PURCHASE AND SALE AGREEMENT

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1.1       Acquired Assets . Subject to the terms and conditions of this Agreement, Seller agrees to sell, convey and deliver to Buyer and Buyer agrees to purchase, acquire and assume from Seller the following (collectively, the “ Assets”):

(A)      All of Seller’s right, title, interest and obligations in, to and under the oil and gas leases described in Exhibit 1.1(A) attached hereto (the “ Leases”), covering the land described in Exhibit 1.1(A) (the “ Land”), whether or not such interests or land are accurately or completely described on Exhibit 1.1(A) , together with all the property and rights incident thereto, including without limitation Seller’s rights and obligations in, to and under all operating agreements; pooling, communitization and unitization agreements; farmout agreements; joint venture agreements; product purchase and sale contracts; transportation, processing, treatment or gathering agreements; leases; permits (the “ Permits”); rights-of-way (the “ Rights-of-Way”), including but not limited to the rights-of-way described in Exhibit 1.1(A) ; surface use agreements; surface leases; easements (the “ Easements”), including but not limited to the easements described in Exhibit 1.1(A) ; licenses; options; declarations; orders; contracts; and instruments in any way relating to the Leases;

(B)      All of Seller’s right, title and interest in and to the wells (“ Wells”) situated on or used in conjunction with operations on the Leases and Land or on land pooled, communitized or unitized therewith (“Pooled Land”), and the real property described in Exhibit 1.1( B) (the “ Deeded Land”), together with all of Seller’s interests in and to all of the personal property, fixtures, improvements and other property, whether real, personal

(C)      or mixed, now or as of the Effective Time on, appurtenant to or used or obtained by Seller in connection with the Leases, Land, Pooled Land, Deeded Lands or Wells or with the production, injection, treatment, sale or disposal of hydrocarbons and all other substances produced therefrom or attributable thereto (collectively, the “ Equipment”), including, without limitation, producing and non-producing wells, injection wells, disposal wells, water supply wells, well equipment, casing, tubing, tanks, generators, boilers, buildings, pumps, motors, machinery, pipelines, gathering systems, power lines, telephone and telegraph lines, roads, field processing plants, field offices and other furnishings related thereto, equipment leases, trailers, inventory in storage, storage yards, and all other improvements or appurtenances thereunto belonging;

(D)      All of Seller’s right, title and interest in and to the other personal property described in Exhibit 1.1(C) attached hereto;

(E)      All of the oil and gas and associated hydrocarbons (“ Oil and Gas”) in and under or otherwise attributable to the Leases, Land, Pooled Land and Deeded Land or produced from the Wells;

(F)      To the extent assignable, all governmental permits, licenses and authorizations, as well as any applications for the same, related to the Leases, Land, Pooled Land, Deeded Land and Wells or the use thereof; and

(G)      All of the files, records, and data of Seller relating to the items described in subsections (A), (B), (C), (D) and (E) above (the “ Records”), including, without limitation, lease records, well records, and division order records; well files and prospect files; title records (including abstracts of title, title opinions and memoranda, and title curative documents related to the Leases and Wells); contracts and contract files; correspondence; computer data files; micro-fiche data files; geological, geophysical and seismic records, interpretations, data, maps and information; production records, electric logs, core data, pressure data, decline curves and graphical production curves; and accounting records, including all records regarding income, expenses and taxes, to the extent only that the Records can be transferred without violation of any third-party restriction and are not protected by Seller’s attorney-client privilege. The Records do not include any appraisals or other evaluation materials related to Seller’s preparation of the Assets for sale hereunder, any reservoir and/or development studies prepared by or on behalf of Seller, nor any of Seller’s income tax returns or files related thereto.

1.2       Assumed Liabilities . On the Closing Date, Buyer shall assume and agree to timely and fully pay, perform and otherwise discharge, without recourse to Seller or its affiliates, all of the liabilities and obligations of Seller and its affiliates, predecessors, successors, assigns or representatives, direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, which relate, directly or indirectly, to the Assets (other than the Excluded Assets), whether such liabilities and obligations accrue before, on or after the Effective Time (collectively, the “ Assumed Liabilities”). Notwithstanding the foregoing, Assumed Liabilities shall not include, and there is excepted, reserved and excluded from such liabilities assumed by

Buyer, the liabilities and obligations for which Seller indemnifies Buyer pursuant to Section 14.1.

2.      PURCHASE PRICE.

2.1       Purchase Price . The purchase price for the Assets is Forty-Eight Million Dollars ($48,000,000.00) (the “ Base Purchase Price”), subject to the adjustments provided for herein, of which Forty-Five Million Dollars ($45,000,000.00) shall be due at Closing, and the balance of Three Million Dollars ($3,000,000.00) shall be due no later than sixty (60) days from the first (1st) day of the calendar month in which the average total production from the Assets is greater than or equal to a calendar day average of one thousand (1,000) barrels of oil per day, as accurately reported to the Wyoming Oil and Gas Conservation Commission on Form 2.

2.2       Deposit . Within three (3) business days following the execution of this Agreement, Buyer shall pay to Seller, in cash by wire transfer in immediately-available funds, a non-refundable Deposit in an amount equal to Three Million, Six Hundred Thousand Dollars ($3,600,000.00), said amount being equivalent to 7.5% of the Base Purchase Price (the “ Deposit”). The Deposit, together with interest thereon, shall be distributed to Seller and credited to the Base Purchase Price at Closing, or if this Agreement is terminated, shall be distributed or retained pursuant to Article 13. In the event the Deposit is not paid to Seller as set forth herein, this Agreement shall immediately terminate.

2.3       Adjustments to the Base Purchase Price . At Closing, appropriate adjustments to the Base Purchase Price shall be made as follows in accordance with Section 4.1 (as adjusted, the “ Purchase Price”):

(A)      The Base Purchase Price shall be adjusted upward by:

(i)      any amount determined to be due Seller pursuant to Section 4.2;

(ii)      Property Taxes and Severance Taxes related to the Assets paid by Seller for the period following the Effective Time as determined pursuant to Section 4.3;

(iii)      an amount equal to the costs, expenses and other expenditures (whether capitalized or expensed) paid by Seller in accordance with this Agreement that are attributable to the Assets for the period from and after 7:00 a.m. (Mountain Time) on December 1, 2006 (the “ Effective Time”);

(iv)   a fixed monthly rate, prorated if necessary, per active Well, as provided in the applicable operating agreement, for operation and maintenance

(v)      expenses (excluding workover costs, plugging and abandoning costs, and major costs) incurred by Seller while operating the Assets from and after the Effective Time until the election of a new operator of the Assets has occurred and that party has assumed operations. If Seller owns a 100% working interest or if no operating agreement applies, the fixed monthly rate per active producing Well shall be Five Hundred Dollars ($500);

(vi)      any amount related to the Value of Interest Additions as determined pursuant to Section 5.5;

(vii)      an amount equal to the amount of proceeds derived from the sale of Oil and Gas, net of royalties and severance taxes paid by Buyer, actually received by Buyer and directly attributable to the Wells which are, in accordance with generally accepted accounting procedures, attributable to the period of time prior to the Effective Time; and

(viii)      any other amount agreed upon in writing by Seller and Buyer.

(B)      The Base Purchase Price shall be adjusted downward by:

(i)      an amount equal to the amount of proceeds derived from the sale of Oil and Gas, net of royalties and severance taxes paid by Seller, actually received by Seller and directly attributable to the Wells which are, in accordance with generally accepted accounting procedures, attributable to the period of time from and after the Effective Time;

(ii)      an amount equal to all expenditures, liabilities and costs relating to the Assets (other than Taxes related to the Assets) that are unpaid as of the Closing Date and assessed for or attributable to periods of time or the ownership of production prior to the Effective Time regardless how such expenditures, liabilities and costs are calculated provided that to the extent the actual amounts cannot be determined prior to the agreement of Buyer and Seller with respect to the Closing Adjustment Statement, a reasonable estimate of such expenditures, liabilities and costs shall be used (and to such extent Buyer shall assume the liability and responsibility for payment therefor);

(iii)      all amounts related to Title Defects as determined pursuant to Section 5.4, consents and preferential rights as determined pursuant to Section 5.6, Adverse Environmental Conditions as determined pursuant to Section 6.4, Exclusion Adjustments as determined pursuant to Sections 5.6 or 6.4, and Casualty Losses as determined pursuant to Section 15.1;

(iv)      Property Taxes and Severance Taxes related to the Assets to be paid by Buyer for the period prior to the Effective Time as determined pursuant to Section 4.3; and

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

(vi)      Seller shall have the right to collect any receivable, refund or other amounts associated with periods prior to the Effective Time. To the extent that Buyer collects any such receivable, refund or other amounts, then Buyer shall promptly remit any such amounts to Seller.

2.4       Allocation . The Base Purchase Price shall be allocated to the Assets as set forth in Exhibit 2.4 . The Parties agree that the values allocated to various portions of the Assets, which are set forth on Exhibit 2.4 (singularly with respect to each item, the “ Allocated Value” and collectively, the “ Allocated Values”), shall be binding on Seller and Buyer and shall be used only for the purposes of adjusting the Base Purchase Price pursuant to Sections 4.3 (relating to Taxes), 5.4 (relating to Title Defects), and 15.1 (relating to Casualty Losses), and are not intended as a measure of value for any other purpose.

3.      CLOSING.

3.1       Closing . The sale and purchase of the Assets (“ Closing”) shall be held on or before December 15, 2006 (“ Closing Date”). The Closing will take place at the offices of Nielson & Associates, Inc., in Cody, WY, or at another location mutually agreed upon by Seller and Buyer.

3.2       Delivery by Seller . At Closing, Seller shall deliver to Buyer:

(A)      An Assignment and Bill of Sale, substantially in the form attached hereto as Exhibit 3.2(A) , effecting the sale, transfer, conveyance and assignment of the Assets, with (i) a special warranty of the real property title by, through and under Seller but not otherwise, and (ii) with all personal property and fixtures conveyed “AS IS, WHERE IS,” with no warranties whatsoever, express, implied or statutory.

(B)      Any governmental forms required to effect transfer in accordance with applicable regulations;

(C)      Letters in lieu of transfer orders instructing purchasers of production to pay to Buyer the proceeds of sales of Oil and Gas from the Assets for sales occurring from and after the first (1st) day of any month in which Buyer assumes operations;

(D)      Executed change of operator forms as required by applicable governmental regulation;

(E)      Releases of the mortgages in favor of any bank that may be currently encumbering the Assets;

(F)      The Closing Adjustment Statement;

(G)      A Warranty Deed, substantially in the form attached hereto as Exhibit 3.2(G) , effecting the sale, transfer and conveyance of the Deeded Land;

(H)      Possession of the Records and all other Assets; and

(I)      Letters of resignation as operator of the Assets, along with ballot forms to the partners as directed by the applicable operating agreement(s).

3.3       Delivery by Buyer . At Closing, Buyer shall deliver to Seller or Seller’s designee the Purchase Price set forth in the Closing Adjustment Statement by wire transfer in immediately available funds, less the Deposit. Buyer shall also deliver evidence that it has provided replacement instruments for each guaranty, bond, letter of credit or similar contingent obligation given by Seller as required by law or the provisions of any Lease or other agreement, along with the appropriate instruments necessary to qualify Buyer to receive approval as operator of the Assets. Buyer shall execute and deliver the Assignment and Bill of Sale, Closing Adjustment Statement and other closing documents as necessary or appropriate.

3.4       Further Cooperation . At the Closing and thereafter as may be necessary, Seller and Buyer shall execute and deliver such other instruments and documents and take such other actions as may be reasonably necessary to evidence and effectuate the transactions contemplated by this Agreement.

4.      ACCOUNTING ADJUSTMENTS.

4.1       Closing Adjustments . With respect to matters that can be determined as of the Closing, Seller shall prepare, in accordance with the provisions of this Article 4, a statement (the “ Closing Adjustment Statement”) with relevant supporting information setting forth each adjustment to the Base Purchase Price submitted by Seller. Seller shall submit the Closing Adjustment Statement to Buyer, together with all records or data supporting the calculation of amounts presented on the Closing Adjustment Statement, no later than five (5) business days prior to the scheduled Closing Date. Prior to the Closing, Buyer and Seller shall review the adjustments proposed by Seller in the Closing Adjustment Statement. Agreed adjustments shall be taken into account in computing any adjustments to be made to the Base Purchase Price at the Closing. When available, actual figures will be used for the adjustments at Closing. To the extent actual figures are not available, estimates shall be used subject to final adjustments as described in Section 4.4 below.

4.2       Strapping and Gauging . Seller will cause the Oil and Gas in the storage facilities located on, or utilized in connection with, the Leases to be measured, gauged or strapped as of the Effective Time. Seller will cause the production meter charts (or if such do not exist, the sales meter charts) on the pipelines transporting Oil and Gas from the Leases to be read as of such time. The Oil and Gas in such storage facilities above the load line or through the meters on the pipelines as of the Effective Time shall belong to Seller and shall be valued based upon the price actually paid for Oil and Gas produced from the Assets for the calendar month prior to the Effective Time, and the Oil and Gas placed in such storage facilities after the Effective Time and production upstream of the aforesaid meters shall belong to Buyer and become part of the Assets. Buyer or Buyer’s representative shall have the option to witness the gauging by Seller. In the event Buyer or Buyer’s representative exercising the option to witness the gauging by Seller, Buyer agrees that the waiver and release provisions set forth in Section 5.1(A) of this Agreement shall apply thereto.

4.3       Taxes .

(A)       Property Taxes . All ad valorem taxes, real property taxes, personal property taxes and similar obligations assessed on the Assets (“ Property Taxes”) shall be apportioned as of the Effective Time between Buyer and Seller. Buyer shall file or cause to be filed all required reports and returns incident to Property Taxes which are due on or after the Closing, and shall pay or cause to be paid to the taxing authorities all such taxes reflected on such reports and returns. The Post-Closing Adjustment Statement shall settle all liability for Property Taxes, using estimates based on previous assessments to the extent current assessments are not known. For clarification purposes, the 2006 ad valorem tax bill that is based on 2005 production will be for the account of Seller. The 2007 ad valorem tax bill that is based on 2006 production will be for the account of Buyer, prorated to the Effective Date between the parties.

(B)       Sales Taxes, Filing Fees, Etc . The Base Purchase Price is net of any sales taxes or other transfer taxes. Buyer shall be liable for any sales tax or other transfer tax as well as any applicable conveyance, transfer and recording fees, and real estate transfer stamp or taxes imposed upon the sale pursuant to this Agreement. If Seller is required by applicable state law to report and pay these taxes or fees, Buyer shall promptly reimburse Seller in fun payment of the invoice.

(C)       Severance Taxes . All production, severance or excise taxes, conservation fees and other similar such taxes or fees (other than income taxes) payable on a current basis with respect to Oil and Gas produced and sold from the Assets (“ Severance Taxes”) shall be borne by Seller to the extent the production on which such taxes are based occurs during Seller’s ownership prior to the Effective Time and shall be borne by Buyer to the extent such production occurs after the Effective Time.

4.4       Post-Closing Adjustments . A post-closing adjustment statement (the “ Post-Closing Adjustment Statement”) based on the actual income and expenses shall be prepared and delivered by Seller to Buyer within ninety (90) days after the Closing, proposing further adjustments to the calculation of the Purchase Price based on the information then available. Seller or Buyer, as the case may be, shall be given access to and shall be entitled to review and audit the other Party’s records pertaining to the computation of amounts claimed in such Post-Closing Adjustment Statement.

(A)      Within thirty (30) days after receipt of the Post-Closing Adjustment Statement, Buyer shall deliver to Seller a written statement describing in reasonable detail its objections (if any) to any amounts or items set forth on the Post-Closing Adjustment Statement. If Buyer does not raise objections within such period, then the Post-Closing Adjustment Statement shall become final and binding upon the Parties at the end of such period.

(B)      If Buyer raises objections, the Parties shall negotiate in good faith to resolve any such objections. If the Parties are unable to resolve any disputed item within thirty (30) days after Buyer’s receipt of the Post-Closing Adjustment Statement, any disputed accounting item shall be submitted to a nationally recognized independent accounting firm mutually agreeable to the Parties who shall be instructed to resolve such disputed item within thirty (30) days. The resolution of disputes by the accounting firm so selected shall be set forth in writing and shall be conclusive, binding and non-appealable upon the Parties with respect to the accounting matters submitted and the Post-Closing Adjustment Statement shall become final and binding upon the Parties on the date of such resolution. The fees and expenses of such accounting firm shall be paid one-half by Buyer and one-half by Seller.

(C)      After the Post-Closing Adjustment Statement has become final and binding on the Parties, Seller or Buyer, as the case may be, shall pay to the other such sums as are due to settle accounts between the Parties due to differences between the estimated Purchase Price paid pursuant to the Closing Adjustment Statement and the actual Purchase Price set forth on the Post-Closing Adjustment Statement.

4.5       Suspended Funds . At the Closing, Seller shall provide to Buyer a listing showing all proceeds from production attributable to the Leases which are currently held in suspense and shall transfer to Buyer all of those suspended proceeds. Buyer shall be responsible for proper distribution of all the suspended proceeds, to the extent turned over to it by Seller, to the parties lawfully entitled to them, and any claims related thereto, and Buyer hereby agrees to indemnify, defend and hold harmless Seller from and against any and all claims, liabilities, losses, costs and expenses arising out of or relating to those suspended proceeds and any claims related thereto after the Effective Date.

4.6       Audit Adjustments . Seller retains all rights to adjustments resulting from any operating agreement and other audit claims asserted against third party operators on transactions occurring prior to the Effective

Time (which includes Buyer, if applicable). Any credit received by Buyer pertaining to such an audit claim shall be paid to Seller within thirty (30) days after receipt.

4.7       Cooperation . Each Party covenants and agrees to promptly inform the other with respect to amounts owing under Sections 4.4 and 4.6 hereof.

5.      DUE DILIGENCE; TITLE MATTERS.

5.1       General Access .

(A)      During reasonable business hours, Seller agrees to grant Buyer physical access to the Leases and Wells to allow Buyer to conduct, at Buyer’s sole risk and expense, on-site inspections and environmental assessments of the Leases and Wells. Buyer agrees not to enter onto the Leases or contact field vendors, employees or contractors without Seller’s prior knowledge and approval, such approval not to be unreasonably withheld. In connection with any such on-site inspections, Buyer agrees not to interfere with the normal operation of the Leases and Wells and agrees to comply with all requirements of the operators of the Wells. If Buyer or its agents prepares an environmental assessment of any Lease or Well, Buyer agrees to keep such assessment confidential and to furnish copies thereof to Seller. In connection with granting such access, Buyer represents that it is adequately insured and waives, releases and agrees to indemnify the Seller against all claims for injury to, or death of, persons or for damage to operations or property arising in any way from the access afforded to Buyer hereunder or the activities of Buyer. This waiver, release and indemnity by Buyer shall survive termination of this Agreement.

(B)      Prior to Closing, Seller shall give Buyer and its representatives, employees, consultants, independent contractors, attorneys and other advisors reasonable access to the Records during regular office hours for any and all inspections and copying.

5.2       Defensible Title . As used herein the term Defensible Title shall mean:

(A)      As to the Assets, that record title or operating rights of Seller which:

(i)      entitles Seller to receive not less than the interests shown in Exhibit 2.4 as the “ Net Revenue Interest” of all Oil and Gas produced, saved and marketed from or allocated to the formations in the associated Wells which are producing as of the date of this Agreement or which have otherwise been given Allocated Value, all without reduction, suspension or termination except as stated in such Exhibit or otherwise permitted as Permitted Encumbrances; and

(ii)      obligates Seller to bear a percentage of the costs and expenses relating to the maintenance and development of, and operations relating to, the producing formations in each associated Well not greater than the “ Working Interest” shown in Exhibit 2.4 (without a proportionate increase in the Net Revenue Interest), all without increase except as stated in such Exhibit or otherwise permitted as Permitted Encumbrances; and

(B)      That title of Seller to the Assets is tree and clear of liens, encumbrances and defects that materially and adversely affect the ownership, operation or use of the Assets, except for Permitted Encumbrances.

(C)      As used herein, the term “ Permitted Encumbrances” shall mean anyone or more of the following:

(1)      The provisions of the Leases and any lessors’ royalties, overriding royalties, net profits interests, carried interests, production payments, reversionary interests and similar burdens reflected in the public records or in the Records, if the net cumulative effect of the burdens does not operate to reduce the Net Revenue Interest of Seller below the interests described in Section 2.4;

(2)      Any increase in lessor’s royalty occasioned by the repeal or suspension of any governmental regulation providing for the reduction of royalty for wells producing below defined threshold amounts;

(3)      Division orders and production sales contracts terminable without penalty upon no more than ninety (90) days notice to the purchaser;

(4)      Preferential Rights and required third party consents to assignment and similar agreements with respect to which waivers or consents are obtained from the appropriate parties, or the appropriate time period for asserting any such right has expired without an exercise of the right;

(5)      Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s and other similar liens or charges arising in the ordinary course of business for obligations that are not delinquent or that will be paid and discharged in the ordinary course of business, or if delinquent, that are being contested in good faith by appropriate action of which Buyer is notified in writing before Closing;

(6)      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 therein if they are routinely obtained subsequent to the sale or conveyance;

(7)      Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations that do not materially interfere with the oil and gas operations to be conducted on any Well or Lease;

(8)      All operating agreements, unit agreements, unit operating agreements, pooling agreements and pooling designations affecting the Assets that are either (i) of

record in Seller’s chain of title or (ii) reflected or referenced in the Records or (iii) included as Material Agreements on Exhibit 7.1(K) ;

(9)      Conventional rights of reassignment prior to release or surrender requiring notice to the holders of the rights;

(10)      All rights reserved to or vested in any 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)      All agreements affecting the Assets that are of record in Seller’s chain of title, or are reflected or referenced in the Records;

(12)      Defects that are defensible by possession under applicable statutes of limitation for adverse possession or for prescription; and

(13)      All other liens, charges, encumbrances, contracts, agreements, instruments, obligations, defects and irregularities affecting the Assets that individually or in the aggregate are not such as to materially interfere with the operation, value or use of any of the Assets or have not prevented, and cannot reasonably be expected to prevent, Buyer from receiving the proceeds of production from the affected Assets.

5.3       Defect Letters .

(A)      Buyer may from time to time and no later than five (5) business days prior to Closing notify Seller in writing (a “ Notice”) of any matter which would cause title to all or part of the Assets not to be Defensible Title (“ Title Defect”), provided that no title Defect shall be deemed to exist unless the Title Defect Value thereof exceeds Twenty-Five Thousand Dollars ($25,000.00). Further, there shall be no adjustment to the Base Purchase Price unless and only to the extent that the aggregate Title Defect Values of all Title Defects exceed Two Hundred Fifty Thousand Dollars ($250,000) (the “ Title Defect Deductible”) (such amount being a deductible, not a threshold) and then only for the amount exceeding the Title Defect Deductible. In order to provide Seller a reasonable opportunity to cure any Title Defects prior to Closing, Buyer shall use reasonable efforts to provide the Notice as soon as reasonably possible after becoming aware of or making its determination of the Title Defect.

(B)      In the Notice, Buyer must describe with reasonable detail each alleged Title Defect it has discovered and the steps required to cure each Title Defect, include Buyer’s reasonable estimate of the Title Defect Value attributable to each, and include all data and information in Buyer’s possession or control bearing thereon. Buyer shall be deemed to have conclusively waived all Title Defects not disclosed to Seller in a Notice before five (5) business days prior to Closing. Buyer waives any remedy against Seller for Title Defects that do not exceed the Title Defect Deductible or for which timely notice is not given as provided hereunder or for which adjustment is made as hereafter provided.

(C)      Upon timely delivery of a Notice by Buyer:

(i)      within three (3) business days after Seller’s receipt of the Title Defects Notice, Seller shall notify Buyer whether Seller agrees with Buyer’s claimed Title Defects and/or the proposed Title Defect Values therefore (“ Seller’s Response”). If Seller does not agree with any claimed Title Defect and/or the proposed Title Defect Value therefor, then the Parties shall enter into good faith negotiations and shall attempt to agree on such matters;

(ii)      within one (1) business day after Seller’s notice of its cure of a Title Defect, Buyer shall notify Seller whether Buyer agrees with Seller’s proposed cure of a Title Defect (“ Buyer’s Response”). If Buyer does not agree with any such cure, then the Parties shall enter into good faith negotiations and shall attempt to agree on such matters;

(iii)      if the Parties cannot reach agreement concerning either the existence of a Title Defect, Seller’s proposed cure of a Title Defect, or a Title Defect Value within ten (10) days after Buyer’s receipt of Seller’s Response or Seller’s receipt of Buyer’s Response, as applicable, upon either Party’s request, the Parties shall mutually agree on and employ an attorney experienced in title examination in the state where the Assets are located (“ Title Consultant”) to resolve all points of disagreement relating to Title Defects and Title Defect Values; provided that Seller may elect not to proceed to Closing with regard to such Assets and adjust the Base Purchase Price in the amount of the Allocated Value and not submit such matter to arbitration;

(iv)      if at any time any Title Consultant so chosen fails or refuses to perform hereunder, a new Title Consultant shall be chosen by the Parties. The cost of any Title Consultant shall be borne fifty percent (50%) by Seller and fifty percent (50%) by Buyer. Each Party shall present a written statement of its position on the Title Defect and/or Title Defect Value in question to the Title Consultant within five (5) days after the Title Consultant is selected, and the Title Consultant shall make a determination of all points of disagreement in accordance with the terms and conditions of this Agreement within ten (10) business days of receipt of such position statements. The determination by the Title Consultant shall be conclusive and binding on the Parties, and shall be enforceable against any Party in any court of competent jurisdiction. If necessary, the Closing Date shall be deferred only as to those Assets affected by any unresolved disputes regarding the existence of a Title Defect and/or the Title Defect Value until the Title Consultant has made a determination of the disputed issues with respect thereto and all subsequent dates and required activities with respect to any such Assets having reference to the Closing Date shall be correspondingly deferred; provided, however, that, unless Seller and Buyer mutually agree to the contrary, the Closing Date shall not be deferred in any event for more than thirty (30) days beyond the scheduled Closing Date in Section 3.1. Once the Title Consultant’s determination has been expressed to both Parties, if applicable, Seller shall have five (5) days in which to advise Buyer in writing which of the options available to

(v)      Seller under Section 5.4 that Seller elects regarding each of the Assets as to which the Title Consultant has made a determination. In evaluating whether a Title Detect exists, due consideration shall be given to the length of time that the particular Asset has been producing Oil and Gas and whether such fact, circumstance or condition is of the type expected to be encountered in the area involved and is usual and customarily acceptable to reasonable and prudent operators, working interest owners and/or purchasers engaged in the business of the exploration, development, and operation of oil and gas properties.

5.4       Effect of Title Defect .

(A)      In the event Buyer provides Seller with a timely Notice and the Title Defects are valid and exceed the Title Defect Deductible, for those Title Defects not cured by Closing, Seller and Buyer shall, upon their mutual agreement:

(i)      adjust the Base Purchase Price in the amount of the Title Defect Value of the Asset to which such Title Defect relates and proceed to Closing on all Assets; provided that Seller shall not be obligated to transfer any Assets for which the Title Defect Value equals or exceeds such Asset’s Allocated Value; or

(ii)      proceed with (a) Closing on those Assets not affected by the valid Title Defects and such Assets to which a Title Defect relates but for which Seller and Buyer have elected to proceed to Closing with an adjustment of the Base Purchase Price in the amount of the Title Defect Value of such Assets and (b) defer Closing on those other Assets to which a Title Defect relates and for which Seller has agreed to attempt to cure such Title Defect and to not proceed to Closing, for which Buyer shall place into escrow an amount equal to the Allocated Values of the Assets affected by the valid Title Defects, which withheld amount shall be paid to Seller when the Asset affected by any valid Title Defect is cured or the Title Defect is waived by Buyer and the affected Asset is conveyed from Seller to Buyer. If neither of the above occurs and if Seller and Buyer later determine that Seller will not cure a Title Defect on or before six (6) months from the Closing Date, the amount in the escrow account attributable to such Title Defect will be returned to Buyer and Seller shall retain such Asset affected by such Title Defect.

(B)      The diminution in value of an Asset attributable to a valid Title Defect (the “ Title Defect Value”) notified in a Notice shall be determined by the following:

(i)      if the valid Title Defect asserted is that the actual Net Revenue Interest attributable to the producing or valued formation in any Asset is less than that stated in the applicable Exhibit, then the Title Defect Value is the product of the Allocated Value attributed to the affected formation(s) in such Asset, multiplied by a traction, the numerator of which is the difference between the Net Revenue Interest set forth in the applicable Exhibit and the actual Net Revenue

(ii)      Interest, and the denominator of which is the Net Revenue Interest stated in the applicable Exhibit; or

(iii)      if the valid Title Defect represents an obligation, encumbrance, burden or charge upon the affected Asset (including any increase in Working Interest for which there is not a proportionate increase in Net Revenue Interest), the amount of the Title Defect Value is to be determined by taking into account the Allocated Value of such Asset, the portion of the Asset affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the affected Asset, and the Title Defect Values placed upon the Title Defect by Buyer and Seller.

(iv)      Notwithstanding the above, in no event shall the total of the Title Defect Values related to a particular Asset exceed the Allocated Value of such Asset.

(C)      If the aggregate value of (i) the Base Purchase Price adjustment for Title Defect Values plus (ii) the Allocated Value of Assets which are retained in lieu of cure or adjustment equals or exceeds ten percent (10%) of the Base Purchase Price, then by notice delivered prior to the Closing either Party may terminate this Agreement and neither Party shall have any further obligation to conclude the transfer of the Assets under this Agreement.

5.5       Possible Upward Adjustment . Promptly on discovery, but no later than five business days prior to Closing, Buyer shall in good faith notify Seller of any interest that would be an Asset hereunder, but that is not listed, including any interest that entitles Seller to receive more than the Net Revenue Interest shown on Exhibit 2.4 or obligates Seller to bear costs and expenses in an amount less than the Working Interest shown on Exhibit 2.4 without a proportionate change in Net Revenue Interest, and that increases the Allocated Value of the affected Asset by more than $25,000, with such interest being an “ Interest Addition.” Buyer acknowledges and agrees to comply with the affirmative obligation set forth in the preceding sentence. Seller shall give Buyer written notice of Interest Additions of which it becomes aware as soon as possible, but in no event later than on or before five (5) business days prior to the Closing. Such notices shall be in writing and shall include (i) a description of the Interest Addition, (ii) the basis for the Interest Addition, (iii) the Allocated Value of the Asset affected by the Interest Addition, (iv) the value of the Interest Addition or the amount by which Seller (or Buyer) believes the Allocated Value of the Asset has been increased by the Interest Addition (“ Value of Interest Addition”) and the associated comp