January 19, 2010

Mr. H. Walt Dunagin
Executive Vice President
Reef Oil & Gas Partners, L.P.
Reef Exploration, L.P.
1901 North Central Expressway, Suite 300
Richardson, Texas 75080

 
Re:
Post Closing Properties/Title Defect Notice

Dear Walt:

Reference is made to that certain Purchase and Sale Agreement dated December 18,
2009 and effective as of December 1, 2009 by and between RCWI, L.P. (“Buyer”)
and Azalea Properties, Ltd. (“Seller”) providing for the purchase by Buyer of
certain assets of Seller (the “PSA”). All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the PSA.

This Letter Agreement (“Letter”) shall set forth the understanding of Buyer and
Seller with regard to the purchase and sale of those properties set forth on
Exhibit A hereto (individually a “Post Closing Property” and collectively the
“Post Closing Properties”)

By their execution hereof, Buyer and Seller agree as follows:

1.           The definition of “Interests” in the PSA being purchased by Buyer
at Closing shall be amended to exclude the Post Closing Properties and the
Purchase Price to be paid by Buyer to Seller at Closing shall be adjusted
downward by the amount of $1,414,826.00, representing the allocated value
attributable to the Post Closing Properties.

2.           Commencing on the Closing Date and ending one hundred eighty (180)
days thereafter (the “Cure Period”), Seller shall not, directly or indirectly
solicit, enter into or conduct discussions relating to, initiate or knowingly
encourage any offer or proposal for, or any indication of interest in the Post
Closing Properties, to any third party.
   
3.           During the Cure Period Seller shall use commercially reasonable
efforts to cure the title defects existing on the Post Closing Properties as
specifically set forth on Exhibit B attached hereto (the “Title Defects”).
Within five (5) days following receipt by Buyer of evidence reasonably
acceptable to Buyer that a Title Defect has been cured,

 
 

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together with such other evidence as Buyer may request in its reasonable
discretion, Buyer shall purchase and Seller shall sell the Post Closing Property
for which all Title Defects have been cured for a purchase price which equals
the allocated value of said Post Closing Property set forth on Exhibit A. In the
event that some, but not all of the Title Defects have been cured by the
expiration of the Cure Period, Buyer may (a) purchase the remaining Post Closing
Properties (which have not previously been purchased during the Cure Period) for
which the Title Defects have been cured at their allocated value set forth on
Exhibit A, or (b) elect to purchase all of the remaining Post Closing
Properties, pay the allocated value of the Post Closing Properties for which
Title Defects have been cured and enter into negotiations with Seller to adjust
the purchase price of the Post Closing Properties for which Title Defects have
not been cured. If the options set forth in (a) or (b) are not exercised by the
Parties, or Buyer and Seller cannot in good faith agree on a purchase price
adjustment pursuant to Buyer’s option in (b) immediately above, either Buyer or
Seller may elect to terminate this Letter and the Parties shall have no further
obligations hereunder.
 
4.           In the event Buyer purchases the Post Closing Properties, Buyer and
Seller shall execute Assignments in same the form executed by Buyer and Seller
at Closing.
 
5.           In the event Buyer purchases the Post Closing Properties pursuant
to this Letter, the Effective Date of the purchase shall be as set forth in the
PSA and all other terms set forth in the PSA shall apply to the purchase and
sale of the Post Closing Properties.

SIGNATURE PAGE FOLLOWS

 
 

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Very truly yours,
 
Azalea Properties, Ltd.
   
By: 
Maple Ridge Property Company
 
Its sole general partner
     
By: 
/s/ Frances Marianne Talbot
   
Frances Marianne Talbot
   
President

 
Accepted and Agreed to
this 19 day of January 2010:
 
RCWI, L.P.
   
By: 
RCWI, GP, LLC
Its general partner
     
By: 
/s/ Michael J. Mauceli
   
Michael J. Mauceli, Manager

 
 

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EXHIBIT A

POST CLOSING PROPERTIES

Skinner Unit 30-10 #1
  $ 344,467.00  
Ezell Unit 29-05 #1
  $ 57,332.00  
Trice Unit 35-04
  $ 8,835.00  
Trice Unit 35-02
  $ 7,669.00  
Turkey Creek Unit 1-1
  $ 4,655.00  
Hollingsworth #1 TJ Unit
  $ 166,805.00  
Grand Canyon B1-32-A2-5
  $ 59,397.00  
Bryant Link Co. #1
  $ 103,590.00  
Summerlin, CE
  $ 71,660.00  
Collins East Upper CV Unit
  $ 155,932.00  
Coot Moore 1
  $ 131,074.00  
Stroud-Polk Unit #2-1
  $ 64,757.00  
Board of Supervisors 16-14 #1-1
  $ 11,994.00  
Garrett #1-1
  $ 4,565.00  
Stroud-Polk Unit #1-1
  $ 1,852.00  
Turner 1-34
  $ 125,478.00  
Haskell #1-4
  $ 587.00  

 
 

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EXHIBIT B

Title Defects

 
 

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[ex10-4_logo.jpg]
H. WALT DUNAGIN
Executive Vice President
Land Manager

Thursday, January 14, 2010

Frances Marianne Talbot
Azalea Properties, Ltd.
c/o David Nini
Lantana Oil & Gas Partners
9000 Hempstead Road
Suite 200
Houston, Texas 77008

Dear Madam and Sirs:

Under the terms of the Purchase and Sale Agreement, dated December 18, 2009
(“PSA”), executed by RCWI, L.P. (“RCWI”) and Azalea Properties, Ltd. (“Azalea”),
RCWI and Azalea agreed that RCWI would notify Azalea of certain matters
affecting the value of the Interests as that term is defined in the PSA. This
letter shall serve as your formal notification under Article V of the PSA. (All
capitalized terms, not defined in this notification, shall have the meaning
ascribed to them in the PSA.)

1.           Article 5.05: The following are the Title Defects which render the
title to an Interest as less than Marketable Title.

a.           There is a break in Azalea’s chain of title to the Wiley Glennburn
Unit caused by the absence of a deed between Great Plains Royalty Corp. to Earl
Schwartz Company, two of the predecessors in title to Azalea. The Title Defect
Amount attributable to this Title Defect is $98,130.

b.           There is no conveyance to Azalea from Woodson Oil & Gas, L.P. of
the following properties:
 
Property:
 
Title Defect Amount:
 
Skinner Unit 30-10 #1, Choctaw County, Alabama
  $ 344,467  
Ezell Unit 29-05#l, Choctaw County, Alabama
  $ 57,332  
Trice Unit 35-04, Choctaw County, Alabama
  $ 8,835  
Trice Unit 35-02, Choctaw County, Alabama
  $ 7,669  
Turkey Creek Unit 1-1, Choctaw County, Alabama
  $ 4,655  

REEF OIL & GAS PARTNERS, L.P.
REEF EXPLORATION, L.P.
 
1901 N Central Expy, Ste 300 • Richardson, TX 75080
(972) 437-6792 • Fax: (972) 994-0369
Toll Free: (877) 915-7333 • www.reefogc.com

 
 

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c.           There is no conveyance to Azalea from Modano Oil & Gas, L.P. of the
following properties:

Property:
 
Title Defect Amount:
 
Hollingsworth #1-TJ Unit -001T, Desoto Parish, Louisiana
  $ 166,805  
Grand Canyon B1-32-A2-5 Otsego County, Michigan
  $ 59,397  
Bryant Link Co. #1, Multi, Andrews County, Texas
  $ 103,590  
Summerlin, CE, Multi, Andrews County, Texas
  $ 71,660  

d.           There is no assignment to Azalea from Nowitzki Oil and Gas, L.P. of
the following properties:

Property:
 
Title Defect Amount:
 
Collins East Upper CV Unit, Covington County Mississippi
  $ 155,932  
Coot Moore 1, Covington County, Mississippi
  $ 131,074  
Stroud-Polk Unit #2-1, Covington County, Mississippi
  $ 64,757  
Board of Supervisors 16-14 #1-1, Covington County, Mississippi
  $ 11,994  
Garrett #1-1, Covington County, Mississippi
  $ 4,565  
Stroud-Polk Unit #1-1, Covington County, Mississippi
  $ 1,852  
Turner 1-34, Woodward County, Oklahoma
  $ 125,478  
Haskell #1-4 1-4, Woodward County, Oklahoma
  $ 587  

e.
The following mortgages burden the Interests:

See Exhibit A
 
2.           Article 5.06(a): Azalea and Reef have agreed to resolve any matters
pertain to Article 5.06(a) under the terms of a separate letter agreement to be
executed by both parties.
 
3.           Article 5.06(b): There are preferential rights to purchase which
burden the following properties:
 
Property:
     
Operator:
a.            Bonanza,
 
Terry County, Texas
 
Dinero
b.            Unidentified
 
Grady County, Oklahoma
 
Marshall Oil Corp.

 
 

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You have notified us of the exercise of the preferential rights on the Bryan’s
Mill Unit PF Record 1-1 property, the Della Colvin 1-18, the Della Colvin 31-8
and the Steffan Harvey 2. This letter confirms that we have agreed to remove
those properties from the sale.

The Mortgages listed on Exhibit A are treated in this letter as Title Defects,
but we have assigned no Title Defect Amount to any of said encumbrances because
we have not been provided with the balances due, and Azalea has agreed to convey
the Interests free of all such burdens and encumbrances at Closing.

Thank you for your prompt attention to these matters, and let us know what we
can do to perfect title in Azalea.

Yours truly,

/s/ H. Walt Dunagin
H. Walt Dunagin
Executive Vice President
RCWI, L.P.

 
 

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EXHIBIT A

This Exhibit A is attached to that certain letter dated January 14, 2010 from
RCWI, L.P. to Azalea Properties, Ltd.

Azalea Properties Ltd, L.P. mortgages in favor of Texas Capital Bank, N.A.

Date
 
Recording
Reference
 
County
 
State
             
04/01/2002
 
#02-0823053
 
Los Angeles
 
California
10/01/2008
 
#20088253414
 
Los Angeles
 
California
             
10/01/2008
 
#410629
 
Baca
 
Colorado
             
08/22/2003
 
668/951
 
Acadia
 
Louisiana
03/16/2007
 
762/927
 
Acadia
 
Louisiana
12/28/2007
 
783/161
 
Acadia
 
Louisiana
             
08/22/2003
 
692/11518
 
East Baton Rouge
 
Louisiana
03/16/2007
 
348/11943
 
East Baton Rouge
 
Louisiana
12/28/2007
 
66/12028
 
East Baton Rouge
 
Louisiana
10/01/2008
 
696/12103
 
East Baton Rouge
 
Louisiana
             
4/16/2004
 
1658/305
 
Terrebonne
 
Louisiana
3/16/2007
 
1966/817
 
Terrebonne
 
Louisiana
12/28/2007
 
2056/565
 
Terrebonne
 
Louisiana
10/1/2008
 
2132/406
 
Terrebonne
 
Louisiana
             
04/16/2004
 
#20405191
 
Vermillion
 
Louisiana
03/16/2007
 
#20703906
 
Vermillion
 
Louisiana
12/28/2007
 
#20800687
 
Vermillion
 
Louisiana
10/01/2008
 
#20811995
 
Vermillion
 
Louisiana
             
01/18/2008
 
608/450
 
Covington
 
Mississippi
10/01/2008
 
618/281
 
Covington
 
Mississippi
             
12/28/2007
 
#374623
 
Bottineau
 
North Dakota
10/01/2008
 
#378182
 
Bottineau
 
North Dakota

 
 

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04/16/2004
 
1298/286
 
Lea
 
New Mexico
03/16/2007
 
1505/289
 
Lea
 
New Mexico
12/28/2007
 
1558/973
 
Lea
 
New Mexico
01/18/2008
 
1562/623
 
Lea
 
New Mexico
10/01/2008
 
1606/364
 
Lea
 
New Mexico
             
08/15/2007
 
RB3365/685
 
Canadian
 
Oklahoma
12/28/2007
 
RB3406/983
 
Canadian
 
Oklahoma
10/01/2008
 
RB3501/434
 
Canadian
 
Oklahoma
10/01/2008
 
997/680
 
Blaine
 
Oklahoma
             
01/01/2008
 
1937/271
 
Roger Mills
 
Oklahoma
             
01/18/2008
 
481/738
 
Crane
 
Texas
10/01/2008
 
499/807
 
Crane
 
Texas
             
04/16/2004
 
366/699
 
Duval
 
Texas
01/18/2008
 
468/38
 
Duval
 
Texas
10/01/2008
 
486/164
 
Duval
 
Texas
             
12/28/2008
 
78/704
 
Crosby
 
Texas
10/01/2008
 
83/97
 
Crosby
 
Texas
             
01/18/2008
 
#2008-0420
 
Gaines
 
Texas
10/01/2008
 
#2008-4647
 
Gaines
 
Texas
             
04/16/2004
 
575/821
 
Hemphill
 
Texas
01/18/2008
 
634/452
 
Hemphill
 
Texas
10/01/2008
 
650/594
 
Hemphill
 
Texas
             
08/22/2008
     
Loving
 
Texas
01/01/08
 
80/435
 
Loving
 
Texas
             
04/16/2004
 
150/402
 
Martin
 
Texas
03/16/2007
 
197/356
 
Martin
 
Texas
12/28/2007
 
217/271
 
Martin
 
Texas
10/01/2008
 
238/19
 
Martin
 
Texas
             
04/16/2004
 
157/214
 
McMullen
 
Texas
10/01/2008
 
180/164
 
McMullen
 
Texas

 
 

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01/18/2008
 
1359/1
 
Sutton
 
Texas
10/01/08
 
365/467
 
Sutton
 
Texas
             
8/15/2007
 
572/60
 
Wheeler
 
Texas
12/28/2007
 
577/657
 
Wheeler
 
Texas
10/01/2008
 
591/640
 
Wheeler
 
Texas
             
08/22/2003
 
744/35
 
Ward
 
Texas
10/01/2008
 
851/6
 
Ward
 
Texas
01/18/2008
 
833/420
 
Ward
 
Texas

 
Nowitzki Oil & Gas, L.P. mortgage in favor of the Bank of Scotland
 
09/01/2006
 
556/430
 
Wheeler
 
Texas
 
Modano Oil &I Gas, L.P. mortgage in favor the Bank of Scotland
 
08/06/2003
 
5403/799
 
Denton
 
Texas
 
Talbot Investment Company mortgage in favor of the First Enterprise Bank
 
07/11/1996
 
96-1162623
 
Los Angeles
 
California

 
 

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