exhibit10-1.htm


    
      
        
          


          
            Exhibit
              10.1

          

           

           

          ASSET
            PURCHASE AND SALE AGREEMENT

           

           

          between

           

           

          Escondido
            Resources LP

          as
            "Seller"

           

           

          and

           

           

          Swift
            Energy Operating, LLC

          as
            "Buyer"

           

           

           

          


           

          Dated
            as of September 4, 2007

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

        TABLE
          OF
          CONTENTS

                                                                                                                                                                                                                                                                                                                                                                       
          Page

         

        
          
            	
                    ARTICLE
                      I PROPERTIES TO BE SOLD AND PURCHASED

                  	
                    1

                  
	
                    Section
                      1.1.

                  	
                    Assets
                      Included.

                  	
                    1

                  
	
                    Section
                      1.2.

                  	
                    Assets
                      Excluded.

                  	
                    2

                  
	
                    ARTICLE
                      II PURCHASE PRICE

                  	
                    4

                  
	
                    Section
                      2.1.

                  	
                    Purchase
                      Price.

                  	
                    4

                  
	
                    Section
                      2.2.

                  	
                    Accounting
                      Adjustments.

                  	
                    4

                  
	
                    Section
                      2.3.

                  	
                    Closing
                      and Post-Closing Accounting Settlements.

                  	
                    5

                  
	
                    Section
                      2.4.

                  	
                    Payment
                      of Adjusted Purchase Price.

                  	
                    6

                  
	
                    Section
                      2.5.

                  	
                    Allocation
                      of Purchase Price.

                  	
                    6

                  
	
                    ARTICLE
                      III THE CLOSING

                  	
                    6

                  
	
                    ARTICLE
                      IV REPRESENTATIONS AND WARRANTIES OF SELLER

                  	
                    7

                  
	
                    Section
                      4.1.

                  	
                    Organization
                      and Existence.

                  	
                    7

                  
	
                    Section
                      4.2.

                  	
                    Power
                      and Authority.

                  	
                    7

                  
	
                    Section
                      4.3.

                  	
                    Valid
                      and Binding Agreement.

                  	
                    7

                  
	
                    Section
                      4.4.

                  	
                    Non-Contravention.

                  	
                    7

                  
	
                    Section
                      4.5.

                  	
                    Approvals.

                  	
                    7

                  
	
                    Section
                      4.6.

                  	
                    Pending
                      Litigation.

                  	
                    8

                  
	
                    Section
                      4.7.

                  	
                    Contracts.

                  	
                    8

                  
	
                    Section
                      4.8.

                  	
                    Commitments,
                      Abandonments or Proposals.

                  	
                    9

                  
	
                    Section
                      4.9.

                  	
                    Production
                      Sales Contracts.

                  	
                    9

                  
	
                    Section
                      4.10.

                  	
                    Plugging
                      and Abandonment.

                  	
                    9

                  
	
                    Section
                      4.11.

                  	
                    Permits.

                  	
                    9

                  
	
                    Section
                      4.12.

                  	
                    Payment
                      of Expenses.

                  	
                    9

                  
	
                    Section
                      4.13.

                  	
                    Compliance
                      with Laws.

                  	
                    10

                  
	
                    Section
                      4.14.

                  	
                    Imbalances;
                      Prepayments.

                  	
                    10

                  
	
                    Section
                      4.15.

                  	
                    Intellectual
                      Property.

                  	
                    10

                  
	
                    Section
                      4.16.

                  	
                    Taxes.

                  	
                    10

                  
	
                    Section
                      4.17.

                  	
                    Fees
                      and Commissions.

                  	
                    11

                  
	
                    Section
                      4.18.

                  	
                    Operations.

                  	
                    11

                  
	
                    Section
                      4.19.

                  	
                    Environmental
                      Laws.

                  	
                    11

                  
	
                    Section
                      4.20.

                  	
                    Wells.

                  	
                    11

                  
	
                    Section
                      4.21.

                  	
                    Disclaimer
                      of Warranties.

                  	
                    11

                  
	
                    ARTICLE
                      V REPRESENTATIONS AND WARRANTIES OF BUYER

                  	
                    12

                  
	
                    Section
                      5.1.

                  	
                    Organization
                      and Existence.

                  	
                    12

                  
	
                    Section
                      5.2.

                  	
                    Power
                      and Authority.

                  	
                    12

                  
	
                    Section
                      5.3.

                  	
                    Valid
                      and Binding Agreement.

                  	
                    12

                  
	
                    Section
                      5.4.

                  	
                    Non-Contravention.

                  	
                    13

                  
	
                    Section
                      5.5.

                  	
                    Approvals.

                  	
                    13

                  
	
                    Section
                      5.6.

                  	
                    Pending
                      Litigation.

                  	
                    13

                  
	
                    Section
                      5.7.

                  	
                    Knowledgeable
                      Purchaser.

                  	
                    13

                  
	
                    Section
                      5.8.

                  	
                    Funds.

                  	
                    14

                  


          

           

          
            
              
              

            

            
              i

              
                

              

            

            
              
              

            

          

          
            
              	
                      Section
                        5.9.

                    	
                      Qualified
                        Leaseholder.

                    	
                      14

                    
	
                      Section
                        5.10.

                    	
                      Fees
                        and Commissions.

                    	
                      14

                    
	
                      ARTICLE
                        VI CERTAIN COVENANTS OF SELLER PENDING CLOSING

                    	
                      14

                    
	
                      Section
                        6.1.

                    	
                      Access
                        to Files.

                    	
                      14

                    
	
                      Section
                        6.2.

                    	
                      Conduct
                        of Operations.

                    	
                      14

                    
	
                      Section
                        6.3.

                    	
                      Restrictions
                        on Certain Actions.

                    	
                      14

                    
	
                      Section
                        6.4.

                    	
                      Seller's
                        Confidentiality Obligation.

                    	
                      15

                    
	
                      Section
                        6.5.

                    	
                      Payment
                        of Expenses.

                    	
                      16

                    
	
                      Section
                        6.6.

                    	
                      Preferential
                        Rights and Third Party Consents.

                    	
                      16

                    
	
                      ARTICLE
                        VII ADDITIONAL PRE-CLOSING AND POST-CLOSING AGREEMENTS OF
                        BOTH
                        PARTIES

                    	
                      16

                    
	
                      Section
                        7.1.

                    	
                      Reasonable
                        Best Efforts.

                    	
                      16

                    
	
                      Section
                        7.2.

                    	
                      Notice
                        of Litigation.

                    	
                      16

                    
	
                      Section
                        7.3.

                    	
                      Notification
                        of Certain Matters.

                    	
                      17

                    
	
                      Section
                        7.4.

                    	
                      Fees
                        and Expenses.

                    	
                      17

                    
	
                      Section
                        7.5.

                    	
                      Public
                        Announcements.

                    	
                      17

                    
	
                      Section
                        7.6.

                    	
                      Casualty
                        Loss Prior to Closing.

                    	
                      17

                    
	
                      Section
                        7.7.

                    	
                      Governmental
                        Bonds.

                    	
                      18

                    
	
                      Section
                        7.8.

                    	
                      Assumed
                        Obligations.

                    	
                      18

                    
	
                      Section
                        7.9.

                    	
                      Books
                        and Records.

                    	
                      18

                    
	
                      Section
                        7.10.

                    	
                      Suspended
                        Funds.

                    	
                      18

                    
	
                      Section
                        7.11.

                    	
                      Letters-in-Lieu.

                    	
                      18

                    
	
                      Section
                        7.12.

                    	
                      Logos
                        and Names.

                    	
                      18

                    
	
                      Section
                        7.13.

                    	
                      Covenant
                        Regarding Joint Account.

                    	
                      18

                    
	
                      Section
                        7.14.

                    	
                      Further
                        Assurances.

                    	
                      19

                    
	
                      ARTICLE
                        VIII DUE DILIGENCE EXAMINATION

                    	
                      19

                    
	
                      Section
                        8.1.

                    	
                      Title
                        Due Diligence Examination.

                    	
                      19

                    
	
                      Section
                        8.2.

                    	
                      Environmental
                        Due Diligence Examination.

                    	
                      22

                    
	
                      Section
                        8.3.

                    	
                      Disputes
                        Regarding Title Defects or Environmental Defects.

                    	
                      24

                    
	
                      Section
                        8.4.

                    	
                      Adjustments
                        to Purchase Price for Defects.

                    	
                      24

                    
	
                      Section
                        8.5.

                    	
                      Buyer
                        Indemnification.

                    	
                      25

                    
	
                      ARTICLE
                        IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES

                    	
                       26

                    
	
                      Section
                        9.1.

                    	
                      Conditions
                        Precedent to the Obligations of Buyer.

                    	
                      26

                    
	
                      Section
                        9.2.

                    	
                      Conditions
                        Precedent to the Obligations of Seller.

                    	
                      27

                    
	
                      ARTICLE
                        X TERMINATION, AMENDMENT AND WAIVER

                    	
                      28

                    
	
                      Section
                        10.1.

                    	
                      Termination.

                    	
                      28

                    
	
                      Section
                        10.2.

                    	
                      Effect
                        of Termination.

                    	
                      28

                    
	
                      Section
                        10.3.

                    	
                      Amendment.

                    	
                      29

                    
	
                      Section
                        10.4.

                    	
                      Waiver.

                    	
                      29

                    
	
                      ARTICLE
                        XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
                        INDEMNIFICATION

                    	
                      29

                    
	
                      Section
                        11.1.

                    	
                      Survival.

                    	
                      29

                    
	
                      Section
                        11.2.

                    	
                      Seller's
                        Indemnification Obligations.

                    	
                      29

                    
	
                      Section
                        11.3.

                    	
                      Buyer's
                        Indemnification Obligations.

                    	
                      30

                    
	
                      Section
                        11.4.

                    	
                      Net
                        Amounts.

                    	
                      30

                    


            

             

            
              
                
                

              

              
                ii

                
                  

                

              

              
                
                

              

            

            
              
                	
                        Section
                          11.5.

                      	
                        Indemnification
                          Proceedings.

                      	
                        31

                      
	
                        Section
                          11.6.

                      	
                        Indemnification
                          Exclusive Remedy.

                      	
                        31

                      
	
                        Section
                          11.7.

                      	
                        Limited
                          to Actual Damages.

                      	
                        31

                      
	
                        Section
                          11.8.

                      	
                        Indemnification
                          Despite Negligence.

                      	
                        32

                      
	
                        Section
                          11.9.

                      	
                        Limits
                          on Liability.

                      	
                        32

                      
	
                        ARTICLE
                          XII MISCELLANEOUS MATTERS

                      	
                        32

                      
	
                        Section
                          12.1.

                      	
                        Notices.

                      	
                        32

                      
	
                        Section
                          12.2.

                      	
                        Entire
                          Agreement.

                      	
                        33

                      
	
                        Section
                          12.3.

                      	
                        Injunctive
                          Relief.

                      	
                        33

                      
	
                        Section
                          12.4.

                      	
                        Binding
                          Effect; Assignment; No Third Party Benefit.

                      	
                        33

                      
	
                        Section
                          12.5.

                      	
                        Severability.

                      	
                        34

                      
	
                        Section
                          12.6.

                      	
                        GOVERNING
                          LAW.

                      	
                        34

                      
	
                        Section
                          12.7.

                      	
                        Counterparts.

                      	
                        34

                      
	
                        Section
                          12.8.

                      	
                        WAIVER
                          OF CONSUMER RIGHTS.

                      	
                        34

                      
	
                        Section
                          12.9.

                      	
                        Competition.

                      	
                        34

                      
	
                        ARTICLE
                          XIII DEFINITIONS AND REFERENCES

                      	
                        34

                      
	
                        Section
                          13.1.

                      	
                        Certain
                          Defined Terms.

                      	
                        34

                      
	
                        Section
                          13.2.

                      	
                        Certain
                          Additional Defined Terms.

                      	
                        38

                      
	
                        Section
                          13.3.

                      	
                        References,
                          Titles and Construction.

                      	
                        39

                      


              

            

          

        

        


        
          
            
            

          

          
            iii

            
              

            

          

          
            
            

          

        

        ASSET
          PURCHASE AND SALE AGREEMENT

         

        THIS
          ASSET PURCHASE AND SALE AGREEMENT dated September 4, 2007, is made by
          and between Escondido Resources LP, a Texas limited partnership
          ("Seller"), and Swift Energy Operating, LLC, a Texas limited
          liability company ("Buyer").

         

        RECITALS:

         

        A.           Seller
          desires to sell, assign and convey to Buyer, and Buyer desires to purchase
          and
          accept from Seller, certain oil and gas properties and related assets located
          in
          the counties of Dimmit, La Salle, and Webb, State of Texas owned and held
          by
          Seller.

         

        B.           Seller
          and Buyer deem it in their mutual best interests to execute and deliver
          this
          Agreement.

         

        NOW,
          THEREFORE, in consideration of the foregoing Recitals and the mutual
          covenants and agreements contained herein, Seller and Buyer do hereby agree
          as
          follows:

         

        AGREEMENT:

         

        ARTICLE
          I

         

        Properties
          To Be Sold and Purchased

         

        Section
          1.1.                                Assets
          Included.     Subject
          to Section 1.2, Seller agrees to sell and Buyer agrees to purchase,
          for the consideration hereinafter set forth, and subject to the terms and
          provisions herein contained, the following described properties, rights
          and
          interests:

         

        (a)           All
          of Seller's right, title and interest in and to those properties described
          in
Exhibit I attached hereto and made a part hereof for all
          purposes;

         

        (b)           Without
          limitation of the foregoing but subject to Section 1.2, all other
          right, title and interest (of whatever kind or character, whether legal
          or
          equitable, and whether vested or contingent) of Seller in and to the oil,
          gas
          and other minerals in and under or that may be produced from the lands
          described
          in Exhibit I hereto (including interests in Leases covering such
          lands, overriding royalties, carried, backin, farmout, farmin, reversionary
          interest, production payments and net profits interests in such lands or
          such
          Leases, and fee mineral interests, fee royalty interests and other interests
          in
          such oil, gas and other minerals), whether such lands be described in a
          description set forth in such Exhibit I or be described in such
Exhibit I by reference to another instrument (and without limitation
          by any depth limitations that may be set forth in such Exhibit I or
          in any such instrument so referred to for description), even though Seller's
          interest in such oil, gas and other minerals may be incorrectly described
          in, or
          omitted from, such Exhibit I;

         

        (c)           All
          rights, titles and interests of Seller in and to, or otherwise derived
          from, all
          presently existing and valid oil, gas or mineral unitization, pooling,
          or
          communitization agreements, declarations and/or orders and in and to the
          properties covered and the units created thereby (including all units formed
          under orders, rules, regulations, or other official acts of any federal,
          state,
          or other authority having jurisdiction, voluntary unitization
          agreements,

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

        (d)           designations
          and/or declarations) relating to the properties described in
paragraphs (a) and (b) above;

         

        (e)           All
          rights, titles and interests of Seller in and to all presently existing
          and
          valid production sales (and sales related) contracts, operating agreements,
          and
          other agreements and contracts which relate to any of the properties described
          in paragraphs (a), (b) and (c) above, or which relate
          to the exploration, development, operation, or maintenance thereof or the
          treatment, storage, transportation or marketing of production therefrom
          (or
          allocated thereto);

         

        (f)           All
          rights, titles and interests of Seller in and to all materials, supplies,
          machinery, equipment, improvements and other personal property and fixtures
          (including all wells, wellhead equipment, pumping units, flowlines, tanks,
          buildings, injection facilities, saltwater disposal facilities, compression
          facilities, gathering systems, and computer equipment located on the lands
          covered by the properties described above which is necessary to operate
          such
          properties), and all easements, rights-of-way, surface leases and other
          surface
          rights, all Permits and licenses, and all other appurtenances being used
          or held
          for use in connection with, or otherwise related to, the exploration,
          development, operation or maintenance of any of the properties described
          in
paragraphs (a), (b) and (c) above, or the treatment,
          storage, transportation or marketing of production therefrom (or allocated
          thereto); and

         

        (g)           Subject
          to Section 1.2, all of Seller's lease files, title files, curative
          reports and information, abstracts and title opinions, division order files,
          unitization files, contract files, land surveys and maps (including those
          in
          electronic or digital format), data sheets, land and mineral owner
          correspondence, joint operating agreement files, environmental and regulatory
          files and reports, operational files and engineering, production records,
          well
          files, accounting records relating directly to the properties described
          above
          (but not including general financial and accounting records), seismic records
          and surveys (to the extent freely assignable to Buyer without restrictions
          of
          any kind), gravity maps, electric logs, geological or geophysical data
          and
          records, (to the extent freely assignable to Buyer without restrictions
          of any
          kind), paleontological, geochemical and technical files, analyses,
          interpretations, and other files, documents and records (including data
          and
          records in electronic or digital format) of every kind and description
          which
          relate to the properties described above (collectively the
          "Records"), that Seller has the right, power and authority to
          sell, transfer, convey or disclose to Buyer. Seller will use Reasonable
          Best
          Efforts to obtain consents to assign and transfer seismic data licenses
          requested by Buyer which may not be freely assignable.

         

        As
          used
          herein:  (i) "Oil and Gas Properties" means the
          properties and interests described in paragraphs (a), (b) and
(c) above, save and except for any such properties
          or assets that are
          Excluded Assets under Section 1.2; and
          (ii) "Properties" means any and all portions of the Oil
          and Gas Properties plus the properties and interests described in
paragraphs (d), (e), and (f) above, save and except
          for any such properties or assets that are Excluded Assets under Section
          1.2.

         

        Section
          1.2.                                Assets
          Excluded.     Notwithstanding
          anything herein contained to the contrary, the Properties do not include,
          and
          there is hereby excepted and reserved unto Seller all other assets, properties,
          and business of Seller, including the following:

         

        (a)           All
          trade credits attributable to the Properties with respect to all periods
          prior
          to the Effective Date;

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        (b)           All
          of Seller's right, title, and interest in any oil, gas, or mineral Leases,
          overriding royalties, production payments, net profits interests, fee mineral
          interests, fee royalty interests and other interests in oil, gas, and other
          minerals not expressly included in the definition of Oil and Gas Properties
          and
          all oil, gas or other Hydrocarbon production from or attributable to the
          Properties with respect to all periods prior to the Effective Date, all
          proceeds
          attributable thereto, and all Hydrocarbons that, at the Effective Date,
          are
          owned by Seller and are in storage or within processing plants;

         

        (c)           Any
          refund of costs, Taxes or expenses borne by Seller or Seller's predecessors
          in
          title attributable to periods prior to the Effective Date;

         

        (d)           Any
          and all proceeds from the settlements of contract disputes with purchasers
          of
          Hydrocarbons from the Properties, including settlement of take-or-pay disputes,
          insofar as said proceeds are attributable to periods of time prior to the
          Effective Date;

         

        (e)           Any
          and all proceeds from settlements with regard to reclassification of gas
          produced from the Properties, insofar as said proceeds are attributable
          to
          periods of time prior to the Effective Date;

         

        (f)           All
          claims (including insurance claims) and causes of action of Seller against
          one
          or more third parties arising from acts, omission or events occurring prior
          to
          the Effective Date and all claims under any joint interest audit attributable
          to
          any period prior to the Effective Date;

         

        (g)           All
          limited partnership, financial, tax and legal (other than title) books
          and
          records of Seller;

         

        (h)           Any
          geological, geophysical or seismic data, materials or information, including
          maps, interpretations records or other technical information related to
          or based
          upon any such data, materials or information, and any other asset, data,
          materials or information, the transfer of which is restricted or prohibited
          under the terms of any third party license, confidentiality agreement or
          other
          agreement or the transfer of which would require the payment of a fee or
          other
          consideration to any third party; provided, however, that if any such data,
          materials or information is transferable upon payment of a fee or other
          consideration (which Seller will give notice to Buyer of same), and if
          Buyer has
          paid such fee or other consideration prior to the Closing Date, then such
          data,
          materials or information shall be transferred to Buyer;

         

        (i)           All
          leases for office premises used by Seller, and all furniture, fixtures
          and
          equipment located thereat, including computers, telephone equipment and
          other
          similar items of tangible personal property;

         

        (j)           All
          of Seller's accounting or other administrative systems, computer software
          (except that software which may be necessary to operate the Properties
          to the
          extent it is freely transferable to Buyer without restrictions of any kind),
          patents, trade secrets, copyrights, names, trademarks, logos and other
          intellectual property;

         

        (k)           All
          documents and instruments of Seller that may be protected by an attorney-client
          privilege (exclusive of title opinions in respect of the Oil and Gas
          Properties);

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

        (l)           All
          of the other assets described on Exhibit 1.2, together with any
          rights, liabilities, or obligations associated with such assets;

         

        (m)           The
          Existing Hedges and all hedging transactions and any gains or losses
          attributable to any hedging activities, whether occurring before or after
          the
          Effective Date;

         

        (n)           All
          (i) correspondence or other documents or instruments of Seller relating
          to the
          transactions contemplated hereby, (ii) lists of other prospective purchasers
          of
          Seller or the Properties compiled by Seller, (iii) bids submitted to Seller
          by
          other prospective purchasers of Seller or the Properties, (iv) analyses
          by
          Seller or any Affiliates thereof submitted by other prospective purchasers
          of
          Seller or the Properties, and (v) correspondence between or among Seller
          or its
          Affiliates or their respective representatives with respect to, or with,
          any
          other prospective purchasers of Seller or the Properties; and

         

        (o)           The
          claims, actions, and litigation listed on Section 4.6 of the Seller's
          Disclosure Schedule.

         

        The
          properties and interests specified in the foregoing paragraphs (a)
          through (o) of this Section 1.2 are herein collectively
          called the "Excluded Assets".

         

        ARTICLE
          II

        Purchase
          Price

         

        Section
          2.1.                                Purchase
          Price.   
           In consideration of the sale of the Properties by Seller to
          Buyer, Buyer shall pay to Seller cash in the amount of $245,000,000 (the
          "Purchase Price"). The Purchase Price, as adjusted pursuant to
          this Article II and the other applicable provisions hereof, is
          herein called the "Adjusted Purchase Price".

         

        Section
          2.2.                                Accounting
          Adjustments.

         

        (a)           Subject
          to Section 2.2(b), appropriate adjustments shall be made between Buyer
          and Seller so that:

         

        (i)           all
          expenses (including all drilling costs, all capital expenditures, and all
          overhead charges under applicable operating agreements, and all other overhead
          charges actually charged by third parties) for work done in the operation
          of the
          Properties after the Effective Date will be borne by Buyer, and all proceeds
          (net of applicable production, severance, and similar Taxes) from the sale
          of
          oil, gas or other minerals produced from the Oil and Gas Properties after
          the
          Effective Date will be received by Buyer, and

         

        (ii)           all
          expenses for work done in the operation of the Properties before the Effective
          Date will be borne by Seller and all proceeds (net of applicable production,
          severance, and similar Taxes) from the sale of oil, gas or other minerals
          produced therefrom before the Effective Date will be received by
          Seller.

         

        (b)           It
          is agreed that, in making the adjustments contemplated by Section
          2.2(a):

         

        (i)           oil
          which was produced from the Oil and Gas Properties and which was, on the
          Effective Date, stored in tanks located on the Oil and Gas Properties (or
          located elsewhere but used to store oil produced from the Oil and Gas Properties
          prior to delivery

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        (ii)           to
          oil purchasers) and above pipeline connections shall be deemed to have
          been
          produced before the Effective Date (it is recognized that such tanks were
          not
          gauged on the Effective Date for the purposes of this Agreement and that
          determination of the volume of such oil in storage will be based on the
          best
          available data, which may include estimates) (with the stored crude oil
          produced
          before the Effective Date valued at the price for the month such oil was
          sold
          (or, if not sold yet, the price for the month in which such oil can reasonably
          be expected to be delivered to the purchaser thereof)),

         

        (iii)           ad
          valorem Taxes assessed with respect to a period which the Effective Date
          splits
          shall be prorated based on the number of days in such period which fall
          on each
          side of the Effective Date (with the day on which the Effective Date falls
          being
          counted in the period after the Effective Date), and

         

        (iv)           no
          consideration shall be given to the local, state or federal income tax
          liabilities of any party.

         

        Section
          2.3.                                Closing
          and Post-Closing Accounting Settlements.

         

        (a)           At
          or before Closing, the parties shall determine, based upon the best information
          reasonably available to them, the amount of the adjustments provided for
          in
Section 2.2. If the amount of adjustments so
          determined which would result in a credit to Buyer exceed the amount of
          adjustments so determined which would result in a credit to Seller, Buyer
          shall
          receive a credit, for the amount of such excess, against the Purchase Price
          to
          be paid at Closing, and, if the converse is true, Buyer shall pay to Seller,
          at
          Closing (in addition to amounts otherwise then owed), the amount of such
          excess.

         

        (b)           On
          or before 90 days after Closing, Buyer and Seller shall review any additional
          information which may then be available pertaining to the adjustments provided
          for in Section 2.2, shall determine if any additional adjustments
          (whether the same be made to account for expenses or revenues not considered
          in
          making the adjustments made at Closing, or to correct errors made in such
          adjustments) should be made beyond those made at Closing, and shall make
          any
          such adjustments by appropriate payments from Seller to Buyer or from Buyer
          to
          Seller. Following such additional adjustments, no further
          adjustments to the Purchase Price shall be made under this
Section 2.3.

         

        (c)           If
          a dispute arises under Section 2.3(b) with respect to any additional
          adjustments (an "Accounting Dispute") that the parties have
          been unable to resolve, then, at the written request of either Seller or
          Buyer
          (the "Request Date"), each of Seller and Buyer shall nominate
          and commit one of its senior officers to meet at a mutually agreed time
          and
          place not later than ten days after the Request Date to attempt to resolve
          same.  If such senior officers have been unable to resolve such
          Accounting Dispute within a period of 30 days after the Request Date, any
          party
          shall have the right, by written notice to the other specifying in reasonable
          detail the basis for the Accounting Dispute, to resolve the Accounting
          Dispute
          by submission thereof to a nationally recognized independent public accounting
          firm commonly considered as one of the "Big 4" and reasonably acceptable
          to
          Seller and Buyer, which firm shall serve as sole arbitrator (the
          "Accounting Referee").  The scope of the Accounting
          Referee's engagement shall be limited to the resolution of the items described
          in the notice of the Accounting Dispute given in accordance with the foregoing
          and the corresponding calculation of the adjustments pursuant to Section
          2.2.  The Accounting Referee shall be instructed by the parties to
          resolve the Accounting

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

        Dispute
          as soon as reasonably practicable in light of the circumstances but in
          no event
          in excess of 15 days following the submission of the Accounting Dispute
          to the
          Accounting Referee.  The decision and award of the Accounting Referee
          shall be binding upon the parties as an award under the Federal Arbitration
          Act
          and final and nonappealable to the maximum extent permitted by law, and
          judgment
          thereon may be entered in a court of competent jurisdiction and enforced
          by any
          party as a final judgment of such court.  The fees and expenses of the
          Accounting Referee shall be borne equally by Seller and Buyer.

         

        Section
          2.4.                                Payment
          of Adjusted Purchase Price.     The
          Adjusted Purchase Price shall be paid to Seller as follows:

         

        (a)           Contemporaneously
          with the execution and delivery of this Agreement, Buyer shall tender to
          the
          Joint Account cash equal to $24,500,000 as a deposit (such amount, together
          with
          all interest earned thereon, the "Deposit").  The
          Deposit shall (i) be distributed to Seller and applied against the Adjusted
          Purchase Price owing by Buyer at the Closing pursuant to
Section 2.4(b), (ii) distributed to Seller pursuant to
Section 10.2 or (iii) distributed to Buyer pursuant to
Section 10.2, as applicable.

         

        (b)           At
          Closing, Buyer shall pay to Seller by bank transfer in immediately available
          funds to the account designated by Seller an amount equal to the Adjusted
          Purchase Price less the Deposit.

         

        (c)           All
          cash payments by Buyer pursuant to this Section 2.4 shall be made in
          immediately available funds by confirmed wire transfer to a bank account
          or
          accounts designated by Seller or the Joint Account Holder, as
          applicable.

         

        Section
          2.5.                                Allocation
          of Purchase Price.

         

          On
          or before the Closing Date, the Buyer and Seller shall agree in writing
          as to
          the allocation of the Adjusted Purchase Price (plus any fixed liabilities
          assumed by the Seller or to which the Properties are subject) among the
          Properties under the methodology required by Section 1060 of the
          Code.  The Buyer and Seller shall report the transactions contemplated
          hereby on all Tax Returns, including, but not limited to Form 8594, in
          a manner
          consistent with such allocation.  If, contrary to the intent of the
          parties hereto as expressed in this Section 2.5, any taxing
          authority makes or proposes an allocation different from the allocation
          determined under this Section 2.5, Buyer and Seller shall cooperate
          with each other in good faith to contest such taxing authority's allocation
          (or
          proposed allocation), provided, however, that, after consultation with
          the party
          adversely affected by such allocation (or proposed allocation), the other
          party
          hereto may file such protective claims or Tax Returns as may be reasonably
          required to protect its interests.

         

        ARTICLE
          III

        The
          Closing

         

        The
          closing of the transactions contemplated hereby (the "Closing")
          shall take place (i) at the offices of Thompson & Knight LLP, Houston,
          Texas, at 10:00 a.m. (local Houston, Texas time) on October 11, 2007, or
          (ii) at such other time or place or on such other date as the parties
          hereto shall agree.  The date on which the Closing is required to take
          place is herein referred to as the "Closing
          Date".  All Closing transactions shall be deemed to have
          occurred simultaneously.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            
ARTICLE
            IV

        

        Representations
          and Warranties of Seller

         

        Except
          as
          provided in Seller's Disclosure Schedule, Seller hereby represents and
          warrants
          to Buyer as follows:

         

        Section
          4.1.                                Organization
          and Existence.   
           Seller is a limited partnership duly formed and validly existing under
          the
          laws of the State of Texas.

         

        Section
          4.2.                                Power
          and Authority.   
           Seller has all requisite limited partnership power and authority to
          execute, deliver, and perform this Agreement and each other agreement,
          instrument, or document executed or to be executed by Seller in connection
          with
          the transactions contemplated hereby to which it is a party and to consummate
          the transactions contemplated hereby and thereby.  The execution,
          delivery, and performance by Seller of this Agreement and each other agreement,
          instrument, or document executed or to be executed by Seller in connection
          with
          the transactions contemplated hereby to which it is a party, and the
          consummation by it of the transactions contemplated hereby and thereby,
          have
          been duly authorized by all necessary action of Seller.

         

        Section
          4.3.                                Valid
          and Binding Agreement.     This
          Agreement has been duly executed and delivered by Seller and constitutes,
          and
          each other agreement, instrument, or document executed or to be executed
          by
          Seller in connection with the transactions contemplated hereby to which
          it is a
          party has been, or when executed will be, duly executed and delivered by
          Seller
          and constitutes, or when executed and delivered will constitute, a valid
          and
          legally binding obligation of Seller, enforceable against it in accordance
          with
          their respective terms, except that such enforceability may be limited
          by
          (a) applicable bankruptcy, insolvency, reorganization, moratorium, and
          similar laws affecting creditors' rights generally and (b) equitable
          principles which may limit the availability of certain equitable remedies
          (such
          as specific performance) in certain instances.

         

        Section
          4.4.                                Non-Contravention.  
  Other
          than requirements (if any) that there be obtained consents to assignment
          (or
          waivers of preferential rights to purchase) from third parties, neither
          the
          execution, delivery, and performance by Seller of this Agreement and each
          other
          agreement, instrument, or document executed or to be executed by Seller
          in
          connection with the transactions contemplated hereby to which it is a party
          nor
          the consummation by it of the transactions contemplated hereby and thereby
          do
          and will (a) conflict with or result in a violation of Seller's Governing
          Documents, (b) conflict with or result in a violation of any provision of,
          or constitute (with or without the giving of notice or the passage of time
          or
          both) a default under, or give rise (with or without the giving of notice
          or the
          passage of time or both) to any right of termination, cancellation, or
          acceleration under, any bond, debenture, note, mortgage or indenture, or
          any
          material lease, contract, agreement, or other instrument or obligation
          to which
          Seller is a party or by which Seller or any of its properties may be bound,
          (c) result in the creation or imposition of any Lien upon the properties of
          Seller, or (d) violate any Applicable Law binding upon Seller, except, in
          the instance of clause (b) or clause (c) above, for any
          such conflicts, violations, defaults, terminations, cancellations or
          accelerations which would not, individually or in the aggregate, have a
          Material
          Adverse Effect.

         

        Section
          4.5.                                Approvals.  
  Other
          than requirements (if any) that there be obtained consents to assignment
          (or
          waivers of preferential rights to purchase) from third parties, no

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

        consent,
          approval, order, or authorization of, or declaration, filing, or registration
          with, any court or governmental agency or of any third party is required
          to be
          obtained or made by Seller in connection with the execution, delivery,
          or
          performance by Seller of this Agreement, each other agreement, instrument,
          or
          document executed or to be executed by Seller in connection with the
          transactions contemplated hereby to which it is a party or the consummation
          by
          it of the transactions contemplated hereby and thereby, except for such
          consents, approvals, orders, authorizations, declarations, filings or
          registrations which, if not obtained or made (as applicable), would not,
          individually or in the aggregate, have a Material Adverse Effect.

         

        Section
          4.6.                                Pending
          Litigation.     Except
          as
          listed on Section 4.6
          of
          the
Seller's
          Disclosure Schedule,
          there are no Proceedings pending or, to Seller's Knowledge, threatened,
          against or affecting Seller or the Properties (including any actions challenging
          or pertaining to Seller's title to any of the Properties), or affecting
          the
          execution and delivery of this Agreement by Seller or the consummation
          of the
          transactions contemplated hereby by Seller.  There are no outstanding
          judgments requiring Seller to take any action of any kind with respect
          to the
          Properties, or to which Seller or any of the Properties are subject, or
          by which
          they are bound or affected.

         

        Section
          4.7.                                Contracts.

         

        (a)           The
          Leases, Seller's interests in which comprise parts of the Oil and Gas
          Properties, and all other material contracts and agreements, licenses,
          Permits
          and easements, rights-of-way and other rights-of-surface use comprising
          any part
          of or otherwise relating to the Properties (such Leases and such material
          contracts, agreements, licenses, Permits, easements, rights-of-way and
          other
          rights-of-surface use being herein called the "Basic
          Documents"), are, in all material respects, in full force and effect
          and constitute valid and binding obligations of the parties
          thereto.  Seller is not in breach or default (and no situation exists
          which with the passing of time or giving of notice would create a breach
          or
          default) of its obligations under the Basic Documents, and (to Seller's
          Knowledge) no breach or default by any third party (or situation which
          with the
          passage of time or giving of notice would create a breach or default) exists,
          to
          the extent such breach or default (whether by Seller or such a third party)
          could reasonably be expected to result in a Material Adverse Effect after
          the
          Effective Date.  All payments (including all delay rentals, royalties,
          shut-in royalties and valid calls for payment or prepayment under operating
          agreements) owing under Basic Documents have been and are being made (timely,
          and before the same became delinquent) by Seller (and, where the non-payment
          of
          same by a third party could have a Material Adverse Effect after the Effective
          Date, have been and are being made, to Seller's Knowledge, by such third
          parties).

         

        (b)           Section 4.7
          of the Seller's Disclosure Schedule is a list of all material contracts
          and
          agreements to which any of the Oil and Gas Properties are bound (other
          than the
          Existing Hedges), including (i) joint operating agreements,
          (ii) agreements with any Affiliate of Seller, (iii) any Production
          Sales Contracts, (iv) any agreement of Seller to sell, lease, farmout or
          otherwise dispose of any of its interests in the Oil and Gas Properties
          other
          than conventional rights of reassignment, (v) gas balancing agreements,
          (vi) exploration agreements, (vii) pooling, unitization or
          communitization agreement, (viii) area of mutual interest agreements, and
          (ix) agreements containing seismic licenses, Permits and other rights to
          geological or geophysical data and information directly or indirectly relating
          to the Oil and Gas Properties.

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

           Section
          4.8            Commitments,
          Abandonments or
          Proposals.      Except
          as set forth in Section 6.3 of the Seller's Disclosure
          Schedule:  (a) Seller has incurred no expenses, and has made no
          commitments to make expenditures in connection with the ownership or operation
          of the Properties after the Effective Date, other than routine expenses
          incurred
          in the normal operation of existing wells on the Oil and Gas Properties
          in
          accordance with generally accepted practices in the oil and gas industry;
          (b) Seller has not abandoned any wells (or removed any material items of
          equipment, except those replaced by items of materially equal suitability
          and
          value) on the Oil and Gas Properties since the Effective Date; and (c) no
          proposals are currently outstanding by Seller or other working interest
          owners
          to drill additional wells, or to deepen, plug back, or rework existing
          wells, or
          to conduct other operations for which consent is required under the applicable
          operating agreement, or to conduct any other operations other than normal
          operation of existing wells on the Oil and Gas Properties, or to abandon
          any
          wells, on the Oil and Gas Properties.

         

        Section
          4.9.                                Production
          Sales Contracts.  
          There exist no agreements or arrangements for the sale of Hydrocarbons
          from the
          Oil and Gas Properties (including calls on, or other rights to purchase,
          production, whether or not the same are currently being exercised) other
          than
          (a) production sales contracts (in this Section,
          the "Scheduled Production Sales
          Contracts") disclosed in Section 4.9 of the Seller's Disclosure
          Schedule or (b) agreements or arrangements which are cancelable on 90 days
          notice or less without penalty or detriment.  Seller is presently
          receiving a price for all production from (or attributable to) each Oil
          and Gas
          Property covered by a Scheduled Production Sales Contract as computed in
          accordance with the terms of such contract, and is not having deliveries
          of gas
          from any Oil and Gas Property subject to a Scheduled Production Sale Contract
          curtailed substantially below such property's delivery
          capacity.  Seller has not received nor is Seller obligated to receive
          any advance, take-or-pay or other similar payments under production sales
          contracts that entitle the purchasers thereunder to recoup or otherwise
          receive
          deliveries of Hydrocarbons produced from or attributable to the Properties
          at
          any time at or after the Effective Date without payment therefor.

         

        Section
          4.10.                                Plugging
          and Abandonment.   Except
          for wells listed in Section 4.10 of the Seller's Disclosure Schedule, there
          are no dry holes, or shut in or otherwise inactive wells, located on the
          Oil and
          Gas Properties or on lands pooled or unitized therewith, except for wells
          that
          have been plugged and abandoned, and except for wells drilled to depths
          not
          included within the Oil and Gas Properties or within units in which the
          Oil and
          Gas Properties participate which have never been completed in such
          depths.

         

        Section
          4.11.                                Permits.    
          Seller has all Permits necessary or appropriate to own and operate the
          Properties as presently being owned and operated, except for such Permits
          the
          absence of which would not be reasonably expected to have a Material Adverse
          Effect, and such Permits are in full force and effect (and are freely
          transferable to Buyer or are subject to being routinely replaced by a license
          or
          Permit issued to Buyer as a successor owner of the
          Properties).  Except as set forth in Section 4.11 of the Seller's
          Disclosure Schedule, Seller has not received written notice of any violations
          in
          respect of any Permits and, to Seller's Knowledge, there are no violations
          in
          respect of any Permit and no one has communicated to Seller that there
          are any
          violations in respect of any Permit, except for such violations which would
          not
          reasonably be expected to have a Material Adverse Effect.

         

        Section
          4.12.                                Payment
          of Expenses.    
          All expenses (including all bills for labor, materials and supplies
          used or furnished for use in connection with the Properties, and
          all

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

        severance,
          production, ad valorem and other similar Taxes) relating to the ownership
          or
          operation by Seller of the Properties, have been, and are being, paid (timely,
          and before the same become delinquent) by Seller, except such expenses
          and Taxes
          as are disputed in good faith by Seller and for which an adequate accounting
          reserve has been established by Seller.  Seller is not delinquent with
          respect to its obligations to bear costs and expenses relating to the
          development and operation of the Oil and Gas Properties.

         

        Section
          4.13.                                Compliance
with Laws.   
           The ownership and operation of the Properties by Seller have been
          in compliance with all Applicable Laws, except for such non-compliance
          which,
          individually or in the aggregate, would not reasonably be expected to have
          a
          Material Adverse Effect.  Notwithstanding the foregoing, this
Section 4.13 does not relate to environmental matters (including
          compliance with Environmental Laws or matters that would constitute
          Environmental Defects), it being agreed that such matters are covered by
          and
          dealt with in Section 4.19 and Article VIII
          exclusively.

         

        Section
          4.14.                                Imbalances;
          Prepayments.   
           Section 4.14 of the Seller's Disclosure Schedule sets forth all Imbalances
          as of the date set forth in such Section with respect to the Oil and Gas
          Properties.  Seller is not obligated by virtue of a take or pay
          payment, advance payment or other similar payment (other than royalties,
          overriding royalties and similar arrangements reflected in Exhibit
          8.1(c)), to deliver Hydrocarbons, or proceeds from the sale thereof,
          attributable to the Oil and Gas Properties at some future time without
          receiving
          payment therefor at or after the time of delivery.

         

        Section
          4.15.                                Intellectual
          Property.   
           Seller owns or has valid licenses or other rights to use all
          patents, copyrights, trademarks, software, databases, geological data,
          geophysical data, engineering data, maps, interpretations and other technical
          information used by Seller in connection with its ownership and operation
          of the
          Properties as presently conducted, subject to the limitations contained
          in the
          agreements governing the use of the same, which limitations are customary
          for
          companies engaged in the business of the exploration and production of
          Hydrocarbons.

         

        Section
          4.16.                                Taxes.

         

        (a)           Except
          as set forth in Section 4.16 of the Seller's Disclosure Schedule, all ad
          valorem
          and severance Taxes due and payable for the Properties through the year
          2006
          have been paid.

         

        (b)           With
          respect to all Taxes related to the Properties, (i) all material Tax
          Returns relating to the Properties required to be filed on or before the
          date
          hereof by Seller with respect to any Taxes for any period ending on or
          before
          the date hereof have been timely filed with the appropriate Governmental
          Entity,
          (ii) such Tax Returns are true and correct in all material respects, and
          (iii) all Taxes reported on such Tax Returns have been paid, except those
          being contested in good faith.

         

        (c)           With
          respect to all Taxes related to the Properties (i) there are not currently
          in effect any extension or waiver by Seller of any statute of limitations
          of any
          jurisdiction regarding the assessment or collection of any Tax related
          to the
          Properties and (ii) there are no administrative Proceedings or lawsuits
          pending against the Properties or Seller with respect to the Properties
          by any
          taxing authority.

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

        (d)           None
          of the Properties were bound as of the Effective Date or will be bound
          at
          Closing by any tax partnership agreement binding upon Seller.

         

        Section
          4.17.                                Fees
          and Commissions.   
           Except for the amounts due Simmons & Company and Griffis and
          Associates by Seller in respect of the transactions contemplated hereby,
          no
          broker, investment banker, financial advisor or other Person is entitled
          to any
          broker's, finder's, financial advisor's or other similar fee or commission
          in
          connection with the transactions contemplated by this Agreement based upon
          arrangements made by or on behalf of Seller.

         

        Section
          4.18.                                Operations.   
           All buildings, fixtures, machinery and equipment currently used in the
          operations related to the Properties are adequate for their normal operations
          consistent with commonly-accepted industry practice, and conform with all
          Applicable Laws.

         

        Section
          4.19.                                Environmental
          Laws.   
          With respect to environmental matters arising from, relating to or affecting
          the
          Properties during Seller's ownership, Seller hereby represents and warrants
          to
          Buyer that:

         

        (a)           the
          Properties have been operated in material compliance with all applicable
          Environmental Laws, rules and regulations;

         

        (b)           Seller
          has not entered into any agreement with a governmental authority or private
          party with respect to any environmental matters; and

         

        (c)           no
          governmental authority investigation under any Environmental Laws is pending
          or,
          to Seller's Knowledge, threatened with respect to the Properties which
          would
          reasonable be expected to have a Material Adverse Effect.

         

        Section
          4.20.                                Wells.   
           To Seller's Knowledge, all of the wells included in the Properties have
          been drilled and completed within the boundaries of the Leases included
          in the
          Properties or within the limits otherwise permitted by contract, pooling
          or unit
          agreement, and by Applicable Law, and no well included in the Properties
          is
          subject to penalties after the date of this Agreement because of any violations
          of Applicable Law or Permits or judgments, orders or decrees of any court
          or
          Governmental Entity.

         

        Section
          4.21.                                Disclaimer
          of Warranties.   
           Other than those expressly set out in this Article IV or
          elsewhere in this Agreement, Seller hereby expressly disclaims any and
          all
          representations or warranties with respect to the Properties, and Buyer
          agrees
          that the Properties are being sold by Seller "where is" and "as is", with
          all
          faults.  Specifically as a part of (but not in limitation of) the
          foregoing, Buyer acknowledges that Seller has not made, and Seller hereby
          expressly disclaims, any representation or warranty (express, implied,
          under
          common law, by statute or otherwise) as to the title or condition of the
          Properties (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF
          MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS
          OR
          SAMPLES OF MATERIALS).  OTHER THAN THOSE EXPRESSLY
          SET OUT IN THIS ARTICLE IV OR
          ELSEWHERE IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY
          AS TO
          (I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR DELIVERABILITY OF ANY
          OIL, GAS, OR OTHER MINERALS OR RESERVES (IF ANY) IN, UNDER, OR ATTRIBUTABLE
          TO
          THE PROPERTIES,

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

        (II) THE
          PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY, OR ENVIRONMENTAL CONDITION
          OF THE PROPERTIES, BOTH SURFACE AND SUBSURFACE, INCLUDING MATTERS RELATED
          TO THE
          PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS
          OR
          NATURALLY OCCURRING RADIOACTIVE MATERIALS
          ("NORM"), OR (III) THE GEOLOGICAL OR
          ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF.  SELLER
          MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY, OR IMPLIED, AS
          TO
          (A) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR
          RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE PROPERTIES OR OTHERWISE
          CONSTITUTING A PORTION OF THE PROPERTIES; (B) THE PRESENCE, QUALITY, AND
          QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES;
          (C) THE ABILITY OF THE PROPERTIES TO PRODUCE HYDROCARBONS, INCLUDING
          PRODUCTION RATES, DECLINE RATES, AND RECOMPLETION OPPORTUNITIES;
          (D) IMBALANCE OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR OTHER
          REGULATORY MATTERS, (E) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED
          INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES,
          (F) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES, (G) ANY PROJECTIONS
          AS TO EVENTS THAT COULD OR COULD NOT OCCUR, AND (H) ANY OTHER MATTERS
          CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIAL FURNISHED TO BUYER
          BY
          SELLER OR OTHERWISE CONSTITUTING A PORTION OF THE PROPERTIES.  ANY
          DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY SELLER ARE PROVIDED TO
          BUYER AS
          A CONVENIENCE AND BUYER'S RELIANCE ON OR USE OF THE SAME IS AT BUYER'S
          SOLE
          RISK.

         

        ARTICLE
          V

        Representations
          and Warranties of Buyer

         

        Section
          5.1.                                Organization
          and Existence.   
           Buyer is a limited liability company duly organized, legally existing and
          in good standing under the laws of the State of Texas, and is qualified
          to do
          business and in good standing in the State of Texas.

         

        Section
          5.2.                                Power
          and Authority.   
           Buyer has full limited liability company power and authority to execute,
          deliver, and perform this Agreement and each other agreement, instrument,
          or
          document executed or to be executed by Buyer in connection with the transactions
          contemplated hereby to which it is a party and to consummate the transactions
          contemplated hereby and thereby.  The execution, delivery, and
          performance by Buyer of this Agreement and each other agreement, instrument,
          or
          document executed or to be executed by Buyer in connection with the transactions
          contemplated hereby to which it is a party, and the consummation by it
          of the
          transactions contemplated hereby and thereby, have been duly authorized
          by all
          necessary limited liability company power action of Buyer.

         

        Section
          5.3.                                Valid
          and Binding Agreement.   
           This Agreement has been duly executed and delivered by Buyer and
          constitutes, and each other agreement, instrument, or document executed
          or to be
          executed by Buyer in connection with the transactions contemplated hereby
          to
          which it is a party has been, or when executed will be, duly executed and
          delivered by Buyer and constitutes, or when executed and delivered will
          constitute, a valid and legally binding obligation

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

        of
          Buyer,
          enforceable against it in accordance with their respective terms, except
          that
          such enforceability may be limited by (a) applicable bankruptcy,
          insolvency, reorganization, moratorium, and similar laws affecting creditors'
          rights generally, and (b) equitable principles which may limit the
          availability of certain equitable remedies (such as specific performance)
          in
          certain instances.

         

        Section
          5.4.                                Non-Contravention.   
           The execution, delivery, and performance by Buyer of this Agreement and
          each other agreement, instrument, or document executed or to be executed
          by
          Buyer in connection with the transactions contemplated hereby to which
          it is a
          party and the consummation by it of the transactions contemplated hereby
          and
          thereby do not and will not (i) conflict with or result in a violation of
          any provision of Buyer's Governing Documents, (ii) conflict with or result
          in a violation of any provision of, or constitute (with or without the
          giving of
          notice or the passage of time or both) a default under, or give rise (with
          or
          without the giving of notice or the passage of time or both) to any right of
          termination, cancellation, or acceleration under, any bond, debenture,
          note,
          mortgage, indenture, lease, contract, agreement, or other instrument or
          obligation to which Buyer is a party or by which Buyer or any of its properties
          may be bound, (iii) result in the creation or imposition of any Lien upon
          the properties of Buyer, or (iv) violate any Applicable Law binding upon
          Buyer.

         

        Section
          5.5.                                Approvals.   
           No consent, approval, order, or authorization of, or declaration, filing,
          or registration with, any court or governmental agency or of any third
          party is
          required to be obtained or made by Buyer in connection with the execution,
          delivery, or performance by Buyer of this Agreement and each other agreement,
          instrument, or document executed or to be executed by Buyer in connection
          with
          the transactions contemplated hereby to which it is a party or the consummation
          by it of the transactions contemplated hereby and thereby, except for such
          consents, approvals, orders, authorizations, declarations, filings or
          registrations which, if not obtained or made (as applicable), would not,
          individually or in the aggregate, affect the ability of the Buyer to consummate
          the transactions contemplated hereby.

         

        Section
          5.6.                                Pending
          Litigation.   
           There are no Proceedings pending or, to Buyer's Knowledge, threatened
          against or affecting the execution and delivery of this Agreement by Buyer
          or
          the consummation of the transactions contemplated hereby by Buyer.

         

        Section
          5.7.                                Knowledgeable
          Purchaser.   
           Buyer is a knowledgeable purchaser, owner and operator of oil and gas
          properties, has the ability to evaluate (and in fact has evaluated) the
          Properties for purchase.  Buyer is an "accredited investor," as
          defined in Regulation D promulgated pursuant to the Securities Act, and
          is
          acquiring the Properties for its own account and not with the intent to
          make a
          distribution within the meaning of the Securities Act  (and the rules
          and regulations pertaining thereto) or a distribution thereof in violation
          of
          any other applicable securities laws.  Buyer has had access to the
          Properties, the officers and consultants of Seller, and the books, Records,
          and
          files of Seller relating to the Properties.  In making the decision to
          enter into this Agreement and to consummate the transactions contemplated
          hereby, Buyer has relied on its own independent due diligence investigation
          of
          the Properties and has been advised by and has relied solely on its own
          expertise and legal, land, tax, reservoir engineering, and other professional
          counsel concerning this transaction, the Properties and the value
          thereof.

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         
             Section 5.8.             Funds.   
           Buyer has, and at the Closing will have, sufficient cash and
          other sources of immediately available funds, as are necessary in order
          to pay
          the Adjusted Purchase Price to Seller at the Closing and otherwise consummate
          the transactions contemplated hereby.

         

        Section
          5.9.                                Qualified
          Leaseholder. 
           At Closing, Buyer will be in compliance with the bonding requirements of
          the State of Texas and other Governmental Entities, and after Closing,
          Buyer
          reasonably anticipates that it will continue to be able to meet such bonding
          requirements.

         

        Section
          5.10.                                Fees
          and Commissions.  
           No broker, investment banker, financial advisor or other Person is
          entitled to any broker's, finder's, financial advisor's or other similar
          fee or
          commission in connection with the transactions contemplated by this Agreement
          based upon arrangements made by or on behalf of Buyer.

         

        ARTICLE
          VI

        Certain
          Covenants of Seller Pending Closing

         

        Section
          6.1.                                Access
          to Files.   
           Subject to the terms of the Confidentiality Agreement and Article
          IX, from the date hereof until Closing, Seller will give Buyer, and its
          attorneys and other authorized representatives, access at all reasonable
          times
          to the Properties and to any contract files, lease or other title files,
          production files, well files and other files of Seller pertaining to the
          ownership or operation of the Properties, and Seller will use its Reasonable
          Best Efforts to arrange for Buyer, and its attorneys and other representatives,
          to have access to any such files in the office of Seller.  Subject to
          the terms of the Confidentiality Agreement and Article IX, upon such
          request for any Records of Seller, Seller shall provide to Buyer, at Buyer's
          expense, requested copies made by Seller or, at either party's option,
          by a
          third party approved by Buyer and Seller.

         

        Section
          6.2.                                Conduct
          of Operations.   
           From the date hereof until Closing, Seller will (i) continue
          the routine operation of the Properties in the ordinary course of business
          and
          as would a reasonable and prudent operator and maintain the Properties
          in a
          condition consistent with customarily accepted oilfield industry practices;
          (ii) operate the Properties in material compliance with all Applicable Laws
          and Environmental Laws and in material compliance with all Basic Documents;
          and
          (iii) fulfill all material obligations under the Basic Documents and, in
          all material respects, under such Applicable Laws and Environmental Laws
          and
          shall carry on its business with respect to the Properties in substantially
          the
          same manner as before execution of this Agreement.

         

        Section
          6.3.                                Restrictions
          on Certain Actions.   
           From the date hereof until Closing, except as set forth in
          Seller's development plan attached as Section 6.3 of the Seller's Disclosure
          Schedule, Seller will not, without Buyer's prior consent in connection
          with the
          Properties:

         

        (a)           expend
          any funds, or make any commitments to expend funds (including entering
          into new
          agreements which would obligate Seller to expend funds), or otherwise incur
          any
          other obligations or liabilities, other than to pay expenses or to incur
          liabilities in connection with routine operation of the Properties after
          the
          Effective Date and except in the event of an emergency requiring immediate
          action to protect life or preserve the Properties;

         

        (b)           except
          where necessary to prevent the termination of a Lease or other material
          agreement governing Seller's interest in the Properties, propose the drilling
          of
          any additional

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

        (c)           wells,
          or propose the deepening, plugging back or reworking of any existing wells,
          or
          propose the conducting of any other operations which require consent under
          the
          applicable operating agreement, or propose the conducting of any other
          operations other than the normal operation of the existing wells on the
          Oil and
          Gas Properties, or propose the abandonment of any wells on the Oil and
          Gas
          Properties (and Seller agrees that it will advise Buyer of any such proposals
          made by third parties and will respond to each such proposal made by a
          third
          party in the manner requested by Buyer) or except in the ordinary course
          of
          business and consistent with past practices, voluntarily waive or release
          any
          material rights with respect to any Property or voluntarily relinquish
          Seller's
          position as operator with respect to any Property;

         

        (d)           sell,
          transfer or abandon any portion of the Properties other than items of materials,
          supplies, machinery, equipment, improvements or other personal property
          or
          fixtures forming a part of the Properties (and then only if the same is
          replaced
          with an item of substantially equal suitability, free of Liens, which
          replacement item will then, for the purposes of this Agreement, become
          part of
          the Properties);

         

        (e)           release
          (or permit to terminate), or modify or reduce its rights under, any Lease
          forming a part of the Oil and Gas Properties, or any other Basic Document,
          or
          enter into any new agreements which would be Basic Documents, or modify
          any
          existing production sales contracts or enter into any new production sales
          contracts, except contracts terminable by Seller with notice of 60 days
          or
          less;

         

        (f)           to
          the extent that Seller is not operator of any of the Properties, the obligations
          of Seller in this Section 6.3 shall be construed to require that Seller
          use Reasonable Best Efforts (without being obligated to incur any expense
          or
          institute any cause of action) to cause the operator of such Properties
          to take
          such action or render such performance within the constraints of the applicable
          operating agreements and other applicable agreements;

         

        (g)           keep
          in full force and effect insurance (including producing well and producing
          facilities coverages) comparable in amount and scope of coverage to that
          maintained by Seller for its Properties at the time of execution of this
          Agreement;

         

        (h)           promptly
          notify Buyer of each casualty loss about which Seller obtains Knowledge
          during
          the period between the date hereof and the Closing Date;

         

        (i)           enter
          into any contract for the sale or other disposition, or any call or option
          for
          such purchase, of Seller's interest in Hydrocarbons produced or to be produced
          from the Properties that is not terminable by Seller without penalty on
          70 days'
          notice or less;

         

        (j)           voluntarily
          compromise, settle or adjust any amounts payable by reason of any casualty
          loss;
          or

         

        (k)           commit
          to do any of the foregoing.

         

        Section
          6.4.                                Seller's
          Confidentiality Obligation.  
           During the period between date hereof and the Closing Date, Seller shall
          use its Reasonable Best Efforts to protect the confidentiality of all geological
          and geophysical information in Seller's possession concerning the Properties
          and
          is not otherwise publicly known or required by Applicable Law or any stock
          exchange to be disclosed.

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

        Section
          6.5              Payment
          of Expenses.   
           Seller will cause all expenses (including all bills for labor, materials
          and supplies used or furnished for use in connection with the Properties
          and all
          severance, production, and similar Taxes) relating to the ownership or
          operation
          of the Properties prior to the date of Closing to be promptly paid and
          discharged, except for expenses disputed in good faith.

         

        Section
          6.5.                                Preferential
          Rights and Third Party Consents.   
           Seller will request, from the appropriate parties (and in
          accordance with the documents creating such rights and/or requirements),
          waivers
          of the preferential rights to purchase, or requirements that consent to
          assignment be obtained, which are identified in Section 6.5 of the Seller's
          Disclosure Schedule.  Seller shall have no obligation hereunder other
          than to so request such waivers (i.e., Seller shall have no obligation to
          assure that such waivers are obtained), and if all such waivers (or any
          other
          waivers of preferential rights to purchase or requirements that consent
          be
          obtained to assignment, even if the same are not listed on such
          Section 6.5) are not obtained, Buyer may treat any waiver which is not
          obtained as a matter which causes Seller's title to not be sufficient to
          meet
          the standards set forth in Article VIII; provided, however, that if
          the unobtained waiver is a waiver of a preferential right to purchase,
          and if
          both Buyer and Seller agree to this treatment of such matter (and agree
          upon an
          appropriate allocation of the Purchase Price), Seller will tender (at the
          agreed
          allocated portion of the Purchase Price) the required interest in the Property
          affected by such unwaived preferential right to purchase to the holder,
          or
          holders, of such right who have elected not to waive such preferential
          right to
          purchase, and if, and to the extent that, such preferential right to purchase
          is
          exercised by such party or parties, such interest in such Property will
          be
          excluded from the transaction contemplated hereby and the Purchase Price
          will be
          reduced by the agreed allocated portion of the Purchase Price attributable
          to
          such Property.

         

        ARTICLE
          VII

        Additional
          Pre-Closing and Post-Closing Agreements of Both
          Parties

         

        Section
          7.1.                                Reasonable
          Best Efforts.   
           Each party hereto agrees that it will not voluntarily undertake any course
          of action inconsistent with the provisions or intent of this Agreement
          and will
          use its Reasonable Best Efforts to take, or cause to be taken, all action
          and to
          do, or cause to be done, all things reasonably necessary, proper, or advisable
          under Applicable Laws to consummate the transactions contemplated by this
          Agreement, including (i) cooperation in determining whether any consents,
          approvals, orders, authorizations, waivers, declarations, filings, or
          registrations of or with any Governmental Entity or third party are required
          in
          connection with the consummation of the transactions contemplated hereby;
          (ii) Reasonable Best Efforts to obtain any such consents approvals, orders,
          authorizations, and waivers and to effect any such declarations, filings,
          and
          registrations; (iii) Reasonable Best Efforts to cause to be lifted or
          rescinded any injunction or restraining order or other order adversely
          affecting
          the ability of the parties to consummate the transactions contemplated
          hereby;
          (iv) Reasonable Best Efforts to defend, and cooperation in defending, all
          Proceedings challenging this Agreement or the consummation of the transactions
          contemplated hereby; and (v) the execution of any additional instruments
          necessary to consummate the transactions contemplated hereby.

         

        Section
          7.2.                                Notice
          of Litigation.   
           Until the Closing, (i) Buyer, upon learning of the same, shall
          promptly notify Seller of any Proceeding which is commenced or threatened
          against Buyer and which affects this Agreement or the transactions contemplated
          hereby and (ii)  Seller, upon learning of the same, shall promptly notify
          Buyer of any Proceeding which is commenced

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

        or
          threatened against Seller which affects this Agreement or the transactions
          contemplated hereby.

         

        Section
          7.3.                                Notification
          of Certain Matters.   
           Until the Closing, Seller shall give prompt notice to Buyer
          of:  (i) the occurrence or nonoccurrence of any event the
          occurrence or nonoccurrence of which, to Seller's Knowledge, would be likely
          to
          cause any representation or warranty made by Seller in Article IV to
          be untrue or inaccurate at or prior to the Closing and (ii) any failure of
          Seller to comply with or satisfy any covenant, condition, or agreement
          to be
          complied with or satisfied by Seller hereunder prior to
          Closing.  Until the Closing, Buyer shall give prompt notice to Seller
          of:  (i) the occurrence or nonoccurrence of any event the
          occurrence or nonoccurrence of which, to Buyer's Knowledge, would be likely
          to
          cause any representation or warranty contained in Article V
          to be untrue or inaccurate at or prior to the Closing, and (ii) any failure
          of Buyer to comply with or satisfy any covenant, condition, or agreement
          to be
          complied with or satisfied by Buyer hereunder prior to Closing.  The
          delivery of any notice pursuant to this Section 7.3 shall not be
          deemed to (x) modify the representations or warranties hereunder of the
          party delivering such notice, (y) modify the conditions set forth in
Article IX, or (z) limit or otherwise affect the
          remedies available hereunder to the party receiving such notice.

         

        Section
          7.4.                                Fees
          and Expenses.

         

        (a)           Except
          as otherwise provided herein, (i) all fee and expenses incurred in connection
          with this Agreement by Seller will be borne by and paid by Seller and (ii)
          all
          fees and expenses incurred in connection with this Agreement by Buyer will
          be
          borne by and paid by Buyer.

         

        (b)           All
          required documentary, filing and recording fees and expenses in connection
          with
          the filing and recording of the Assignment and other instruments required
          to
          convey title to the Properties to Buyer shall be borne by
          Buyer.  Buyer shall assume responsibility for, and shall bear and pay,
          all state sales and use Taxes (including any applicable interest or penalties)
          incurred or imposed with respect to the transactions contemplated by this
          Agreement.

         

        Section
          7.5.                                Public
          Announcements.   
           Except as may be required by Applicable Law, neither Buyer, on the one
          hand, nor Seller, on the other hand, shall issue any press release or otherwise
          make any statement to the public generally with respect to this Agreement
          or the
          transactions contemplated hereby without the prior consent of the other
          party
          (which consent shall not be unreasonably withheld and which consent, if
          given
          verbally, shall be confirmed in writing within one Business Day
          thereafter).  Any such press release or statement required by
          Applicable Law shall only be made after reasonable notice to the other
          parties.

         

        Section
          7.6.                                Casualty
          Loss Prior to Closing.   
           In the event of damage by fire or other casualty to the
          Properties after the Effective Date and prior to the Closing, then this
          Agreement shall remain in full force and effect, and (unless Buyer and
          Seller
          shall otherwise agree) in such event:

         

        (a)           as
          to each such Property so damaged which is an Oil and Gas Property, then,
          at
          Buyer's election, either (i) such Property shall be treated as if it had an
          asserted Title Defect associated with it and the procedure provided for
          in
Article VIII shall be applicable thereto, or (ii) the Purchase
          Price will not be adjusted, and if Seller should be entitled to make any
          claims

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

        (b)           under
          any insurance policy with respect to such damage, Seller shall, at Seller's
          election, either collect (and when collected pay over to Buyer), or assign
          to
          Buyer, such claims, and

         

        (c)           as
          to each such Property which is other than an Oil and Gas Property, Seller
          shall,
          at Seller's election, either collect (and when collected pay over to Buyer),
          or
          assign to Buyer, any and all insurance claims relating to such loss, and
          Buyer
          shall take title to the Property affected by such loss without reduction
          of the
          Purchase Price.

         

        Section
          7.7.                                Governmental
          Bonds.   
           At or prior to Closing, Buyer shall deliver to Seller evidence that Buyer
          has completed all action necessary to permit Buyer to post bonds or other
          security immediately following the Closing with all applicable Governmental
          Entities meeting the requirements of such Governmental Entities to own,
          and
          where appropriate, operate, the Properties.

         

        Section
          7.8.                                Assumed
          Obligations.   
           At Closing, Buyer shall assume and agree to pay, perform and
          discharge the Assumed Obligations.

         

        Section
          7.9.                                Books
          and Records.   
           At or promptly after Closing, but in no event later than 15 days after
          the
          Closing, Seller will deliver to Buyer all Records that are a part of the
          Properties to a location designated by Buyer.  Buyer will promptly
          reimburse Seller for all reasonable costs of shipping or transporting such
          Records.  Seller (or its Affiliates) shall have the right to have
          reasonable access during Buyer's reasonable and customary business hours
          to
          inspect and copy (at Seller's or such Affiliate's expense) the Records
          so
          delivered under this Section 7.9 for the six-year period commencing on
          the Closing Date.

         

        Section
          7.10.                                Suspended
          Funds.   
           As soon as practicable after the Closing Date, but no later than
          30 days thereafter, Seller shall provide to Buyer a listing showing all
          proceeds
          from production attributable to the wells which are currently held in suspense
          by Seller and shall transfer to Buyer all those suspended proceeds (the
          "Suspended Proceeds").  Thereafter, Buyer shall be
          responsible for distribution of the Suspended Proceeds to the parties entitled
          to them to the extent and only to the extent of Suspended Proceeds, provided,
          however, Buyer shall not be responsible for any errors or mistakes relating
          to
          the Suspended Proceeds where such errors or mistakes were made prior to
          the
          Closing by Seller.

         

        Section
          7.11.                                Letters-in-Lieu.   
           Either at or after Closing, Seller shall execute and deliver letters in
          lieu of transfer orders (or similar documentation) in form reasonably acceptable
          to Buyer and Seller.

         

        Section
          7.12.                                Logos
          and Names.   
           As soon as practicable after the Closing, Buyer will remove or
          cause to be removed the names and marks used by Seller and all variations
          and
          derivatives thereof and logos relating thereto from the Properties.

         

        Section
          7.13.                                Covenant
          Regarding Joint Account.   
           Without limiting its covenants and agreements regarding the Joint Account
          hereunder (including Sections 8.4(d) and 10.2), if, under the
          terms and provisions of this Agreement, funds held in the Joint Account
          are
          required to be disbursed therefrom and paid to Buyer or Seller, as applicable
          (such payee, the "Required Payee"), (i) Buyer covenants and
          agrees that it will cause the Authorized Buyer Representative to execute
          such
          instructions and to take such other reasonable actions, in the name and
          on
          behalf

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

        Buyer,
          to
          implement the terms hereof and to cause such funds to be disbursed and
          paid to
          the Required Payee, and (ii) Seller covenants and agrees that it will cause
          the
          Authorized Seller Representative to execute such instructions and to take
          such
          other reasonable actions, in the name and on behalf Seller, to implement
          the
          terms hereof and to cause such funds to be disbursed and paid to the Required
          Payee.

         

        Section
          7.14.                                Further
          Assurances.   
           From time to time following the Closing, at the request of any party
          hereto and without further consideration, the other party or parties hereto
          shall execute and deliver to such requesting party such instruments and
          documents and take such other action (but without incurring any material
          financial obligation) as such requesting party may reasonably request in
          order
          to consummate more fully and effectively the transactions contemplated
          hereby.

         

        ARTICLE
          VIII

        Due
          Diligence Examination

         

        Section
          8.1.                                Title
          Due Diligence Examination.

         

        (a)           From
          the date of this Agreement until 5:00 p.m. (local time in Houston, Texas)
          on
          October 1, 2007 (the "Examination Period"), Seller shall afford
          to Buyer and its authorized representatives reasonable access during normal
          business hours to the office, personnel and Records of Seller in order
          for Buyer
          to conduct a title examination as it may in its sole discretion choose
          to
          conduct with respect to the Oil and Gas Properties in order to determine
          whether
          Title Defects (as defined below) exist ("Buyer's Title
          Review").  Such Records shall include all abstracts of title,
          title opinions, title files, ownership maps, lease files, assignments,
          division
          orders, operating records and agreements, well files, financial and accounting
          records, geological, geophysical and engineering records, in each case
          insofar
          as same may now be in existence and in the possession of Seller, excluding,
          however, any information that Seller is prohibited from disclosing by bona
          fide,
          third party confidentiality restrictions; provided, that if requested by
          Buyer,
          Seller shall use its Reasonable Best Efforts to obtain a waiver of any
          such
          restrictions in favor of Buyer.  The cost and expense of Buyer's Title
          Review, if any, shall be borne solely by Buyer.

         

        (b)           If
          Buyer discovers any Title Defect affecting any of the Oil and Gas Properties,
          Buyer shall notify Seller prior to the expiration of the Examination Period
          of
          such alleged Title Defect.  To be effective, such notice
          ("Title Defect Notice") must (i) be in writing,
          (ii) be received by Seller prior to the expiration of the Examination
          Period, (iii) describe the Title Defect in reasonable detail (including any
          alleged variance in the Net Revenue Interest to the extent it is possible
          to
          estimate same), (iv) identify the specific Oil and Gas Property affected by
          such Title Defect, and (v) include the value of such Title Defect as
          determined by Buyer in good faith.  Any matters that may otherwise
          constitute Title Defects, but of which Seller has not been specifically
          notified
          by Buyer in accordance with the foregoing, shall be deemed to have been
          waived
          by Buyer for all purposes.  Upon the receipt of such effective Title
          Defect Notice from Buyer, Seller shall have the option, in addition to
          the
          remedies set forth in Section 8.1(c) (the "Remedies
          for Title Defects"), but not the obligation, to attempt to cure such
          Title Defect at any time prior to the Closing.  The Oil and Gas
          Property affected by such uncured Title Defect shall be a "Title Defect
          Property".  Notwithstanding the foregoing, Buyer retains the
          right to assert that any offered written undertaking by Seller is insufficient
          to constitute an actual cure of a Title Defect and Buyer possesses the
          right to
          reject such offered undertaking.

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

        (c)           With
          respect to each Title Defect that is not cured on or before the Closing,
          the
          Purchase Price shall be reduced, subject to this
Article VIII, by the Title Defect Amount with respect
          to such Title Defect Property.  The "Title Defect
          Amount" shall mean, with respect to a Title Defect Property, the amount
          by which such Title Defect Property is impaired as a result of the existence
          of
          one or more Title Defects, which amount shall be determined as
          follows:

         

        (i)           The
          Title Defect Amount with respect to a Title Defect Property shall be determined
          by taking into consideration the "Allocated Value" (as set
          forth in Exhibit 8.1(c) attached hereto) of the Oil and Gas Property
          subject to such Title Defect, the portion of the Oil and Gas Property subject
          to
          such Title Defect, and the legal effect of such Title Defect on the Oil
          and Gas
          Property affected thereby; provided, however, that:  (A) if such
          Title Defect is in the nature of Seller's Net Revenue Interest in an Oil
          and Gas
          Property being less than the Net Revenue Interest set forth in
Exhibit 8.1(c) hereto and the Working Interest remains the same,
          then the Title Defect Amount shall equal the Allocated Value for the relevant
          Oil and Gas Property multiplied by the percentage reduction in such Net
          Revenue
          Interest as a result of such Title Defect or (B) if such Title Defect is in
          the nature of a Lien, then the Title Defect Amount shall equal the amount
          required to fully discharge such Lien; and

         

        (ii)           If
          the Title Defect results from any matter not described in
Section 8.1(c)(i), the Title Defect Amount shall be an amount equal
          to the difference between the value of the Title Defect Property affected
          by
          such Title Defect with such Title Defect and the value of such Title Defect
          Property without such Title Defect (taking into account the portion of
          the
          Allocated Value of the Title Defect Property).

         

        (d)           As
          used in this Section 8.1:

         

        (i)           "Defensible
          Title" means, as of the date of this Agreement and the Closing Date,
          with respect to the Oil and Gas Properties, such record title and ownership
          by
          Seller that:

         

        (A)           entitles
          Seller to receive and retain, without reduction, suspension or termination,
          not
          less than the percentage set forth in Exhibit 8.1(c) as Seller's Net
          Revenue Interest of all Hydrocarbons produced, saved and marketed from
          each
          Lease comprising such Oil and Gas Property as set forth in
Exhibit 8.1(c), through plugging, abandonment and salvage of all
          wells comprising or included in such Oil and Gas Property, and except for
          changes or adjustments that result from the establishment of units, changes
          in
          existing units (or the participating areas therein), or the entry into
          of
          pooling or unitization agreements after the date hereof unless made in
          breach of
          the provisions of Section 6.3;

         

        (B)           obligates
          Seller to bear not greater than the percentage set forth in
Exhibit 8.1(c) as Seller's Working Interest of the costs and
          expenses relating to the maintenance, development and operation of each
          Lease
          comprising such Oil and Gas Property, through plugging, abandonment and
          salvage
          of all wells comprising or included in such Oil and Gas Property, and except
          for
          changes or adjustments that result from the establishment of units, changes
          in
          existing units (or the participating areas therein), or the entry into
          of
          pooling or unitization

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

        (C)           agreements
          after the date hereof unless made in breach of the provisions of
          Section 6.3;

         

        (D)           is
          free and clear of all Liens, except Permitted Encumbrances;

         

        (E)           reflects
          that all consents to assignment, notices of assignment or preferential
          purchase
          rights which are applicable to or must be complied with in connection with
          the
          transaction contemplated by this Agreement, or any prior sale, assignment
          or the
          transfer of such Oil and Gas Property, have been obtained and complied
          with to
          the extent the failure to obtain or comply with the same could render this
          transaction or any such sale, assignment or transfer (or any right or interest
          affected thereby) void or voidable or could result in Buyer or Seller incurring
          any liability; and

         

        (F)           is
          free of imperfections in title which a reasonable and experienced purchaser
          of
          oil and gas properties would, in accordance with customary and generally
          accepted industry practices and norms, consider a defect in title and not
          normally waive.

         

        (ii)           "Permitted
          Encumbrances" shall mean (A) Liens for Taxes which are not yet
          delinquent or which are being contested in good faith and for which adequate
          reserves have been established; (B) normal and customary Liens of co-owners
          under operating agreements, unitization agreements, and pooling orders
          relating
          to the Oil and Gas Properties, which obligations are not yet due and pursuant
          to
          which Seller is not in default; (C) mechanic's and materialman's Liens
          relating to the Oil and Gas Properties, which obligations are not yet due
          and
          pursuant to which Seller is not in default; (D) Liens in the ordinary
          course of business consisting of minor defects and irregularities in title
          or
          other restrictions (whether created by or arising out of joint operating
          agreements, farm-out agreements, Leases and assignments, contracts for
          purchases
          of Hydrocarbons or similar agreements, or otherwise in the ordinary course
          of
          business) that are of the nature customarily accepted by prudent purchasers
          of
          oil and gas properties and do not decrease the Net Revenue Interest, increase
          the Working Interest (without a proportionate increase in the Net Revenue
          Interest) or materially affect the value of any property encumbered thereby;
          (E) all approvals required to be obtained from Governmental Entities that
          are lessors under Leases forming a part of the Oil and Gas Properties (or
          who
          administer such Leases on behalf of such lessors) which are customarily
          obtained
          post-closing; (F) preferential rights to purchase and consent to transfer
          requirements of any Person (to the extent same have been complied with
          in
          connection with the prior sale, assignment or the transfer of such Oil
          and Gas
          Property and are not triggered by the consummation of the transactions
          contemplated herein); (G) Liens under the Senior Credit Facility (provided
          such Liens are released at Closing); (H) Liens under the Existing Hedges
          (provided such Liens are released at Closing); and (I) conventional rights
          of reassignment normally actuated by an intent to abandon or release a
          Lease and
          requiring notice to the holders of such rights.

         

        (iii)           "Title
          Defect" shall mean any particular defect in or failure of Seller's
          ownership of any Oil and Gas Property:  (A) that causes Seller to
          not have Defensible Title to such Oil and Gas Property, (B) that has
          attributable thereto a Title Defect Amount in excess of $50,000 and
          (C) regarding which a Title Defect Notice has been timely and

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

        (iv)           otherwise
          validly delivered.  Notwithstanding any other provision in this
          Agreement to the contrary, the following matters shall not constitute,
          and shall
          not be asserted as, a Title Defect:  (A) defects or
          irregularities arising out of lack of corporate authorization; (B) defects
          or irregularities that have been cured or remedied by the applicable statutes
          of
          limitation or statutes for prescription; (C) defects or irregularities in
          the chain of title consisting of the failure to recite marital status in
          documents or omissions of heirship Proceedings; (D) minor defects or
          irregularities in title which for a period of ten years or more have not
          delayed
          or prevented Seller (or Seller's predecessor) from receiving its Net Revenue
          Interest share of the proceeds of production and have not caused Seller
          to bear
          a share of expenses and costs greater than its Working Interest share from
          each
          Lease, unit or Well; and (E) defects or irregularities resulting from or
          related to probate Proceedings or the lack thereof which defects or
          irregularities have been outstanding for ten years or more.  Further,
          notwithstanding any other provisions in this Agreement to the contrary,
          Buyer
          agrees that (i) if any of the following Leases have expired or expire prior
          to
          the Closing, such expiration will not be asserted as a Title
          Defect:  Fidelity-Philadelphia Mineral Trust (expires May 2, 2007),
          JCM Jr. Minerals Co. No. 2 (expires September 1, 2007), Briscoe Ranch,
          Inc (2004
          Lease which expires September 7, 2007 and Gloria A. Reeves (one third interest
          in 960 acres; and (ii) if an to the extent that Buyer asserts a Title Defect
          with respect to any undeveloped acreage included in the Properties, the
          Title
          Defect Value will be computed on the basis of $150 per acre.

         

        (e)           If
          Seller and Buyer are unable to reach an agreement as to whether a Title
          Defect
          exists or, if it does exist, the Title Defect Amount attributable such
          Title
          Defect, the provisions of Section 8.3 shall be
          applicable.

         

        Section
          8.2.                                Environmental
          Due Diligence Examination.

         

        (a)           Buyer
          shall have the right, or the right to cause an environmental consultant
          reasonably acceptable to Seller ("Buyer's Environmental
          Consultant"), to conduct an environmental review of the Properties
          prior to the expiration of the Examination Period ("Buyer's
          Environmental Review").  No less than 48 hours prior to the
          proposed commencement date of Buyer's Environmental Review, Buyer shall
          furnish
          Seller with an outline of the proposed scope of such review, including
          the
          locations of such activities.  The cost and expense of Buyer's
          Environmental Review, if any, shall be borne solely by Buyer.  No
          Person, other than Buyer's Environmental Consultant and Buyer's employees
          may
          conduct Buyer's Environmental Review.  Seller shall have the right to
          have representatives thereof present to observe Buyer's Environmental Review
          conducted in Seller's offices or on Seller's properties.  With respect
          to any samples taken in connection with Buyer's Environmental Review, Seller
          shall be permitted to take split samples.  Buyer agrees to conduct
          Buyer's Environmental Review in a manner so as not to unduly interfere
          with the
          business operations of Seller and in compliance with all Applicable Laws,
          and
          Buyer shall exercise due care with respect to Seller's properties and their
          condition.

         

        (b)           Prior
          to the Closing, unless otherwise required by Applicable Law or Environmental
          Laws, Buyer shall (and shall cause Buyer's Environmental Consultant, if
          applicable, to) treat confidentially any matters revealed by Buyer's
          Environmental Review and any reports or data generated from such review
          (the
          "Environmental Information"), and Buyer shall not (and shall
          cause Buyer's Environmental Consultant, if applicable, to not) disclose
          any

         

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

        (c)           Environmental
          Information to any Governmental Entity or other third party without the
          prior
          written consent of Seller.  Prior to the Closing, unless otherwise
          required by Applicable Law or Environmental Law, Buyer may use the Environmental
          Information only in connection with the transactions contemplated by this
          Agreement.  If Buyer, Buyer's Environmental Consultant, if applicable,
          or any third party to whom Buyer has provided any Environmental Information
          become legally compelled to disclose any of the Environmental Information,
          Buyer
          shall provide Seller with prompt notice and Seller, at Seller's expense,
          may
          file any protective order, or seek any other remedy, as it deems appropriate
          under the circumstances.  If this Agreement is terminated prior to the
          Closing, Buyer shall deliver the Environmental Information to Seller, which
          Environmental Information shall become the sole property of
          Seller.  Upon Seller's written request to Buyer, Buyer shall provide
          copies of the Environmental Information to Seller without charge.

         

        (d)           If
          Buyer or Buyer's Environmental Consultant, if applicable, discovers any
          Environmental Defect (as herein defined) prior to the expiration of the
          Examination Period, Buyer shall notify Seller prior to the expiration of
          the
          Examination Period of such alleged Environmental Defect.  To be
          effective, such notice (an "Environmental Defect Notice") must
          (i) be in writing; (ii) be received by Seller prior to the expiration
          of the Examination Period; (iii) describe the Environmental Defect in
          reasonable detail, including (A) the specific Properties affected by or
          associated with such Environmental Defect, and (B) the written conclusion
          of Buyer's Environmental Consultant, if applicable, that an Environmental
          Defect
          is believed to exist, which conclusion shall be reasonably substantiated
          by the
          factual data gathered in Buyer's Environmental Review; and (iv) set forth
          Buyer's good faith estimate of the Environmental Defect Value, including
          the
          basis for such estimate.  Any matters that may otherwise constitute
          Environmental Defects, but of which Seller has not been specifically notified
          by
          Buyer in accordance with the foregoing, together with any environmental
          matter
          that does not constitute an Environmental Defect, shall be deemed to have
          been
          waived by Buyer for purposes of this Section 8.2.  Upon
          the receipt of such effective notice from Buyer, Seller shall have the
          option,
          in addition to the remedy set forth in Section 8.4(c), but not the
          obligation, to attempt to cure such Environmental Defect at any time prior
          to
          the Closing, at the sole cost and expense of Seller.  If Seller and
          Buyer are unable to reach an agreement as to whether an Environmental Defect
          exists or, if it does exist, the amount of the Environmental Defect Value
          attributable thereto, the provisions of Section 8.3 shall be
          applicable.  Notwithstanding the foregoing, Buyer retains the right to
          assert that any offered written undertaking by Seller is insufficient to
          constitute an actual cure of an Environmental Defect and Buyer possesses
          the
          right to reject such offered undertaking.

         

        (e)           If
          any Environmental Defect described in a notice delivered in accordance
          with
Section 8.2 is not cured on or before the Closing, then the Purchase
          Price shall be reduced, subject to Section 8.4, by the Environmental
          Defect Value of such Environmental Defect.

         

        (f)           As
          used in this Section 8.2:

         

        (i)           "Environmental
          Defect" shall mean, with respect to any given Property, a
          violation of Environmental Laws in effect as of the date hereof in the
          jurisdiction in which such Property is located, an obligation under
          Environmental Laws to complete immediately or promptly after the Closing
          any
          corrective action at the Property, or any Environmental Liability arising
          from
          or attributable to any condition, event, circumstance, activity, practice,
          incident, action, or omission existing or occurring prior

         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

        (ii)           to
          the Closing Date, or the use, release, storage, treatment, transportation,
          or
          disposal of Hazardous Materials prior to the Closing Date, (A) regarding
          which an Environmental Defect Notice has been timely and otherwise validly
          delivered, (B) that has an Environmental Defect Value attributable thereto
          in excess of $50,000, and (C) is not otherwise disclosed in that certain
          report of Carr Environmental Group, Inc. dated as of January, 2006, a copy
          of
          which has heretofore been provided by Seller to Buyer.

         

        (iii)           "Environmental
          Defect Value" shall mean, (A) the net present value of the
          reasonably estimated costs and expenses to correct such Environmental Defect
          in
          the most cost effective manner reasonably available, consistent with
          Environmental Laws, or (B) the net present value of the amount of
          Environmental Liabilities reasonably believed will be incurred or required
          to be
          paid by Seller with respect thereto. The parties recognize that the calculation
          of an Environmental Defect Value may require the use of assumptions and
          extrapolations; however, it is acknowledged and agreed that any such assumptions
          and extrapolations will be consistent with the known factual information
          and
          reasonable in nature.

         

        Section
          8.3.                                Disputes
          Regarding Title Defects or Environmental Defects.   
           If Seller and Buyer are unable to reach an agreement as to whether a Title
          Defect or an Environmental Defect exists, or if it does exist, the Title
          Defect
          Amount or Environmental Defect Value attributable to such Title Defect
          or
          Environmental Defect, or disputes relating to Post-Closing Defects pursuant
          to
Section 8.4(c) (a "Defect Dispute"), each party shall
          have the right to submit a Defect Dispute to an independent expert (the
          "Independent Expert"), who shall serve as sole
          arbitrator.  The Independent Expert shall be appointed by mutual
          agreement of Seller and Buyer from among candidates (including lawyers)
          with
          experience and expertise in the area that is the subject of such Defect
          Dispute,
          and failing such agreement, such Independent Expert for such Defect Dispute
          shall be selected in accordance with the Commercial Arbitration Rules of
          the AAA
          (the "Rules").  Defect Disputes to be resolved by an
          Independent Expert shall be resolved in accordance with mutually agreed
          procedures and rules and failing such agreement, in accordance with the
          Rules.  The Independent Expert shall be instructed by the parties to
          resolve such Defect Dispute as soon as reasonably practicable in light
          of the
          circumstances.  The decision and award of the Independent Expert shall
          be binding upon the parties as an award under the Federal Arbitration Act
          and
          final and nonappealable to the maximum extent permitted by law, and judgment
          thereon may be entered in a court of competent jurisdiction and enforced
          by any
          party as a final judgment of such court.

         

        Section
          8.4.                                Adjustments
          to Purchase Price for Defects.

         

        (a)           Notwithstanding
          anything to the contrary contained in this Agreement, no adjustment of
          the
          Purchase Price shall be made for Title Defects unless the aggregate of
          the Title
          Defect Amounts, as determined in accordance with this Agreement, equals
          or
          exceeds $1,000,000, in which event the Purchase Price shall be adjusted
          downward
          by the total of such Title Defect Amounts.

         

        (b)           Notwithstanding
          anything to the contrary contained in this Agreement, no adjustment of
          the
          Purchase Price shall be made for Environmental Defects unless the aggregate
          of
          the Environmental Defect Values, as determined in accordance with this
          Agreement, equals or exceeds $1,000,000, in which event the Purchase Price
          shall
          be adjusted downward by the amount such Environmental Defect Values exceed
          $1,000,000 in the aggregate.

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

        (c)           Notwithstanding
          anything herein to the contrary, if Seller is unable to cure a Title Defect
          or
          an Environmental Defect (a "Post-Closing Defect") on or prior
          to Closing, Seller shall have the option, by notice in writing to Buyer
          on or
          before Closing, to attempt to cure such Post-Closing Defect within the
          90-day
          period commencing the Closing Date (the "Cure
          Period").  In such event, the transactions contemplated
          hereby will close as provided herein, but an amount equal to the applicable
          Title Defect Amount or Environmental Defect Value to which the Post-Closing
          Defect pertains shall be deducted from the Adjusted Purchase Price otherwise
          payable at Closing and paid into the Joint Account.  The amount
          deposited into the Joint Account with respect to a Post-Closing Defect
          will
          remain therein until released as provided in
Section 8.4(d).

         

        (d)           Buyer
          will act in good faith and reasonably cooperate with the Seller after the
          Closing to timely cure a Post-Closing Defect.  If Seller and Buyer
          mutually agree that a Post-Closing Defect has been cured, then within two
          Business Days after such determination, the amount withheld in the Joint
          Account
          with respect thereto (together with any interest earned thereon) shall
          be
          released to Seller.  If Seller and Buyer mutually agree that a
          Post-Closing Defect has been partially cured, then Seller and Buyer shall
          mutually determine the portion of the amount retained in the Joint Account
          with
          respect thereto (together with any interest earned thereon) that should
          be paid
          to Buyer to compensate it for the uncured portion thereof (together with
          interest earned thereon), and the remaining portion of such amount shall
          be
          released to Seller (together with any interest earned thereon).  If
          Seller and Buyer mutually agree that a Post-Closing Defect has not been
          cured,
          then within two Business Days after such determination, the amount withheld
          in
          the Joint Account with respect thereto (together with any interest earned
          thereon) shall be released to Buyer.  If, at the end of the Cure
          Period, Seller has been unable to cure a Post-Closing Defect (and there
          is no
          dispute as to whether or not it has been cured), the amount withheld in
          the
          Joint Account with respect thereto (together with any interest earned thereon)
          shall be released to Buyer. If, at the end of the Cure Period, Seller and
          Buyer
          are unable to agree whether there has been a satisfactory resolution of
          a
          Post-Closing Defect, then such disagreement shall be resolved as provided
          in
Section 8.3.

         

        Section
          8.5.                                Buyer
          Indemnification.   
           BUYER HEREBY INDEMNIFIES AND SHALL DEFEND AND HOLD SELLER, AFFILIATES
          THEREOF, AND ITS AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES,
          AGENTS, REPRESENTATIVES, CONTRACTORS, SUCCESSORS, AND ASSIGNS HARMLESS
          FROM AND
          AGAINST ANY AND ALL OF THE FOLLOWING CLAIMS ARISING FROM BUYER'S INSPECTING
          AND
          OBSERVING THE PROPERTIES:  (I) CLAIMS FOR PERSONAL INJURIES TO OR
          DEATH OF EMPLOYEES OF BUYER, ITS CONTRACTORS, AGENTS, CONSULTANTS, AND
          REPRESENTATIVES, AND DAMAGE TO THE PROPERTY OF BUYER OR OTHERS ACTING ON
          BEHALF
          OF BUYER, EXCEPT FOR INJURIES OR DEATH CAUSED BY THE GROSS NEGLIGENCE OR
          WILLFUL
          MISCONDUCT OF SELLER, AFFILIATES THEREOF OR ITS OR THEIR RESPECTIVE EMPLOYEES,
          CONTRACTORS, AGENTS, CONSULTANTS, OR REPRESENTATIVES; AND (II) CLAIMS FOR
          PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF SELLER OR THIRD PARTIES,
          AND
          DAMAGE TO THE PROPERTY OF SELLER OR THIRD PARTIES, TO THE EXTENT CAUSED
          BY THE
          NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF BUYER.  TO THE
          EXTENT PROVIDED ABOVE, THE FOREGOING INDEMNITY INCLUDES, AND THE PARTIES
          INTEND
          IT TO INCLUDE, AN INDEMNIFICATION OF THE INDEMNIFIED PARTIES FROM
          AND

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

        AGAINST
          CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR PART, FROM THE CONDITION
          OF THE
          PROPERTY OR THE SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE OR STRICT
          LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.  THE PARTIES HERETO AGREE
          THAT THE FOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
          CONSPICUOUS.

         

        ARTICLE
          IX

        Conditions
          Precedent to the Obligations of the Parties

         

        Section
          9.1.                                Conditions
          Precedent to the Obligations of Buyer.   
           The obligations of Buyer under this Agreement are subject to each of the
          following conditions being met:

         

        (a)           Each
          of the representations and warranties of Seller contained in this Agreement
          shall be true and correct in all material respects as of the date made
          and
          (having been deemed to have been made again on and as of the Closing Date
          in the
          same language) on and as of the Closing Date as if made on and as of such
          date,
          except (i) as affected by transactions contemplated or permitted by this
          Agreement, (ii) to the extent that any such representation or warranty is
          made as of a specified date, in which case such representation or warranty
          shall
          have been true and correct in all material respects as of such specified
          date,
          and (iii) any such inaccuracies or breaches which, in the aggregate, have
          not had or could not reasonably be expected to have, a Material Adverse
          Effect.

         

        (b)           Seller
          shall have performed and complied in all material respects with (or compliance
          therewith shall have been waived in writing by Buyer) each and every covenant,
          agreement and condition required by this Agreement to be performed or complied
          with by Seller prior to or at the Closing.

         

        (c)           Seller
          shall have delivered a certificate executed by the president of Seller
          dated the
          Closing Date, representing and certifying in such detail as Buyer may reasonably
          request that the conditions set forth in subsections (a) and
(b) above have been fulfilled and certifying on behalf of
          Seller the
          incumbency of each individual on behalf of Seller executing this Agreement
          or
          any document delivered in connection with the Closing.

         

        (d)           No
          Proceeding (excluding any Proceeding initiated by Buyer or any of its
          affiliates) shall, on the Closing Date, be pending or threatened before
          any
          Governmental Entity or arbitration seeking to restrain, prohibit, or obtain
          damages or other relief in connection with the consummation (in whole or
          in
          part) of the transactions contemplated by this Agreement.

         

        (e)           Buyer
          shall have received a release of Liens with respect to the Properties,
          executed
          in recordable form by the Senior Lender, and in form and substance agreeable
          to
          Buyer delivered on or before the Closing.

         

        (f)           Buyer
          shall have received an assignment of the Properties executed and delivered
          by
          Seller, which assignment shall be substantially in the form of the instrument
          attached hereto as Exhibit 9.1(f) in all material respects (the
          "Assignment"), delivered at Closing.

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

        (g)           Buyer
          shall have received a certificate of non-foreign status in form, date and
          content reasonably acceptable to Buyer, executed and delivered by Seller
          pursuant to Section 1445 of the Code and the regulations promulgated
          thereunder.

         

        (h)           Buyer
          shall have received all other agreements, instruments and documents which
          are
          required by other terms of this Agreement to be executed or delivered by
          Seller
          or any other party to Buyer prior to or in connection with the
          Closing.

         

        (i)           Seller
          shall have delivered a preliminary accounting statement, which preliminary
          accounting statement shall consist only of those adjustments agreed to
          (or
          deemed agreed to) in accordance with this Agreement.

         

        (j)           Seller
          shall have delivered a certificate (duly executed by the secretary or any
          assistant secretary of Seller or otherwise by any authorized individual
          for
          Seller) on behalf of Seller, dated as of the Closing, attaching and certifying
          on behalf of Seller as complete and correct, copies of the resolutions
          authorizing the execution, delivery and performance by Seller of this Agreement
          and the transactions contemplated hereby.

         

        (k)           Seller
          shall execute, acknowledge and deliver to Buyer letters in lieu of transfer
          or
          division orders directing all purchasers of production from the subject
          Properties to make payment of proceeds attributable to such production
          from and
          after the Effective Date to Buyer.

         

        (l)           Seller
          shall deliver to Buyer appropriate change of operator forms on those Properties
          operated by Seller and which operatorships can be transferred to Buyer
          at
          Closing.

         

        Section
          9.2.                                Conditions
          Precedent to the Obligations of Seller.   
           The obligations of Seller under this Agreement are subject to each of the
          following conditions being met:

         

        (a)           Each
          of the representations and warranties of Buyer contained in this Agreement
          shall
          be true and correct in all material respects as of the date made and (having
          been deemed to have been made again on and as of the Closing Date in the
          same
          language) on and as of the Closing Date, except as affected by transactions
          permitted by this Agreement and except to the extent that any such
          representation or warranty is made as of a specified date, in which case
          such
          representation or warranty shall have been true and correct in all material
          respects as of such specified date.

         

        (b)           Buyer
          shall have performed and complied in all material respects with (or compliance
          therewith shall have been waived by Seller) each and every covenant, agreement
          and condition required by this Agreement to be performed or complied with
          by
          Buyer prior to or at the Closing.

         

        (c)           No
          Proceeding (excluding any Proceeding initiated by Seller or any of its
          affiliates) shall, on the Closing Date, be pending or threatened before
          any
          Governmental Entity seeking to restrain, prohibit, or obtain damages or
          other
          relief in connection with the consummation of the transactions contemplated
          by
          this Agreement.

         

        (d)           Seller
          shall have received all other agreements, instruments and documents which
          are
          required by other terms of this Agreement to be executed or delivered by
          Buyer
          or any other party to Seller prior to or in connection with the
          Closing.

         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

        ARTICLE
          X

        Termination,
          Amendment and Waiver

         

        Section
          10.1.                                Termination.   
           This Agreement may be terminated and the transactions contemplated hereby
          abandoned at any time prior to the Closing in the following manner:

         

        (a)           by
          mutual written consent of Seller and Buyer; or

         

        (b)           by
          either Seller or Buyer, if:

         

        (i)           the
          Closing shall not have occurred on or before 5:00 p.m., local Houston,
          Texas
          time, on or before October 11, 2007, unless such failure to close shall
          be due
          to a breach of this Agreement by the party seeking to terminate this Agreement
          pursuant to this clause (i); or

         

        (ii)           there
          shall be any statute, rule, or regulation that makes consummation of the
          transactions contemplated hereby illegal or otherwise prohibited or a
          Governmental Entity shall have issued an order, decree, or ruling or taken
          any
          other action permanently restraining, enjoining, or otherwise prohibiting
          the
          consummation of the transactions contemplated hereby, and such order, decree,
          ruling, or other action shall have become final and nonappealable;
          or

         

        (c)           by
          Buyer or Seller, if the aggregate amount of the Title Defect Amounts and
          the
          Environmental Defect Values exceeds ten percent of the Purchase Price;
          or

         

        (d)           by
          Seller, if (i) there shall be a material breach of any representation and
          warranty of Buyer contained in Article V, or (ii) there shall be a
          material breach by Buyer of any of its covenants and agreements contained
          in
          this Agreement, which breach, in the case of clause (i) or clause
          (ii), is not capable of being cured or, if it is capable of being cured,
          has
          not been cured by the 5th Business
          Day
          following written notice to Buyer from the Seller of such breach;
          or

         

        (e)           by
          Buyer, if (i) there shall be a material breach of any representation and
          warranty of Seller contained in Article IV, other than any such breaches
          which, in the aggregate, have not had or could not reasonably be expected
          to
          have a Material Adverse Effect, or (ii) there shall be a material breach
          by
          Seller of any of its covenants and agreements contained in this Agreement,
          which
          breach, in the case of clause (i) or clause (ii), is not
          capable of being cured or, if it is capable of being cured, has not been
          cured
          by the 5th
          Business Day following written notice to Seller from Buyer of such
          breach.

         

        Section
          10.2.                                Effect
          of Termination.   
           In the event of the termination of this Agreement pursuant to
Section 10.1 by Seller, on the one hand, or Buyer, on the other,
          written notice thereof shall forthwith be given to the other party or parties
          specifying the provision hereof pursuant to which such termination is made,
          and
          this Agreement shall become void and have no effect, except that the agreements
          contained in this Article X, in Sections 7.4, 7.5
          and 8.5 and in Articles XII and
XIII shall survive the termination
          hereof.  Nothing contained in this Section 10.2 shall relieve
          any party from liability for damages actually incurred as a result of any
          breach
          of this Agreement.  If this Agreement is terminated by Seller pursuant
          to (i) Section 10.1(b)(i) (and Buyer is in material breach of
          this Agreement) or (ii) Section 10.1(d), Seller shall
          be

         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

        entitled
          to the Deposit.  If this Agreement is terminated under
Section 10.1 for any other reason, the Deposit shall be returned to
          Buyer.

         

        Section
          10.3.                                Amendment.   
           This Agreement may not be amended except by an instrument in writing
          signed by or on behalf of all the parties hereto.

         

        Section
          10.4.                                Waiver.   
           Seller, on the one hand, or Buyer, on the other,
          may:  (i) waive any inaccuracies in the representations and
          warranties of the other contained herein or in any document, certificate,
          or
          writing delivered pursuant hereto, or (ii) waive compliance by the other
          with any of the other's agreements or fulfillment of any conditions to
          its own
          obligations contained herein.  Any agreement on the part of a party
          hereto to any such waiver shall be valid only if set forth in an instrument
          in
          writing signed by or on behalf of such party.  No failure or delay by
          a party hereto in exercising any right, power, or privilege hereunder shall
          operate as a waiver thereof nor shall any single or partial exercise thereof
          preclude any other or further exercise thereof or the exercise of any other
          right, power, or privilege.

         

        ARTICLE
          XI

        Survival
          of Representations, Warranties and Covenants;
          Indemnification

         

        Section
          11.1.                                Survival.

         

        (a)           The
          representations and warranties of the parties hereto contained in this
          Agreement
          shall terminate at Closing except that the representations made by Seller
          pursuant to Article IV, and the representations and warranties made by
          Buyer pursuant to Article V shall survive the Closing and shall remain in
          effect thereafter for the period that an Indemnified Party is entitled
          to
          indemnification based on a breach of such representation or warranty contained
          in this Article XI.

         

        (b)           No
          party hereto shall have any indemnification obligation pursuant to this
          Article XI or otherwise in respect of any representation, warranty
          or covenant unless (i) it shall have received from the party seeking
          indemnification written notice of the existence of the claim for or in
          respect
          of which indemnification in respect of such representation, warranty or
          covenant
          is being sought and (ii) if applicable, such notice is received on or
          before the Survival Date.  Such notice shall set forth with reasonable
          specificity (i) the basis under this Agreement, and the facts that
          otherwise form the basis of such claim, (ii) the estimate (to the extent it
          is possible to estimate same) of the amount of such claim (which estimate
          shall
          not be conclusive of the final amount of such claim) and an explanation
          of the
          calculation of such estimate, including a statement of any significant
          assumptions employed therein, and (iii) the date on and manner in which the
          party delivering such notice became aware of the existence of such
          claim.

         

        Section
          11.2.                                Seller's
          Indemnification Obligations.   
           Seller shall, on the date of Closing, agree (and, upon delivery to Buyer
          of the Assignment, shall be deemed to have agreed), subject to the limitations
          and procedures contained in this Article XI, following the Closing,
          to indemnify and hold Buyer, its Affiliates and its and their respective
          successors and permitted assigns and all of their respective stockholders,
          partners, members, managers, directors, officer, employees, agents and
          representatives harmless from and against any and all claims, obligations,
          actions, liabilities, damages or expenses (collectively, "Buyer's
          Losses"):

         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

        resulting
          from a breach of any of the representations or warranties made by Seller
          in
Article IV (other than pursuant to Section 4.1, 4.2,
4.3, 4.4, 4.5, 4.17, or 4.19);

         

        (a)           resulting
          from a breach of any of the representations or warranties made by Seller
          in
Section 4.19;

         

        (b)           arising
          out of claims for royalties, rentals, Taxes (or other loss burdens on production
          of any kind) attributable to Seller's ownership of the Properties before
          the
          Effective Date;

         

        (c)           relating
          to the Excluded Assets; or

         

        (d)           resulting
          from a breach of any of the representations or warranties made by Seller
          in
Section 4.1, 4.2, 4.3, 4.4, 4.5,
          or  4.17.

         

        provided,
          however, that Seller's indemnification obligations for Buyer's Losses under
          Section 11.2(a), (b), and (c) shall expire on the one-year
          anniversary of the Closing Date (the "Survival Date"), except
          for Buyer's Losses for which a notice is received by Seller as provided
          in this
          Agreement prior to such date.

         

        Section
          11.3.                                Buyer's
          Indemnification Obligations.   
          Buyer shall, on the date of Closing, agree (and, upon delivery to Buyer
          of the
          Assignment, shall be deemed to have agreed), subject to the limitations
          and
          procedures contained in this Article XI, following the Closing, to
          indemnify and hold Seller, its Affiliates and its and their respective
          successors and permitted assigns and all of their respective stockholders,
          partners, members, managers, directors, officer, employees, agents and
          representatives harmless from and against any and all claims, obligations,
          actions, liabilities, damages, costs or expenses, (collectively,
          "Seller's Losses"):

         

        (a)           resulting
          from any misrepresentation or breach of any warranty, covenant or agreement
          of
          Buyer contained in this Agreement or any certificate delivered by Buyer
          at the
          Closing; or

         

        (b)           relating
          to the Assumed Obligations;

         

        provided,
          however, that Buyer's indemnification obligations for Seller's Losses under
          Section 11.3(a) shall expire on the Survival Date, except for Seller's
          Losses for which a notice is received by Buyer as provided in this Agreement
          prior to such date; and further provided, however, that Buyer's indemnification
          obligations for Seller's Losses under Section 11.3(b) shall not expire
          but shall remain in effect until such Assumed Obligations are fully
          satisfied.

         

        Section
          11.4.                                Net
          Amounts.   
           Any amounts recoverable by any party pursuant to this
Article XI with respect to any Buyer's Losses or Seller's Losses, as
          the case may be, shall be increased by any net tax costs to the Indemnified
          Party (Taxes incurred with respect to any indemnity payment less tax benefits
          resulting from the circumstances serving as the basis for such Buyer's
          Loss or
          Seller's Loss, as the case may be) and shall be decreased by (i) any net
          tax benefit to the Indemnified Party (tax benefits less Taxes incurred,
          as
          calculated above), and (ii) insurance proceeds or other amounts relating to
          such Buyer's Loss or Seller's Loss, as the case may be, paid to such Indemnified
          Party by any Person (other than any Affiliate of such Indemnified Party)
          not a
          party to this Agreement.

         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

           
           Section 11.5.      
            Indemnification
          Proceedings.   
           In the event that any claim or demand for which a party (an
          "Indemnifying Party"), would be liable to the another party
          under Section 11.2 or Section 11.3 (an
          "Indemnified Party") is asserted against or sought to be
          collected from an Indemnified Party by a third party, the Indemnified Party
          shall with reasonable promptness notify the Indemnifying Party of such
          claim or
          demand, but the failure so to notify the Indemnifying Party shall not relieve
          the Indemnifying Party of its obligations under this Article XI,
          except to the extent the Indemnifying Party demonstrates that the defense
          of
          such claim or demand is materially prejudiced thereby.  The
          Indemnifying Party shall have 30 days from receipt of the above notice
          from the
          Indemnified Party (in this Section 11.5, the "Notice
          Period") to notify the Indemnified Party whether or not the
          Indemnifying Party desires, at the Indemnifying Party's sole cost and expense,
          to defend the Indemnified Party against such claim or demand; provided,
          that the
          Indemnified Party is hereby authorized prior to and during the Notice Period
          to
          file any motion, answer or other pleading that it shall deem necessary
          or
          appropriate to protect its interests or those of the Indemnifying Party
          and not
          prejudicial to the Indemnifying Party.  If the Indemnifying Party
          elects to assume the defense of any such claim or demand, the Indemnified
          Party
          shall have the right to employ separate counsel at its own expense and
          to
          participate in the defense thereof.  If the Indemnifying Party elects
          not to assume the defense of such claim or demand (or fails to give notice
          to
          the Indemnified Party during the Notice Period), the Indemnified Party
          shall be
          entitled to assume the defense of such claim or demand with counsel of
          its own
          choice, at the expense of the Indemnifying Party.  If the claim or
          demand is asserted against both the Indemnifying Party and the Indemnified
          Party
          and based on the advice of counsel reasonably satisfactory to the Indemnifying
          Party it is determined that there is a conflict of interest which renders
          it
          inappropriate for the same counsel to represent both the Indemnifying Party
          and
          the Indemnified Party, the Indemnifying Party shall be responsible for
          paying
          separate counsel for the Indemnified Party; provided, however, that the
          Indemnifying Party shall not be responsible for paying for more than one
          separate firm of attorneys to represent all of the Indemnified Parties,
          regardless of the number of Indemnified Parties.  If the Indemnifying
          Party elects to assume the defense of such claim or demand, (i) no
          compromise or settlement thereof may be effected by the Indemnifying Party
          without the Indemnified Party's written consent (which shall not be unreasonably
          withheld) unless the sole relief provided is monetary damages that are
          paid in
          full by the Indemnifying Party and (ii) the Indemnifying Party shall have
          no liability with respect to any compromise or settlement thereof effected
          without its written consent (which shall not be unreasonably
          withheld).

         

        Section
          11.6.                                Indemnification
          Exclusive Remedy.   
           Indemnification pursuant to the provisions of this Article XI
          shall be the exclusive remedy of the parties hereto for any misrepresentation
          or
          breach of any warranty, covenant or agreement contained in this Agreement
          or in
          any closing document executed and delivered pursuant to the provisions
          hereof or
          thereof, or any other claim arising out of the transactions contemplated
          by this
          Agreement.

         

        Section
          11.7.                                Limited
          to Actual Damages.   
           The indemnification obligations of the parties pursuant to this
          Article XI shall be limited to actual Buyer's Losses or Seller's
          Losses, as the case may be, and shall not include incidental, consequential,
          indirect, punitive, or exemplary damages, provided that any incidental,
          consequential, indirect, punitive, or exemplary damages recovered by a
          third
          party (including a Governmental Entity, but excluding any Affiliate of
          any
          party) against a party entitled to indemnity pursuant to this
Article XI shall be included in the damages recoverable under such
          indemnity.

         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

            Section
          11.8.            Indemnification
          Despite Negligence.   
           It is the express intention of the parties hereto that each party to
          be
          indemnified pursuant to this Article XI shall be indemnified and held
          harmless from and against all Buyer's Losses or Seller's Losses, as the
          case may
          be, as to which indemnity is provided for under this Article XI,
          notwithstanding that any such damages arise out of or result from the ordinary,
          strict, sole, or contributory negligence of such party and regardless of
          whether
          any other party (including the other parties to this Agreement) is or is
          not
          also negligent.  The parties hereto acknowledge that the foregoing
          complies with the express negligence rule and is
          conspicuous.

         

        Section
          11.9.                                Limits
          on Liability.

         

        (a)           Notwithstanding
          anything herein to the contrary, Seller shall have no obligation or liability
          to
          indemnify Buyer under Section 11.2(a) unless and until the aggregate
          amount of Buyer's Losses under such Section exceed $1,000,000; provided,
          however, that once the amount of Buyer's Losses exceeds $1,000,000, Seller
          shall
          be obligated to indemnify Buyer to the full extent of such Buyer's
          Losses.

         

        (b)           Notwithstanding
          anything herein to the contrary, Seller shall have no obligation or liability
          to
          indemnify Buyer under Section 11.2(b) unless and until the sum of (i) the
          aggregate amount of Buyer's Losses under such Section plus (ii) the
          aggregate Environmental Defect Values attributable to the Pre-Closing Deductible
          Subject Environmental Defects exceed $1,000,000, and then only to the extent
          the
          amount of such Buyer's Losses and Pre-Closing Deductible Subject Environmental
          Defects exceed $1,000,000.

         

        (c)           Notwithstanding
          anything herein to the contrary, Seller's obligation to indemnify Buyer
          under
Section 11.2(a), (b) or (c) shall terminate and be of no
          further force and effect at such time as Seller has indemnified Buyer for
          Buyer's Losses under Sections 11.2(a), (b) and (c) in an
          aggregate amount equal to $5,000,000.

         

        ARTICLE
          XII

        Miscellaneous
          Matters

         

        Section
          12.1.                                Notices.   
           All notices, requests, demands, and other communications required or
          permitted to be given or made hereunder by any party hereto shall be in
          writing
          and shall be deemed to have been duly given or made if (i) delivered
          personally, (ii) transmitted by first class registered or certified mail,
          postage prepaid, return receipt requested, (iii) sent by a recognized
          prepaid overnight courier service (which provides a receipt), or (iv) sent
          by facsimile transmission, with receipt acknowledged, to the parties at
          the
          following addresses (or at such other addresses as shall be specified by
          the
          parties by like notice):

         

        
          	
                   

                	
                  If
                    to Seller:

                


        

         

        
          	
                   

                	
                  Escondido
                    Resources LP

                


        

        
          	
                   

                	
                  526
                    Kingwood Drive, #353

                


        

        
          	
                   

                	
                  Kingwood,
                    Texas  77339-4473

                


        

        
          	
                   

                	
                  Attention:  William
                    E. Deupree

                


        

        
          	
                   

                	
                  Fax
                    No.:  281-359-6780

                


        

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

        
          	
                   

                	
                  With
                    , prior to Closing, a copy to (which shall not constitute notice
                    to
                    Seller):

                


        

         

        
          	
                   

                	
                  Thompson
                    & Knight LLP

                


        

        
          	
                   

                	
                  333
                    Clay Street, Suite 3300

                


        

        
          	
                   

                	
                  Houston,
                    Texas  77002

                


        

        
          	
                   

                	
                  Attention:  Michael
                    K. Pierce and Sarah E. McLean

                


        

        
          	
                   

                	
                  Fax
                    No.:  Pierce—832-397-8049 and
                    McLean—832-397-8062

                


        

         

        
          	
                   

                	
                  If
                    to Buyer:

                


        

         

        
          	
                   

                	
                  Swift
                    Energy Operating, LLC

                


        

        
          	
                   

                	
                  16825
                    Northchase Drive, Suite 400

                


        

        
          	
                   

                	
                  Houston,
                    Texas 77060

                


        

        
          	
                   

                	
                  Attention:  James
                    P. Mitchell

                


        

        
          	
                   

                	
                  Fax
                    No.:  281-874-2808

                


        

         

        
          	
                   

                	
                  With,
                    prior to Closing, a copy to (which shall not constitute notice
                    to
                    Buyer):

                


        

         

        
          	
                   

                	
                  Swift
                    Energy Operating, LLC

                


        

        
          	
                   

                	
                  16825
                    Northchase Drive, Suite 400

                


        

        
          	
                   

                	
                  Houston,
                    Texas 77060

                


        

        
          	
                   

                	
                  Attention:  Larry
                    Baillargeon

                


        

        
          	
                   

                	
                  Fax
                    No.:  281-874-2808

                


        

         

        Such
          notices, requests, demands, and other communications shall be effective
          upon
          receipt.

         

        Section
          12.2.                                Entire
          Agreement.   
           This Agreement, the Seller's Disclosure Schedule, together with the
          Exhibits, and other writings referred to herein or delivered pursuant hereto,
          constitute the entire agreement between the parties hereto with respect
          to the
          subject matter hereof and supersede all prior agreements and understandings,
          both written and oral, between the parties with respect to the subject
          matter
          hereof.

         

        Section
          12.3.                                Injunctive
          Relief.   
           The parties hereto acknowledge and agree that irreparable damage would
          occur in the event any of the provisions of this Agreement were not performed
          in
          accordance with their specific terms or were otherwise breached.  It
          is accordingly agreed that the parties shall be entitled to an injunction
          or
          injunctions to prevent breaches of the provisions of this Agreement, and
          shall
          be entitled to enforce specifically the provisions of this Agreement, in
          any
          court of the United States or any state thereof having jurisdiction, in
          addition
          to any other remedy to which the parties may be entitled under this Agreement
          or
          at law or in equity.

         

        Section
          12.4.                                Binding
          Effect; Assignment; No Third Party Benefit.   
           This Agreement shall be binding upon and inure to the benefit of the
          parties hereto and their respective heirs, legal representatives, successors,
          and permitted assigns.  Except as otherwise expressly provided in this
          Agreement, neither this Agreement nor any of the rights, interests, or
          obligations hereunder shall be assigned by any of the parties hereto without
          the
          prior written consent of the other parties.  Except as provided in
Section 8.5 and Article XI, nothing in this Agreement,
          express or implied, is intended to or shall confer upon any Person other
          than
          the parties hereto,

         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

        and
          their
          respective heirs, legal representatives, successors, and permitted assigns,
          any
          rights, benefits, or remedies of any nature whatsoever under or by reason
          of
          this Agreement.

         

        Section
          12.5.                                Severability.   
           If any provision of this Agreement is held to be unenforceable, this
          Agreement shall be considered divisible and such provision shall be deemed
          inoperative to the extent it is deemed unenforceable, and in all other
          respects
          this Agreement shall remain in full force and effect; provided, however,
          that if
          any such provision may be made enforceable by limitation thereof, then
          such
          provision shall be deemed to be so limited and shall be enforceable to
          the
          maximum extent permitted by Applicable Law.

         

        Section
          12.6.                                GOVERNING
          LAW.   
           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
          ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
          TO THE
          PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

         

        Section
          12.7.                                Counterparts.   
           This instrument may be executed in any number of identical counterparts,
          each of which for all purposes shall be deemed an original, and all of
          which
          shall constitute collectively, one instrument.  It is not necessary
          that each party hereto execute the same counterpart so long as identical
          counterparts are executed by each such party hereto.  This instrument
          may be validly executed and delivered by facsimile or other electronic
          transmission.

         

        Section
          12.8.                                WAIVER
          OF CONSUMER RIGHTS.   
           BUYER HEREBY WAIVES ITS RIGHTS UNDER THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER
          PROTECTION ACT,
          SECTION 17.41 ET SEQ., BUSINESS AND
          COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS,
          AND
          ANY SIMILAR LAW IN ANY OTHER STATE TO THE EXTENT SUCH ACT OR SIMILAR LAW
          WOULD
          OTHERWISE APPLY.  AFTER CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN
          SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.

         

        Section
          12.9.                                Competition.   
           Seller, William E. Deupree, Mark Semmelbeck, J. David Wrather, and Kurt
          von Plonski (each, a "Restricted Person") each agree that it
          will not, directly or indirectly, for a period of eighteen months from
          the
          Closing Date (the "Restricted Period"), purchase or otherwise
          acquire any Lease within one mile of the boundary of any of the Properties
          being
          acquired and listed on Exhibit I.  In the event a Restricted
          Person does acquire, directly or indirectly, such a Lease during the Restricted
          Period, such Restricted Person hereby grants to Buyer the irrevocable option
          to
          purchase for cash all of Seller's rights, title, and interest in such Lease
          for
          an amount equal to the actual price paid by Seller to purchase or acquire
          such
          Lease, plus the reasonable out-of-pocket costs and expenses incurred by
          such
          Restricted Person to purchase such Lease.

         

        ARTICLE
          XIII

        Definitions
          and References

         

        Section
          13.1.                                Certain
          Defined Terms.   
           When used in this Agreement, the following terms shall have the respective
          meanings assigned to them in this Section 13.1:

         

        "AAA"
          means the American Arbitration Association.

         

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

        "Affiliate"
          means any Person directly or indirectly controlling, controlled by or under
          common control with a Person.

         

        "Agreement"
          means this Asset Purchase and Sale Agreement, as hereafter amended or modified
          in accordance with the terms hereof.

         

        "Applicable
          Law" means any statute, law, principle of common law, rule, regulation,
          judgment, order, ordinance, requirement, code, writ, injunction, or decree
          of
          any Governmental Entity, exclusive of Environmental Laws.

         

        "Assumed
          Obligations" means (i) the obligation to (x) plug and abandon
          or remove and dispose of all wells, platforms, structures, flow lines,
          pipelines
          and other equipment, hits and holding ponds now or hereafter located on
          the Oil
          and Gas Properties (but only where such action is required by Applicable
          Law,
          Environmental Law, or third party agreements), (y) cap and bury all flow
          lines and other pipelines now or hereafter located on the Oil and Gas Properties
          (but only where such action is required by Applicable Law, Environmental
          Law, or
          third party agreements), and (z) remedy all Environmental Liabilities with
          respect to the Properties, including any actual or potential NORM contamination
          or chloride or other contamination of groundwater; (ii) all obligations and
          liabilities arising from or in connection with any Imbalances, whether
          before,
          on or after the Effective Date; and (iii) without limiting the foregoing,
          all costs, obligations, and liabilities that arise under or otherwise relate
          to
          the Properties, whether before, on or after the Effective Date; provided,
          that
          Assumed Obligations does not mean or include Seller's obligations and
          liabilities (x) under the Senior Credit Facility or any amounts that may be
          due and owing Seller's officers, employees or owners or (y) with respect to
          the Excluded Assets.

         

        "Authorized
          Buyer Representative" means any of (i) James Mitchell, (ii) Adrian
          Shelley, or (iii) any other individual designated in a writing from Buyer
          to the
          Joint Account Holder and Seller.

         

        "Authorized
          Seller Representative" means any of (i) William E. Deupree, (ii) J.
          David Wrather, or (iii) any other individual designated in a writing from
          Seller
          to the Joint Account Holder and Buyer

         

        "Business
          Day" means a day other than a Saturday, Sunday or day on which
          commercial banks in the State of Texas are authorized or required to be
          closed
          for business.

         

        "Code"
          means the Internal Revenue Code of 1986, or any comparable successor statute
          thereto, as amended.

         

        "Confidentiality
          Agreement" means that certain Confidentiality Agreement by and between
          Seller and Buyer dated July 20, 2007.

         

        "Dollars"
          or "$" means U.S. Dollars.

         

        "Effective
          Date" means 7:00 a.m., local time at the location of the Properties,
          on
          July 1, 2007.

         

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

        "Environmental
          Laws" means all national, state, municipal or local laws, rules,
          regulations, statutes, ordinances or orders of any Governmental Entity
          pertaining to the protection of human health or the environment, including
          the
          Comprehensive Environmental Response, Compensation and Liability Act, as
          amended
          by the Superfund Amendments and Reauthorization Act, 42 U.S.C. § 9601 et
          seq. ("CERCLA"), the Solid Waste Disposal Act, as amended by
          the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the
          Federal Water Pollution Control Act, as amended by the Clean Water Act,
          33
          U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the
          Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., and any similar state or
          local statutes.

         

        "Environmental
          Liabilities" means any and all damages whether accrued or unaccrued,
          whether currently claimed or yet to be claimed (including any remedial,
          removal,
          response, abatement, clean-up, investigation and/or monitoring costs and
          associated legal costs) incurred or imposed (a) pursuant to any agreement
          order, notice of responsibility, directive (including directives embodied
          in
          Environmental Laws), injunctions, judgment or similar documents (including
          settlements) arising out of, in connection with, or under Environmental
          Laws, or
          (b) pursuant to any claim by a Governmental Entity or any other Person for
          personal injury, property damage, damage to natural resources, remediation,
          or
          payment or reimbursement of response costs incurred or expended by such
          Governmental Entity or other Person pursuant to common law or statute and
          related to the use or release of Hazardous Materials.

         

        "Existing
          Hedges" mean any Hedges affecting the Properties on the date hereof
          or
          the Closing Date.

         

        "Governing
          Documents" means, when used with respect to an entity, the documents
          governing the formation and operation of such entity, including (i) in the
          instance of a corporation, the articles or incorporation and bylaws of
          such
          corporation, (ii) in the instance of a partnership, the partnership
          agreement, and (iii) in the instance of a limited liability company, the
          certificate of formation and limited liability company agreement.

         

        "Governmental
          Entity" means any court or tribunal in any jurisdiction (domestic or
          foreign) or any federal, state, county, municipal or other governmental
          or
          quasi-governmental body, agency, authority, department, board, commission,
          bureau or instrumentality.

         

        "Hazardous
          Materials" means (i) any substance or material that is listed,
          defined or otherwise designated as a "hazardous substance" under
          Section 101(14) of CERCLA, (ii) any petroleum or petroleum products,
          (iii) radioactive materials, urea formaldehyde, asbestos and PCBs and
          (iv) any other chemical substance or waste that is regulated by any
          Governmental Entity under any Environmental Law.

         

        "Hedge"
          means any future derivative, swap, collar, put, call, cap, option or other
          contract that is intended to benefit from, relate to, or reduce or eliminate
          the
          risk of fluctuations in interest rates, basis risk or the price of commodities,
          including Hydrocarbons.

         

        "Hydrocarbons"
          means oil, gas, other liquid or gaseous hydrocarbons, or any of them or
          any
          combination thereof, and all products and substances extracted, separated,
          processed and produced therefrom.

         

        
          
            
            

          

          
            36

            
              

            

          

          
            
            

          

        

        "Imbalances"
          means gas production, pipeline, storage, processing or other imbalance
          attributable to substances produced from the Oil and Gas
          Properties.

         

        "Joint
          Account" means one or more (as determined by Buyer and Seller) interest
          bearing accounts to be established and maintained with the Joint Account
          Holder,
          which account shall require the signatures of both (i) an Authorized Buyer
          Representative and (ii) an Authorized Seller Representative in order to
          transfer
          therefrom any of the funds held therein.

         

        "Joint
          Account Holder" means (i) Wells Fargo Bank, N.A., Houston, Texas, (ii)
          such other bank as shall be mutually agreed upon by Buyer and Seller in
          writing
          or (iii) any successor to the bank referenced in either clause (i) or
clause (ii).

         

        "Knowledge"
          means, with respect to Seller, the actual knowledge of any of the officers
          of
          Seller and, with respect to Buyer, the actual knowledge of any of the officers
          of Buyer.

         

        "Lease"
          means an oil, gas or mineral lease, a leasehold estate, operating rights
          and
          other rights authorizing the owner thereof to explore or drill for and
          produce
          Hydrocarbons and other minerals, contractual rights to acquire any such
          of the
          foregoing interest, which have been earned by performance.

         

        "Lien"
          means any claim, lien, mortgage, security interest, pledge, charge, option,
          right-of-way, easement, encroachment, or encumbrance of any kind.

         

        "Material
          Adverse Effect" means any change, development, or effect (individually
          or in the aggregate) which is, or is reasonably likely to be, materially
          adverse
          (i) to the business, assets, results of operations or condition (financial
          or otherwise) of a party, or (ii) to the ability of a party to perform on a
          timely basis any material obligation under this Agreement or any agreement,
          instrument, or document entered into or delivered in connection herewith;
          provided, however, that changes, developments or effects relating to (x)
          the
          economy in general (including any effects on the economy arising as a result
          of
          acts of terrorism), (y) changes in Hydrocarbon commodity prices or other
          changes
          affecting the U.S. oil and gas industry generally, or (z) the announcement
          of
          the transactions contemplated hereby, shall not be deemed to constitute
          a
          Material Adverse Effect with respect to Seller and shall not be considered
          in
          determining whether a Material Adverse Effect has occurred with respect
          to
          Seller.

         

        "Net
          Revenue Interest" means an interest (expressed as a percentage or
          decimal fraction) in and to all Hydrocarbons produced and saved from or
          attributable to an Oil and Gas Property.

         

        "Permits"
          means licenses, permits, franchises, consents, approvals, variances, exemptions,
          and other authorizations of or from Governmental Entities.

         

        "Person"
          means any individual, corporation, partnership, limited liability company
          (or
          similar entity), joint venture, association, joint-stock company, trust,
          enterprise, unincorporated organization, or Governmental Entity.

         

        "Pre-Closing
          Deductible Subject Environmental Defect" means an Environmental Defect
          that was asserted by Buyer pursuant to Section 8.3(c) but for
          which no adjustment to the Purchase Price was made as a result of the provisions
          of Section 8.4(b).

         

        
          
            
            

          

          
            37

            
              

            

          

          
            
            

          

        

        "Proceedings"
          means all proceedings, actions, claims, suits, investigations, and inquiries
          by
          or before any arbitrator or Governmental Entity.

         

        "Reasonable
          Best Efforts" means a party's reasonable best efforts in accordance
          with reasonable commercial practice.

         

        "Securities
          Act" shall mean the Securities Act of 1933, as amended, and all rules
          and regulations under such Act.

         

        "Seller's
          Disclosure Schedule" shall mean a schedule delivered by Seller to Buyer
          on the date hereof which sets forth additional information regarding the
          representations and warranties of Seller contained herein and information
          called
          for hereby.

         

        "Senior
          Credit Facility" means Seller's Credit Agreement as listed in Section
          4.7 of the Seller's Disclosure Schedule.

         

        "Senior
          Lender" means the lenders party to the Senior Credit
          Facility.

         

        "Tax
          Returns" mean any return, report, statement, form or similar statement
          required to be filed with respect to any Taxes (including any attached
          schedules), including  any information return, claim for refund,
          amended return or declaration of estimated Taxes.

         

        "Taxes"
          means any income taxes or similar assessments or any sales, excise, occupation,
          use, ad valorem, property, production, severance, transportation, employment,
          payroll, franchise, or other tax imposed by any United States federal,
          state, or
          local (or any foreign or provincial) taxing authority, including any interest,
          penalties, or additions attributable thereto.

         

        "Working
          Interest" means the percentage of costs and expenses attributable to
          the maintenance, development and operation of an Oil and Gas
          Property.

         

        Section
          13.2.                                Certain
          Additional Defined Terms.

         

          In
          addition to such terms as are defined in the preamble to this Agreement
          and in
Section 13.1, the following terms are used in this Agreement as
          defined in the Articles or Sections set forth opposite such terms:

         

        
          	
                  Defined
                    Term

                	
                  Reference

                
	
                  Accounting
                    Dispute

                	
                  Section
                    2.3(c)

                
	
                  Accounting
                    Referee

                	
                  Section
                    2.3(c)

                
	
                  Adjusted
                    Purchase Price

                	
                  Section
                    2.1

                
	
                  Allocated
                    Value

                	
                  Section
                    8.1(c)(i)

                
	
                  Assignment

                	
                  Section
                    9.1(f)

                
	
                  Basic
                    Documents

                	
                  Section
                    4.7

                
	
                  Buyer's
                    Environmental Consultant

                	
                  Section
                    8.2(a)

                
	
                  Buyer's
                    Environmental Review

                	
                  Section
                    8.2(a)

                
	
                  Buyer's
                    Losses

                	
                  Section
                    11.2

                
	
                  Buyer's
                    Title Review

                	
                  Section
                    8.1(a)

                
	
                  Closing

                	
                  Article
                    III

                
	
                  Closing
                    Date

                	
                  Article
                    III

                
	
                  Cure
                    Period

                	
                  Section
                    8.4(c)

                
	
                  Defect
                    Dispute

                	
                  Section
                    8.3

                


        

         

        
          
            
            

          

          
            38

            
              

            

          

          
            
            

          

        

        
          	
                  Defensible
                    Title

                	
                  Section
                    8.1(d)(i)

                
	
                  Deposit

                	
                  Section
                    2.4(a)

                
	
                  Environmental
                    Defect

                	
                  Section
                    8.2(e)(i)

                
	
                  Environmental
                    Defect Notice

                	
                  Section
                    8.2(c)

                
	
                  Environmental
                    Defect Value

                	
                  Section
                    8.2(e)(ii)

                
	
                  Environmental
                    Information

                	
                  Section
                    8.2(b)

                
	
                  Examination
                    Period

                	
                  Section
                    8.1(a)

                
	
                  Excluded
                    Assets

                	
                  Section
                    1.2

                
	
                  Indemnified
                    Party

                	
                  Section
                    11.5

                
	
                  Indemnifying
                    Party

                	
                  Section
                    11.5

                
	
                  Independent
                    Expert

                	
                  Section
                    8.3

                
	
                  Notice
                    Period

                	
                  Section
                    11.5

                
	
                  Oil
                    and Gas Properties

                	
                  Section
                    1.1

                
	
                  Permitted
                    Encumbrances

                	
                  Section
                    8.1(d)(ii)

                
	
                  Post-Closing
                    Defect

                	
                  Section
                    8.4(c)

                
	
                  Properties

                	
                  Section
                    1.1

                
	
                  Purchase
                    Price

                	
                  Section
                    2.1

                
	
                  Records

                	
                  Section
                    1.1(f)

                
	
                  Remedies
                    for Title Defects

                	
                  Section
                    8.1(b)

                
	
                  Request
                    Date

                	
                  Section
                    2.3(c)

                
	
                  Required
                    Payee

                	
                  Section
                    7.13

                
	
                  Restricted
                    Period

                	
                  Section
                    12.9

                
	
                  Restricted
                    Person

                	
                  Section
                    12.9

                
	
                  Rules

                	
                  Section
                    8.3

                
	
                  Scheduled
                    Production Sales Contracts

                	
                  Section
                    4.9

                
	
                  Seller's
                    Losses

                	
                  Section
                    11.3

                
	
                  Suspended
                    Proceeds

                	
                  Section
                    7.10

                
	
                  Survival
                    Date

                	
                  Section
                    11.2

                
	
                  Title
                    Defect

                	
                  Section
                    8.1(d)(iii)

                
	
                  Title
                    Defect Amount

                	
                  Section
                    8.1(c)

                
	
                  Title
                    Defect Notice

                	
                  Section
                    8.1(b)

                
	
                  Title
                    Defect Property

                	
                  Section
                    8.1(b)

                


        

         

        Section
          13.3.                                References,
          Titles and Construction.

         

        (a)           All
          references in this Agreement to articles, sections, subsections and other
          subdivisions refer to corresponding articles, sections, subsections and
          other
          subdivisions of this Agreement unless expressly provided otherwise.

         

        (b)           Titles
          appearing at the beginning of any of such subdivisions are for convenience
          only
          and shall not constitute part of such subdivisions and shall be disregarded
          in
          construing the language contained in such subdivisions.

         

        (c)           The
          words "this Agreement", "this instrument", "herein", "hereof", "hereby",
          "hereunder" and words of similar import refer to this Agreement as a whole
          and
          not to any particular subdivision unless expressly so limited.

         

        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

        (d)           Words
          in the singular form shall be construed to include the plural and
viceversa, unless the context otherwise
          requires.  Pronouns in masculine, feminine and neuter genders shall be
          construed to include any other gender.

         

        (e)           Unless
          the context otherwise requires or unless otherwise provided herein, the
          terms
          defined in this Agreement which refer to a particular agreement, instrument
          or
          document also refer to and include all renewals, extensions, modifications,
          amendments or restatements of such agreement, instrument or document, provided
          that nothing contained in this subsection shall be construed to authorize
          such
          renewal, extension, modification, amendment or restatement.

         

        (f)           Examples
          shall not be construed to limit, expressly or by implication, the matter
          they
          illustrate.

         

        (g)           The
          word "or" is not intended to be exclusive and the word "includes" and its
          derivatives means "includes, but is not limited to" and corresponding derivative
          expressions.

         

        (h)           No
          consideration shall be given to the fact or presumption that one party
          had a
          greater or lesser hand in drafting this Agreement.

         

        (i)           All
          references herein to "$" or "dollars" shall refer to U.S. Dollars.

         

        (j)           Exhibits I,
          1.2, 8.1(c), and 9.1(f) are attached
          hereto.  Each such Exhibit is incorporated herein by reference for all
          purposes and references to this Agreement shall also include such Exhibit
          unless
          the context in which used shall otherwise require.

         

         

        [REMAINDER
          OF PAGE INTENTIONALLY LEFT BLANK]

         

        
          
            
            

          

          
            40

            
              

            

          

          
            
            

          

        

        IN
          WITNESS WHEREOF, this Agreement is executed by the parties hereto on
          the date set forth above.

         

        SELLER:

         

         

        ESCONDIDO
          RESOURCES LP

         

         

        By:           Escondido
          Resources GP, LLC,

                                                                                                        
          its General Partner

         

        


         

        By:           

                                                                                      
          Name: William E. Deupree

                                                                                     
          Title: President

         

        BUYER:

         

                                                                                      
          SWIFT ENERGY OPERATING, LLC

         

        


                                                                            
                  
By:           

                                                                                 
              Name: Bruce H. Vincent

                                                                                 
              Title: President

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

        Joined,
          solely for the purpose of evidencing his agreement to the provision of
          Section 12.9, by:

         

        


         

        William
          E. Deupree

         

        


         

        Mark
          Semmelbeck

         

        


         

        J.
          David
          Wrather

         

        


         

        Kurt
          von
          Plonsk

         

        
          
            
            

          

          
            2