##### 



Exhibit 10.1
 PURCHASE AND SALE AGREEMENT
 between
 THE HOUSTON EXPLORATION COMPANY
 as Seller
 and
 MERIT MANAGEMENT PARTNERS I, L.P., MERIT MANAGEMENT PARTNERS II,
L.P., MERIT MANAGEMENT PARTNERS III, L.P., MERIT ENERGY PARTNERS III,
L.P., MERIT ENERGY PARTNERS D-III, L.P., MERIT ENERGY PARTNERS E-III,
L.P. AND MERIT ENERGY PARTNERS F-III, L.P.
 as Buyer
 Dated
 February 28, 2006




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##### 



TABLE OF CONTENTS
 PageARTICLE I DEFINITIONS AND INTERPRETATION
    
    
    11.1
    
    Defined Terms
    
    
    11.2
    
    References
    
    
    121.3
    
    Articles
    
    
    121.4
    
    Number and Gender
    
    
    12ARTICLE II PURCHASE AND SALE
    
    
    132.1
    
    Purchase and Sale
    
    
    132.2
    
    Excluded Assets
    
    
    142.3
    
    Revenues and Expenses
    
    
    14ARTICLE III PURCHASE PRICE
    
    
    143.1
    
    Purchase Price
    
    
    143.2
    
    Deposit
    
    
    153.3
    
    Adjustments to Purchase Price
    
    
    153.4
    
    Adjustment Methodology
    
    
    173.5
    
    Preliminary Settlement Statement
    
    
    173.6
    
    Final Settlement Statement
    
    
    183.7
    
    Disputes
    
    
    183.8
    
    Allocation of Purchase Price / Allocated Values
    
    
    193.9
    
    Interim Settle   Up
    
    
    19ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
    
    
    194.1
    
    Organization, Existence
    
    
    194.2
    
    Authorization
    
    
    194.3
    
    No Conflicts
    
    
    204.4
    
    Consents
    
    
    204.5
    
    Litigation
    
    
    204.6
    
    Material Contracts
    
    
    204.7
    
    No Violation of Laws
    
    
    204.8
    
    Insurance
    
    
    204.9
    
    Hurricane Damage
    
    
    214.10
    
    Wells
    
    
    214.11
    
    Preferential Rights
    
    
    214.12
    
    Royalties, Etc
    
    
    214.13
    
    Personal Property
    
    
    214.14
    
    Current Commitments
    
    
    214.15
    
    Environmental
    
    
    214.16
    
    Production Taxes
    
    
    224.17
    
    Brokers Fees
    
    
    224.18
    
    Accuracy of Data
    
    
    224.19
    
    Affiliated Contracts
    
    
    22
 i




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Page4.20
    
    Sales Contracts
    
    
    224.21
    
    Hedging
    
    
    234.22
    
    Limitations
    
    
    23ARTICLE V BUYERS REPRESENTATIONS AND WARRANTIES
    
    
    235.1
    
    Organization; Existence
    
    
    235.2
    
    Authorization
    
    
    235.3
    
    No Conflicts
    
    
    235.4
    
    Consents
    
    
    235.5
    
    Bankruptcy
    
    
    245.6
    
    Litigation
    
    
    245.7
    
    Financing
    
    
    245.8
    
    Regulatory
    
    
    245.9
    
    Independent Evaluation
    
    
    245.10
    
    Brokers Fees
    
    
    245.11
    
    NORM, Wastes and Other Substances
    
    
    24ARTICLE VI COVENANTS
    
    
    256.1
    
    Conduct of Business
    
    
    256.2
    
    HSR Act
    
    
    266.3
    
    Bonds, Letters of Credit and Guarantees
    
    
    266.4
    
    Cooperation with Seller Retained Litigation, Etc
    
    
    266.5
    
    Cooperation with Respect to Insurance Claims
    
    
    266.6
    
    Plugging, Abandonment, Decommissioning and Other Costs
    
    
    276.7
    
    Record Retention
    
    
    276.8
    
    Notifications
    
    
    27ARTICLE VII BUYERS CONDITIONS TO CLOSING
    
    
    277.1
    
    Representations
    
    
    277.2
    
    Performance
    
    
    287.3
    
    No Legal Proceedings
    
    
    287.4
    
    Title Defects and Environmental Defects
    
    
    287.5
    
    HSR Act
    
    
    28ARTICLE VIII SELLERS CONDITIONS TO CLOSING
    
    
    288.1
    
    Representations
    
    
    288.2
    
    Performance
    
    
    288.3
    
    No Legal Proceedings
    
    
    288.4
    
    Title Defects and Environmental Defects
    
    
    298.5
    
    HSR Act
    
    
    298.6
    
    Replacement Bonds, Letters of Credit and Guarantees
    
    
    298.7
    
    Insurance
    
    
    29ARTICLE IX CLOSING
    
    
    299.1
    
    Date of Closing
    
    
    299.2
    
    Place of Closing
    
    
    299.3
    
    Closing Obligations
    
    
    29
 ii




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Page9.4
    
    Records
    
    
    31ARTICLE X ACCESS/DISCLAIMERS
    
    
    3110.1
    
    Access
    
    
    3110.2
    
    Confidentiality
    
    
    3310.3
    
    Disclaimers
    
    
    33ARTICLE XI TITLE MATTERS; CASUALTIES; TRANSFER RESTRICTIONS
    
    
    3411.1
    
    Sellers Title
    
    
    3411.2
    
    Notice of Title Defects; Defect Adjustments
    
    
    3411.3
    
    Casualty or Condemnation Loss
    
    
    3911.4
    
    Preferential Purchase Rights and Consents to Assign
    
    
    40ARTICLE XII ENVIRONMENTAL MATTERS
    
    
    4212.1
    
    Environmental Defects
    
    
    4212.2
    
    NORM, Wastes and Other Substances
    
    
    42ARTICLE XIII ASSUMPTION; INDEMNIFICATION; SURVIVAL
    
    
    4513.1
    
    Assumption of Obligations by Buyer
    
    
    4513.2
    
    Indemnities of Seller
    
    
    4513.3
    
    Indemnities of Buyer
    
    
    4613.4
    
    Express Negligence
    
    
    4613.5
    
    Indemnification Procedures
    
    
    4613.6
    
    Survival
    
    
    4813.7
    
    Non   Compensatory Damages
    
    
    4913.8
    
    Disclaimer of Application of Anti   Indemnity Statutes
    
    
    4913.9
    
    Buyer Credit Support
    
    
    49ARTICLE XIV TERMINATION, DEFAULT AND REMEDIES
    
    
    5014.1
    
    Right of Termination
    
    
    5014.2
    
    Effect of Termination
    
    
    50ARTICLE XV MISCELLANEOUS
    
    
    5015.1
    
    Exhibits and Schedules
    
    
    5015.2
    
    Expenses and Taxes
    
    
    5115.3
    
    Assignment
    
    
    5115.4
    
    Preparation of Agreement
    
    
    5215.5
    
    Publicity
    
    
    5215.6
    
    Notices
    
    
    5215.7
    
    Removal of Name
    
    
    5315.8
    
    Further Cooperation
    
    
    5315.9
    
    Filings, Notices and Certain Governmental Approvals
    
    
    5315.10
    
    Entire Agreement; Conflicts
    
    
    5315.11
    
    Parties in Interest
    
    
    5415.12
    
    Amendment
    
    
    5415.13
    
    Waiver; Rights Cumulative
    
    
    5415.14
    
    Governing Law; Jurisdiction, Venue; Jury Waiver
    
    
    54
 iii




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##### 



Page15.15
    
    Severability
    
    
    5415.16
    
    Counterparts
    
    
    5515.17
    
    Like   Kind Exchange
    
    
    5515.18
    
    Certain Governmental Approvals
    
    
    5515.19
    
    Adequacy of Supplemental Bonds or Arrangements for the Pledge of Securities
    
    
    5615.20
    
    Special Offshore Interests
    
    
    57
 iv




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##### 



EXHIBITS AND SCHEDULES
 ExhibitsExhibit A
    
    Well (WI/NRI), EncumbrancesExhibit B
    
    Form of Bill of SaleExhibit C
    
    Form of Assignment of Record Title to Oil and Gas LeaseExhibit D
    
    Form of Assignment of Oil and Gas Lease Operating RightsExhibit E
    
    Form of Assignment of Right of WayExhibit F
    
    Form of Assignment of Contract RightsExhibit G
    
    Form of Title Indemnity AgreementExhibit H
    
    Form of Access AgreementSchedulesSchedule 1.1(j)
    
    Contested Mechanics or Similar LiensSchedule 1.1(k)
    
    Contested Liens Under Leases or Operating AgreementsSchedule 2.1(i)
    
    Excluded Geologic DataSchedule 3.3
    
    Oil and Gas ImbalancesSchedule 3.8
    
    Allocated ValuesSchedule 4.4
    
    ConsentsSchedule 4.5
    
    LitigationSchedule 4.6
    
    Material ContractsSchedule 4.7
    
    Violation of LawsSchedule 4.8
    
    InsuranceSchedule 4.9
    
    Hurricane DamageSchedule 4.10
    
    WellsSchedule 4.11
    
    Preferential RightsSchedule 4.13
    
    Personal PropertySchedule 4.14
    
    AFEsSchedule 4.15
    
    EnvironmentalSchedule 4.16
    
    Production TaxesSchedule 4.20
    
    Sales ContractsSchedule 6.1
    
    Conduct of BusinessSchedule 13.1
    
    Retained Litigation
 v




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##### 



PURCHASE AND SALE AGREEMENT
 Agreement Seller Buyer
 Recitals:
  NOW, THEREFORE
 ARTICLE I
DEFINITIONS AND INTERPRETATION
 1.1 Defined Terms Article I
 Access Agreement Section 12.1(b)(iv)
 Accounting Arbitrator Section 3.7
 Adjusted Purchase Price Section 3.3
 AFEs Section 4.14
 Affected Well Section 11.2(g)(v)
 Affiliate
 Aggregate Deductible
 Agreement
 1




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##### 



Allocated Value Schedule
3.8
 Applicable Contracts
 Assets Section 2.1
 Assignments Exhibit C Exhibit D Exhibit E Exhibit A Exhibit F
 Assumed Obligations Section 13.1
 Buyer
 Buyer Indemnified Parties Section 13.2
 Buyers Representatives Section 10.1(a)
 Claim Section 13.5(c)
 Claim Notice Section 13.5(c)
 Closing Section 9.1
 Closing Date Section 9.1
 Code
 Confidentiality Agreement
 Contract
 2




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##### 



Cure Period Section 11.2(c)
 Customary Post-Closing Consents
 Defective Support Property Section 11.2(g)(v)
 Defensible Title
 Exhibit
A Exhibit A Exhibit A Section 3.3 Exhibit A
 Exhibit
A Exhibit A Exhibit A Exhibit A
  Deposit Section 3.2
 Dispute Notice Section 3.6
 DOJ
 Effective Time
 Encumbrance
 Environmental Arbitrator Section 12.1(e).
 3




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##### 



Environmental Claim Date Section 12.1(a)
 Environmental Condition
 Environmental Defect Notice Section 12.1(a)
 Environmental Laws
 Excluded Assets Section 2.1 Section 2.1(d)
 4




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##### 



Excluded Liabilities
     Schedule 13.1
  5




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##### 



Final Price Section 3.6
 Final Settlement Statement Section 3.6
 FTC
 GAAP
 Geologic Data
 Governmental Authority
 Hazardous Substances
 HSR Act
 Hydrocarbons
 Imbalance
 6




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##### 



Indemnified Party Section 13.5(a)
 Indemnifying Party Section 13.5(a)
 Individual Environmental Threshold Section
12.1(d)
 Individual Title Benefit Threshold Section
11.2(i)
 Individual Title Defect Threshold Section
11.2(i)
 Interim Period
 Knowledge
 Lands  Section 2.1(a)
 Law
 Leases Section 2.1(a)
 Liabilities
 Material Adverse Effect provided, however
 7




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##### 



Material Contracts Section 4.6
 MMS
 Net Revenue Interest
 NORM
 OPA
 Operating Expenses Section 2.3
 P & A Obligations Section 6.6
 Permitted Encumbrances
 Exhibit A Exhibit A Exhibit A
 Schedule 4.11
     8




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##### 



Schedule 1.1(j)
 Schedule 1.1(k)
  Exhibit A
 Exhibit A Exhibit A Exhibit A
 Exhibit A
 9




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##### 



Exhibit A Exhibit
A
 Person
 Personal Property Section 2.1(g)
 Preference Notices Section 11.4(b)
 Preference Right Assets Section 11.4(d)
 Preference Rights Section 11.4(a)
 Preliminary Settlement Statement Section 3.5
 Property Properties Section 2.1(b)
 Purchase Price Section 3.1
 Qualified Buyer
 Qualified Parent Guarantor
 Records Section 2.1(i)
 Remediation
 Remediation Amount
 Seismic Data
 Seller
 10




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##### 



Seller Indemnified Parties Section 13.3(a)
 Third Party
 Title Arbitrator Section 11.2(j)
 Title Benefit Exhibit A Exhibit A Exhibit A Exhibit A
 Title Benefit Amount Section 11.2(e)
 Title Benefit Notice Section 11.2(b)
 Title Claim Date Section 11.2(a)
 Title Defect provided
     Section 11.3(b)
 Section
11.4(e)
 11




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##### 



Title Defect Amount Section 11.2(d)(i)
 Title Defect Notice Section 11.2(a)
 Title Defect Property Section 11.2(a)
 Title Indemnity Agreement Section 11.2(d)(ii)
 Transaction Documents
 Treasury Regulations
 Wachovia
 Wells Section 2.1(b)
 Working Interest
 1.2 References
 1.3 Articles
 1.4 Number and Gender
 12




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##### 



ARTICLE II
PURCHASE AND SALE
 2.1 Purchase and Sale Assets
 Exhibit A Exhibit A Leases Exhibit A Exhibit A Exhibit A Lands
 Exhibit A Wells Properties
  Schedule 4.9
   Personal Property
  13




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##### 



Schedule 2.1(i)
 Records
 2.2 Excluded Assets
 2.3 Revenues and Expenses Operating Expenses ad valorem
 ARTICLE III
PURCHASE PRICE
 3.1 Purchase Price Purchase
Price
 14




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##### 



3.2 Deposit Deposit
 Article VII
 Section 3.2(a) Section 14.2
 3.3 Adjustments to Purchase Price Adjusted Purchase Price
   ad valorem
 Schedule 3.3
 15




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##### 



Schedule 3.3
 Schedule 4.9
  Section
3.3(a) Section 15.2
   Section 3.3(a)
 Section 2.3
 Section 11.2(d)(i)
 Section 12.1(b)(i)
  16




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##### 



Section 11.4(c) Section
12.1(b)(iii)
 Section
3.3 Section 15.2
 Schedule 3.3
 Schedule 3.3
  Subsections
3.3(a)(iii) (iv) Section 3.3(b)(viii) (ix) Section 3.6 Schedule 3.3 Schedule 3.3 Section 3.6 Subsection 3.3(a)(v)
 3.4 Adjustment Methodology Section 3.6
 3.5 Preliminary Settlement Statement
 17




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##### 



Preliminary Settlement Statement Section 9.3(d)
 3.6 Final Settlement Statement
 Final
Settlement Statement Final Price Dispute
Notice Section 3.6 Section 13.5 Section 3.6
  st
 3.7 Disputes Section 3.6
 18




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##### 



Accounting Arbitrator
 3.8 Allocation of Purchase Price / Allocated Values Schedule 3.8 Allocated Value Schedule 3.8
 3.9 Interim Settle-Up Section 3.6 Section 3.9
 ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
  4.1 Organization, Existence
 4.2 Authorization
 19




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##### 



4.3 No Conflicts
 4.4 Consents Schedule 4.4
 4.5 Litigation Schedule 4.5
 4.6 Material Contracts
 Schedule 4.6 Material Contracts
 Schedule 4.6
 4.7 No Violation of Laws Schedule 4.7 Section 4.7 Section 4.15
 4.8 Insurance Schedule 4.8
 20




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##### 



Schedule 4.8
 4.9 Hurricane Damage Schedule 4.9
 4.10 Wells Schedule 4.10
 4.11 Preferential Rights Schedule 4.11
 4.12 Royalties, Etc
 4.13 Personal Property Schedules 4.9 or
4.13(a) Schedule 4.13(b)
 4.14 Current Commitments Schedule 4.14 AFEs
 4.15 Environmental
 Schedule 4.15
 21




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##### 



4.16 Production Taxes Schedule 4.16 ad valorem
 4.17 Brokers Fees
 4.18 Accuracy of Data . Section 4.18
 4.19 Affiliated Contracts .
 4.20 Sales Contracts . Sales Contracts
 Advance Payments Schedule
4.20
 Carried Payments
 Terminable Sales Contracts Schedule 4.20
 22




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##### 



4.21 Hedging .
 4.22 Limitations
 ARTICLE V
BUYERS REPRESENTATIONS AND WARRANTIES
  5.1 Organization; Existence
 5.2 Authorization
 5.3 No Conflicts
 5.4 Consents
 23




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##### 



5.5 Bankruptcy
 5.6 Litigation
 5.7 Financing
 5.8 Regulatory
 5.9 Independent Evaluation Section 11.2(k)
 5.10 Brokers Fees
 5.11 NORM, Wastes and Other Substances
 24




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##### 



ARTICLE VI
COVENANTS
 6.1 Conduct of Business Schedule 6.1
  Schedule 4.9
       25




---



##### 



Section 6.1 Section 6.1
 6.2 HSR Act
 6.3 Bonds, Letters of Credit and Guarantees
 6.4 Cooperation with Seller Retained Litigation, Etc Schedule 13.1
 6.5 Cooperation with Respect to Insurance Claims 26
       Schedule 4.9
 6.6 Plugging, Abandonment, Decommissioning and Other Costs P&A Obligations
 6.7 Record Retention Section 13.2
 6.8 Notifications Section 6.8
 ARTICLE VII
BUYERS CONDITIONS TO CLOSING
  7.1 Representations
 27




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##### 



Article IV Section 7.1
 7.2 Performance
 7.3 No Legal Proceedings
 7.4 Title Defects and Environmental Defects Section 11.2(d)(i) Section 11.2(b) Article XII
 7.5 HSR Act
 ARTICLE VIII
SELLERS CONDITIONS TO CLOSING
  8.1 Representations
 8.2 Performance
 8.3 No Legal Proceedings
 28




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##### 



8.4 Title Defects and Environmental Defects Section 11.2(d)(i) Section 11.2(b) Article XII
 8.5 HSR Act
 8.6 Replacement Bonds, Letters of Credit and Guarantees Section 6.3
 8.7 Insurance
 ARTICLE IX
CLOSING
 9.1 Date of Closing Closing Closing Date.
 9.2 Place of Closing th
 9.3 Closing Obligations
 29




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##### 



30




---



##### 



9.4 Records Section 9.3
 ARTICLE X
ACCESS/DISCLAIMERS
 10.1 Access
 Section 10.1 Buyers Representatives
 provided, however
 31




---



##### 



Buyer hereby agrees to defend, indemnify and hold harmless each of the Third Party operators
and owners of the Assets and Seller Indemnified Parties from and against any and all
Liabilities arising out of, resulting from or relating to any field visit, environmental
property assessment, or other due diligence activity conducted by Buyer or any Buyers
Representative with respect to the Assets, even if such Liabilities arise out of or result
from, solely or in part, the
sole, active, passive, concurrent or comparative negligence, strict liability or other
fault or violation of Law of or by any such Third Party operator or owner or Seller
Indemnified Party, excepting only Liabilities actually resulting on the account of the gross
negligence or willful misconduct of such person.
    32




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##### 



10.2 Confidentiality
 10.3 Disclaimers
 Except as and to the extent expressly set forth in Article IV and elsewhere
in this Agreement and the special warranty in the assignments to be executed pursuant
hereto, (i) Seller makes no representations or warranties, express, statutory or implied,
and (ii) Seller expressly disclaims all liability and responsibility for any representation,
warranty, statement or information made or communicated (orally or in writing) to Buyer or
any of its Affiliates or Representatives (including, without limitation, any opinion,
information, projection or advice that may have been provided to Buyer by any officer,
director, employee, agent, consultant, representative or advisor of Seller or any of its
Affiliates). In particular, except as expressly set forth in Article IV and
elsewhere in this Agreement and the special warranty in the assignments to be executed
pursuant hereto, and without limiting the generality of the foregoing, Seller expressly
disclaims any representation or warranty, express, statutory or implied, as to (i) title to
any of the Assets, (ii) the contents, character or nature of any report of any petroleum
engineering consultant or any engineering, geological or seismic data or interpretation,
relating to the Assets, (iii) the quantity, quality or recoverability of Hydrocarbons in or
from the Assets, (iv) any estimates of the value of the Assets or future revenues generated
by the Assets, (v) the production of Hydrocarbons from the Assets, (vi) the maintenance,
repair, condition, quality, suitability, design or marketability of the Assets, (vii) the
content of any information memorandum, reports, brochures, charts or statements prepared by
Seller or third parties with respect to the Assets and (viii) any other materials or
information that may have been made available to Buyer or its Affiliates, or its or their
Representatives in connection with the transactions contemplated by this Agreement or any
discussion or presentation relating thereto. Except as expressly set forth in Article
IV and elsewhere in this Agreement, Seller further disclaims any representation or
warranty, express, statutory or implied, of merchantability, freedom from latent vices or
defects, fitness for a particular purpose or conformity to models or samples of materials of
any assets, rights of a purchaser under appropriate statutes to claim diminution of
consideration or return of the Purchase Price, it being expressly understood and agreed by
the parties hereto that Buyer shall be deemed to be obtaining the Assets in their present
status, condition and state of repair, as is and where is with all faults or defects
(known or unknown, latent, discoverable or undiscoverable), and that Buyer has made or
caused to be made such inspections as Buyer deems appropriate. With respect to any of the
Assets that are located in or in
 33




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##### 



federal waters offshore Louisiana, Buyer acknowledges that
this waiver has been expressly called to its attention and includes, without limitation, a
waiver of warranty against rehibitory vices arising under Louisiana Civil Code Articles 2520
through 2548, inclusive.
 Section 10.3 conspicuous
 ARTICLE XI
TITLE MATTERS; CASUALTIES; TRANSFER RESTRICTIONS
 11.1 Sellers Title General Disclaimer of Title Warranties and Representations Section 11.2
 11.2 Notice of Title Defects; Defect Adjustments
 Title Defect Notices Section 11.2(a) Title
Defect Notices Title Defect Notice Title Defect Property
 Title Benefit Notices Title Benefit Notice
 34




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##### 



Sellers Right to Cure Cure Period th
 Remedies for Title Defects Section 11.2 Section 14.1 Section 11.2(a)
 Title Defect Amount Section 11.2(g) 11.2(j)
 Title Indemnity Agreement Exhibit G
 Section
14.1(a)
 Section 11.2(j) Section 11.2(j)
 35




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##### 



Section 11.2(j)
 Remedies for Title Benefits Section 11.2(b) Title Benefit Amount Section 11.2(h) Individual Title Benefit Threshold
 Exclusive Remedy Section 11.2(d)
 Title Defect Amount
   Exhibit A Exhibit A
  36




---



##### 



provided, however
 Exhibit A Affected Well Defective Support Property Article XI provided, however Article XI
  Article XI
 Title Benefit Amount
   37




---



##### 



Title Deductibles Individual Title Defect Threshold
 Title Dispute Resolution Section 11.2(j) Title
Arbitrator Sections 11.2(g) 11.2(h)
 38




---



##### 



Section 3.5 Section 3.6
 Scriveners Error Article
XI Exhibit A Section 11.2
 11.3 Casualty or Condemnation Loss
  Section 11.2 provided, however
 39




---



##### 



11.4 Preferential Purchase Rights and Consents to Assign
 Section 11.4 Preference Rights
 Preference Notices Schedule 4.11
 provided, however, provided
further
 40




---



##### 



Section 3.3
 Preference
Right Assets provided
  41




---



##### 



ARTICLE XII
ENVIRONMENTAL MATTERS
 12.1 Environmental Defects
 Assertions of Environmental Defects Section 12.1(a) Environmental Defect Notices Environmental Defect Notice Environmental Claim Date Section 12.1
 Remedies for Environmental Defects Section 12.1(a)
    42




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##### 



Section 14.1
 Exhibit H Access
Agreement
 Exclusive Remedy Section 12.1(d) Section
12.1(b)
 Environmental Deductibles Individual Environmental Threshold
 Environmental Dispute Resolution 43
       Section 12.1 Environmental Arbitrator Section 12.1 Section 3.3 Section 12.1
 12.2 NORM, Wastes and Other Substances
 44




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##### 



ARTICLE XIII
ASSUMPTION; INDEMNIFICATION; SURVIVAL
 13.1 Assumption of Obligations by Buyer Article XIII Section 13.1 Assumed Obligations provided
   13.2 Indemnities of Seller Article XIII Buyer Indemnified
Parties 
   45




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##### 



Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.11, 4.17
 Sections 6.5,
11.4
 13.3 Indemnities of Buyer  Seller Indemnified
Parties 
  Section 15.18(b)
    Article V
 Sections
6.3, 6.4, 6.6, and 11.4
 13.4 Express Negligence The indemnification, release and Assumed Obligations provided for
in this Agreement shall be applicable whether or not the liabilities, losses, costs, expenses and
damages in question arose or resulted solely or in part from the gross, sole, active, passive,
concurrent or comparative negligence, strict liability or other fault or violation of law of or by
any Indemnified Party. Buyer and Seller acknowledge that this statement complies with the express
negligence rule and is conspicuous.
 13.5 Indemnification Procedures Sections
13.2 13.3
 Sections 13.2(b) (c) Indemnification Threshold
 46




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##### 



Sections 13.2(b) (c) Indemnification Cap provided Sections 13.2(a) (d)
 Article XIII Indemnifying Party Article XIII Indemnified Party Article
XIII
 Sections 10.1(c), 13.2 13.3 Section 13.5 Claim Notice Claim provided Section 13.5 Sections 10.1(c), 13.2 13.3
  Section 13.5(e) 47
          13.6 Survival
 Article XIII Section 11.4 Section 13.6
 48




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##### 



Sections 4.1, 4.2, 4.3, 4.17, 4.21, 6.4, 6.5, 6.6, 9.4, 11.4, Article V
 Section 6.7
 Sections 4.4, 4.5, 4.8, 4.9, 4.11 6.3
 Section 3.3
 Article XIII Section 13.3 provided, however Section 13.2
 13.7 Non-Compensatory Damages
 13.8 Disclaimer of Application of Anti-Indemnity Statutes
 13.9 Buyer Credit Support
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Article XIII
 ARTICLE XIV
TERMINATION, DEFAULT AND REMEDIES
 14.1 Right of Termination
 Article
VIII
 Article
VII
  provided, however
 14.2 Effect of Termination Section 14.1 Section 3.2 Sections 1.1 10.2 10.3 13.7 Section 14.2 Article XV Sections 15.2(b) 15.7 15.8 15.9 15.17
 ARTICLE XV
MISCELLANEOUS
 15.1 Exhibits and Schedules
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15.2 Expenses and Taxes
  ad valorem ad valorem ad valorem ad valorem ad valorem
 15.3 Assignment
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15.4 Preparation of Agreement
 15.5 Publicity
 15.6 Notices provided
 If to Seller:
    
    The Houston Exploration Company1100 Louisiana StreetSuite 2000Houston, Texas 77002Attn: Jeffrey SherrickFax: 713-830-6885with a copy to:
    
    Akin, Gump, Strauss, Hauer & Feld LLP1111 Louisiana Street44th FloorHouston, Texas 77002Attn: Christine LaFolletteJennifer De la RosaFax: 713-236-0822If to Buyer:
    
    Merit Energy Company13727 Noel Road, Suite 500Dallas, Texas 75240Attn: General CounselFax: 972-960-8420
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Section 15.6
 15.7 Removal of Name
 15.8 Further Cooperation
 15.9 Filings, Notices and Certain Governmental Approvals
 15.10 Entire Agreement; Conflicts This Agreement, the exhibits hereto and the
Confidentiality Agreement collectively constitute the entire agreement among Seller and Buyer
pertaining to the subject matter hereof and supersede all prior agreements, understanding,
negotiations and discussion, whether oral or written, of the parties pertaining to the subject
matter hereof. There are no warranties, representations or other agreements among the parties
relating to the subject matter hereof except as specifically set forth in this Agreement or the
assignments and other documents expressly contemplated hereby, and neither Seller nor Buyer shall
be bound by or liable for any alleged representation, promise, inducement or statements of
intention not so set forth. In the event of a conflict between the terms and provisions of this
Agreement and the terms and provisions of any exhibit hereto, the terms and provisions of this
Agreement shall govern
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and control; provided, however , that the inclusion in any of the exhibits
hereto of terms and provisions not addressed in this Agreement shall not be deemed a conflict, and
all such additional provisions shall be given full force and effect, subject to the provisions of
this Section 15.10 .
 15.11 Parties in Interest
 15.12 Amendment
 15.13 Waiver; Rights Cumulative
 15.14 Governing Law; Jurisdiction, Venue; Jury Waiver This Agreement and the legal
relations among the parties shall be governed and construed in accordance with the laws of the
State of Texas, excluding any conflicts of law rule or principle that might refer construction of
such provisions to the laws of another jurisdiction. All of the parties hereto consent to the
exercise of jurisdiction in personam by the courts of the State of Texas for any action arising out
of this Agreement or the other Transaction Documents. All actions or proceedings with respect to,
arising directly or indirectly in connection with, out of, related to, or from this Agreement or
the other Transaction Documents shall be exclusively litigated in courts having situs in Houston,
Harris County, Texas. Each party hereto waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any action, suit or proceeding arising out
of or relating to this Agreement.
 15.15 Severability
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15.16 Counterparts
 15.17 Like-Kind Exchange Rev. Proc. 2000-37 Section 15.17 provided, however
 15.18 Certain Governmental Approvals Exhibit C Exhibit D Exhibit E Section 15.18
  Section 13.3
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Section 8.7
  mutatis mutandis
     Schedule 3.8 Section 15.18
 15.19 Adequacy of Supplemental Bonds or Arrangements for the Pledge of Securities
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15.20 Special Offshore Interests Section 15.18
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SELLER:THE HOUSTON EXPLORATION COMPANY
 By:
    
    /s/ Jeffery B. SherrickName:
    
    Jeffrey B. SherrickTitle:
    
    Senior Vice President  Business
Development
 BUYER:MERIT MANAGEMENT PARTNERS I, L.P.MERIT MANAGEMENT PARTNERS II, L.P.MERIT MANAGEMENT PARTNERS III, L.P.MERIT ENERGY PARTNERS III, L.P.By: MERIT ENERGY COMPANY, General Partner
 By:
    
    /s/ Fred N. DiemFred N. Diem, Vice President
 MERIT ENERGY PARTNERS D-III, L.P.By: MERIT MANAGEMENT PARTNERS I, General PartnerBy: MERIT ENERGY COMPANY, General Partner
 By:
    
    /s/ Fred N. DiemFred N. Diem, Vice President
 MERIT ENERGY PARTNERS E-III, L.P.By: MERIT MANAGEMENT PARTNERS II, L.P., General PartnerBy: MERIT ENERGY COMPANY, Sole Member
 By:
    
    /s/ Fred N. DiemFred N. Diem, Vice President
 MERIT ENERGY PARTNERS F-III, L.P.By: MERIT MANAGEMENT PARTNERS III, L.P., General PartnerBy: MERIT ENERGY COMPANY, Sole Member
 By:
    
    /s/ Fred N. DiemFred N. Diem, Vice President