Document:

ex10_1.htm

     

    Exhibit
10.1

     

    EXECUTION VERSION

     

    
 

    ASSET
PURCHASE AGREEMENT

     

    DATED
AS OF MAY 15, 2009,

     

    BY
AND AMONG

     

    QUICKSILVER
RESOURCES INC.,

     

    AS
SELLER,

     

    AND

     

    ENI
US OPERATING CO. INC.

     

    AND

     

    ENI
PETROLEUM US LLC,

     

    AS
BUYERS

     

    
      
        
           

        

         

      

      
         

        
          
 

      

      
         

        
          TABLE OF
CONTENTS

        

      
Page

     

    
      
        
          
            
              
                	
                        ARTICLE
      1

                      	
                        DEFINITIONS

                      	
                        1

                      
	
                        Section
      1.1

                      	
                        Certain
      Defined Terms

                      	
                        1

                      
	
                        Section
      1.2

                      	
                        References,
      Gender, Number

                      	
                        1

                      
	
                        ARTICLE
      2

                      	
                        SALE
      AND PURCHASE OF ASSETS

                      	
                        1

                      
	
                        Section
      2.1

                      	
                        Sale
      and Purchase

                      	
                        1

                      
	
                        ARTICLE
      3

                      	
                        PURCHASE
      PRICE AND PAYMENT

                      	
                        2

                      
	
                        Section
      3.1

                      	
                        Purchase
      Price

                      	
                        2

                      
	
                        Section
      3.2

                      	
                        Payment

                      	
                        2

                      
	
                        Section
      3.3

                      	
                        Allocation
      of Purchase Price

                      	
                        2

                      
	
                        Section
      3.4

                      	
                        Adjustment
      Period Cash Flow

                      	
                        3

                      
	
                        Section
      3.5

                      	
                        Post
      Closing Review

                      	
                        4

                      
	
                        Section
      3.6

                      	
                        Gas
      Imbalance Adjustments

                      	
                        6

                      
	
                        ARTICLE
      4

                      	
                        REPRESENTATIONS
      AND WARRANTIES

                      	
                        6

                      
	
                        Section
      4.1

                      	
                        Representations
      and Warranties of Seller

                      	
                        6

                      
	
                        Section
      4.2

                      	
                        Representations
      and Warranties of Buyers

                      	
                        11

                      
	
                        ARTICLE
      5

                      	
                        ACCESS
      TO INFORMATION; ETC

                      	
                        13

                      
	
                        Section
      5.1

                      	
                        General
      Access

                      	
                        13

                      
	
                        Section
      5.2

                      	
                        Confidential
      Information

                      	
                        13

                      
	
                        Section
      5.3

                      	
                        Environmental
      Review and Audit

                      	
                        14

                      
	
                        Section
      5.4

                      	
                        Buyers’
      Responsibility for Review

                      	
                        15

                      
	
                        ARTICLE
      6

                      	
                        TITLE
      ADJUSTMENTS

                      	
                        15

                      
	
                        Section
      6.1

                      	
                        General
      Disclaimer of Warranties and Representations

                      	
                        15

                      
	
                        Section
      6.2

                      	
                        Buyers’
      Title Review

                      	
                        16

                      
	
                        Section
      6.3

                      	
                        Determination
      of Title Defects

                      	
                        20

                      
	
                        Section
      6.4

                      	
                        Seller
      Title Credits

                      	
                        20

                      
	
                        Section
      6.5

                      	
                        Dispute
      Resolution

                      	
                        21

                      
	
                        Section
      6.6

                      	
                        No
      Duplication

                      	
                        22

                      
	
                        Section
      6.7

                      	
                        Operational
      Defects

                      	
                        22

                      
	
                        ARTICLE
      7

                      	
                        PREFERENCE
      RIGHTS AND TRANSFER REQUIREMENTS

                      	
                        22

                      
	
                        Section
      7.1

                      	
                        Compliance

                      	
                        22

                      

              

            

          

        

      

    

     

    
      
        
          
            	
                     

                  	
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          TABLE OF
CONTENTS

          (continued)

        

      
Page

     

    
      
        
          
            
              	
                      Section
      7.2

                    	
                      Allocations

                    	
                      23

                    
	
                      Section
      7.3

                    	
                      Preference
      Rights

                    	
                      23

                    
	
                      Section
      7.4

                    	
                      Transfer
      Requirements

                    	
                      24

                    
	
                      Section
      7.5

                    	
                      Certain
      Governmental Consents

                    	
                      24

                    
	
                      Section
      7.6

                    	
                      Express
      Conditions on Sale

                    	
                      24

                    
	
                      ARTICLE
      8

                    	
                      COVENANTS
      OF SELLER AND BUYERS

                    	
                      25

                    
	
                      Section
      8.1

                    	
                      Conduct
      of Business Pending Closing

                    	
                      25

                    
	
                      Section
      8.2

                    	
                      Qualifications
      on Conduct

                    	
                      27

                    
	
                      Section
      8.3

                    	
                      Conveyance

                    	
                      27

                    
	
                      Section
      8.4

                    	
                      Public
      Announcements

                    	
                      27

                    
	
                      Section
      8.5

                    	
                      Amendment
      of Schedules

                    	
                      28

                    
	
                      Section
      8.6

                    	
                      Parties
      Efforts and Further Assurances

                    	
                      28

                    
	
                      Section
      8.7

                    	
                      Records

                    	
                      28

                    
	
                      Section
      8.8

                    	
                      Recording

                    	
                      28

                    
	
                      Section
      8.9

                    	
                      Casualty
      and Condemnation

                    	
                      28

                    
	
                      Section
      8.10

                    	
                      Acreage
      Failure

                    	
                      29

                    
	
                      Section
      8.11

                    	
                      Change
      of Control

                    	
                      29

                    
	
                      Section
      8.12

                    	
                      Third
      Person Indebtedness

                    	
                      31

                    
	
                      ARTICLE
      9

                    	
                      TAX
      MATTERS

                    	
                      31

                    
	
                      Section
      9.1

                    	
                      Tax
      Returns; Proration of Taxes

                    	
                      31

                    
	
                      Section
      9.2

                    	
                      Like-Kind
      Exchange

                    	
                      32

                    
	
                      Section
      9.3

                    	
                      Transfer
      Taxes

                    	
                      33

                    
	
                      Section
      9.4

                    	
                      Conflict

                    	
                      33

                    
	
                      ARTICLE
      10

                    	
                      CLOSING
      CONDITIONS

                    	
                      33

                    
	
                      Section
      10.1

                    	
                      Seller’s
      Closing Conditions

                    	
                      33

                    
	
                      Section
      10.2

                    	
                      Buyers’
      Closing Conditions

                    	
                      34

                    
	
                      ARTICLE
      11

                    	
                      CLOSING

                    	
                      35

                    
	
                      Section
      11.1

                    	
                      Closing

                    	
                      35

                    
	
                      Section
      11.2

                    	
                      Seller’s
      Closing Obligations

                    	
                      35

                    
	
                      Section
      11.3

                    	
                      Buyers’
      Closing Obligations

                    	
                      36

                    

            

          

           

          
            
              
                
                  
                    	
                             

                          	
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                  TABLE OF
CONTENTS

                  (continued)

                

              
Page

          

           

          
            
              
                
                  
                    	
                            ARTICLE
      12

                          	
                            EFFECT
      OF CLOSING

                          	
                            36

                          
	
                            Section
      12.1

                          	
                            Revenues

                          	
                            36

                          
	
                            Section
      12.2

                          	
                            Expenses

                          	
                            36

                          
	
                            Section
      12.3

                          	
                            Payments
      and Obligations

                          	
                            37

                          
	
                            Section
      12.4

                          	
                            Survival

                          	
                            37

                          
	
                            ARTICLE
      13

                          	
                            LIMITATIONS

                          	
                            38

                          
	
                            Section
      13.1

                          	
                            Disclaimer
      of Warranties

                          	
                            38

                          
	
                            Section
      13.2

                          	
                            Texas
      Deceptive Trade Practices Act Waiver

                          	
                            39

                          
	
                            Section
      13.3

                          	
                            Damages

                          	
                            39

                          
	
                            ARTICLE
      14

                          	
                            INDEMNIFICATION

                          	
                            40

                          
	
                            Section
      14.1

                          	
                            Indemnification
      by Buyers

                          	
                            40

                          
	
                            Section
      14.2

                          	
                            Indemnification
      by Seller

                          	
                            40

                          
	
                            Section
      14.3

                          	
                            Indemnification
      and Defense Procedures

                          	
                            41

                          
	
                            ARTICLE
      15

                          	
                            TERMINATION;
      REMEDIES

                          	
                            44

                          
	
                            Section
      15.1

                          	
                            Termination

                          	
                            44

                          
	
                            Section
      15.2

                          	
                            Remedies

                          	
                            45

                          
	
                            ARTICLE
      16

                          	
                            MISCELLANEOUS

                          	
                            46

                          
	
                            Section
      16.1

                          	
                            Counterparts

                          	
                            46

                          
	
                            Section
      16.2

                          	
                            Governing
      Law; Jurisdiction; Process

                          	
                            46

                          
	
                            Section
      16.3

                          	
                            Entire
      Agreement

                          	
                            46

                          
	
                            Section
      16.4

                          	
                            Expenses

                          	
                            46

                          
	
                            Section
      16.5

                          	
                            Notices

                          	
                            47

                          
	
                            Section
      16.6

                          	
                            Successors
      and Assigns

                          	
                            48

                          
	
                            Section
      16.7

                          	
                            Amendments
      and Waivers

                          	
                            48

                          
	
                            Section
      16.8

                          	
                            Appendices,
      Schedules and Exhibits

                          	
                            48

                          
	
                            Section
      16.9

                          	
                            Interpretation

                          	
                            48

                          
	
                            Section
      16.10

                          	
                            Limited
      Arbitration

                          	
                            49

                          
	
                            Section
      16.11

                          	
                            Agreement
      for the Parties’ Benefit Only

                          	
                            49

                          
	
                            Section
      16.12

                          	
                            Attorneys
      Fees

                          	
                            49

                          
	
                            Section
      16.13

                          	
                            Severability

                          	
                            49

                          

                  

                

              

            

          

          

            
              
                
                  
                    	
                             

                          	
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                  TABLE OF
CONTENTS

                  (continued)

                

              
Page

            
              
                
                  
                    	
                            Section
      16.14

                          	
                            No
      Recordation

                          	
                            50

                          
	
                            Section
      16.15

                          	
                            Time
      of Essence

                          	
                            50

                          

                  

                

              

            

          

           

        

      

    

    
      
        
          
            	
                     

                  	
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    APPENDICES

     

    
      
        
          
            
              
                
                  
                    
                      	
                              Appendix
      A

                            	
                              -

                            	
                              Definitions

                            

                    

                  

                

              

            

          

        

      

    

     

    EXHIBITS

     

    
      
        
          
            
              
                	
                        Exhibit
      8.3

                      	
                        -

                      	
                        General
      Conveyance

                      
	
                        Exhibit
      11.2(c)

                      	
                        -

                      	
                        Affidavit
      of Non-Foreign Status

                      
	
                        Exhibit
      11.2(d)

                      	
                        -

                      	
                        Joint
      Development Agreement

                      
	
                        Exhibit
      11.2(e)

                      	
                        -

                      	
                        Area
      of Mutual Interest Agreement

                      
	
                        Exhibit
      11.2(f)

                      	
                        -

                      	
                        Joint
      Operating Agreement

                      
	
                        Exhibit
      11.2(g)

                      	
                        -

                      	
                        Use
      and Access Agreement

                      
	
                        Exhibit
      11.2(i)

                      	
                        -

                      	
                        Gathering
      Agreement

                      

              

            

          

        

      

    

     

    SCHEDULES

     

    
      
        
          
            
              
                	
                        Schedule
      A-1

                      	
                        -

                      	
                        Property
      Schedule

                      
	
                        Schedule
      A-2

                      	
                        -

                      	
                        Excluded
      Assets

                      
	
                        Schedule
      A-3

                      	
                        -

                      	
                        Certain
      Permitted Encumbrances

                      
	
                        Schedule
      A-4

                      	
                        -

                      	
                        Option
      Properties

                      
	
                        Schedule
      4.1(d)

                      	
                        -

                      	
                        Seller’s
      Conflicts

                      
	
                        Schedule
      4.1(e)

                      	
                        -

                      	
                        Seller’s
      Consents

                      
	
                        Schedule
      4.1(f)

                      	
                        -

                      	
                        Seller’s
      Actions

                      
	
                        Schedule
      4.1(g)

                      	
                        -

                      	
                        Compliance
      with Laws

                      
	
                        Schedule
      4.1(j)

                      	
                        -

                      	
                        Material
      Contracts

                      
	
                        Schedule
      4.1(k)

                      	
                        -

                      	
                        Tax
      Matters

                      
	
                        Schedule
      4.1(n)

                      	
                        -

                      	
                        Capital
      Commitments

                      
	
                        Schedule
      4.1(o)

                      	
                        -

                      	
                        Payments
      for Production

                      
	
                        Schedule
      4.1(p)

                      	
                        -

                      	
                        Suspense

                      
	
                        Schedule
      4.1(s)

                      	
                        -

                      	
                        Environmental

                      
	
                        Schedule
      6.7

                      	
                        -

                      	
                        Operational
      Defects

                      
	
                        Schedule
      7.1

                      	
                        -

                      	
                        Preference
      Rights and Transfer Requirements

                      
	
                        Schedule
      8.1

                      	
                        -

                      	
                        Conduct
      of Business

                      
	
                        Schedule
      8.3

                      	
                        -

                      	
                        Division
      of Assets

                      
	
                        Schedule
      8.12

                      	 
      	
                        Existing
      Liens

                      

              

            

          

          
            
              
                 

              

               

            

            
               

              
                
 

            

            
               

            

          

      

    

    ASSET
PURCHASE AGREEMENT

     

    THIS
ASSET PURCHASE AGREEMENT (this “Agreement”),
dated as of May 15, 2009, is by and among QUICKSILVER RESOURCES INC., a Delaware
corporation (“Seller”),
and ENI US OPERATING CO. INC., a Delaware corporation (“Eni
Operating”), and ENI PETROLEUM US LLC, a Delaware limited liability
company (“Eni
Petroleum”; Eni Petroleum together with Eni Operating being hereinafter
referred to as “Buyers”).  Seller
and each of the Buyers are hereinafter referred to individually as a “Party”
and collectively as the “Parties”.

     

    WHEREAS,
Seller owns undivided interests in certain oil and gas leases, royalty
interests, mineral interests and related assets located in the Fort Worth Basin
in the State of Texas; and

     

    WHEREAS,
Seller desires to sell to Buyers, and Buyers desire to purchase from Seller, an
undivided twenty-seven and five-tenths percent (27.5%) of such interests in such
oil and gas leases, royalty interests, mineral interests and related assets upon
the terms and subject to the conditions set forth in this
Agreement;

     

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth in
this Agreement, the Parties agree as follows:

     

    ARTICLE
1

    DEFINITIONS

     

    Section
1.1                                Certain
Defined Terms.  Unless the context otherwise requires, the
respective terms defined in Appendix A attached hereto and incorporated
herein shall, when used herein, have the respective meanings therein specified,
with each such definition to be equally applicable both to the singular and the
plural forms of the term so defined.

     

    Section
1.2                                References,
Gender, Number.  All references in this Agreement to an
“Article,” “Section,” “subsection,” “Exhibit” or “Schedule” shall be to an
Article, Section, subsection, Exhibit or Schedule of this Agreement, unless the
context requires otherwise.  Unless the context otherwise requires,
the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words
of similar import shall refer to this Agreement as a whole and not to a
particular Article, Section, subsection, clause or other subdivision
hereof.  Whenever the context requires, the words used herein shall
include the masculine, feminine and neuter gender, and the singular and the
plural.

     

    ARTICLE
2

    SALE
AND PURCHASE OF ASSETS

     

    Section
2.1                                Sale
and Purchase.  On and subject to the terms and conditions of
this Agreement, Seller agrees to sell and convey to Buyers, and Buyers agree to
purchase from Seller, the Assets.

     

    
      
        
          
            	
                     

                  	
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    ARTICLE
3

    PURCHASE
PRICE AND PAYMENT

     

    Section
3.1                                Purchase
Price.  The purchase price for the sale and conveyance of the
Assets to Buyers is Two Hundred Eighty Million and No/100 Dollars
($280,000,000.00) (the “Purchase
Price”), subject to adjustment in accordance with the terms of this
Agreement.  The “Adjusted
Purchase Price” shall be the Purchase Price (a) as adjusted by the
Initial Adjustment Amount determined pursuant to Section 3.4, (b) as
adjusted for payments of portions of the Purchase Price received by Seller from
holders of Preference Rights contemporaneously with Closing in accordance with
and as contemplated by Section 7.3, (c) as adjusted downward for Title
Defects, if any, in accordance with Section 6.2(e), (d) as adjusted for gas
imbalances, if any, pursuant to Section 3.6 and (e) as adjusted downward on
account of an Option Failure occurring prior to the Closing Date as set forth in
Section 8.10.

     

    Section
3.2                                Payment.  Contemporaneously
with the execution of this Agreement, Buyers have deposited an amount equal to
ten percent (10%) of the Purchase Price with the Escrow Agent pursuant to the
Escrow Agreement as a deposit hereunder (the “Deposit”).  If
the Closing occurs, Buyers and Seller agree that they will direct the Escrow
Agent to pay the Deposit together with all interest earned thereon to Seller at
the Closing and that the Deposit (but not the interest earned thereon), when
received by Seller, shall be credited against the Adjusted Purchase
Price.  Buyers acknowledge and agree that the interest earned on the
Deposit shall not be credited against the Adjusted Purchase Price, but shall be
paid and belong to Seller.  At the Closing, Buyers shall assume the
Assumed Liabilities and, subject to the second sentence of this Section 3.2,
shall wire transfer the Adjusted Purchase Price in immediately available funds
to Quicksilver Resources Inc., JPMorgan Chase Bank, N.A., ABA No. 021000021 for
the account of Seller, Account No. 08806377907, or such other account or
accounts specified by Seller to Buyers on or prior to the Business Day
immediately preceding the Closing Date.

     

    Section
3.3                                Allocation
of Purchase Price.  As soon as reasonably practicable after the
Closing, the Parties shall agree to allocate, in accordance with Section 1060 of
the Code, the Adjusted Purchase Price (plus other capitalized costs) among the
Assets.  For purposes of such allocation, the Parties shall use, to
the extent possible, the Allocated Values.  Buyers shall provide a
proposed allocation to Seller, and thereafter, Buyers and Seller will act in
good faith and reasonably cooperate with each other to agree on the final
allocation (as finalized, the “Tax
Allocation Schedule”).  Each of the Parties (or its applicable
Affiliate) shall file a Form 8594 (Asset Acquisition Statement Under Section
1060) on a timely basis, reporting the allocation of the Adjusted Purchase Price
(plus other capitalized costs) consistent with the Tax Allocation
Schedule.  Each of the Parties (or its applicable Affiliate) shall
file, on a timely basis, any amendments required to such Form 8594 as a result
of a subsequent increase or decrease in the Adjusted Purchase Price pursuant to
this Agreement.  Except as required by Law, none of the Parties (or
their applicable Affiliates) shall take any position on its Tax Returns that is
inconsistent with the allocation of the Adjusted Purchase Price (plus other
capitalized costs) as so agreed or as adjusted.

     

    
      
        
           

        

         

      

      
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    Section
3.4                                Adjustment
Period Cash Flow.

     

    (a)           Initial
Adjustment Amount.  Without limitation of Buyers’ rights
pursuant to Section 14.2, the Purchase Price shall be increased or decreased, as
the case may be, by an amount equal to the Net Cash Flow with respect to the
Assets for the time period beginning at the Effective Time through but excluding
the Closing Date (the “Adjustment
Period”).  Seller shall deliver to Buyers on or prior to the
fifth (5th) Business Day preceding the Closing Date a statement (the “Adjustment
Statement”) setting forth Seller’s preliminary determination (the “Initial
Adjustment Amount”) of the Net Cash Flow.  If the Initial
Adjustment Amount shown on the Adjustment Statement is a positive number, then
the Purchase Price shall be increased by such amount.  If the Initial
Adjustment Amount shown on the Adjustment Statement is a negative number, then
the Purchase Price shall be decreased by such amount.

     

    (b)           Basis of
Adjustments.  Except with respect to any costs and expenses of
drilling and completing any Well by Seller as more fully described in
Section 3.4(c), the Adjustment Statement shall be based upon actual
information available to Seller at the time of its preparation.  There
shall be attached to the Adjustment Statement such supporting documentation and
other data as is reasonably necessary to provide a basis for the Net Cash Flow
or as may be reasonably requested by Buyers.

     

     

    (c)           Net Cash
Flow.  The “Net Cash
Flow” shall be the algebraic sum of (i) a positive amount equal to
the aggregate amount incurred and paid by Seller as Seller’s share of the costs
of acquisition, exploration, development, construction, maintenance, operation,
abandonment and production of the Assets with respect to the Adjustment Period,
including, but not limited to, royalties, overriding royalties, net profit
interests and other similar burdens on production; Production Taxes; the cost of
maintaining leaseholds, easements, rights-of-way or other interests included in
the Assets; option payments; the cost of acquiring new leasehold, easements,
rights-of-way and other interests that shall, upon acquisition, become part of
the Assets; the cost of extension or renewal of any interest included in the
Assets; the cost of treating, processing, storing, compressing, transporting,
selling, marketing and otherwise handling and dealing with Hydrocarbon
production with respect to the Assets; the cost of any exploration, development
or construction activities on the Assets; costs of insurance coverage (including
prepayments of any of the foregoing costs, which prepayments shall be prorated
in the manner contemplated by Section 3.4(d)); provided,
however,
(i) any costs and expenses associated with the drilling and/or completion by
Seller of any Well (other than the Wells addressed in item (ii) of this
provision) during the Adjustment Period, or which are otherwise included in the
Turnkey Drilling Rate or Turnkey Completion Rate, will be calculated in the
manner contemplated by Section 4.1 of the Joint Development Agreement
irrespective of the actual costs and expenses paid by Seller, and (ii) $201,140
of the costs and expenses associated with the drilling of the Alliance D-6H
Well and the Alliance Saratoga A-10H Well shall be included in the
calculation of Net Cash Flow irrespective of the actual costs and expenses
incurred by Seller to drill same or when such costs are paid by Seller (the
“Property
Costs”); (ii) a negative amount equal to the aggregate gross
proceeds received by Seller from the sale of Hydrocarbons produced from or
attributable to the Assets during the Adjustment Period or from the sale,
salvage or other disposition of any Assets during the Adjustment Period; provided,
however,
that, for the purposes of determining Net Cash Flow, gaseous Hydrocarbons shall
be

     

    
      
        
           

        

         

      

      
        3

        
          
 

      

      
         

      

    

     

    deemed to
have been sold for an amount per MMBtu equal to the Guaranteed Rate, whether
actually sold for more or less; and (iii) a negative amount equal to the
aggregate amount of any costs incurred under clause (i) above and reimbursed to
Seller by any third Person (unless such reimbursement is accounted for under
clause (ii) above); provided,
however,
the amounts held by Seller for the account or benefit of any third Person joint
interest owners shall not be included in the calculation of Net Cash Flow, and
therefore, shall not have an effect on the Purchase Price.  If an
operating agreement is not in place during any part of the Adjustment Period
with respect to any Asset for which Seller or an Affiliate of Seller is acting
as operator, then overhead charges of the operator for such Asset with respect
to such part of the Adjustment Period shall be Seven Hundred Dollars ($700) per
producing Well per month, (y) deemed incurred by Seller and
(z) charged and allocated to such Asset for purposes of determining Net
Cash Flow; provided,
however,
that no other general and administrative costs and other indirect expenses shall
be included in the calculation of Net Cash Flow, except if and to the extent
charged pursuant to an applicable existing operating agreement, and, to the
extent that any overhead costs are included in the Turnkey Drilling Rate or
Turnkey Completion Rate, such overhead costs shall not be charged to Buyers and
shall not be included in the determination of Net Cash Flow, except insofar as
such costs are included in the Turnkey Drilling Rate or Turnkey Completion
Rate.

     

    (d)           Interpretation.  The
term “incurred,” as used in this Section 3.4 and with respect to Article 12, and
the amount of each adjustment to the Purchase Price, shall be interpreted in
accordance with accounting recognition guidance under the Accounting
Principles.  Surface use fees, insurance premiums and other Property
Costs that are paid periodically shall be prorated based upon the number of days
in the applicable period falling before, or on or after, the Effective
Time.  Production Taxes shall be prorated based on the amount of
Hydrocarbons actually produced, purchased or sold, as applicable, before and on
or after the Effective Time.

     

    Section
3.5                                Post
Closing Review.  After the Closing, Seller shall review the
Adjustment Statement and determine the actual Net Cash Flow.  On or
prior to the ninetieth (90th) day
after the Closing Date, Seller shall present Buyers with a statement of the
actual Net Cash Flow and such supporting documentation as is reasonably
necessary (and as may be reasonably requested by Buyers) to support the Net Cash
Flow shown therein (the “Final
Adjustment Statement”).  Buyers will give personnel,
accountants and representatives of Seller reasonable access to Buyers’ premises
and to its books and records to the extent relating to the Assets for purposes
of preparing the Final Adjustment Statement and will cause appropriate personnel
of Buyers to assist Seller and Seller’s personnel, accountants and
representatives, at no cost to Seller, in the preparation of the Final
Adjustment Statement; provided,
however, that Buyers shall not be required to provide such access (or
assistance with respect thereto) to the extent related to information concerning
Buyers that is not publicly available unless and until the Parties have executed
an amendment to the Confidentiality Agreement (or other agreement), in form and
substance reasonably satisfactory to Buyers, providing that any such
non-publicly available information to which Seller (or any employee, contractor,
accountant or other representative thereof) is given access shall be
confidential and shall not be disclosed or otherwise used except in furtherance
of the transactions contemplated by this Agreement, and except as may be
required pursuant to applicable Law.  Seller will give personnel,
accountants and representatives of Buyers reasonable access to Seller’s premises
and to its books and records to the extent relating to the Assets for purposes
of reviewing the calculation of Net Cash Flow and will cause appropriate
personnel of Seller to assist Buyers and Buyers’ personnel, 

    
      
        
           

        

         

      

      
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    accountants
and representatives, at no cost to Buyers, in verification of such
calculation.  The Final Adjustment Statement shall become final and
binding on Seller and Buyers as to the Net Cash Flow (subject, however, to
Article 12) thirty (30) days following the date the Final Adjustment Statement
is received by Buyers, except to the extent that prior to the expiration of such
30-day period Buyers shall deliver to Seller one or more notices, as hereinafter
required, of its disagreement with the contents of the Final Adjustment
Statement.  Such notices shall be in writing and set forth all of
Buyers’ disagreements with respect to any portion of the Final Adjustment
Statement, together with Buyers’ proposed changes thereto, and shall include an
explanation in reasonable detail of, and such supporting documentation as is
reasonably necessary to support, such changes.  Any disagreements with
or changes to the Final Adjustment Statement not included in such notices shall
be waived by Buyers.  If Buyers have timely delivered one or more
notices of disagreement to Seller in the manner required above, then, upon
written agreement between Buyers and Seller resolving all disagreements of
Buyers set forth in such notices, the Final Adjustment Statement (including any
revisions thereto as are so agreed) will become final and binding on Buyers and
Seller as to the Net Cash Flow.  If the Final Adjustment Statement has
not become final and binding by the one hundred fiftieth (150th) day following
the Closing Date, then Buyers or Seller may submit any unresolved disagreements
of Buyers set forth in the aforesaid notices to the Houston office of
PricewaterhouseCoopers, LLP or, if such firm is not able or willing to serve, a
nationally-recognized independent accounting firm or consulting firm mutually
acceptable to both Seller and Buyers, or, if Buyers and Seller are unable to
agree upon a firm within ten (10) days after being notified of Pricewaterhouse
Coopers, LLP’s inability or unwillingness to serve, a firm selected by the
Houston, Texas office of the American Arbitration Association (the “Accounting
Arbitrator”) for final and binding determination.  The fees and
expenses of the Accounting Arbitrator in making such determination shall be
shared fifty percent (50%) by Buyers and fifty percent (50%) by
Seller.  The Accounting Arbitrator shall conduct the arbitration
proceedings in Fort Worth, Texas in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, to the extent such rules do not
conflict with the terms of this Section 3.5.  Upon resolution of such
unresolved disagreements of Buyers, the Final Adjustment Statement (including
any revisions thereto as are so resolved or agreed), shall be conclusive, final
and binding on Buyers and Seller as to the Net Cash Flow.  The
Accounting Arbitrator’s determination shall be made within forty-five (45) days
after submission of the matters in dispute and shall be final and binding on all
Parties, without right of appeal.  In determining the proper amount of
any adjustment to the Purchase Price, the Accounting Arbitrator shall be bound
by the terms of this Agreement and may not increase the Purchase Price by more
than the increase proposed by Seller nor decrease the Purchase Price by more
than the decrease proposed by Buyers, as applicable.  The Accounting
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed aspects of Purchase Price adjustments submitted by any Party
and may not award damages, interest (except as expressly provided for in this
Section 3.5), or penalties to any Party with respect to any
matter.  Seller and Buyers shall each bear their own legal fees and
other costs of presenting their case to the Accounting Arbitrator.  If
the final amount of Net Cash Flow is more or less than the Initial Adjustment
Amount, the Adjusted Purchase Price shall be redetermined under Section 3.1
using such final amount of Net Cash Flow.  If such redetermination
under Section 3.1 results in a reduction in the Adjusted Purchase Price, Seller
shall pay Buyers the amount of such reduction.  If such
redetermination results in an increase in the Adjusted Purchase Price, Buyers
shall pay Seller the amount of such increase.  Within
three

    
      
        
           

        

         

      

      
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    (3)
Business Days after the Final Adjustment Statement (as so resolved or agreed)
becomes final and binding, Seller or Buyers, as appropriate, shall pay to the
other Party the amount of such increase or reduction, if any, in the Adjusted
Purchase Price, together with interest on the amount of such increase or
reduction from the Closing Date until paid at the Agreed Rate.

     

    Section
3.6                                Gas
Imbalance Adjustments.  The Purchase Price shall
be:

     

    (a)           reduced
by the product obtained by multiplying the aggregate volume of MMBtu owed by
Seller to a third Person as of the Effective Time for production imbalances or
overlifts attributable to the Properties by the Guaranteed Rate;
and

     

    (b)           increased
by the product obtained by multiplying the aggregate volume of MMBtu owed by a
third Person to Seller as of the Effective Time for production imbalances or
overlifts attributable to the Properties by the Guaranteed Rate.

     

    ARTICLE
4

    REPRESENTATIONS
AND WARRANTIES

     

    Section
4.1                                Representations
and Warranties of Seller.  Seller represents and warrants to
Buyers as follows:

     

    (a)           Organization
and Qualification.  Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to carry on its business as
it is now being conducted.  Seller is duly qualified to do business,
and is in good standing, in each jurisdiction in which the Assets owned or
leased by it makes such qualification necessary.

     

    (b)           Authority.  Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder (and under all documents
required to be executed and delivered and actions to be performed by Seller
pursuant hereto).  The execution, delivery and performance of this
Agreement and the agreements contemplated hereby and the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite corporate action on the part of Seller.

     

    (c)           Enforceability.  This
Agreement constitutes a valid and binding agreement of Seller enforceable
against Seller in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application with respect to creditors, (ii) general principles of equity
and (iii) the power of a court to deny enforcement of remedies generally based
upon public policy.

     

    (d)           No Conflict
or Violation.  Except for any exceptions set forth in Section
4.1(e) (or referenced in Schedule 4.1(e)),
neither the execution and delivery of this Agreement nor the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Seller will (i) conflict with or result in a violation or breach of or
default under any provision of the certificate of incorporation, by-laws or
other similar governing documents of Seller, (ii) conflict with or
result in a violation or breach of or default (whether currently or with due
notice or lapse of time or both) or the creation of any lien or encumbrance or
give rise to any right of termination, cancellation, or acceleration under any
agreement,

    
      
        
           

        

         

      

      
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    indenture
or other instrument under which Seller is bound and to which any Asset is
subject, or (iii) violate or conflict with any Law applicable to Seller or
any Asset (or Seller’s ownership or operation thereof), other than, in the case
of the matters described in clauses (ii) and (iii) of this Section 4.1(d), such
conflicts, breaches, violations or defaults as will not have a Material Adverse
Effect.

     

    (e)           Consents.  Except
for (i) consents or approvals of, or filings with, any applicable
Governmental Authorities in connection with assignments of the Assets which are
not customarily obtained prior to the assignment of the Assets,
(ii) Preference Rights and Transfer Requirements, and (iii) other
consents, approvals, authorizations, permits, filings or notices described in
Schedule 4.1(e),
no consent, approval, authorization or permit of, or filing with or notification
to, any Person is required for or in connection with the execution and delivery
of this Agreement by Seller or for or in connection with the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Seller.

     

    (f)           Actions.  Except
as set forth in Schedule 4.1(f),
(i) there is no Action pending (with service of process therein having been
made on Seller) or, to the knowledge of Seller, threatened (or pending without
service of process therein having been made on Seller) to which Seller is (or is
threatened to be made) a party and which relates to the Assets, other than
Actions which are not reasonably expected to have a Material Adverse Effect; and
(ii) without limiting the foregoing, to the knowledge of Seller, no written
or electronic notice from any third Person has been received by Seller claiming
or calling attention to any violation of Law which relates to the Assets, or, in
the case of a Governmental Authority, claiming or calling attention to any
possible violation of Law which relates to the Assets, other than any such
violation or possible violation which is not reasonably expected to have a
Material Adverse Effect.

     

    (g)           Compliance
with Laws.  Except as set forth in Schedule 4.1(g),
(i) Seller has no knowledge of any violation by Seller of any Law with
respect to the Assets, other than violations of Law which are not reasonably
expected to have a Material Adverse Effect and (ii) to the knowledge of
Seller, all necessary permits, licenses, approvals, consents, certificates, and
other authorizations with respect to the ownership or operation of the Assets
are in full force and effect, and no violations exist in respect thereof, other
than those, the failure of which to obtain or maintain or the violation of
which, would not have a Material Adverse Effect; provided,
that, no representation or warranty made in this Section 4.1(g), shall
apply with respect to (x) violations of Environmental Law,
(y) violations of Law relating to Tax, except as set forth in Section
4.1(k), or (y) Seller’s title to the Assets.

     

    (h)           Brokerage
Fees and Commissions.  Neither Seller nor any Affiliate of
Seller has incurred any obligation or entered into any agreement for any
investment banking, brokerage or finder’s fee or commission in respect of the
transactions contemplated by this Agreement for which Buyers shall incur any
liability, whether directly or indirectly.

    
      
        
           

        

         

      

      
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    (i)           Insolvency.

     

    (i)           There
are no bankruptcy, reorganization, receivership or arrangement proceedings
pending against, being contemplated by, or, to the knowledge of Seller,
threatened against Seller or any Affiliate of Seller.

     

    (ii)           The
Assets are not being, and to the knowledge of Seller, have not been, assigned,
transferred, conveyed, pledged, disposed of, delegated or otherwise alienated,
in whole or in part, in any manner (whether by assignment, merger, change of
control, sale of stock, assignment for the benefit of creditors, receivership,
bankruptcy or otherwise), and whether by Seller or any Affiliate of Seller or
any other Person, with the actual intent to hinder, delay, or defraud any
creditor.

     

    (iii)           Immediately
prior to and immediately subsequent to the Closing, neither Seller nor any
Affiliate of Seller will have incurred, nor does such Person intend to or
believe that it will incur, debts or obligations (including, without limitation,
contingent obligations, and including the obligations of Seller under or with
respect to this Agreement), beyond such Person’s ability to pay such debts and
obligations as they mature or come due.

     

    (iv)           Seller
agrees for and on behalf of itself and its Affiliates that the Purchase Price
(as adjusted pursuant to this Agreement) constitutes reasonable value for the
Assets, and Seller has not paid less than reasonable value for the purchase,
sale, or other transfer of the Assets.  The transactions contemplated
by this Agreement are not in satisfaction of any antecedent or preexisting debt
owed by Seller to Buyers.

     

    (j)           Material
Contracts.

     

    (i)           Schedule
4.1(j) sets forth a list of all Material Contracts that exist as of the
date of this Agreement.  Prior to the Closing Date, Seller will
provide or cause to be provided to Buyers access to true, correct, and complete
copies of such Material Contracts, together with any amendments and supplements
thereto.

     

    (ii)           Except
as set forth in Schedule
4.1(j), Seller is not in breach of, or default under, and to the
knowledge of Seller, no other Person is in breach of, or default under, any
Material Contract, and there does not exist under any provision thereof, to the
knowledge of Seller, any event that, with the giving of notice or the lapse of
time or both, would constitute such a breach or default by any Person, except
for such breaches, defaults and events as to which requisite waivers or consents
have been or are being obtained or which would not, individually or in the
aggregate, have a Material Adverse Effect.

     

    (k)           Tax
Matters.

     

    (i)           Except
for Taxes being contested in good faith in connection with the matters set forth
in Schedule
4.1(k), each material Tax Return required to be filed with respect to the
Assets has been timely and properly filed and all material Taxes
with

    
      
        
           

        

         

      

      
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    respect
to the Assets have been timely and properly paid.  All such Tax
Returns are correct and complete in all material respects.

     

    (ii)           Except
for Taxes not yet due and payable, Seller has not received written notice of any
claim from any applicable Governmental Authority for the assessment of any Taxes
with respect to the Assets.  There is not currently in effect any
extension or waiver of any statute of limitation of any jurisdiction regarding
the assessment or collection of Taxes with respect to the
Assets.  There are no administrative proceedings or lawsuits pending
against the Assets by any applicable Governmental Authority with respect to
Taxes.

     

    (iii)           No
lien or encumbrance (other than Tax liens contested in good faith and for which
adequate reserves are maintained in accordance with the Accounting Principles)
exists (whether or not filed in the real property records of any applicable
Governmental Authority) on or with respect to any Assets as a result of a
failure to pay Taxes; provided,
however,
that, to the extent notice of any such Tax lien or encumbrance is not filed in
the real property records of an applicable Governmental Authority, this
representation shall be deemed to be qualified by the knowledge of
Seller.

     

    (iv)           None
of the Assets are subject to any Tax partnership agreement requiring a
partnership income Tax Return to be filed under Subchapter K of Chapter 1 of
Subtitle A of the Code.

     

    (l)           Wells.  There
is no Well (including, without limitation, any “orphan well”) or piece of
Equipment included in the Assets that:

     

    (i)           Seller
is obligated on the date of this Agreement by applicable Law or agreement to
plug and abandon, abandon, decommission, remove, or otherwise dispose
of;

     

    (ii)           to
the knowledge of Seller, has been plugged and abandoned, abandoned,
decommissioned, removed, or otherwise disposed of other than in compliance in
all material respects with applicable Law or agreement; and

     

    (iii)           is
subject to penalties on allowables after the Effective Time because of any
overproduction.

     

    (m)           Equipment.  To
the knowledge of Seller, all Wells and Equipment are in an operable state of
repair adequate to maintain normal operations in accordance with past practices,
ordinary wear and tear excepted, other than any non-operable state of repair
that would not have a Material Adverse Effect.

     

    (n)           Outstanding
Capital Commitments.  Except as set forth on Schedule 4.1(n),
as of the date of this Agreement, there are no outstanding authorities for
expenditure or other commitments, whether oral or written, to conduct any
operations or expend any amount of money on or with respect to the Assets which
are binding on Seller or the Assets and will be binding on Buyers after Closing
and which Seller reasonably anticipates will require

    
      
        
           

        

         

      

      
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    the
expenditure of money in excess of Five Hundred Thousand Dollars ($500,000) (net
to the interest being conveyed to Buyers pursuant to this Agreement) per
item.

     

    (o)           Payments
for Production.  Except as set forth on Schedule 4.1(o),
Seller is not obligated by virtue of a take-or-pay payment, advance payment,
make-whole payment, or other similar payment (other than royalties, overriding
royalties, and similar arrangements established in the Leases or reflected on
the Property Schedule), to deliver Hydrocarbons, or proceeds from the sale
thereof, attributable to Seller’s interest in the Assets at some future time
without receiving payment therefor at or after the time of delivery, except as
would not, individually or in the aggregate, have a Material Adverse
Effect.

     

    (p)           Suspense.  Except
as set forth on Schedule 4.1(p),
proceeds from the sale of Hydrocarbons produced from or attributable to the
Assets are being paid by or on behalf of Seller in compliance with the terms of
the Leases, Surface Agreements and other applicable instruments and applicable
Law without suspension or indemnity other than standard division order
suspensions or indemnities, except as would not, individually or in the
aggregate, have a Material Adverse Effect.

     

    (q)           Status of
Seller.  Seller is not an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

     

    (r)           Records and
Reserve Report.  The historical factual information provided to
Schlumberger by Seller regarding the Assets for the preparation of the Reserve
Report (including, without limitation, historical costs of operation and
production volumes), was accurate in all material respects when
furnished.

     

    (s)           Environmental.  Except
as set forth on Schedule 4.1(s)
and except as would not have a Material Adverse Effect:

     

    (i)           to
the knowledge of Seller, the Assets and Seller with respect to the Assets are in
compliance with the requirements of all Environmental Laws;

     

    (ii)           to
the knowledge of Seller, all permits, licenses, approvals, consents,
certificates and other authorizations required by Environmental Laws with
respect to the ownership or operation of the Assets (the “Environmental
Permits”) have been properly obtained and are in full force and effect,
and the Assets are in compliance with the Environmental Permits;

     

    (iii)           no
written claims have been received by Seller with respect to the Assets that
relate to Hazardous Materials or to matters covered by Environmental Laws or
Environmental Permits;

     

    (iv)           to
the knowledge of Seller, there are no facts, conditions, or circumstances in
connection with, related to or associated with the Assets, the ownership or
operation of any thereof, or the disposal or removal of Hazardous Materials from
the Assets that could reasonably be expected to give rise to any Action or other
assertion that

    
      
        
           

        

         

      

      
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    Seller,
the Assets, or the ownership or operation of any thereof gives rise to any
liability under or in connection with any Environmental Law or Environmental
Permit; and

     

    (v)           to
the knowledge of Seller, there are and have been no Hazardous Materials that
have been disposed of or released on, in, from or under the Assets that could
reasonably be expected to result in a violation of any Environmental Law, any
claim of exposure to or damage from any such Hazardous Material, or in a
liability or obligation under any Environmental Law to perform any remediation,
removal, response, restoration, abatement, investigation or
monitoring.

     

    Section
4.2                                Representations
and Warranties of Buyers.  Buyers represent and warrant to
Seller as follows:

     

    (a)           Organization
and Qualification.  Eni Petroleum is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the requisite limited liability company power and
authority to carry on its business as it is now being conducted.  Eni
Operating is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to carry on its business as it is now being
conducted.  Each Buyer is duly qualified to do business, and is in
good standing, in each jurisdiction in which the Assets to be acquired by it
makes such qualification necessary.

     

    (b)           Authority.  Buyers
have all requisite limited liability company, in the case of Eni Petroleum, and
corporate, in the case of Eni Operating, power and authority to execute and
deliver this Agreement and to perform each of their respective obligations under
this Agreement (and under all documents required to be executed and delivered
and actions to be performed by any Buyer pursuant hereto).  The
execution, delivery and performance of this Agreement and the agreements
contemplated hereby and the transactions contemplated hereby and thereby have
been duly and validly authorized by all requisite limited liability company, in
the case of Eni Petroleum, and corporate, in the case of Eni Operating, action
on the part of Buyers.

     

    (c)           Enforceability.  This
Agreement constitutes a valid and binding agreement of each Buyer enforceable
against it in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application with respect to creditors, (ii) general principles of equity and
(iii) the power of a court to deny enforcement of remedies generally based upon
public policy.

     

    (d)           No Conflict
or Violation.  Except for any exceptions set forth in Section
4.2(e), neither the execution and delivery of this Agreement nor the
consummation of the transactions and performance of the terms and conditions
contemplated hereby by Buyers will (i) conflict with or result in a violation or
breach of or default under any provision of the certificate of incorporation,
by-laws, operating agreement or other similar governing documents of either
Buyer or any material agreement, indenture or other instrument under which
either Buyer is bound or (ii) violate or conflict with any Law applicable to
either Buyer or the Assets.

    
      
        
           

        

         

      

      
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    (e)           Consents.  No
consent, approval, authorization or permit of, or filing with or notification
to, any Person is required for or in connection with the execution and delivery
of this Agreement by Buyers or for or in connection with the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Buyers.

     

    (f)           Actions.  There
is no Action pending (with service of process therein having been made on either
Buyer) or, to the knowledge of either Buyer, threatened (or pending without
service of process therein having been made on either Buyer) to which either
Buyer is (or is threatened to be made) a party, other than Actions which are not
reasonably expected by either Buyer to have a material adverse effect on either
Buyer.

     

    (g)           Brokerage
Fees and Commissions.  Neither Buyers nor any respective
Affiliate of either Buyer has incurred any obligation or entered into any
agreement for any investment banking, brokerage or finder’s fee or commission in
respect of the transactions contemplated by this Agreement for which Seller
shall incur any liability.

     

    (h)           Qualified
Owner.  Each Buyer (i) is, or as of the Closing Date will
be, qualified under Law to own the Assets and (ii) has, or as of the
Closing Date will have, complied with any necessary governmental bonding
requirements required for its ownership of the Assets.

     

    (i)           Funds.  Buyers
have, and at all times prior to Closing will have, sufficient funds available to
enable Buyers to consummate the transactions contemplated hereby and to pay the
Adjusted Purchase Price and all related fees and expenses of
Buyers.

     

    (j)           Buyers’
Knowledge.  Neither Buyer has any knowledge that Seller is
currently in breach of any representation or warranty of Seller in Section
4.1.

     

    (k)           No
Distribution.  Buyers are experienced and knowledgeable
investors in the oil and gas business, Buyers are able to bear the economic
risks of their acquisition and ownership of the Assets, and Buyers are capable
of evaluating (and have evaluated) the merits and risks of the Assets and
Buyers’ acquisition and ownership thereof.  Prior to entering into
this Agreement, Buyers were advised by their counsel and such other persons they
have deemed appropriate concerning this Agreement and have relied solely on an
independent investigation and evaluation of, and appraisal and judgment with
respect to, the geologic and geophysical characteristics of the Properties, the
estimated reserves recoverable therefrom, and the price and expense assumptions
applicable thereto.  Buyers are each an “accredited investor,” as such
term is defined in Regulation D of the Securities Act of 1933, as amended, and
will acquire the Assets for their own account and not with a view to a sale or
distribution thereof in violation of the Securities Act of 1933, as amended, and
the rules and regulations thereunder, any applicable state blue sky laws or any
other applicable securities Laws.

     

    (l)           Insolvency.

     

    (i)           There
are no bankruptcy, reorganization, receivership or arrangement proceedings
pending against, being contemplated by, or, to the knowledge of each Buyer,
threatened against any Buyer or any Affiliate of any Buyer.

    
      
        
           

        

         

      

      
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    (ii)           Immediately
prior to and immediately subsequent to the Closing, no Buyer or any Affiliate of
any Buyer will have incurred, nor does such Person intend to or believe that it
will incur, debts or obligations (including, without limitation, contingent
obligations, and including the obligations of the Buyers under or with respect
to this Agreement), beyond such Person’s ability to pay such debts and
obligations as they mature or come due.

     

    (iii)           Buyers
agree for and on behalf of themselves and their respective Affiliates that the
Purchase Price (as adjusted pursuant to this Agreement) constitutes reasonable
value for the Assets.  The transactions contemplated by this Agreement
are not in satisfaction of any antecedent or preexisting debt owed by Buyers to
Seller.

     

    ARTICLE
5

    ACCESS
TO INFORMATION; ETC.

     

    Section
5.1                                General
Access.  Subject to Section 5.3 (which shall govern all
environmental reviews, inspections and audits), Seller has, and until the
Closing Date (or earlier termination of this Agreement), Seller
shall:

     

    (a)           permit
Buyers and their respective representatives to have reasonable access during
normal business hours in Seller’s offices, and in a manner so as not to
interfere unduly with the business operations of Seller, to (and the ability to
copy in Seller’s offices) the Records insofar as Seller may do so without
(i) violating any contractual restriction or applicable Laws or
(ii) waiving any attorney/client, work product or like privilege (except
insofar as such privileges relate to title opinions); and

     

    (b)           subject
to any required consent of any third Person, permit Buyers and their respective
representatives at reasonable times and at Buyers’ sole risk, cost and expense,
to conduct, in the presence of Seller’s representatives, reasonable inspections
of the Assets;

     

    provided,
however,
Buyers shall repair any damage to the Assets resulting from such inspections and
do hereby indemnify and hold harmless, release and agree to defend the Seller
Indemnified Persons from and against any and all Covered Liabilities to the
extent arising from Buyers’ inspection of the Assets, REGARDLESS
OF ANY CONCURRENT NEGLIGENCE OR STRICT LIABILITY ON THE PART OF THE SELLER
INDEMNIFIED PERSONS AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT COMMON LAW,
STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR REGULATION, EXCLUDING,
HOWEVER, THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED
PERSON.  Nothing in this Agreement shall be construed to permit
Buyers or their respective representatives to have access to any files, records,
contracts or documents of Seller prepared in connection with this transaction or
relating to any offers received by Seller for the sale of the Assets in
competition with the Buyers’ offer, it being agreed that all such competing
offers shall be the sole property of Seller.

     

    Section
5.2                                Confidential
Information.  Buyers agree to maintain all information made
available to them pursuant to this Agreement confidential and to cause their
respective directors, officers, employees, agents, representatives, consultants
and advisors to

     

    
      
        
           

        

         

      

      
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    maintain
all information made available to them pursuant to this Agreement confidential,
all as provided in that certain confidentiality agreement dated December 3,
2008, by and between Seller and Eni Operating, as amended by that certain First
Amendment to Confidentiality Agreement dated as of April 8, 2009, by and
between Seller and Eni Operating (the “Confidentiality
Agreement”), which shall continue in full force and effect and the terms
of which are incorporated herein by reference and made a part of this
Agreement.

     

    Section
5.3                                Environmental
Review and Audit.  

     

    (a)           Environmental
Access.  Commencing on the execution of this Agreement and
continuing until the Closing Date (or earlier termination of this Agreement),
subject to the restrictions contained in this Agreement and any required consent
or waiver of any third Person, Seller shall (i) permit Buyers and their
respective representatives to have access during normal business hours in the
Seller’s offices, and in a manner so as not to interfere unduly with the
business operations of Seller, to Seller’s environmental files and records
(including the ability to copy same in Seller’s offices, including field
offices) in the possession or control of Seller (whether now or prior to the
Closing Date), to the extent relating to the Assets and insofar as Seller may do
so without waiving any attorney/client, work product or like
privilege  and (ii) permit Buyers and the Environmental
Consultant to have reasonable access during normal business hours to the Assets
for the purpose of allowing Buyers and the Environmental Consultant to conduct
an environmental inspection and audit of the Assets (collectively, the “Environmental
Review”), all at Buyers’ sole risk, cost and expense.

     

    (b)           Conduct of
Review.  Prior to conducting the Environmental Review, Buyers
shall furnish Seller with a proposed scope of the Environmental Review,
including a description of the activities to be conducted and the approximate
locations of such activities.  No Person other than the Environmental
Consultant, the employees of each Buyer, and, to the extent related to the
review of Seller’s environmental files and records related to the Assets,
Buyers’ outside legal counsel, may conduct the Environmental
Review.  Buyers shall not commence any activity proposed to be
included in the Environmental Review unless and until such activity (including
the approximate location thereof) has been approved in writing by Seller, which
approval shall not be unreasonably withheld or delayed.  Seller shall
have the right to be present during any inspection (including the Environmental
Review) of the Assets and shall have the right, at its option and expense, to
split samples with Buyers; provided,
however,
that, so long as Buyers have provided Seller with reasonable advance written
notice of when they desire to conduct a proposed activity, Seller shall not
withhold or delay its consent to any activity proposed to be conducted pursuant
to the Environmental Review due solely to the inability of a representative of
Seller to be present at such activity.  It is understood and agreed by
the Parties that the proposed scope and list of activities provided to Seller
pursuant to which Buyers will perform the Environmental Review may be modified
during the course of the Environmental Review pursuant to the approval of Seller
(including the oral approval of any on-site representative of Seller), which
approval shall not be unreasonably withheld or delayed; provided
however, that Buyers shall not conduct any sampling boring, drilling or
operation of machinery without first obtaining the prior written consent of
Seller, which consent shall not be unreasonably withheld or
delayed.

    
      
        
           

        

         

      

      
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    Section
5.4                                Buyers’
Responsibility for Review.  In connection with the
Environmental Review, Buyers agree that Buyers, the Environmental Consultant and
the employees, agents and contractors of each Buyer shall comply with all Laws
and shall exercise reasonable care with respect to the Assets and their
condition, taking into consideration the characteristics of any wastes or
substances found thereon, and in light of all relevant facts and
circumstances.  Specifically, but without limitation, when handling
solid waste or hazardous substances, if any, discovered during the inspection of
the Assets, Buyers, the Environmental Consultant and the employees, agents and
contractors of each Buyer shall handle such waste or substances in accordance
with all Laws.  Any soil or water samples taken by Buyers from the
Assets shall become the sole property and responsibility of Buyers and will be
managed consistent with the applicable rules and regulations of the U.S.
Environmental Protection Agency and any other applicable Governmental Authority
with regulatory authority.  Promptly after completing the
Environmental Review, Buyers shall, at their sole cost and expense, restore the
Assets to their original condition, in accordance with good engineering
practice, if damaged due to the Environmental Review.  Failure by
Buyers to comply with the requirements of this subsection within a reasonable
time period will entitle (but shall not obligate) Seller to take any action
reasonably necessary to correct such failure, all at Buyers’
expense.  Buyers shall maintain and shall cause their respective
officers, directors, employees, agents, representatives, contractors,
consultants and advisors to maintain all information obtained pursuant to the
Environmental Review strictly confidential and shall not disclose the same to
any third Person without the prior written consent of Seller, except to the
extent required by Law.  Buyers shall provide Seller’s counsel with
copies of any reports prepared and analytical test results received by Buyers or
the Environmental Consultant promptly following Buyers’ preparation or receipt
of the same.  Buyers do hereby indemnify and hold harmless, release
and agree to defend the Seller Indemnified Persons from and against any and all
Covered Liabilities, including all Environmental Liabilities, to the extent
arising out of any violation by Buyers, Buyers’ outside legal counsel, the
Environmental Consultant, or Buyers’, Buyers’ outside legal counsel’s or the
Environmental Consultant’s officers, directors, employees, agents,
representatives, contractors, consultants and advisors of the provisions of this
Section or, in whole or in part, from Buyers’ or the Environmental Consultant’s
inspection or testing of the Assets or handling any substances or samples in
connection therewith, REGARDLESS
OF ANY CONCURRENT NEGLIGENCE OR STRICT LIABILITY ON THE PART OF ANY SELLER
INDEMNIFIED PERSON AND REGARDLESS OF THE FORM OF CLAIM WHETHER AT COMMON LAW,
STRICT LIABILITY, NEGLIGENCE OR UNDER ANY STATUTE OR REGULATION, BUT EXCLUDING
THE GROSS NEGLIGENCE AND WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED
PERSON.  Notwithstanding any other provision hereof, under no
circumstances shall Buyers’ discovery during the Environmental Review of any
Hazardous Materials or violations of Environmental Law that may be present at
any location assessed hereunder be deemed to have caused or given rise to any
Environmental Liabilities simply because such Hazardous Materials were
discovered by Buyers or brought to Seller’s attention in connection with the
Environmental Review.

     

    ARTICLE
6

    TITLE
ADJUSTMENTS

     

    Section
6.1                                General
Disclaimer of Warranties and Representations.  Without limiting
Buyers’ right to adjust the Purchase Price by operation of this Article 6
or

    
      
        
           

        

         

      

      
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    Section
8.10 and subject to the provisions of Section 8.12 and Section 10.2(f), and
except for the special warranty of Defensible Title to be made in the
Conveyance, Seller makes no warranty or representation, express, implied,
statutory or otherwise, with respect to Seller’s title to any of the Assets, and
Buyers hereby acknowledge and agree that, except as provided above, Buyers’ sole
remedy for any Title Defect with respect to any of the Assets shall be pursuant
to the procedures set forth in this Article 6.  Buyers shall not be
entitled to protection under the special warranty of Defensible Title to be
contained in the Conveyance against any Option Failure (which failure is
addressed in Section 8.10 and in the Joint Development Agreement), any Title
Defect asserted by Buyers under this Article 6 or for any other Title Defect of
which Buyers had knowledge prior to the expiration of the Examination
Period.

     

    Section
6.2                                Buyers’
Title Review.  

     

    (a)           Buyers’
Assertion of Title Defects.  Commencing on the execution of
this Agreement and continuing until 5:00 p.m., Central Daylight Time, on June 1,
2009 (the “Examination
Period”), Buyers may furnish Seller written notice meeting the
requirements of this Section 6.2(a) (a “Title
Defect Notice”) setting forth any matters which, in Buyers’ reasonable
opinion, constitute Title Defects.  For all purposes of this
Agreement, Buyers shall be deemed to have waived any Title Defect which Buyers
fail to assert as a Title Defect by a Title Defect Notice given to Seller on or
before the expiration of the Examination Period.  To be effective,
Buyers’ Title Defect Notice of a Title Defect must include (i) a brief
description of the matter constituting the asserted Title Defect, (ii) the
claimed Title Defect Amount attributable thereto, and (iii) supporting documents
reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of such asserted Title Defect.  The
Parties acknowledge and agree that any dispute between the Parties as to the
effectiveness of any notice furnished by Buyers to Seller pursuant to this
Section 6.2(a) may be submitted for resolution by the Title Arbitrator pursuant
to the arbitration procedures set forth in Section 6.5.  To give
Seller an opportunity to commence reviewing and curing Title Defects, Buyers
agree to give Seller written notice of any Title Defect which Buyers determine
exist promptly following Buyers’ determination of the existence of same, which
notice may be preliminary in nature and supplemented prior to the end of the
Examination Period.  Buyers shall also promptly furnish Seller with
written notice of any Seller Title Credit which is discovered by any employee or
representative of either Buyer while conducting Buyers’ title review, due
diligence or investigation with respect to the Assets.

     

    (b)           Purchase
Price Allocations.  A portion of the Purchase Price has been
allocated to the various Property Subdivisions in the manner and in accordance
with the respective values set forth in Part II of the Property
Schedule.  The “Allocated
Value” for any Property Subdivision equals the portion of the Purchase
Price that is allocated to such Property Subdivision on Part II of the Property
Schedule, increased or decreased (a) as set forth in Section 3.1(b),
(c) and (d) with respect to such Property Subdivision, and (b) by a share
of each adjustment to the Purchase Price under Section 3.1(a) (with respect
to Net Cash Flow) and Section 3.1(e).  The share of each
adjustment allocated to a particular Property Subdivision pursuant to
item (b) of the immediately preceding sentence shall be obtained by
allocating that adjustment among the various Property Subdivisions on a pro-rata
basis in proportion to the Purchase Price allocated to such Property Subdivision
on Part II of the Property Schedule.

    
      
        
           

        

         

      

      
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    (c)           Seller’s
Assertion of Seller Title Credits.  Commencing on the execution
of this Agreement and continuing until the expiration of the Examination Period,
Seller may furnish Buyers written notice meeting the requirements of this
Section 6.2(c) (a “Seller
Title Credit Notice”) setting forth any matters which, in Seller’s
reasonable opinion, constitute Seller Title Credits.  To be effective,
a Seller Title Credit Notice must include (i) a brief description of the
matter constituting the asserted Seller Title Credit, (ii) the claimed
Seller Title Credit Amount attributable thereto, and (iii) supporting
documents reasonably necessary for Buyers (as well as any title attorney or
examiner hired by Buyers) to verify the existence of such asserted Seller Title
Credit.  The Parties acknowledge and agree that any dispute between
the Parties as to the effectiveness of any notice furnished by Seller to Buyers
pursuant to this Section 6.2(c) may be submitted for resolution by the Title
Arbitrator pursuant to the arbitration procedures set forth in Section
6.5.  SELLER
SHALL BE DEEMED TO HAVE WAIVED FOR ALL PURPOSES (INCLUDING, WITHOUT LIMITATION,
FOR THE PURPOSES OF THE JOINT DEVELOPMENT AGREEMENT AND ANY JOINT OPERATING
AGREEMENT ATTACHED THERETO OR OTHERWISE APPLICABLE TO THE PROPERTIES) ANY SELLER
TITLE CREDIT WHICH SELLER FAILS TO ASSERT AS A SELLER TITLE CREDIT BY A SELLER
TITLE CREDIT NOTICE GIVEN TO BUYERS ON OR BEFORE THE EXPIRATION OF THE
EXAMINATION PERIOD.

     

    (d)           Seller’s
Opportunity to Cure.

     

    (i)           Without
limiting Seller’s rights provided in Section 6.2(d)(ii) to cure asserted Title
Defects following the Closing, Seller shall have until two (2) days prior to the
Closing Date, at its cost and expense, if it so elects but without obligation,
to cure all or a portion of such asserted Title Defects.  Any asserted
Title Defects which are expressly waived in writing by Buyers or cured to
Buyers’ reasonable satisfaction on or before the Closing Date shall be deemed
“Permitted Encumbrances” hereunder.  Subject to Section 6.2(d)(ii) and
Seller’s continuing right to dispute the existence of a Title Defect and/or the
Title Defect Amount asserted with respect thereto, if Seller within such time
fails to cure any Title Defect of which Buyers have given timely written notice
as required above, and Buyers have not and do not waive same on or before the
day immediately preceding the Closing Date, any Property Subdivision affected by
such uncured and unwaived Title Defect shall be a “Title
Defect Property”.

     

    (ii)           If
Buyers furnish to Seller timely Title Defect Notice(s) of one or more Title
Defects and the same are not waived or cured as provided in Section 6.2(d)(i),
Seller shall close the transactions contemplated hereby and retain the right to
cure any of such Title Defects after Closing, and Seller’s election to cure such
Title Defects shall not affect the calculation of the Adjusted Purchase Price to
be paid at Closing pursuant to Section 3.2.  In such event, but
subject to Seller’s continuing right to dispute the existence of a Title Defect
and/or the Title Defect Amount asserted with respect thereto, the Purchase Price
shall be adjusted pursuant to Section 6.2(e).  Seller shall
have one hundred twenty (120) days after the Closing Date in which to
attempt to cure any such Title Defects.  The election by Seller to
cure a Title Defect after the Closing shall not affect the Title Defect Amounts
and Seller Title Credit Amounts used to determine the Adjusted Purchase Price to
be paid at Closing pursuant to Section 3.2 or the rights and obligations of the
Parties under Section 6.5 with respect to dispute resolution.  If
Seller

    
      
        
           

        

         

      

      
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    cures any
such Title Defect, then Buyers shall promptly pay Seller the Title Defect Amount
with respect to the Title Defect that is so cured, but not exceeding the
aggregate amount of the reductions in the Purchase Price which Buyers received
as a result of the applicable Title Defects, together with interest on the
amount due Seller from the Closing Date through and including the date of
payment at the Agreed Rate.  Furthermore, the Aggregate Deductible
Amount shall be restored to the extent any portion of the Aggregate Deductible
Amount was applied as a credit against the Title Defect Amount attributable to
such cured Title Defect.  If a positive balance exists in the
Aggregate Deductible Amount after any restorations or increases thereof pursuant
to the foregoing, and Seller has suffered a reduction in the Purchase Price as a
result of any one or more uncured Title Defects, Buyers shall pay to Seller an
amount (together with interest thereon from the Closing Date through and
including the date of payment at the Agreed Rate) equal to the lesser of
(i) the amount by which the Purchase Price was reduced as a result of such
uncured Title Defects and (ii) the then existing balance of the Aggregate
Deductible Amount.

     

    (iii)           Any
dispute relating to whether and to what extent a Title Defect has been cured
after Closing shall be resolved as set forth in Section 6.5, except that any
such matter shall be submitted to the Title Arbitrator on or before ten (10)
Business Days after the date described in Section 6.2(d)(ii).

     

    (e)           Buyers’
Title Adjustments.  As Buyer’s sole and exclusive remedy with
respect to Title Defects, Buyers shall be entitled to reduce the Purchase Price
by the amount, if any, by which the aggregate amount of Title Defect Amounts
which otherwise generate an adjustment to the Purchase Price exceed the
Aggregate Deductible Amount.  The Aggregate Deductible Amount shall be
restored to the extent that any portion thereof is applied as a credit against a
Title Defect Amount attributable to a Title Defect which is subsequently cured
by Seller or determined not to constitute a Title Defect.  As used
herein, the term “Title
Defect Amount” shall mean, with respect to a Title Defect Property, the
amount by which the value of such Title Defect Property is impaired as a result
of the existence of one or more uncured and unwaived Title Defects, which amount
shall be determined as follows and subject to the following
conditions:

     

    (i)           if
the Title Defect results from Seller (or Buyers, as successors in interest to
Seller) having a lesser Net Revenue Interest in such Title Defect Property than
the Net Revenue Interest specified therefor in Part II of the Property Schedule,
the Title Defect Amount shall be equal to the product obtained by multiplying
the portion of the Purchase Price allocated to such Title Defect Property in
Part II of the Property Schedule by a fraction, the numerator of which is the
reduction in the Net Revenue Interest and the denominator of which is the Net
Revenue Interest specified for such Title Defect Property in Part II of the
Property Schedule;

     

    (ii)           if
the Title Defect results from Seller (or Buyers, as successors in interest to
Seller) having a greater Working Interest in a Title Defect Property than the
Working Interest specified therefor in Part II of the Property Schedule, the
Title Defect Amount shall be equal to the present value (discounted at 10%
compounded annually) of the increase in the costs and expenses forecasted in the
Reserve Report with respect to

    
      
        
           

        

         

      

      
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    such
Title Defect Property for the period from and after the Effective Time which is
attributable to such increase in Seller’s Working Interest; provided,
however,
that no Title Defect Amount shall be allowed on account of and to the extent
that an increase in Seller’s Working Interest in a Property Subdivision has the
effect of proportionately increasing Seller’s Net Revenue Interest in such
Property Subdivision;

     

    (iii)           if
the Title Defect results from the existence of a lien, the Title Defect Amount
shall be an amount necessary to unconditionally discharge such
lien.

     

    (iv)           if
the Title Defect results from any matter not described in paragraphs (i), (ii)
or (iii) above, 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 Purchase Price
allocated in Part II of the Property Schedule to such Title Defect Property);
provided, that if such Title Defect is reasonably susceptible of being cured,
the Title Defect Amount shall not be greater than the reasonable cost and
expense of curing such Title Defect;

     

    (v)           if
a Title Defect is not effective or does not affect a Title Defect Property
throughout the entire remaining productive life of such Title Defect Property,
such fact shall be taken into account in determining the Title Defect
Amount;

     

    (vi)           the
Title Defect Amount with respect to a Title Defect shall be determined without
duplication of any costs or losses included in another Title Defect
Amount;

     

    (vii)           the
adjustment to the Purchase Price attributable to Title Defects upon a given
Title Defect Property shall not exceed the Allocated Value of the affected
Property Subdivision; provided,
however,
that the foregoing shall not limit any adjustment to the Purchase Price pursuant
to this Article 6 if and to the extent that any applicable Title Defect would
constitute a Title Defect upon another Property Subdivision set forth in Part II
of the Property Schedule;

     

    (viii)                      if
a Title Defect affects only a portion of a Property Subdivision (as contrasted
with an undivided interest in the entirety of such Property Subdivision) and a
portion of the Purchase Price has not been allocated specifically to such
portion of a Property Subdivision in Part II of the Property Schedule, then for
purposes of computing the Title Defect Amount, the portion of the Purchase Price
allocated to such Property Subdivision shall be further allocated among the
portions of such Property Subdivision in the proportion that the net acreage (or
net acre feet, as appropriate) of such Property Subdivision affected by such
Title Defect bears to the net acreage (or net acre feet, as appropriate) in the
entire Property Subdivision.  In the event such Property Subdivision
is subject to a unitization agreement, the foregoing allocation shall be made in
a manner which is consistent with the allocation of production or productive
acreage in such unitization agreement; and

    
      
         

         

      

      
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    (ix)           notwithstanding
the foregoing, if the Title Defect Amount determined pursuant to the foregoing
with respect to a Title Defect Property is $100,000.00 or less, then the Title
Defect Amount with respect to such Title Defect Property shall be deemed
zero.

     

    Section
6.3                                Determination
of Title Defects.  A Property Subdivision shall be deemed to
have a “Title
Defect” if Seller does not have Defensible Title thereto as of the
Effective Time and as of the Closing Date.  Notwithstanding any other
provision in this Agreement to the contrary, the following matters shall be
deemed to be Permitted Encumbrances and shall not be asserted as, and shall not
constitute Title Defects:  (i) defects arising out of lack of
survey, (ii) defects arising out of lack of corporate authorization, unless
Buyers provide affirmative evidence that such corporate action was not
authorized and results in another Person’s superior claim of title to the
relevant Property Subdivision or portion thereof, (iii) defects based
solely on (A) lack of information in Seller’s files or (B) references
to a document(s) if such document(s) is not in Seller’s files, (iv) defects
in the chain of title prior to January 1, 1950, unless Buyers provide
affirmative evidence that the defect results in another Person’s superior claim
of title to the relevant Property Subdivision or portion thereof,
(v) defects relating to matters for which the applicable statute of
limitations (including any extension thereof due to the failure of a Person to
discover the facts or circumstances giving rise to such defect) has expired and
(vi) defects which result from any Option Failure (which defects are addressed
in Section 8.10).

     

    Section
6.4                                Seller
Title Credits.  A “Seller
Title Credit” shall mean, with respect to a Property Subdivision, the
amount by which the value of such Property Subdivision is enhanced by virtue of
(a) Seller having a greater Net Revenue Interest in such Property Subdivision
than the Net Revenue specified therefor in Part II of the Property Schedule or
(b) Seller having a lesser Working Interest in such Property Subdivision than
the Working Interest specified therefor in Part II of the Property Schedule,
which amount  (the “Seller
Title Credit Amount”) shall be determined as follows:

     

    (i)           if
the Seller Title Credit results from Seller (and Buyers, as successors in
interest to Seller) having a greater Net Revenue Interest in such Property
Subdivision than the Net Revenue Interest specified therefor in Part II of the
Property Schedule, the Seller Title Credit Amount shall be equal to the product
obtained by multiplying the portion of the Purchase Price allocated to such
Property Subdivision in Part II of the Property Schedule by a fraction, the
numerator of which is the increase in the Net Revenue Interest and the
denominator of which is the Net Revenue Interest specified for such Property
Subdivision in Part II of the Property Schedule;

     

    (ii)           if
the Seller Title Credit results from Seller (and Buyers, as successors in
interest to Seller) having a lesser Working Interest in a Property Subdivision
than the Working Interest specified therefor in Part II of the Property
Schedule, the Seller Title Credit shall be equal to the present value
(discounted at 10% compounded annually) of the decrease in the costs and
expenses forecasted in the Reserve Report with respect to such Property
Subdivision for the period from and after the Effective Time which is
attributable to such decrease in Seller’s Working Interest;

    
      
        
           

        

         

      

      
        
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    (iii)           in
determining the Seller Title Credit Amount, the principles and methodology set
forth in paragraphs (v), (vi), (vii), and (viii) of Section 6.2(e) shall be
applied, mutatis
mutandis;

     

    (iv)           no
Seller Title Credit shall be allowed on account of and to the extent that a
decrease in Seller’s Working Interest in a Property Subdivision has the effect
of proportionately decreasing Seller’s Net Revenue Interest in such Property
Subdivision; and

     

    (v)           Notwithstanding
the foregoing:

     

    (1)           if
a Seller Title Credit Amount determined pursuant to the foregoing with respect
to a Property Subdivision is $100,000.00 or less, then such Seller Title Credit
shall be deemed zero; and

     

    (2)           there
shall be no increase to the Aggregate Deductible Amount for Seller Title Credits
which would otherwise generate an increase to the Aggregate Deductible Amount
unless and until the aggregate amount of such Seller Title Credits exceeds Seven
Million Dollars ($7,000,000), and then only to the extent that such aggregate
amount exceeds such amount.

     

    Section
6.5                                Dispute
Resolution.  

     

    (a)           Determination
of Title Defects and Seller Title Credits for Closing.  Seller
and Buyers shall attempt to agree upon all Title Defects, Seller Title Credits,
Title Defect Amounts and Seller Title Credit Amounts on or before the Closing
Date.  If Seller and Buyers are unable to agree by that date, then
Buyers’ good faith estimate shall be used to determine the Adjusted Purchase
Price to be paid by Buyers at Closing pursuant to Section 3.2, and the Title
Defects, Seller Title Credits, Title Defect Amounts and Seller Title Credit
Amounts in dispute shall be exclusively and finally resolved by arbitration
pursuant to Section 6.5(b).

     

    (b)           Title
Arbitration.  On or before a date that is ten (10) Business
Days following the Closing Date (or the period described in Section 6.2(d)(iii),
with respect to Title Defects that Seller has elected to cure pursuant to
Section 6.2(d)(ii), or as contemplated by Section 15.1(a)(iii), with respect to
the disputes which are described therein and subject to the limitations stated
therein), Title Defects, Seller Title Credits, Title Defect Amounts and Seller
Title Credit Amounts in dispute shall be submitted to Terry I. Cross of McClure
& Cross LLP, or, if such Person in unwilling or unable to serve, a title
attorney with at least ten (10) years’ experience in oil and gas titles in Texas
as selected by mutual agreement of Buyers and Seller, or, absent such agreement
during such ten (10) Business Day period, by the Houston office of the American
Arbitration Association (the “Title
Arbitrator”).  The Title Arbitrator shall not have worked as an
employee or outside counsel for any Party or its Affiliates during the five (5)
year period preceding the arbitration or have any financial interest in the
dispute.  The arbitration proceeding shall be held in Fort Worth,
Texas and shall be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, to the extent such rules do not
conflict with the terms of this Section 6.5(b).  The Title
Arbitrator’s determination shall be made within forty-five (45) days after
submission of the matters in dispute (or, with respect to

    
      
        
           

        

         

      

      
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    disputes
which are the subject of Section 15.1(a)(iii), the later of (1) ten (10) days
after submission of the matters in dispute or (2) the second Business Day
preceding the Termination Date) and shall be final and binding upon the Parties,
without right of appeal.  In making his determination, the Title
Arbitrator shall be bound by the provisions of this Article 6 and may consider
such other matters as in the opinion of the Title Arbitrator are reasonably
necessary or helpful to make a proper determination.  Additionally,
the Title Arbitrator may consult with and engage disinterested third Persons to
advise the Title Arbitrator, including petroleum engineers.  The Title
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed Title Defects, Seller Title Credits, Title Defect Amounts and
Seller Title Credit Amounts submitted by any Party and may not award damages,
interest, or penalties to any Party with respect to any
matter.  Seller and Buyers shall each bear their own legal fees and
other costs of presenting their cases.  Buyers shall bear one-half of
the costs and expenses of the Title Arbitrator, and Seller shall be responsible
for the remaining one-half of the costs and expenses.  Any disputes
relating to Title Defects, Seller Title Credits, Title Defect Amounts and Seller
Title Credit Amounts not submitted to the Title Arbitrator pursuant to the first
sentence of this Section 6.5(b) shall be deemed to be waived.

     

    Section
6.6                                No
Duplication.  Notwithstanding anything herein provided to the
contrary, if a Title Defect results from any matter which could also result in
the breach of any representation or warranty of Seller set forth in Section 4.1,
then Buyers shall only be entitled to assert such matter as a Title Defect
pursuant to this Article 6 and shall be precluded from also asserting such
matter as the basis of the breach of any such representation or
warranty.

     

    Section
6.7                                Operational
Defects.  As of the date hereof, Buyers have identified defects
(the "Operational
Defects") affecting certain of the Assets, which Operational Defects are
more particularly described in Schedule 6.7.  The
Parties acknowledge and agree that (a) the rights and obligations of the
Parties with respect to the Operational Defects shall be as set forth in the
Joint Development Agreement and shall not be subject to the remainder of this
Article 6 (including without limitation, Section 6.2(e)(ix)), and no
amounts asserted by Buyers with respect thereto shall be taken into account in
determining whether the Aggregate Deductible Amount has been exceeded and
(b) Buyers shall not have the right to assert any additional matters
similar to the Operational Defects as Title Defects pursuant to this
Article 6 or the Conveyance.

     

    ARTICLE
7

    PREFERENCE
RIGHTS AND TRANSFER REQUIREMENTS

     

    Section
7.1                                Compliance.  Buyers’
purchase of the Assets is expressly subject to all validly existing and
applicable Preference Rights and Transfer Requirements.  To Seller’s
knowledge, all agreements containing (a) a Preference Right which is
triggered as a result of the transactions contemplated by this Agreement are set
forth in Part I of Schedule
7.1 and (b) a Transfer Requirement which is triggered as a result of
the transactions contemplated by this Agreement are set forth in Part II of
Schedule
7.1.  Promptly after the date hereof, Seller shall prepare and
send notices to the holders of any such Preference Rights and rights with
respect to such Transfer Requirements (and the holders of any other Transfer
Requirements or Preference Rights that Seller discovered prior to the Closing
Date, or, with respect to Preference Rights, before, on or after the Closing
Date), which notices shall comply with the terms of the
applicable

    
      
        
           

        

         

      

      
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    Preferential
Right or Transfer Requirement and shall be in form and substance reasonably
satisfactory to Buyers, requesting consents, approvals and waivers, as
applicable, of such rights with respect to the transactions contemplated by this
Agreement.  Seller shall not be obligated to pay any consideration to
(or incur any cost or expense for the benefit of) the holder of any Preference
Right or Transfer Requirement in order to obtain the waiver thereof or
compliance therewith.

     

    Section
7.2                                Allocations.  The
portion of the Purchase Price to be allocated to any Asset or portion thereof
affected by a Preference Right (a “Preference
Property”) shall be the Allocated Value therefor.  If a
Preference Right affects only a portion of a Property Subdivision and a portion
of the Purchase Price has not been allocated specifically to such portion of a
Property Subdivision in Part II of the Property Schedule, then the portion of
the Purchase Price to be allocated to such Preference Property shall be
determined in the same manner as provided in Section 6.2(e)(viii) when a Title
Defect affects only a portion of a Property Subdivision.

     

    Section
7.3                                Preference
Rights.  If a third Person who has been offered a Preference
Property pursuant to Section 7.1 elects prior to Closing to purchase such
Preference Property in accordance with the terms of such Preference Right, and
Seller and Buyers receive written notice of such election prior to the Closing
Date, such Preference Property will be eliminated from the Assets and the
Purchase Price shall be reduced by the portion of the Purchase Price allocated
to such Preference Property pursuant to Section 7.2.  If a third
Person who has been offered a Preference Property or who has been requested to
waive its Preference Right pursuant to Section 7.1 does not elect to purchase
such Preference Property or waive such Preference Right with respect to the
transactions contemplated by this Agreement prior to the Closing Date and the
time for the exercise or waiver of such Preference Right has not expired, such
Preference Property shall be held back from the Assets to be transferred and
conveyed to Buyers at Closing, the Purchase Price to be paid at Closing shall be
reduced by the portion of the Purchase Price which would be allocated to such
Preference Property pursuant to Section 7.2. Seller shall continue to use
commercially reasonable efforts to obtain the waiver of such Preference Right
and, to the extent not prohibited by actions or inaction of Buyer, shall
continue to be responsible for the compliance therewith.  If a third
Person elects to purchase any such Preference Property, Seller shall convey said
Preference Property to such third Person and shall be entitled to the
consideration for the sale of such Preference Property. If the holder of a
Preference Right that affects a Preference Property that is held back from the
Assets that are conveyed to Buyers at Closing waives such Preference Right after
Closing, or if the time period for the exercise by such holder of its right to
purchase such Preference Property expires and such holder has not exercised its
right to purchase same, then such Preference Property shall be conveyed to
Buyers at a delayed Closing (which shall become the new Closing Date with
respect to such Preference Property), within ten (10) days following the date on
which Seller obtains such waiver or the time period for the holder to exercise
such Preference Right expires, for a purchase price equal to the amount by which
the Purchase Price was reduced on account of the holding back of such Preference
Property (as adjusted pursuant to Section 3.1 through the new Closing Date
therefor).  In connection with any subsequent conveyance of a
Preference Property, appropriate adjustments in Net Cash Flow and proration of
revenues and costs contemplated by Section 3.1 will be made to account for any
delayed Closing with respect to such Preference Property.

    
      
        
           

        

         

      

      
        
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    Section
7.4                                Transfer
Requirements.  Seller shall notify Buyers in writing on a date
that is one (1) Business Day prior to the Closing of any Transfer Requirements
which have not been obtained and the Assets to which they pertain or which are
affected thereby.  If a Transfer Requirement applicable to the
transactions contemplated by this Agreement is not obtained, complied with or
otherwise satisfied prior to the Closing Date, then, unless otherwise mutually
agreed by Seller and Buyers, any Asset or portion thereof affected by such
Transfer Requirement (a “Retained
Asset”) shall be held back from the Assets to be transferred and conveyed
to Buyers at Closing, the Purchase Price to be paid at Closing shall be reduced
by the portion of the Purchase Price which would be allocated to such Retained
Asset pursuant to Section 7.2 if such Retained Asset were a Preference
Property.  Without in any way limiting the application of the last
sentence of Section 7.1, Seller shall continue after Closing to use
commercially reasonable efforts to satisfy or obtain a waiver of the Transfer
Requirement so that the Retained Asset may be transferred to Buyers upon
satisfaction of the Transfer Requirement.  Any Retained Asset so held
back at the initial Closing will be conveyed to Buyers at a delayed Closing
(which shall become the new Closing Date with respect to such Retained Asset),
within ten (10) days following the date on which Seller obtains, complies with
or otherwise satisfies all Transfer Requirements with respect to such Retained
Asset, for a purchase price equal to the amount by which the Purchase Price was
reduced on account of the holding back of such Retained Asset (as adjusted
pursuant to Section 3.1 through the new Closing Date therefor); provided,
however,
if all Transfer Requirements with respect to any Retained Asset so held back at
the initial Closing are not obtained, complied with or otherwise satisfied
within one hundred twenty (120) days after Closing has occurred with respect to
Assets to which a majority of the Purchase Price is attributable, then
(a) such Retained Asset shall be eliminated from the Assets and this
Agreement; or (b) if the Parties mutually agree, (i) Seller shall
promptly assign such Retained Asset to Buyers notwithstanding such Transfer
Requirement, (ii) Buyers shall pay to Seller the amount contemplated by
this Section 7.4 with respect to such Retained Asset and (iii) Buyers shall
save, indemnify, defend and hold harmless Seller Indemnified Parties pursuant to
Section 14.1 from and against Covered Liabilities arising from, or relating to,
the transfer of such Retained Asset notwithstanding the Transfer
Requirement.  In connection with any subsequent conveyance of a
Retained Asset, appropriate adjustments in Net Cash Flow and proration of
revenues and costs contemplated by Section 3.1 will be made to account for any
delayed Closing with respect to such Retained Asset.

     

    Section
7.5                                Certain
Governmental Consents.  Seller and Buyers will use their
commercially reasonable efforts after Closing to obtain all approvals and
consents from, and make all filings with, all applicable Governmental
Authorities that may be required under the terms of (or regulations specifically
applicable to) any Leases or Surface Agreements in connection with the
assignment of such Leases or Surface Agreements from Seller to
Buyers.  Until such approvals and consents are obtained, Seller shall
continue to hold legal title to such Leases or Surface Agreements as nominee for
Buyers.  Seller shall not be obligated to incur any expenses in
Seller’s capacity as nominee.  For purposes of Article 14, Seller and
Buyers shall treat and deal with affected Assets as if full legal and equitable
title to such Leases or Surface Agreements had passed from Seller to Buyers at
Closing.

     

    Section
7.6                                Express
Conditions on Sale.  Buyers acknowledge that Seller desires to
sell all of the Assets and would not have entered into this Agreement but for
Buyers’ agreement to purchase all of the Assets as herein
provided.  Accordingly, it is expressly

    
      
        
           

        

         

      

      
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    understood
and agreed that Seller does not desire to sell any Preference Property unless
the sale of all of the Assets is consummated by the Closing Date in accordance
with the terms of this Agreement.  In furtherance of the foregoing,
Seller’s obligation hereunder to sell the Preference Properties to Buyers is
expressly conditioned upon the consummation by the Closing Date of the sale of
all of the Assets in accordance with the terms of this Agreement, either by
conveyance to Buyers or conveyance pursuant to an applicable Preference Right;
provided
that, nothing herein is intended or shall operate to extend or apply any
Preference Right to any portion of the Assets which is not otherwise burdened
thereby.  Time is of the essence with respect to the Parties’
agreement to consummate the sale of the Assets by the Closing Date.

     

    ARTICLE
8

    COVENANTS
OF SELLER AND BUYERS

     

    Section
8.1                                Conduct
of Business Pending Closing.  Subject to Section 8.2 and
the constraints of applicable operating agreements and other existing
agreements, from the date hereof through the Closing, except as disclosed in
Schedule 8.1
or as otherwise consented to or approved by Buyers (which consent or approval
shall not be unreasonably withheld or delayed), Seller covenants and agrees
that:

     

    (a)           Changes in
Business.  Seller shall not:

     

    (i)           make
any material change in the conduct of its business or operations with respect to
the Assets;

     

    (ii)           except
with respect to Contracts for the sale or exchange of Hydrocarbons terminable
without penalty on sixty (60) days or shorter notice, or as is reasonably
necessary to satisfy or comply with the activities and operations contemplated
by or reflected in the Reserve Report (provided, however, that Seller shall
provide Buyers with copies of same promptly following execution thereof), enter
into, assign, extend, terminate or amend, in any material respect, any Material
Contract; or

     

    (iii)           sell,
lease or otherwise dispose of any of the Assets, except (A) Hydrocarbons
sold or otherwise disposed of in the ordinary course of business,
(B) personal property or Equipment which is replaced with personal property
or equipment of comparable or better value and utility in connection with the
maintenance, repair and operation of the Assets, and (C) any item of
personal property or equipment having a value of less than $25,000.

     

    (b)           Liens.  Seller
shall not create any express lien or security interest on any Assets, except to
the extent (i) constituting liens for materialman’s, mechanics’,
repairman’s, employees’, contractors’, operators’ or other similar liens,
security interests or charges incidental to the exploration, construction,
maintenance, development, production or operation of the Assets or the
production or processing of Hydrocarbons therefrom pursuant to or in accordance
with this Section 8.1 or Section 8.2, in each case, to the extent arising in the
ordinary course of business and that are not delinquent and that will be paid in
the ordinary course of business or, if delinquent, that are being contested in
good faith, or (ii) required or evidenced by the Leases, joint operating
agreements or unitization or pooling agreements relating to the Properties,
or

    
      
        
           

        

         

      

      
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    required
or evidenced by any other Contract, to the extent securing amounts or
obligations arising in the ordinary course of business and that are not
delinquent and that will be paid or performed in the ordinary course of
business, or, if delinquent, that are being contested in good faith by
appropriate actions and for which adequate reserves are being maintained in
accordance with the Accounting Principles.

     

    (c)           Operation
of Assets.  Seller shall:

     

    (i)           cause
the Assets to be maintained and operated (and the production attributable
thereto marketed, sold, exchanged, processed and otherwise handled) in the
ordinary course of business in accordance with Seller’s past practices
(including the repair or replacement of damaged, destroyed, obsolete,
depreciated, non-working or non-economical items of Equipment or other personal
property), to the extent in accordance with Section 8.1(a), and in accordance in
all material respects with applicable Law (including, without limitation,
Environmental Law); maintain insurance now in force with respect to the Assets;
and pay or cause to be paid all costs and expenses in connection therewith
promptly when due;

     

    (ii)           maintain
and keep the Assets in full force and effect, except where such failure is due
to the failure to pay a delay rental, royalty, shut in royalty or other payment
by mistake or oversight (including Seller’s negligence) unless caused by
Seller’s gross negligence or willful misconduct;

     

    (iii)           maintain
all material permits, consents, approvals and other agreements with Governmental
Authorities relating to the Assets and bonds and sureties relating thereto in
full force and effect;

     

    (iv)           use
commercially reasonable efforts to preserve relationships with all third Persons
having business dealings with respect to the Assets; and

     

    (v)           notify
Buyers of the discovery by Seller that any representation or warranty of Seller
contained in this Agreement is or becomes untrue or will be untrue on the
Closing Date.

     

    (d)           Contracts
and Agreements.  Seller  shall not:

     

    (i)           grant
or create any Preference Right or Transfer Requirement with respect to the
Assets except (A) as required in connection with the performance by Seller
of an obligation or agreement pursuant to a Contract existing on the date hereof
or pursuant to this Agreement or (B) in connection with the renewal or
extension of Assets after the Effective Time if granting or creating such
Preference Right or Transfer Requirement is a condition of such renewal or
extension; or

     

    (ii)           enter
into any oil, gas or other hydrocarbon sales, exchange, processing or
transportation contract with respect to the Assets having a term in excess of
one year which is not terminable without penalty on notice of ninety (90) days
or less.

    
      
        
           

        

         

      

      
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    Requests
for approval of any action restricted by this Section 8.1 shall be delivered to
the following individual, who shall have full authority to grant or deny such
requests for approval on behalf of Buyers:

     

    
      
        
          
            	
                    Eni
      US Operating Co. Inc.

                  
	
                    1201
      Louisiana, Suite 3500

                  
	
                    Attention:  Roberto
      Dall'Omo

                  
	
                    Telephone
      No.:  (713) 393-6111

                  
	
                    Telecopy
      No.:  (713)
393-6212

                  

          

        

      

    

     

    Buyers’
approval of any action restricted by this Section 8.1 shall not be unreasonably
withheld or delayed.

     

    Section
8.2                                Qualifications
on Conduct.

     

    (a)           Emergencies;
Legal Requirements.  Seller may take (or not take, as the case
may be) any of the actions mentioned in Section 8.1 to the extent reasonably
necessary under emergency circumstances which pose a threat to life, safety,
property or the environment (or if required or prohibited, as the case may be,
pursuant to Law) and provided Buyers are notified as soon thereafter as
practicable.

     

    (b)           Non
Operated Properties.  If Seller is not the operator of a
particular portion of the Assets, the obligations of Seller in Section 8.1 with
respect to such portion of the Assets, which have reference to operations or
activities that pursuant to existing contracts are carried out or performed by
the operator, shall be construed to require only that Seller vote its interests
under the applicable joint operating agreement or other Contract in a manner
consistent with Section 8.1 and use its commercially reasonable efforts (without
being obligated to incur any expense or institute any cause of action) to cause
the operator of such portion of the Assets to take such actions or render such
performance within the constraints of the applicable operating agreements and
other applicable agreements.

     

    Section
8.3                                Conveyance.  Upon
the terms and subject to the conditions of this Agreement, at or prior to the
Closing, Seller and each Buyer shall execute and deliver or cause the execution
and delivery of the General Conveyance, in substantially the form attached
hereto as Exhibit 8.3
(the “Conveyance”),
together with any special federal assignment forms as may be required by Law to
be executed in connection with the conveyance of specific Assets; provided that
the terms and provisions of the Conveyance shall control as to any conflict
between the Conveyance and any such special assignment forms.  In no
way limiting or otherwise affecting either Buyer’s obligations to Seller under
this Agreement, Buyers do hereby direct Seller to convey to each Buyer pursuant
to the Conveyance the specific Assets which are noted in Schedule
8.3 to be conveyed to such Buyer.

     

    Section
8.4                                Public
Announcements.  Prior to the Closing Date, without the prior
written approval of the other Party, which approval shall not be unreasonably
withheld, no Party will issue, or permit any agent or Affiliate of it to issue,
any press releases or otherwise make, or cause any agent or Affiliate of it to
make, any public statements with respect to this Agreement and the transactions
contemplated hereby, except where such release or statement is

    
      
        
           

        

         

      

      
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    deemed in
good faith by the releasing Party to be required by Law or under the rules and
regulations of the New York stock exchange (or other public stock exchange of
similar reputation and standing) on which the shares of such Party or any of its
Affiliates are listed.  In each case to which such exception applies,
the releasing Party will use its commercially reasonable efforts to provide a
copy of such release or statement to the other Party prior to releasing or
making the same.  Each Party shall be liable for the compliance of its
Affiliates with the terms of this Section 8.4.

     

    Section
8.5                                Amendment
of Schedules.  The Parties shall be entitled to amend and
supplement the schedules hereto on or before the Closing Date, and any reference
to a schedule hereunder shall be deemed to be a reference to the applicable
schedule as so amended or supplemented; provided,
however,
that, to the extent such amendment or supplement is not made pursuant to a
written agreement of the Parties, such amendment or supplement shall be without
waiver of any rights of the Parties under this Agreement or applicable
Law.

     

    Section
8.6                                Parties
Efforts and Further Assurances.  Each of the Parties shall (and
shall cause its Affiliates to) use commercially reasonable efforts to cause its
representations and warranties to be true and correct and its covenants to be
fulfilled in all material respects on and as of the Closing Date and shall
refrain from taking any action within its control which would cause a breach of
any of its representations and warranties contained in Section 4.1 or Section
4.2, as applicable, or which would prevent it from delivering to the other Party
the certificate which it is required to deliver pursuant to Section 10.1(b) or
Section 10.2(b), as the case may be.  Notwithstanding the foregoing,
compliance by any Party with this Section 8.6 shall not excuse any breach of any
provision of this Agreement and shall not constitute a substitution for,
satisfaction of, or waiver of compliance with such term in all
respects.  Seller and Buyers each agrees that from time to time after
the Closing Date, each of them will execute and deliver or cause their
respective Affiliates to execute and deliver such further instruments, and take
(or cause their respective Affiliates to take) such other action, as may be
necessary to carry out the purposes and intents of this Agreement.

     

    Section
8.7                                Records.  Within
a reasonable period of time following the Closing, Seller shall make all Records
that have not previously been copied by or delivered to either Buyer available
for delivery to Buyers at Seller’s offices in Fort Worth, Texas.

     

    Section
8.8                                Recording.  Immediately
following the Closing, Buyers, at their cost and expense, shall record the
Conveyance and any other instruments of assignment in the appropriate
governmental offices of the jurisdictions in which the Assets are located and in
any other locations and records in which recordation is required or
advisable.  Promptly following such recording, Buyers shall advise
Seller in writing of the pertinent recording data.

     

    Section
8.9                                Casualty
and Condemnation.  

     

    (a)           If
after the Effective Time and prior to the Closing any part of the Assets shall
be destroyed by fire or other casualty or if any part of the Assets shall be
taken in condemnation or under the right of eminent domain or if proceedings for
such purposes shall be pending or threatened (a “Casualty
Loss”), this Agreement shall remain in full force and effect
notwithstanding any such Casualty Loss, except as set forth in
Section 8.9(b). To the extent

    
      
        
           

        

         

      

      
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    insurance
proceeds, condemnation awards or other awards or payments attributable to the
Assets are not committed, used or applied by Seller prior to the Closing Date to
repair, restore or replace such damaged or taken Assets, Seller shall at the
Closing (1) assign to Buyers Seller’s right to receive all insurance or
condemnation proceeds, awards or payments owed to Seller by reason of such
Casualty Loss to the extent attributable to the Assets, less Buyers’
proportionate share of any reasonable costs and expenses actually incurred by
Seller in collecting same or in connection with such proceedings or the threat
thereof and (2) pay to Buyers their respective proportionate shares of
insurance or condemnation proceeds, awards or payments theretofore paid to
Seller by reason of such Casualty Loss, less any reasonable costs and expenses
incurred by Seller in collecting same or in connection with such proceedings or
the threat thereof; provided,
however,
that any insurance or condemnation proceeds, awards or payments (or any rights
thereto) by reason of such destruction or taking which are held by or owed to
Seller for the account or benefit of any third Person joint interest owners or
the undivided interest in the oil and gas leases, mineral interests and related
assets in the Fort Worth Basin in the State of Texas that are retained by Seller
shall not be paid or assigned by Seller to Buyers pursuant to this
Section 8.9.

     

    (b)           Notwithstanding
anything herein provided to the contrary, if a Casualty Loss results in the
decrease in the value of the Assets, taken as a whole, by twenty million dollars
($20,000,000) or more, either Party shall have the right to terminate this
Agreement upon written notification to other Party pursuant to Section
15.1(a)(iv).

     

    Section
8.10                                Acreage
Failure.  Prior to the Closing Date, if an Option Failure
occurs and Buyers and Seller have not agreed upon an alternative remedy, in lieu
of and in substitution for any remedy that Buyers may otherwise have in Article
6 on account thereof, the Purchase Price shall be reduced by the Option Property
Defect Amount; provided,
however,
that if the aggregate of the amounts calculated in this Section 8.10 and Title
Defects under Section 6.2(e) which generate adjustments to the Purchase Price,
equals or exceeds the amount set forth in Section 15.1(a)(iii), either Seller or
Buyers shall be entitled to terminate this Agreement pursuant to Section
15.1(a)(v).

     

    Section
8.11                                Change
of Control.  

     

    (a)           Notification
and Buyers’ Rights.  If a Change of Control occurs within four
(4) years after the Closing Date, Seller shall promptly deliver to Buyers
written notice thereof.  Any such notice shall provide the name and
address of the Persons involved and, in the event a Change of Control occurs as
a result of item (d) of the definition of Change in Control contained in this
Agreement, copies of the agreement(s) pursuant to which the Change of Control
has or will occur (together with any amendments, supplements, or other
modifications thereto from time to time) to the extent that Seller is not
contractually prohibited from furnishing same (provided, however, that Seller
shall (i) request any waivers or consents necessary to furnish such
agreement(s) to Buyers (even if in redacted form), (ii) take any reasonably
necessary follow-up actions in respect of such request, and (iii) promptly
after obtaining such waivers or consents, furnish such agreement(s) to
Buyers).  On or before forty-five (45) days after receiving such
written notice from Seller, Buyers shall deliver to Seller written notice of
their election to do one of the following:

    
      
        
           

        

         

      

      
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    (i)           cause
Seller or its purchasers or other counterparties to promptly acquire from Buyers
all, but not less than all, of the Assets and other assets and properties
jointly acquired by Seller and Buyers pursuant to the Joint Development
Agreement, the Area of Mutual Interest Agreement or within any area covered
thereby, that are then owned by Buyers (the “Remaining
Buyer Assets”) for the fair market value of the Remaining Buyer Assets as
determined in accordance with Section 8.11(c);

     

    (ii)           cause
Seller or its purchasers or other counterparties to promptly acquire from Buyers
all, but not less than all, of the Remaining Buyer Assets for an amount equal to
(A) the sum of (1) the Purchase Price allocated to such Remaining
Buyer Assets in Part II of the Property Schedule plus (2) all expenses and
capital expenditures paid by Buyers in respect of such Remaining Buyer Assets
minus (B) the sum of all net proceeds received by Buyers from or
attributable to the Remaining Buyer Assets; or

     

    (iii)           not
exercise any right to cause the purchase of the Remaining Buyer Assets pursuant
to Section 8.11(a)(i) or Section 8.11(a)(ii).

     

    If Buyers
shall fail to timely deliver such written notice to Seller, then Buyers shall be
deemed to have exercised the option set forth in Section
8.11(a)(iii).

     

    (b)           Terms of
Sale and Conveyance.  If Buyers timely deliver such written
notice to Seller electing to exercise their right under Section 8.11(a)(i) or
Section 8.11(a)(ii), except for the purchase price which will be determined in
the manner contemplated by this Section 8.11, Buyers shall sell and convey to
Seller or its purchasers or other counterparties, and Seller or its purchasers
or other counterparties shall purchase and acquire from Buyers, the Remaining
Buyer Assets pursuant to an asset purchase agreement containing substantially
the same terms and subject to substantially the same conditions as are contained
in this Agreement.

     

    (c)           Fair Market
Value Determination.  If Buyers timely deliver written notice
to Seller electing to exercise their right under Section 8.11(a)(i), Buyers and
Seller shall attempt to agree upon the fair market value of the Remaining Buyer
Assets as of the first day of the month immediately following the occurrence of
the Change of Control (the “Fair Market
Value”).  To the extent Buyers and Seller are unable to agree
upon the Fair Market Value (or any part thereof) within fifteen (15) Business
Days following Seller’s receipt of Buyers’ notice pursuant to Section
8.11(a)(i), then either Seller or Buyers may engage Ryder Scott (the “Sale
Appraiser”) to determine the Fair Market Value.  Buyers and
Seller agree to cooperate fully with the Sale Appraiser and to provide the Sale
Appraiser with access to all facilities, books, records, documents, information
and personnel to the extent reasonably necessary for the Sale Appraiser to make
a fully-informed decision regarding the Fair Market Value in an expeditious
manner.  The Sale Appraiser shall be instructed to deliver to the
Parties a written determination of the any disputed aspects of the Fair Market
Value on or before a date that is sixty (60) days after the date of its
appointment.  The Parties agree to accept the Sale Appraiser’s
determinations as to the disputed aspects of the Fair Market
Value.  The Sale Appraiser may determine the issues in dispute
following such procedures, consistent with the provisions of this Agreement, as
it reasonably deems appropriate in the circumstances and with reference to the
amounts disputed.  The Parties do not intend to impose any particular
procedures upon the Sale Appraiser, it being the desire and direction of the
Parties that any such dispute shall be resolved as expeditiously
and

    
      
        
           

        

         

      

      
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    inexpensively
as reasonably practicable.  The Sale Appraiser shall act as an expert
for the limited purpose of determining the specific disputed aspects of the Fair
Market Value submitted by any Party and may not award damages, interest, or
penalties to any Party with respect to any matter.  Before issuing its
final decision, the Sale Appraiser shall issue a draft appraisal and allow
Buyers and Seller to comment on it.  The Sale Appraiser’s decision
shall be final and binding on Buyers and Seller, without right of
appeal.  The fees and expenses of the Sale Appraiser in making the
determination of the Fair Market Value shall be shared fifty percent (50%) by
Buyers and fifty percent (50%) by Seller.

     

    (d)           Termination.  The
rights and obligations set forth in this Section 8.11 shall terminate and cease
to be of further force and effect as of the fourth (4th) anniversary of the
Closing Date.

     

    Section
8.12                                Third
Person Indebtedness.  At Closing, Seller shall deliver or cause
to be delivered documents or instruments evidencing the release of the Assets
from each of the mortgages, deeds of trust and security agreements described in
Schedule
8.12.

     

    ARTICLE
9

    TAX
MATTERS

     

    Section
9.1                                Tax
Returns; Proration of Taxes.  

     

    (a)           Tax
Returns; Payment of Taxes.  Except as provided otherwise in
this Agreement or the Joint Operating Agreement:

     

    (i)           for
any Tax period or the portion of any Tax period ending on or before the Closing
Date, Seller shall be responsible for preparing and timely filing all Tax
Returns required by applicable Law to be filed and for the payment of all Taxes
levied or imposed that are attributable to the Assets;

     

    (ii)           for
any Tax period or portion of any Tax period beginning after the Closing Date,
Buyers shall be responsible for preparing and the timely filing of all Tax
Returns required by applicable Law to be filed and for the payment of all Taxes
levied or imposed that are attributable to the Assets;

     

    (iii)           control
of any legal or administrative proceedings concerning any Taxes with respect to
the Assets, and entitlement to any refunds or awards concerning any such Taxes
with respect to such Assets, shall rest with the Party responsible for payment
therefor under this Section 9.1(a).

     

    (b)           Property
Taxes.  With respect to any Property Taxes assessed on any of
the Assets for a Tax period that begins before and ends on the Cut-Off Date (a
“Straddle
Period”) the liability for such Property Taxes shall be prorated on a
daily basis between Buyers and Seller, with Seller being liable for the portion
of such Property Taxes equal to the product of (i) the amount of such
Property Taxes for the entirety of the Straddle Period, multiplied by
(ii) a fraction, the numerator of which is the number of days in the
Straddle Period ending on the Cut-Off Date and the denominator of which is the
total number of days in the Straddle Period, and with Buyers being liable for
the remainder of such Property Taxes. After the Closing, the
Party

    
      
        
           

        

         

      

      
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    (the
“Paying
Party”) receiving a Property Tax bill or notice applicable to the Assets
for a Straddle Period shall promptly notify the other Party or Parties that may
be responsible for a portion of such Property Taxes pursuant to this Section
9.1(b) (the “Reimbursing
Party”) in writing, and the Paying Party shall pay such Property Tax bill
prior to the last day such Property Taxes may be paid without penalty or
interest.  Upon receipt of the written notice from the Paying Party,
which shall include appropriate supporting documentation, the Reimbursing Party
shall promptly pay the Paying Party any amount equal to the portion of the Taxes
for which the Reimbursing Party is liable under this Agreement.  The
Parties shall reasonably cooperate with each other after Closing with respect to
any Property Tax assessment or valuation (or protest in connection therewith) by
any Governmental Authority with respect to a Straddle Period.  If any
Party receives a refund of any Property Taxes with respect to the Assets that is
attributable to a Straddle Period, the Party receiving such refund, whether
received in cash, or as a credit against another state and/or local Tax, shall,
within 30 days after the receipt of such refund, pay to the other Party who was
responsible for a portion of such Property Taxes an amount equal to the product
of (i) the amount of the refund, multiplied by (ii) a fraction, the numerator of
which is the number of days in the Straddle Period that such other Party was
responsible for such Property Taxes and the denominator of which is the total
number of days in the Straddle Period.

     

    (c)           Production
Taxes.  Notwithstanding anything to the contrary in this
Agreement, Production Taxes levied or imposed on or before the Closing Date,
shall not be subject to Section 9.1 and responsibility therefor and payment
thereof shall be exclusively addressed by Section 3.4 and Article
12.

     

    Section
9.2                                Like-Kind
Exchange.  Buyers and/or any Seller may, at or before Closing,
elect to affect a tax-deferred exchange of the Assets for other qualifying
properties (the “Exchange
Property”) in accordance with the following:

     

    (a)           Seller’s
Election.  In the event that Seller makes such an election
prior to the Closing, Seller may elect, by notice to Buyers delivered on or
before the Closing Date, to have (i) all or a portion of its rights under the
Agreement assigned to a qualified intermediary and (ii) all or a portion of the
Purchase Price paid to a qualified intermediary until such Seller has designated
the Exchange Property.  The Exchange Property shall be designated by
such Seller and acquired by the qualified intermediary within the time periods
prescribed in Section 1031(a)(3) of the Code, and shall thereupon be conveyed to
such Seller.  In the event that such Seller fails to designate, and
the qualified intermediary fails to acquire, the Exchange Property within such
time periods, unless the agreement with the qualified intermediary provides
otherwise, the agency or trust shall terminate and the proceeds then held by the
qualified intermediary shall be paid immediately to such Seller.

     

    (b)           Buyers’
Election.  In the event that Buyers make an election under this
Section prior to Closing, Buyers may elect, by notice to Seller delivered on or
before the Closing Date, to have all or a portion of the Assets conveyed to a
qualified intermediary or an exchange accommodation titleholder (as such term is
defined in Rec. Proc. 2000-37 issued effective September 15, 2000).

     

    
      (c)           Documentation.  The
rights and responsibilities of any applicable Seller, any applicable Buyers, and
the qualified intermediary or exchange accommodation titleholder

       

      
        
          
            
               

            

             

          

          
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shall be
documented with such agreements containing such terms and provisions as shall be
reasonably determined by the applicable Parties to be necessary to accomplish a
tax deferred exchange under Section 1031 of the Code, subject, however, to the
limitations on costs and liabilities of Buyers and Seller set forth
below.  If any Seller makes a tax deferred exchange election, Buyers
shall not be obligated to pay additional costs or incur any additional
obligations in the acquisition of the Assets or otherwise.  If Buyers
make a tax deferred exchange election, Seller shall not be obligated to pay any
additional costs or incur any additional obligations in the consummation of the
transactions contemplated by this Agreement or otherwise.  Any such
tax deferred exchange election by either Party shall not affect the duties,
rights, or obligations of the Parties except as expressly set forth in this
Section 9.2.

    

     

    (d)           Failed
Exchange.  If Seller or Buyers make a tax deferred exchange
election, then (i) the non-electing Party’s sole responsibility to the electing
Party shall be to take such actions as are required by subsections (a), (b), and
(c), above; (ii) such non-electing Party shall have no other responsibility or
liability whatsoever to the electing Party pursuant to this Section 9.2; and
(iii) the electing Party shall release, indemnify, and hold harmless the
non-electing Party from any responsibility or liability related to such election
except for such actions as may be required pursuant to subsections (a), (b), and
(c) above.  Notwithstanding anything to the contrary in this
Agreement, the indemnities in this Section 9.2 shall survive the Closing and
delivery of the Conveyance indefinitely.

     

    Section
9.3                                Transfer
Taxes.  The Parties agree that the purchase and sale of the
Assets pursuant to this Agreement is not subject to any state and local sales,
use, transfer or similar Taxes (“Transfer
Taxes”) imposed under any applicable Law, including by reason of Section
151.306 of the Texas Tax Code and 34 Texas Administrative Code Section
3.331(a).  However, if any exception to such Transfer Taxes claimed by
the Parties is subsequently denied by any Governmental Authority, and as a
result a Party is assessed additional Transfer Taxes, then Seller shall pay such
Transfer Taxes, including interest and penalty, to the appropriate Governmental
Authority.

     

    Section
9.4                                Conflict.  In
the event of a conflict between the provisions of this Article 9 and any other
provision of this Agreement, this Article 9 shall control.

     

    ARTICLE
10

    CLOSING
CONDITIONS

     

    Section
10.1                                Seller’s
Closing Conditions.  The obligation of Seller to proceed with
the Closing contemplated hereby is subject, at the option of Seller, to the
satisfaction on or prior to the Closing Date of all of the following
conditions:

     

    (a)           Representations,
Warranties and Covenants.  The (i) representations and
warranties of Buyers contained in this Agreement shall be true and correct in
all material respects (and in all respects, in the case of representations and
warranties which are qualified by the requirement of materiality or a material
adverse effect) on and as of the Closing Date as though made as of the Closing
Date, and (ii) covenants and agreements of Buyers to be performed on or
before the Closing Date in accordance with this Agreement shall have been
duly

    
      
        
           

        

         

      

      
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    performed
in all material respects (and in all respects, in the case of covenants and
agreements which are qualified by the requirement of materiality).

     

    (b)           Officer’s
Certificates.  Seller shall have received a certificate dated
as of the Closing Date, (i) executed on behalf of each Buyer by a duly
authorized officer of such Buyer, to the effect that the conditions set forth in
subsection (a) of this Section 10.1 have been satisfied, and
(ii) attached to which are true and correct copies of the resolutions of
the Board of Directors or other equivalent governing body of such Buyer
authorizing the execution, delivery, and performance by such Buyer of this
Agreement and the transactions contemplated hereby.

     

    (c)           Closing
Documents.  On or prior to the Closing Date, Buyers shall have
delivered, or be standing ready to deliver at Closing, all agreements,
instruments and other documents required to be delivered by Buyers pursuant to
Section 11.3.

     

    (d)           No
Action.  On the Closing Date, no Action (excluding any such
matter initiated by Seller or any of its Affiliates) shall be pending or
threatened seeking to enjoin or restrain the consummation of the Closing or
recover damages from Seller or any Affiliate of Seller resulting
therefrom.

     

    Section
10.2                                Buyers’
Closing Conditions.  The obligation of Buyers to proceed with
the Closing contemplated hereby is subject, at the option of Buyers, to the
satisfaction on or prior to the Closing Date of all of the following
conditions:

     

    (a)           Representations,
Warranties and Covenants.  The (i) representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects (and in all respects, in the case of representations and
warranties which are qualified by the requirement of materiality or a Material
Adverse Effect) on and as of the Closing Date as though made as of the Closing
Date, and (ii) covenants and agreements of Seller to be performed on or
before the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects (and in all respects, in the case of
covenants and agreements which are qualified by the requirement of
materiality).

     

    (b)           Officer’s
Certificate.  Buyers shall have received a certificate dated as
of the Closing Date, (i) executed on behalf of Seller by a duly authorized
officer of the Seller, to the effect that the conditions set forth in subsection
(a) of this Section 10.2 have been satisfied, and (ii) attached to which
are true and correct copies of the resolutions of the Board of Directors or
other equivalent governing body of Seller authorizing the execution, delivery,
and performance by Seller of this Agreement and the transactions contemplated
hereby.

     

    (c)           Closing
Documents.  On or prior to the Closing Date, Seller shall have
delivered, or be standing ready to deliver at the Closing, all agreements,
instruments and other documents required to be delivered by Seller pursuant to
Section 11.2.

     

    (d)           No
Action.  On the Closing Date, no Action (excluding any such
matter initiated by one or more Buyers or any of their respective Affiliates)
shall be pending or threatened seeking to enjoin or restrain the consummation of
the Closing or recover damages from Buyers or any of their respective Affiliates
resulting therefrom.

    
      
        
           

        

         

      

      
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    (e)           Material
Adverse Change.  No determination has been made by Buyers
exercising commercially reasonable judgment that (i) a Change of Control
has occurred; or (ii) Seller will be unable to fulfill in any material
respect its obligations under the Joint Development Agreement and its other
commitments as operator under the Joint Operating Agreement.

     

    (f)           Release of
Certain Liens.  Seller shall have complied with, or shall be
standing ready to comply with, its obligations set forth in Section
8.12.

     

    (g)           Nortex
Exploration Agreement and Leases.  All Transfer Requirements
necessary to transfer to Buyers their proportionate share of the Nortex
Exploration Agreement and any Leases granted pursuant thereto shall have been
satisfied.

     

    (h)           Certain
Waivers.  All waivers which are required pursuant to the terms
of the agreements referenced in items 4 and 5 of Schedule 4.1(e) to allow
consummation of the transactions contemplated by this Agreement have been
obtained.

     

    ARTICLE
11

    CLOSING

     

    Section
11.1                                Closing.  The
Closing shall be held on the Closing Date at 10:00 a.m., Houston time, at the
offices of Fulbright & Jaworski L.L.P. at the Fulbright Tower, Suite 5100,
1301 McKinney, Houston, Texas, or at such other time or place as Seller and
Buyers may otherwise agree in writing.

     

    Section
11.2                                Seller’s
Closing Obligations.  At Closing, Seller shall execute and
deliver, or cause to be executed and delivered, to Buyers the
following:

     

    (a)           The
Conveyance and the special assignment forms contemplated by Section
8.3;

     

    (b)           The
officer’s certificate referred to in Section 10.2(b);

     

    (c)           A
non-foreign affidavit, as such affidavit is referred to in
Section 1445(b)(2) of the Code, in the form attached hereto as Exhibit
11.2(c), dated as of the Closing Date;

     

    (d)           A
joint development agreement in substantially the form attached hereto as Exhibit
11.2(d) (the “Joint
Development Agreement”);

     

    (e)           An
area of mutual interest agreement in substantially the form attached hereto as
Exhibit
11.2(e) (the “Area of
Mutual Interest Agreement”);

     

    (f)           A
joint operating agreement in substantially the form attached hereto as Exhibit
11.2(f) (the “Joint
Operating Agreement”);

     

    (g)           A
use and access agreement in substantially the form attached hereto as Exhibit
11.2(g) (the “Use and
Access Agreement”);

    
      
        
           

        

         

      

      
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    (h)           The
releases referenced in Section 10.2(f);

     

    (i)           A
gathering and transportation agreement in substantially the form attached hereto
as Exhibit 11.2(i)
(the “Gathering
Agreement”); and

     

    (j)           Any
other agreements, instruments and documents which are required by other terms of
this Agreement to be executed and/or delivered by Seller to Buyers at the
Closing.

     

    Section
11.3                                Buyers’
Closing Obligations.  At Closing, Buyers shall
(i) deliver, or cause to be delivered, the Adjusted Purchase Price to
Seller in immediately available funds to the bank account as provided in Section
3.2 and (ii) execute and deliver, or cause to be executed and delivered, to
Seller the following:

     

    (a)           The
officer’s certificate of each Buyer referred to in Section 10.1(b);

     

    (b)           The
Conveyance and the special assignment forms contemplated by Section 8.3 which
require or contemplate execution by Buyer;

     

    (c)           The
Joint Development Agreement;

     

    (d)           The
Area of Mutual Interest Agreement;

     

    (e)           The
Joint Operating Agreement;

     

    (f)           The
Use and Access Agreement;

     

    (g)           The
Gathering Agreement; and

     

    (h)           Any
other agreements, instruments and documents which are required by other terms of
this Agreement to be executed and/or delivered by Buyers to Seller at the
Closing.

     

    ARTICLE
12

    EFFECT
OF CLOSING

     

    Section
12.1                                Revenues.  After
Closing, all proceeds, accounts receivable, notes receivable, income, revenues,
monies and other items included in or attributable to the Excluded Assets and
all other Excluded Assets shall belong to and be paid over to Seller and all
proceeds, accounts receivable, notes receivable, income, revenues, monies and
other items included in or attributable to the Assets with respect to any period
of time after the Effective Time shall belong to and be paid over to Buyers
except that, to the extent any such items are credited to Buyers in calculating
the Adjusted Purchase Price, as adjusted pursuant to Section 3.5, the same shall
belong to and be paid over to Seller.

     

    Section
12.2                                Expenses.  After
Closing, all accounts payable, Property Costs and other costs and expenses with
respect to the Assets for which Seller is given credit in the determination of
Net Cash Flow pursuant to Section 3.4, as adjusted pursuant to Section 3.5,
together with any accounts payable, Property Costs and other costs expenses
incurred with respect to any period of time prior to the Effective Time shall be
borne by Seller.  Surface use

    
      
        
           

        

         

      

      
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    fees,
insurance premiums and other Property Costs related to the Assets which are paid
periodically and not accounted for in the determination of Net Cash Flow will be
prorated as of the Effective Time.

     

    Section
12.3                                Payments
and Obligations.  If monies are received by any Party which,
under the terms of this Article 12 or Section 3.4, belong to another Party, the
same shall immediately be paid over to the proper Party.  If an
invoice or other evidence of an obligation is received by a Party which, under
the terms of this Article 12 or Section 3.4 is the obligation of the other
Party, such Party shall, promptly upon receipt of the other Party’s invoice or
other evidence of such obligation, pay the same, or, if such obligation was
satisfied by the other Party, reimburse such Party.  If an invoice or
other evidence of an obligation is received which, under the terms of this
Article 12 or Section 3.4, is partially the obligation of Seller and partially
the obligation of Buyers, then the Parties shall consult each other and each
shall promptly pay its portion of such obligation to the obligee.

     

    Section
12.4                                Survival.  Except
as provided in this Section 12.4, the terms and provisions of this
Agreement and the documents and instruments to be delivered at Closing shall
survive the Closing indefinitely.  Each representation, warranty,
covenant and agreement made herein shall terminate and cease to be of further
force and effect as of the date set forth below.  Following such date,
such representation, warranty, covenant or agreement shall not form the basis
for, or give rise to, any claim, demand, cause of action, counterclaim, defense,
damage, indemnity, obligation or liability which is asserted, claimed, made or
filed following the date stipulated for survival; provided,
however,
that there shall be no termination of any claim asserted pursuant to this
Agreement with respect to any such representation, warranty, covenant or
agreement prior to its termination date.  It is expressly agreed that
the terms and provisions of:

     

    (a)           Article
4 (excluding Section 4.1(a), Section 4.1(b), Section 4.1(c),
Section 4.1(d), Section 4.1(e), Section 4.1(f),
Section 4.1(g), Section 4.1(h), Section 4.1(i), Section 4.1(k),
Section 4.1(l), Section 4.1(m), Section 4.1(n), Section 4.1(p),
Section 4.1(q), Section 4.2(a), Section 4.2(b), Section 4.2(c), Section 4.2(d),
Section 4.2(e), Section 4.2(g), Section 4.2(j) and Section 4.2(l)), the
representation and warranty in Section 7.1, Section 8.1, Section 8.2 and Section
8.12 shall survive the Closing for a period of two (2) years from the Closing
Date;

     

    (b)           Section
4.1(k) shall survive the Closing for the applicable statute of limitations
period and Section 4.2(j) shall survive the Closing for a period of six (6)
months from the Closing Date;

     

    (c)           Section
4.1(f), Section 4.1(g), Section 4.1(l), Section 4.1(m), Section 4.1(n) and
Section 4.1(p) shall terminate as of the Closing Date; and

     

    (d)           The
remainder of this Agreement (and the documents to be delivered pursuant hereto)
shall survive the Closing indefinitely or for such shorter period of time as may
be stipulated in such provisions.

    
      
        
           

        

         

      

      
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    ARTICLE
13

    LIMITATIONS

     

    Section
13.1                                Disclaimer
of Warranties.  

     

    (a)           NOTWITHSTANDING
ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, IT
IS THE EXPLICIT INTENT AND UNDERSTANDING OF EACH PARTY THAT SELLER IS NOT MAKING
ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES EXPRESSLY GIVEN IN THIS
AGREEMENT, THE CONVEYANCE AND THE OTHER DOCUMENTS AND AGREEMENTS TO BE DELIVERED
BY SELLER PURSUANT HERETO, AND IT IS UNDERSTOOD THAT, WITHOUT LIMITING SUCH
EXPRESS REPRESENTATIONS AND WARRANTIES, BUYERS TAKE THE ASSETS “AS IS” AND
“WHERE IS” AND “WITH ALL FAULTS”.  WITHOUT LIMITING THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, SELLER HEREBY EXPRESSLY DISCLAIMS AND
NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY
STATUTE OR OTHERWISE, RELATING TO (I) THE CONDITION OF THE ASSETS
(INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF QUALITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS
OR SAMPLES OF MATERIALS, OR THE PRESENCE OR ABSENCE OF ANY HAZARDOUS MATERIALS
IN OR ON, OR DISPOSED OF OR DISCHARGED FROM, THE ASSETS) OR (II) ANY
INFRINGEMENT BY SELLER OR ANY OF ITS AFFILIATES OF ANY PATENT OR PROPRIETARY
RIGHT OF ANY THIRD PARTY, IT BEING THE INTENTION OF SELLER AND BUYERS THAT THE
ASSETS ARE TO BE ACCEPTED BY BUYERS IN THEIR PRESENT CONDITION AND STATE OF
REPAIR.

     

    (b)           EXCEPT AS EXPRESSLY
REPRESENTED OTHERWISE IN THIS AGREEMENT, THE CONVEYANCE AND THE DOCUMENTS AND
AGREEMENTS TO BE DELIVERED BY SELLER PURSUANT HERETO, AND WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING LIMITATIONS, 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, CHARACTER OR NATURE OF ANY
REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, AND (VIII)
ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE
BEEN

    
      
        
           

        

         

      

      
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    MADE AVAILABLE OR
COMMUNICATED TO BUYERS OR THEIR RESPECTIVE AFFILIATES, OR THEIR EMPLOYEES,
AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION
RELATING THERETO.

     

    Section
13.2                                Texas
Deceptive Trade Practices Act Waiver.  EACH BUYER
(A) REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS ACQUIRING THE
ASSETS FOR COMMERCIAL OR BUSINESS USE, (ii) IS REPRESENTED BY LEGAL
COUNSEL, (iii) ACKNOWLEDGES THE CONSIDERATION PAID OR TO BE PAID FOR THE
ASSETS WILL EXCEED $500,000, AND (iv) HAS KNOWLEDGE AND EXPERIENCE IN
FINANCIAL AND BUSINESS MATTERS SUCH THAT ENABLE IT TO EVALUATE THE MERITS AND
RISKS OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE SELLER; AND
(B) HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHTS OR
REMEDIES IT MAY HAVE UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION
ACT OF THE STATE OF TEXAS, TEX. BUS. & COM. CODE § 17.41 ET
SEQ. TO
THE MAXIMUM EXTENT IT CAN DO SO UNDER APPLICABLE LAW, IF SUCH ACT WOULD FOR ANY
REASON BE DEEMED APPLICABLE TO THE TRANSACTIONS CONTEMPLATED
HEREBY.

     

    WAIVER
OF CONSUMER RIGHTS

     

    EACH
BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT, SECTION 17.41 ET
SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL
RIGHTS AND PROTECTIONS.  AFTER CONSULTATION WITH AN ATTORNEY OF
BUYERS’ OWN SELECTION, BUYERS VOLUNTARILY CONSENT TO THIS WAIVER.

     

    Section
13.3                                Damages.  NOTWITHSTANDING
ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT,
SELLER AND BUYERS AGREE THAT, EXCEPT FOR THE LIQUIDATED DAMAGES SPECIFICALLY
PROVIDED FOR IN SECTION
15.2, THE RECOVERY BY
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A RESULT OF ANY
BREACH OR NONFULFILLMENT BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE ACTUAL
DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY (AND THE INDEMNIFIED
PERSONS TO WHICH SUCH OBLIGATIONS MAY EXTEND UNDER THE TERMS HEREOF) AS A RESULT
OF THE BREACH OR NONFULFILLMENT BY THE BREACHING PARTY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS HEREUNDER AND IN NO EVENT SHALL THE BREACHING PARTY BE
LIABLE TO THE NON-BREACHING PARTY OR ANY INDEMNIFIED PERSON FOR ANY INDIRECT,
CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING, WITHOUT
LIMITATION,

     

    
      
        
           

        

         

      

      
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    ANY DAMAGES ON
ACCOUNT OF LOST PROFITS OR OPPORTUNITIES, BUSINESS INTERRUPTION OR LOST OR
DELAYED PRODUCTION) SUFFERED OR INCURRED BY THE NON-BREACHING PARTY OR ANY
INDEMNIFIED PERSON AS A RESULT OF THE BREACH OR NONFULFILLMENT BY THE BREACHING
PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS
HEREUNDER.  For purposes of the foregoing, actual damages may,
however, include indirect, consequential, special, exemplary or punitive damages
to the extent (i) the injuries or losses resulting in or giving rise to
such damages are incurred or suffered by a Person which is not a Seller
Indemnified Person, a Buyer Indemnified Person or an Affiliate of any of the
foregoing and (ii) such damages are recovered against an Indemnified Person
by a Person which is not a Seller Indemnified Person, a Buyer Indemnified Person
or an Affiliate of any of the foregoing.  This Section 13.3 shall
operate only to limit a Party’s liability and shall not operate to increase or
expand any contractual obligation of a Party hereunder or cause any contractual
obligation of a Party hereunder to survive longer than provided in Section
12.4.

     

    ARTICLE
14

    INDEMNIFICATION

     

    Section
14.1                                Indemnification
by Buyers.  From and after the Closing, Buyers shall assume,
pay, perform, fulfill and discharge all Assumed Liabilities and shall indemnify,
defend and hold harmless Seller, Seller’s Affiliates, each of Seller’s and its
Affiliate’s respective past, present and future directors, officers, employees,
consultants and agents, and each of the directors, officers, heirs, executors,
successors and permitted assigns of any of the foregoing (collectively, the
“Seller
Indemnified Persons”) from and against any and all (a) Assumed
Liabilities incurred by or asserted against any of the Seller Indemnified
Persons and (b) subject to the limitations set forth in Section 12.4 or as
set forth in Article 13, any Covered Liability incurred or suffered by a Seller
Indemnified Person resulting from any breach or nonfulfillment of any
representation, warranty, covenant (including, without limitation, Buyers’
covenant in Section 3.3) or agreement on the part of either Buyer which is
expressly set forth in this Agreement, or confirmed in the officer’s certificate
referred to in Section 10.1(b) (provided,
however,
that Seller acknowledges and agrees that such confirmation shall not operate to
extend the survival period of any such representation, warranty, covenant or
agreement), EVEN IF CAUSED IN
WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT
LIABILITY OR OTHER LEGAL FAULT OF ANY SELLER INDEMNIFIED PERSON, BUT EXCLUDING
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED
PERSON.

     

    Section
14.2                                Indemnification
by Seller.  From and after the Closing, Seller shall assume,
pay, perform, fulfill and discharge all Excluded Liabilities and indemnify,
defend and hold harmless Buyers, the present and future directors, officers,
employees, consultants and agents of each Buyer, and each of the directors,
officers, heirs, executors, successors and permitted assigns of any of the
foregoing (collectively, the “Buyer
Indemnified Persons”) from and against any and all (a) Excluded
Liabilities incurred by or asserted against any of the Buyer Indemnified
Persons, (b) subject to the limitations of Section 12.4 and Article 13, any
Covered Liability incurred or suffered by a Buyer Indemnified Person resulting
from any breach or nonfulfillment of any representation, warranty, covenant
(including, without limitation, Seller's

    
      
        
           

        

         

      

      
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    covenant
in Section 3.3) or agreement on the part of Seller which is expressly set forth
in this Agreement or confirmed in the officer’s certificate referred to in
Section 10.2(b) (provided,
however,
that Buyers acknowledge and agree that such confirmation shall not operate to
extend the survival period of any such representation, warranty, covenant or
agreement), EVEN IF CAUSED IN
WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT
LIABILITY OR OTHER LEGAL FAULT OF ANY BUYER INDEMNIFIED PERSON, BUT EXCLUDING
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY BUYER INDEMNIFIED
PERSON.

     

    Section
14.3                                Indemnification
and Defense Procedures.  A Person which is entitled to be
indemnified under Article 5, Section 14.1, Section 14.2, or Article 9 is herein
referred to as an “Indemnified
Person” and the Party which is obligated to indemnify an Indemnified
Person under Article 5, Section 14.1, Section 14.2, or Article 9 is herein
referred to as the “Indemnifying
Party” with respect to the matter for which it is obligated to indemnify
such Indemnified Person.  All claims for indemnification under Article
5, Section 14.1, Section 14.2, and Article 9 shall be asserted and resolved as
follows:

     

    (a)           If
a third Person claim for which an Indemnified Person is entitled to indemnity
under Article 5, Section 14.1, Section 14.2, or Article 9 (an “Indemnified
Claim”) is made against an Indemnified Person, and if Buyers or Seller
intends to seek indemnity with respect thereto by or from an Indemnifying Party
pursuant to Article 5, Section 14.1, Section 14.2, or Article 9, then the Party
electing to seek indemnity on behalf of such Indemnified Person shall promptly
transmit to the Indemnifying Party a written notice (“Claim
Notice”) (i) notifying such Indemnifying Party of such Indemnified
Claim and request indemnity on behalf of such Indemnified Person with respect to
such Indemnified Claim under Article 5, Section 14.1, Section 14.2, or Article
9, as the case may be, (ii) setting forth the full name, address for all
notices and the authorized representatives of such Indemnified Person with
respect to such Indemnified Claim, and (iii) describing in reasonable
detail the nature of the Indemnified Claim, including a copy of all papers
served with respect to such Indemnified Claim (if any) and the basis of such
request for indemnification under Article 5, Section 14.1, Section 14.2, or
Article 9, as the case may be.  Failure to provide such Claim Notice
promptly shall not affect the right of the Indemnified Person to indemnification
hereunder except to the extent the Indemnifying Party is prejudiced thereby;
provided that, the Indemnifying Party shall not be obligated to defend,
indemnify or otherwise hold harmless an Indemnified Person with respect to a
third Person claim until a Claim Notice meeting the foregoing requirements is
furnished to the Indemnifying Party by the Party seeking indemnity
hereunder.  Within thirty (30) days after receipt of any Claim Notice
(the “Election
Period”), the Indemnifying Party shall notify the Party which sent the
Claim Notice whether the Indemnifying Party disputes its obligation to indemnify
the Indemnified Person under Article 5, Section 14.1, Section 14.2, or Article
9, as the case may be, with respect to such third Person claim; provided
that, if the Indemnifying Party fails to so notify the Indemnified Person
during the Election Period, the Indemnifying Party shall be deemed to have
elected to dispute such liability and not to defend against such third Person
claim.

     

    (b)           If
the Indemnifying Party notifies the Party who sent the Claim Notice within the
Election Period that the Indemnifying Party does not dispute its liability to
indemnify the Indemnified Person under Article 5, Section 14.1, Section 14.2, or
Article 9, as the case may

    
      
        
           

        

         

      

      
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    be (or
reserves the right to dispute whether such claim is an Indemnified Claim under
Article 5, Section 14.1, Section 14.2, or Article 9), then the Indemnifying
Party shall have the right and obligation to defend, at its sole cost and
expense, such third Person claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 14.3(b).  If an Indemnifying Party assumes the
defense of an Indemnified Person with respect to a third Person claim which is
subsequently determined not to be an Indemnified Claim, the Indemnifying Party
shall be entitled to recover from the Indemnified Person the reasonable costs
and expenses incurred by the Indemnifying Party in providing such defense,
including, without limitation, reasonable attorneys’ fees.  The
Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof; provided that the Indemnifying
Party shall not enter into any settlement agreement (or settle or compromise any
such third Person claim in a manner) which provides for or results in any
payment by or liability of the Indemnified Person of or for any damages or other
amount, any lien, charge or encumbrance on any property of the Indemnified
Person, any finding of responsibility or liability on the part of the
Indemnified Person or any sanction or restriction upon the conduct of any
business by the Indemnified Person without the Indemnified Person’s express
written consent, which consent shall not be unreasonably
withheld.  The Indemnified Person is hereby authorized, at the sole
cost and expense of the Indemnifying Party (but only to the extent the
Indemnified Person is actually entitled to indemnification hereunder), to file,
during the Election Period, any motion, answer or other pleadings which the
Indemnified Person shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party and not reasonably expected to be prejudicial
to the Indemnifying Party.  If requested by the Indemnifying Party,
the Indemnified Person agrees, at the sole cost and expense of the Indemnifying
Party, to reasonably cooperate with the Indemnifying Party and its counsel in
contesting any such third Person claim which the Indemnifying Party elects to
contest, including the making of any related counterclaim or cross-complaint
relating to such third Person claim against any Person (other than a Buyer
Indemnified Person, if the Indemnified Person is a Buyer Indemnified Person, or
a Seller Indemnified Person, if the Indemnified Person us a Seller Indemnified
Person).  The Indemnified Person may participate in, but not control,
any defense or settlement of any third Person claim controlled by the
Indemnifying Party pursuant to this Section 14.3(b), and the Indemnified Person
shall bear its own costs and expenses with respect to such
participation.  The prosecution of the defense of a third Person claim
with reasonable diligence shall include the taking of such action (including the
posting of a bond, deposit or other security) as may be necessary to prevent any
action to foreclose a lien against or attachment of the property of the
Indemnified Person for payment of such third Person claim.

     

    (c)           If
the Indemnifying Party (i) fails to notify the Party who sent the Claim
Notice within the Election Period that the Indemnifying Party elects to defend
the Indemnified Person pursuant to Section 14.3(b) or (ii) elects to defend
the Indemnified Person pursuant to Section 14.3(b) but fails to prosecute the
defense of (or to settle) the third Person claim with reasonable diligence, then
the Indemnified Person shall have the right to defend, at the sole cost and
expense of the Indemnifying Party (but only if the Indemnified Person is
actually entitled to indemnification hereunder), the third Person claim by all
appropriate proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Person to a final conclusion or
settled.  The Indemnified Person shall have full control of such
defense and proceedings; provided,
however,
that the Indemnified Person may not enter into any compromise

    
      
        
           

        

         

      

      
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    or
settlement of such third Person claim, without the Indemnifying Party’s express
written consent, which shall not be unreasonably withheld or
delayed.  The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Person pursuant to this
Section 14.3(c), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.

     

    (d)           If
an Indemnified Person is entitled to indemnity under Article 5, Section 14.1,
Section 14.2, or Article 9 for a claim or other matter which does not involve a
third Person claim, and if Buyers or Seller intend to seek indemnity on behalf
of an Indemnified Person with respect thereto by or from an Indemnifying Party
pursuant to Article 5, Section 14.1, Section 14.2, or Article 9, then the Party
electing to seek indemnity on behalf of an Indemnified Person shall promptly
transmit to the Indemnifying Party a written notice describing in reasonable
detail the nature of such claim or other matter, the Indemnified Person’s best
estimate of the amount of Covered Liabilities attributable to such claim or
other matter and the basis for the Indemnified Person’s entitlement to
indemnification under Article 5, Section 14.1, Section 14.2, or Article 9, as
the case may be.  If the Indemnifying Party does not notify the Party
who sent such notice within thirty (30) days from its receipt of such notice
that the Indemnifying Party does not dispute such claim for indemnity, the
Indemnifying Party shall be conclusively deemed to have disputed such
claim.

     

    (e)           To
the extent any claim, action, suit or proceeding includes one or more
Indemnified Claims with respect to an Indemnified Person and one or more third
Person claims which are not Indemnified Claims with respect to such Indemnified
Person, any such non-Indemnified Claim insofar as it is with respect to such
Indemnified Person shall not be covered by the indemnity in Article 5, Section
14.1, Section 14.2, or Article 9, the Indemnifying Party shall not be obligated
to undertake, conduct and control the defense or settlement of such
non-Indemnified Claim insofar as it is with respect to such Indemnified Person,
and such Indemnified Person shall be responsible for its own defense and
settlement of such non-Indemnified Claim.  The seeking by a Party of
indemnity hereunder on behalf of any Indemnified Person with respect to any
third Person claim or other claim or matter shall not prevent such Party from
then or thereafter also seeking indemnity hereunder on behalf of any other
Indemnified Person with respect to such third Person claim or other claim or
matter and shall not prevent the other Party from seeking indemnity hereunder on
behalf of any Indemnified Person with respect to the same third Person claim or
other claim or matter.

     

    (f)           A
claim for indemnification shall be deemed to be made for the purposes of this
Agreement when the appropriate notice of such claim is received (or deemed
received) by the alleged Indemnifying Party, notwithstanding that the alleged
Indemnified Person did not file a lawsuit or institute any arbitration,
mediation or other legal proceeding.

     

    (g)           In
the event of a conflict between this Section 14.3 and Article 9, the terms of
Article 9 shall control.

     

    (h)           The
amount of any Covered Liabilities for which an Indemnified Person is entitled to
indemnity under this Agreement shall be reduced by the amount of insurance,
indemnification or guarantee proceeds or payments realized by the Indemnified
Person or its Affiliates with respect to such Covered Liabilities (net of any
reasonable collection costs

    
      
        
           

        

         

      

      
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    incurred
by such Persons, and excluding the proceeds of any insurance policy issued or
underwritten by the Indemnified Person or its Affiliates or any indemnification
or guarantee agreements executed by an Affiliate of any Indemnified Person);
provided,
however,
the Indemnified Person shall seek insurance recovery, indemnification or
guarantee under any agreement giving rise to rights to the same (except that
such Indemnified Person shall only be required to seek insurance recovery from
policies of insurance obtained from unaffiliated third Persons for the benefit
of the Indemnified Person) and take any reasonably necessary follow-up actions
to receive such insurance recovery, indemnification or guarantee (but the
election to file suit or otherwise pursue litigation or arbitration or other
remedy shall be at the Indemnified Person's sole discretion).

     

    ARTICLE
15

    TERMINATION;
REMEDIES

     

    Section
15.1                                Termination.  

     

    (a)           Termination
of Agreement.  This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing:

     

    (i)           By
the mutual consent of Seller and Buyers;

     

    (ii)           If
the Closing has not occurred on or before 5:00 p.m. Central Daylight Time on
July 1, 2009 (the “Termination
Date”), then (A) by Seller if any condition specified in Section
10.1 has not been satisfied on or before the Termination Date, and shall not
theretofore have been waived by Seller, or (B) by Buyers if any condition
specified in Section 10.2 has not been satisfied on or before the Termination
Date, and shall not theretofore have been waived by Buyers; provided, in each
case, that the failure to consummate the transactions contemplated hereby on or
before such date did not result from the willful or negligent failure by the
Party or Parties seeking termination of this Agreement to fulfill any
undertaking or commitment provided for herein on the part of such Party or
Parties that is required to be fulfilled on or prior to Closing;

     

    (iii)           By
Buyers or Seller if the sum of the reduction in the Purchase Price (whether
disputed or undisputed) on account of the aggregate amount of all Title Defect
Amounts exceeds Twenty-Eight Million Dollars ($28,000,000.00); provided,
however,
if Buyers desire to terminate this Agreement pursuant to this Section
15.1(a)(iii) or Section 15.1(a)(v) and such right to terminate would not exist
but for Title Defect Amounts claimed by Buyers which are disputed by Seller or
Title Defect Amounts claimed by Buyers with respect to Title Defects which are
disputed by Seller, Seller shall have the right to delay Buyers’ ability to
terminate this Agreement pursuant to this Section 15.1(a)(iii) or Section
15.1(a)(v) (whereupon such disputes shall promptly be submitted to arbitration
in accordance with Section 6.5), until the earlier to occur of (x) the date
when a sufficient number of any such disputes have been resolved pursuant to
Section 6.5 to determine whether the right to terminate this Agreement set
forth in this Section 15.1(a)(iii) or Section 15.1(a)(v) exists or
(y) the Termination Date;

    
      
        
           

        

         

      

      
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    (iv)           By
Buyers or Seller if permitted pursuant to Section 8.9(b);

     

    (v)           Subject
to the proviso set forth in Section 15.1(a)(iii), by Buyers or Seller if
permitted pursuant to Section 8.10.

     

    (b)           Effect of
Termination.  Without limiting Seller’s and Buyers’ respective
remedies and rights in regard to the Deposit under Section 15.2, in the event of
termination of this Agreement by Seller, on the one hand, or Buyers, on the
other hand, pursuant to Section 15.1(a), written notice thereof shall promptly
be given by the terminating Party or Parties to the other Party or Parties, and
this Agreement shall thereupon terminate; provided,
however,
that following such termination, the Parties will continue to be bound by their
respective obligations set forth in Article 1, Article 5, this Article 15,
Article 16 and the Confidentiality Agreement, all of which shall continue in
full force and effect.  If this Agreement is terminated as provided
herein, all filings, applications, notices and other submissions made to any
Governmental Authority or any holder of any Preference Right or Transfer
Requirement shall, to the extent practicable, be withdrawn from the Governmental
Authority or holder of the Preference Right or Transfer Requirement to which
they were made.  Notwithstanding anything to the contrary in this
Agreement (except as set forth in Section 13.3), the termination of this
Agreement under Section 15.1(a) shall not relieve any Party from liability for
any willful or negligent failure to perform or observe in any material respect
any of its agreements or covenants contained herein that are to be performed or
observed at or prior to Closing.  In the event this Agreement
terminates under Section 15.1(a) and any Party has willfully or negligently
failed to perform or observe in any material respect any of its agreements or
covenants contained herein which are to be performed or observed at or prior to
Closing, then the other Party shall be entitled to all remedies available at law
or in equity and shall be entitled to recover court costs and attorneys’ fees in
addition to any other relief to which such Party maybe entitled.

     

    Section
15.2                                Remedies.  

     

    (a)           Seller’s
Remedies.  Notwithstanding anything herein provided to the
contrary, if this Agreement is terminated pursuant to Section 15.1(a)(ii)(A),
Seller shall be entitled to receive the Deposit together with all interest
earned thereon as liquidated damages, as Seller’s sole and exclusive remedy, all
other remedies being expressly waived by Seller.  Seller and Buyers
agree upon the amount of the Deposit and such interest as liquidated damages due
to the difficulty and inconvenience of measuring actual damages and the
uncertainty thereof, and Seller and Buyers agree that the amount of the Deposit
and such interest is a reasonable estimate of Seller’s loss in the event of any
such default by Buyers.  If Seller is entitled to receive the Deposit
together with all interest earned thereon pursuant to this Section 15.2(a),
Buyers and Seller agree to promptly direct the Escrow Agent in writing to make
such payment to Seller in accordance with the terms of the Escrow
Agreement.

     

    (b)           Buyers’
Remedies.  Notwithstanding anything herein provided to the
contrary, upon failure of the Seller to fulfill any undertaking or commitment
provided for herein on the part of Seller that is required to be fulfilled on or
prior to the Closing Date, Buyers may enforce specific performance of this
Agreement.  If this Agreement terminates for any reason other than as
set forth in Section 15.2(a), Buyers shall be entitled to receive the Deposit
together with all interest earned thereon as Buyers’ sole and exclusive remedies
for such default, all other

    
      
        
           

        

         

      

      
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    remedies
being expressly waived by Buyers.  If Buyers are entitled to receive
the Deposit together with all interest earned thereon pursuant to this Section
15.2(b), Seller and Buyers agree to promptly direct the Escrow Agent in writing
to make such payment to Buyers in accordance with the terms of the Escrow
Agreement.

     

    ARTICLE
16

    MISCELLANEOUS

     

    Section
16.1                               Counterparts.  This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the Parties and delivered to the
other Party.

     

    Section
16.2                                Governing
Law; Jurisdiction; Process.  

     

    (a)           THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE
APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.

     

    (b)           SUBJECT TO THE
ARBITRATION PROVISIONS SET FORTH IN SECTION 3.5,
SECTION 6.5, AND SECTION 8.11(c), THE PARTIES
CONSENT TO PERSONAL JURISDICTION IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT IN ANY COURT, FEDERAL OR STATE, WITHIN HARRIS COUNTY,
TEXAS, HAVING SUBJECT MATTER JURISDICTION AND WITH RESPECT TO ANY SUCH CLAIM,
THE PARTIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
CLAIM, OR ANY OBJECTION THAT THE PARTIES MAY NOW OR HEREAFTER HAVE, THAT VENUE
OR JURISDICTION IS NOT PROPER WITH RESPECT TO ANY SUCH LEGAL ACTION, SUIT OR
PROCEEDING BROUGHT IN SUCH COURT IN HARRIS COUNTY, TEXAS, INCLUDING ANY CLAIM
THAT SUCH LEGAL ACTION, SUIT OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM AND ANY CLAIM THAT ANY PARTY IS NOT SUBJECT TO
PERSONAL JURISDICTION OR SERVICE OF PROCESS IN HARRIS COUNTY,
TEXAS.

     

    Section
16.3              
                 Entire
Agreement.  This Agreement (including the Confidentiality
Agreement) and the Appendices, Schedules and Exhibits hereto contain the entire
agreement between the Parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the Parties other than those set forth or referred to herein.

     

    Section
16.4                                Expenses.  Buyers
shall be responsible for all recording, filing or registration fees relating to
the filing, recording or registration of the Conveyance and any other
instruments or documents transferring title in or to the Assets or any part
thereof from Seller to

    
      
        
           

        

         

      

      
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    Buyers
pursuant to this Agreement.  All other costs and expenses incurred by
each Party in connection with all things required to be done by it hereunder,
including attorney’s fees, accountant’s fees and the expense of environmental
and title examination, shall be borne by the Party incurring
same.  Should a Party or its Affiliate pay any amount which is the
responsibility of the other Party pursuant to this Section 16.4, such other
Party shall reimburse the Party that paid such amount promptly upon receipt of
such Party’s invoice therefor and reasonable substantiation
thereof.

     

    Section
16.5                                Notices.  Unless
otherwise expressly provided in this Agreement, all notices required or
permitted hereunder shall be in writing and deemed sufficiently given for all
purposes hereof if (a) delivered in person, by courier or by registered or
certified United States Mail to the Person to be notified, with receipt
obtained, or (ii) sent by telecopy, telefax or other facsimile or
electronic transmission, with “answer back” or other “advice of receipt”
obtained, in each case to the appropriate address or number as set forth
below.  Each notice shall be deemed effective on receipt by the
addressee as aforesaid; provided
that, notice received by telex, telecopy, telefax or other facsimile or
electronic transmission after 5:00 p.m. at the location of the addressee of such
notice shall be deemed received on the first Business Day following the date of
such electronic receipt.  Notices to Seller shall be addressed as
follows:

     

    Quicksilver
Resources Inc.

    777 West
Rosedale

    Fort
Worth, Texas  76104

    Attention:  John
C. Cirone, Senior Vice

    President
and General Counsel

    Telecopy
No.:  (817) 665-5021

     

    with a
copy to:

     

    Fulbright
& Jaworski L.L.P.

    Fulbright
Tower

    1301
McKinney Street, Suite 5100

    Houston,
Texas  77010

    Attention:  Deborah
A. Gitomer

    Telecopy
No.:  (713) 651-5246

     

    or at
such other address or to such other telecopy, telefax or other facsimile or
electronic transmission number and to the attention of such other Person as
Seller may designate by written notice to Buyers.  Notices to Buyers
shall be addressed to:

    
      
        
           

        

         

      

      
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    Eni US
Operating Co. Inc.

    Eni
Petroleum US LLC

    1201
Louisiana, Suite 3500

    Houston,
Texas  77002

    Attention:  Roberto
Dall’Omo

    Telephone
No.:  (713) 393-6111

    Telecopy
No.:  (713) 393-6212

     

    with a
copy to:

     

    Eni US
Operating Co. Inc.

    Eni
Petroleum US LLC

    1201
Louisiana, Suite 3500

    Attention:  Susan
Lindberg

    Telephone
No.:  (713) 393-6146

    Telecopy
No.:  (713) 393-6203

     

    and a
copy to:

     

    Bracewell
& Giuliani LLP

    711
Louisiana, Suite 2300

    Houston,
Texas 77002

    Attention:  James
McAnelly III

    Telephone:  (713)
221-1194

    Telecopy:  (713)
222-3241

     

    or at
such other address or to such other telecopy, telefax or other facsimile or
electronic transmission number and to the attention of such other Person as
Buyers may designate by written notice to Seller.

     

    Section
16.6                                Successors
and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and assigns; provided,
however,
that the respective rights and obligations of the Parties shall not be
assignable or delegable (whether by assignment, conveyance, merger,
consolidation, Change of Control, entity  purchase, or otherwise) by
any Party without the express written consent of the non-assigning or
non-delegating Party.  Without limiting the generality of the
foregoing, Seller does hereby acknowledge and agree that this Section 16.6 shall
not prohibit Eni Operating from assigning its undivided interest in and to any
of the Assets to Eni Petroleum following the Closing.

     

    Section
16.7                                Amendments
and Waivers.  This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or amendment is sought which
instrument and expressly identified as a modification or
amendment.  Any Party may, only by an instrument in writing and
expressly identified as a waiver, waive compliance by another Party with any
term or provision of this Agreement on the part of such other Party to be
performed or complied with.  The waiver by any Party hereto of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.

    
      
        
           

        

         

      

      
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    Section
16.8                                Appendices,
Schedules and Exhibits.  All Appendices, Schedules and Exhibits
hereto which are referred to herein are hereby made a part of this Agreement and
incorporated herein by such reference.

     

    Section
16.9                                Interpretation.  It
is expressly agreed that this Agreement shall not be construed against any
Party, and no consideration shall be given or presumption made, on the basis of
who drafted this Agreement or any particular provision hereof or who supplied
the form of Agreement.  Each Party agrees that this Agreement has been
purposefully drawn and correctly reflects its understanding of the transaction
that this Agreement contemplates.  In construing this
Agreement:

     

    (a)           examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate;

     

    (b)           the
word “includes” and its derivatives means “includes, but is not limited to” and
corresponding derivative expressions;

     

    (c)           a
defined term has its defined meaning throughout this Agreement and each
Appendix, Exhibit and Schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined;

     

    (d)           each
Exhibit and Schedule to this Agreement is a part of this Agreement, but if there
is any conflict or inconsistency between the main body of this Agreement
(including Appendix
A which shall be considered part of the main body of this Agreement) and
any Exhibit or Schedule, the provisions of the main body of this Agreement shall
prevail;

     

    (e)           the
term “cost” includes expense and the term “expense” includes cost;

     

    (f)           the
headings and titles herein are for convenience only and shall have no
significance in the interpretation hereof; and

     

    (g)           “include”
and “including” shall mean include or including without limiting the generality
of the description of the preceding term.

     

    Section
16.10                                Limited
Arbitration.  Except to the limited extent expressly provided
in Section 3.5, Section 6.5 and Section 8.11(c), disputes and differences
arising under or out of, in relation to or in any way connected with this
Agreement shall not be subject to arbitration.

     

    Section
16.11                                Agreement
for the Parties’ Benefit Only.  This Agreement is for the sole
benefit of Buyers, Seller and their respective successors and assigns as
permitted herein and no other Person shall be entitled to enforce this
Agreement, rely on any representation, warranty, covenant or agreement contained
herein, receive any rights hereunder or be a third party beneficiary of this
Agreement.  Any Indemnified Person which is a third Person shall be
indemnified and held harmless under the terms of this Agreement only to the
extent that a Party expressly elects to exercise such right of indemnity and
hold harmless on behalf of such third Person Indemnified Person pursuant to
Section 14.3; and no Party shall have any direct liability or obligation to any
third Person or be liable to any third Person for any election or
non-election

    
      
        
           

        

         

      

      
        49

        
          
 

      

      
         

      

    

    or any
act or failure to act under or in regard to any term of this
Agreement.  Any claim for indemnity or hold harmless hereunder on
behalf of an Indemnified Person must be made and administered by a Party to this
Agreement.  Any claim on behalf of an Indemnified Person may only be
brought against the defaulting Party or Parties.

     

    Section
16.12                                Attorneys
Fees.  The prevailing Party in any legal proceeding brought
under or to enforce this Agreement shall be additionally entitled to recover
court costs and reasonable attorneys fees from the nonprevailing
Party.

     

    Section
16.13                                Severability.  If
any term, provision or condition of this Agreement, or any application thereof,
is held invalid, illegal or unenforceable in any respect under any Law, this
Agreement shall be reformed to the extent necessary to conform, in each case
consistent with the intention of the Parties, to such Law, and to the extent
such term, provision or condition cannot be so reformed, then such term,
provision or condition (or such invalid, illegal or unenforceable application
thereof) shall be deemed deleted from (or prohibited under) this Agreement, as
the case may be, and the validity, legality and enforceability of the remaining
terms, provisions and conditions contained herein (and any other application
such term, provision or condition) shall not in any way be affected or impaired
thereby.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent
possible.

     

    Section
16.14                                No
Recordation.  Without limiting any Party’s right to file suit
to enforce this Agreement, Buyers and Seller expressly covenant and agree not to
record or place of record this Agreement or any copy or memorandum
hereof.

     

    Section
16.15                                Time
of Essence.  Time is of the essence in this
Agreement.  If the date specified in this Agreement for giving any
notice or taking any action is not a Business Day (or if the period during which
any notice is required to be given or any action taken expires on a date which
is not a Business Day), then the date for giving such notice or taking such
action (and the expiration date of such period during which notice is required
to be given or action taken) shall be the next day which is a Business
Day.

     

    [SIGNATURE
PAGE FOLLOWS]

    
      
        
           

        

         

      

      
        50

        
          
 

      

      
         

      

    

    IN
WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the
Parties as of the day first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 	SELLER:	 
	 	 	 
	 	QUICKSILVER
      RESOURCES INC.	 
	 	 	 	 
	 	
                                By:

                              	/s/
      Thomas F. Darden	 
	 	Name: 	Thomas
      F. Darden	 
	 	Title:	Chairman	 

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        	 	BUYERS:	 
	 	 	 
	 	ENI
      US OPERATING CO. INC.	 
	 	 	 	 
	 	
                By:

              	/s/
      Roberto Dall'Omo	 
	 	Name: 	Roberto
      Dall'Omo	 
	 	Title:	President
      and CEO	 

      

    

     

    
      
        
          
            	 	ENI
      PETROLEUM US LLC	 
	 	 	 	 
	 	
                    By:

                  	/s/
      Roberto Dall'Omo	 
	 	Name: 	Roberto
      Dall'Omo	 
	 	Title:	President
      and CEO	 

          

        

      

    

     

    
      
        
           

        

        
          Signature
Page to Asset Purchase Agreement

        

      

      
         

        
          
 

      

      
         

      

    

    APPENDIX
A

     

    Attached
to and made a part of that certain Asset Purchase Agreement

    dated as
of May 15, 2009, by and among

    QUICKSILVER
RESOURCES INC., as “Seller”,
and

    ENI US
OPERATING CO. INC. and ENI PETROLEUM US LLC, as “Buyers”

     

    DEFINITIONS

     

    “Accounting
Principles” means United States generally accepted accounting principles,
consistently applied.

     

    “Accounting
Arbitrator” shall be as defined in Section 3.5.

     

    “Action”
shall mean any action, suit or other proceeding by or before any court or other
Governmental Authority or any arbitration proceeding.

     

    “Adjusted
Purchase Price” shall be as defined in Section 3.1.

     

    “Adjustment
Period” shall be as defined in Section 3.4(a).

     

    “Adjustment
Statement” shall be as defined in Section 3.4(a).

     

    “Affiliate”
shall mean, as to the Person specified, any Person controlling, controlled by or
under common control with such specified Person.  The concept of
control, controlling or controlled as used in the aforesaid context means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.  No Person
shall be deemed an Affiliate of any Person by reason of the exercise or
existence of rights, interests or remedies under this Agreement.

     

    “Aggregate
Deductible Amount” shall mean Seven Million Dollars ($7,000,000)
increased by an amount determined pursuant to Section 6.4.

     

    “Agreed
Rate” shall mean an annual rate of interest equal to the lesser of (i)
the annual rate of interest published from time to time as the “Prime
Rate” in the “Money
Rates” section of The Wall Street Journal plus three percent (3%) and
(ii) the maximum rate of interest allowed by Law.

     

    “Agreement”
shall be as defined in the preamble hereof.

     

    “Allocated
Value” shall be as defined in Section 6.2(b).

     

    “Area of
Mutual Interest Agreement” shall be as defined in Section
11.2(e).

     

    “Assets”
shall mean twenty-seven and five-tenths percent (27.5%) of Seller’s right,
title, and interest in and to the following described assets and properties
(except to the extent constituting Excluded Assets):

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -i-

        
          
 

      

      
         

      

    

    (a)           The
oil and gas leases, oil, gas, and mineral leases and subleases, royalties,
overriding royalties, net profits interests, mineral fee interests, carried
interests, rights of recoupment, options, contractual rights, and, without
limiting the foregoing, other rights (of whatever character, whether legal or
equitable, and whether vested or contingent) in and to the Hydrocarbons in, on,
under, and that may be produced from, the lands described on Part I of the
Property Schedule and the Option Properties (the “Leases”),
and all tenements, hereditaments, and appurtenances relating or belonging
thereto, together with each and every kind of character of right, title, claim,
and interest in and to the lands covered thereby or pooled, unitized, or
otherwise consolidated therewith, in each case, whether or not Seller owns
record title thereto or has earned an interest therein as of the date hereof
(collectively, the “Lands”);

     

    (b)           Any
and all oil, gas, water, injection, or disposal wells thereon or on pooled,
communitized, or unitized acreage that includes all or any part of the Lands,
including, without limiting the foregoing, the wells constituting Property
Subdivisions, whether producing, non-producing, permanently or temporarily
plugged and abandoned, and whether or not fully described on Part II of the
Property Schedule (collectively, the “Wells”);

     

    (c)           All
easements, permits, privileges, licenses, servitudes, rights-of-way, surface
leases, and other rights or agreements related to the use of the surface and
subsurface, to the extent used, or held in connection with, the Lands or
Property Subdivisions, but excluding any such permits, privileges, licenses,
servitudes and other rights and agreements to the extent transfer is prohibited
by contractual restriction or applicable Law (subject to such exclusions, the
“Surface
Agreements,” and, together with the Leases, Lands and Property
Subdivisions, the “Properties”);

     

    (d)           All
(i) operating agreements; unitization, pooling, and communitization agreements;
area of mutual interest agreements; joint venture agreements; exploration
agreements; farmin and farmout agreements; and water rights agreements relating
or applicable to the Properties or by which the Properties are bound and (ii)
other contracts, commitments, agreements, arrangements and instruments relating
or applicable to the Properties or by which the Properties are bound, but
excluding such other contracts, commitments, agreements, arrangements and
instruments to the extent transfer is prohibited  by contractual
restriction (which, following a request by Seller, the Person in whose favor the
restriction exists is unwilling to waive such restriction), and, in all cases,
any and all amendments, ratifications, or extensions of the foregoing; provided,
however,
that the term “Contracts” shall not include the Leases and Surface Agreements
(subject to such exclusions, the “Contracts”);

     

    (e)           All
equipment, machinery, fixtures, facilities, improvements, and other tangible
personal property and improvements located on, or, to the extent charged to the
Properties after the Effective Time, owned for use in connection with, the
Properties or the production of Hydrocarbons from the Properties, and, without
limiting the foregoing, tubular and other trade inventory (i) charged to the
Properties pursuant to a Contract for which the Purchase Price is increased
pursuant to Section 3.4, as adjusted pursuant to Section 3.5, whether or not
located on the Properties or (ii) acquired for the account of or charged to the
Properties after the Effective Time (subject to such exclusions, the “Equipment”);

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
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    (f)           All
(i) trade credits, accounts receivable, notes receivable, take-or pay
amounts receivable, and other receivables and general intangibles to the extent
attributable to the Assets with respect to periods of time from and after the
Effective Time; and (ii) liens and security interests in favor of Seller,
whether choate or inchoate, under any Law or under any of the Contracts to the
extent arising from, or relating to the ownership, operation, or sale or other
disposition on or after the Effective Time of any of the Assets;

     

    (g)           All
Hydrocarbons produced from, or attributable to, the Properties on and after the
Effective Time (whether or not produced from Wells or other Property
Subdivisions located on the Lands); to the extent related to the Properties, all
production, plant, transportation, and other imbalances as of the Effective
Time; and all make-up rights with respect to take-or-pay payments, and proceeds
with respect to any of the foregoing;

     

    (h)           The
Claims; and

     

    (i)           Copies
of all land, lease, and Well files; Contract files; division order files;
abstracts; title opinions; logs; interpretive data; maps; and geophysical,
geological, and other technical data (whether or not reprocessed), in each case,
to the extent relating to the Assets, excluding, however (subject to the
following exclusions, the “Records”):

     

    (i)           all
corporate, financial, Tax, and legal records of Seller that relate to Seller’s
business generally (whether or not relating to the Assets);

     

    (ii)           any
data, software, and records (including, without limitation, the licenses or
other agreements granting the right to use the same) to the extent disclosure or
transfer is prohibited or subjected to payment of a fee or other consideration
by any license agreement or other agreement with a Person other than Affiliates
of Seller, or by applicable Law, and for which, following request by Seller
therefor, no consent to transfer has been received or for which Buyers have not
agreed in writing to pay the fee or other consideration, as
applicable;

     

    (iii)           all
legal records and legal files of Seller including all work product of and
attorney-client communications with Seller’s legal counsel (other than title
opinions);

     

    (iv)           records
and documents relating to the negotiation and consummation of the transactions
contemplated hereby or pursuant to which the Assets were acquired by Seller;
and

     

    (v)           any
data and records to the extent relating to the Excluded Assets;

     

    (the
assets described in clauses (i) through (v) are hereinafter referred to as the
“Excluded
Records”).

     

    “Assumed
Liabilities” shall mean any and all Covered Liabilities (a) to the
extent related and attributable to the ownership, use, construction, maintenance
or operation of the Assets on and after the Effective Time (including, without
limitation, Environmental Liabilities), (b) to the extent required to be
borne by Buyers pursuant to Section 3.4 or Article 12, and (c) to the
extent

    
      
        
           

        

        Appendix A to Asset Purchase Agreement

      

      
        -iii-

        
          
 

      

      
         

      

    

    constituting
Tax obligations assumed by Buyers pursuant to Article 9; provided,
however,
Buyers do not assume, and Seller shall retain, all Covered Liabilities to the
extent (i) Buyer is entitled to indemnification therefor pursuant to Section
14.2(b) or (ii) such Covered Liabilities are attributable to the
Environmental Liabilities described in Schedule
4.1(s).

     

    “Business
Combination Transaction” shall mean a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
consolidated assets of Seller.

     

    “Business
Day” shall mean any day which is not a Saturday, Sunday or legal holiday
recognized by the United States of America.

     

    “Buyers”
shall be as defined in the preamble of this Agreement.

     

    “Buyer
Indemnified Persons” shall be as defined in Section 14.2.

     

    “Casualty
Loss” shall be as defined in Section 8.9(a).

     

    “Change of
Control” shall mean the occurrence of any of the following (whether
effectuated pursuant to one or a series of transactions):

     

    (a)           any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) is or becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of fifty
percent (50%) or more of the combined voting power of the then outstanding
Voting Stock of Seller; provided,
however,
that the following acquisitions shall not constitute a Change in Control:
(i) any acquisition of Voting Stock of Seller by Seller or any Subsidiary
of Seller; (ii) any acquisition of Voting Stock of Seller by the trustee or
other fiduciary holding securities under any employee benefit plan (or related
trust) sponsored or maintained by Seller or any Subsidiary of Seller; and
(iii) any acquisition of Voting Stock of Seller by Mercury Exploration
Company, Quicksilver Energy, L.P., The Discovery Fund, Pennsylvania Avenue
Limited Partnership, Pennsylvania Management Company, the estate of Frank
Darden, Lucy Darden, Anne Darden Self, Glenn Darden or Thomas Darden, or their
respective successors, assigns, designees, heirs, beneficiaries, trusts, estates
or controlled affiliates;

     

    (b)           a
majority of the Board of Directors of Seller or its direct or indirect parent
ceases to be comprised of Incumbent Directors;

     

    (c)           the
consummation of a Business Combination Transaction immediately after which the
Voting Stock of Seller outstanding immediately prior to such Business
Combination Transaction does not continue to represent (either by remaining
outstanding or by being converted into Voting Stock of the entity surviving,
resulting from, or succeeding to all or substantially all of Seller’s
consolidated assets as a result of such Business Combination Transaction or any
parent of such entity), at least 50% of the combined voting power of the then
outstanding shares of Voting Stock of (i) the entity surviving, resulting from,
or succeeding to all or substantially all of Seller’s consolidated assets as a
result of, such Business Combination Transaction or (ii) any parent of any such
entity (including, without limitation, an entity which as

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -iv-

        
          
 

      

      
         

      

    

    a result
of such transaction owns Seller or all or substantially all of Seller’s assets
either directly or through one or more subsidiaries);

     

    (d)           (i)
the sale, transfer, conveyance, divestiture or other disposition of Seller’s
interests in the Properties associated with the Subject Wells to any Person
other than to an Affiliate of Seller, such that, following such sale, transfer,
conveyance, divestiture or other disposition, Seller's interest in fifty percent
(50%) of the Subject Wells is less than Buyers' then interest in such Subject
Wells and (ii) neither Seller nor any Affiliate operate at least fifty percent
(50%) of the Subject Wells after giving effect to any transfers in
(d)(i).

     

    “Claim
Notice” shall be as defined in Section 14.3(a).

     

    “Claims”
shall mean all right, title and interest of Seller to any claims and causes of
action (and other rights with respect thereto) to the extent attributable to
ownership, use, construction, maintenance or operation of the Assets subsequent
to the Effective Time, including, without limitation, past, present or future
claims, whether or not previously asserted by Seller, excluding, however, any
claims against Seller or any past or present Affiliate of Seller.

     

    “Closing”
shall be the consummation of the transaction contemplated by Article
11.  The Closing with respect to part of the Assets may be delayed or
extended as provided in Section 7.3 and Section 7.4.

     

    “Closing
Date” shall mean (a) the later of (i) June 15, 2009, or (ii) such later
date, if any, to which the Closing is delayed on account of the disputes
referenced in Section 15.1(a)(iii), or (b) such other date as may be
mutually agreed in writing by Seller and Buyers.  The Closing Date
with respect to part of the Assets may also be delayed or extended as provided
in Section 7.3 and Section 7.4; provided that, the Closing Date for purposes of
Section 11.1 shall be the Closing Date provided in the preceding
sentence.

     

    “Code”
shall mean the Internal Revenue Code of 1986, as amended.

     

    “Confidentiality
Agreement” shall be as defined in Section 5.2.

     

    “Contracts”
shall be as defined in clause (d) of the definition of Assets.

     

    “Conveyance”
shall be as defined in Section 8.3.

     

    “Covered
Liabilities” shall mean any and all debts, losses, liabilities, duties,
fines, damages, claims, Taxes, costs and expenses (including, without
limitation, those arising out of any demand, assessment, settlement, judgment or
compromise relating to any actual or threatened Action and any court costs,
reasonable fees and expenses of expert witnesses, reasonable investigative
expenses, reasonable fees and disbursements of legal counsel and other
reasonable legal and investigative fees and expenses incurred in investigating,
preparing or defending any Action), matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown,
including, without limitation, any of the foregoing arising under, out of or in
connection with any actual or threatened Action, any order or consent decree of
any Governmental Authority, any award of any arbitrator, or any Law, contract,
commitment or undertaking.

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -v-

        
          
 

      

      
         

      

    

    “Cut-Off
Date” means the day before the day that includes the Effective
Time.

     

    “Defensible
Title” shall mean, respectively as to the Lease or Leases related to a
particular Property Subdivision, title to such Property Subdivision and the
Lease or Leases related to such Property Subdivision that, subject to and except
for the terms of the Leases and any Permitted
Encumbrances:  (a) entitles Seller (and will entitle Buyers, as
successors in interest to Seller) to receive not less than the applicable Net
Revenue Interest or Net Revenue Interests specified for such Property
Subdivision in Part II the Property Schedule throughout the life of such
Property Subdivision; (b) obligates Seller (and will obligate Buyers, as
successors in interest to Seller) to bear the costs and expenses attributable to
the maintenance, development, and operation of such Property Subdivision in an
amount not greater than the applicable Working Interest or Working Interests
specified for such Property Subdivision in Part II the Property Schedule
throughout the life of such Property Subdivision, except increases that are
accompanied by at least a corresponding and proportionate increase in Net
Revenue Interest; and (c) is free and clear of all liens and
encumbrances.

     

    “Deposit”
shall be as defined in Section 3.2.

     

    “Effective
Time” shall mean 7:00 a.m., Central Daylight Time, on April 1,
2009.

     

    “Election
Period” shall be as defined in Section 14.3(a).

     

    “Eni
Operating” shall be as defined in the preamble of this
Agreement.

     

    “Eni
Petroleum” shall be as defined in the preamble of this
Agreement.

     

    “Environmental
Consultant” shall mean E-Vironment, LP, or another environmental
consulting firm of similar expertise and reputation approved by Seller, which
approval will not be withheld or delayed unreasonably, which is retained by
Buyers in connection with the Environmental Review.

     

    “Environmental
Laws” shall mean all Laws relating in any way to environmental
protection, including, without limitation (a) the control of any potential
pollutant, or protection of the air, water or land, (b) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation, and (c) exposure to hazardous, toxic or other substances
alleged to be harmful.  “Environmental
Laws” shall include, but are not limited to, the Clean Air Act, the Clean
Water Act, the Resource Conservation Recovery Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking Water
Act, and the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, and shall also include all state, local and municipal Laws dealing
with the subject matter of the above listed Federal statutes or promulgated by
any governmental or quasi-governmental agency thereunder in order to carry out
the purposes of any Federal, state, local or municipal Law.

     

    “Environmental
Liabilities” shall mean any and all costs (including costs of
remediation), damages, settlements, expenses, penalties, fines, Taxes,
prejudgment and post-judgment interest, court costs and attorneys’ fees incurred
or imposed (a) pursuant to any order, notice of responsibility, directive
(including requirements embodied in Environmental Laws), injunction, judgment or
similar act (including settlements) by any Governmental Authority to the
extent

    
      
        
           

        

        
          Appendix
A to Asset Purchase Agreement

        

      

      
        -vi-

        
          
 

      

      
         

      

    

    arising
out of or under Environmental Laws or (b) pursuant to any claim or cause of
action by a Governmental Authority or other third Person (other than Buyers and
any Affiliate of Buyers) for personal injury, property damage, damage to natural
resources, remediation or response costs to the extent arising out of or
attributable to any violation of, or any remedial obligation under, any
Environmental Law.

     

    “Environmental
Permits” shall be as defined in Section 4.1(s)(ii).

     

    “Environmental
Review” shall be as defined in Section 5.3(a).

     

    “Equipment”
shall be as defined in clause (e) of the definition of Assets.

     

    “Escrow
Agent” shall mean JPMorgan Chase & Co.

     

    “Escrow
Agreement” shall mean that certain escrow agreement dated May 15, 2009,
by and among Escrow Agent, Seller and Buyers.

     

    “Examination
Period” shall be as defined in Section 6.2(a).

     

    “Exchange
Act” shall mean the Securities Exchange Act of 1934.

     

    “Exchange
Property” shall be as defined in Section 9.2.

     

    “Excluded
Assets” shall mean the following:

     

    (a)           originals
of all Records;

     

    (b)           all
deposits, cash, checks, funds and accounts receivable to the extent attributable
to the Assets with respect to any period of time prior to the Effective
Time;

     

    (c)           all
(i) Hydrocarbons produced from or attributable to the Properties with
respect to all periods prior to the Effective Time, (ii) Hydrocarbons
attributable to the Properties which, at the Effective Time, are in storage,
within processing plants, in pipelines or otherwise held in inventory, and
(iii) proceeds from or of such Hydrocarbons;

     

    (d)           all
receivables and cash proceeds to the extent expressly taken into account and for
which credit was given in the determination of Net Cash Flow pursuant to Section
3.4, as adjusted pursuant to Section 3.5;

     

    (e)           claims
of Seller or any Affiliate of Seller for refund of or loss carry forwards with
respect to (i) Taxes attributable to any period prior to the Effective Time or
(ii) any Taxes attributable to the Excluded Assets;

     

    (f)           any
futures, options, swaps or other derivatives of Seller or any of its
Affiliates;

     

    (g)           all
rights, interests, assets and properties described in Schedule
A-2;

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
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    (h)           except
as otherwise provided in Section 8.9 and except for insurance proceeds to the
extent related to costs or expenses which constitute Assumed Liabilities, all
rights, titles, claims and interests of Seller or any Affiliate of Seller (i)
under any policy or agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards;

     

    (i)           all
computer or communications software or intellectual property (including tapes,
data and program documentation and all tangible manifestations and technical
information relating thereto) owned, licensed or used by Seller;

     

    (j)           any
logo, service mark, copyright, trade name or trademark of or associated with
Seller or any Affiliate of Seller or any business of Seller or of any Affiliate
of Seller;

     

    (k)           other
than the agreements described in items 2 and 3 of Schedule
4.1(j), all transportation agreements, agreements for the marketing,
sale, purchase or other disposition of Hydrocarbons, gathering agreements,
compression agreements, processing agreements and drilling contracts;
and

     

    (l)           all
Excluded Records.

     

    “Excluded
Liabilities” shall mean any and all Covered Liabilities (a) to the
extent related and attributable to the ownership, use, construction, maintenance
or operation of the Assets prior to the Effective Time (including, without
limitation, Environmental Liabilities); (b) to the extent attributable to
the Excluded Assets; (c)  to the extent constituting are Tax obligations
retained by Seller pursuant to Article 9; (d) to the extent such Covered
Liabilities would be the responsibility of Seller pursuant to Section 3.4 or
Article 12; (e) to the extent caused by, arising out of, or resulting from
off-site disposal of any Hazardous Materials from the Assets prior to the
Effective Time; and (f) to the extent attributable to the Environmental
Liabilities described in Schedule 4.1(s).

     

    “Excluded
Records” shall be as defined immediately after subclause (i)(v) of the
definition of Assets.

     

    “Fair Market
Value” shall be as defined in Section 8.11(c).

     

    “Final
Adjustment Statement” shall be as defined in Section 3.5.

     

    “Gathering
Agreement” shall be as defined in Section 11.2(i).

     

    “Governmental
Authority” shall mean (a) the United States of America, (b) any
state, county, municipality or other governmental subdivision within the United
States of America, and (c) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality or other governmental
subdivision within the United States of America.

     

    “Guaranteed
Rate” shall mean an amount per MMBtu equal to (a) $8.60 minus
(b) the sum of the costs and expenses per MMBtu that would be incurred by
Seller to (a) gather, treat

    
      
        
           

        

        
          Appendix
A to Asset Purchase Agreement

        

      

      
        -viii-

        
          
 

      

      
         

      

    

    and
process the subject gaseous Hydrocarbons during the month in question and
(b) transport the subject gaseous Hydrocarbons from the location from which
they are produced to Henry Hub during the month in question.

     

    “Hazardous
Materials” shall mean any pollutants, wastes, contaminants, or hazardous,
extremely hazardous, or toxic materials, substances, chemicals or wastes listed
or regulated under any Environmental Law.

     

    “Hydrocarbons”
shall mean crude oil, gas, casinghead gas, condensate, natural gas liquids, and
other gaseous or liquid hydrocarbons (including, without limitation, ethane,
propane, iso-butane, nor-butane, gasoline, and scrubber liquids) of any type and
chemical composition.

     

    “Incumbent
Directors” shall mean the individuals who, as of November 24, 2008, are
Directors of Seller and any individual becoming a Director subsequent to such
date whose election, nomination for election by Seller’s shareholders, or
appointment, was approved by a vote of a majority of the then Incumbent
Directors (either by a specific vote or by approval of the proxy statement of
Seller in which such person is named as a nominee for director, without
objection to such nomination).

     

    “Indemnified
Claim” shall be as defined in Section 14.3(a).

     

    “Indemnified
Person” shall be as defined in Section 14.3.

     

    “Indemnifying
Party” shall be as defined in Section 14.3.

     

    “Initial
Adjustment Amount” shall be as defined in Section 3.4(a).

     

    “Joint
Development Agreement” shall be as defined in Section
11.2(d).

     

    “Joint
Operating Agreement” shall be as defined in Section 11.2(f).

     

    “knowledge”
shall mean, (a) with respect to Seller, the actual knowledge (excluding any
imputed or implied knowledge) of the following individuals after a reasonable
inquiry by them of their respective direct reports:

     

    
      	
               
      

            	
              Stan
      Page

            

    

    
      	
               
      

            	
              Scott
      Herstein

            

    

    
      	
               
      

            	
              John
      Regan

            

    

    
      	
               
      

            	
              Clay
      Blum

            

    

    
      	
               
      

            	
              John
      Hinton

            

    

    
      	
               
      

            	
              Judy
      Raab

            

    

    
      	
               
      

            	
              Chris
      Cirone (for purposes of Section 4.1(f)(i)
only)

            

    

     

    and (b)
with respect to Buyers, the actual knowledge (excluding any imputed or implied
knowledge) of the following individuals after a reasonable inquiry by them of
their respective direct reports:

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -ix-

        
          
 

      

      
         

      

    

     

    
      
        	
                 
      

              	
                Martin
      Black

              

      

      
        	
                 
      

              	
                Brian
      Lloyd

              

      

      
        	
                 
      

              	
                David
      Dougal

              

      

      
        	
                 
      

              	
                Gary
      Clifford

              

      

      
        	
                 
      

              	
                Bob
      White

              

      

      
        	
                 
      

              	
                Jason
      Ervin

              

      

      
        	
                 
      

              	
                Susan
      Lindberg (for purposes of Section 4.2(f)
only)

              

      

    

     

    “Lands”
shall be as defined in clause (a) of the definition of Assets.

     

    “Law”
shall mean any applicable statute, law (including common law), ordinance,
regulation, rule, ruling, order, writ, injunction, decree or other official act
of or by any Governmental Authority.

     

    “Leases”
shall be as defined in clause (a) of the definition of Assets.

     

    “Material
Adverse Effect” shall mean a material adverse effect on the value of the
Assets taken as a whole (after taking into account any insurance, indemnity and
other recoveries payable in respect thereof), excluding any effect resulting
from any change in economic, industry or market conditions (whether general or
regional in nature or limited to any area where any Assets are located) or from
any change in Law or regulatory policy.

     

    “Material
Contract” shall mean, to the extent binding upon the Assets and Buyers’
ownership thereof or operations with respect thereto from and after Closing, any
Contract (whether or not written) which is one or more of the following
types:

     

    (a)           Any
agreement with any Affiliate of Seller;

     

    (b)           Any
agreement for the sale, purchase, exchange, or other disposition of Hydrocarbons
which is not cancelable without penalty on sixty (60) days prior written
notice;

     

    (c)           Except
for agreements for the sale, purchase, exchange or other disposition of
Hydrocarbons, any agreement to sell, lease, farmout, or otherwise dispose of all
or any part of the Assets other than rights of reassignment upon abandonment of
an Asset;

     

    (d)           Any
area of mutual interest agreement;

     

    (e)           Any
tax partnership agreement or arrangement or other election of Seller to be
subject, in connection with a third Person, to the provisions of Subchapter K of
Chapter 1 of Subtitle A of the Code;

     

    (f)           Except
for Leases and operating, unitization, pooling and communitization agreements,
any agreement that could reasonably be expected to result in aggregate payments
by Seller of more than Two Million Five Hundred dollars ($2,500,000) during the
current or any subsequent fiscal year; or

     

    (g)           Any
agreement for the lease or rental to Seller of compressors which is not
cancellable without penalty on sixty (60) days prior written
notice.

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -x-

        
          
 

      

      
         

      

    

    “Net Cash
Flow” shall be as defined in Section 3.4(c).

     

    “Net Revenue
Interest” shall mean an interest (expressed as a percentage or decimal
fraction) in and to all Hydrocarbons produced and saved from or attributable to
a Property Subdivision.

     

    “Nortex
Exploration Agreement” shall mean that certain Exploration and
Participation Agreement (Expansion Area) Tarrant and Denton Counties, Texas,
dated January 1, 2005, by and between Chief Oil & Gas LLC, Chief Holdings
LLC and Nortex Minerals, L.P., as amended.

     

    "Operational
Defects" shall be as defined in Section 6.7.

     

    “Option
Failure” shall mean, with respect to a particular Option Property, the
loss by Seller of the right to acquire or earn an interest in and to such Option
Property (or any portion thereof) as a result of the failure to comply with the
drilling and other conditions set forth in the Nortex Exploration
Agreement.

     

    “Option
Properties” shall mean the lands referenced in Schedule
A-4.

     

    “Option
Property Defect Amount” shall mean, with respect to an Option Failure, an
amount equal to the product of (a) the price per net acre reflected on
Schedule A-4
for the Option Property affected by such Option Failure multiplied by
(b) the number of net acres included in such Option Property that are
affected by such Option Failure.

     

    “Party”
and “Parties”
shall be as defined in the preamble hereof.

     

    “Paying
Party” shall be as defined in Section 9.1(b).

     

    “Permitted
Encumbrances” shall mean any of the following matters:

     

    (a)           all
agreements, instruments, documents, liens, encumbrances, and other matters which
are described in Schedule A-3
to the extent that they do not, individually or in the aggregate, reduce
Seller’s Net Revenue Interest (or the Net Revenue Interest of Buyers, as
successors in interest to Seller) with respect to any Property Subdivision below
that shown in Part II of the Property Schedule or increase Seller’s share of
costs and expenses (or the share of costs and expense of Buyers, as successors
in interest to Seller) with respect to any Property Subdivision above that shown
in Part II of the Property Schedule without a corresponding and
proportionate increase in Net Revenue Interest;

     

    (b)           any
(i) undetermined or inchoate liens or charges constituting or securing the
payment of expenses which were incurred incidental to maintenance, development,
production or operation of the Assets or for the purpose of developing,
producing or processing Hydrocarbons therefrom or therein and
(ii) materialman’s, mechanics’, repairman’s, employees’, contractors’,
operators’ or other similar liens, security interests or charges for liquidated
amounts incidental to construction, maintenance, development, production or
operation of the Assets or the production or processing of Hydrocarbons
therefrom, in each case, to the extent arising in the ordinary course of
business and that are not delinquent and that will be paid in the ordinary
course of business or, if delinquent, that are being contested in good faith by
appropriate actions

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -xi-

        
          
 

      

      
         

      

    

    and for
which adequate reserves are being maintained in accordance with the Accounting
Principles;

     

    (c)           any
liens for Taxes not yet delinquent or, if delinquent, that are being contested
in good faith in the ordinary course of business and for which adequate reserves
are being maintained in accordance with the Accounting Principles;

     

    (d)           any
liens or security interests created by Law or reserved in oil, gas and/or
mineral leases for royalty, bonus or rental or for compliance with the terms of
the Leases to the extent payment and other obligations secured by such liens is
not yet delinquent, or if delinquent, that are being contested in good faith by
appropriate actions in the ordinary course of business and for which adequate
reserves are being maintained in accordance with the Accounting
Principles;

     

    (e)           Subject
to Article 7, Preference Rights and Transfer Requirements;

     

    (f)           any
easements, rights-of-way, servitudes, permits, licenses, surface leases and
other rights with respect to operations to the extent such matters do not,
individually or in the aggregate, interfere in any material respect with
Seller’s operation of the portion of the Property Subdivision burdened
thereby;

     

    (g)           agreements
and obligations to the extent relating to (i) imbalances with respect to
the production, transportation or processing of gas; or (ii) calls or
purchase options on Hydrocarbons exercisable at current fair market prices or
the posted prices of such purchaser;

     

    (h)           all
royalties, overriding royalties, net profits interests, carried interests,
reversionary interests and other similar burdens to the extent that they do not,
individually or in the aggregate, reduce Seller’s net revenue interest (or the
net revenue interest of Buyers, as successors in interest to Seller) with
respect to any Property Subdivision below that shown in Part II of the
Property Schedule or increase Seller’s share of costs and expenses (or the share
of costs and expense of Buyers, as successors in interest to Seller) with
respect to any Property Subdivision above that shown in Part II of the
Property Schedule without a corresponding and proportionate increase in Net
Revenue Interest;

     

    (i)           subject
to the special warranty of title in the Conveyance (but without in any way
limiting the last sentence of Section 6.1), any encumbrance, title defect or
other matter (whether or not constituting a Title Defect) waived or deemed
waived by Buyers pursuant to Article 6;

     

    (j)           rights
reserved to or vested in any Governmental Authority to control or regulate any
of the wells, well locations or units included in the Assets and all applicable
Laws, rules, regulations and orders of such Governmental Authorities to the
extent that same do not, individually or in the aggregate, reduce Seller’s Net
Revenue Interest (or the Net Revenue Interest of Buyers, as successors in
interest to Seller) with respect to any Property Subdivision below that shown in
Part II of the Property Schedule or increase Seller’s share of costs and
expenses (or the share of costs and expense of Buyers, as successors in interest
to Seller) with respect to any Property Subdivision above that shown in
Part II of the Property Schedule without a corresponding and proportionate
increase in Net Revenue Interest;

    
      
        
           

        

        Appendix A to Asset Purchase
Agreement

      

      
        -xii-

        
          
 

      

      
         

      

    

    (k)           the
terms and conditions of all Contracts and Leases to the extent that same do not,
individually or in the aggregate, reduce Seller’s Net Revenue Interest (or the
Net Revenue Interest of Buyers, as successors in interest to Seller) with
respect to any Property Subdivision below that shown in Part II of the
Property Schedule or increase Seller’s share of costs and expenses (or the share
of costs and expense of Buyers, as successors in interest to Seller) with
respect to any Property Subdivision above that shown in Part II of the
Property Schedule without a corresponding and proportionate increase in Net
Revenue Interest;

     

    (l)           rights
of reassignment requiring notice or the reassignment (or granting an opportunity
to receive a reassignment) of a leasehold interest to the holders of such
reassignment rights prior to surrendering or releasing such leasehold interest;
and

     

    (m)           all
consents and approvals of or filings with any applicable Governmental
Authorities in connection with assignments of the Assets as contemplated by
Section 7.5.

     

    “Person”
shall mean any Governmental Authority or any individual, firm, partnership,
corporation, association, joint venture, trust, unincorporated organization or
other entity or organization.

     

    “Preference
Property” shall be as defined in Section 7.2.

     

    “Preference
Right” shall mean any right or agreement that enables or may enable any
Person to purchase or acquire any Asset or any interest therein or portion
thereof as a result of or in connection with (a) the sale, assignment,
encumbrance or other transfer of any Asset or any interest therein or portion
thereof or (b) the execution or delivery of this Agreement or the consummation
or performance of the terms and conditions contemplated by this
Agreement.

     

    “Production
Taxes” shall mean severance, production and similar Taxes based upon, or
measured by, the production of Hydrocarbons.

     

    “Properties”
shall be as defined in clause (c) of the definition of Assets.

     

    “Property
Costs” shall be as defined in Section 3.4(c).

     

    “Property
Schedule” shall mean Schedule
A-1 attached to and made a part of this Agreement.

     

    “Property
Subdivision” shall mean each Well, well location (including a
non-producing, undeveloped, probable or possible well location), or unit
described or referenced on Part II of the Property Schedule.

     

    “Property
Taxes” shall mean ad valorem, property, excise and similar Taxes and
shall exclude Production Taxes, Transfer Taxes, and Taxes based upon, measured
by, or calculated with respect to (a) net income, profits, or similar
measures, or (b) multiples bases (including corporate franchise, business
and occupation, business license, or similar Taxes) if one or more of the bases
on which such Tax is based, measured, or calculated is described in
clause (a), above, in each case, together with any interest, penalties, or
additions to such Tax.

    
      
        
           

        

        
          Appendix
A to Asset Purchase Agreement

        

      

      
        -xiii-

        
          
 

      

      
         

      

    

    “Purchase
Price” shall be as defined in Section 3.1.

     

    “Records”
shall be as defined in clause (i) of the definition of Assets.

     

    “Reimbursing
Party” shall be as defined in Section 9.1(b).

     

    “Remaining
Buyer Assets” shall be as defined in Section 8.11(a)(i).

     

    “Reserve
Report” shall mean the Aries database that supports that certain six (6)
page report dated February 13, 2009, and dated effective as of April, 2009,
entitled “Alliance –
Schlumberger forecasts - $8.60 for 2009-2010 then Strip”.

     

    “Retained
Asset” shall be as defined in Section 7.4.

     

    “Sale
Appraiser” shall be as defined in Section 8.11(c).

     

    “Seller”
shall be as defined in the preamble of this Agreement.

     

    “Seller
Indemnified Persons” shall be as defined in Section 14.1.

     

    “Seller
Title Credit” shall be as defined in Section 6.4.

     

    “Seller
Title Credit Amount” shall be as defined in Section 6.4.

     

    “Seller
Title Credit Notice” shall be as defined in Section 6.2(c).

     

    “Straddle
Period” shall be as defined in Section 9.1(b).

     

    “Subsidiary”
shall mean a corporation, partnership, limited liability company or other entity
in which Seller owns directly or indirectly more than 50% of the outstanding
shares of voting stock or other voting interest.

     

    “Surface
Agreements” shall be as defined in clause (c) of the definition of
Assets.

     

    "Subject
Wells" shall be as defined in the Joint Development
Agreement.

     

    “Turnkey
Completion Rate” shall be as defined in the Joint Development
Agreement.

     

    “Turnkey
Drilling Rate” shall be as defined in the Joint Development
Agreement.

     

    “Tax”
shall mean (a) any federal, state, provincial, county, local or foreign
taxes, charges, fees, levies or other assessments, including all net income,
gross income, sales and use, goods and services, ad valorem, transfer, gains,
profits, excise, franchise, real and personal property, gross receipt, value
added, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance,
unemployment, social security, Medicare, alternative minimum or withholding
taxes or charges imposed by any Governmental Authority, and includes any
interest and penalties (civil or criminal) on or additions to any such taxes and
(b) liability for items in subparagraph (a), above, of any other
Person by contract, operation of law (including Treasury Regulation 1.1502 6) or
otherwise.

    

      
        
          
             

          

          
            Appendix
A to Asset Purchase Agreement

          

        

        
          -xiv-

          
            
 

        

        
           

        

      

    

     

    “Tax
Allocation Schedule” shall be as defined in Section 3.3.

     

    “Tax
Return” shall mean any return, report, election, declaration, statement,
information return, schedule, or other document (including any related or
supporting information) filed or required to be filed with any Governmental
Authority in connection with the determination, assessment, collection or
administration of any Taxes or the administration of any laws, regulations or
administrative requirements relating to any Taxes or any amendment
thereof.

     

    “Termination
Date” shall be as defined in Section 15.1(a)(ii).

     

    “Title
Arbitrator” shall be as defined in Section 6.5(b).

     

    “Title
Defect” shall be as defined in Section 6.3.

     

    “Title
Defect Amount” shall be as defined in Section 6.2(e).

     

    “Title
Defect Notice” shall be as defined in Section 6.2(a).

     

    “Title
Defect Property” shall be as defined in Section 6.2(d)(i).

     

    “Transfer
Requirement” shall mean any consent, approval, authorization or permit
of, or filing with or notification to, any Person which is required to be
obtained, made or complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Asset or any interest therein, regardless of the
legal effect of failure to comply with such requirement prior to such sale,
assignment, transfer or encumbrance.

     

    “Transfer
Taxes” shall be as defined in Section 9.3.

     

    “Voting
Stock” shall mean securities entitled to vote generally in the election
of Directors of Seller.

     

    “Use and
Access Agreement” shall be defined in Section 11.2(g).

     

    “Wells”
shall be as defined in clause (b) of the definition of Assets.

     

    “Working
Interest” shall mean the percentage of costs and expenses attributable to
the maintenance, development and operation of a Property
Subdivision.

     

     

    Appendix A to Asset Purchase Agreement

    -xv-AMENDING AGREEMENT

AMENDING AGREEMENT

                  THIS AMENDING AGREEMENT made this 14th day of May, 2009.

                  BETWEEN:

FERO INDUSTRIES, INC.

and -

PYRO PHARMECUTICALS, INC.

WHEREAS PYRO and FERO have entered into an Interim Agreement on December 8, 2008 in which PYRO and FERO wish to enter into a business combination to further PYRO’S business development, with a definitive agreement to be entered into not later than January 15, 2009, with closing to occur on or before February 27, 2009.  These dates have lapsed, and both PYRO and FERO wish to extend the Interim Agreement, and dates for entering to a definitive agreement and closing of the business combination.

NOW THEREFORE this Agreement witnesseth that in consideration of the mutual covenants and promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto have agreed and do hereby agree as follows.

1.   Clause 6 shall be amended to provide that the date for entering into a definitive agreement be extended from January 15th, 2009 to June 29, 2009.

2.    Clause 6 shall be amended to provide that the closing date of the transaction shall be extended from February 27, 2009 to August 31, 2009.

3.   In all other respects the term of the Interim Agreement shall apply,

IN WITNESS WHEREOF THE PARTIES have hereto set their hands and seals, as duly witnessed by the hands of their properly authorized officers on their behalf on the day and year first above written.

Signed for and on behalf of

PYRO PHARMECUTICALS, INC.

By its authorized signatory

/s/ Alan Schechter

_________________________

Alan M. Schechter

Chairman and Chief Executive Officer

Signed for and on behalf of

FERO INDUSTRIES, INC.

By its authorized signatory

/s/Kyle Schlosser

________________________

Kyle Schlosser, President

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