NOTE AND COMMON STOCK PURCHASE AGREEMENT

(A)      The Company proposes to issue and sell (i) $60,000,000 in aggregate principal amount of its Series B 16% Second Lien Junior Secured Notes due 2014 (the “Notes”), and (ii) 13,224,720 shares of common stock of Parent (the “Shares” and, together with the Notes, the “Securities”).  The Securities will be offered and sold to the Purchasers in a transaction (the “Offering”) exempt from the registration requirements of the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder (collectively, the “Securities Act”) in a private placement without being registered under the Securities Act in reliance upon Section 4(2) thereof and/or Regulation D thereunder (“Regulation D”).

(B)      Prior to or concurrently with the closing of the Offering, (i) the Company Parties will enter into an amendment to the Amended and Restated First Lien Credit Agreement with the Lenders party thereto and The Royal Bank of Scotland plc, as Administrative Agent (the “Agent”) of the Lenders (such credit agreement, such amendment and all related loan documents, collectively, the “Credit Agreement”) and (ii) the Agent and the Required Lenders (as defined in the Credit Agreement) will enter into an Intercreditor Agreement with the Trustee (as defined below) on mutually satisfactory terms (the “Intercreditor Agreement”).

(C)      The Notes will be issued pursuant to an indenture (the “Indenture”), to be entered into between the Company, Parent, the other Guarantors and Wilmington Trust Company, as trustee (the “Trustee”).  Pursuant to the Indenture, the Guarantors, other than Intermediate Holdco. shall fully and unconditionally guarantee, and Intermediate Holdco will guarantee to the extent provided in the CIM (as defined below), to each holder of the Notes and the Trustee, the payment and performance of the Company’s obligations under the Indenture and the Notes (each such guarantee being referred to herein as a “Guarantee”).

(D)      Holders of the Securities will be entitled to the benefits of a registration rights agreement (the “Registration Rights Agreement”) to be entered into among the Company Parties and the Purchasers pursuant to which the Company Parties will agree, among other things to (i) file a registration statement (the “Registration Statement”) with the Commission for a registered offer (the “Exchange Offer”) to exchange any and all of the Notes for a like aggregate principal amount of notes that are identical in all material respects to the Notes (the “Exchange Notes”) except that the Exchange Notes will not contain terms with respect to transfer restrictions or liquidated damages, (ii) use their reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act and (iii) use their reasonable best efforts to consummate the Exchange Offer, in each case, within the timeframe, and subject to the provisions contained therein.

(E)      This Agreement, the Credit Agreement, the Intercreditor Agreement, the Indenture, the security and collateral documents listed on Annex D hereto and the Registration Rights Agreement are referred to herein collectively as the “Transaction Documents,” and the transactions contemplated hereby and thereby are referred to herein collectively as the “Transactions.” This Agreement, the Registration Rights Agreement and the Indenture are referred herein collectively as the “Purchase Documents.”

(F)      The Company has prepared a confidential information memorandum relating to the Offering, dated the date hereof relating to the Offering (including annexes, exhibits and schedules thereto and documents incorporated by reference therein, the “CIM”).

(a)     Purchase and Sale of Securities .

(i)       Closing .  Subject to the satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 , at the closing of the Offering (the “Closing”), the Company shall issue and sell to the several Purchasers, and the Purchasers severally agree to purchase from the Company on the Closing Date (as defined below), the principal amount of Notes and the Shares (free and clear of all liens and encumbrances) set forth in Schedule I hereto; provided , however, that if the number of Shares to be issued to a Purchaser pursuant to Schedule I would result in such Purchaser (together with its affiliates) owning 10% or more of the outstanding shares of common stock of Parent, such Purchaser will instead receive a reduced number of Shares (such reduction made pro rata with any of its affiliates also purchasing Notes) such that it will own the greatest number of shares (rounded down to the nearest whole share) that it (together with its affiliates) can own at the Closing and still remain below ownership of 10% of the outstanding common stock of the Parent. The Closing shall occur at the offices of Vinson & Elkins LLP, First City Tower, 1001 Fannin Street, Suite 2500, Houston, Texas 77002-6760.

(ii)       Determination of Closing Date .  The date and time of the Closing (the “Closing   Date”) shall be 10:00 a.m., New York City time, on October 2, 2009 (or such later date as is mutually agreed to by the Company and the Purchasers); provided, however , that if the Closing has not taken place on such Closing Date because of a failure to satisfy one or more of the conditions specified in Section 5 or Section 6 hereof, “Closing Date” shall mean 10:00 a.m., New York City time, on the first day that is not a Saturday, a Sunday or other day on which commercial banks in New York, New York are required or authorized by law to remain closed (a “Business Day”) following the satisfaction (or waiver) of all such conditions after notification by the Company to the Purchasers of the satisfaction (or waiver) of such conditions (but in no event later than October 15, 2009 without the consent of each of the Purchasers).

(iii)       Purchase Price .  The purchase price for the Securities to be purchased by the several Purchasers at the Closing (in the aggregate, the “Purchase Price”) shall be as set forth on Schedule I hereto and the payment of the Purchase Price shall be made by the Purchasers by wire transfer of immediately available funds in accordance with the instructions provided in Schedule II hereto

(a)       No Public Sale or Distribution .  The Purchaser is acquiring the Securities for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in a manner that would violate the Securities Act; provided , however , that by making the representations herein, the Purchaser does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act and, with respect to the Notes, subject to the terms of the Notes and the Indenture.  The Purchaser is acquiring the Securities hereunder in the ordinary course of its business.  The Purchaser does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.  As used in this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(b)       Purchaser Status .  Each of the Purchasers acknowledges that it is one of the following:

(i)      an institutional “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D; or

(ii)      a “qualified institutional buyer” as defined in Rule 144A(a)(1) under the Securities Act.

(c)       Reliance on Exemptions .  The Purchaser understands that the Securities are being offered and sold in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Purchasers’ compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchasers set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchasers to acquire the Securities.

(d)       Information .  The Purchaser and its advisors, if any, have (i) had access to the Company SEC Documents (as defined below) and (ii) been afforded the opportunity to ask questions of the Company.  The Purchaser understands that its investment in the Securities involves a high degree of risk and is able to bear the economic risk of such investment.  The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Securities and has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

(e)       No Governmental Review .  The Purchaser understands that no United States agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(f)       Transfer or Resale .  The Purchaser understands that: (i) the Securities have not been and will not be registered under the Securities Act or any state securities laws; and (ii) the Purchaser agrees that if it decides to offer, sell or otherwise transfer any of the Securities, such Securities may be offered, sold or otherwise transferred only: (A) pursuant to an effective registration statement under the Securities Act; (B) to the Company; (C) outside the United States in accordance with Regulation S under the Securities Act and in compliance with local laws; or (D) within the United States (1) in accordance with the exemption from registration under the Securities Act and in compliance with any applicable state securities laws, or (2) in a transaction that does not require registration under the Securities Act or applicable state securities laws.

(g)       Legends .  The Purchaser understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act or applicable state securities laws, (A) the certificates or other instruments representing the Notes and all certificates or other instruments issued in exchange therefor or in substitution thereof, shall bear the legend(s) set forth in the Indenture, and that the Company will make a notation on its records and give instructions to the Trustee in order to implement the restrictions on transfer of the Notes, set forth and described therein, and (B) the Share certificates shall bear the legend set forth below:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR NON-U.S. SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE UNITED STATES ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”)), OR (B) IT IS AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS SIX MONTHS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144 (OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY, ONLY (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE SECURITIES LAWS OF ANY OTHER JURISDICTION, INCLUDING ANY STATE OF THE UNITED STATES, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S, OR TRANSFER AGENT'S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.”;

(h)       Validity; Enforcement .  The Purchaser has all necessary power and authority to execute and deliver this Agreement and the Registration Rights Agreement and to perform its obligations hereunder and thereunder; this Agreement and the Registration Rights Agreement have been duly authorized by the Purchaser, and, when executed and delivered by the Purchaser, will constitute a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(i)       Residency .  For purposes of U.S. securities laws, the Purchaser is a resident of the jurisdiction specified with respect to such Purchaser on Annex A hereto.

(j)       Suitability and Reliance on Own Advisors .  The Purchaser has carefully considered, and has, to the extent the Purchaser deems necessary, discussed with the Purchaser’s own professional legal, tax and financial advisers the suitability of an investment in the Securities for the Purchaser’s particular tax and financial situation, and the Purchaser has determined that the Securities are a suitable investment for the Purchaser.  Such Purchaser has not relied upon the Company Parties or its advisers for legal or tax advice.

(a)       SEC Filings and the Sarbanes-Oxley Act .  

(i)      The Company Parties have filed with or furnished to the Commission all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed or furnished by the Company Parties since June 30, 2007 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “Company SEC Documents”).

(ii)      As of its filing date (and as of the date of any amendment), each Company SEC Document complied, and each Company SEC Document filed subsequent to the date hereof will comply, in all material respects with the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission (collectively, the “Exchange Act”), as the case may be.

(iii)      As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document filed pursuant to the Exchange Act, and the CIM (together with the Company SEC Documents, the “Company Documents”) did not, and each Company SEC Document filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b)       The Transaction Documents .  Each of the Company Parties has all necessary power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its respective obligations thereunder; each of the Transaction Documents has been duly authorized by the Company Parties, as the case may be, and, when executed and delivered by the Company Parties, as the case may be, will constitute a valid and binding agreement of the Company Parties, as the case may be, enforceable against the Company Parties, as the case may be, in accordance with its terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies; and the Indenture, when executed and delivered by the Company Parties will meet the requirements for qualification under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Trust Indenture Act”).

(c)       The Securities .  The Company has all necessary power and authority to execute, issue and deliver the Securities; the Securities have been duly authorized for issuance and sale by the Company, the Notes will be in the form contemplated by the Indenture and, when the Notes are executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Purchasers pursuant to this Agreement, will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies; and the Shares, when issued in accordance with the terms of this Agreement, will be fully paid and non-assessable and will not have been issued in violation of any pre-emptive or similar rights.

(d)       The Guarantees .  Each of the Guarantors has all necessary power and authority to execute, issue and deliver its respective Guarantee; the Guarantees have been duly authorized for issuance and sale by each of the Guarantors, will be in the form contemplated by the Indenture and, when executed and the Guarantees issued in accordance with the terms of the Indenture, will constitute valid and binding obligations of each of the Guarantors, entitled to the benefits of the Indenture, enforceable against each of the Guarantors in accordance with their terms, except as such enforceability may be limited by general principles of equity or by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(e)       The Exchange Notes and Related Guarantees .  Each of the Company Parties has all necessary power and authority to execute, issue and deliver the Exchange Notes and the related Guarantees to which they are a party; the Exchange Notes and the related Guarantees have been duly authorized for issuance and sale by the Company Parties, as the case may be, will be in the form contemplated by the Indenture and, when executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and exchanged for the Notes and the related Guarantees, as the case may be, will constitute valid and binding obligations of the Company Parties, as the case may be, entitled to the benefits of the Indenture, enforceable against the Company Parties, as the case may be, in accordance with their terms.

(f)       No Material Adverse Change .  Except as otherwise disclosed in the CIM, and for the period from and after the date of the CIM through the Closing Date: (i) since June 30, 2009, there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity or Parent and its subsidiaries (any such change is called a “Material Adverse Change”); (ii) Parent, Intermediate Holdco or the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation (including any off-balance sheet obligation), indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company, Intermediate Holdco, or Parent, except for dividends paid to the Company or other subsidiaries, any of the Company’s subsidiaries on any class of capital stock or repurchase or redemption by the Company or Parent or any of its subsidiaries of any class of capital stock.

(g)       Going Concern of Company .  On the Closing Date, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the CIM, and the other transactions contemplated thereby, (i) the fair value and present fair saleable value of the assets of the Company and its subsidiaries on a going concern basis will exceed the sum of its stated liabilities and identified contingent liabilities; and (ii) each of the Company and its subsidiaries will not be (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent.  In computing the amount of such contingent liabilities at any time, such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represent the amount that can reasonably be expected to become an actual or matured liability.

(h)       Independent Accountants .  UHY, LLP, who have expressed their opinion with respect to the financial statements of the Parent (which includes the related notes thereto) included in the Parent’s Form 10-K for the year ended June 30, 2009 are (i) independent public or certified public accountants as required by the Exchange Act, (ii) in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X and (iii) a registered public accounting firm as defined by the Public Company Accounting Oversight Board whose registration has not been suspended or revoked and who has not requested such registration to be withdrawn.

(i)       Preparation of the Financial Statements .  The financial statements contained in the CIM, present fairly in all material respects the consolidated financial position of the Parent and its subsidiaries as of and at the dates indicated and the results of each of their respective operations and cash flows for the periods specified.  All such financial statements have been prepared in conformity in all material respects with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved, except as otherwise stated in the CIM.  The financial data set forth in the CIM, and the financial data set forth or to be set forth in the CIM will as of its date, fairly present the information set forth therein on a basis consistent with that of the audited and unaudited financial statements contained in the CIM.

(j)       Incorporation and Good Standing of the Company Parties .  Each of the Company Parties has been duly incorporated or organized and is validly existing as a corporation, partnership or limited liability company, as applicable, in good standing under the laws of the jurisdiction of its incorporation or organization and has the power and authority (corporate or other) to own, lease and operate its properties and to conduct its business as described in the CIM as of its date, and to enter into and perform its obligations under each of the Transaction Documents to which it is a party.  Each of the Company Parties is duly qualified as a foreign corporation, partnership or limited liability company, as applicable, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the financial position, stockholders’ equity, results of operations or business of the Company or Parent (a “Material Adverse Effect”).  All of the issued and outstanding capital stock or other equity or ownership interest of each of the Subsidiary Guarantors has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, charge, encumbrance or adverse claim, except as disclosed in the CIM.  Parent does not, directly or indirectly, own any securities of any entity other than Energy XXI (US Holdings) Limited, Intermediate Holdco, the Company and each of their subsidiaries.  The Company does not own or control, and as of the Closing Date, the Company will not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed on Annex B hereto, nor does the Company hold any equity or debt securities or other interests in any other entity, other than as set forth in Annex B hereto.

(k)       Capitalization and Other Capital Stock Matters .  The capitalization of the Company and its subsidiaries presented on a consolidated basis in the CIM under the caption “Capitalization” under the column “Actual” is a fair summary of such capitalization in all material respects.  All the outstanding shares of capital stock in the Company have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or subscription rights.  There are no options, calls, warrants or convertible or exchangeable securities, or conversion, preemptive, subscription or other rights, or agreements, arrangements or commitments, in any such case, obligating or which may obligate the Company   to issue, sell, purchase, return or redeem any shares of its capital stock or securities convertible into or exchangeable for any shares of its capital stock, other than as described in the CIM.  There are no shares of any capital stock of the Company reserved for issuance, other than as described in the CIM.  There are no capital appreciation rights, phantom stock plans, securities with participation rights or features, or similar obligations and commitments of the Company, other than as described in the CIM.  There are no capital contributions with respect to the Company that are owed or that have been called which have not been capitalized.

(l)       Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required .  None of the Company Parties (i) is in violation of its charter or by laws, (ii) is in default (or, with the giving of notice or lapse of time, would be in default or constitute a default) (“Default”) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which any of the Company Parties is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company Parties is subject (each, an “Existing Instrument”), or (iii) is in violation of any law, administrative regulation or administrative or court decree applicable to any of the Company Parties except with respect to clauses (ii) and (iii) of this sentence, for such Defaults or violations as would not, individually or in the aggregate, result in a Material Adverse Effect.  The Company Parties’ execution, delivery and performance of the Transaction Documents to which they are a party and the consummation of the Transactions, including the issuance and sale of the Securities, (x) will not result in any violation of the provisions of the charter or bylaws of any of the Company Parties, (y) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any security interest, mortgage, pledge, lien, charge, encumbrance or adverse claim upon any property or assets of any of the Company Parties pursuant to, or require the consent of any other party to any Existing Instrument or any other third party and (z) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to any of the Company Parties except with respect to clauses (y) and (z) of this sentence, for such conflicts, breaches, Defaults, Debt Repayment Triggering Events or violations as would not, individually or in the aggregate, result in a Material Adverse Effect.  As used herein, a “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company Parties.

(m)       Regulatory Approval .  No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for each of the Company Parties’ execution, delivery and performance of the Transaction Documents to which it is a party and consummation of the Transactions, except (i) with respect to the transactions contemplated by the Registration Rights Agreement or the filing of a Current Report on Form 8-K with the Commission as may be required under the Securities Act and the Exchange Act, as the case may be, (ii) as required by the state securities or “blue sky” laws, and (iii) for such consents, approvals, authorizations, orders, filings or registrations that have been obtained or made and are in full force and effect except as would not have a Material Adverse Effect.

(n)       No Material Actions or Proceedings .  Except as otherwise disclosed in the CIM, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company’s knowledge, (i) threatened against or affecting any of the Company Parties, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company Parties, or (iii) relating to environmental or discrimination matters, where in any such case (A) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Effect or adversely affect the consummation of the Transactions or (B) any such action, suit or proceeding is or would be material in the context of the offer and sale of Securities.  No material labor dispute with the employees of any of the Company Parties, or with the employees of any principal supplier of the Company Parties, exists or, to the best of the Company’s knowledge, is threatened or imminent.

(o)       All Necessary Permits, etc .  Except as otherwise disclosed in the CIM, each of the Company Parties possesses such valid and current certificates, authorizations or permits issued by the appropriate state, federal or other applicable regulatory agencies or bodies and such valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps and other technical information, in each case, necessary to conduct their respective businesses, and neither the Company nor any Guarantor has received, or has any reason to believe that it has received or will receive, any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

(p)       Title to Properties .  Each of the Company Parties has (i) generally satisfactory title to its oil and gas properties, title investigations having been carried out by the Company Parties in accordance with the practice in the oil and gas industry in the areas in which the Company Parties operate except as, in each case, would not result in a Material Adverse Effect, (ii) good and marketable title to all other real property owned by it to the extent necessary to carry on its business and (iii) good and marketable title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except such as are described in the CIM or such as do not materially affect the value of the properties of the Company Parties, considered as one enterprise, and do not interfere with the use made and proposed to be made of such properties, by the Company Parties, considered as one enterprise; and all of the leases and subleases material to the business of the Company Parties, considered as one enterprise, and under which the Company Parties hold properties described in the CIM, are in full force and effect, and none of the Company Parties has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of any of the Company Parties under any of the leases or subleases mentioned above, or affecting or questioning the rights of any of the Company Parties to the continued possession of the leased or subleased premises under any such lease or sublease.

(q)       Gas Imbalances; Prepayments .  On a net basis there are no gas imbalances, take-or-pay or other prepayments that would require the Parent or any of its subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor exceeding one-half bcf of gas (on an mcf equivalent basis) in the aggregate, other than as disclosed in the CIM or as would not result in a Material Adverse Effect.

(r)       Tax Law Compliance .  Except as disclosed in the CIM, the Company Parties have duly filed all necessary tax returns and have paid all taxes that have become due and payable except such taxes that are being contested in good faith and by appropriate proceedings and for which adequate reserves have been recorded in accordance with GAAP.  The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 3(i) above in respect of all taxes for all periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined, other than as disclosed in the CIM or as would not result in a Material Adverse Effect.  There are no liens for taxes (except for statutory liens for taxes that have not become due) on the assets of the Company or any of its subsidiaries

(s)       Compliance with Environmental Laws .  Except as described in the CIM or as would not, singly or in the aggregate, result in a Material Adverse Effect, (i) neither the Company nor any of its subsidiaries is in violation of any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (ii) the Company Parties have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (iii) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against any of the Company Parties, and (iv) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting any of the Company Parties relating to Hazardous Materials or any Environmental Laws.

(t)       Compliance with Laws .  The Company has not been advised, and has no reason to believ