Document:

exh10_1.htm

    
      
        Exhibit
10.1

      

       

      LUFKIN
INDUSTRIES, INC.

      2008
VARIABLE COMPENSATION PLAN

       

      Policy:

      A
Variable Compensation Plan for 2008 has been established and approved for
designated participants to encourage sustained high performance and continued
employment with the Company. In order for the 2008 Variable Compensation Plan to
be operational, the Company's performance must clear established hurdles. The
triggering mechanism for the plan is a percent of shareholders' equity goal. In
2008 the hurdle is 9% return on average equity from operational earnings before
adjustments for LIFO inventory and Pension Income. This equates to approximately
$57.1 million pretax profits from operations and $37.1 million after tax profits
from operations (excluding "other income").

       

      Individual
Participation:

      Anticipating
that the Company's performance objectives are attained in 2008 for purposes of
this Plan, designated individuals may participate by achieving their established
divisional, departmental and personal goals. Each participant will be provided
with an Individual Incentive Plan, which describes their variable compensation
opportunities and the corresponding goals that must be obtained.

       

      Establishment
of Goals:

      The
establishment of an individual's goals should be consistent with the Company's
overall budget and business plan for 2008. Additionally, every goal established
for an individual will be illustrated as having three separate attainment levels
for purposes of measurement. The three attainment levels will be identified as:
(1) Threshold, (2) Target and  (3) Maximum.

      
        
           

        

        
           

           

        

        
           

        

      

       

       

      Individual
Opportunity:

      
 

      
        	 
      	
                Opportunity
      as a % of Base Salary

              
	 
      	
                Threshold

              	
                Target

              	
                Maximum

              
	
                Tier
      I

              	
                36

              	
                58

              	
                116

              
	
                Tier
      II

              	
                30

              	
                50

              	
                100

              
	
                Tier
      III

              	
                20

              	
                30

              	
                41

              
	
                Tier
      IV

              	
                15

              	
                25

              	
                35

              
	
                Tier
      V

              	
                8

              	
                15

              	
                22

              

      

       

      Measurement
of Objectives:

      Individual
and unit measurements should:

      
        	
                1.  

              	
                Relate
      to the goals and objectives of the
Company.

              

      

      
        	
                2.  

              	
                Be
      perceived as equitable and valid measures of job
    performance.

              

      

      
        	
                3.  

              	
                Quantifiable
      to the extent possible.

              

      

       

      Awards
to Plan Participants:

      Awards to
participants of this plan will be made based upon:

      
        	
                1.  

              	
                The
      level of accomplishment of assigned goals and
  objectives.

              

      

      
        	
                2.  

              	
                Overall
      contribution to the Company's
performance.

              

      

      
        	
                3.  

              	
                Consistency
      within the framework of the Plan.

              

      

      
        	
                4.  

              	
                Extraordinary
      financial items (both favorable and unfavorable) will not be considered as
      part of performanceinformation.

              

      

      
        	
                5.  

              	
                President
      reserves the right, subject to approval from the Compensation Committee,
      to reduce or forfeit any participant's award if he believes the individual
      or unit's performance does not truly reflect the award generated by this
      plan.

              

      

      
        	
                6.  

              	
                President
      may recommend, with the approval of the Compensation Committee, an
      incentive award to a participant or other key employee if, in his opinion,
      the calculated award does not truly reflect the participant's contribution
      to the company.

              

      

      
        
           

        

        
           

           

        

        
           

        

      

       

      Plan
Administration:

      
        	
                1.  

              	
                Participation
      in the Variable Compensation Plan does not constitute an employment
      contract.

              

      

      
        	
                2.  

              	
                Participation
      in the Variable Compensation Plan does not guarantee participation in any
      subsequent year.

              

      

      
        	
                3.  

              	
                All
      participants are advised that their participation in this plan must be
      held strictly confidential.Converted by EDGARwiz

EXHIBIT 10.1

WAIVER OF REGISTRATION RIGHTS

This WAIVER is given this 14th day of February, 2008 by Valens U.S. SPV I, LLC (“Investor”) to STEN Corporation (the “Company”).

WHEREAS, the Company and Investor have entered into that certain Registration Rights Agreement dated as of November 23, 2007 (“Agreement”);

WHEREAS, the Company has requested, and Investor desires to grant, a waiver of certain provisions of the Agreement.

NOW THEREFORE, in consideration of the premises and for value received Investor hereby consents and agrees as follows:

1.     Definitions.  Capitalized terms not otherwise defined herein have the meaning ascribed to them in the Agreement.

2.     Waiver.  Investor hereby consents and agrees to the waiver of the provisions of Section 2(a) of the Agreement that require the Company to:

(a)     on or prior to each Filing Date, prepare and file with the Commission a Registration Statement covering the Registrable Securities for a selling stockholder resale offering to be made on a continuous basis pursuant to Rule 415; and

(b)    use its best efforts to cause each Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date.

3.     Relationship to Security Agreement and Ancillary Agreements.  Investor hereby consents and agrees that neither the request for nor giving of this Waiver nor the Company’s failure to take the actions specified in Section 2(a)-(b) hereof in reliance upon this Waiver is or will result in (i) an Event of Default under the Security Agreement or the Ancillary Agreements (as that term is defined in the Security Agreement) or (ii) any breach of representation, warranty, covenant or agreement of any of Security Agreement or Ancillary Agreements. 

4.    Full Force and Effect.  Except as modified by this Waiver, the Agreement remains in full force and effect.

5.     Governing Law.  This Waiver shall be governed by and construed in accordance with the laws of the state of New York, without regard to principles of conflicts of law.

IN WITNESS WHEREOF, Investor has executed and delivered this Waiver as of the date and year first above written.

Valens U.S. SPV I, LLC

By:  Valens Capital Management, LLC

Its:   Investment Manager

By:  /s/ [AUTHORIZED SIGNATORY]

Its:  Senior Managing Directorexhibit10-1.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      

       

      ASSET
PURCHASE AND SALE AGREEMENT

       

      

       

      between

       

      

       

      Escondido
Resources LP

       

      as
"Seller"

       

      

       

      and

       

      

       

      Swift
Energy Operating, LLC

       

      as
"Buyer"

       

      

       

      

       

      

       

      Dated
as of September 4, 2007

    

    Exhibit
10.1

    
      
        
          

          507982
000005 HOUSTON 435585.7

        

         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    Page

     

    
      	
              ARTICLE
      I PROPERTIES TO BE SOLD AND PURCHASED

            	
              1

            
	
              Section
      1.1.

            	
              Assets
      Included.

            	
              1

            
	
              Section
      1.2.

            	
              Assets
      Excluded.

            	
              2

            
	
              ARTICLE
      II PURCHASE PRICE

            	
              4

            
	
              Section
      2.1.

            	
              Purchase
      Price.

            	
              4

            
	
              Section
      2.2.

            	
              Accounting
      Adjustments.

            	
              4

            
	
              Section
      2.3.

            	
              Closing
      and Post-Closing Accounting Settlements.

            	
              5

            
	
              Section
      2.4.

            	
              Payment
      of Adjusted Purchase Price.

            	
              6

            
	
              Section
      2.5.

            	
              Allocation
      of Purchase Price.

            	
              6

            
	
              ARTICLE
      III THE CLOSING

            	
              6

            
	
              ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF SELLER

            	
              7

            
	
              Section
      4.1.

            	
              Organization
      and Existence.

            	
              7

            
	
              Section
      4.2.

            	
              Power
      and Authority.

            	
              7

            
	
              Section
      4.3.

            	
              Valid
      and Binding Agreement.

            	
              7

            
	
              Section
      4.4.

            	
              Non-Contravention.

            	
              7

            
	
              Section
      4.5.

            	
              Approvals.

            	
              7

            
	
              Section
      4.6.

            	
              Pending
      Litigation.

            	
              8

            
	
              Section
      4.7.

            	
              Contracts.

            	
              8

            
	
              Section
      4.8.

            	
              Commitments,
      Abandonments or Proposals.

            	
              9

            
	
              Section
      4.9.

            	
              Production
      Sales Contracts.

            	
              9

            
	
              Section
      4.10.

            	
              Plugging
      and Abandonment.

            	
              9

            
	
              Section
      4.11.

            	
              Permits.

            	
              9

            
	
              Section
      4.12.

            	
              Payment
      of Expenses.

            	
              9

            
	
              Section
      4.13.

            	
              Compliance
      with Laws.

            	
              10

            
	
              Section
      4.14.

            	
              Imbalances;
      Prepayments.

            	
              10

            
	
              Section
      4.15.

            	
              Intellectual
      Property.

            	
              10

            
	
              Section
      4.16.

            	
              Taxes.

            	
              10

            
	
              Section
      4.17.

            	
              Fees
      and Commissions.

            	
              11

            
	
              Section
      4.18.

            	
              Operations.

            	
              11

            
	
              Section
      4.19.

            	
              Environmental
      Laws.

            	
              11

            
	
              Section
      4.20.

            	
              Wells.

            	
              11

            
	
              Section
      4.21.

            	
              Disclaimer
      of Warranties.

            	
              11

            
	
              ARTICLE
      V REPRESENTATIONS AND WARRANTIES OF BUYER

            	
              12

            
	
              Section
      5.1.

            	
              Organization
      and Existence.

            	
              12

            
	
              Section
      5.2.

            	
              Power
      and Authority.

            	
              12

            
	
              Section
      5.3.

            	
              Valid
      and Binding Agreement.

            	
              12

            
	
              Section
      5.4.

            	
              Non-Contravention.

            	
              13

            
	
              Section
      5.5.

            	
              Approvals.

            	
              13

            
	
              Section
      5.6.

            	
              Pending
      Litigation.

            	
              13

            
	
              Section
      5.7.

            	
              Knowledgeable
      Purchaser.

            	
              13

            
	
              Section
      5.8.

            	
              Funds.

            	
              14

            
	
              Section
      5.9.

            	
              Qualified
      Leaseholder.

            	
              14

            
	
              Section
      5.10.

            	
              Fees
      and Commissions.

            	
              14

            
	
              ARTICLE
      VI CERTAIN COVENANTS OF SELLER PENDING CLOSING

            	
              14

            
	
              Section
      6.1.

            	
              Access
      to Files.

            	
              14

            
	
              Section
      6.2.

            	
              Conduct
      of Operations.

            	
              14

            
	
              Section
      6.3.

            	
              Restrictions
      on Certain Actions.

            	
              14

            
	
              Section
      6.4.

            	
              Seller's
      Confidentiality Obligation.

            	
              15

            
	
              Section
      6.5.

            	
              Payment
      of Expenses.

            	
              16

            
	
              Section
      6.6.

            	
              Preferential
      Rights and Third Party Consents.

            	
              16

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

            	
              16

            
	
              Section
      7.1.

            	
              Reasonable
      Best Efforts.

            	
              16

            
	
              Section
      7.2.

            	
              Notice
      of Litigation.

            	
              16

            
	
              Section
      7.3.

            	
              Notification
      of Certain Matters.

            	
              17

            
	
              Section
      7.4.

            	
              Fees
      and Expenses.

            	
              17

            
	
              Section
      7.5.

            	
              Public
      Announcements.

            	
              17

            
	
              Section
      7.6.

            	
              Casualty
      Loss Prior to Closing.

            	
              17

            
	
              Section
      7.7.

            	
              Governmental
      Bonds.

            	
              18

            
	
              Section
      7.8.

            	
              Assumed
      Obligations.

            	
              18

            
	
              Section
      7.9.

            	
              Books
      and Records.

            	
              18

            
	
              Section
      7.10.

            	
              Suspended
      Funds.

            	
              18

            
	
              Section
      7.11.

            	
              Letters-in-Lieu.

            	
              18

            
	
              Section
      7.12.

            	
              Logos
      and Names.

            	
              18

            
	
              Section
      7.13.

            	
              Covenant
      Regarding Joint Account.

            	
              18

            
	
              Section
      7.14.

            	
              Further
      Assurances.

            	
              19

            
	
              ARTICLE
      VIII DUE DILIGENCE EXAMINATION

            	
              19

            
	
              Section
      8.1.

            	
              Title
      Due Diligence Examination.

            	
              19

            
	
              Section
      8.2.

            	
              Environmental
      Due Diligence Examination.

            	
              22

            
	
              Section
      8.3.

            	
              Disputes
      Regarding Title Defects or Environmental Defects.

            	
              24

            
	
              Section
      8.4.

            	
              Adjustments
      to Purchase Price for Defects.

            	
              24

            
	
              Section
      8.5.

            	
              Buyer
      Indemnification.

            	
              25

            
	
              ARTICLE
      IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES

            	 
      
	
              Section
      9.1.

            	
              Conditions
      Precedent to the Obligations of Buyer.

            	
              26

            
	
              Section
      9.2.

            	
              Conditions
      Precedent to the Obligations of Seller.

            	
              27

            
	
              ARTICLE
      X TERMINATION, AMENDMENT AND WAIVER

            	
              28

            
	
              Section
      10.1.

            	
              Termination.

            	
              28

            
	
              Section
      10.2.

            	
              Effect
      of Termination.

            	
              28

            
	
              Section
      10.3.

            	
              Amendment.

            	
              29

            
	
              Section
      10.4.

            	
              Waiver.

            	
              29

            
	
              ARTICLE
      XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
      INDEMNIFICATION

            	
              29

            
	
              Section
      11.1.

            	
              Survival.

            	
              29

            
	
              Section
      11.2.

            	
              Seller's
      Indemnification Obligations.

            	
              29

            
	
              Section
      11.3.

            	
              Buyer's
      Indemnification Obligations.

            	
              30

            
	
              Section
      11.4.

            	
              Net
      Amounts.

            	
              30

            
	
              Section
      11.5.

            	
              Indemnification
      Proceedings.

            	
              31

            
	
              Section
      11.6.

            	
              Indemnification
      Exclusive Remedy.

            	
              31

            
	
              Section
      11.7.

            	
              Limited
      to Actual Damages.

            	
              31

            
	
              Section
      11.8.

            	
              Indemnification
      Despite Negligence.

            	
              32

            
	
              Section
      11.9.

            	
              Limits
      on Liability.

            	
              32

            
	
              ARTICLE
      XII MISCELLANEOUS MATTERS

            	
              32

            
	
              Section
      12.1.

            	
              Notices.

            	
              32

            
	
              Section
      12.2.

            	
              Entire
      Agreement.

            	
              33

            
	
              Section
      12.3.

            	
              Injunctive
      Relief.

            	
              33

            
	
              Section
      12.4.

            	
              Binding
      Effect; Assignment; No Third Party Benefit.

            	
              33

            
	
              Section
      12.5.

            	
              Severability.

            	
              34

            
	
              Section
      12.6.

            	
              GOVERNING
      LAW.

            	
              34

            
	
              Section
      12.7.

            	
              Counterparts.

            	
              34

            
	
              Section
      12.8.

            	
              WAIVER
      OF CONSUMER RIGHTS.

            	
              34

            
	
              Section
      12.9.

            	
              Competition.

            	
              34

            
	
              ARTICLE
      XIII DEFINITIONS AND REFERENCES

            	
              34

            
	
              Section
      13.1.

            	
              Certain
      Defined Terms.

            	
              34

            
	
              Section
      13.2.

            	
              Certain
      Additional Defined Terms.

            	
              38

            
	
              Section
      13.3.

            	
              References,
      Titles and Construction.

            	
              39

            

    

    

    
      
        
          

          507982 000005 HOUSTON 435585.7
                                                                      
--

        

         

      

      
         

        
          

        

      

      
         

      

    

    ASSET
PURCHASE AND SALE AGREEMENT

     

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

     

    RECITALS:

     

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

     

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

     

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

     

    AGREEMENT:

     

    ARTICLE
I

     

    Properties To Be Sold and
Purchased

     

    Section
1.1.                                Assets
Included.

     

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

     

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

     

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

     

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

     

    
      
        
          

          507982
000005 HOUSTON 435585.7

        

         

      

      
         

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

    Section
1.2.                                Assets
Excluded.

     

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

     

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

     

    
      
        
          507982 000005 HOUSTON 435585.7
                                                                      
--

        

         

      

      
         

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
II

     

    Purchase
Price

     

    Section
2.1.                                Purchase
Price.

     

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

     

    Section
2.2.                                Accounting
Adjustments.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    Section
2.3.                                Closing and Post-Closing
Accounting Settlements.

     

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

     

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

     

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

     

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

     

    Section
2.4.                                Payment of Adjusted Purchase
Price.

     

      The Adjusted
Purchase Price shall be paid to Seller as follows:

     

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

     

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

     

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

     

    Section
2.5.                                Allocation of Purchase
Price.

     

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

     

    ARTICLE
III

     

    The
Closing

     

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

     

    
      
        
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    ARTICLE
IV

     

    Representations and
Warranties of Seller

     

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

     

    Section
4.1.                                Organization and
Existence.

     

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

     

    Section
4.2.                                Power and
Authority.

     

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

     

    Section
4.3.                                Valid and Binding
Agreement.

     

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

     

    Section
4.4.                                Non-Contravention.

     

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

     

    Section
4.5.                                Approvals.

     

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

     

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

     

    Section
4.6.                                Pending
Litigation.

     

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

     

    Section
4.7.                                Contracts.

     

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

     

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

     

    (c)

     

    Section 4.8  Commitments,
Abandonments or Proposals.

     

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

     

    Section
4.9.                                Production Sales
Contracts.

     

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

     

    Section
4.10.                                Plugging and
Abandonment.

     

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

     

    Section
4.11.                                Permits.

     

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

     

    Section
4.12.                                Payment of
Expenses.

     

      All expenses
(including all bills for labor, materials and supplies used or furnished for use
in connection with the Properties, and all

     

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

     

    Section
4.13.                                Compliance with
Laws.

     

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

     

    Section
4.14.                                Imbalances;
Prepayments.

     

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

     

    Section
4.15.                                Intellectual
Property.

     

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

     

    Section
4.16.                                Taxes.

     

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

     

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

     

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

     

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

     

    Section
4.17.                                Fees and
Commissions.

     

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

     

    Section
4.18.                                Operations.

     

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

     

    Section
4.19.                                Environmental
Laws.

     

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

     

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

     

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

     

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

     

    Section
4.20.                                Wells.

     

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

     

    Section
4.21.                                Disclaimer of
Warranties.

     

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

     

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

     

    ARTICLE
V

     

    Representations and
Warranties of Buyer

     

    Section
5.1.                                Organization and
Existence.

     

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

     

    Section
5.2.                                Power and
Authority.

     

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

     

    Section
5.3.                                Valid and Binding
Agreement.

     

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

     

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

     

    Section
5.4.                                Non-Contravention.

     

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

     

    Section
5.5.                                Approvals.

     

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

     

    Section
5.6.                                Pending
Litigation.

     

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

     

    Section
5.7.                                Knowledgeable
Purchaser.

     

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

     

    
      
        
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    Funds.

     

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

     

    Section
5.8.                                Qualified
Leaseholder.

     

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

     

    Section
5.9.                                Fees and
Commissions.

     

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

     

    ARTICLE
VI

     

    Certain Covenants of Seller
Pending Closing

     

    Section
6.1.                                Access to
Files.

     

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

     

    Section
6.2.                                Conduct of
Operations.

     

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

     

    Section
6.3.                                Restrictions on Certain
Actions.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (k)           commit
to do any of the foregoing.

     

    Section
6.4.                                Seller's Confidentiality
Obligation.

     

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

     

    
      
        
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    Section
6.5     Payment
of Expenses.

     

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

     

    Section
6.5.                                Preferential Rights and
Third Party Consents.

     

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

     

    ARTICLE
VII

     

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

     

    Section
7.1.                                Reasonable Best
Efforts.

     

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

     

    Section
7.2.                                Notice of
Litigation.

     

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

     

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

     

    Section
7.3.                                Notification of Certain
Matters.

     

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

     

    Section
7.4.                                Fees and
Expenses.

     

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

     

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

     

    Section
7.5.                                Public
Announcements.

     

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

     

    Section
7.6.                                Casualty Loss Prior to
Closing.

     

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

     

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

     

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

     

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

     

    Section
7.7.                                Governmental
Bonds.

     

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

     

    Section
7.8.                                Assumed
Obligations.

     

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

     

    Section
7.9.                                Books and
Records.

     

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

     

    Section
7.10.                                Suspended
Funds.

     

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

     

    Section
7.11.                                Letters-in-Lieu.

     

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

     

    Section
7.12.                                Logos and
Names.

     

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

     

    Section
7.13.                                Covenant Regarding Joint
Account.

     

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

     

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

     

    Section
7.14.                                Further
Assurances.

     

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

     

    ARTICLE
VIII

     

    Due Diligence
Examination

     

    Section
8.1.                                Title Due Diligence
Examination.

     

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

     

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

     

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

     

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

     

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

     

    (d)           As
used in this Section 8.1:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    Section
8.2.                                Environmental Due Diligence
Examination.

     

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

     

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

     

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

     

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

     

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

     

    (f)           As
used in this Section 8.2:

     

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

     

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

     

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

     

    Section
8.3.                                Disputes Regarding Title
Defects or Environmental Defects.

     

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

     

    Section
8.4.                                Adjustments to Purchase
Price for Defects.

     

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

     

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

     

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

     

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

     

    Section
8.5.                                Buyer
Indemnification.

     

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

     

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

     

    ARTICLE
IX

     

    Conditions Precedent to the
Obligations of the Parties

     

    Section
9.1.                                Conditions Precedent to the
Obligations of Buyer.

     

      The
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    Section
9.2.                                Conditions Precedent to the
Obligations of Seller.

     

      The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:

     

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

     

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

     

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

     

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

     

    
      
        
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    ARTICLE
X

     

    Termination, Amendment and
Waiver

     

    Section
10.3.                                Termination.

     

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

     

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

     

    (b)           by
either Seller or Buyer, if:

     

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

     

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

     

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

     

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

     

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

     

    Section
10.4.                                Effect of
Termination.

     

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

     

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

     

    Section
10.5.                                Amendment.

     

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

     

    Section
10.6.                                Waiver.

     

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

     

    ARTICLE
XI

     

    Survival of Representations,
Warranties and Covenants;
Indemnification

     

    Section
11.1.                                Survival.

     

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

     

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

     

    Section
11.2.                                Seller's Indemnification
Obligations.

     

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

     

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

     

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

     

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

     

    (c)           relating
to the Excluded Assets; or

     

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

     

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

     

    Section
11.3.                                Buyer's Indemnification
Obligations.

     

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

     

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

     

    (b)           relating
to the Assumed Obligations;

     

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

     

    Section
11.4.                                Net
Amounts.

     

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

     

    
      
        
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    Indemnification
Proceedings.

     

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

     

    Section
11.5.                                Indemnification Exclusive
Remedy.

     

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

     

    Section
11.6.                                Limited to Actual
Damages.

     

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

     

    
      
        
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    Indemnification
Despite Negligence.

     

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

     

    Section
11.7.                                Limits on
Liability.

     

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

     

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

     

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

     

    ARTICLE
XII

     

    Miscellaneous
Matters

     

    Section
12.1.                                Notices.

     

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

     

    
      	
               
      

            	
              If to
      Seller:

            

    

     

    

     

    
      	
               
      

            	
              Escondido
      Resources LP

            

    

     

    
      	
               
      

            	
              526
      Kingwood Drive, #353

            

    

     

    
      	
               
      

            	
              Kingwood,
      Texas  77339-4473

            

    

     

    
      	
               
      

            	
              Attention:  William
      E. Deupree

            

    

     

    
      	
               
      

            	
              Fax
      No.:  281-359-6780

            

    

     

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

            

    

     

    

     

    
      	
               
      

            	
              Thompson
      & Knight LLP

            

    

     

    
      	
               
      

            	
              333
      Clay Street, Suite 3300

            

    

     

    
      	
               
      

            	
              Houston,
      Texas  77002

            

    

     

    
      	
               
      

            	
              Attention:  Michael
      K. Pierce and Sarah E. McLean

            

    

     

    
      	
               
      

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

            

    

     

    
      	
               
      

            	
              If to
      Buyer:

            

    

     

    
      	
               
      

            	 

    

     

    
      	
               
      

            	
              Swift
      Energy Operating, LLC

            

    

     

    
      	
               
      

            	
              16825
      Northchase Drive, Suite 400

            

    

     

    
      	
               
      

            	
              Houston,
      Texas 77060

            

    

     

    
      	
               
      

            	
              Attention:  James
      P. Mitchell

            

    

     

    
      	
               
      

            	
              Fax
      No.:  281-874-2808

            

    

     

    
      	
               
      

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

            

    

     

    
      	
               
      

            	 

    

     

    
      	
               
      

            	
              Swift
      Energy Operating, LLC

            

    

     

    
      	
               
      

            	
              16825
      Northchase Drive, Suite 400

            

    

     

    
      	
               
      

            	
              Houston,
      Texas 77060

            

    

     

    
      	
               
      

            	
              Attention:  Larry
      Baillargeon

            

    

     

    
      	
               
      

            	
              Fax
      No.:  281-874-2808

            

    

     

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

     

    Section
12.2.                                Entire
Agreement.

     

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

     

    Section
12.3.                                Injunctive
Relief.

     

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

     

    Section
12.4.                                Binding Effect; Assignment;
No Third Party Benefit.

     

      This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and permitted
assigns.  Except as otherwise expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties.  Except as provided in Section 8.5 and
Article XI,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto,

     

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

     

    Section
12.5.                                Severability.

     

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

     

    Section
12.6.                                GOVERNING
LAW.

     

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

     

    Section
12.7.                                Counterparts.

     

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

     

    Section
12.8.                                WAIVER OF CONSUMER
RIGHTS.

     

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

     

    Section
12.9.                                Competition.

     

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

     

    ARTICLE
XIII

     

    Definitions and
References

     

    Section
13.1.                                Certain Defined
Terms.

     

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

     

    "AAA" means the American
Arbitration Association.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    Section
13.2.                                Certain Additional Defined
Terms.

     

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

     

    
      	
              Defined
      Term

            	
              Reference

            
	
              Accounting
      Dispute

            	
              Section
      2.3(c)

            
	
              Accounting
      Referee

            	
              Section
      2.3(c)

            
	
              Adjusted
      Purchase Price

            	
              Section
      2.1

            
	
              Allocated
      Value

            	
              Section
      8.1(c)(i)

            
	
              Assignment

            	
              Section
      9.1(f)

            
	
              Basic
      Documents

            	
              Section
      4.7

            
	
              Buyer's
      Environmental Consultant

            	
              Section
      8.2(a)

            
	
              Buyer's
      Environmental Review

            	
              Section
      8.2(a)

            
	
              Buyer's
      Losses

            	
              Section
      11.2

            
	
              Buyer's
      Title Review

            	
              Section
      8.1(a)

            
	
              Closing

            	
              Article
      III

            
	
              Closing
      Date

            	
              Article
      III

            
	
              Cure
      Period

            	
              Section
      8.4(c)

            
	
              Defect
      Dispute

            	
              Section
      8.3

            
	
              Defensible
      Title

            	
              Section
      8.1(d)(i)

            
	
              Deposit

            	
              Section
      2.4(a)

            
	
              Environmental
      Defect

            	
              Section
      8.2(e)(i)

            
	
              Environmental
      Defect Notice

            	
              Section
      8.2(c)

            
	
              Environmental
      Defect Value

            	
              Section
      8.2(e)(ii)

            
	
              Environmental
      Information

            	
              Section
      8.2(b)

            
	
              Examination
      Period

            	
              Section
      8.1(a)

            
	
              Excluded
      Assets

            	
              Section
      1.2

            
	
              Indemnified
      Party

            	
              Section
      11.5

            
	
              Indemnifying
      Party

            	
              Section
      11.5

            
	
              Independent
      Expert

            	
              Section
      8.3

            
	
              Notice
      Period

            	
              Section
      11.5

            
	
              Oil
      and Gas Properties

            	
              Section
      1.1

            
	
              Permitted
      Encumbrances

            	
              Section
      8.1(d)(ii)

            
	
              Post-Closing
      Defect

            	
              Section
      8.4(c)

            
	
              Properties

            	
              Section
      1.1

            
	
              Purchase
      Price

            	
              Section
      2.1

            
	
              Records

            	
              Section
      1.1(f)

            
	
              Remedies
      for Title Defects

            	
              Section
      8.1(b)

            
	
              Request
      Date

            	
              Section
      2.3(c)

            
	
              Required
      Payee

            	
              Section
      7.13

            
	
              Restricted
      Period

            	
              Section
      12.9

            
	
              Restricted
      Person

            	
              Section
      12.9

            
	
              Rules

            	
              Section
      8.3

            
	
              Scheduled
      Production Sales Contracts

            	
              Section
      4.9

            
	
              Seller's
      Losses

            	
              Section
      11.3

            
	
              Suspended
      Proceeds

            	
              Section
      7.10

            
	
              Survival
      Date

            	
              Section
      11.2

            
	
              Title
      Defect

            	
              Section
      8.1(d)(iii)

            
	
              Title
      Defect Amount

            	
              Section
      8.1(c)

            
	
              Title
      Defect Notice

            	
              Section
      8.1(b)

            
	
              Title
      Defect Property

            	
              Section
      8.1(b)

            

    

     

    Section
13.3.                                References, Titles and
Construction.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

     

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

     

    SELLER:

     

    

     

    ESCONDIDO
RESOURCES LP

     

    

     

    By:           Escondido
Resources GP, LLC,

     

    its General Partner

     

    

     

    By:           

     

    Name: William
E. Deupree

     

    Title: President

     

    BUYER:

     

    

     

    SWIFT
ENERGY OPERATING, LLC

     

    

     

    

     

    By:           

     

    Name: Bruce
H. Vincent

     

    Title: President

     

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

     

    

     

    William
E. Deupree

     

    

     

    Mark
Semmelbeck

     

    

     

    J. David
Wrather

     

    

     

    Kurt von
Plonsk

     

    
      
        
          507982 000005 HOUSTON 435585.7
                                                                      
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