizations required for the sale and transfer of the Assets to Buyer;

(3)            Seller has not materially defaulted or materially violated any agreement to which Seller is a party or any obligation to which Seller is bound affecting or pertaining to the Scheduled Interests other than as disclosed hereunder or on any exhibit attached hereto;

(4)            The Leases attributable to the Scheduled Interests are in full force and effect; and

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(5)            All taxes, rentals, royalties, operating costs and expenses, and other costs and expenses related to the Scheduled Interests which are due from or are the responsibility of Seller have been paid.

( d)            “ Title Defect Property ” shall mean any Scheduled Interest or portion thereof burdened by a Title Defect.

( e)            “ Permitted Encumbrances ” shall mean any of the following matters:

(1)            defects in the early chain of title consisting of failure to recite marital status or the omission of succession or heirship proceedings;

(2)            defects or irregularities arising out of uncancelled mortgages, judgments or liens, the inscriptions of which, on their face, have expired as a matter of law prior to the Effective Time, or prior unreleased oil and gas leases which, on their face, expired more than ten (10) years prior to the Effective Time and have not been maintained in force and effect by production or operations pursuant to the terms of such leases;

(3)            tax liens and operator’s liens for amounts not yet due and payable, or those that are being contested in good faith by Seller in the ordinary course of business;

(4)            to the extent any of the following do not materially diminish the value of, or impair the conduct of operations on, any of the Assets and do not impair Seller’s right to receive the revenues attributable thereto: (i) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, hunting, fishing, logging, canals, ditches, lakes, reservoirs or the like, (ii) easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other similar rights-of-way, on, over or in respect of property owned or leased by Seller or over which Seller owns rights of way, easements, permits or licenses, and (iii) the terms and conditions of all leases, agreements, orders, instruments and documents pertaining to the Assets;

(5)            all lessors’ royalties, overriding royalties, net profits interests, carried interest, production payments, reversionary interests and other burdens on or deductions from the proceeds of production if the net cumulative effect of such burdens or deductions does not reduce the net revenue interest of Seller in any Well affected thereby to the extent that Seller will not be able to deliver to Buyer at Closing, a net revenue interest of at least that reflected on Exhibit “A-2” of all oil and gas produced, saved and marketed from or attributable to the unitized sand or other sands listed from the Wells listed, or impair the right to receive revenues attributable thereto;

(6)            preferential rights to purchase and required third party consents to assignments and similar agreements with respect to which waivers or consents are

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obtained from the appropriate parties, or the appropriate time period for asserting the rights has expired without an exercise of the rights prior to the Closing Date;

(7)            Required third-party consents to the assignment of the Leases, which Seller has previously requested, but not obtained, and the lessor of any such lease or holder of any such right has not prior to the execution of this Agreement objected to such assignment or notified Seller in writing of such objection obligation.

(8)            all rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests if they are customarily obtained subsequent to the sale or conveyance;

(9)            defects or irregularities of title arising out of events or transactions which have been barred by limitations or by acquisitive or liberative prescription;

(10)          rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the Assets in any manner, and all applicable laws, rules and orders of governmental authority;

(11)          any encumbrance or other matter (whether or not constituting a Title Defect) expressly waived in writing by Buyer or listed on Exhibit “F” ;

(12)          the litigation and threatened litigation, and any Claims thereunder, as listed on Exhibit “F.”

8.2.          Notice of Title Defects .

No later than 5:00 p.m. Central Standard Time on Friday, February 15, 2008 (the “ Title Defect Notice Date ” ), Buyer may provide Seller written notice of any Title Defect along with a description of those matters which, in Buyer’s reasonable opinion, constitute Title Defects and setting forth in detail Buyer’s calculation of the value for each Title Defect.  Seller may elect, at its sole cost and expense, but without obligation, to cure all or any portion of such Title Defects prior to Closing, in a manner acceptable to both Parties, in which case no reduction in the Purchase Price shall be made.  Buyer’s failure to deliver to Seller such notice on or before the Title Defect Notice Date shall be deemed a waiver by Buyer of all Title Defects, known or unknown, that Seller does not have notice of from Buyer on such date.  Any defect or deficiency concerning Seller’s title to the Scheduled Interests not asserted by Buyer on or prior to the Title Defect Notice Date shall be deemed waived by Buyer for purposes of any adjustment to the Purchase Price, the Parties shall proceed with Closing, Seller shall be under no obligation to correct the defects, and Buyer shall assume the risks, liability and obligations associated with such defects.  However, such waiver shall not effect or impair the warranties of Seller set forth in Section 8.5 or the indemnity obligations of Seller as set forth in Article 17 .

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8.3.          Title Defect Adjustment .

(a)            In the event any Title Defect, for which notice has been timely given as provided hereinabove, remains uncured as of Closing, Seller may elect to (i) cure such Title Defect by indemnifying Buyer against any damages, claims or expenses that may arise out of such Title Defect, subject to the provisions of Section 8.3(b)  below, with no reduction in the Purchase Price; or (ii) reduce the Purchase Price by an amount equal to the Defect Value as determined pursuant to Section 8.4 , to the extent that each individual Title Defect exceeds a Ten Thousand And No/100 dollar ($10,000.00) threshold, and the sum of all individual Title Defects in excess of each threshold amount exceeds Forty Five Thousand And No/100 dollars ($45,000.00) (the “ Title Defect Deductible ”) and the Aggregate Defect Basket described in Section 7.4 .  Should Seller elect either alternative “(i)” (indemnity) or “(ii)” (price reduction) in this Section 8.3(a) , those Assets affected by the Title Defect shall be transferred to Buyer at Closing.

(b)            The following provisions shall apply to an election by Seller under the second sentence of Section 8.3(a)  to cure a Title Defect by indemnifying Buyer with regard to such Title Defect:

(1)            Seller’s indemnity shall be limited to a period of two (2) years from the Effective Time.

(2)            In no event shall Seller’s indemnity exceed the amount of the Defect Value as determined under Section 8.4 hereof.

(3)            Seller’s indemnity shall be freely transferable by Buyer to its successors and assigns of the Assets affected by such Title Defect, including without limitation, any lender to Buyer and any purchaser of such Assets, whether directly from Buyer or through any foreclosure proceeding; and

(4)            If the Defect Value, as determined under Section 8.4 hereof, individually or in the aggregate, for one or more Title Defects to be covered by the Seller’s indemnity exceeds Seven Hundred Fifty Thousand and No/100 dollars ($750,000.00) (after application of the appropriate deductible(s) and without application of the Aggregate Defect Basket provided for in Section 7.4 ), Seller shall have no right under to indemnify Buyer with regard to such Title Defects without Buyer’s consent.

(c)            In the event any adjustment to the Purchase Price is made due to a Title Defect raised by Buyer, the Parties shall proceed with Closing, Seller shall be under no obligation to correct such defect, and such defect shall become an Assumed Obligation of Buyer.

8.4.          Environmental Defect and Title Defect Values .

Upon timely delivery of notice of an Environmental Defect and/or a Title Defect, Buyer and Seller shall use their best efforts to agree on the validity and value of the claim for

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the purpose of making any adjustment to the Purchase Price based on the provisions herein ( “ Defect Value ” ).  Notwithstanding anything to the contrary set forth herein, the Defect Value and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Scheduled Interest.  In determining the Defect Value of an Environmental Defect or a Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the Scheduled Interests, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the defect.  The following guidelines shall be followed by the Parties in establishing the Defect Value of any Environmental Defect or Title Defect for the purpose of adjusting the Purchase Price if the validity of the claim is agreed to by the Parties and proper notice has been timely given, subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects, and (ii) application of the Aggregate Defect Basket requirement as set forth in Section 7.4 for Environmental Defects and Title Defects:

(a)            If the Title Defect is based on a difference in net revenue interest or expense interest from that shown on Exhibit “C” for the affected Scheduled Interest, then the Purchase Price shall be proportionately reduced or increased as the case may be.

(b)            If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the defect from the Scheduled Interest, or (2) the decrease in the fair market value (determined as set forth below) of the Scheduled Interest as a result of the defect.

(c)            If the Environmental Defect or Title Defect represents an obligation or burden upon the affected Scheduled Interest for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the adjustment to the Purchase Price shall be the sum necessary to compensate Buyer at Closing for the adverse economic effect which the Environmental Defect or Title Defect will have on the affected Scheduled Interest.  This sum shall be the lesser of the cost of remediating the defect, or the decrease in the fair market value (determined as set forth below) of the Scheduled Interest as a result of the defect.  The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following:

(1)            the Allocated Value of the Scheduled Interest affected by the Environmental or Title Defect;

(2)            the productive status of the affected Scheduled Interest (i.e., proved developed producing, etc.) and the net present value of the future income expected to be produced therefrom;

(3)            if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and

(4)            the economic effect of the Environmental Defect or Title Defect.

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(d)            If the Defect Value cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Purchase Price, or if the validity of the claim as to an Environmental Defect or Title Defect cannot be agreed upon, then the Closing shall include the Asset(s) affected thereby.  If the validity of the claim is in dispute, there shall be no adjustment to the Purchase Price at Closing.  If the Defect Value of the claim is in dispute, the Purchase Price at Closing shall be adjusted by Seller’s good faith estimate of the Defect Value.  In either case, Buyer shall have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to arbitration in accordance with Section 18.2 .  Subject to the terms of Section 18.2 , the decision of the arbitrator regarding any dispute as to the validity or Defect Value of an Environmental Defect or a Title Defect Dispute shall be final as between the Parties, provided in no event shall the Defect Value of the disputed Environmental Defect or Title Defect exceed the Allocated Value of the affected Scheduled Interest.

8.5.          Title Warranty .

SELLER SHALL CONVEY SELLER’S INTERESTS IN AND TO THE ASSETS TO BUYER AS PROVIDED IN THE FORM OF ASSIGNMENT, CONVEYANCE AND BILL OF SALE ATTACHED AS EXHIBIT “D” HERETO (THE “ CONVEYANCE ”).  THE CONVEYANCE SHALL BE MADE WITHOUT WARRANTY OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND WITHOUT RECOURSE, EVEN AS TO THE RETURN OF THE PURCHASE PRICE OR OTHER CONSIDERATION, EXCEPT THAT, SUBJECT TO THE PERMITTED ENCUMBRANCES, SELLER SHALL WARRANT TITLE TO THE ASSETS AGAINST ALL CLAIMS, LIENS, BURDENS AND ENCUMBRANCES ARISING BY, THROUGH OR UNDER SELLER, BUT NOT OTHERWISE AND NOT WITH RESPECT TO ANY IMPAIRMENT OR FAILURE OF TITLE RELATED TO ANY LACK OF PRODUCTION IN PAYING QUANTITIES.  THE CONVEYANCE SHALL BE MADE WITH FULL SUBSTITUTION AND SUBROGATION TO BUYER IN AND TO ALL COVENANTS AND WARRANTIES BY OTHERS HERETOFORE GIVEN OR MADE TO SELLER WITH RESPECT TO THE ASSETS.

THE PARTIES AGREE THAT THE EXISTENCE OF ANY SUCH IMBALANCES SHALL NOT BE DEEMED A TITLE DEFECT.

ARTICLE 9. - DISCLAIMERS

9.1.          Disclaimer — Representations and Warranties .  Buyer acknowledges and agrees that, except as otherwise expressly provided in Article 4 , neither Seller nor Seller’s parent makes any representation or warranty, express, statutory, implied or otherwise with respect to the Company and the Assets.  Except as otherwise expressly provided in Article 4 , Seller, for itself and its Parent, hereby expressly disclaims any and all representations and warranties associated with the Company, or the Assets express, statutory, implied or otherwise, including any representation or warranty

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regarding:  (a) title (except as provided in Section 8.5 , (b) any costs, expenses, revenues, receipts, accounts receivable, or accounts payable, (c) any contractual, economic or financial information and data associated with the Company, or the Assets, (d) the continued financial viability or productivity of the Company or the Assets or transportability of product, (e) the environmental or physical condition of the Assets, (f) any federal, state, local or tribal income or other Tax consequences associated with the Company and the Assets, (g) the absence of patent or latent defects, (h) the state of repair of the Assets, (i) 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) freedom from patents, copyright or trademark infringement, (l) fitness for a particular purpose, and (m)  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.

9.2.          Disclaimer – Statements and Information .  Seller expressly disclaims any and all representations and warranties, except as otherwise expressly provided in Article 4 , associated with the quality, accuracy, completeness or materiality of the information, data and materials furnished (whether electronically, orally, by video, in writing or any other medium, by compact disk, in any data room, or otherwise) at any time to Buyer Group associated with transactions contemplated by this Agreement, including, information, data or materials regarding:  (a) title to the Assets, (b) costs, expenses, revenues, receipts, accounts receivable or accounts payable associated with the Company and the Assets, (c) contractual, economic or financial information associated with the Company, the Assets , (d) the continued financial viability or productivity of the Company or 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 Company, the Assets, (g) the absence of 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 and (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.

ARTICLE 10. - PREFERENTIAL PURCHASE RIGHTS

AND CONSENTS OF THIRD PARTIES

10.1.        Actions and Consents .

(a)            Seller and Buyer agree that each shall use all reasonable efforts to take or cause to be taken all such action as may be necessary to consummate and make effective the transactions provided in this Agreement and to assure that it will not be under any material corporate, legal, or contractual restriction that could prohibit or delay the timely consummation of such transaction.

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(b)            Seller shall notify all holders of (i) preferential rights to purchase the Assets ( “ Preferential Purchase Rights ” ), (ii) rights of consent to the assignment, or (iii) rights of approval to the assignment of the Assets, and of such terms and conditions of this Agreement to which the holders of such rights are entitled.  Seller shall promptly notify Buyer if any Preferential Purchase Rights are exercised, any consents or approvals denied, or if the requisite period has elapsed without said rights having been exercised or consents or approvals having been received.  If prior to Closing, any such Preferential Purchase Rights are timely and properly exercised, or Seller is unable to obtain a necessary consent or approval prior to Closing, the interest or part thereof so affected shall be eliminated from the Assets and the Purchase Price reduced by the portion of the Purchase Price allocated to such interest or part thereof as provided in Exhibit “C.”   If any additional Preferential Purchase Rights are discovered after Closing, or if a third party Preferential Purchase Rights holder alleges improper notice, then Buyer agrees to cooperate with Seller in giving effect to any such valid third party Preferential Purchase Rights.  In the event any such valid third party preferential purchase rights are validly exercised after Closing, Buyer’s sole remedy against Seller shall be return by Seller to Buyer of that portion of the Purchase Price allocated under Exhibit “C” to the portion of the assets on which such rights are exercised and lost by Buyer to such third party.  The Parties agree that the Allocated Values for properties subject to Preferential Purchase Rights shall be the sole responsibility of Buyer, and Buyer agrees to indemnify and hold Seller harmless from all liability and claims related to the reasonableness of such values.

(c)            With respect to any portion of the Assets for which a Preferential Purchase Right has not been asserted prior to Closing or a consent or other approval to assign has not been granted (other than Permitted Encumbrances) and for which the time for election to exercise such Preferential Purchase Right or to grant such consent has not expired, Closing with respect to the portion of the Assets subject to such outstanding obligations will be deferred (the “ Third Party Interests ” ). Closing with respect to all other Assets will proceed as provided in this Agreement, but the Base Purchase Price delivered to Seller at Closing will be reduced by the Allocated Value of the Third Party Interests.  In the event that within ninety (90) days after Closing any such Preferential Purchase Right is waived or consent or approval is obtained or the time for election to purchase or to deliver a consent or approval passes (such that under the applicable documents, Seller may sell the affected Third Party Interest to Buyer), then the Closing with respect to the applicable portion of the Third Party Interests will proceed promptly. If such waivers, consents or approvals as are necessary are not received by Seller within the applicable ninety (90) day period, Seller shall retain such Third Party Interests and the Parties shall have no further obligation to each other with respect thereto.

ARTICLE 11. - COVENANTS

11.1.        Conduct of Operations .

(a)            From and after the date of execution of this Agreement and until the Closing, and subject to Section 11.2 and the constraints of applicable operating and other agreements,

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Seller shall operate, manage, and administer or cause the operation, management and administration of the Assets as a reasonable and prudent operator and in a good and workmanlike manner consistent with its past practices, and shall carry on its business with respect to the Assets in substantially the same manner as before execution of this Agreement.  Prior to Closing, Seller shall use all reasonable efforts to preserve in full force and effect all Leases, operating agreements, easements, rights-of-way, permits, licenses, and agreements which relate to the Assets in which Seller owns an interest, and shall perform all obligations of Seller in or under all such agreements relating to the Assets; provided, however, Buyer’s sole remedy for Seller’s breach of its obligations under this Section 11.1(a)  shall be limited to the amount of that portion of the Purchase Price allocated in Exhibit “C” to that portion of the Assets affected by such breach.  Seller shall, except for emergency action taken in the face of serious risk to life, property, or the environment (1) submit to Buyer, for prior written approval, all requests for operating or capital expenditures and all proposed contracts and agreements relating to the Assets which involve individual commitments of more than twenty-five thousand dollars ($25,000.00); (2) consult with, inform, and advise Buyer regarding all material matters concerning the operation, management, and administration of the Assets; (3) obtain Buyer’s written approval prior to voting under any operating, unit, joint venture, partnership or similar agreement; and (4) not approve or elect to go nonconsent as to any proposed well or plug and abandon or agree to plug and abandon any Well without Buyer’s prior written approval.  On any matter requiring Buyer’s approval under this Section 11.1(a) , Buyer shall respond within five (5) days to Seller’s request for approval, and failure of Buyer to respond to Seller’s request for approval within such time shall release Seller from the obligation to obtain Buyer’s approval before proceeding on such matter.  With respect to emergency actions taken by Seller in the face of serious risk to life, property, or the environment, without prior approval of Buyer pursuant to the provisions above, Seller will advise Buyer of its actions as promptly as reasonably possible and consult with Buyer as to any further related actions.

(b)            Seller shall promptly notify Buyer of any suit, lessor demand action, or other proceeding before any court, arbitrator, or governmental agency and any cause of action which relates to the Assets or which might result in impairment or loss of Seller’s interest in any portion of the Assets or which might hinder or impede the operation of the Assets.

11.2.        Limitations on Seller’s Covenants Pending Closing .

To the extent Seller is not the operator of any of the Assets, the obligations of Seller in Section 11.1 concerning operations or activities which normally or pursuant to existing contracts are carried out or performed by the operator, shall be construed to require only that Seller use all reasonable efforts (without being obligated to incur any expense or institute any cause of action) to cause the operator of such Assets to take such actions or render such performance as would a reasonable prudent operator and within the constraints of the applicable operating agreements and other applicable agreements.

11.3.        Conduct of Company Business .

Except as set forth in Schedule 4.23 , as provided in the Material Contracts, required by Law or Order, as otherwise would not have a Material Adverse Effect or as specifically

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contemplated by this Agreement, from the date of this Agreement until the Closing Date, Seller shall cause the Company to, unless Buyer shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed):

(i)             operate only in the usual, regular and ordinary manner consistent with past practice, and use its commercially reasonable efforts to preserve its present business operations and organization;

(ii)            maintain books, accounts and records in the usual, regular and ordinary manner, on a basis consistent with prior years, and comply in all material respects with all contractual and other obligations;

(iii)           comply in all material respects with all applicable Laws and Orders to which it is subject;

(iv)           not acquire by merger, consolidation, purchase of stock or assets, or otherwise, any Person;

(v)            except in the ordinary course of business under existing lines of credit, not create, incur or assume any debt for borrowed money;

(vi)           not make any material election with respect to Taxes;

(vii)          not amend or modify its organizational documents;

(viii)         not incur any capital expenditures in excess of Ten Thousand Dollars ($10,000) except in case of emergency or as may otherwise be required to prevent injury or damage to persons, property or the environment; and

(ix)            not agree to take any action or actions prohibited by any of the foregoing clauses (i) through (ix).

11.4.        Return of Information .   In the event of termination of this Agreement, Buyer shall promptly, and in any event, within ten (10) Days of such termination, return or cause to be returned to Seller all documents and other materials obtained from or on behalf of Seller in connection with the transactions contemplated hereby and shall keep confidential any such information, all in accordance with the provisions of Section 6.3 .

ARTICLE 12. - CLOSING CONDITIONS

12.1.        Seller’s Closing Conditions .

The obligations of Seller under this Agreement are subject, at the option of Seller, to the satisfaction, at or prior to the Closing, of the following conditions:

(a)            All representations and warranties of Buyer contained in this Agreement shall be true, accurate, and not misleading in all material respects at and as of the Closing as if

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such representations and warranties were made at and as of the Closing, and Buyer shall have performed, satisfied and complied with all agreements and covenants required by this Agreement to be performed, satisfied and complied with by Buyer at or prior to the Closing;

(b)            The execution, delivery, and performance of this Agreement and the transactions contemplated thereby have been duly and validly authorized by all necessary action, corporate, partnership or otherwise, on the part of Buyer, and an officer’s certificate of Buyer confirming the same;

(c)            All necessary consents of and filings with any state or federal governmental authority or agency relating to the consummation of the transactions contemplated by this Agreement shall have been obtained, accomplished or waived, except to the extent that such consents and filings are normally obtained, accomplished or waived after Closing; and

(d)            As of the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by Seller) shall be pending or threatened before any court or governmental agency seeking to restrain Seller or prohibit the Closing or seeking damages against Seller as a result of the consummation of this Agreement.

12.2.        Buyer’s Closing Conditions .

The obligations of Buyer under this Agreement are subject, at the option of Buyer, to the satisfaction, at or prior to the Closing, of the following conditions:

(a)            All representations and warranties of Seller contained in this Agreement shall be true, accurate, and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Seller shall have performed, satisfied and complied with all agreements and covenants required by this Agreement to be performed, satisfied and complied with by Seller at or prior to the Closing;

(b)            The execution, delivery, and performance of this Agreement and the transactions contemplated thereby have been duly and validly authorized by all necessary action, corporate, partnership or otherwise, on the part of Seller, and an officer’s certificate of Seller confirming the same;

(c)            All necessary consents of and filings with any state or federal governmental authority or agency relating to the consummation of the transactions contemplated by this Agreement shall have been obtained, accomplished or waived, except to the extent that such consents and filings are normally obtained, accomplished or waived after Closing; and

(d)            As of the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by Buyer) shall be pending or threatened before any court or governmental agency seeking to restrain Buyer or prohibit the Closing or seeking damages against Buyer as a result of the consummation of this Agreement.

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ARTICLE 13. - CLOSING

13.1.        Closing .

The closing of this transaction (the “ Closing ” ) shall be held at the offices of Adams and Reese, LLP located at 1221 McKinney, Suite 4400, Houston, Texas  77010 on March 3, 2008 at 10:00 a.m. Central Standard Time, or at such earlier date or place as the Parties may agree in writing (herein called “ Closing Date ” ).  Time is of the essence and the Closing Date shall not be extended unless by written agreement of the Parties.  Any extension of the Closing Date shall also extend the Effective Date to March 1, 2008, without any corresponding change in the Purchase Price.  On or before five (5) business days prior to Closing, Buyer and Seller shall use their best efforts to provide each other copies of all closing documents.

13.2.        Seller’s Closing Obligations .

At Closing, except to the extent comprising the Excluded Assets, Seller shall deliver to Buyer the following:

(a)            the Assignment, Conveyance and Bill of Sale substantially in the form attached as Exhibit “D,” and such other documents as may be reasonably necessary to convey all of Seller’s interest in the Assets (except the Shares)  to Buyer in accordance with the provisions hereof, executed by Seller;

(b)            two (2) non-foreign affidavit executed by an authorized officer of Seller in the form attached as Exhibit “J” ;

(c)            copies of all third-party waivers, consents, approvals, permits and actions obtained;

(d)            exclusive possession of the Assets;

(e)            letters-in-lieu of transfer orders in form acceptable to Seller and Buyer;

(f)             resignations of the board of directors and officers of the Company;

(g)            two (2) originals of the Certificate executed by an officer of the Seller;

(h)            two (2) originals of resolutions of Seller’s authorizing bodies authorizing the transactions contemplated by this Agreement (including designation of the Persons authorized to execute this Agreement on behalf of Seller and the Operative Documents to which it is a party); and

(i)             Stock Power and stock certificate representing all outstanding and issued capital stock of the Company.

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13.3.        Buyer’s Closing Obligations .

At Closing, Buyer shall deliver to Seller the following:

(a)            the Purchase Price, as adjusted, by wire transfer in immediately available funds to a bank account designated, in writing, by Seller;

(b)            the Assignment, Conveyance and Bill of Sale substantially in the form attached as Exhibit “D” executed by Buyer;

(c)            two (2) originals of the Certificate executed by an authorized officer or an attorney-in-fact of Buyer; and

(d)            two (2) originals of resolutions of a Secretary’s certificate of Buyer certifying resolutions of Buyer’s Board of Directors authorizing the transactions contemplated by this Agreement (including designation of the Persons authorized to execute this Agreement on behalf of Buyer)

13.4.        Joint Closing Obligations .

Both Parties at Closing shall execute a Settlement Statement evidencing the amount actually wire transferred and all adjustments to the Purchase Price taken into account at Closing.  All events of Closing shall each be deemed to have occurred simultaneously with the other, regardless of when actually occurring and each shall be a condition precedent to the other.

ARTICLE 14. –LIMITATIONS ON WARRANTIES

AND REMEDIES/DTPA -UTPCPL WAIVER

14.1.        Limitations on Warranties and Remedies.

THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE LEASES, OR THE ENVIRONMENTAL CONDITION OF THE ASSETS.  THE ITEMS OF PERSONAL PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE ASSETS ARE SOLD HEREUNDER “AS IS, WHERE IS, AND WITH ALL FAULTS” AND NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION, ARE GIVEN BY OR ON BEHALF OF SELLER.  IT IS UNDERSTOOD AND AGREED THAT PRIOR TO CLOSING BUYER SHALL

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HAVE INSPECTED THE ASSETS FOR ALL PURPOSES AND HAS SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, AND THAT BUYER ACCEPTS SAME IN ITS “AS IS, WHERE IS AND WITH ALL FAULTS” CONDITION.  BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION, OR CONFORMITY TO SAMPLES.

BUYER EXPRESSLY WAIVES THE WARRANTY OF FITNESS FOR INTENDED PURPOSES OR GUARANTEE AGAINST HIDDEN OR LATENT REDHIBITORY VICES UNDER LOUISIANA LAW, INCLUDING LOUISIANA CIVIL CODE ARTICLES 2520 THROUGH 2548, AND THE WARRANTY IMPOSED BY LOUISIANA CIVIL CODE ARTICLE 2475; BUYER WAIVES ALL RIGHTS IN REDHIBITION PURSUANT TO LOUISIANA CIVIL CODE ARTICLE 2520, ET SEQ; BUYER ACKNOWLEDGES THAT THIS EXPRESS WAIVER IS A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION THEREOF; AND BUYER ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF BUYER AND EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER OF WARRANTY OF FITNESS AND/OR WARRANTY AGAINST REDHIBITORY VICES AND DEFECTS FOR THE ABOVE DESCRIBED PROPERTY.

14.2.        Waiver of Trade Practices Acts .

(a)            It is the intention of the parties that Buyer’s rights and remedies with respect to this transaction and with respect to all acts or practices of Seller, past, present or future, in connection with this transaction shall be governed by legal principles other than the Texas Deceptive Trade Practices—Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq . (the “ DTPA ” ) or the Louisiana unfair trade practices and consumer protection law, La. R.S. 51:1402, et seq . (the “ UTPCPL ” ).  As such, Buyer hereby waives the applicability of the DTPA and the UTPCPL to this transaction and any and all duties, rights or remedies that might be imposed by the DTPA and/or the UTPCPL, whether such duties, rights and remedies are applied directly by the DTPA or the UTPCPL itself or indirectly in connection with other statutes; provided, however , Buyer does not waive § 17.555 of the DTPA.  Buyer acknowledges, represents and warrants that it is purchasing the goods and/or services covered by this Agreement for commercial or business use; that it has knowledge and experience in financial and business matters that enable it to evaluate the merits and risks of a transaction such as this; that it is not in a significantly disparate bargaining position with Seller, and that Buyer has been represented by legal counsel in the negotiation of this Agreement and the terms of this particular provision.

(b)            Buyer expressly recognizes that the price for which Seller has agreed to perform its obligations under this Agreement has been predicated upon the inapplicability of the DTPA and the UTPCPL and this waiver of the DTPA and the UTPCPL.  Buyer further recognizes that

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

ARTICLE 15. - CASUALTY LOSS AND CONDEMNATION

If, prior to the Closing, all or any portion of the Scheduled Interests is destroyed by fire or other casualty or if any portion of the Assets shall be taken by condemnation or under the right of eminent domain (all of which are herein called “ Casualty Loss ” and limited to property damage or taking only), Buyer and Seller must agree prior to Closing either (i) to delete that portion of the Scheduled Interests which is subject to the Casualty Loss from the Assets, and the Purchase Price shall be reduced by the value allocated to the deleted interest as set out in Exhibit “C,” or (ii) for Buyer to proceed with the purchase of such Scheduled Interests, notwithstanding any such destruction or taking (without reduction of the Purchase Price) in which case Seller shall pay, at the Closing, to Buyer all sums paid to Seller by third parties by reason of the destruction or taking of such Scheduled Interests and shall assign, transfer and set over unto Buyer all insurance proceeds received by Seller as well as all of the right, title and interest of Seller in and to any claims, causes of action, unpaid proceeds or other payments from third parties arising out of such destruction or taking.  If the Allocated Value of that portion of the Scheduled Interests affected by the Casualty Loss as shown on Exhibit “C” exceeds Seven Hundred Fifty Thousand and No/100 dollars ($750,000.00), Buyer and Seller shall each have the right to terminate this Agreement upon written notification to the other, the transaction shall not close and thereafter neither Buyer nor Seller shall have any liability or further obligations to the other hereunder.  In the event of such termination, Seller shall return the Escrow Deposit to Buyer, without interest.  Prior to Closing, Seller shall not voluntarily compromise, settle or adjust any amounts payable by reason of any Casualty Loss without first obtaining the written consent of Buyer.

ARTICLE 16. - REMEDIES

16.1.        Seller’s Remedies .

If Seller and Buyer close the transaction contemplated by this Agreement on or before the Closing Date, as it may be extended in accordance herewith, the Escrow Deposit and any accrued interest will be applied to the Purchase Price and the amount due from Buyer at Closing will be reduced by the amount of the Escrow Deposit.  If the transaction contemplated by this Agreement does not close on or before the Closing Date, as it may be extended in accordance herewith, because (a) Seller is unable, unwilling or refuses to close, or because (b) a condition to Buyer’s obligation to close, as set forth in Section 12.2 , is not satisfied or waived, or because (c) Buyer terminates this Agreement under the provisions of Article _15, or as elsewhere provided for and allowed in this Agreement, unless Buyer chooses the remedy of specific performance, if applicable, as set forth in Section 16.2 , Seller will provide Buyer with written authorization to disburse the Escrow Deposit, with accrued interest, within five (5) days following the later of the Closing Date or any extension thereof in accordance with the provisions of this Agreement.  If for any reason other than those set forth in subparagraphs (a), (b) and (c) above, Buyer fails, refuses or is unable to close the transaction contemplated by this Agreement on or before the Closing Date, as it may be extended in accordance herewith, Seller shall retain the Escrow Deposit together with any

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accrued interest as a liquidated damage and not as a penalty, and terminate this Agreement, as Seller’s sole and exclusive remedies for such default, all other remedies (except as expressly retained in Section 16.3 ) being expressly waived by Seller.

16.2.        Buyer’s Remedies .

Upon failure of Seller to comply herewith by the Closing Date, as it may be extended in accordance herewith, Buyer, at its sole option and in addition to any other remedies it may have at law or equity, may (i) enforce specific performance, or (ii) terminate this Agreement.  In the event Buyer elects to terminate this Agreement as set forth above, Seller shall immediately return the Escrow Deposit to Buyer, without interest.

16.3.        Other Remedies .

Notwithstanding the foregoing, termination of this Agreement shall not prejudice or impair Buyer’s obligations under Section 6.3 (and the Confidentiality Agreement referenced therein).  The prevailing Party in any legal proceeding brought under or to enforce this Agreement shall be additionally entitled to recover court costs and reasonable attorneys’ fees from the non-prevailing Party.  Notwithstanding the provisions of Sections 16.1 and 16.2 , the remedy of mediation and arbitration provided in Section 8.4(d) shall be the exclusive remedy for the matters provided for in such Section.

16.4.        Effect of Termination .

In the event of termination of this Agreement under this Article 16 , the transaction shall not close and neither Buyer nor Seller shall have any further obligations, remedies, liabilities, rights or duties to the other hereunder, except as expressly provided herein.

16.5.        Limitations on Damages .

Notwithstanding any other provision contained elsewhere in this Agreement to the contrary, the Parties acknowledge that this Agreement does not authorize one Party to sue for or collect from the other Party its own punitive damages, or its own consequential or indirect damages in connection with this Agreement and the transactions contemplated hereby and each Party expressly waives for itself and on behalf of its affiliates, any and all Claims it may have against the other Party for its own such damages in connection with this Agreement and the transactions contemplated hereby.

ARTICLE 17. - ASSUMPTION AND INDEMNITY

17.1.        Assumed Obligations; Pre-Closing Liabilities .

Upon and after Closing, Buyer shall own the Assets, together with all the rights, duties, obligations, and liabilities accruing after Closing, including the Assumed Obligations and Buyer’s indemnity obligations hereunder.  Buyer agrees to assume and pay, perform, fulfill and discharge all Assumed Obligations and Buyer’s indemnity obligations.  Seller

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agrees to retain and pay, perform, fulfill and discharge all Retained Obligations, and Seller’s indemnity obligations.

17.2.        Buyer’s Indemnity .

BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD SELLER, SELLER’S GROUP AND SELLER’S EMPLOYEES, OFFICERS AND DIRECTORS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LOSSES, DAMAGES, PUNITIVE DAMAGES, COSTS, EXPENSES, CAUSES OF ACTION OR JUDGMENTS OF ANY KIND OR CHARACTER INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY, REASONABLE ATTORNEYS’ FEES AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH OR THE DEFENSE THEREOF (COLLECTIVELY THE “ CLAIMS ”), WITH RESPECT TO ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR THREATENED LIABILITIES AND OBLIGATIONS CAUSED BY, RELATED TO, ATTRIBUTABLE TO, OR ARISING OUT OF THE ASSUMED OBLIGATIONS.  THE DEFENSE AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE SOLE OR PARTIAL OR COMPARATIVE OR CONCURRENT OR OTHER FAULT, NEGLIGENCE OR STRICT, PRE-EXISTING OR OTHER LIABILITY ON THE PART OF SELLER.  ADDITIONALLY, THE DEFENSE AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE NATURE OF THE OBLIGATIONS OF SELLER, BE THEY IN TORT, CONTRACT, QUASI-CONTRACT, STATUTORY, OR OTHERWISE.

17.3.        Seller’s Indemnity .

SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER AND BUYER’S EMPLOYEES, OFFICERS AND DIRECTORS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS WITH RESPECT TO ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR THREATENED LIABILITIES AND OBLIGATIONS CAUSED BY, RELATED TO, ATTRIBUTABLE TO, OR ARISING OUT OF THE RETAINED OBLIGATIONS.  THE DEFENSE AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE SOLE OR PARTIAL OR COMPARATIVE OR CONCURRENT OR OTHER FAULT, NEGLIGENCE OR STRICT, PRE-EXISTING OR OTHER LIABILITY ON THE PART OF BUYER.  ADDITIONALLY, THE DEFENSE AND INDEMNITY OBLIGATIONS PROVIDED BY THIS SECTION SHALL APPLY REGARDLESS OF THE NATURE OF THE OBLIGATIONS OF BUYER, BE THEY IN TORT, CONTRACT, QUASI-CONTRACT, STATUTORY, OR OTHERWISE.

17.4.        Stipulation Regarding Express Negligence And Fault .

THE PARTIES HERETO BOTH AGREE AND STIPULATE THAT THEY HAVE ACTUAL KNOWLEDGE OF ALL INDEMNITY PROVISIONS HEREIN, THAT THEY ARE FAMILIAR WITH THE EXPRESS NEGLIGENCE TEST, THAT

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THIS DEFENSE AND INDEMNIFICATION AGREEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE TEST, THAT THE PARTIES CLEARLY INTEND TO TRANSFER THE RISK OF LOSS FOR THE INDEMNITEE’S NEGLIGENCE, FAULT AND OTHER LIABILITIES AND OBLIGATIONS AS SET FORTH ABOVE TO BUYER, AND THAT THESE INDEMNIFICATION PROVISIONS ARE CONSPICUOUS.

17.5.        Broker or Finder’s Fee .

Each Party hereby agrees to indemnify and hold the other harmless from and against any claim for a brokerage or finder’s fee or commission in connection with this Agreement or the transactions contemplated by this Agreement to the extent such claim arises from or is attributable to the actions of such indemnifying Party, including, without limitation, any and all losses, damages, punitive damages, attorneys’ fees, costs and expenses of any kind or character arising out of or incurred in connection with any such claim or defending against the same.

17.6         Litigation .              Seller shall retain responsibility and liability for the litigation and threatened litigation listed on Exhibit “F,” and the Claims thereunder, except as provided in this Section 17.6 .

17.7.        Insurance, Taxes .   The amount of any Claims for which any party is entitled to indemnification under this Agreement shall be reduced by any corresponding (a)  tax benefit created or generated or (b)  insurance proceeds realized by such party if a claim were properly pursued under the relevant insurance arrangements.

17.8 .        Waiver of Certain Damages.   Each of the Parties expressly waives and agrees not to, and to cause the members of the Buyer Group in the case of Buyer and the members of the Seller Group in the case of Seller not to, seek indirect, consequential, punitive or exemplary damages or damages for lost profits of any kind with respect to any dispute arising under, related to, or in connection with this Agreement or breach hereof (except such damages that are payable to a third party with respect to a third party claim for which any Person is seeking indemnification hereunder).  The Parties agree that no indemnified Person shall be entitled to any such damages under this Agreement.

17.9.        Extent of Indemnification .   Without limiting or enlarging the scope of the indemnification, disclaimer and assumption obligations set forth in this Agreement, to the fullest extent permitted by Law, an indemnified Person shall be entitled to indemnification hereunder in accordance with the terms hereof, regardless of whether the indemnifiable loss giving rise to any such indemnification obligation is the result of the sole, active, passive, concurrent or comparative negligence, strict liability or other legal fault or violation of any Law of or by any such indemnified Person.  Buyer and Seller acknowledge that this statement complies with the express negligence rule and is conspicuous.

17.10.      Disclaimer of Application of Anti-Indemnity Statutes .   The Parties acknowledge and agree that the provisions of any anti-indemnity statute relating to

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oilfield services and associated activities shall not be applicable to this Agreement or the transactions contemplated hereby.

17.11.      Waiver of Right to Rescission .   Seller and Buyer acknowledge that the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in connection with or with respect to the transactions contemplated in this Agreement.  As the payment of money shall be adequate compensation, Buyer and Seller waive any right to rescind this Agreement or any of the transactions contemplated hereby.

17.12.      Indemnity Claims .

From and after Initial Closing, any demand for indemnity hereunder shall be made by written notice, together with a written description of any Claims asserted stating the nature and basis of such Claim and, if ascertainable, the amount thereof.  The Party upon whom notice is served shall have a period of twenty (20) days after receipt of such notice within which to respond thereto or, in the case of an underlying demand which requires a shorter time for response, then within such shorter period as specified in such notice (the “ Notice Period ”).  If the Party upon whom notice is served denies liability or fails to provide the defense for any Claim, the other Party may defend or compromise the Claim as it deems appropriate.  If the Party upon whom notice is served accepts liability and responsibility for the defense of any Claim, it shall so notify the other Party as soon as is practicable prior to the expiration of the Notice Period and undertake the defense or compromise of such Claim with counsel selected by the Party accepting such liability.  If the Party on whom notice is served undertakes the defense or compromise of such Claim, the other Party shall be entitled, at its own expense, to participate in such defense.  No compromise or settlement of any Claim shall be made without reasonable notice to the other Party, and without the prior written approval of the other Party, which approval shall not be unreasonably withheld or delayed.  No such approval shall be withheld if such compromise or settlement includes a general and complete release of the other Party, its successors, assigns, Affiliates and their respective Representatives in respect of the matter, with prejudice, and with no express or written admission of liability on the part of the other Party, its Affiliates and their respective Representatives, and is without cost or liability and has no constraints on the future conduct of its or their respective businesses. Buyer and Seller acknowledge that their obligations to indemnify, defend and hold the other Party and its Affiliates harmless under this Agreement include obligations to pay the attorneys’ fees and court and arbitral costs incurred by the other Party and its Affiliates in defending said Claims, regardless of the merits of said Claims, where the Party to whom notice is served hereunder denies liability or fails to provide the defense for any said Claim.            Seller and Buyer shall have the right at all times to participate, at their sole cost, in the preparation for any defense, hearing or trial related to the indemnities set forth in this Agreement, as well as the right to appear on their own behalf or to retain separate counsel to represent them at any such hearing or trial.

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ARTICLE 18. - MISCELLANEOUS

18.1.        Receivables and other Excluded Funds .

Buyer shall be under no obligation to collect on behalf of Seller any receivables or other funds included in the Excluded Assets above.  With respect to receivables, Buyer shall be free to treat the interests of any party with a delinquent receivable in any manner deemed appropriate by Buyer.

18.2.        Arbitration .

Unless expressly provided otherwise in this Agreement, any and all claims or causes of action arising out of or relating to this Agreement must be resolved through the use of binding arbitration using three (3) arbitrators, in accordance with the Commercial Arbitration Rules of the AAA, as supplemented to the extent necessary to determine any procedural appeal questions by the Federal Arbitration Act (Title 9 of the United States Code).  If there is any inconsistency between this Article and the Commercial Arbitration Rules or the Federal Arbitration Act, the terms of this Article shall control the rights and obligations of the Parties.  If there is more than one (1) Arbitrable Dispute that involves the same facts and parties as the facts and parties with respect to which an arbitration has been initiated pursuant to this Agreement, such disputes shall be consolidated into the first arbitration initiated pursuant to this Agreement.  No other arbitration shall be consolidated with any arbitration initiated pursuant to this Agreement without the agreement of the Parties or parties thereto.  Arbitration may be initiated by a Party (“Claimant”) serving written notice on the other Party (“Respondent”) that the Claimant has referred the Arbitrable Dispute to binding arbitration.  Claimant’s notice initiating binding arbitration must describe in reasonable detail the nature of the Arbitrable Dispute and the facts and circumstances relating thereto and identify the arbitrator Claimant has appointed.  Respondent shall respond to Claimant within thirty (30) Days after receipt of Claimant’s notice, identifying the arbitrator Respondent has appointed.  If Respondent fails for any reason to name an arbitrator within the thirty (30) Day period, Claimant shall name the arbitrator for Respondent’s account.  The two (2) arbitrators so chosen shall select a third arbitrator (who must have not less than seven (7) years experience as a lawyer in the energy industry) within thirty (30) Days after the second arbitrator has been appointed.  If the two arbitrators are unable to agree on a third arbitrator within thirty (30) Days from the date the second arbitrator has been appointed, then a third arbitrator shall be selected by the AAA office in Houston, Texas, with due regard given to the selection criteria above and input from the Parties and other arbitrators.  The AAA shall select the third arbitrator not later than ninety (90) Days from initiation of arbitration.  In the event AAA should fail to select the third arbitrator within ninety (90) Days from initiation of arbitration, then either Party may petition the Chief United States District Judge for the Southern District of Texas to select the third arbitrator.  Due regard shall be given to the selection criteria above and input from the Parties and other arbitrators.  Claimant shall pay the compensation and expenses of the arbitrator named by or for it, and Respondent shall pay the compensation and expenses of the arbitrator named by or for it.  Claimant and Respondent shall each pay one-half of the compensation and expenses of the third arbitrator.  All arbitrators must be neutral parties who have never been officers, directors or employees of the Parties or any of their Affiliates.  Unless expressly provided otherwise in this Agreement, the two (2)

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arbitrators named by the Parties must have not less than seven (7) years experience in the energy industry, and must have a formal education or training in the area of dispute resolution.  The hearing shall be conducted in Houston, Texas and commence within sixty (60) Days after the selection of the third arbitrator.  The Parties and the arbitrators should proceed diligently and in good faith in order that the award may be made as promptly as possible.  The arbitrators shall determine the Arbitrable Disputes of the Parties and render a final award in accordance with the substantive Law of the State of Texas, excluding the conflicts provisions of such Law.  The arbitrators shall render their decision on or before sixty (60) Days following the completion of the hearing.  The arbitrator’s decision shall be in writing and set forth the reasons for the award and shall include an award of costs to the prevailing party, including without limitation reasonable attorneys’ fees and disbursements.  All statutes of limitations and defenses based upon passage of time applicable to any Arbitrable Dispute (including any counterclaim or setoff) shall be interrupted by the filing of the arbitration and suspended while the arbitration is pending.  The terms hereof shall not create or limit any obligations of a Party to defend, indemnify, or hold harmless another Party against court proceedings or other Claims.  In order to prevent irreparable harm, the arbitrators shall have the power to grant temporary or permanent injunctive or other equitable relief.  A Party may, notwithstanding any other provision of this Agreement, seek temporary injunctive relief from any court of competent jurisdiction; provided that the Party seeking such relief shall (if arbitration has not already been commenced) simultaneously commence arbitration.  Such court-ordered relief shall not continue more than ten (10) Days after the appointment of the arbitrators and in no event for longer than sixty (60) Days.  Except as provided in the Federal Arbitration Act, the decision of the arbitrators shall be binding on and non-appealable by the Parties.  Each Party agrees that any arbitration award against it may be enforced in any court of competent jurisdiction and that any Party may authorize any such court to enter judgment on the arbitrators’ decisions.  The arbitrators may not grant or award indirect, consequential, punitive or exemplary damages or damages for lost profits.

18.3.        Public Announcements .

The Parties hereto agree that prior to Closing, each may publicly disclose the principal terms of this Agreement following its execution, provided that prior to making any public announcement or statement with respect to the transaction contemplated by this Agreement, the Party desiring to make such public announcement or statement shall consult with the other Party hereto and exercise its best efforts to (i) agree upon the text of a joint public announcement or statement to be made by both of such Parties; or (ii) obtain written approval of the other Party hereto to the text of a public announcement or statement to be made solely by Seller or Buyer, as the case may be.  Nothing contained in this paragraph shall be construed to require either Party to obtain approval of the other Party hereto to disclose information with respect to the transaction contemplated by this Agreement to any state or federal governmental authority or agency to the extent (i) required by applicable law or by any applicable rules, regulations or orders of any governmental authority or agency having jurisdiction; or (ii) necessary to comply with disclosure requirements of the American Stock Exchange or other recognized exchange or over the counter, and applicable securities laws.

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18.4.        Filing and Recording of Assignments, etc .

Buyer shall be solely responsible for all filings and the prompt recording of assignments and other documents related to the transfer of the Assets as contemplated hereunder and for all fees connected therewith, and Buyer shall furnish certified copies of all such filed and/or recorded documents to Seller.  Seller shall not be responsible for any loss to Buyer because of Buyer’s failure to file or record documents correctly or promptly.  Buyer shall promptly file all appropriate forms, declarations or bonds with federal and state agencies relative to its assumption of operations and Seller shall cooperate with Buyer in connection with such filings.  Buyer shall also comply with all notice provisions contained in the Leases or otherwise applicable to the transfer of the Assets.

18.5.        Further Assurances and Records .

(a)            After the Closing, each of the Parties will execute, acknowledge and deliver to the other such further instruments, and take such other action, as may be reasonably requested in order to more effectively assure to said Party all of the respective properties, rights, titles, interests, estates, and privileges intended to be assigned, delivered or inuring to the benefit of such Party in consummation of the transactions contemplated hereby.  Without limiting the foregoing, in the event Exhibits “A-1” through “A-5” incorrectly or insufficiently describe or reference an interest intended to be conveyed hereby, Seller agrees to, within twenty (20) days of Seller’s receipt of Buyer’s written request, together with supporting documentation satisfactory to Seller, correct such Exhibit and/or execute an amended assignment or other appropriate instruments necessary to transfer the property or interest intended to be conveyed hereby to Buyer.

(b)            Buyer agrees to maintain the files and records of Seller that are acquired pursuant to this Agreement for seven (7) years after Closing.  Buyer shall provide Seller and its representatives reasonable access to and the right to copy such files and records for the purposes of (i) preparing and delivering any accounting provided for under this Agreement and adjusting, prorating and settling the charges and credits provided for in this Agreement; (ii) complying with any law, rule or regulation affecting Seller’s interest in the Assets prior to the Closing Date; (iii) preparing any audit of the books and records of any third party relating to Seller’s interest in the Assets prior to the Closing Date, or responding to any audit prepared by such third parties; (iv) preparing tax returns; (v) responding to or disputing any tax audit; or (vi) asserting, defending or otherwise dealing with any claim or dispute under this Agreement or as to the Assets.

(c)            Buyer agrees that within thirty (30) days after Closing or within thirty (30) days after operations are actually transferred, whichever is later, it will remove or cause to be removed its signs and the names and marks used by Seller and all variations and derivatives thereof and logos relating thereto from the Assets and will not thereafter make any use whatsoever of such names, marks and logos.

(d)            To the extent not obtained or satisfied as of Closing, Seller agrees to continue to use all reasonable efforts, but without any obligation to incur any cost or expense in

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connection therewith, and to cooperate with Buyer’s efforts to obtain for Buyer (i) access to files, records and data relating to the Assets in the possession of third parties; and (ii) access to wells constituting a part of the Assets operated by third parties for purposes of inspecting same.

(e)            Buyer shall comply with all current and subsequently amended applicable laws, ordinances, rules, and regulations applicable to the Assets and shall promptly obtain and maintain all permits required by governmental authorities in connection with the Assets.

18.6.        Notices .

Except as otherwise expressly provided herein, all communications required or permitted under this Agreement shall be in writing and may be given by personal delivery, facsimile, US mail (postage prepaid), or commercial delivery service, and any communication hereunder shall be deemed to have been duly given and received when actually delivered to the address of the Parties to be notified as set forth below and addressed as follows: