Document:

psaenervest.htm

     

     

    

    

    PURCHASE AND SALE
AGREEMENT

    

    BETWEEN

    

    ENERVEST ENERGY INSTITUTIONAL FUND
IX, L.P.,

    ENERVEST ENERGY INSTITUTIONAL FUND
IX-WI, L.P.

    and EVERSTAR ENERGY,
LLC

    (Collectively,
“Sellers”)

    

    AND

    

    FIDELITY EXPLORATION AND PRODUCTION
COMPANY

    (“Buyer”)

    

    

    

    EFFECTIVE TIME:  January 1,
2008

    

    
      
              

                  
    

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE OF
CONTENTS

    

     

    ARTICLE
1.PROPERTY DESCRIPTION

    1.1           The
Interests

    1.1.1               Leases

    1.1.2               Units

    1.1.3               Wells

    1.1.4               Equipment

    1.1.5               Surface
Agreements

    1.1.6               Contracts

    1.1.7               Miscellaneous
Interests

    1.2           Exclusions
from the Interests

    1.3           Ownership
of Production from the Interests Prior to the Effective Date

    1.4           Ownership
of Production from the Interests After the Effective Date

    ARTICLE
2.CONSIDERATION

    2.1           Sale
Price

    2.1.1               Amount
Due at Closing

    2.1.2               Allocated
Values

    2.1.3               Earnest
Money

    2.2           Adjustments
at Closing

    2.2.1               Preliminary
Settlement Statement

    2.2.2               Upward
Adjustments

    2.2.3               Downward
Adjustments

    2.3           Adjustments
After Closing

    2.3.1               Final
Settlement Statement

    2.3.2               Payment
of Post-Closing Adjustments

    2.3.3               Resolution
of Disputed Items

    2.4           Payment
Method

    2.5           Principles
of Accounting

    ARTICLE
3.REPRESENTATIONS AND WARRANTIES

    3.1           Sellers’
Representations

    3.1.1               Corporate
Authority

    3.1.2               Approvals

    3.1.3               Validity
of Obligation

    3.1.4               No
Violation of Contractual Restrictions

    3.1.5               No
Violation of Other Legal Restrictions

    3.1.6               Bankruptcy

    3.1.7               Broker's
Fees

    3.1.8               Lawsuits
and Claims

    3.1.9               Contracts

    3.1.10               Seller’s
Knowledge

    3.2           Buyer’s
Representations

    3.2.1               Authority

    3.2.2               Requisite
Approvals

    3.2.3               Validity
of Obligation

    3.2.4               No
Violation of Contractual Restrictions

    3.2.5               No
Violation of Other Legal Restrictions

    3.2.6               Bankruptcy

    3.2.7               Independent
Evaluation

    3.2.8               Broker's
Fees

    3.2.9               Lawsuits
and Claims

    3.2.10               Securities
Laws

    3.3           Notice
of Changes

    3.4           Representations
and Warranties Exclusive

    ARTICLE
4.TITLE WARRANTY; DISCLAIMER OF WARRANTIES

    4.1           Special
Warranty of Title: Encumbrances

    4.2           Condition
and Fitness of the Interests

    4.3           Information
About the Interests

    4.4           Subrogation
of Warranties

    ARTICLE
5.DUE DILIGENCE REVIEW OF THE INTERESTS

    5.1           Access
to Records

    5.2           Physical
and Environmental Inspection

    5.3           Environmental
Assessment

    5.3.1               Inspection
and Test Results

    5.3.2               Notice
of Material Environmental Conditions

    5.3.3               Rights
and Remedies for Material Environmental Conditions

    5.4           Government
Approvals

    5.4.1               Title
Pending Governmental Approvals

    5.4.2               Denial
of Required Government Approvals

    5.5           Preferential
Rights and Consents to Assign

    5.5.1               Notices
to Holders

    5.5.2               Remedies
Before Closing

    5.5.3               Remedies
After Closing

    5.6           Title
Defects

    5.6.1               Definition
of Title Defect

    5.6.2               Notice
of Title Defects

    5.6.3               Right
to Cure Title Defect

    5.6.4               Remedies
for Uncured Title Defects

    5.7           Casualty
Losses and Government Takings

    5.7.1               Notice
of Casualty Losses and Government Takings

    5.7.2               Remedies
for Casualty Losses and Government Takings

    5.7.3               Exclusion
of Ordinary Depreciation and Deletion

    ARTICLE
6.TERMINATION AND EFFECT OF TERMINATION

    6.1           Right
to Terminate

    6.2           Effect
of Termination

    6.2.1               Termination
by Agreement

    6.2.2               Termination
as a Result of Buyer’s Breach

    6.2.3               Termination
as a Result of Seller's Breach

    ARTICLE
7.CONDITIONS OF CLOSING AND CLOSING

    7.1           Conditions
of Closing by Buyer

    7.1.1               Representations,
Warranties and Covenants

    7.1.2               Consents

    7.1.3               Lawsuits
and Claims

    7.2           Conditions
of Closing by Sellers

    7.2.1               Representations
Warranties and Covenants

    7.2.2               Lawsuits
and Claims

    7.2.3               Bonds
and Insurance

    7.3           Closing

    7.4           Actions
to Occur at Closing

    7.4.1               Delivery
of Assignment

    7.4.2               Delivery
of Sale Price

    7.4.3               Delivery
of Suspense Funds

    7.4.4               Change
of Operatorship Forms

    7.4.5               Evidence
of Bonds

    7.4.6               Possession
of the Interests

    7.4.7               Letters-in-Lieu

    7.4.8               Officer's
Certificates

    7.5           Post-Closing
Obligations

    7.5.1               Delivery
of Records

    7.5.2               Recording
and Filing

    7.5.3               Change
of Operator Requirements

    7.5.4               Further
Assurances

    ARTICLE
8.ASSUMED RIGHTS AND OBLIGATIONS AND INDEMNITIES

    8.1           Condition
of the Interests

    8.1.1               Oil
and Gas Activities

    8.1.2               NORM

    8.2           Assumption
of Obligations

    8.3           Retained
Obligations

    8.4           Buyer’s
General Indemnification

    8.5           Sellers'
General Indemnification

    8.6           Environmental
Indemnity and Release

    8.7           Limitations
on Liabilities

    8.8           Successors
and Assigns

    ARTICLE
9.TAXES AND EXPENSES

    9.1           Recording
and Transfer Expenses

    9.2           Real
Property and Personal Property Taxes

    9.3           Ad
Valorem and Severance Taxes

    9.4           Tax
and Financial Reporting

    9.4.1               IRS
Form 8594

    9.4.2               Financial
Reporting

    9.5           Sales
and Use Taxes

    9.6           Income
Taxes

    9.7           Incidental
Expenses

    ARTICLE
10.OPERATIONS DURING THE TRANSITION PERIOD

    10.1           Operations
by Seller

    10.2           Buyer's
Approval

    10.3           Compensation
of Sellers

    10.4           Operation
of Certain Interests After Interim Period

    ARTICLE
11.MISCELLANEOUS

    11.1           Notices

    11.2           Further
Assurance

    11.3           Removal
of Signs

    11.4           Securities
Laws

    11.5           Due
Diligence

    11.6           Press
Release

    11.7           Entire
Agreement

    11.8           Assignability

    11.9           Survival

    11.10         Severability

    11.11         Counterparts

    11.12         Governing
Law

    11.13         Dispute
Resolution

    11.14         Production
Imbalances

    11.15         Pipeline
and Other Imbalances

    11.16         Exhibits

    LIST OF EXHIBITS AND
SCHEDULES

    

    EXHIBITS

    

    Exhibit
A                      Sellers’
Ownership Shares

    

    Exhibit
B                      Description
of Interests

    

    Part
I                                Lease
Description

    

    Part
II                               Wells

    

    Part
III                              Equipment

    

    Part
IV                              Surface
Agreements

    

    Part
V                               Material
Contracts

    

    Exhibit
C                      Allocated
Values

    

    Exhibit
D                      Form
of Assignment and Bill of Sale

    

    Exhibit
E                      Production
Imbalances

    

    Exhibit
F                      Preferential
Rights and Consents

    

    Exhibit
G                      Shiloh
Drilling Checklists

    

    

    SCHEDULES

    

    3.1.8                            Lawsuits
and Claims

     

    
       

      
        
        

        
          

        

      

       

    

    PURCHASE AND SALE
AGREEMENT

    

    THIS PURCHASE AND SALE
AGREEMENT (this “Agreement”), dated
January 4, 2008 is between ENERVEST ENERGY INSTITUTIONAL FUND IX, L.P., a
Delaware limited partnership (“Fund IX”), ENERVEST
ENERGY INSTITUTIONAL FUND IX-WI, L.P. a Delaware limited partnership (“WI Fund IX”) with
each of Fund IX, and WI Fund IX having an address of 1000 Louisiana, Suite 800,
Houston, Texas 77002, and EVERSTAR ENERGY, LLC., a Texas limited liability
company having an address of 1614 Chestnut Grove Lane, Kingwood, Texas 77345
(“EverStar”),
and all of which being called collectively herein “Sellers” and
individually “Seller” and Fidelity
Exploration & Production Company, a Delaware corporation (“Buyer”) having an
address of 1700 Lincoln Street, Suite 2800, Denver,
CO  80203.  Sellers and Buyer are sometimes hereinafter
collectively called the “Parties” and
individually called a “Party.”  Additionally,
EnerVest Operating, L.L.C., a Delaware limited liability company (“EnerVest Operating”),
hereby joins in this agreement for the sole and limited purpose of conveying the
Drilling Contract, as hereinafter defined.

     

    WHEREAS,
Sellers desire to sell, and Buyer desires to purchase, upon and subject to the
terms, conditions, reservations and exceptions hereinafter set forth, Sellers’
interest in and to certain oil and gas properties and other assets related
thereto as further described hereinafter;

     

    NOW
THEREFORE, for and in consideration of the covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Sellers and Buyer agree as
follows.

     

    ARTICLE 1.  PROPERTY
DESCRIPTION

     

    
      	
              1.1  

            	
              The
      Interests.   Subject to the terms, conditions,
      reservations and exceptions set forth in this Agreement, each Seller shall
      sell, transfer, assign, convey and deliver unto Buyer, and Buyer shall
      purchase, receive, pay for and accept, as of  7:00 a.m. local time
      where the properties are located on January 1, 2008 (the “Effective
      Date”), the undivided interests of each Seller as set forth in
      Exhibit A attached hereto and made a part hereof (hereinafter, each
      Seller’s “Ownership
      Share”), the intent of Sellers being to convey to Buyer all of
      Sellers' right, title and interest in and to the Interests, SAVE AND
      EXCEPT, however, the Retained ORRI, as hereinafter
  defined.

            

    

     

    Sellers’
interests in the assets described hereinafter in Sections 1.1.1 through 1.1.7
are collectively called herein the “Interests”.

     

    
      	
              1.1.1  

            	
              Leases.  The
      oil and gas leases and oil, gas and mineral leases set forth in Exhibit B,
      Part I attached hereto and made a part hereof for all purposes, together
      with all of Sellers’ other right, title and interest in and to the land
      covered by such leases, including without limitation, all mineral, royalty
      and overriding royalty interests, and all rights, privileges and
      obligations appurtenant to those interests (the “Leases”);

            

    

     

    
      	
              1.1.2  

            	
              Units.  All
      rights and interests in any unit or pooled area in which the Leases are
      included, to the extent that these rights and interests arise from and are
      associated with the leases, including without limitation all rights
      derived from any unitization, pooling, operating, communitization or other
      agreement or from any declaration or order of any governmental authority
      (the “Units”);

            

    

     

    
      	
              1.1.3  

            	
              Wells. All
      oil, gas and condensate wells (whether producing, not producing or
      abandoned), water source, water injection and other injection or disposal
      wells and systems located on the Leases or lands unitized or pooled with
      the Leases, including without limitation, the wells set forth in Exhibit
      B, Part II attached hereto and made a part hereof for all purposes (the
      “Wells”);

            

    

      

    
      	
              1.1.4  

            	
              Equipment. All
      equipment, facilities, pipelines, pipeline laterals, gathering systems,
      platforms, well pads, tank batteries, improvements, fixtures, inventory,
      spare parts, tools, materials and other personal property on the Leases or
      used in developing or operating the Leases or producing, treating,
      storing, compressing, processing or transporting hydrocarbons on or from
      the Leases, including without limitation, those items listed in Exhibit B,
      Part III attached hereto and made a part hereof for all purposes (the
      “Equipment”);

            

    

      

    
      	
              1.1.5  

            	
              Surface
      Agreements.  To the extent assignable or transferable,
      all easements, rights-of-way, licenses, permits, servitudes, surface
      leases, and similar interests applicable to or used in operating the
      Leases, the lands unitized or pooled with the Leases or the Equipment,
      including, without limitation, those set forth in Exhibit B, Part IV
      attached hereto and made a part hereof for all purposes (the “Surface
      Agreements”);

            

    

      

    
      	
              1.1.6  

            	
              Contracts.  To
      the extent assignable or transferable, all contracts and contractual
      rights, obligations and interests relating to the Leases or the lands
      unitized or pooled with the Leases or the Equipment, including, without
      limitation, that certain IADC Drilling Bid Proposal and Daywork Drilling
      contract – U.S. dated March 14, 2006 between EnerVest Operating and Nabors
      Drilling USA, LP (“Nabors”)
      relating to Nabor’s Rig M22, as amended pursuant to (i) Amendment to
      Contract dated May 16, 2006 and (ii) letter agreement dated July 2, 2007
      reflecting, among other matters, the change of the Rig name from M23 to
      M22,  (herein the “Drilling
      Contract”), together with all unit agreements, farmout agreements,
      farm-in agreements, operating agreements, and hydrocarbon sales, purchase,
      gathering, transportation, treating, marketing, exchange, processing and
      fractionating agreements, surface leases, operating agreements, whether of
      record or not, including without limitation, as described in Exhibit B,
      Part V hereto (the “Contracts”);
      and

            

    

      

    
      	
              1.1.7  

            	
              Miscellaneous
      Interests.  All other tangibles, miscellaneous interests
      or other assets on or used in connection with the Leases, Units, Wells,
      Equipment and/or Contracts, including, without limitation, all lease
      files, land files, well files, production records, division order files,
      abstracts, title opinions, and contract files, insofar as they are
      directly related to the items described in Sections 1.1.1 through 1.1.6
      hereof.

            

    

     

    
      	
              1.2  

            	
              Exclusions from the
      Interests.  The Interests to be conveyed and assigned
      under this Agreement do not
include:

            

    

     

    
      	
              1.2.1 
      

            	
              Any
      and all interpretive data that Sellers are contractually prevented from
      selling or conveying to third parties, including without limitation
      proprietary 3-D seismic, computer software, 3-D seismic and computer
      software licensed from third parties, patents, trade secrets, copyrights,
      names, marks and logos, all of which Sellers will remove before, or as
      soon as possible after, Closing;

            

    

     

    
      	
              1.2.2 
      

            	
              Trade
      credits and rebates from contractors and vendors, accounts and notes
      receivable, and adjustments or refunds attributable to Sellers’ interest
      in the Interests that relate to any period before the Effective Date,
      including without limitation transportation tax credits and refunds,
      tariff refunds, take-or-pay claims, insurance premium adjustments, and
      audit adjustments under the Contracts;
and

            

    

     

    
      	
              1.2.3 
      

            	
              All
      overriding royalty interests owned by EverStar in and to the Interests or
      any portion thereof separate and apart from the net revenue interest
      attributable to EverStar’s Ownership Share in the Interests (the “Retained
      ORRI”).

            

    

     

    
      	
              1.3  

            	
              Ownership of
      Production from the Interests Prior to the Effective
      Date.

            

    

     

    
      	
               

            	
              (i)

            	
              Sellers
      shall own all merchantable oil, gas, condensate and distillate (“Hydrocarbons”)
      produced from the Interests before the Effective Date. If, on the
      Effective Date, Hydrocarbons produced from the Interests before the
      Effective Date are stored on the Leases or unit stock tanks (the “Stock Tank
      Oil”), Sellers shall remain the owner thereof and shall be entitled
      to all of the proceeds therefrom.

            

    

     

    
      	
               

            	
              (ii)

            	
              The
      Stock Tank Oil will be gauged and measured as of 7:00 am. local time where
      the Interests are located on the Effective Date. Sellers and Buyer will
      accept the Lease or unit operator's tank gauge readings, meter tickets or
      other inventory records of the Stock Tank
Oil.

            

    

     

    
      	
              1.4  

            	
              Ownership of
      Production from the Interests After the Effective
      Date.  Upon the occurrence of Closing (as hereinafter
      defined), Buyer will own all Hydrocarbons produced from the Interests on
      and after the Effective Date. Upon terms and conditions approved by Buyer,
      Sellers will sell, on Buyer’s behalf, all Hydrocarbons produced from the
      Interests between the Effective Date and the Closing Date (as hereinafter
      defined), and Sellers will credit Buyer for any proceeds of those sales
      received by Sellers as an adjustment at Closing, as provided in Section
      2.2 hereof.  Subject to any continuing sales obligations under
      the Contracts, Buyer may sell Hydrocarbons produced from the Interests on
      and after the Closing Date as it deems
  appropriate.

            

    

     

    ARTICLE 2.  CONSIDERATION.

     

    
      	
              2.1  

            	
              Sale
      Price.

            

    

     

    2.1.1  Amount Due at
Closing.

     

    
      	
               

            	
              (i)

            	
              At
      Closing, Buyer shall pay to Sellers the aggregate cash sum of two hundred
      thirty-four million, nine hundred and fifty thousand Dollars ($234,950,000
      USD) for the Interests (the “Sale Price”) as
      adjusted pursuant to the terms of this Agreement, said Sale Price to be
      paid as set forth in (ii) below.

            

    

     

    
      	
               

            	
              (ii)

            	
              The
      Sale Price shall be paid to Sellers by Buyer by wire transfer to a bank
      account to be designated by Sellers in accordance with written
      instructions to be provided by Sellers to Buyer no later than three (3)
      business days prior to the Closing.

            

    

      

    
      	
              2.1.2  

            	
              Allocated
      Values.  The Sale Price shall be allocated among the
      Interests as set forth in Exhibit C attached hereto and made a part hereof
      for all purposes. Neither Party will take any position in preparing tax
      returns that is materially inconsistent with the allocation of values set
      forth in Exhibit C, unless the Parties otherwise agree in writing. The
      value assigned to each portion of the Interests in Exhibit C is hereafter
      call the “Allocated Value” of such
Interest.

            

    

      

    
      	
              2.1.3  

            	
              Earnest
      Money.  Upon the execution of this Agreement, Buyer shall
      pay to U.S. Bank National Association (the “Escrow Agent”)
      into an interest bearing, escrow  account to be established by
      the Parties requiring the authorized signature of each Party on a joint
      written direction to the Escrow Agent for the disbursement of funds
      therefrom, an earnest money deposit (the “Earnest Money”)
      in the amount of fifteen million Dollars ($15,000,000) to assure Buyer’s
      performance under this Agreement. If Sellers and Buyer close the
      transaction contemplated by this Agreement, the Earnest Money together
      with any interest accrued thereon, will be applied to the Sale Price. If
      Buyer and Sellers fail to close the transaction contemplated by this
      Agreement, Sellers and Buyer will have the respective rights and
      obligations with respect to the Earnest Money set forth in Article 6
      hereof.

            

    

     

    
      	
              2.2  

            	
              Adjustments at
      Closing.

            

    

      

    
      	
              2.2.1  

            	
              Preliminary Settlement
      Statement.  At Closing, the Sale Price will be adjusted
      as set forth in Sections 2.2.2 and 2.2.3. No later than five (5) business
      days prior to Closing, Sellers, will provide to Buyer a preliminary
      settlement statement identifying all adjustments to the Sale Price to be
      made at Closing (the “Preliminary Settlement
      Statement”).  Sellers and Buyer acknowledge that some
      items in the Preliminary Settlement Statement may be subject to change in
      the Final Settlement Statement.

            

    

      

    
      	
              2.2.2  

            	
              Upward
      Adjustments.  The Sale Price will be increased by the
      following expenses and revenues:

            

    

     

    
      	
               

            	
              (i)

            	
              all
      actual production expenses, operating expenses, overhead expenses under
      applicable operating agreements and capital expenditures paid by Sellers
      in connection with the Interests (including, without limitation, royalties,
      minimum royalties, rentals and prepaid charges), to the extent they are
      attributable to the ownership or operation of the Interests on and after
      the Effective Date;

            

    

     

    
      	
               

            	
              (ii)

            	
              all
      proceeds for the sale of Hydrocarbons and other income from the Interests
      received by Buyer, to the extent they are attributable to periods before
      the Effective Date; and

            

    

     

    
      	
               

            	
              (iii)

            	
              any
      other increases in the Sale Price specified in this
    Agreement.

            

    

     

    2.2.3  Downward
Adjustments.  The
Sale Price will be decreased by the following expenses and
revenues:

     

    
      	
               

            	
              (i)

            	
              all
      actual production expenses, operating expenses, overhead expenses under
      applicable operating agreements and capital expenditures paid or incurred
      by Buyer in connection with the Interests (including, without limitation,
      royalties, minimum royalties, rentals, and prepaid charges), to the extent
      they are attributable to the ownership or operation of the Interests
      before the Effective Date;

            

    

     

    
      	
               

            	
              (ii)

            	
              all
      proceeds attributable to the sale of Hydrocarbons from the Interests and
      all other income received by Sellers from the Interests, to the extent it
      is attributable to the ownership or operation of the Interests on and
      after the Effective Date; and

            

    

     

    (iii)           any
other decreases in the Sale Price specified in this Agreement.

     

    
      	
              2.3  

            	
              Adjustments After
      Closing.

            

    

     

    
      	
              2.3.1  

            	
              Final Settlement
      Statement.  Within one hundred twenty (120) days after
      Closing, Sellers will prepare a final settlement statement for the
      interests containing a final reconciliation of the adjustments to the Sale
      Price specified in Section 2.1 and 2.2 (the “Final Settlement
      Statement”). Buyer will have thirty (30) days after receiving the
      Final Settlement Statement to provide Sellers with written exceptions to
      any items in the Final Settlement Statement that Buyer believes, in good
      faith, to be questionable.  All items in the Final Settlement
      Statement to which Buyer does not except within the 30 day review period
      will be deemed to be correct.

            

    

      

    
      	
              2.3.2  

            	
              Payment of
      Post-Closing Adjustments.  Any post-Closing adjustments
      to the Sale Price (including disputed items which have ultimately been
      resolved) will be offset against each other so that only one payment is
      required. The Party owing payment will pay the other Party the net
      post-Closing adjustment to the Sale Price within ten (10) days after the
      expiration of Buyer’s 30 day review period for the Final Settlement
      Statement. However, the payment of any disputed items will be subject to
      the further rights of the Parties under Section
  2.3.3.

            

    

     

    
      	
              2.3.3  

            	
              Resolution of Disputed
      Items.  After the completion and delivery of the Final
      Settlement Statement, the Parties agree to negotiate in good faith to
      attempt to reach agreement on the amount due with respect to any disputed
      items in the Final Settlement Statement. If the Parties agree on the
      amount due with respect to any disputed items, and a payment adjustment is
      required, the Party owing payment will pay the other Party within ten (10)
      days after the Parties reach agreement. If the Parties are unable to agree
      on the amount due with respect to any disputed items within sixty (60)
      days after Sellers receive Buyer's written exceptions to the Final
      Settlement Statement, then (i) the Parties will attempt to resolve their
      disagreement with respect to the disputed items by mediation, as provided
      in Section 11.14 hereof, and (ii) if the Parties are unable to resolve
      their disagreement over the disputed items by mediation, either Party may
      seek a judicial determination of the amount actually due in connection
      with the disputed items.

            

    

     

    
      	
              2.4  

            	
              Payment
      Method.  Unless the Parties otherwise agree in writing,
      all payments under this Agreement shall be made by wire transfer in
      immediately available funds to an account designated by the Party
      receiving payment.

            

    

     

    
      	
              2.5  

            	
              Principles of
      Accounting.  The Preliminary Settlement Statement and the
      Final Settlement Statement will be prepared in accordance with generally
      accepted accounting principles in the petroleum industry and with
      reasonable supporting documentation for each item in those
      statements.

            

    

     

    ARTICLE 3.  REPRESENTATIONS AND
WARRANTIES.

     

    
      	
              3.1  

            	
              Sellers’
      Representations.  Each Seller, severally but not jointly,
      represents and warrants to Buyer, solely with respect to such Seller’s
      Ownership Share in the Interests, that the following statements are true
      and accurate as of the execution date of this Agreement, the Effective
      Date and the Closing Date.

            

    

     

    
      	
              3.1.1  

            	
              Corporate
      Authority.  Fund IX and WI Fund IX is each duly formed
      and in good standing under the laws of the State of Delaware and EverStar
      is duly formed and in good standing under the laws of the State of Texas
      and each Seller is duly qualified to carry on its business in the state in
      which the Interests that it owns are located, and has full power and
      authority to enter into and perform pursuant to this Agreement according
      to its terms.

            

    

     

    3.1.2  Approvals.  Seller's
execution, delivery and performance of this Agreement has been duly authorized
by all necessary corporate action and will not violate or conflict with any
agreement, law, rule, regulation, charter or other instrument governing Seller's
organization, management or business affairs.

     

    3.1.3  Validity of
Obligation.  This
Agreement and all other transaction documents executed and delivered on or
before the Closing Date (i) have been duly executed by Seller's authorized
representatives; (ii) constitute the valid and legally binding obligations of
Seller, and (iii) are enforceable against it in accordance with their respective
terms.

     

    3.1.4   No Violation of Contractual
Restrictions.  To
Seller's knowledge, the execution, delivery and performance of this Agreement
does not conflict with or violate any agreement or instrument to which Seller is
a party or by which it is bound, except any provision contained in agreements
customary in the oil and gas industry relating to (i) preferential rights to
purchase all or any portion of an Interest; (ii) required consents to transfer
and related provisions; (iii) maintenance of uniform interest provisions in
joint operating agreements, and (iv) any other third party approvals or consents
contemplated in this Agreement.

     

    3.1.5  No Violation of Other Legal
Restrictions.  The
execution, delivery and performance of this Agreement does not violate any law,
rule, regulation, ordinance, judgment, decree or order to which Seller or the
Interests is, or upon Closing will be, subject.

     

    3.1.6  Bankruptcy.  There
are no bankruptcy, reorganization or receivership proceedings pending, being
contemplated by or, to Seller's knowledge, threatened against
Seller.

     

    3.1.7  Broker's
Fees.  Seller
has not incurred any liability, contingent or otherwise, for brokers' or
finders' fees relating to the transactions contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever.

     

    3.1.8  Lawsuits and
Claims.  Except
as otherwise set forth in Schedule 3.1.8, there is no action, suit, proceeding,
arbitration, or to Seller's knowledge any claim or investigation by any person,
pending entity, administrative agency or governmental body threatened, against
Seller or the Interests.

     

    3.1.9  Contracts.  Except
for the Leases, the Contracts described on Exhibit “A”, Part VI (the “Material Contracts”)
and the Surface Agreements, there exist no agreement, contract or commitment
that is material to the ownership, operation, value or use of any of the
Interests, or to which the Interests or Buyer will be subject after the
Closing.  Seller is not and has not been in default in any material
respect of any obligation under any Lease, Material Contract or Surface
Agreement, and no such default has been asserted. The Material Contracts and
Surface Agreements are in full force and effect.

     

    3.1.10  Seller’s
Knowledge.  As
used in this Section 3.1, “Seller’s knowledge”
shall mean the actual knowledge of the particular Seller’s executive management,
or the knowledge Seller’s executive management should have had, upon reasonable
inquiry.

     

    
      	
              3.2  

            	
              Buyer’s
      Representations.  The Buyer represents and warrants to
      Seller that the following statements are true and accurate as of the
      execution date of this Agreement, the Effective Date and the Closing
      Date.

            

    

     

    3.2.1  Authority. Buyer
is a duly organized entity validly existing under the laws of the state of
Delaware, is duly qualified to carry on its business in the state in which the
Interests are located, and has full power and authority to enter into and
perform pursuant to this Agreement according to its terms.

     

    3.2.2  Requisite
Approvals.  Buyer's
execution, delivery and performance of this Agreement has been duly authorized
by all necessary corporate action, and will not conflict with or violate any
agreement, law, rule, regulation, ordinance, charter or other instrument
governing any of the Buyer's organization, management, business affairs or
instrument to which Buyer is a party or by which Buyer is bound.

     

    3.2.3  Validity of
Obligation. This
Agreement and all other transaction documents executed and delivered on or
before the Closing Date (i) have been in the case of this Agreement and will be
in the case of such other documents duly executed by Buyer's authorized
representatives; (ii) do constitute in the case of this Agreement and will
constitute in the case of such other documents the valid and legally binding
obligations of Buyer, and (iii) is enforceable in the case of this Agreement and
will be enforceable in the case of such other documents against it in accordance
with their respective terms.

     

    3.2.4  No Violation of Contractual
Restrictions.  The
execution, delivery and performance of this Agreement does not conflict with or
violate any agreement or instrument to which Buyer is a party or by which it is
bound.

     

    3.2.5  No Violation of Other Legal
Restrictions.  The
execution, delivery and performance of this Agreement does not violate any law,
rule, regulation, ordinance, judgment, decree or order to which Buyer is or,
upon Closing, will be subject.

     

    3.2.6  Bankruptcy.  There
are no bankruptcy, reorganization or receivership proceedings pending, being
contemplated by, or to the Buyer’s actual knowledge, threatened against
Buyer.

     

    3.2.7  Independent
Evaluation.  Buyer
represents that in entering into this Agreement, Buyer has relied solely on the
express representations, warranties and covenants of Seller contained in this
Agreement, Buyer's independent investigation of, and judgment based on its
knowledge and experience in the evaluation, acquisition and operating of oil and
gas properties with respect to, the Equipment and the other Interests and the
advice of its own legal, tax, economic, environmental, engineering, geological
and geophysical advisors and not on any comments or statements of Seller or any
representatives of, or consultants or advisors engaged by Seller. Buyer further
represents that, except with respect to the express representations, warranties
and covenants of Seller contained in this Agreement, it has not relied and will
not rely on any statements by Seller or any of its representatives, consultants
or advisors in making its decision to enter into this Agreement or to close this
transaction.

     

    3.2.8  Broker's
Fees.  Buyer
has not incurred any liability, contingent or otherwise, for brokers' or
finders' fees relating to the transactions contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.

     

    3.2.9  Lawsuits and
Claims.  There
is no action, suit, proceeding, claim or investigation by any person, entity,
administrative agency or governmental body pending or, to the best of its
knowledge, threatened, against Buyer before any governmental authority that
impedes or is likely to impede Buyer's ability to consummate the transactions
contemplated by this Agreement and to assume the liabilities to be assumed by it
under this Agreement.

     

    3.2.10  Securities
Laws.  Buyer
has complied with all federal and state securities laws applicable to the
purchase and sale of the Interests and will comply with such laws if it
subsequently disposes of all or any part of the Interests.

     

    
      	
              3.3  

            	
              Notice of Changes.
      Seller and Buyer will give the other prompt written notice of any
      matter materially affecting any of their representations or warranties
      under this Article 3 of this Agreement) are exclusive, and are given in
      lieu of all other representations and warranties, express or
      implied.

            

    

     

    
      	
              3.4  

            	
              Representations and
      Warranties Exclusive. All representations and warranties contained
      in this Agreement (including, without limitation, those in Article 3 of
      this Agreement) are exclusive, and are given in lieu of all other
      representations and warranties, express or
  implied.

            

    

     

    ARTICLE 4.  TITLE WARRANTY; DISCLAIMER
OF WARRANTIES.

     

    
      	
              4.1  

            	
              Special Warranty of
      Title: Encumbrances.  SELLERS CONVEY THE INTERESTS TO
      BUYER WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR IMPLIED, EXCEPT
      THAT EACH SELLER SPECIALLY WARRANTS AND AGREES TO DEFEND TITLE TO ITS
      OWNERSHIP INTEREST IN THE INTERESTS AGAINST THE CLAIMS, ENCUMBRANCES AND
      DEMANDS OF ALL PERSONS CLAIMING TITLE TO THE INTERESTS BY, THROUGH, OR
      UNDER SELLER BUT NOT OTHERWISE.

            

    

     

    
      	
              4.2  

            	
              Condition and Fitness
      of the Interests. SELLERS
      CONVEY THE INTERESTS TO BUYER WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED
      WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING, WITHOUT LIMITATION,
      WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE
      INTERESTS, OR (ii) THE FITNESS OF THE INTERESTS FOR A PARTICULAR PURPOSE.
      BUYER HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN
      GIVEN THE OPPORTUNITY TO INSPECT, THE INTERESTS, BOTH SURFACE AND
      SUBSURFACE, FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION FOR THE PURPOSE
      OF DETECTING THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIALS
      (“NORM”) AND MAN MADE MATERIAL FIBERS (“MMMF”) AND SATISFIED ITSELF AS TO
      THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, INCLUDING BUT NOT LIMITED TO
      CONDITIONS RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS
      SUBSTANCES. BUYER IS RELYING SOLELY UPON THE RESULTS OF SUCH INSPECTION OF
      THE INTERESTS AND SHALL ACCEPT ALL OF THE SAME IN THEIR “AS IS, WHERE IS”
      CONDITION AND “WITH ALL FAULTS”. SELLERS DISCLAIM ALL LIABILITY ARISING IN
      CONNECTION WITH THE PRESENCE OF NORM OR MMMF ON THE INTERESTS AND IF TESTS
      HAVE BEEN CONDUCTED BY SELLERS FOR THE PRESENCE OF NORM OR MMMF, SELLERS
      DISCLAIM ANY WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR
      RESULTS.

            

    

     

     

    
      	
              4.3  

            	
              Information About the
      Interests.  EXCEPT
      AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLERS AND THEIR
      CONSULTANTS, OFFICERS, AGENTS, EMPLOYEES OR REPRESENTATIVES MAKE NO
      WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE
      ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS
      FURNISHED TO BUYER IN CONNECTION WITH THE INTERESTS; (ii) THE QUALITY AND
      QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE INTERESTS;
      (iii) THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, INCLUDING
      WITHOUT LIMITATION, PRODUCTION RATES, DECLINE RATES AND RECOMPLETION
      OPPORTUNITIES; (iv) GAS BALANCING INFORMATION, ALLOWABLES OR OTHER
      REGULATORY MATTERS; (v) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED
      INCOME, COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE INTERESTS, OR
      (vi) THE ENVIRONMENTAL CONDITION OF THE INTERESTS. SELLERS REPRESENT THAT
      THEY HAVE NOT INTENTIONALLY WITHHELD FROM BUYER ANY DATA, INFORMATION OR
      RECORDS RELATING TO THE INTERESTS AND TO THE BEST OF ITS KNOWLEDGE THE
      DATA, INFORMATION AND RECORDS SUPPLIED TO BUYER ARE COMPLETE AND CORRECT.
      ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND
      OTHER MATERIALS FURNISHED BY SELLERS OR OTHERWISE MADE AVAILABLE TO BUYER
      ARE PROVIDED AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY
      LIABILITY OF OR AGAINST SELLERS AND ANY RELIANCE ON OR USE OF THE SAME
      SHALL BE AT BUYER’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY
      LAW.

            

    

     

     

    
      	
              4.4  

            	
              Subrogation of
      Warranties.  To the extent transferable, Sellers will
      give and grant to Buyer, its successors and assigns full power and right
      of substitution and subrogation in and to all covenants, indemnities and
      warranties (including warranties of title) by preceding owners, vendors,
      or others, given or made with respect to the Interests or any part thereof
      prior to the Effective Date of this
Agreement.

            

    

     

    ARTICLE 5.  DUE DILIGENCE REVIEW OF THE
INTERESTS.

    
    

    
      	
              5.1  

            	
              Access to
      Records.  After execution of this Agreement, Sellers
      shall give Buyer and its authorized representatives, during regular
      business hours, at Buyer’s sole risk, cost and expense, access, with
      copying privileges, to all production, environmental, geological,
      engineering and other technical data and records, and to all contract,
      land, accounting, title, and lease records, to the extent such data and
      records are in Sellers' possession and relate to the Interests, and to
      such other information relating to the Interests as Buyer may reasonably
      request. However, Sellers shall have no obligation to provide Buyer such
      access to any data or information which Sellers cannot legally provide
      Buyer because of third-party restrictions on Sellers after Sellers have
      made a reasonable attempt to obtain the waiver of such restriction. Buyer
      shall keep all materials and data obtained confidential until the Closing
      Date. Any confidentiality agreement previously executed by Sellers and
      Buyer with respect to the Interests will continue in force and effect
      until the Closing Date and for as long thereafter as provided in the
      confidentiality agreement.

            

    

     

    Buyer
shall take all reasonable steps necessary to ensure that Buyer's authorized
representatives comply with the provisions of this Section 5.1 and any
confidentiality agreement in effect.  Upon termination of this
Agreement without Closing, Buyer shall destroy or return to Sellers any and all
materials and data provided by Sellers and relating to any properties not
purchased at Closing and shall, if not destroyed, deliver to Sellers any and all
of Buyer’s notes and work papers derived therefrom.

     

    
      	
              5.2  

            	
              Physical and
      Environmental Inspection.  Buyer may perform a physical
      inspection of the Leases, Wells and Equipment subject to the items of this
      Section 5.2.  Sellers will permit Buyer reasonable physical
      access to the Leases, Wells and Equipment at times approved by Sellers and
      at Buyer’s sole cost, risk and expense for the purposes of inspecting the
      same, conducting such tests, examinations, investigations and assessments
      as may be reasonable and necessary or appropriate to evaluate the physical
      and Material Environmental Condition (as hereinafter defined) of the
      Leases, Wells and Equipment including, without limitation, a Phase I
      investigation but excluding, however, any invasive procedures including
      any Phase II investigations except upon Sellers’ prior written
      approval.  Buyer shall repair any damage to the Interests
      resulting from the inspection of Buyer and shall defend and indemnify
      Sellers and Sellers’ affiliates, members, partners, shareholders,
      directors, officers, agents, representatives, consultants, advisers,
      successors and assigns (collectively, the “Sellers’ Indemnified
      Group”) from any and all Claims (as hereinafter defined) arising
      from Buyer’s inspecting and observing the Interests, including, without
      limitation, (i) Claims for personal injury to or death of employees of
      Buyer, its agents, contractors, subcontractors or invitees and/or damage
      to the property of Buyer, REGARDLESS OF WHETHER SUCH CLAIMS ARE CAUSED BY
      THE CONCURRENT NEGLIGENCE OF SELLERS, and (ii) Claims for personal injury
      to or death of employees of Sellers or third parties and damage to the
      property of Sellers or third parties.  As used in this
      Agreement, the term “Claims” means
      any and all losses, liabilities, damages, obligations, expenses, fines,
      penalties, costs, claims, causes of action and judgments, including,
      without limitation, reasonable attorneys fees, court costs, and other
      reasonable costs of litigation resulting from the defense of any claim or
      cause of action within the scope of the indemnities in this Agreement for
      (i) breaches of contract; (ii) loss or damage to property, injury to or
      death of persons, and other tortious injury; and (iii) violations of
      applicable laws, rules, regulations, orders or any other legal right or
      duty actionable at law or equity.

            

    

     

    
      	
              5.3  

            	
              Environmental
      Assessment.

            

    

     

    5.3.1  Inspection and Test
Results.  Buyer
agrees to provide to Sellers a copy of any and all environmental inspections and
assessments of Buyer, including, without limitation, all written reports, data
and conclusions. Buyer and Sellers shall keep any and all data or information
acquired by all such examinations and results of all analysis of such data and
information strictly confidential and shall not disclose the same to any person
or agency without the prior written approval of the other Party, unless
necessary in connection with any pending litigation or required to do so by
applicable law or by the order of a Court or regulatory agency. Notwithstanding
the foregoing, Buyer may disclose the results of any such environmental
inspections and assessments to its employees, agents and representatives that
have a need to review same in order to conclude the necessary environmental
review and assessment under this Agreement, provided that Buyer insure that such
employees, agents and representatives comply with the same confidentiality
obligations as are contained herein

     

    5.3.2  Notice of Material
Environmental Conditions.  As
soon as reasonably possible after discovering, but in any event no later than
5:00 p.m. on the date which is five (5) business days before Closing (the “Claim Date”), Buyer
shall notify Sellers in writing of any Material Environmental Conditions, and
the estimated value of such Material Environmental Conditions. The value of a
Material Environmental Condition for purposes of Section 5.3.3 shall be (i) the
amount of all existing Claims associated with the existence of the Material
Environmental Condition and (ii) the reasonable cost of remediation or
correction of the Material Environmental Condition in the most cost effective
manner as determined by a third person to be agreed upon by Sellers and Buyer
(the “Environmental
Defect Value”). Such estimate shall be based upon the standards required
under applicable Environmental Laws (as hereinafter defined) in effect on the
Effective Date.  As used herein, the term “Material Environmental
Condition” means a condition that exists prior to the Effective Date, and
only to the extent in existence as of the Effective Date, with respect to the
air, land, soil, surface, subsurface strata, surface water, ground water or
sediments which causes an Interest to be subject to remediation under
Environmental Laws in effect as of the Effective Date, but only to the extent
that (i) the condition was not otherwise know to the Buyer prior to the
execution of this Agreement, (ii) the cost to remediate such condition to
lawfully acceptable levels will exceed, net to Buyer’s share, the sum of
$50,000, and (iii) the cumulative cost to remediate all conditions qualifying
under (i) and (ii) above exceeds the Environmental Deductible (as hereinafter
defined).  As used herein, Material Environmental Condition does not
include the obligation to plug and abandon existing wellbores on the Leases. As
used herein, the term “Environmental Laws” means all laws, statutes, treaties,
rules, codes, ordinances, regulations, certificates, orders, interpretations,
licenses and permits of any governmental body, including the common or civil
law, and all judgments, decrees, injunctions, writs, orders or like action of
any court, arbitrator or other governmental body of competent jurisdiction and
all contracts and agreements relating to pollution, the protection of the
environment, public health or safety or the release or disposal of waste
materials.

     

    5.3.3  Rights and Remedies for
Material Environmental Conditions.

     

    
      	
               

            	
              (i)

            	
              The
      rights and remedies of the Parties with respect to Material Environmental
      Conditions affecting the Interests are as
  follows:

            

    

     

    
      	
               

            	
              (a)

            	
              If
      the aggregate of the Environmental Defect Values, as determined under
      Section 5.3, is less than One Million Dollars ($1,000,000.00) (the “Environmental
      Deductible”), then the Parties shall be obligated to proceed with
      Closing as to all Interests without curative action by Seller with respect
      to such Material Environmental Conditions and without an adjustment of the
      Sale Price.

            

    

     

    
      	
               

            	
              (b)

            	
              If
      the aggregate of the Environmental Defect Values equals or exceeds the
      Environmental Deductible, and the Parties agree with respect to the
      existence of such Material Environmental Conditions and the value thereof,
      the Sale Price will be reduced by the positive difference, if any, between
      the agreed upon aggregate of the Environmental Defect Values and the
      Environmental Deductible, and the Parties will be obligated to proceed
      with Closing, subject to the termination rights of the Parties under
      Article 6 and subpart (d) of this Section
5.3.3.

            

    

     

    
      	
               

            	
              (c)

            	
              If
      the aggregate of the Environmental Defect Values equals or exceeds the
      Environmental Deductible, and the Parties are unable to agree as to the
      existence of such Material Environmental Conditions and/or the value
      thereof, either Buyer or Seller may elect to eliminate the Interests
      affected by Material Environmental Conditions from the transfer of the
      Interests under this Agreement and reduce the Sale Price by the Allocated
      Values of such Interests until the aggregate of the Environmental Defect
      Values equals the Environmental Deductible, and if neither Party elects to
      remove sufficient Interests from this transaction, then the Sale Price
      will be reduced by the amount that the aggregate of the Environmental
      Defect Values exceeds the Environmental Deductible, and the Parties will
      be obligated to proceed with Closing, subject to the termination rights of
      the Parties under Article 6 and subpart (d) of this Section
      5.3.3.

            

    

     

    
      	
               

            	
              (d)

            	
              If
      the aggregate of the Environmental Defect Values equals or exceeds ten
      percent (10%) of the Sale Price, either Party may terminate this
      Agreement, and neither Party will have any further obligation to conclude
      the transfer of the Interests under this Agreement. However, the right of
      termination under this subpart (d) must be exercised no later than 3
      business days before Closing, after which both Parties will be deemed to
      have waived their termination rights under this subpart (d) in connection
      with Material Environmental
Conditions.

            

    

     

    
      	
               

            	
              (ii)

            	
              Any
      Material Environmental Condition which is not disclosed by Buyer to Seller
      in or before the Claim Date conclusively shall be deemed waived by
      Buyer.  At Closing, Buyer shall assume all environmental
      obligations with respect to the Interests, as provided in and subject to
      Sections 8.2 and 8.6.

            

    

     

    
      	
              5.4  

            	
              Government
      Approvals.

            

    

      

    
      	
              5.4.1  

            	
              Title Pending
      Governmental Approvals.  Until Sellers and Buyer obtain
      any necessary federal and state approvals of the assignment of Leases or
      other Interests requiring such approval (collectively, “Governmental
      Approvals”). Seller will continue to hold record title and/or
      operating rights to such Leases or other Interests as nominee for
      Buyer.  If Seller continues to operate the Interests pending
      such approval, Seller and Buyer will have the rights and obligations with
      respect to the operation of the Interests set forth in Section
      10.4.

            

    

     

      

    
      	
              5.4.2  

            	
              Denial of Required
      Government Approvals.  If any required Governmental
      Approval is finally denied, Sellers shall promptly pay Buyer the Allocated
      Value of the affected Leases or other affected Interests as adjusted
      pursuant to this Agreement, and Buyer shall promptly reassign such Leases
      or other Interests to Seller, free and clear of any and all liens, claims
      or other encumbrances except those burdening such Leases or other
      Interests at the time of Sellers' conveyance to Buyer, and Buyer shall
      have no further obligations under this Agreement relating to such Leases
      or other Interests.

            

    

     

    
      	
              5.5  

            	
              Preferential Rights
      and Consents to Assign.

            

    

     

    5.5.1  Notices to
Holders.

     

    
      	
               

            	
              (i)

            	
              Attached
      hereto as Exhibit F and made a part hereof for all purposes is, to the
      best of Sellers’ knowledge, a list of the Interests subject to third party
      preferential purchase rights, rights of first refusal, or similar rights
      (collectively, “Preferential
      Rights”), or third party consents to assign, lessor's approvals or
      similar rights (collectively, “Consents”).  Promptly
      following the execution of this Agreement, Seller shall use reasonable
      efforts to notify the holders of the Preferential Rights and Consents that
      it intends to transfer the Interests to Buyer, provide them with any
      information about the transfer of the Interests to which they are
      contractually entitled, and in the case of Consents, ask the holders of
      the Consents to consent to the assignment of the affected Interests to
      Buyer

            

    

     

    
      	
               

            	
              (ii)

            	
              Seller
      shall promptly notify Buyer whether (a) any Preferential Rights are
      exercised, waived or deemed waived, (b) any Consents are denied, or (c)
      the requisite time periods have elapsed without any Preferential Rights
      being exercised or Consents being received.  Sellers will not be
      liable to Buyer if any Preferential Rights are exercised, or any Consents
      are denied, except as expressly provided in this Section
    5.5.

            

    

     

      

    
      	
              5.5.2  

            	
              Remedies Before
      Closing.  If Sellers are unable before Closing to obtain
      the required Consents (other than Consents ordinarily obtained after
      closing and Consents on hydrocarbon sales, purchase, gathering,
      transportation, treating, marketing, exchange, processing and
      fractionating agreements) and waivers of all Preferential Rights,
      then:

            

    

     

    
      	
              (i)  

            	
              Sellers
      and Buyer by agreement may proceed with Closing as to the Interests
      affected by the unwaived Preferential Rights or unobtained Consents,
      subject to the further obligations of Seller and Buyer set forth in
      Section 5.5.3 in the event that such Preferential Rights are validly
      exercised or such Consents are ultimately denied after
      Closing;

            

    

    

    
      	
              (ii)  

            	
              Either
      Sellers or Buyer may exclude the affected portion of the Interests from
      the transaction under this Agreement, adjust the Sale Price by the
      Allocated Value of the excluded Interests, and proceed with Closing as to
      the rest of the Interests; provided, however, that if the required Consent
      or waiver of Preferential Rights is obtained within ninety (90) days after
      Closing, Buyer shall acquire the excluded Interests for the Allocated
      Value thereof (subject to adjustments herein provided) within ten (10)
      days of written notice by Sellers to Buyer that such required Consent or
      waiver of Preferential Rights has been
obtained;

            

    

    

    
      	
              (iii)  

            	
              If
      neither of the remedies set forth in subparts (i) and (ii) of this Section
      5.5.2 is exercised, Sellers or Buyer may exercise the termination rights
      set forth in Article 6.

            

    

    

    5.5.3  Remedies After
Closing.

     

    
      	
               

            	
              (i)

            	
              Preferential
      Rights. After Closing, if (a) any holder of Preferential Rights
      alleges improper notice of sale, or (b) Sellers or Buyer discover, or any
      third party alleges, the existence of additional Preferential Rights,
      Sellers and Buyer will use their best efforts to obtain waivers of those
      discovered or alleged Preferential Rights.  If Sellers and Buyer
      are unable to obtain waivers of such Preferential Rights, or the third
      party ultimately establishes and exercises its rights, and such exercise
      denies the Interests to Buyer, then Buyer shall convey the affected
      Interests under this Agreement to such third party and shall be entitled
      to the consideration for the sale of such affected
    Interests.

            

    

     

    
      	
               

            	
              (ii)

            	
              Consents.  After
      Closing, if Sellers or Buyer discover, or any third party alleges, the
      existence of additional Consents, Sellers and Buyer will use their best
      efforts to obtain waivers of those discovered or alleged
      Consents.  If Sellers and Buyer are unable to obtain waivers of
      such Consents (other than Consents on hydrocarbon sales, purchase,
      gathering, transportation, treating, marketing, exchange, processing and
      fractionating agreements), and such unwaived Consents deny the affected
      Interests to Buyer, then Sellers and Buyer will rescind the assignment of
      the affected Interests under this Agreement, after which Sellers shall pay
      Buyer an amount equal to the Allocated Value of the affected Interests as
      adjusted at Closing pursuant to this Agreement less revenues net of
      expenses generated from the affected Interest(s) after the Closing. Buyer
      shall immediately reassign the affected Interest(s) to the Sellers free
      and clear of any and all liens, claims and other encumbrances other than
      those burdening the affected Interests at the time of Sellers' conveyance
      to Buyer and Buyer shall have no further obligations under this Agreement
      relating to the affected Interest(s). Rescission of the assignment of the
      affected Interests and receipt of the payment described above shall be
      Buyer's sole remedy if undiscovered or alleged Preferential Rights are
      exercised or Consents are denied after
Closing.

            

    

     

    
      	
              5.6  

            	
              Title
      Defects.

            

    

      

    
      	
              5.6.1  

            	
              Definition of Title
      Defect.  For the purpose of this Agreement a “Title Defect”
      shall mean any deficiency in the Interests or Sellers’ title which results
      or could result in:

            

    

     

    
      	
               

            	
              (i)

            	
              Sellers’
      title, as to one or more Interests, being subject to an outstanding
      mortgage, deed of trust, lien, security interest, restriction, or other
      encumbrance; or

            

    

    

    
      	
               

            	
              (ii)

            	
              Sellers
      owning less than the net revenue interest shown on Exhibit B, Parts I and
      II hereto or being obligated to bear a share of the costs and expenses of
      operation greater than the working interest shown on Exhibit B, Parts I,
      and II hereto without a proportionate increase in net revenue interest;
      or

            

    

    

    
      	
               

            	
              (iii)

            	
              Sellers’
      rights and interests being reduced or being subject to reduction by virtue
      of the exercise by a third party reversionary or back-in interest,
      farm-out, or other similar right not reflected on Exhibit B, Parts and II;
      and

            

    

    

    
      	
               

            	
              (iv)

            	
              the
      Title Defect Value (as hereinafter defined) of a title deficiency
      qualifying under (i) or (ii) above.

            

    

    

      

    
      	
              5.6.2  

            	
              Notice of Title
      Defects.  Upon the discovery of a Title Defect by Buyer,
      Buyer shall notify Sellers in writing as soon as reasonably possible. Any
      such notice by Buyer shall include appropriate evidence and documentation
      to substantiate its position and shall be delivered to Sellers on or
      before the Claim Date.  Such notice shall also include Buyer's
      reasonable estimate of the amount by which such Title Defect reduces the
      value of the affected Interest (the “Title Defect
      Value”). After the Claim Date, the
      Interests shall be deemed to be free of Title Defects except for those for
      which notice has been timely provided as set forth herein. Any Title
      Defect which is not disclosed to Sellers on or before the Claim Date shall
      conclusively be deemed waived by Buyer for all purposes, except Sellers'
      special warranty of title.

            

    

     

      

    
      	
              5.6.3  

            	
              Right to Cure Title
      Defect.  If Buyer notifies Sellers of a Title Defect as
      provided in Section 5.6.2, Sellers shall have the right, but not the
      obligation, to cure the Title Defect.  If Sellers choose to cure
      a Title Defect, Sellers must cure the Title Defect before Closing, unless
      the Parties otherwise agree in
writing.

            

    

     

    5.6.4  Remedies for Uncured Title
Defects.

     

    
      	
               

            	
              (i)

            	
              If
      Buyer notifies Sellers of any Title Defect as provided in Section 5.6.2,
      and Sellers refuses or is unable to cure the Title Defect before Closing,
      then Buyer and Sellers will have the following rights and remedies with
      respect to the uncured Title Defects, unless the Parties otherwise agree
      in writing.

            

    

    

    
      	
              (a)  

            	
              Buyer
      may waive the uncured Title Defect and proceed with
    Closing.

            

    

    

    
      	
              (b)  

            	
              If
      the aggregate of the Title Defect Values is less than Five Hundred
      Thousand Dollars ($500,000.00) (the “Title
      Deductible”) then the Parties shall be obligated to proceed with
      Closing as to all Interests without curative action by Seller with respect
      to such Title Defects and without an adjustment of the Sale
      Price.

            

    

    

    
      	
              (c)  

            	
              If
      the aggregate of the Title Defect Values equals or exceeds the Title
      Deductible, and the Parties agree with respect to the existence of such
      Title Defects and the value thereof, the Sale Price will be reduced by the
      positive difference, if any, between the agreed upon aggregate of the
      Title Defect Values and Title Deductible, and the Parties will be
      obligated to proceed with Closing, subject to the termination rights of
      the Parties under Article 6 and subpart (e) of this Section
      5.6.4.

            

    

    

    
      	
              (d)  

            	
              If
      the aggregate of the Title Defect Values equals or exceeds the Title
      Deductible, and the Parties are unable to agree as to the existence of
      such Title Defects and/or the value thereof, either Buyer or Sellers may
      elect to eliminate the Interests affected by Title Defects from the
      transfer of the Interests under this Agreement and reduce the Sale Price
      by the Allocated Values of such Interests until the aggregate of the Title
      Defect Values equals the Title Deductible, and if neither Party elects to
      remove sufficient Interests from this transaction, then the Sale Price
      will be reduced by the amount that the aggregate of the Title Defect
      Values exceeds the Title Deductible, and the Parties will be obligated to
      proceed with Closing, subject to the termination rights of the Parties
      under Article 6 and subpart (e) of this Section
  5.6.4.

            

    

    

    
      	
              (e)  

            	
              If
      the aggregate of the Title Defect Values equals or exceeds ten percent
      (10%) of the Sale Price, either Party may terminate this Agreement, and
      neither Party will have any further obligation to conclude the transfer of
      the Interests under this Agreement. However, the right of termination
      under this subpart (e) must be exercised no later than 3 business days
      before Closing, after which both Parties will be deemed to have waived
      their termination rights under this subpart (e) in connection with Title
      Defects.

            

    

    

    
      	
              5.7  

            	
              Casualty Losses and
      Government Takings.

            

    

      

    
      	
              5.7.1  

            	
              Notice of Casualty
      Losses and Government Takings.  If, prior to the Closing
      Date, all or part of the Interests is damaged or destroyed by fire, flood,
      storm or other casualty (“Casual Loss”)
      or is taken in condemnation or under the right of eminent domain, or if
      proceedings for such purposes shall be pending or threatened (“Government
      Taking”), Sellers must promptly notify Buyer in writing of the
      nature and extent of the Casualty Loss or Government Taking and Sellers'
      estimate of the cost required to repair or replace that portion of the
      Interests affected by the Casualty Loss or value of the Interests taken by
      the Government Taking.

            

    

     

    
      	
              5.7.2  

            	
               Remedies for Casualty
      Losses and Government Takings.  If all or any
      portion of the Interests are affected by a Casualty Loss or Government
      Taking, the Sale Price will be adjusted by the agreed cost of the Casualty
      Loss or the agreed value of the Interests taken by the Government Taking,
      and the Parties will proceed with Closing.  Sellers will be
      entitled to retain (i) all insurance proceeds payable to Sellers with
      respect to any such Casualty Loss, (ii) all sums paid to Sellers by third
      parties by reason of any such Casualty Loss, and (iii) all compensation
      paid to Sellers with respect to any such Government Taking.  In
      addition to the remedies set forth hereinabove, Sellers and Buyer will
      have the termination rights in connection with Casualty Losses and
      Government Takings as set forth in Section
6.1.

            

    

     

      

    
      	
              5.7.3  

            	
              Exclusion of Ordinary
      Depreciation and Deletion.  Buyer will assume all risk
      and loss with respect to any change, between the Effective Date and the
      Closing Date, in the condition of the Interests resulting from production
      of Hydrocarbons through normal depletion (including the watering-out,
      collapsed casing or sand infiltration of any well) and the depreciation of
      personal property through ordinary wear and tear. None of the events or
      conditions set forth in this Section 5.7.3 will be considered a Casualty
      Loss with respect to the Interests, nor will they be cause for any other
      reduction in the Sale Price, or give rise to any right to terminate this
      Agreement.

            

    

     

    ARTICLE 6.  TERMINATION AND EFFECT OF
TERMINATION.

     

    
      	
              6.1  

            	
              Right to
      Terminate.    If, on the Closing Date, the Sale
      Price is to be reduced as a result of uncured Title Defects, unwaived
      Preferential Rights, unobtained Consents, Material Environmental
      Conditions and/or Casualty Losses or Government Takings by an aggregate
      amount equal to or greater than ten percent (10%) of the total unadjusted
      Sale Price, either Buyer or Sellers shall have the right to terminate this
      Agreement, and thereafter neither Party will have any further rights,
      duties or obligations under this Agreement except as to matters of
      confidentiality as provided in Section 5.1 hereof and as further set forth
      in this Article 6.  Either Party may exercise this right by
      notifying the other Party of its election to terminate this Agreement in
      writing no later than two (2) business days before the Closing
      Date.

            

    

    

    
      	
              6.2  

            	
              Effect of
      Termination.  The
      following provisions shall apply in the event this Agreement is terminated
      prior to the Closing Date.

            

    

     

    
      	
              6.2.1  

            	
               Termination by
      Agreement.  If this Agreement is terminated by the
      mutual agreement of the Seller and the Buyer and not as the result of the
      failure of either Party to perform its obligations hereunder, such
      termination shall be without liability of any Party to this Agreement or
      any shareholder, director, officer, employee, agent or representative of
      such party, and the Seller shall return the Earnest Money together with
      any interest accrued thereon to the Buyer promptly and neither Party will
      have any further rights, duties or obligations except as to matters of
      confidentiality as provided in Section 5.1
  hereof.

            

    

      

    
      	
              6.2.2  

            	
              Termination as a
      Result of Buyer’s Breach.  If this Agreement is
      terminated (i) by Sellers as a result of Buyer’s material breach of this
      Agreement, then Sellers shall be entitled to retain the Earnest Money and
      all interest accrued thereon as liquidated damages and as reimbursement
      for Seller's out-of-pocket fees and expenses incurred in connection with
      the transactions contemplated by this Agreement.  The parties
      hereby acknowledge that the extent of damages to Sellers occasioned by
      such breach or default or failure to proceed by Buyer would be impossible
      or extremely impractical to ascertain and that the amount of the Earnest
      Money and interest accrued thereon is a fair and reasonable estimate of
      such damage.

            

    

      

    
      	
              6.2.3  

            	
              Termination as a
      Result of Seller's Breach.  If this Agreement is
      terminated by Buyer as a result of Sellers' material breach of this
      Agreement or by either Sellers or Buyer pursuant to Section 6.1 hereof,
      then Sellers shall return the Earnest Money together with any interest
      accrued thereon promptly and neither Party shall have any further rights,
      duties or obligations under this Agreement except as to matters of
      confidentiality as provided in Section 5.1 hereof.  The parties
      hereby acknowledge that the extent of damages to Buyer occasioned by such
      material breach by Sellers would be impossible or extremely impractical to
      ascertain and that the amount of the liquidated damages set forth above is
      a fair and reasonable estimate of such
damage.

            

    

     

    ARTICLE 7.  CONDITIONS OF CLOSING AND
CLOSING.

     

    
      	
              7.1  

            	
              Conditions of Closing
      by Buyer.
      The obligation of Buyer to close the transactions contemplated in this
      Agreement is subject to the satisfaction of the following
      conditions.

            

    

      

    
      	
              7.1.1  

            	
              Representations,
      Warranties and Covenants. All representations and warranties of
      Sellers contained in this Agreement shall be true and correct in all
      material respects, and Sellers shall have performed and satisfied in all
      material respects all agreements and covenants required by this Agreement
      to be performed and satisfied by
Sellers.

            

    

      

    
      	
              7.1.2  

            	
              Consents.  To
      the best of Sellers’ knowledge, Sellers shall have obtained and delivered
      to Buyer all necessary consents for transfer of the Interests, except
      those which by their nature cannot be requested or obtained until after
      Closing.

            

    

      

    
      	
              7.1.3  

            	
              Lawsuits and
      Claims.  No suit or other proceeding shall be pending or
      threatened before any court or governmental agency seeking to restrain or
      prohibit this transaction, or to declare the transaction illegal, or to
      obtain substantial damages in connection with the transaction contemplated
      hereby.

            

    

     

    
      	
              7.2  

            	
              Conditions of Closing
      by Sellers.  The obligation of Sellers to close the
      transactions contemplated in this Agreement is subject to the satisfaction
      of the following conditions.

            

    

      

    
      	
              7.2.1  

            	
              Representations
      Warranties and Covenants.  All representations and
      warranties of Buyer contained in this Agreement shall be true and correct
      in any and all material respects, and Buyer shall have performed and
      satisfied in all material respects all agreements and covenants required
      by this Agreement to be performed and satisfied by
  Buyer.

            

    

      

    
      	
              7.2.2  

            	
              Lawsuits and
      Claims.  No suit or other proceeding shall be pending or
      threatened before any court or governmental agency seeking to restrain or
      prohibit this transaction, or to declare this transaction illegal, or to
      obtain substantial damages in connection with the transaction contemplated
      hereby.

            

    

      

    
      	
              7.2.3  

            	
              Bonds and
      Insurance.  If requested by Sellers, Sellers shall have
      received evidence that Buyer has in place, effective on or before the
      Closing Date and relating to the ownership of the Interests on and after
      the Closing Date (i) all necessary state, federal and local bonds, and
      (ii) insurance as is reasonable and customary in the
    industry.

            

    

     

    
      	
              7.3  

            	
              Closing. 
      The Closing (“Closing”) shall
      occur on or before January 31, 2008 at 10:00 a.m. (“Closing Date”),
      at the offices of Haynes and Boone, LLP, 1221 McKinney Street, Suite 2100,
      Houston, Texas  77010.

            

    

     

    
      	
              7.4  

            	
              Actions to Occur at
      Closing.  At Closing, each of the following actions shall
      occur.

            

    

      

    
      	
              7.4.1  

            	
              Delivery of
      Assignment.  Sellers shall execute, acknowledge and
      deliver an Assignment and Bill of Sale substantially in the form and
      substance of Exhibit D attached hereto and made a part hereof for all
      purposes together with such other state, federal or Indian Tribal forms of
      conveyance as may be required or expedient, covering all of the Interests
      to be conveyed to Buyer pursuant
hereto.

            

    

      

    
      	
              7.4.2  

            	
              Delivery of Sale
      Price.  Buyer shall deliver to Sellers by wire transfer
      the Sale Price as adjusted hereunder, subject to further adjustment after
      Closing as provided for herein.

            

    

     

    
      	
              7.4.3  

            	
               Delivery of Suspense
      Funds.  For accounts attributable to the Interests
      that are being held in suspense or escrow by Sellers, Sellers will deliver
      such funds to Buyer at the Post Closing and, Buyer shall indemnify and
      hold Seller harmless from and against any and all claims, proceedings,
      actions, costs, expenses and other liabilities arising out of or related
      to such suspense accounts.

            

    

     

    
      	
              7.4.4  

            	
              Change of Operatorship
      Forms.  Sellers and Buyer shall execute designation of
      operator forms required by applicable conservation or regulatory agencies
      and notices to third party working interest owners of the change of
      ownership.

            

    

      

    
      	
              7.4.5  

            	
              Evidence of
      Bonds.  If requested by Sellers, Buyer shall deliver to
      Sellers evidence of its appropriate state and federal plugging bond,
      surety letter, or letter of credit acceptable to such authority to
      authorize Buyer's right to conduct
operations.

            

    

      

    
      	
              7.4.6  

            	
              Possession of the
      Interests.  Seller shall, subject to the terms of any
      applicable operating agreements and to the provisions hereof deliver to
      Buyer possession of the Interests.

            

    

     

    7.4.7  Letters-in-Lieu.  Sellers
and Buyer shall execute letters-in-lieu of transfer orders.

     

    
      	
              7.4.8  

            	
               Officer's
      Certificates.  Each Party shall deliver to the
      other Party a certificate executed by a duly authorized officer of such
      Party certifying that the representations and warranties of such Party
      contained herein are true and correct as of the Closing
    Date.

            

    

     

    
      	
              7.5  

            	
              Post-Closing
      Obligations.  Sellers
      and Buyer shall have the following post-Closing
      obligations:

            

    

      

    
      	             
      7.5.1	
              Delivery of
      Records.  Sellers shall provide Buyer, promptly after
      Closing, at Buyer's sole expense, any and all original maps, reports and
      other written material relating to the Interests, including without
      limitation, lease files, property records, contract files, operations
      files, copies of tax and accounting records and files (other than Seller's
      income tax returns), well files, core analyses and hydrocarbon analyses,
      well logs, mud logs, core data, field studies, seismic, geological,
      geochemical or geophysical data or interpretations thereof (“Records”);
      however, Sellers shall have no obligation to furnish Buyer (i) Sellers’
      income tax returns, or (ii) any interpretive data or information of
      Sellers described in Section 1.2.1.  Buyer agrees to maintain
      the Records and allow Sellers reasonable access thereto for a period of
      six (6) years after Closing.

            

    

      

    
      	
              7.5.2  

            	
              Recording and
      Filing.  Buyer, within thirty (30) days after the Closing
      Date, shall (i) record all assignments, conveyances and other instruments
      that must be recorded to effectuate the transfer of the Interests, (ii)
      file for approval with the applicable governmental and Tribal agencies all
      state, federal and Indian transfer and assignment documents for the
      Interests, and (iii) file with the applicable government agencies all
      applications and other documents required for the transfer of permits and
      operatorship of the Interests. Buyer shall provide Sellers a recorded copy
      of each assignment, conveyance and other recorded instrument, and approved
      copies of the state and federal transfer and assignment documents, if any,
      as soon as they are available.

            

    

      

    
      	
              7.5.3  

            	
              Change of Operator
      Requirements.  Buyer shall comply with all applicable
      laws, ordinances, rules and regulations, orders, terms of permits and
      authorizations of any governmental or Tribal body which may have
      jurisdiction with respect to the Interests to be transferred hereunder
      (including, without limitation, the filing with such governmental and
      Tribal bodies of any and all compliance reports, notices, or other
      compliance documents which are due after the Closing Date regardless of
      the period covered by such reports, notices or documents) and shall
      promptly obtain and maintain all permits and bonds required by public
      authorities in connection with the
Interests.

            

    

      

    
      	
              7.5.4  

            	
              Further
      Assurances.  Sellers and Buyer, their successors and
      assigns agree to execute and deliver from time to time such further
      instruments and do such other acts as may be reasonably necessary to
      effectuate the purposes of this
Agreement.

            

    

     

    ARTICLE 8.  ASSUMED RIGHTS AND
OBLIGATIONS AND INDEMNITIES.

     

    
      	
              8.1  

            	
              Condition of the
      Interests.

            

    

     

    
      	
              8.1.1  

            	
               Oil and Gas
      Activities.  The Interests have been used for
      exploring, developing, producing, treating and transporting oil and
      gas.  Spills of wastes, crude oil, produced water, hazardous
      substances and other materials may have occurred in the past on the Leases
      or in connection with the Interests. There is a possibility that there are
      currently unknown, abandoned wells, plugged wells, pipelines and other
      equipment on or underneath the property subject to the Interests. Except
      as otherwise provided in this Agreement, it is the intent of Buyer and
      Seller that all liability associated with the above matters as well as any
      liability to plug or replug any and all wells located on the Leases in
      accordance with the applicable rules, regulations and requirements of
      governmental agencies be passed to the Buyer at Closing, and that Buyer
      shall assume all liability for such matters and all Claims related
      thereto.

            

    

      

    
      	
              8.1.2  

            	
              NORM.  The
      Interests may contain asbestos or NORM. NORM may affix or attach itself to
      the inside of wells, materials and equipment as scale or in other forms;
      wells, materials and equipment located on the Leases or included in the
      Interests may contain NORM, and NORM containing material may have been
      buried or otherwise disposed of on the Leases. Special procedures may be
      required for remediating, removing, transporting and disposing of asbestos
      and NORM from the Interests, and, except as otherwise provided in this
      Agreement, Buyer assumes all liability for any assessment, remediation,
      removal, transportation, and disposal of these materials in accordance
      with the applicable rules, regulations and requirements of governmental
      agencies regardless of whether these materials existed before, on or after
      the Effective Date.

            

    

     

    
      	
              8.2  

            	
              Assumption of
      Obligations.  Subject to the provisions of Section 8.3,
      and except as otherwise set forth therein, Buyer shall, at Closing, assume
      and be responsible for and comply with all duties and obligations of
      Sellers, express or implied, arising before, on or after the Effective
      Time, with respect to the Interests, including, without limitation, those
      arising under or by virtue of any lease, contract, agreement, document,
      permit, applicable statute or rule, regulation or order of any
      governmental authority, (specifically including, without limitation, any
      governmental request or requirement to plug, re-plug and/or abandon any
      well of whatsoever type, status or classification, remove all equipment
      and facilities, including but not limited to pipelines, pipeline laterals,
      and flowlines and any such request or requirement to remove any and all
      platforms and restore the site whether such obligation arose before, on or
      after the Effective Date, or take any clean-up or other action with
      respect to the property or premises, including hazardous waste cleanup
      costs under applicable Environmental
Laws).

            

    

     

    
      	
              8.3  

            	
              Retained
      Obligations.  From
      and after Closing, Sellers, severally, but not jointly, shall retain
      responsibility for and shall timely pay and perform the following
      (“Retained Obligations”):

            

    

     

    
      	
               

            	
              (i)

            	
              All
      obligations, liabilities and Claims for royalties and other payments out
      of production attributable to the Interests for all periods prior to the
      Effective Date;

            

    

    

    
      	
               

            	
              (ii)

            	
              Taxes
      and any fines and penalties associated therewith, attributable to the
      Interests and production therefrom for all periods prior to the Effective
      Date; and

            

    

    

    
      	
               

            	
              (iii)

            	
              All
      obligations, liabilities and Claims, other than Environmental Claims,
      relating to all costs and expenses attributable to the Interests prior to
      the Effective Date.

            

    

    

    
      	
              8.4  

            	
              Buyer’s General
      Indemnification.  Buyer shall defend, indemnify and hold
      the Sellers Indemnified Group harmless from and against any and all Claims
      for personal injury, death or damage to property or to the environment, or
      for any other relief, arising directly or indirectly from, or incident to,
      (i) the ownership, use, occupation, operation, maintenance or abandonment
      of any of the Interests, or condition of the property or premises, whether
      latent or patent, and whether asserted against Buyer and/or any member of
      the Sellers’ Indemnified Group, to the extent any such Claims result from
      conditions, actions or inactions occurring or arising before, on, or after
      the Effective Date except any such Claim relating to or arising out a
      Retained Obligation; (ii) Sellers' operation of the Interests under
      Article 10 (if applicable), except to the extent caused by Seller's gross
      negligence or willful misconduct; (iii) all obligations assumed by Buyer
      pursuant to this Article 8 or Section 9.5; (iv) any obligations for
      broker's fees incurred by Buyer in connection with its purchase of the
      Interests; (y) any oil and gas production imbalances associated with the
      Interests that Buyer assumed under Section 11.15; (vi) any violation by
      Buyer of state or federal securities laws, or Buyer’s dealings with its
      partners, investors, financial institutions and other third parties in
      connection with the transactions contemplated under this Agreement; (vii)
      any and all duties, obligations and liabilities arising under or pursuant
      to that certain Pipeline Easement dated March 13, 2007 by and among
      Timberstar Nacogdoches II LP, as grantor, and Fund IX and WI Fund IX,
      collectively as grantee; and (viii) reasonable attorneys fees, court
      costs, and other reasonable costs of litigation resulting from the defense
      of any claim or cause of action within the scope of Buyer’s
      indemnification obligations hereto; excluding, however, (y) any Claims
      which would, but for this indemnification provision, be covered by
      Sellers' special warranty of title contained in Section 4.1 hereof; and
      (z) all Retained Obligations pursuant to Section 8.3 hereof. With respect
      to any Claim Buyer may be obligated to defend pursuant to Buyer’s
      indemnification obligations contained in this Agreement, Sellers shall
      have the right, but not the obligation, to participate at its sole expense
      fully in the defense of the Claim. Sellers’ Indemnified Group includes
      Sellers and its members, directors, officers, employees and
      agents.

            

    

     

    
      	
              8.5  

            	
              Sellers' General
      Indemnification.  Sellers, severally, but not jointly,
      shall defend, indemnify and hold the Buyer, its directors, officers,
      employees and agents harmless from and against any and all Claims directly
      or indirectly relating to or arising out of (i) the Retained Obligations;
      (ii) Sellers’ operation of the Interests under Article 10 (if applicable)
      to the extent caused by Sellers’ gross negligence or willful misconduct;
      (iii) any obligations for broker's fees incurred by Sellers in connection
      with its sale of the Interests; and (iv) reasonable attorneys fees, court
      costs, and other reasonable costs of litigation resulting from the defense
      of any claim or cause of action within the scope of Sellers'
      indemnification obligations hereto.  With respect to any Claim
      Sellers may be obligated to defend pursuant to Sellers' indemnification
      obligations contained in this Agreement, Buyer shall have the right, but
      not the obligation, to participate at its sole expense fully in the
      defense of the Claim.

            

    

     

    
      	
              8.6  

            	
              Environmental
      Indemnity and Release.  Buyer releases and forever
      discharges the Sellers’ Indemnified Group and Buyer agrees to defend,
      indemnify and hold the Seller Indemnified Group harmless from any and all
      Claims, whether direct or indirect, known or unknown, foreseen or
      unforeseen, that may arise on account of or in any way be connected with
      the physical condition of the Interests and property or any applicable
      Environmental Law, regardless whether or not arising during the period of,
      or from, or in connection with Sellers' ownership, or operation or use of
      the Interests.

            

    

     

    
      	
              8.7  

            	
              Limitations on
      Liabilities.  Neither Sellers nor Buyer shall have any
      obligation or liability under this Agreement or in connection with or with
      respect to the transactions contemplated in this Agreement for (i) any
      breach, misrepresentation or noncompliance with respect to any
      representation, warranty, covenant or obligation if such breach,
      misrepresentation or noncompliance shall have been waived in writing by
      the other party or (ii) any misrepresentation or breach of warranty if
      such other party had knowledge of the relevant facts at or before
      Closing.

            

    

     

    
      	
              8.8  

            	
              Successors and
      Assigns.  The indemnities of this Article 8 shall inure
      to the benefit of Buyer and Sellers and the respective affiliates,
      partners, members, officers, directors, employees, agents, successors and
      assigns of each of them. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
      INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS
      ARTICLE 8 OF THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE CLAIMS
      IN QUESTION AROSE FROM THE GROSS, SOLE, CONCURRENT, ACTIVE OR PASSIVE
      NEGLIGENCE OF THE INDEMNIFIED PARTY AND ITS EMPLOYEES AND/OR AGENTS OR ANY
      THIRD PARTY AND REGARDLESS OF WHO MAY BE AT FAULT OR OTHERWISE RESPONSIBLE
      UNDER ANY OTHER CONTRACT, OR ANY STATUTE, RULE, OR THEORY OF LAW,
      INCLUDING, BUT NOT LIMITED TO, THEORIES OF STRICT LIABILITY. BUYER AND
      SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS
      NEGLIGENCE RULE AND IS CONSPICUOUS.

            

    

     

    ARTICLE 9.  TAXES AND
EXPENSES.

     

    
      	
              9.1  

            	
              Recording and Transfer
      Expenses.  Buyer shall pay all costs of recording and
      filing (i) the assignments delivered hereunder for the Interests, (ii) all
      state, federal and Indian transfer and assignment documents, (iii) all
      applications and other documents required for the transfer of permits and
      operatorship of the Interests, and (iv) all other
    instruments.

            

    

     

    
      	
              9.2  

            	
              Real Property and
      Personal Property Taxes.  All Real Property Taxes,
      Personal Property Taxes, and similar obligations (“Property
      Taxes”) on the Interests (i) for periods before the Effective Date
      are Sellers’ obligation and (ii) for periods on and after the Effective
      Date are Buyer’s obligation.  If Property Taxes for the current
      year have not been assessed and paid as of the Closing Date, the Buyer
      shall file all required reports and returns incident to the Property Taxes
      and pay the Property Taxes for the current tax year and subsequent
      periods.  The Sellers will reimburse the Buyer promptly for the
      Sellers' proportionate share of these taxes, prorated as of the Effective
      Date, upon receipt of evidence of the Buyer’s payment of the
      taxes.  If Property Taxes for the current tax year have been
      assessed and paid as of the Closing Date, the Buyer will reimburse the
      Seller for its proportionate share of these taxes, prorated as of the
      Effective Date, as a closing adjustment to the Sale Price, as provided in
      Section 2.2 of this Agreement.

            

    

     

    
      	
              9.3  

            	
              Ad Valorem and
      Severance Taxes.  Sellers shall bear and pay all Ad
      Valorem, severance or other taxes measured by Hydrocarbon production from
      the Interests, or the receipt of proceeds therefrom, to the extent
      attributable to production from the Interests before the Effective Date
      regardless of whether the billings for such taxes are rendered after the
      Effective Date and regardless of the assessment year reflected on such
      billings. Buyer shall bear and pay all such taxes on production from the
      Interests on and after the Effective Date.  Sellers shall
      withhold and pay on behalf of Buyer all such taxes on production from the
      Interests between the Effective Date and the Closing Date, and the amount
      of any such payment shall be reimbursed to Sellers as a closing adjustment
      to the Sale Price pursuant to Section 2.2 hereof.  If either
      Party pays taxes owed by the other, upon receipt of evidence of payment,
      the nonpaying party will reimburse the paying Party promptly for its
      proportionate share of such taxes.

            

    

     

    
      	
              9.4  

            	
              Tax and Financial
      Reporting.

            

    

      

    
      	
              9.4.1  

            	
              IRS Form
      8594.  If the Parties mutually agree that a filing of
      Form 8594 is required, the Parties will confer and cooperate in the
      preparation and filing of their respective forms to reflect a consistent
      reporting of the Allocated Values of the
  Interests.

            

    

      

    
      	
              9.4.2  

            	
              Financial
      Reporting.  Sellers and Buyer agree to furnish to each
      other at Closing or as soon thereafter as practicable any and all
      information and documents reasonably required to comply with tax and
      financial reporting requirements and
audits.

            

    

     

    
      	
              9.5  

            	
              Sales and Use
      Taxes.  Buyer shall be responsible for all sales, use and
      similar taxes applicable to the transfer of the Interests.  If
      Seller is required to pay such sales, use or similar taxes on behalf of
      Buyer, Buyer will reimburse Seller at Closing for all sale and use taxes
      due and payable on the transfer of the Interests to
      Buyer.  Buyer shall indemnify Sellers and hold Sellers harmless
      from any liability, including, without limitation, penalties, interest and
      attorneys' fees, arising out of Buyer's failure to pay Sellers at Closing
      the amount equal to all state and local sales and use taxes payable by
      Sellers on the transfer of ownership of any tangible personal
      property.

            

    

     

    
      	
              9.6  

            	
              Income
      Taxes.  Each Party shall be responsible for its own state
      and federal income taxes, if any, as may result from this
      transaction.

            

    

     

    
      	
              9.7  

            	
              Incidental
      Expenses.  Each Party shall bear its own respective expenses
      incurred in connection with the negotiation and Closing of this
      transaction, including its own consultants' fees, broker's fees,
      attorneys' fees, accountants' fees, and other similar costs and
      expenses.

            

    

     

    ARTICLE 10.  OPERATIONS DURING THE
TRANSITION PERIOD.

     

    
      	
              10.1  

            	
              Operations by
      Seller.  Sellers shall continue to operate that portion
      of the Interests for which Sellers are the operator during the period
      between the Effective Date and 7:00 a.m., local time where the Interests
      are located, on the first day of the month following the month in which
      Closing occurs, or such other date as Sellers and Buyer may agree in
      writing or may be required by the applicable operating agreement (the
      “Interim
      Period”). However, Sellers will have no obligation to operate any
      portion of the Interests after the Interim Period except as provided for
      in Section 10.4 of this Agreement.  Sellers shall operate the
      Interests during the Interim Period in a prudent manner consistent with
      generally accepted industry practices and standards, applicable laws and
      regulations, and all applicable lease and operating agreements and other
      applicable agreements. Transfer of operations for the Interests is
      controlled by the applicable operating agreements and governmental
      regulatory requirements.  Sellers shall use their good faith
      efforts to assist Buyer in becoming operator of those Interests currently
      operated by Sellers but shall in no event be required to expend funds in
      connection therewith.

            

    

     

    
      	
              10.2  

            	
              Buyer's
      Approval. In conducting operations during the Interim Period,
      Sellers shall, except for emergency action taken in the face of serious
      risk of life, property or the environment, (i) obtain Buyer's prior
      written approval of all expenditures and proposed contracts and
      agreements, or amendments to existing contracts and agreements relating to
      the Interests that involve individual commitments net to Seller's
      interests of more than $50,000; (ii) consult with and advise Buyer
      regarding all material matters concerning the operation, management and
      administration of the Interests; and (iii) obtain Buyer's written approval
      before voting under any operating, unit, joint venture or similar
      agreement.  Sellers shall notify Buyer of any emergency action
      taken, and to the extent reasonably practicable, obtain Buyer's prior
      approval of such actions.  However, except for emergency action
      that must be taken in the face of serious risk of life, property or
      environment, Sellers will have no obligation to undertake any actions with
      respect to the Interests that are not required in the course of the normal
      operation of the Interests.

            

    

     

    
      	
              10.3  

            	
              Compensation of
      Sellers.  Buyer will pay Sellers, as provided under the
      applicable operating agreement, for Buyer’s working interest share of all
      operating expenses and other expenditures paid by Sellers in connection
      with the operation of the Interests during the Interim Period, including
      overhead charges at the rate specified in the applicable operating
      agreement. Sellers shall make, subject to Buyer’s approval, capital
      expenditures or extraordinary operating expenditures in connection with
      the Interests during the Interim Period in accordance with and subject to
      the timing and other parameters set forth in the Shiloh Drilling Checklist
      attached hereto as Exhibit G.

            

    

     

    
      	
              10.4  

            	
              Operation of Certain
      Interests After Interim Period.  Buyer and Sellers
      recognize that Seller may remain the record title owner of certain
      portions of the Interests after the Interim Period, pending receipt of
      Government Approvals, as provided in Section 5.4.1. If Sellers are
      required to remain the operator of the affected Interests until the
      required approvals are obtained, then Sellers will operate the affected
      Interests during the period prior to receiving such approvals, as provided
      in this Sections 10.1 through 10.3.

            

    

    

    ARTICLE 11.  MISCELLANEOUS.

     

    
      	
              11.1  

            	
              Notices.  All
      communications required or permitted under this Agreement shall be in
      writing and any communications or delivery hereunder shall be deemed to
      have been fully made if actually delivered, or if mailed by registered or
      certified mail, postage prepaid, or by facsimile or electronic
      transmission to the address set forth
  below:

            

    

     

    SELLERS

    

    ENERVEST
ENERGY INSTITUTIONAL FUND IX, L.P.

    c/o
EnerVest, Ltd.

    1001
Fannin, Suite 800

    Houston,
Texas 77002

    Attention:
Mark A. Houser

    Phone:
(713) 659-3500 Fax: (713) 659-3556

    E-mail:
mhouser@enervest.net

    

    ENERVEST
ENERGY INSTITUTIONAL FUND IX-WI, L.P.

    c/o
EnerVest, Ltd.

    1001
Fannin, Suite 800

    Houston,
Texas 77002

    Attention:
Mark A Houser

    Phone:
(713) 659-3500

     
Fax: (713) 659-3556

    E-mail:
mhouser@enervest.net

    

      EVERSTAR ENERGY,
LLC

      1614 Chestnut Grove
Lane

    Kingwood,
TX 77345

    Attention:  Keith
E. Jordan

    Phone:  (713)
237-5002

    Fax:  (713)
237-5040

    E-mail:  k.jordan@indigominerals.com

    

    BUYER

    

    FIDELITY EXPLORATION & PRODUCTION
COMPANY

    1700 Lincoln Street, Suite
2800

    Denver, CO 80203

    Attention:   Darwin L.
Subart

    Phone:  (720)
931-9636

    Fax:           (303)
893-1964

    E-Mail:  darwin.subart@fidelityepco.com

    

    cc:  Julie Krenz, Assistant
Secretary

    MDU Resources Group, Inc.

    P.O. Box 5650

    Bismarck, ND 58506-5650

    Phone:  (701)
530-1017

    Fax:  (701)
530-1731

    E-Mail:  julie.krenz@mduresources.com

    

    
      	
              11.2  

            	
              Further
      Assurance.  After Closing, each of the Parties shall
      execute, acknowledge and deliver to the other such further instruments,
      and take such other actions as may be reasonably necessary to carry out
      the provisions of this Agreement. However, Buyer shall assume all
      responsibility for notifying the purchaser of oil and gas production from
      the Interests, and such other designated persons who may be responsible
      for disbursing payments for the purchase of such production, or the change
      of ownership of the Interests. Buyer shall take all actions necessary to
      effectuate the transfer of such payments to Buyer.  After final
      settlement has been made in accordance with Section 2.3, additional
      proceeds received by or expenses paid by either Buyer or Sellers on behalf
      of the other Party shall be settled by invoicing such Party for expenses
      paid or remitting to such other Party any proceeds
    received.

            

    

     

    
      	
              11.3  

            	
              Removal of
      Signs.  Sellers shall remove its name and signs from the
      Seller-operated Interests. Buyer grants Sellers a right of access to the
      Interests to remove Sellers' signs and name from all wells, facilities and
      Leases. If Sellers' name or signs remain on the Interests after Closing,
      Buyer will promptly, but no later than the date required by applicable
      rules and regulations or thirty (30) days after Closing, whichever is
      earlier, remove all remaining signs and references to Sellers and erect or
      install signs complying with applicable rules and regulations, including
      signs showing the Buyer as Operator of the
  Interests.

            

    

     

    
      	
              11.4  

            	
              Securities
      Laws.  The
      solicitation of offers and the sale of the Interests by Sellers have not
      been registered under any securities laws. Buyer represents that at no
      time has it been presented with or solicited by or through any public
      promotion or any form of advertising in connection with this transaction.
      Buyer represents that it intends to acquire the Interests for its own
      benefit and account and that it is not acquiring the Interests with the
      intent of distributing fractional, undivided interests that would be
      subject to regulation by federal or state securities laws, and that if it
      sells, transfers, or otherwise disposes of the Interests or fractional,
      undivided interests, it will do so in compliance with applicable federal
      and state securities laws.

            

    

     

    
      	
              11.5  

            	
              Due
      Diligence.  Buyer represents that it has performed, or
      will perform prior to Closing, sufficient review and due diligence with
      respect to the Interests, which includes reviewing well-data, title, and
      other files, and performing necessary evaluations, assessments, and other
      tasks involved in evaluating the Interests, to satisfy its requirements
      completely and to enable it to make an informed decision to acquire the
      Interests under the terms of this
Agreement.

            

    

     

    
      	
              11.6  

            	
              Press
      Release.  There shall be no press release or public
      communication concerning this purchase and sale by either Party, except as
      required by law, rule, regulation or order, including the rules of any
      stock exchange, or without the prior written consent of the Party not
      originating said release or communication. The Parties will endeavor to
      consult each other in a timely manner on all press releases, whether prior
      to or after Closing.

            

    

     

    
      	
              11.7  

            	
              Entire
      Agreement.  This instrument states the entire agreement
      between the Parties and may be supplemented, altered, amended, modified or
      revoked by writing only, signed by all Parties. This Agreement supersedes
      any prior agreements between the Parties concerning sale of the Interests,
      except that any confidentiality agreement shall continue as provided in
      Section 5.1 hereof. The headings are for guidance only and shall have no
      significance in the interpretations of this
  Agreement.

            

    

     

    
      	
              11.8  

            	
              Assignability.  This
      Agreement and the rights and obligations hereunder shall not be assignable
      or delegable by either Party hereto without the prior written consent of
      the other Party.

            

    

     

    
      	
              11.9  

            	
              Survival.  The
      representations and warranties contained in Sections 3.1.1 through 3.1.5,
      3.1.7, 3.2.1 through 3.2.10 shall survive the execution and delivery of
      the Assignment and Bill of Sale.  Unless otherwise expressly
      limited herein, all of the representations, warranties, and agreements of
      or by the Parties hereto shall survive the execution and delivery of the
      Assignment and Bill of Sale.

            

    

     

    
      	
              11.10  

            	
              Severability.  If
      any provision of this Agreement is found by a court of competent
      jurisdiction to be invalid or unenforceable, that provision will be deemed
      modified to the extent necessary to make it valid and enforceable and if
      it cannot be so modified, it shall be deemed deleted and the remainder of
      the Agreement shall continue and remain in full force and
      effect.

            

    

     

    
      	
              11.11  

            	
              Counterparts.  This
      Agreement may be executed in multiple counterparts, each of which taken
      together shall constitute an original and all of which shall constitute
      one document.

            

    

     

    
      	
              11.12  

            	
              Governing
      Law.  This
      Agreement is governed by and must be construed according to the laws of
      the State of Texas, excluding any conflicts-of-law rule or principle that
      might apply the law of another jurisdiction.

            

    

     

    
      	
              11.13  

            	
              Dispute
      Resolution.  If a dispute arises between the Parties
      under this Agreement and cannot be resolved by negotiation, the Parties
      agree to submit the dispute to mediation. Either Party may request
      mediation of a dispute by sending a written request to the other
      Party.  If either Party requests mediation of a dispute, the
      Parties agree to choose a mutually acceptable mediator, promptly begin
      mediation of the dispute, and share the costs of all mediation services
      equally.  Each Party agrees to have present at all mediation
      conferences at least one individual who has authority to settle the
      dispute. Notwithstanding this agreement to mediate disputes, either Party
      may file a complaint for statute of limitation or venue reasons, or seek a
      preliminary injunction or other provisional judicial relief, if in its
      sole judgment such action is necessary to avoid irreparable damage or to
      preserve the status quo. Despite any such protective action, the Parties
      will continue to try to resolve the dispute by negotiation or
      mediation.

            

    

     

    
      	
              11.14  

            	
              Production Imbalances.
      Set forth in Exhibit E attached hereto and made a part hereof for
      all purposes is a listing of all gas imbalance volumes measured in mcf and
      the aggregate net volume of overproduction or underproduction, as
      applicable, with respect to the Interests as of the Effective Date (the
      “Assumed
      Imbalance”). At Closing, the Sale Price shall be adjusted, upward
      or downward, as appropriate, to reflect the value of said aggregate net
      volume of overproduction or underproduction with respect to the Assumed
      Imbalance as said volume may be adjusted prior to Closing in accordance
      with each Party's due diligence investigation. The value of said aggregate
      net volume (less royalties) of overproduction or underproduction, as
      applicable, shall be the product obtained by multiplying $6.00 by the
      volume of such aggregate net overproduction or underproduction measured in
      mcf as shown in Exhibit E. The Parties acknowledge that the imbalances
      assumed at Closing may be incorrect, and Buyer and Seller agree that the
      Sale Price will be adjusted in the Final Settlement for any actual
      variances, but not thereafter. Buyer will be solely responsible for any
      liability and solely entitled to any benefit from production imbalances
      relating to the Interests from and after the Closing
  Date.

            

    

     

    
      	
              11.15  

            	
              Pipeline and Other
      Imbalances.  To the extent there exists any imbalances
      attributable to hydrocarbons produced from the Interests as of the
      Effective Date, with respect to any gas pipeline, storage, or processing
      facility, at Closing the Sale Price shall be adjusted upward or downward,
      as appropriate, to reflect the value of said imbalance. The value of said
      imbalance shall be the product obtained by multiplying the volume of such
      aggregate net over-position or under-position, as the case may be,
      measured in the same manner as it is measured by the pipeline, storage or
      processing facility, as applicable, by the value at which the imbalance
      was either cashed out, made up or sold, or if otherwise undeterminable
      then using existing fair market value of, or price for, said Hydrocarbons.
      If the imbalance cannot be determined by Closing, then the value
      adjustment associated with any imbalance will be made in connection with
      the Final Settlement Statement.

            

    

     

    
      	
              11.16  

            	
              Exhibits.  In
      the event of a conflict between the provisions of the Exhibits attached to
      this Agreement and the foregoing provisions of this Agreement, the
      provisions of this Agreement shall take precedence. The omission of
      certain provisions of this Agreement from any conveyance delivered
      pursuant hereto does not constitute a conflict between this Agreement and
      said conveyance document and will not effect a merger of the omitted
      provisions.

            

    

     

    EACH
PARTY ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT IN ITS ENTIRETY, AND THAT IT
UNDERSTANDS ALL THE PROVISIONS SET FORTH HEREIN, INCLUDING, BUT NOT LIMITED TO,
THOSE PROVISIONS LOCATED IN ARTICLE 8 WHEREIN BUYER AGREES TO INDEMNIFY SELLER
IN CERTAIN CIRCUMSTANCES EVEN THOUGH THE LOSSES, COSTS, EXPENSES AND/OR DAMAGES
MAY HAVE BEEN CAUSED BY IHE GROSS, SOLE, CONCURRENT, ACTIVE OR PASSIVE
NEGLIGENCE OF 1HE SELLER, ITS EMPLOYEES, OR ANY THIRD PARTY AND EVEN THOUGH THE
SELLER MAY BE RESPONSIBLE FOR SUCH LOSSES, COSTS, EXPENSES AND/OR DAMAGES UNDER
ANY THEORY OF LAW, INCLUDING BUT NOT LIMITED TO STRICT LIABILITY.

     

    

    [SIGNATURE PAGES TO
FOLLOW]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXECUTED
as of the date first above mentioned.

    

    SELLERS:

    

    ENERVEST ENERGY INSTITUTIONAL FUND
IX, L.P.

    

    a Delaware limited
partnership

    

    By:           EnerVest,
Ltd.,

    its general partner

    By:           EnerVest
Management GP, L.C.,

    its general partner

    

    By:        /s/ MARK A.
HOUSER

    Mark A. Houser

    Executive Vice President and Chief
Operating Officer

    

    

    ENERVEST ENERGY INSTITUTIONAL FUND
IX-WI, L.P.

    

    a
Delaware limited partnership

    

    By:           EnerVest,
Ltd.,

    its general partner

    By:           EnerVest
Management GP, L.C.,

    its general partner

    

    By:       /s/ MARK A.
HOUSER

    Mark A. Houser

    Executive Vice President and Chief
Operating Officer

    

    

    

    EVERSTAR ENERGY,
LLC

    

    By:           Keith
E. Jordan

    Name:      /s/
KEITH E. JORDAN

    Title:         President

    

    

    ENERVEST
OPERATING, L.L.C. hereby joins in this Agreement for the sole purpose of
acknowledging its agreement to convey to Buyer the Drilling
Contract.

    

    ENERVEST OPERATING,
L.L.C.

    

    

    

    By:        /s/ MARK A.
HOUSER

    Mark A. Houser

    President

    BUYER:

    

    FIDELITY EXPLORATION & PRODUCTION
COMPANY

    

    

    

    By:           /s/ DARWIN L.
SUBART

    Darwin L. Subart

    Presidentresourceseicp.htm

    MDU
      RESOURCES GROUP, INC.

    

      EXECUTIVE
      INCENTIVE COMPENSATION PLAN

       ____________________________________________________________

    

    I.         PURPOSE

               The
      purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide
      an incentive for key executives of MDU Resources Group, Inc. (the "Company")
      to
      focus their efforts on the achievement of challenging and demanding corporate
      objectives.  The Plan is designed to reward successful corporate
      performance as measured against specified performance goals as well as
      exceptional individual performance.  When corporate performance
      reaches or exceeds the performance targets and individual performance is
      exemplary, incentive compensation awards, in conjunction with salaries, will
      provide a level of compensation which recognizes the skills and efforts of
      the
      key executives.

    

    II.      
       DEFINITIONS

               Capitalized
      terms not otherwise defined herein shall have the meanings given them in the
      Company’s Executive Incentive Compensation Plan Rules and
      Regulations.

    

    III.      BASIC
      PLAN CONCEPT

               The
      Plan provides an opportunity to earn annual incentive compensation based on
      the
      achievement of specified annual performance objectives.  A target
      incentive award for each individual within the Plan is established based on
      the
      position level and actual base salary, provided, however, that the Compensation
      Committee of the Board of Directors (the “Committee”) in its sole discretion,
      may, instead of actual base salary, use the assigned salary grade market value
      (midpoint) (“Salary”).  The target incentive award represents the
      amount to be paid, subject to the achievement of the performance objective
      targets established each year.  Larger incentive awards than target
      may be authorized when performance exceeds targets; lesser or no amounts may
      be
      paid when performance is below target.

               It
      is recognized that during a Plan Year major unforeseen changes in economic
      and
      environmental conditions or other significant factors beyond the control of
      management may substantially affect the ability of the Plan Participants to
      achieve the specified performance goals.  Therefore, in its review of
      corporate performance the Committee, in consultation with the Chief Executive
      Officer of the Company, may modify the performance targets.  However,
      it is contemplated that such target modifications will be necessary only in
      years of unusually adverse or favorable external conditions.

    

    IV.      ADMINISTRATION

               The
      Plan shall be administered by the Committee with the assistance
      of the Chief Executive Officer of the Company.  The Committee shall
      approve annually, prior to the beginning of each Plan Year, the list of eligible
      Participants, and the target incentive award level for each position within
      the
      Plan.  The Plan’s performance targets for the year shall be approved
      by the Committee no later than its regularly scheduled February meeting during
      that Plan Year.  The Committee shall have final discretion to
      determine actual award payment levels, method of payment, and whether or not
      payments shall be made for any Plan Year.

               The
      Board of Directors of the Company may, at any time and from time to time, alter,
      amend, supersede or terminate the Plan in whole or in part, provided that no
      termination, amendment or modification of the Plan shall adversely affect in
      any
      material way an award that has met all requirements for payment without the
      written consent of the Participant holding such award, unless such termination,
      modification or amendment is required by applicable law.

    

    V.       ELIGIBILITY

               Executives
      who are determined by the Committee to have a key role in both the establishment
      and achievement of Company objectives shall be eligible to participate in the
      Plan.

               Nothing
      in the Plan shall interfere with or limit in any way the right of the Company
      to
      terminate any Participant’s employment at any time, for any reason or no reason
      in the Company’s sole discretion, or confer upon any Participant any right to
      continue in the employment of the Company.  No executive shall have
      the right to be selected to receive an award under the Plan, or, having been
      so
      selected, to be selected to receive a future award.

    

    
      	
              VI.

            	
              PLAN
                PERFORMANCE MEASURES

            

    

               Performance
      measures shall be established that consider shareholder and customer
      interests.  These measures shall be evaluated annually based on
      achievement of specified goals.

              The
      performance measure reflective of shareholder’s interest will be the percentage
      attainment of corporate goals, as determined each year by the
      Committee.  This measure may be applied at the corporate level for
      individuals, such as the Chief Executive Officer, or at the business unit level
      for individuals whose major or sole impact is on business unit
      results.

              Individual
      performance will be assessed based on the achievement of annually established
      individual objectives.

              Threshold,
      target and maximum award levels will be established annually for each
      performance measure and business unit.  The Committee will retain the
      right to make all interpretations as to the actual attainment of the desired
      results and will determine whether any circumstances beyond the control of
      management need to be considered.

    

    VII.     TARGET
      INCENTIVE AWARDS

               Target
      incentive awards will be expressed as a percentage of each Participant’s
      Salary.  These percentages shall vary by position and reflect larger
      reward opportunity for positions having greater effect on the establishment
      and
      accomplishment of the Company’s or business unit’s objectives.  An
      exhibit showing the target awards as a percentage of Salary for eligible
      positions will be attached to this Plan at the beginning of each Plan
      Year.

    

    VIII.   
      INCENTIVE FUND DETERMINATION

               The
      target incentive fund is the sum of the individual

    target
      incentive awards for all eligible Participants.  Once the incentive
      targets have been determined by the Committee, a target incentive fund shall
      be
      established and accrued ratably by the Company.  The incentive fund
      and accruals may be adjusted during the year.

               At
      the close of each Plan Year, the Chief Executive Officer
      of the Company will prepare an analysis showing the Company's or business unit's
      performance in relation to each of the performance measures
      employed.  This will be provided to the Committee for review and
      comparison to threshold, target and maximum performance levels.  In
      addition, any recommendations of the Chief Executive Officer will be presented
      at this time.  The Committee will then determine the amount of the
      target incentive fund earned.

    

    IX.      INDIVIDUAL
      AWARD DETERMINATION

               Each
      individual Participant's award will be based first upon the level of performance
      achieved by the Company or business unit and secondly based upon the
      individual's performance.  The performance measures applicable for
      assessing individual performance will be established at the beginning of each
      Plan Year.  The assessment by the Committee, after consultation with
      the Chief Executive Officer, of achievement relative to the established
      performance measures, as determined by a percentage from 0 percent to 200
      percent, will be applied to the Participant's target incentive award which
      has
      been first adjusted for Company or business unit performance.

    

    X.       PAYMENT
      OF AWARDS

               Except
      as provided below or as otherwise determined by the Committee, in order to
      receive an award under the Plan, the Participant must remain in the employment
      of the Company or business unit for the entire Service Year.  If a
      Participant terminates employment with the Company pursuant to Section 5.01
      of
      the Company’s Bylaws which provides for mandatory retirement for certain
      officers on their 65th
      birthday (or terminates employment with a subsidiary of the Company pursuant
      to
      a similar subsidiary Bylaw provision) and if the Participant’s 65th birthday occurs during
      the
      Service Year, determination of whether the performance measures have been met
      will be made at the end of the Service Year, and to the extent met, payment
      of
      the award will be made to the Participant, prorated.  Proration of
      awards shall be based upon the number of full months elapsed from and including
      January to and including the month in which the Participant’s 65th birthday
      occurs.  The prorated award shall be paid as soon as practicable in
      the year following the Service Year, but in all events between January 1 and
      March 10.

               An
      individual Participant who transfers between the Company and business units
      may
      receive a prorated award at the discretion of the Committee.  Payments
      made under this Plan will not be considered part of compensation for pension
      purposes.  Payments will be made in cash as soon as practicable in the
      year following the Service Year, but in all events between January 1 and
      March 10.

               Incentive
      awards may be deferred if the appropriate elections have been executed prior
      to
      the beginning of the Service Year.  A deferral election will be
      effective only for the incentive award earned in the Service Year following
      the
      Plan Year in which the election is made.  Deferral elections may not
      be changed or revoked after the Service Year begins.  Deferred amounts
      shall be subject to the terms of the Plan and the Rules and the Rules and
      Regulations as amended, and, to the extent not inconsistent therewith, the
      deferral election forms pursuant to which the amounts were
      deferred.  Deferred amounts will accrue interest at a rate determined
      annually by the Committee and specified in the Rules and
      Regulations.

               In
      the event of a "Change in Control" (as defined by the Committee in its Rules
      and
      Regulations) then any award deferred by each Participant shall become
      immediately payable to the Participant in cash, together with accrued interest
      thereon to the date of payment.  In the event the Participant files
      suit to collect the Participant's deferred award then all of the court costs,
      other expenses of litigation, and attorneys' fees shall be paid by the Company
      in the event the Participant prevails upon any of the Participant's claims
      for
      payment of a deferred award.

    

    XI.        ACCOUNTING
      RESTATEMENTS

    This
      Section XI shall apply to incentive awards granted to all Participants in the
      Plan.  Notwithstanding anything in the Plan or the Plan's Rules and
      Regulations to the contrary, if the Company's audited financial statements
      are
      restated, the Committee may, in accordance with the Company's Guidelines for
      Repayment of Incentives Due to Accounting Restatements, take such actions
      as it deems appropriate (in its sole discretion) with respect to

    (a)           unpaid
      incentive awards under the Plan (including incentive awards relating to
      completed Plan Years, but with respect to which payments have not yet been
      made
      or deferred) ("Outstanding Awards") and

    (b)           prior
      incentive awards that were paid (or deferred) within the three-year period
      preceding the restatement ("Prior Awards"), provided such Prior Awards were
      not
      paid prior to the date the Plan was amended to add this
      Section XI,

    if
      the
      calculation of the amounts payable, paid or deferred under such awards are,
      or
      would have been, directly impacted by the restatement, including, without
      limitation, (i) securing (or causing to be secured) repayment of some or all
      payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making
      (or causing to be made) additional payments (or crediting additional deferrals),
      (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding
      Awards and/or (iv) causing the forfeiture of Outstanding Awards.  The
      Committee may, in its sole discretion, take different actions pursuant to this
      Section XI with respect to different awards, different Participants (or
      beneficiaries) and/or different classes of awards or Participants (or
      beneficiaries).  The Committee has no obligation to take any action
      permitted by this Section XI.  The Committee may consider any factors
      it chooses in taking (or determining whether to take) any action permitted
      by
      this Section XI, including, without limitation, the following:

    (A)           The
      reason for the restatement of the financial statements;

    (B)           The
      amount of time between the initial publication and subsequent restatement of
      the
      financial statements; and

    (C)           The
      Participant's current employment status, and the viability of successfully
      obtaining repayment.

               If
      the Committee requires repayment of all or part of a Prior Award, the amount
      of
      repayment may be based on, among other things, the difference between the amount
      paid to the individual and the amount that the Committee determines in its
      sole
      discretion should have been paid based on the restated results.  The
      Committee shall determine whether repayment shall be effected (i) by seeking
      repayment from the Participant, (ii) by reducing (subject to applicable law
      and
      the terms and conditions of the applicable plan, program or arrangement) the
      amount that would otherwise be provided to the Participant under any
      compensatory plan, program or arrangement maintained by the Company or any
      of
      its affiliates, (iii) by withholding payment of future increases in compensation
      (including the payment of any discretionary bonus amount) or grants of
      compensatory awards that would otherwise have been made in accordance with
      the
      Company's otherwise applicable compensation practices, or (iv) by any
      combination of the foregoing.  Additionally, by accepting an incentive
      award under the Plan, Participants acknowledge and agree that the Committee
      may
      take any actions permitted by this Section XI with respect to Outstanding Awards
      to the extent repayment is to be made pursuant to another plan, program or
      arrangement maintained by the Company or any of its affiliates.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    MDU
      RESOURCES GROUP, INC.

     

    EXECUTIVE
      INCENTIVE COMPENSATION PLAN

     

    RULES
      AND REGULATIONS

    

    The
      Compensation Committee of the Board
      of Directors of MDU Resources Group, Inc. (the "Company") adopted Rules and
      Regulations for the administration of the Executive Incentive Compensation
      Plan
      (the "Plan") on February 9, 1983, following adoption of the Plan by the Board
      of
      Directors of the Company on November 4, l982.

    

    
      	
              I.  

            	
              DEFINITIONS

            

    

    The
      following definitions shall be used
      for purposes of these Rules and Regulations and for the purposes of
      administering the Plan:

    
      	
               

            	
              1.

            	
              The
                "Committee" shall be the Compensation Committee of the Board of Directors
                of the Company.

            

    

     

    
      	
               

            	
              2.

            	
              The
                "Company" shall refer to MDU Resources Group, Inc. alone and shall
                not
                refer to its utility division or to any of its subsidiary
                corporations.

            

    

     

    
      	
               

            	
              3.

            	
              "Participants"
                for any Plan Year shall be those executives who have been approved
                by the
                Committee as eligible for participation in the Plan for such Plan
                Year.

            

    

     

    
      	
               

            	
              4.

            	
              "Payment
                Date" shall be the date set by the Committee for payment of awards
                pursuant to Section X of the Plan, other than those awards deferred
                pursuant to Section X of the Plan and Section VII of these Rules
                and
                Regulations.

            

    

     

    
      	
               

            	
              5.

            	
              The
                "Plan" shall refer to the Executive Incentive Compensation
                Plan.

            

    

     

    6.           The
      "Plan Year" shall be the calendar year.

     

    
      	
               

            	
              7.

            	
              "Change
                in Control" shall mean the occurrence of any of the following transactions
                or events: (a) any person (which shall not include the Company, any
                subsidiary of the Company or any employee benefit plan of the Company
                or
                of any subsidiary of the Company) ("Person") or group (as that term
                is
                defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires
                (or
                has acquired during the 12-month period ending on the date of the
                most
                recent acquisition by such Person or Persons) ownership of stock
                of the
                Company possessing 30% or more of the total voting power of the stock
                of
                the Company; (b) any Person or group (as that term is defined in
                Treasury
                Regulation Section 1.409A-3(i)(5)(v)(B)), acquires ownership of the
                stock
                of the Company that, together with stock held by such Person or group,
                constitutes more than 50% of the total fair market value or total
                voting
                power of the stock of the Company (this part (b) applies only when
                there
                is a transfer of stock of the Company and the Company's stock remains
                outstanding after the transaction); (c) a majority of the members
                of the
                Board of Directors of the Company is replaced during any 12-month
                period
                by directors whose appointment or election is not endorsed by a majority
                of the members of the Board of Directors of the Company; or (d) any
                Person
                or group (as that term is defined in Treasury Regulation Section
                1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the 12-month
                period ending on the date of the most recent acquisition by such
                Person or
                Persons) assets from the Company that have a gross fair market value
                equal
                to or more than 40% of the total gross fair market value of all of
                the
                assets of the Company immediately before such acquisition or
                acquisitions.

            

    

     

    Notwithstanding
      anything contained herein to the contrary, no transaction or event shall
      constitute a Change in Control for purposes of the Plan unless the transaction
      or event constitutes a change in the ownership of a corporation (as defined
      in
      Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control
      of
      a corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi))
      or
      a change in the ownership of a substantial portion of the assets of a
      corporation (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi))
      and
      the term Change in Control shall be interpreted in a manner consistent with
      the
      proper interpretation of the similar provisions in the Section 409A Treasury
      Regulations.

     

    
      	
               

            	
              8.

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

            

    

     

    
      	
               

            	
              9.

            	
              The
                "Prime Rate" shall be the base rate on corporate loans posted by
                at least
                75 percent of the nation's largest banks as reported in The Wall
                Street Journal.

            

    

     

    
      	
               

            	
              10.

            	
              “Retirement”
                means the later of the day the Participant attains age 55 or the
                day the
                Participant ceases to be an employee of the Company, its utility
                division
                or any of its subsidiary
                corporations.

            

    

     

    
      	
               

            	
              11.

            	
              “Service
                Year” means the Plan Year during which the services giving rise to the
                incentive award are performed.

            

    

    

    
      	
               

            	
              12.

            	
              “Specified
                Employee” means an employee who, as of the date the employee separates
                from service, is a “specified employee” (as that term is used in Section
                409A(a)(2)(B) of the Code), as determined under the Company's policy
                for
                determining specified employees.

            

    

     

    
      	
              II.  

            	
              ADMINISTRATION

            

    

    
      	
               

            	
              1.

            	
              The
                Committee shall have the full power to construe and interpret the
                Plan and
                to establish and to amend these Rules and Regulations for its
                administration.

            

    

     

    
      	
               

            	
              2.

            	
              No
                member of the Committee shall participate in a decision as to their
                own
                eligibility for, or award of, an incentive award
                payment.

            

    

     

    
      	
               

            	
              3.

            	
              Prior
                to the beginning of each Plan Year, the Committee shall approve a
                list of
                eligible executives and notify those so approved that they are eligible
                to
                participate in the Plan for such Plan
                Year.

            

    

     

    
      	
               

            	
              4.

            	
              Prior
                to the beginning of each Plan Year, the Committee shall approve an
                Annual
                Operating Plan.  The Annual Operating Plan shall include the
                Plan's performance measures and target incentive award levels for
                each
                salary grade covered by the Plan for the following Plan
                Year.  The Plan’s performance targets for the year shall be
                approved by the Committee no later than its regularly scheduled February
                meeting during the Plan Year.  The Annual Operating Plan,
                insofar as it is relevant to each individual Participant, shall be
                made
                available by the Committee to each Participant in the Plan at the
                beginning of each Plan Year.

            

    

     

    
      	
               

            	
              5.

            	
              The
                Committee shall have final discretion to determine actual award payment
                levels, method of payment, and whether or not payments shall be made
                for
                any Plan Year.  However, unless the Plan's performance
                objectives are met for the Plan Year, no award shall be made for
                that Plan
                Year.  Performance targets modified pursuant to Section III of
                the Plan will be deemed performance targets for purposes of determining
                whether or not these targets have been
                met.

            

    

     

    III.       PLAN
      PERFORMANCE MEASURES

     

    
      	
               

            	
              1.

            	
              The
                Committee shall establish the percentage attainment of corporate
                performance measure and the percentage attainment of individual goals
                measure.  The Committee may establish more or fewer performance
                measures as it deems necessary.

            

    

     

    
      	
               

            	
              2.

            	
              The
                corporate performance measure may be set by reference to earnings,
                return
                on invested capital or any other measure or combination of measures
                deemed
                appropriate by the Committee.  It may be established for the
                Company or for the individual business
                unit.

            

    

     

    
      	
               

            	
              3.

            	
              Individual
                performance will be assessed based on the achievement of annually
                established individual objectives.

            

    

     

    
      	
               

            	
              4.

            	
              Plan
                performance measures may be applied at the corporate level for individuals
                such as the Chief Executive Officer whose major or sole impact is
                Company-wide, or at the business unit level for individuals whose
                major or
                sole impact is on the business unit results.  The Annual
                Operating Plan shall contain a list of individuals to whom the Plan
                performance measures will be applied at the corporate level and a
                list of
                those individuals for whom the Plan performance measures will be
                applied
                at the business unit level.  The relevant business unit for each
                individual will be identified.

            

    

     

    
      	
               

            	
              5.

            	
              The
                Committee shall set threshold, target and maximum award levels for
                the
                performance measures, for each business unit, and for the
                Company.  Those levels shall be included in the Annual Operating
                Plan.

            

    

     

    
      	
               

            	
              6.

            	
              The
                Committee will retain the authority to determine whether or not the
                actual
                attainment of these measures has been
                made.

            

    

     

    IV.       TARGET
      INCENTIVE AWARDS

     

    
      	
               

            	
              1.

            	
              Target
                incentive awards will be a percentage of each Participant’s Salary, as
                defined in the Plan.

            

    

     

    
      	
               

            	
              2.

            	
              Target
                incentive awards shall be set by the Committee annually and will
                be
                included in the Annual Operating
                Plan.

            

    

     

    V.        INCENTIVE
      FUND DETERMINATION

     

    
      	
               

            	
              1.

            	
              The
                target incentive fund is the sum of the individual target incentive
                awards
                for all eligible Participants.

            

    

     

    
      	
               

            	
              2.

            	
              Once
                individual incentive targets have been determined, a target incentive
                fund
                shall be established and accrued ratably by the Company.  The
                incentive fund and accruals may be adjusted during the
                year.

            

    

     

    
      	
               

            	
              3.

            	
              As
                soon as practicable following the close of each Plan Year, the Chief
                Executive Officer will provide the Committee with an analysis showing
                the
                Company's and each relevant business unit's performance in relation
                to the
                performance measures.  The Committee will review the analysis
                and determine, in its sole discretion, the amount of the actual incentive
                fund.

            

    

     

    
      	
               

            	
              4.

            	
              In
                determining the actual incentive fund, the Committee may consider
                any
                recommendations of the Chief Executive
                Officer.

            

    

     

    VI.       INDIVIDUAL
      AWARD DETERMINATION

     

    
      	
               

            	
              1.

            	
              The
                Committee shall have the sole discretion to determine each individual
                Participant's award. The Committee's decision will be based first
                upon the
                level of performance achieved by the Company or business unit and
                second
                upon the individual's performance.

            

    

     

    
      	
               

            	
              2.

            	
              The
                Committee, after consultation with the Chief Executive Officer, shall
                set
                the award as a percentage from 0 percent to 200 percent of the
                Participant's target incentive award, adjusted for Company or business
                unit performance.

            

    

     

    VII.      PAYMENT
      OF AWARDS

     

    
      	
               

            	
              1.

            	
              On
                the date the Committee determines the awards to be made to individual
                Participants, it shall also establish the Payment
                Date.

            

    

     

    
      	
               

            	
              2.

            	
              Except
                as provided below or as the Committee otherwise determines, in order
                to
                receive an award under the Plan, a Participant must remain in the
                employment of the Company for the entire Service
                Year.

            

    

     

    
      	
               

            	
              3.

            	
              If
                a Participant terminates employment with the Company pursuant to
                Section
                5.01 of the Company’s Bylaws, which provides for mandatory retirement for
                certain officers on their 65th
                birthday (or
                terminates employment with a subsidiary of the Company pursuant to
                a
                similar subsidiary Bylaw provision), and if the Participant’s 65th
                birthday
                occurs during the Service Year, determination of whether the performance
                measures have been met will be made at the end of the Service Year,
                and to
                the extent met, payment of the award will be made to the Participant,
                prorated.  Proration of awards shall be based upon the number of
                full months elapsed from and including January to and including the
                month
                in which the Participant’s 65th
                birthday
                occurs.

            

    

     

    
      	
               

            	
              4.

            	
              Payment
                of the awards shall be made in cash.  Payments shall be made on
                the Payment Date unless the Participant has deferred, in whole or
                in part,
                the receipt of the award by making an election on the deferral form
                attached hereto, prior to the beginning of the Service
                Year.  Deferral elections may not be changed or revoked after
                the Service Year begins.

            

    

     

    
      	
               

            	
              5.

            	
              In
                the event a Participant has elected to defer receipt of all or a
                portion
                of the award, the Company shall set up an account in the Participant's
                name. The amount of the Participant's award to the extent deferred
                will be
                credited to the Participant's account on the Payment
                Date.

            

    

     

    
      	
               

            	
              6.

            	
              The
                balance credited to an account of a Participant who has elected to
                defer
                receipt of an award will be an unsecured, unfunded obligation of
                the
                Company.

            

    

     

    
      	
               

            	
              7.

            	
              Interest
                shall accrue on the balance credited to a Participant's account from
                the
                date the balance is credited.  Effective January 1, 2008, the
                rate of interest shall be the Prime Rate as reported on the last
                business
                day of the preceding year to be effective on January 1 of each new
                Plan
                Year.

            

    

     

    
      	
               

            	
              8.

            	
              Interest
                shall be compounded and credited to the account
                monthly.

            

    

     

    
      	
               

            	
              9.

            	
              A
                Participant may elect to defer any percentage, not to exceed l00,
                of an
                annual award.

            

    

     

    
      	
               

            	
              10.

            	
              A
                Participant electing to defer any part of an award must elect one
                of the
                following dates on which (a) payment will be made, if payment will
                be made
                in a lump sum or (b) payments will commence, if payment will be made
                in
                monthly installments:

            

    

     

    
      	
               

            	
              (1)

            	
              Between
                January 1 and March 10 next following termination of employment with
                the
                Company or an affiliated company;
                or

            

    

    

    
      	
               

            	
              (2)

            	
              Between
                January 1 and March 10 of the fifth year following the year in which
                the
                award would have been paid had it not been
                deferred.

            

    

    

    For
      Participants who previously elected to have payments made or commence on the
      Payment Date next following termination of employment, their payments will
      be
      made or commence between January 1 and March 10 next following their termination
      of employment with the Company or an affiliated company.  For
      Participants who elected to have payments made or commence on the Payment Date
      of the fifth year following the year in which the award may be made, their
      payments will be made or commence between January 1 and March 10 of the fifth
      year following the year in which the award would have been paid had it not
      been
      deferred.

    

    
      	
               

            	
              11.

            	
              A
                Participant may elect to receive the deferred amounts accumulated
                in the
                Participant's account in monthly installments, not to exceed
                120.  In the event the Participant elects to receive the amounts
                in the Participant's account in more than one installment, interest
                shall
                continue to accrue on the balance remaining in their account at the
                applicable rate or rates determined annually by the
                Committee.

            

    

     

    
      	
               

            	
              12.

            	
              Notwithstanding
                anything contained in the Plan or these Rules and Regulations to
                the
                contrary, if a Specified Employee's employment terminates, to the
                extent
                required by Section 409A(a)(2)(B) of the Code, except as otherwise
                provided in paragraph 13 below of this Section VII of these Rules
                and
                Regulations, payment of any deferred amounts under the Plan that
                are to be
                paid during the 6 month period following the Specified Employee's
                termination of employment shall not be paid or provided until the
                first
                business day after the date that is 6 months following the Specified
                Employee's termination of employment.  Any payment that is made
                pursuant to the prior sentence shall include the cumulative amount
                of any
                amounts that could not be paid during the 6 month period following
                the
                Specified Employee's termination of employment.  To the extent
                payments are deferred pursuant to the prior sentence, such deferred
                amounts shall continue to accrue interest pursuant to Section VII
                of these
                Rules and Regulations until payment
                occurs.

            

    

     

    For
      all
      purposes under the Plan and these Rules and Regulations, references to
      termination of employment and similar terms shall be interpreted to mean
“separation from service,” as that term is used in Section 409A of the Code, and
      the Participant's employment shall not be deemed to have terminated for purposes
      of the Plan or these Rules and Regulations unless and until a separation from
      service shall have occurred for purposes of Section 409A of the
      Code.

     

    
      	
               

            	
              13.

            	
              In
                the event of the death of a Participant in whose name a deferred
                account
                has been set up, the Company shall, within 90 days thereafter, pay
                to the
                Participant's estate or the designated beneficiary the entire amount
                in
                the deferred account.

            

    

     

    
      	
               

            	
              14.

            	
              In
                the event of a "Change in Control" then any award deferred by each
                Participant shall become immediately payable to the
                Participant.  In the event the Participant files suit to collect
                a deferred award then all of the Participant's court costs, other
                expenses
                of litigation, and attorneys' fees shall be paid by the Company in
                the
                event the Participant prevails upon any of the Participant's claims
                for
                payment.

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