Document:

Exhibit
10.1

     

    GAS
GATHERING AGREEMENT

     

    THIS GAS
GATHERING AGREEMENT (this “Agreement”), dated
November 16, 2009, is by and between (i) Hilltop Resort GS, LLC, a Delaware
limited liability company (“Gatherer”) and (ii)
Gastar Exploration Texas, LP, a Delaware limited partnership (“Producer”).  Gatherer
and Producer are sometimes referred to herein individually as a “Party” and
collectively as the “Parties.”

     

    Recitals:

     

    A.           Gatherer
owns and operates a natural gas gathering system and related facilities in Leon
and Robertson Counties, Texas.

     

    B.           Producer
owns or controls, and has the right to deliver, natural gas for gathering on
such gathering systems, and Gatherer desires to gather such gas, on the terms
and subject to the conditions in the Agreement.

     

    Agreements:

     

    NOW,
THEREFORE, for good and valuable consideration, Gatherer and Producer agree as
follows:

     

    Article
1

    Definitions

     

    1.1              Definitions The
following capitalized terms used in this Agreement and the attached exhibits and
schedules shall have the meanings set forth below:

     

    “AAA” is defined in
Section 13.3(ii).

     

    “Agreement” is defined
in the preamble.

     

    “Affiliate” means, as
to any Person, any other Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with such
Person, whether by contract, voting power, or otherwise.  As used in
this definition, the term “control,” including the correlative terms
“controlling,” “controlled by,” and “under common control with,” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of an entity, whether through ownership
of voting securities, by contract, or otherwise.

     

    “AMI” means the
geographic area described in Schedule
6.

     

    “Ancillary Agreements”
means this Agreement, the Purchase and Sale Agreement, dated of even date
herewith, between Producer and Gatherer, and the other agreements entered into
by the Parties under the Purchase and Sale Agreement.

     

    “Applicable Law” means
any applicable law, statute, rule, regulation, ordinance, order, or other
pronouncement, action, or requirement of any Governmental
Authority.

     

    “Bcf” means one
million Mcf’s.

     

    “Btu” means the amount
of energy required to raise the temperature of one pound of pure water one
degree Fahrenheit (1 ̊F) from fifty-nine degrees Fahrenheit (59 ̊F) to sixty
degrees Fahrenheit (60 ̊F).

     

    “Business Day” means
any day except Saturday, Sunday, or Federal Reserve Bank holidays.

     

    “Co-Owners” means
Presco, Inc. and Navasota Resources Ltd., LLP.

     

    
      
         

      

      
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    “Co-Owners’ Gas” means
all Gas owned or controlled by Co-Owners or their Affiliates and their
successors and assigns and gathered on the Gathering System.

     

    “Cumulative Volumetric
Commitment” means 91,250,000 Mcf’s of Gas.

     

    “Day” means a period
of 24 consecutive hours, coextensive with a “day” as defined by the Receiving
Transporter.

     

    “Dedicated Reserves”
means the interests of Producer and its Affiliates in all Gas reserves in and
under, and all Gas owned or controlled by Producer or its Affiliates and
produced or delivered from, (i) the Subject Leases and (ii) any other lands
located within the AMI, whether now owned or hereafter acquired by Producer or
its Affiliates.

     

    “Delivery Points”
means (i) the points identified in Schedule 4 at which
Gas is delivered to a Receiving Transporter by Gatherer and (ii) any additional
delivery point that, from time to time, may be added by Gatherer and Producer to
the Gathering System after the Effective Date to permit delivery of Gas to other
Receiving Transporters or other local Gas users such as central treating or
compression facilities operated by Gatherer or Producer.

     

    “Dispute”
is defined in Section
13.3(i).

     

    “Equivalent Quantity”
means, on any Day, a quantity of Gas (in MMBtu’s) that is thermally equivalent
to the quantity of Producer’s Gas received from Producer at the Receipt Points
on the Gathering System on that Day less Producer’s allocated share of Fuel Gas
and Lost and Unaccounted for Gas.

     

    “Effective Date” means
November 1, 2009.

     

    “ETC Contract” means,
collectively (i) the Agency Agreement between and among ETC Pipeline, Ltd., and
ETC Katy Pipeline, Ltd and Oasis Pipeline, L.P. and Gastar Exploration Texas,
L.P., effective September 1, 2007; (ii) the Gathering and Natural Gas Services
Agreement between Gastar Exploration Texas, L.P. and ETC Texas Pipeline, LTD.,
dated September 1, 2007 [Contract No. 8885-100]; (iii) the Individual
Transaction Confirmation to Gathering and Natural Gas Services Agreement between
Gastar Exploration Texas, L.P. and ETC Texas Pipeline, LTD. dated September 1,
2007 [Individual Transaction No. 8885-101]; (iv) the Intrastate Natural Gas
Transportation Service Agreement dated September 1, 2007 by and between Oasis
Pipeline, L.P. and Gastar Exploration Texas, L.P. [Contract No.
028-31434-02-100]; (v) the Service Agreement Confirmation to the Intrastate
Natural Gas Transportation Service Agreement [Contract No. 028-31434-02-101];
and (vi) the Intrastate Natural Gas Transportation Service Agreement dated
September 1, 2007 by and between ETC Katy Pipeline Ltd., and Gastar Exploration
Texas L.P. [Contract No. 150-31434-02-100]

     

    “Force Majeure Event”
is defined in Section
9.2.

     

    “Fuel Gas” means (i)
necessary amounts of Gas used by Gatherer for operation of the Gathering System
but excluding any fuel used by Gatherer to operate treating and compression
equipment on the Gathering System, or (ii) Gas used upstream of the Receipt
Points by Producer to operate compressors, dehydrators, and related equipment
and facilities in regards to well operations.

     

    “Gas” means any
mixture of hydrocarbons and noncombustible gases in a gaseous state consisting
primarily of methane.

     

    “Gatherer” is defined
in the preamble.

     

    “Gathering Fees” means
the gathering fees shown in Schedule
1.

    
      
         

      

      
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    “Gathering System”
means the gas gathering system described in Schedule 2, together
with any modifications, alterations, replacements, extensions, or expansions
made by Gatherer, from time to time, to such gathering system.

     

    “Governmental
Authority” means any court, government (federal, state, local, or
foreign), department, political subdivision, commission, board, bureau, agency,
official, or other regulatory, administrative, or governmental
authority.

     

    “Gross Heating Value”
is defined and determined in strict accordance with Gas Processors Association
(GPA) Standard 2172 – “Calculation of Gross Heating Value, Relative Density, and
Compressibility of Natural Gas Mixtures from Compositional
Analysis.”

     

    “Independent Engineer”
means Netherland, Sewell and Associates, Inc. or such other qualified
independent third party engineer that Gatherer and Producer mutually agree
upon.

     

    “Losses” means all
losses, liabilities, damages, claims, fines, penalties, costs, or expenses,
including reasonable attorneys’ fees and court costs.

     

    “Lost and Unaccounted for
Gas” means the volumetric losses in Gas that occur on the Gathering
System, other than Gas used for Fuel Gas.

     

    “Maximum Daily Volume”
means the maximum volume of Producer’s Gas that Gatherer is obligated to receive
on any Day at a Receipt Point, as shown in Schedule
3.

     

    “Mcf” means one
thousand cubic feet of Gas at a temperature of 60 oF and a
pressure of 14.65 pounds per square inch absolute.

     

    “Mcf’s/d” means Mcf’s
per Day.

     

    “Minimum Reserve
Limit” means, for a well or wells to be connected to the Gathering
System, gross proved developed gas reserves attributable to Producer’s and
Co-Owners’ working interests in such wells and committed by Producer and
Co-Owners to Gatherer for gathering on the Gathering System of not less than 1
Bcf for each mile of new gathering line to be constructed by Gatherer to connect
such well or wells to the Gathering System, as such reserves are determined by
the Independent Engineer.

     

    “Minimum Volume
Period” means the period beginning on the Effective Date and ending on
the 5th
anniversary of the Effective Date.

     

    “MMBtu” means one
million Btu’s, which is equivalent to one dekatherm.

     

    “Month” means the
period beginning on the first Day of the calendar month and ending immediately
prior to the commencement of the first Day of the next calendar
month.

     

    “Notice” is defined in
Section
12.1.

     

    “Party” and “Parties” are defined
in the preamble.

     

    “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association (whether incorporated or unincorporated), joint-stock company,
trust, Governmental Authority, unincorporated organization, or other
entity.

     

    “Producer” is defined
in the preamble.

     

    “Producer’s Gas” means
all Gas owned or controlled by Producer or its Affiliates and produced from or
otherwise attributable to the Dedicated Reserves.

    
      
         

      

      
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    “Producer’s Quarterly Deficit
Volumes” means, for a calendar quarter, the volume (in Mcf”s), if any, by
which (i) a volume equal to 35,000 Mcf’s per Day multiplied by the number of
Days in such calendar quarter exceeds (ii) the volume of Producer’s Gas gathered
on the Gathering System in such calendar quarter, as such deficit volume is
reduced by (x) any Quarterly Third Party Credit Volumes gathered in such
calendar quarter and (y) any Quarterly Excess Volumes gathered in prior calendar
quarters but only to the extent such Quarterly Excess Volumes have not been
previously applied.

     

    “Producer’s Quarterly Excess
Volumes” means, for a calendar quarter, the amount (in Mcf”s), if any, by
which (i) the volume of Producer’s Gas gathered on the Gathering System in such
calendar quarter exceeds (ii) a volume equal to 35,000 Mcf’s per Day multiplied
by the number of Days in such calendar quarter.

     

    “Quarterly Minimum
Volume” means, for each calendar quarter in the Minimum Volume Period, a
minimum volume of Gas equal to 50,000 Mcf’s per Day multiplied by the number of
Days in each such calendar quarter.

     

    “Quarterly Third Party Credit
Volumes” means, for a calendar quarter, 70% of the volume (in Mcf’s) of
Third Party Gas gathered on the Gathering System in such calendar
quarter.

     

    “Receipt Points” means
(i) the receipt points described in Schedule 3 and (ii)
any new receipt points that may, from time to time, be added by Gatherer to the
Gathering System after the Effective Date to permit Producer to deliver
Producer’s Gas to the Gathering System.

     

    “Receiving
Transporter” means the intrastate or interstate pipeline company, local
distribution company, or other party taking delivery or custody of Producer’s
Gas at, or immediately downstream of, the Delivery Points.

     

    “Rules”
is defined in Section
13.3(ii).

     

    “Scheduled Gas” means,
for a specified period of time, the quantity of Producer’s Gas scheduled by
Producer and confirmed by Gatherer for delivery and gathering on the Gathering
System.

     

    “Subject Leases” means
the oil, gas, and mineral leases, deeds, conveyances, and other instruments
described in Schedule
5.

     

    “Third Party Gas”
means all Gas gathered on the Gathering System from wells within the AMI, other
than Producer’s Gas and Co-Owners’ Gas.

     

    “Year” means the
period of time beginning on one Day and ending on the same Day the following
year.

     

    1.2              Attachments Each
exhibit, schedule, or other attachment to this Agreement is a part of this
Agreement and incorporated herein for all purposes.  When the term
“Agreement” is
used herein, it means this Agreement and all of the exhibits, schedules, and
other attachments hereto. A list of the exhibits, schedules, and other
attachments to this Agreement is attached behind the signature
page.

     

    Article
2

    Term

     

    2.1              Term Unless
terminated sooner as provided below, the term of this Agreement shall commence
on the Effective Date and continue in effect through the close of the last Day
of the Month following the fifteenth (15th) anniversary of the Effective Date
and shall continue in effect for so long thereafter as Producer’s Gas can be
produced in commercial quantities from the Dedicated Reserves.

     

    2.2              Termination This
Agreement may be terminated as follows:

    
      
         

      

      
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              (i)

            	
              by
      either Party if the other Party fails to perform any of its material
      obligations under this Agreement and such failure is not (x) excused by a
      Force Majeure Event under Article 9 or
      (y) cured by the defaulting Party within 30 Days after written Notice
      thereof by the non-defaulting Party to the defaulting Party;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              by
      either Party if the other Party fails to pay any amount when due under
      this Agreement if such failure is not remedied within ten (10) Business
      Days after Notice of such failure is given by the non-defaulting Party to
      the defaulting Party (other than amounts disputed in good faith pursuant
      to Section
      8.3);

            

    

     

    
      	
               
      

            	
              (iii)

            	
              by
      either Party by Notice to the other Party if the other Party
      (1) makes an assignment or any general arrangement for the benefit of
      creditors, (2) files a petition or otherwise commences, authorizes,
      or acquiesces in the commencement of a proceeding or cause under any
      bankruptcy or similar law for the protection of creditors or have such
      petition filed or proceeding commenced against them, or (3) otherwise
      becomes bankrupt or insolvent (however
  evidenced).

            

    

     

    2.3              Damages for Early
Termination If
either Party terminates this Agreement under Section 2.2 above,
then the terminating Party may pursue any and all remedies at law or in equity
against the non-terminating Party for its Losses resulting from such
termination.  Upon termination of this Agreement, the Parties shall
retain all other rights and remedies available at law or in equity, and
termination of this Agreement shall not relieve the Parties from any obligation
accruing or accrued prior to the date of such termination.

     

    Article
3

    Gathering of Producer’s
Gas

     

    3.1              Dedicated
Reserves.  Subject only to Producer’s Reservations, Producer
(i) exclusively dedicates and commits to the performance of this Agreement the
Dedicated Reserves, (ii) represents that the Dedicated Reserves are not
otherwise subject to any other gas gathering agreement or commitment, except as
provided in the ETC Contract, and (iii) agrees not to deliver any Gas produced
from the Dedicated Reserves and owned or controlled by Producer or their
Affiliates to any other gas gatherer or gas gathering
system.  Producer agrees to cause any existing or future Affiliates of
Producer to be bound by, and to execute and join as a party, this
Agreement.  The dedication and commitment made by Producer and their
Affiliates under this Agreement is a covenant running with the
land.

     

    3.2              Producer’s
Reservations.  Producer reserves the following rights (and
reasonable quantities of Gas to satisfy same) (“Producer’s
Reservations”):  (i) to operate wells producing from the
Dedicated Reserves as a reasonably prudent operator, (ii) to separate or process
Gas using only mechanical equipment located at surface production facilities on
or near wells producing from the Dedicated Reserves, (iii) to use Gas produced
from the Dedicated Reserves for lease operations, (iv) to pool, communitize, or
unitize Producer’s interests in the Dedicated Reserves, and (v) to pay lessors’
royalties in kind.  Producer shall pay Gathering Fees for any volumes
of Gas reserved to pay lessors’ royalties in kind if said volumes are
transported to market on Gatherer’s Gathering System.  If Producer
should commence Gas flow from any new well or if Producer repairs, reworks,
curtails, or plugs and abandons any existing well, notice thereof shall be given
to Gatherer as soon as is reasonably practicable prior to delivering or
curtailing deliveries of Gas from such well to a Receipt Point.

     

    3.3              Memorandum.  Producer
shall enter into and deliver to Gatherer, at Gatherer’s request, a fully
recordable memorandum of this Agreement.

     

    Article
4

    Gathering
Fees

     

    4.1              Gathering
Fees.  As consideration for gathering Producer’s Gas hereunder,
Producer shall pay Gatherer the Gathering Fees for Producer’s Gas delivered to
the Delivery Points each Month, as provided herein.

    
      
         

      

      
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    4.2              Payment Payment
of the Gathering Fees shall be made in accordance with the procedures set forth
in Article
8.

     

    Article
5

    Gas Delivery and
Allocation

     

    5.1              Receipt and
Delivery.  Producer agrees to tender, or cause to be tendered,
to the Receipt Points, Producer’s Gas, each Day, and Gatherer agrees to accept
Producer’s Gas at the Receipt Points,  and redeliver Producer’s Gas,
to the Delivery Points, subject to the terms hereof.  Producer’s Gas
shall be delivered to the Receiving Transporter under the ETC Contract at the
Delivery Points.  Producer and Gatherer may mutually agree to deliver
Producer’s Gas to other available Delivery Points in the future if capacity is
available at such Delivery Points and on the Gathering System as then
configured.  Such redelivery is subject to any additional compression,
treating, and dehydration charges and fees that may be required to effect such
redelivery.

     

    5.2              Minimum Volume
Commitment.

     

    
      	
               
      

            	
              (i)

            	
              Producer's
      Obligation.  Producer commits to deliver to Gatherer for
      gathering on the Gathering System in each calendar quarter during the
      Minimum Volume Period a volume of Gas, which when added to the volume of
      Co-Owners' Gas and Third Party Gas delivered in such calendar quarter, is
      not less than the Quarterly Minimum
Volume.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Producer’s Quarterly
      Deficit Volumes.  If the volume of Gas (in Mcf’s)
      delivered to and gathered on the Gathering System (including Producer’s
      Gas, Co-Owners’ Gas and Third Party Gas) in a calendar quarter of the
      Minimum Volume Period is less than the Quarterly Minimum Volume, then
      Producer shall pay Gatherer in cash, no later than 30 days following the
      end of such calendar quarter, an amount equal to the Producer’s Quarterly
      Deficit Volume, if any, for such calendar quarter (in Mcf’s) multiplied by
      the Gathering Fee for such calendar quarter, as its share of liquidated
      and agreed damages for the Quarterly Minimum Volume not being delivered to
      the Gathering System in such calendar
quarter.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Quarterly Excess
      Volumes.  Any Producer’s Quarterly Excess Volumes
      delivered in a calendar quarter will accumulate as a positive balance to
      be used by Gatherer in subsequent calendar quarters without limitation
      during the term to determine and remedy any Producer’s Quarterly Deficit
      Volumes.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Cumulative Volumetric
      Commitment.  Producer’s obligation hereunder to deliver
      its share of the Quarterly Minimum Volume shall terminate upon the
      delivery to the Gathering System of a volume of Producer’s Gas, Co-Owner’s
      Gas and Third Party Gas equal in the aggregate to the Cumulative
      Volumetric Commitment.

            

    

     

    
      	
               
      

            	
              (v)

            	
              No Suspension.
      Producer’s obligations to make payments under this Section 5.2 shall not
      be suspended or affected by the occurrence of Force Majeure Events
      affecting Producer’s or Co-Owners’ Gas, or the production or delivery
      thereof, upstream of the Receipt
Points.

            

    

     

    
      	
               
      

            	
              (vi)

            	
              First
      Quarter.  The calculations under this Section 5.2 for
      the first calendar quarter in the term of this Agreement shall be
      made only for the Months of November and December 2009 (and will
      exclude October 2009).

            

    

     

    5.3              Scheduling.  Producer
shall Notify Gatherer not less than 3 Business Days before the last day of each
Month of the total volume of Gas (in Mcf’s/d and MMBtu’s) that Producer expects
to deliver in the following Month, specifying the volumes to be delivered to or
by Gatherer at each of the Receipt Points and at the Delivery
Points.  Producer may modify its nominations at any time upon at least
24 hours advance Notice.  The Parties shall coordinate their
nomination activities, giving sufficient time to meet the deadlines of the
Receiving Transporter.  Each Party shall give the other Party timely
prior Notice, sufficient to meet the requirements of the Receiving Transporter
involved in the transaction, of the quantities of Producer’s Gas to be delivered
to the Delivery Points each Day. If either Party becomes aware that actual
deliveries of Producer’s Gas at the Receipt Points or Delivery Points are
greater or less than by 5 per cent or more the quantities of Scheduled Gas, then
such Party shall promptly Notify the other Party.  Throughout the term
of this Agreement, the Parties agree to work together to refine and improve the
scheduling, nominating, and balancing procedures applicable to Producer’s Gas to
accommodate the Receiving Transporter’s nomination procedures (or changes to
such procedures) and the operational requirements of both Gatherer and
Producer.  Except in cases where Gatherer is unable to accept delivery
of Producer’s Gas, and unless Gatherer’s liability, costs or expenses are
incurred as a result of the Gatherer failing to take any action or give any
notice required under this Agreement, if Gatherer incurs any liabilities, costs,
or expenses as a result of Producer not scheduling deliveries of Producer’s Gas
at the Delivery Points in accordance with the Receiving Transporter’s
requirements, then Producer shall promptly reimburse Gatherer for such
liabilities, costs, or expenses, including all imbalance charges assessed in
respect of the delivery of Producer’s Gas to the Receiving
Transporter.

    
      
         

      

      
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    5.4              Thermally Equivalent
Volumes.  Subject to this Agreement, Gatherer shall, as nearly
as practicable each Day, deliver for Producer’s account Equivalent Quantities of
Gas at the Delivery Points.  Fuel Gas shall be rendered to Gatherer by
Producer for Gatherer’s use at no cost to Gatherer; except Gatherer agrees
to  reimburse Producer for landowner  royalties actually
paid by Producer on Fuel Gas used by Gatherer, if any.  All receipts
and deliveries of Producer’s Gas hereunder shall be balanced on an MMBtu basis,
less Producer’s allocated share of Fuel Gas and Lost and Unaccounted For
Gas.  No Gathering Fee shall be paid on Fuel Gas.

     

    5.5              Equal Receipt and
Delivery.  Notwithstanding anything herein to the contrary, as
long as Producer’s Gas is the only Gas being gathered by Gatherer, on the
Gathering System then Gatherer will not reduce or discontinue receipt or
delivery of  any of Producer’s Gas at any Receipt Points or Delivery
Points unless required by the Receiving Transporter or as the result of the
occurrence of a Force Majeure Event or other limitations in the capacity of the
Gathering System.  If requested by a Receiving Transporter, receipt of
Producers gas will be reduced as directed by such Receiving Transporter along
with all nominated volumes from other shippers if any using the Delivery Point
affected by the Receiving Transporter’s requirements, and any subsequent
imbalance charges from Receiving Transporter attributable to Producer’s Gas will
be the responsibility of and paid by Producer.  Further, in the event
of Gatherer reducing or discontinuing Producer’s Gas under this Section 5.5, then
Gatherer shall first notify Producer prior to taking any actions to reduce
receipts of Producers Gas under this Section
5.5.

     

    5.6              Information.  Each
Party will furnish or cause to be furnished to the other Party hereto all data
required to accurately account for all Producer’s Gas received and delivered
hereunder.

     

    5.7              Upstream and Downstream
Arrangements.  Producer shall make, or cause to be made, all
necessary arrangements with other pipelines or third parties at or upstream of
the Receipt Points and at or downstream of the Delivery Points to effect
Gatherer’s receipt and delivery of Producer’s Gas.  Such arrangements
must be coordinated with Gatherer. As of the date hereof, Producer’s Gas will be
delivered by Gatherer on behalf of Producer at the Delivery Points under the ETC
Contract.   Gatherer agrees to cause Producer’s Gas to be
delivered at the Delivery Points in a manner that does not violate the
provisions of Sections 4.1, 5.1, 6.1, 6.2 and 6.5 of the ETC Contract (as
described in clause (ii) of the definition), and if Producer’s Gas meets the
specifications requirements of this Agreement, Section 7.1 of the ETC Contract
(as described in clause (ii) of the definition).

     

    5.8              Commingling.  Although
Producer shall retain title to Producer’s Gas delivered to Gatherer at the
Receipt Points hereunder, Producer’s Gas received by Gatherer shall constitute
part of the supply of Gas from all sources in the Gathering System, and as such
Gatherer shall, subject to its obligation to deliver an Equivalent Quantity as
provided in Section
5.4 and to comply with the quality specifications herein have the
absolute and unqualified right to commingle Producer’s Gas and to deliver
molecules different from those received and to handle the molecules received in
any manner.

     

    5.9              Lost and Unaccounted for
Gas.  Gatherer agrees to use ordinary care in gathering
Producer’s Gas from the Receipt Points to the Delivery
Points.  However, Producer acknowledges that certain volumetric losses
in Producer’s Gas will occur, and such losses attributable to Lost and
Unaccounted For Gas shall be shared and allocated among the Producer and
other  parties whose Gas is gathered on the Gathering System in the
proportion that each such party delivers Gas to the Gathering
System.

     

    
      
         

      

      
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    5.10            Notice of New
Connections.  Producer and Gatherer agree to work together to
connect  new wells drilled by Producer within the AMI as soon as
practical to the Gathering System upon completion of any such well by
Producer.  This may include laying a connection before a well can be
practically assessed or completed.  Under normal conditions, Producer
shall provide Gatherer no less than 3 Months’ Notice of the expected date of
first production for each new well or wells in the AMI operated by Producer that
Producer desires to connect to the Gathering System.  Such Notice to
Gatherer shall include the location of the well or wells to be connected to the
Gathering System, the projected date of final completion and testing of such
well or wells, Producer’s good faith estimate of the Gas reserves for each such
well, the projected monthly production profile for the first 5 Years after
initial production for each such well or wells, and all other information or
data reasonably requested by Gatherer.  If the projected Gas reserves
for such well or wells equal or exceed the Minimum Reserve Limit, as determined
by the Independent Engineer, then such well or wells shall be connected to the
Gathering System by Gatherer as soon as reasonably practicable and Producer’s
gas delivered through such connection shall be gathered under the terms of this
Agreement.  Such connection shall be constructed by Gatherer at its
sole cost.  All Producer’s Gas delivered through a connection
constructed by Gatherer shall be gathered by Gatherer on the Gathering System
under the terms of this Agreement.  If the projected Gas reserves for
such well or wells cannot be reasonably determined in advance or do not equal or
exceed the Minimum Reserve Limit, as determined by the Independent Engineer,
then Gatherer and Producer may mutually agree to elect one of two alternate
courses:

     

    
      	
               
      

            	
              i.

            	
              Producer
      may request that Gatherer complete the connection as if the Gas Reserves
      for such well or wells equals or exceeds the Minimum Reserve
      Limit.  Producer’s working interest share of all costs incurred
      by Gatherer to complete such connection shall be charged to the account of
      the Producer.  When any such well is completed, a new
      determination will be made by the Independent Engineer to assess if the
      completed well or wells meets or exceeds the Minimum Reserve
      Limit.  If the Minimum Reserve Limit, as determined by the
      Independent Engineer, is met, Producer shall have no obligation for the
      costs of Gatherer to construct and complete such connection and Gatherer
      shall promptly reimburse Producer for any such costs charged to
      Producer.  If the completed well or wells does not meet the
      Minimum Reserve Limit as determined by the Independent Engineer, Producer
      shall promptly reimburse Gatherer for its working interest share of
      Gatherer’s costs to construct and complete such connection.  In
      that event all production from such well or wells shall be gathered by
      Gatherer  on the Gathering System under the terms of this
      Agreement, except the Gathering fee shall not exceed $.20 per
      Mcf  per day.  The costs of the Independent Engineer,
      if used, will be added to the construction costs for such
      connection.

            

    

    

    
      	
               
      

            	
              ii.

            	
              By
      mutual agreement with the Gatherer, such mutual agreement on the part of
      the Gatherer not to be unreasonably withheld, Producer may complete such
      connection to the Gathering System, at Producer’s sole
      cost.  All facilities constructed by Producer to complete such
      connection shall meet or exceed the reasonable design and operating
      standards of Gatherer for the Gathering System.  All Producer’s
      Gas delivered through a connection constructed by Producer shall be
      gathered by Gatherer on the Gathering System under the terms of this
      Agreement, except the Gathering Fee shall not exceed $0.20 per
      Mcf.  This option may not be elected by the Producer unless
      Gatherer has waived in writing its right to provide the connection as
      otherwise described in this Section 5.10,
      such waiver shall not be unreasonably withheld after reserve information
      has been provided and assessed by the Independent
  Engineer.

            

    

     

    5.11              Pressures.  Producer’s
Gas shall be delivered at the Receipt Points at pressures sufficient to effect
delivery into Gatherer’s facilities at the Receipt Points, but not to exceed the
maximum allowable operating pressure of the Gathering System from time to
time.  Gatherer shall cause Producer’s Gas to be redelivered at the
Delivery Points at pressures sufficient to effect delivery into Receiving
Transporter’s facilities at the Delivery Points, but not to exceed the maximum
allowable operating pressure of such facilities from time to time.

     

    5.12              Allocation Of Volumes
Delivered.  Producer shall be credited with its allocated
portion of volumes of Gas received at the  Delivery Points by the
Receiving Transporters.  So long as no Third Party Gas is received by
Gatherer on the Gathering System, all delivered volumes shall be credited to
Producer and Co-Owners, as applicable.  Gathering Fees shall be
calculated based on volumes of Producer’s Gas delivered to the Delivery
Points.  Allocation of volumes and Gathering Fees among Receipt Points
shall be the responsibility of Producer based on measurement made by its
measurement equipment at the Receipt Points.  If Gas is delivered by
shippers other than Producer and Co-Owners to the Gathering System , Gatherer
shall allocate total delivered volumes among all shippers and calculate the
Gathering Fees based on metering and equipment installed and operated by
Gatherer.  Gatherer may elect to install area metering covering
multiple wells for purposes of such allocations.  Allocations by
Gatherer will not be based on meters operated by Producer unless check metering
and equipment is installed by Gatherer.

    
      
         

      

      
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    Article
6

    Taxes and
Warranties

     

    6.1              Taxes.  Producer
shall pay or cause to be paid, and agrees to indemnify and hold harmless
Gatherer from and against the payment of, all excise, gross production,
severance, sales, occupation, and all other taxes, charges, or impositions of
every kind and character required by statute or by any Governmental Authority
with respect to Producer’s Gas and the handling thereof prior to receipt thereof
by Gatherer at the Receipt Points.  Gatherer shall pay or cause to be
paid, and agrees to indemnify and hold harmless Producer from and against the
payment of, all taxes and assessments, if any, imposed upon Gatherer for the
activity of gathering of Producer’s Gas after receipt and prior to redelivery
thereof by Gatherer at the Delivery Points.  Neither Party shall be
responsible or liable for any taxes or other statutory charges levied or
assessed against the facilities of the other Party used for the purpose of
carrying out the provisions of this Agreement.

     

    6.2              Title and No
Liens Producer
warrants to Gatherer good title to Producer’s Gas delivered to the Receipt
Points, free from all liens, charges, and other adverse claims or encumbrances
(other than liens in favor of Producer’s lenders).  Producer shall
indemnify, defend, and hold harmless Gatherer from and against all Losses
arising from all such liens, charges, and adverse claims and encumbrances,
including Losses arising from claims (i) by co-working interest owners, royalty
or overriding royalty owners, Producers lenders,or other purported owners of
interests or rights in Producer’s Gas or in the Dedicated Reserves or (ii) by
Persons from whom Producer purchased or otherwise acquired Producer’s Gas prior
to the Receipt Points.

     

    6.3              Other
Warranties EXCEPT
AS SET FORTH IN THIS ARTICLE 6 AND THE
OTHER PROVISIONS OF THIS AGREEMENT AND ITS ATTACHMENTS, NEITHER PARTY MAKES ANY
OTHER WARRANTIES, EXPRESSED OR IMPLIED, AND SPECIFICALLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT
TO THE GAS DELIVERED AND REDELIVERED HEREUNDER.

     

    Article
7

    Control, Possession, and
Waiver

     

    7.1              Control and
Possession As
between the Parties, Producer shall be deemed to be in exclusive control and
possession of Producer’s Gas delivered hereunder and responsible for any damage
or injury caused thereby prior to the time Producer’s Gas shall have been
delivered to Gatherer at the Receipt Points and after Producers Gas is
redelivered to or on behalf of Producer at Delivery Points.  After
delivery of Producer’s Gas to Gatherer at the Receipt Points, Gatherer shall be
deemed to be in exclusive control and possession thereof and responsible for any
injury or damage caused thereby until redelivered to or on behalf of Producer at
the Delivery Points.

     

    7.2              Indemnity Producer
agrees to indemnify, defend, and hold harmless Gatherer and its Affiliates from
any and all Losses arising from or out of (i) personal injury or property damage
attributable to Producer’s Gas when Producer shall be deemed to be in control
and possession of Producer’s Gas as provided in Section 7.1 and (ii)
the delivery by Producer of Producer’s Gas that does not meet the quality
specifications in Section 3 of Exhibit A of this
Agreement.  Except to the extent a Loss (or Losses) is covered by the
indemnity in the preceding sentence, Gatherer agrees to indemnify, defend, and
hold harmless Producer and their Affiliates from all Losses arising from or out
of personal injury or property damage attributable to Producer’s Gas when
Gatherer shall be deemed to be in control and possession of Producer’s Gas as
provided in Section
7. THE INDEMNITIES SET FORTH IN THIS SECTION 7.2 ARE
TO BE CONSTRUED WITHOUT REGARD TO THE CAUSES THEREOF, INCLUDING THE NEGLIGENCE
OF ANY INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT, OR CONCURRENT,
OR ACTIVE OR PASSIVE, OR THE STRICT LIABILITY OF ANY INDEMNIFIED PARTY OR OTHER
PERSON.

    
      
         

      

      
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    7.3              Waiver of Damages A
PARTY’S LIABILITY HEREUNDER SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES
ONLY.  SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ITS
AFFILIATES FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT
DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION OR SIMILAR DAMAGES, BY
STATUTE, IN TORT, OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR
OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS
HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE
CAUSE OR CAUSES RELATED THERETO, INCLUDING THE STRICT LIABILITY OR NEGLIGENCE OF
ANY PARTY, WHETHER SUCH STRICT LIABILITY OR NEGLIGENCE BE SOLE, JOINT, OR
CONCURRENT, OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED
TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES
ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE
REMEDY IS INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A
REASONABLE APPROXIMATION OF THE HARM OR LOSS.  DAMAGES OWING BY
PRODUCER UNDER THE ETC CONTRACT CAUSED BY A FAILURE BY GATHERER TO PERFORM ITS
OBLIGATIONS UNDER SECTION 5.7 OF THIS
AGREEMENT SHALL BE CONSIDERED DIRECT ACTUAL DAMAGES.

     

    Article
8

    Billing and
Payments

     

    8.1              Billing. As
soon as practicable each Month, Gatherer shall invoice Producer for volumes of
Producer’s Gas received and gathered hereunder in the preceding Month and for
any other applicable charges and provide a statement setting forth (i) the
volumes and quantities (in Mcf’s and MMBtu’s) of Producer’s Gas delivered to
each Delivery Point, (ii) any adjustments for prior periods, (iii) any amount
that may be due for a calendar quarter under Section 5.2, and (iv)
all other amounts due hereunder.  Any amount owing by Producer under
Section 5.2 for
a calendar quarter shall be paid by Producer as provided in Section 8.2 below,
except amounts owing in excess of $350,000 may be paid by Producer in two equal
monthly installments. If actual measurements of volumes of Producer’s Gas are
not available in any Month, Gatherer may prepare and submit its invoice based on
estimated volumes, which estimated volumes shall be corrected to actual volumes
in the Month in which actual volumes are determined.

    
      
         

      

      
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    8.2              Payment. Producer
shall remit to Gatherer the amount due under Section 8.1, in
immediately available funds, by the 25th Day of each Month or 10 Days from the
date of Gatherer’s invoice, whichever is later.  If such due date is
not a Business Day, payment is due on the next Business Day following such
date.

     

    8.3              Dispute If
Producer, in good faith, disputes the amount of any such invoice or any part
thereof, Producer will pay such amount as it concedes to be correct. If Producer
disputes the amount due, it must provide supporting documentation acceptable in
industry practice to support the amount disputed within 20 Days of the date of
such invoice.  If the Parties are unable to resolve such dispute,
either Party may pursue any remedy available at law or in equity to enforce its
rights under this Agreement.

     

    8.4              Late
Payments If
Producer fails to pay the amount of any invoice rendered by Gatherer hereunder
when such amount is due, interest thereon shall accrue from, but excluding, the
due date to, and including, the date payment thereof is actually made at the
lesser of the “Prime
Rate” plus 4%, computed on an annualized basis and compounded Monthly, or
the maximum rate of interest permitted by Applicable Law, not to exceed the
maximum legal rate.  “Prime Rate” means the
prime rate on corporate loans at large U.S. money center commercial banks as set
forth in the Wall
Street Journal “Money Rates” table under the Heading “Prime Rate,” or any
successor thereto, on the first date of publication for the Month in which
payment is due.  Gatherer shall render a late payment charge invoice
and Producer shall make payment within 10 Days of the date of such
invoice.

     

    8.5              Audit A
Party shall have the right, at its own expense, upon reasonable Notice and at
reasonable times, to examine and audit and to obtain copies of the relevant
portion of the books, records, and telephone recordings of the other Party to
the extent reasonably necessary to verify the accuracy of any statement, charge,
payment, or computation made under this Agreement.  This right to
examine, audit, and to obtain copies shall not be available with respect to
proprietary information not directly relevant to transactions under this
Agreement.  All invoices and billings shall be conclusively presumed
final and accurate and all associated claims for underpayments or overpayments
shall be deemed waived unless such invoices or billings are objected to in
writing, with adequate explanation and/or documentation, within 2 Years after
the date of the invoice or billing.  All retroactive adjustments under
this Section 8.5
shall be paid in full by the Party owing payment within 30 Days of Notice and
substantiation of such inaccuracy.

     

    8.6              Financial
Responsibility.  If Producer fails to pay any amounts when due
under this Agreement for any two consecutive months, then Gatherer shall notify
Producer in writing. Producer shall then have a 30 day period to remedy payments
owed in full.  After the second failure to pay for two consecutive
months, in the event Producer fails to remedy within 30 days following notice,
Gatherer may require Producer to post security reasonably satisfactory to
Gatherer, provided that payment in cash in advance by Producer for Gathering of
Producer’s Gas hereunder shall be deemed to satisfy that
requirement.

     

    Article
9

    Force
Majeure

     

    9.1              Non-Performance If
a Party is rendered unable, wholly or in part, by reason of a Force Majeure
Event to perform its obligations under this Agreement, other than a Party’s
obligations to make payments when due hereunder, then such Party’s obligations
shall be suspended to the extent affected by the Force Majeure
Event.  A Party claiming a Force Majeure Event shall use commercially
reasonable efforts to remove such Force Majeure Event, shall give prompt written
notice to the other Party of the termination of such Force Majeure Event, and
shall resume performance of any suspended obligation promptly after termination
of such Force Majeure Event.

     

    
      
         

      

      
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    9.2              Definition “Force Majeure Event”
means any cause or event not reasonably within the control of the Party whose
performance is sought to be excused thereby; including acts of God, strikes,
lockouts, or other industrial disputes or disturbances, acts of the public
enemy, wars, blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, tornadoes, hurricanes, storms, and warnings for any of the
foregoing which may necessitate the precautionary shut-down of wells, plants,
pipelines, gathering systems, or other related facilities, floods, washouts,
arrests and restraints of governments and people, civil disturbances,
explosions, sabotage, breakage or accidents to equipment, machinery, gathering
systems, plants, facilities or lines of pipe, the making of repairs or
alterations to lines of pipe, gathering systems, plants or equipment, inability
to secure labor or materials, freezing of wells or lines of pipe, partial or
entire failure of wells or lines of pipe, partial or entire failure of gas
supply, electric power shortages, necessity for compliance with any court order,
or any law, statute, ordinance, regulation or order promulgated by a
Governmental Authority having or asserting jurisdiction prohibiting a Party from
discharging its obligations under this Agreement, inclement weather that
necessitates extraordinary measures and expense to construct facilities or
maintain operations and any other causes, whether of the kind enumerated herein
or otherwise, not reasonably within the control of the Party claiming
suspension. Such term shall likewise include, in those instances where either
Party is required to obtain servitudes, rights-of-way, grants, permits, or
licenses to enable such Party to fulfill its obligations hereunder, the
inability of such Party to acquire, or delays on the part of such Party in
acquiring, at reasonable cost and after the exercise of reasonable diligence,
such servitudes, rights-of-way, grants, permits or licenses, and in those
instances where either Party hereto is required to furnish materials and
supplies for the purpose of constructing or maintaining facilities or is
required to secure permits or permissions from any Governmental Authority to
enable such Party to fulfill its obligations hereunder, the inability of such
Party to acquire, or delays on the part of such Party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such materials,
supplies, permits, and permissions.  “Force Majeure Event”
also includes any event of force majeure occurring with respect to the
facilities or services of either Party’s Affiliates or service providers
providing a service or providing any equipment, goods, supplies or other items
necessary to the performance of such Party’s obligations hereunder, to the
extent such force majeure event renders a Party unable to perform its
obligations under this Agreement and to the extent such event is not reasonably
within the control of such Party.

     

    9.3              Strikes. The
settlement of strikes or lockouts shall be entirely within the discretion of the
Party having the difficulty, and any obligation hereunder to remedy a Force
Majeure Event shall not require the settlement of strikes or lockouts by
acceding to the demands of the opposing Party when such course is inadvisable in
the sole discretion of the Party having the difficulty.

     

    9.4              Notice The
Party whose performance is affected by a Force Majeure Event must provide Notice
to the other Party.  Initial notice may be given orally, but written
Notice with reasonably full particulars of the Force Majeure Event is required
as soon as reasonably possible after the occurrence of the Force Majeure
Event.

     

    9.5              Maintenance and Other
Operations Gatherer
may interrupt its performance hereunder for the purpose of making necessary or
desirable inspections, alterations, and repairs and Gatherer shall give to
Producer reasonable notice of its intention to suspend its performance
hereunder, except in cases of emergency where such notice is impracticable or in
cases where the operations of Producer will not be affected.  Gatherer
shall endeavor to arrange such interruptions so as to inconvenience Producer as
little as possible.  Service interruptions on the part of either Party
that are covered by this provision are included within the definition of “Force Majeure Event”
for the purpose of this Agreement.

     

    Article
10

    Assignment

     

    10.1           Restriction on
Assignment Neither
Party may assign or delegate any of its rights or obligations under this
Agreement, by operation of law, change of control, or otherwise, without the
prior written consent of the other Party which consent shall not be unreasonably
withheld, delayed or conditioned, except as provided in Section 10.2
below.

     

    10.2           Permitted
Assignments.  Producer may assign its rights under this
Agreement, without consent, to a Person that is acquiring an interest in or all
or part of the Dedicated Reserves contemporaneous with such assignment if such
assignment expressly provides that (i) it is subject to the terms of this
Agreement and (ii) the Dedicated Reserves will remain committed to this
Agreement.  Gatherer may assign its rights under this Agreement,
without consent, to a Person that is acquiring an interest in or all or a part
of a Gathering System contemporaneous with such assignment.  Each
Party also (x) may pledge this Agreement (or pledge any of its rights under this
Agreement including the right to receive payments due hereunder) to secure any
credit facility or indebtedness of such Party or its Affiliates for borrowed
money without the consent of the other Party and (y) may assign any of its
rights, or delegate any of its obligations, under this Agreement to one or more
of its Affiliates without the consent of the other Party; provided, no such
pledge or assignment shall relieve the assignor Party from any of its
obligations hereunder.

     

    
      
         

      

      
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    10.3           Inurement Subject
to Section 10.1
and 10.2,  this
Agreement binds and inures to the benefit of the Parties and their respective
successors and assigns.

     

    Article
11

    Jurisdiction

     

    This
Agreement is subject to, and each Party will comply with, all Applicable Laws of
any Governmental Authority now or hereafter having jurisdiction over either or
both Parties or their facilities.

     

    Article
12

    Notices

     

    12.1           Notice All
notices, invoices, payments, and other communications made under this Agreement
(“Notice”)
shall be in writing and sent to the addresses shown in Exhibit
B.

     

    12.2           Method All
Notices required hereunder may be sent by facsimile or mutually acceptable
electronic means, a nationally recognized overnight courier service, first class
mail, or hand delivered.

     

    12.3           Delivery Notice
shall be given when received on a Business Day by the addressee.  In
the absence of proof of the actual receipt date, the following presumptions will
apply.  Notices sent by facsimile shall be deemed to have been
received upon the sending Party’s receipt of its facsimile machine’s
confirmation of successful transmission.  If the Day on which such
facsimile is received is not a Business Day or is after five p.m. on a Business
Day, then such facsimile shall be deemed to have been received on the next
following Business Day.  Notice by overnight mail or courier shall be
deemed to have been received on the next Business Day after it was sent or such
earlier time as is confirmed by the receiving Party.  Notice by first
class mail shall be considered delivered 5 Business Days after
mailing.

     

    Article
13

    Other
Provisions

     

    13.1            Additional
Terms The
measurement terms and conditions set forth in Exhibit A are
incorporated herein by reference.

     

    13.2            Governing
Law This
Agreement shall be construed, enforced, and interpreted according to the laws of
the State of Texas, without regard to the conflicts of law rules
thereof.

     

    
      	
               
      

            	
              13.3

            	
              Arbitration Agreement to
      Arbitrate.  Any claim, counterclaim, demand, cause of
      action, dispute, or any other controversy arising out of or relating in
      any way to this Agreement, the subject matter of this Agreement, or the
      relationship between the Parties created by this Agreement (each a “Dispute”),
      shall be resolved by binding arbitration in accordance with the terms of
      this Section
      13.3.  A
      Dispute must be resolved through arbitration regardless of whether the
      Dispute involves claims that the Agreement is unlawful, unenforceable,
      void, or voidable or involves claims sounding in tort, contract, statute
      or common law.  The validity, construction and interpretation of
      this agreement to arbitrate, and all other procedural aspects of the
      arbitration conducted pursuant hereto, shall be decided by the arbitral
      tribunal.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Rules and Applicable
      Law.  Any arbitration of a Dispute shall be administered
      by the American Arbitration Association (“AAA”) and
      conducted in accordance with the Commercial Arbitration Rules (the “Rules”) of the
      AAA in existence at the time of the arbitration.  In resolving
      any Dispute, the arbitral tribunal shall refer to the governing law as
      specified in Section 13.2, provided
      that legal issues relating to arbitration procedure or the scope or
      enforceability of the arbitration agreement shall be governed by the
      Federal Arbitration Act.  The arbitral tribunal shall not be
      empowered to award exemplary, punitive, indirect, consequential, remote,
      speculative, treble, multiple or special damages, and the Parties waive
      any right they may have to recover such damages from one
      another.

            

    

     

    
      
         

      

      
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              (iii)

            	
              Location of the
      Proceeding.  The seat (or legal place) and venue of the
      arbitration shall be in Houston,
Texas.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Parties.  This
      shall apply to any Dispute between the Parties, and it shall also apply to
      any (a) Dispute between a Party and any Affiliate of the other Party, and
      (b) Dispute between an Affiliate of one Party and an Affiliate of the
      other Party. With regard to any Dispute, the Affiliates of the Parties are
      intended third party beneficiaries of the agreement to arbitrate set out
      in this Section
      13.3.

            

    

     

    
      	
               
      

            	
              (v)

            	
              Selection of the Arbitral
      Tribunal.  The Dispute shall be decided by a panel of
      three neutral arbitrators.  The claimant shall nominate an
      arbitrator at the time it serves its request for
      arbitration.  The respondent shall nominate an arbitrator at the
      time it serves its response to the request for arbitration.  If
      a Party fails to appoint an arbitrator, then that arbitrator shall be
      appointed in accordance with the Rules.  The two arbitrators
      shall together agree upon a third arbitrator to recommend to the AAA to
      chair the arbitration.  If the two party-appointed arbitrators
      are unable to agree upon an arbitrator within 15 days of the respondent’s
      appointment of an arbitrator, then the chairman shall be chosen according
      to the Rules.

            

    

     

    
      	
               
      

            	
              (vi)

            	
              Interim Measures and
      Provisional Remedies. The arbitral tribunal is authorized to award
      interim measures, provisional remedies or injunctive relief, which may be
      enforced by the arbitral tribunal or by a court of law.  In the
      event of an emergency or if one of the arbitrators is unavailable, then
      the chairman is authorized to award interim measures or injunctive relief,
      which may upon the request of a Party be reviewed by the entire arbitral
      tribunal.

            

    

     

    
      	
               
      

            	
              (vii)

            	
              The
      Award.  The award shall be final and
      binding.  The award shall be required to be in writing, stating
      the award and the reasons therefor.

            

    

     

    
      	
               
      

            	
              (viii)

            	
              Enforcement of Award by a
      Court.  Any arbitration award may be enforced by the
      courts sitting in Houston, Texas or any other court of competent subject
      matter jurisdiction (including any jurisdiction in which a Party holds or
      keeps assets).  The Parties further agree that any action to
      challenge, vacate or set aside the Award in whole or in part must be
      brought in the courts sitting in Houston, Texas.  The Parties
      agree to waive any objections they may have to personal jurisdiction,
      venue, or forum non-conveniens for any action brought to enforce the award
      in the courts sitting in Houston, Texas or any other jurisdiction where a
      Party holds or keeps assets.

            

    

     

    
      	
               
      

            	
              (ix)

            	
              Costs and Attorneys
      Fees.  The arbitral tribunal is authorized to award costs
      of the arbitration in its award and to allocate costs between the Parties,
      including (a)  the fees and expenses of the arbitrators; (b) the
      costs of assistance required by the tribunal, including the fees and
      expenses of its experts; (c) the fees and expenses of the AAA;
      (d)  the reasonable costs for legal representation of a
      successful Party, including attorneys’ fees, expert witness fees, out of
      pocket costs and other expenses; and (e) any such costs incurred in
      connection with an application for interim or emergency
      measures.

            

    

     

    
      	
               
      

            	
              (x)

            	
              Severability.  If
      any provision of this arbitration provision is found by a court to be
      unenforceable or unlawful, then it shall be severed from this Agreement
      and the remaining terms shall be enforced as
  written.

            

    

     

    
      
         

      

      
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      13.4            Representations Each
Party represents to the other Party during the term hereof as
follows:  (i) there are no suits, proceedings, judgments, or orders by
or before any governmental authority that materially adversely affect its
ability to perform this Agreement or the rights of the other Parties hereunder,
(ii) it is duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its formation, and it has the legal right, power and
authority and is qualified to conduct its business, and to execute and deliver
this Agreement and perform its obligations hereunder, (iii) the making and
performance by it of this Agreement is within its powers, and has been duly
authorized by all necessary action on its part, (iv) this Agreement constitutes
a legal, valid, and binding act and obligation of it, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other laws affecting creditor’s rights generally, and with regard to equitable
remedies, to the discretion of the court before which proceedings to obtain same
may be pending, and (v) there are no bankruptcy, insolvency, reorganization,
receivership or other arrangement proceedings pending or being contemplated by
it.  .  Producer and Gatherer
jointly acknowledge and agree that (a) the movement of Gas on the Gathering
System under this Agreement constitutes (and is intended to constitute for
purposes of all Applicable Laws) a movement of Producer’s Gas that is not
subject to the jurisdiction of the Federal Energy Regulatory Commission under
the Natural Gas Act or Section 311 of the Natural Gas Policy Act, (b) the
Gathering Fees have been freely negotiated and agreed upon as a result of good
faith negotiations and are not discriminatory or preferential, but are just,
fair, and reasonable in light of the Parties’ respective covenants and
undertakings herein during the term of this Agreement, and (c) neither Producer
nor Gatherer had an unfair advantage over the other during the negotiation of
this Agreement.

    

     

    13.5            Integrated
Transaction This
Agreement is being executed and delivered by the Parties contemporaneous with,
and as a condition precedent to, the execution and delivery of the Ancillary
Agreements by the Persons that are party thereto.  The Parties
acknowledge that the execution and delivery of this Agreement and the rights and
obligations of the Parties hereto are part of an integrated transaction being
affected pursuant to the terms of this Agreement and the Ancillary
Agreements.

     

    13.6            Waiver No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach.

     

    13.7            Rules of
Construction In
construing this Agreement, the following principles shall be
followed:

     

    
      	
               
      

            	
              (i)

            	
              no
      consideration shall be given to the fact or presumption that one Party had
      a greater or lesser hand in drafting this
  Agreement;

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

            	
              the
      word “includes” and
      its syntactical variants mean “includes, but is not
      limited to” and corresponding syntactical variant
      expressions;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              a
      defined term has its defined meaning throughout this Agreement, regardless
      of whether it appears before or after the place in this Agreement where it
      is defined;

            

    

     

    
      	
               
      

            	
              (v)

            	
              the
      plural shall be deemed to include the singular, and vice versa;
      and

            

    

     

    
      	
               
      

            	
              (vi)

            	
              each
      gender shall be deemed to include the other
  genders.

            

    

     

    13.8            No Third Party
Beneficiaries Except
as provided in Section
13.3(iv), there is no third party beneficiary to this
Agreement.

     

    13.9            Headings The
headings and subheadings contained in this Agreement are used solely for
convenience and do not constitute a part of this Agreement between the Parties
and shall not be used to construe or interpret the provisions of this
Agreement.

     

    [Signature
pages follow.]

    
      
         

      

      
        Page
15

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

     

    
      
        	
                Producer:

              
	 
      
	
                GASTAR
      EXPLORATION TEXAS, LP

              
	 
      
	
                BY:
      GASTAR EXPLORATION TEXAS LLC, its general partner

              
	 
      	 
      
	
                By:

              	
                /s/ Michael
      A. Gerlich

              
	
                Name:
      Michael A. Gerlich

              
	
                Title:
      Secretary and Treasurer

              

      

    

     

    
      Signature
Page to Gas Gathering Agreement

    

    
      
         

      

      
        Page
16

        
          

        

      

      
         

      

    

    

    
      
        	
                Gatherer:

              
	 
      
	
                HILLTOP
      RESORT GS, LLC

              
	 
      	 
      
	
                By:

              	
                /s/ Gilbert
      Burciaga

              
	
                Name:
      Gilbert Burciaga

              
	
                Title: Chief Executive
Officer

              

      

    

    

    
      Signature
Page to Gas Gathering Agreement

    

    
      
         

      

      
        Page
17

        
          

        

      

      
         

      

    

    List of Exhibits and
Schedules

    

    
      
        
          
            
              
                	
                        Exhibit
      A

                      	
                        -

                      	
                        Additional
      Terms and Conditions.

                      
	
                        Exhibit
      B

                      	
                        -

                      	
                        Addresses
      for Notice.

                      
	 
      	 
      	 
      
	
                        Schedule
      1

                      	
                        -

                      	
                        Gathering
      Fees.

                      
	
                        Schedule
      2

                      	
                        -

                      	
                        Gathering
      System Description.

                      
	
                        Schedule
      3

                      	
                        -

                      	
                        Receipt
      Points.

                      
	
                        Schedule
      4

                      	
                        -

                      	
                        Delivery
      Points.

                      
	
                        Schedule
      5

                      	
                        -

                      	
                        Subject
      Leases.

                      
	
                        Schedule
      6

                      	
                        -

                      	
                        Description
      of
AMI.

                      

              

            

          

        

      

    

     

    
      
        
          List
of Exhibits and Schedules

        

        
          Page
1

          
            

          

        

        
           

        

      

    

    

    Exhibit
A

    ADDITIONAL
TERMS AND CONDITIONS

     

    The
following terms and conditions shall apply to the gathering of Producer’s Gas on
the Gathering System.

     

    1.          
 Measurement and
Testing.

     

    (a)           Receiving
Transporters.  The ultimate custody transfer point for
Producer’s Gas will be at the interconnection between the facilities of Gatherer
and the Receiving Transporter and therefore the volume attributable to Producer
will be an allocated volume based on Producer’s pro rata portion of all Gas
delivered to the Receiving Transporter less Producer’s allocated share of Fuel
Gas and Lost and Unaccounted For Gas.

     

    (b)           Meters.  Gatherer
purchased the Gathering System  from Producer and Co-owners, but
Producer shall continue to own, and Producer or its designee shall operate, the
existing meters at the Receipt Points.   Existing check measuring
stations and measuring equipment at the Delivery Points shall be owned and
operated by Gatherer.  Both Producer and Gatherer may install,
maintain, and operate, at their own expense, such additional check measuring
equipment as desired and where appropriate on meters owned by the other
Party.  Such equipment shall be installed so as not to interfere with
the operation of the owning Party’s or its designee’s measuring
equipment.  Where no  check measuring equipment is installed
by the Party that does not own existing meters, the owning Party agrees to
provide the non-owning Party with immediate on-line access to flow information
from such meters.  Ownership and operation of new metering on future
Receipt Points and Delivery Points shall be determined on a case by case basis
by mutual agreement between Gatherer and Producer.

     

    (c)           Practices.  All
existing Delivery Point meters and future Receipt Point and Delivery Point
meters installed by Producer or Gatherer shall be constructed, installed, and
operated in accordance with the following standards depending on the type of
meters used.

     

    (1)           Orifice Meters - In
accordance with American Gas Association Report Number 3, dated 2000 or the most
recent edition as agreed to by Gatherer and Producer.  If Gas
pulsation problems occur upstream of the Receipt Points or downstream of the
Delivery Points, Producer, or their designee, shall take whatever steps
necessary to mitigate such pulsation.

     

    (2)           Positive Meters - In
accordance with American National Standards Institute B109.2, dated 2000 or the
most recent edition as agreed to by Gatherer and Producer.

     

    (3)           Turbine Meters - In
accordance with American Gas Association Report Number 7, dated 1996 or the most
recent edition as agreed to by Gatherer and Producer.

     

    (4)           Electronic Transducers and
Flow Computers (solar and otherwise) - in accordance with the applicable
American Gas Association standards, including but not limited to American Gas
Association Measurement Committee Report Nos. 3, 5, 6 and 7 and any subsequent
amendments, revisions, or modification thereof.

     

    (5)           Ultrasonic Meters -
In accordance with American Gas Association Report Number 9, dated 2003 or the
most recent edition as agreed to by Gatherer and Producer.

     

    Notwithstanding
anything contained in this Section 1(c) to the
contrary, Gatherer shall not be required to replace or make any alterations to
its measuring equipment as a result of any subsequent amendments, revisions, or
modifications of the American Gas Association Reports cited in Subparagraphs (1)
through (5) of this Section 1(c), unless
the Parties mutually agree to such replacement or alteration.

     

    (d)           Testing.  Owners
of meters on the Gathering System at Receipt Points and Delivery Points shall
give reasonable Notice to the other Party of any cleaning, changing, repairing,
inspecting, testing, calibrating, or adjusting of the owning Party’s meters or
the measurement equipment at Receipt Points and Delivery Points to permit the
non-owning Party to have a representative present.  The official
records from the measurement equipment shall remain the property of the
owner.  Upon request, Gatherer will submit its records from the
Delivery Points, together with calculations therefrom, to Producer for
inspection and verification, subject to return to Gatherer or its designee
within 30 Days after receipt thereof.

    
      
        Exhibit
A

      

      
        Page
1

        
          

        

      

      
         

      

    

    (e)           Accuracy of
Meters.  All meters shall be verified (and calibrated) at the
following intervals: (i) if the deliveries of Gas through the meter average less
than 100 Mcf’s/d, at least once each Year, (ii) if the deliveries of Gas through
the meter average between 100 Mcf’s/d and 500 Mcf’s/d, at least once every 6
Months, (iii) if the deliveries of Gas through the meter average between 500
Mcf’s/d and 5,000 Mcf’s/d, at least once every 3 Months, or (iv) if the
deliveries of Gas through the meter average more than 5,000 Mcf’s/d, at least
once each Month.  If, upon any test, the measuring equipment is found
to be inaccurate by 1% or less, previous readings of such equipment will be
considered correct in computing the deliveries of Producer’s Gas hereunder, but
such equipment shall immediately be adjusted to record
accurately.  If, upon any test, the measuring equipment is found to be
inaccurate by more than 1% of the average flow rate since the last test, then
any previous recordings of such equipment shall be corrected to zero (0) error
for any period which is known definitely or agreed upon, using the procedure set
forth in Section 1(f).  If
such period is not known or agreed upon, such correction shall be made for a
period covering 1/2 of the time elapsed since the date of the latest test, but
not to exceed 16 Days when the equipment is tested every Month and not to exceed
45 Days when the equipment is tested every 3 months.  If Producer
desires a special test of any measuring equipment owned by Gatherer, at least 72
hours advance notice shall be given to Gatherer by Producer, and both Parties
shall cooperate to secure a prompt test of the accuracy of such
equipment.  If the measuring equipment so tested is found to be
inaccurate by 1% or less, Gatherer shall have the right to bill Producer for the
costs incurred due to such special test, including any labor and transportation
cost, and Producer shall pay such costs promptly upon invoice
thereof.

     

    (f)           Adjustments.  If,
for any reason, any measurement equipment is out of adjustment, out of service,
or out of repair and the total calculated hourly flow rate through each meter
run is found to be in error by an amount of the magnitude described in Section 1(e),
the total quantity of Producer’s Gas delivered shall be redetermined in
accordance with the first of the following methods which is
feasible:

     

    (1)           by
using the registration of any check meters, if installed and accurately
registering (subject to testing as described in Section 1(e)),
or

     

    (2)           where
parallel multiple meter runs exist, by calculation using the registration of
such parallel meter runs; provided that they are measuring Producer’s Gas from
upstream headers in common with the faulty metering equipment, are not
controlled by separate regulators, and are accurately registering;
or

     

    (3)           by
correcting the error by straightforward application of a correcting factor to
the quantities recorded for the period (if the net percentage of error is
ascertainable by calibration, tests, or mathematical calculation);
or

     

    (4)           by
estimating the quantity, based upon deliveries made during periods of similar
conditions when the meter was registering accurately.

     

    (g)           Meter Records
Retention.  Gatherer shall retain and preserve for a period of
at least 2 years all measurement results, test data and other similar
records.

     

    2.           Measurement
Specifications.

     

    (a)           Units.  The
unit of volume for measurement shall be one (1) cubic foot.  Such
measured volumes shall be multiplied by their Gross Heating Value per cubic foot
and divided by 1,000,000 to determine MMbtu’s delivered hereunder.

     

    (b)           Practices.  Computations
for Gas measurement shall be made in accordance with the following depending on
the type of meters used:

    
      
        Exhibit
A  

      

      
        Page
2

        
          

        

      

      
         

      

    

     

    (1)           Orifice Meters - In
accordance with American Gas Association Report Number 3, dated 2000 or the most
recent edition as agreed to by Gatherer and Producer.

     

    (2)           Positive Meters - In
accordance with American National Standards Institute B109.2,  dated
2000 or the most recent edition as agreed to by Gatherer and
Producer.

     

    (3)           Turbine Meters - In
accordance with American Gas Association Report Number 7, dated 1996 or the most
recent edition as agreed to by Gatherer and Producer.

     

    (4)           Electronic Transducers and
Flow Computers (solar and otherwise) - in accordance with the applicable
American Gas Association standards, including but not limited to American Gas
Association Measurement Committee Report Nos. 3, 5, 6 and 7 and any subsequent
amendments, revisions, or modification thereof.

     

    (5)           Ultrasonic Meters -
In accordance with American Gas Association Report Number 9, dated 2003 or the
most recent edition as agreed to by Gatherer and Producer.

     

    (c)           Temperature.  The
temperature of Producer’s Gas typically shall be determined by a temperature
measurement device installed as part of the selected meter and flow computer
combination, or such other means of recording temperature as may be mutually
agreed upon by the Parties.  The temperature so recorded, obtained
while Producer’s Gas is being delivered, shall be the applicable flowing Gas
temperature for purposes of calculating the actual gas flow.

     

    (d)           Composition of Producer’s
Gas.  Gatherer may elect to obtain a continuous flow monthly
composite sample or a monthly spot sample of the Gas delivered by Producer
hereunder while the Gas is being produced under normal operating
conditions.  Analysis of such sample shall be made by Gatherer, at
Gatherer’s election, by gas chromatography or other industry approved method,
and the results reported as mol percent along with other composition
parameters.

     

    (e)           Pressure.  For
purposes of measurement and meter calibration, the atmospheric pressure for each
of the Receipt Points and Delivery Points shall be assumed to be the pressure
value determined by Gatherer, or its designee, for the county elevation in which
such point is located pursuant to generally accepted industry practices
irrespective of the actual atmospheric pressure at such points from time to
time.  For the purposes herein, such atmospheric pressure will be
assumed to be 14.65 pounds per square inch absolute.

     

    (f)           Gross Heating Value,
Specific Gravity, and Compressibility.  The Gross Heating
Value, Specific Gravity, and Compressibility of the Gas delivered at the Receipt
Points and Delivery Points shall be determined from compositional analysis as
described in Section
2(d) above as outlined in Gas Processors Association Standard 2172 Calculation of Gross Heating Value,
Relative Density, and Compressibility of Natural Gas Mixtures from Compositional
Analysis.

     

    (g)           Other
Contaminants.  Other tests to determine water content, sulfur,
hydrogen sulfide, inert gases, and other impurities in Producer’s Gas shall be
conducted whenever requested by either Party and shall be conducted in
accordance with standard industry testing procedures.

     

    3.           Quality
Specifications.

     

    (a)           Producer’s
Gas.  All Producer’s Gas delivered at the Receipt Points shall
meet all quality specifications imposed by the Receiving Transporter as
follows:

     

    (1)           Water
Vapor:  Producer’s Gas shall not have a water vapor content in
excess of 7 pounds of water vapor per 1,000,000 standard cubic feet of
Gas.

     

    (2)           Hydrogen
Sulfide:  Producer’s Gas shall not contain more than 1⁄4 grain of
hydrogen sulfide per 100 standard cubic feet of Gas at the Receipt
Points.

    
      
        Exhibit
A  

      

      
        Page
3

        
          

        

      

      
         

      

    

     

    (3)           Total
Sulfur:  Producer’s Gas shall not contain more than 5 grains of
total sulfur per 100 standard cubic feet of Gas at the Receipt
Points.

     

    (4)           Temperature:  Producer’s
Gas shall not have a temperature less than 40oF or more than 120
oF.

     

    (5)           Carbon
Dioxide:  Producer’s Gas shall not contain more than 2% by
volume of carbon dioxide.

     

    (6)           Oxygen:  Producer’s
Gas shall contain no oxygen.

     

    (7)           Nitrogen:  Producer’s
Gas shall not contain more than 2% by volume of nitrogen.

     

    (8)           Total Inert Gas:
Producer’s Gas shall not contain more than 3% by volume of total inert
gases.

     

    (9)           Objectionable Liquids and
Solids and Dilution:  Producer’s Gas shall be commercially free
of dust, gum, gum-forming constituents, gasoline, liquid hydrocarbons, water,
and any other substance of any kind that may become separated from the Gas
during the handling thereof or that may cause injury to or interference with
proper operation of the lines, meters, regulators, or other appliances through
with it flows.

     

    (10)         Gross Heating
Value:  Producer’s Gas shall not have a Gross Heating Value
less than 950 Btu’s per cubic foot of Gas or more than 1050 Btu’s per cubic foot
of Gas.

     

    (11)         Hydrocarbon
Dewpoint:  Producer’s Gas shall have a hydrocarbon dewpoint
below 40 degrees Fahrenheit (40 oF).

     

    (b)           Treating and Dehydration by
Receiving Transporter: Notwithstanding the Gas specifications above for
carbon dioxide and hydrogen sulfide, Producer may deliver Producer’s Gas at the
Receipt Points with up to 6% by volume carbon dioxide and up to 24 ppm(v)
hydrogen sulfide if Producer has made suitable arrangements for delivering such
non-specification Producer’s Gas under the ETC Contract, at no cost to Gatherer.
These higher limits are intended to mirror the specifications contained in the
Treating Option in the ETC Contract, and shall be determined at the Delivery
Points into such  Receiving Transporter.  Blended H2S content
at the Delivery Points up to 40 ppm(v) will be reduced to below 24 ppm(v) by
injection of suitable scavenger at the Delivery Points by Gatherer at no cost to
the Producer.  Therefore, H2S content
at the Delivery Point above 40 ppm(v) shall be the responsibility of the
Producer, who will be required in that event to reduce the aggregate H2S content
below 40 ppm(v) by treating at selected well sites or curtailment of high H2S well flow
at the Receipt Points.   If the blended CO2 content of
Producer’s Gas exceeds 6% in the aggregate at the Delivery Points, but does not
exceed 8% in the aggregate at Delivery Points, Gatherer shall accept and gather
such non-specification Producer’s Gas if such non-specification Producer’s Gas
is accepted under the ETC Contract, at no cost to Gatherer.  Shut in
of the Producer’s Gas due to CO2 content
above 6% at the Delivery Points shall be the sole responsibility of the
Producer.   Producer’s Gas may also be delivered with water in
excess of 7 pounds per 1,000,000 standard cubic feet, up to complete water
saturation but with no free liquid water, so long as Producer has made suitable
arrangements for delivering Producer’s Gas with this water content by payment of
the Dehydration Fee under the ETC Contract, and at no cost to
Gatherer.  Gatherer warrants that any Third Party Gas received on the
Gathering System shall meet specifications at least as stringent as those then
in effect by the Receiving Transporter, including relaxed specifications for the
Treating and Dehydrations Options, if applicable, and that such Third Party Gas
will meet the quality specifications at the Delivery Points.  Gatherer
shall meter Third Party Gas and measure its quality using procedures
substantially similar to those set forth in this Agreement, and Gatherer shall
notify Producer on a monthly basis of the results of such metering and
measurement.  Anything herein to the contrary notwithstanding,
Gatherer may refuse to accept Producer’s Gas that does not meet the
specifications in Section 3(a) above if Gatherer reasonably determines that
receipt of such non-specification Producer’s Gas will cause material damage the
Gathering System.

    
      
        Exhibit
A  

      

      
        Page
4

        
          

        

      

      
         

      

    

     

    (c)           Change in Receiving
Transporter’s Specifications.  Notwithstanding the Gas
specifications above, if a Receiving Transporter notifies Gatherer or Producer
of different or additional quality specifications required at the Delivery
Points and different from those outlined in Section 3(a) or (b) above, Gatherer
will notify Producer of any such different or additional specifications as soon
as practicable after being notified of such specifications.  Gatherer
may, at its sole option, retain the original specifications as outlined above or
choose to adopt such revised specifications as the quality specifications for
Producer’s Gas under this Agreement for as long as required by the Receiving
Transporter.

     

    (d)           Failure to Meet
Specifications.  If Producer’s Gas delivered hereunder fails to
meet any of the quality specifications stated in Section 3(a), (b) or (c) above, Gatherer
(i) may install equipment, at Producer’s expense, on the Gathering System to
treat such nonconforming Producer’s Gas or (ii) may refuse to accept such
Producer’s Gas for so long as Producer is unable to deliver Producer’s Gas
conforming to such specifications.  If Gatherer, in its sole
discretion, accepts Producer’s Gas that fails to meet any of the quality
specifications stated above, Gatherer shall not be deemed to have waived
Gatherer’s right to refuse to accept non-specification Gas at a subsequent
time.  In addition, if Producer continues to flow any Gas that fails
to meet the quality specifications under this Section 3,
Producer shall be responsible for (i) any fees charged by any Receiving
Transporter and (ii) any costs, expenses, damages incurred by Gatherer or caused
by such non-specification Producer’s Gas.

     

    4.           Easements.

     

    (a)           Access.  To
the extent that Producer may contractually or lawfully do so under its leasehold
interests and other property rights in the Subject Leases, Producer hereby
grants, convey, assign, and transfer to Gatherer a right of way and easement
across the Subject Leases, and across adjoining lands in which Producer may have
an interest, for the purposes of installing, using, inspecting, repairing,
operating, replacing, and removing Gatherer’s facilities (including installation
of new custody transfer meters and other equipment) used or useful in the
performance of this Agreement.  Any property of Gatherer placed in or
on any of such land shall remain the property of Gatherer, subject to removal by
Gatherer when necessary or desirable, in Gatherer’s sole judgment, or upon the
expiration or termination of this Agreement.  Gatherer shall have a
reasonable time after the expiration or termination of this Agreement to remove
its property.

     

    (b)           Further
Assurances.  Producer shall execute and deliver such additional
instruments and other documents, and shall take such further actions as may be
reasonably necessary or appropriate, to effectuate, carry out, and comply with
the terms of this Section
4.

     

    (c)           Uneconomic
Systems.  If total deliveries of Producer’s Gas to Gatherer at
a Receipt Point fall below an average daily quantity of 50 Mcf’s of Gas for any
ninety (90) consecutive Day period, then Gatherer may, in its sole discretion,
assign and convey to Producer, for a mutually acceptable price, the uneconomic
portion of the Gathering System and all related equipment, and Producer shall
assume responsibility for the operation and maintenance of and measurement at
the applicable Receipt Point (including all costs related thereto), subject to
the provisions of a Gas measurement and operation agreement between Producer and
Gatherer, and subject to compliance with the provisions of this Agreement
regarding measurement. If Producer and Gatherer cannot agree on a mutually
acceptable price, the Parties agree to negotiate in good faith to remedy the
uneconomic operation.  Such remedies may include special agreements
for increased Gathering Fees for the uneconomic connection, supplemental
payments by Producer to Gatherer to cover extraordinary costs, or other means as
might be appropriate.  Gatherer reserves the right to shut in, or to
permit Producer to operate and maintain, at Producer’s sole risk, cost, and
expense, any part of the Gathering System that is uneconomic for which a
mutually agreeable solution cannot be agreed to between the
Parties.

     

    
      
        Exhibit
A  

      

      
        Page
5

        
          

        

      

      
         

      

    

    Exhibit
B

    ADDRESSES
FOR NOTICES

     

    Gastar Exploration
Ltd.

     

    Mr.
Michael A. Gerlich

    Chief
Financial Officer

    1331
Lamar, Suite 1080

    Houston,
Texas 77010

    Telephone:
(713) 739-0455

    Fax:
(713) 739-0458

    mgerlich@gastar.com

    

    Mr. Henry
Hansen

    Vice
President Land

    1331
Lamar, Suite 1080

    Houston,
Texas 77010

    Telephone:
(713) 739-0443

    Fax:
(713) 739-0458

    hhansen@gastar.com

    

    Hilltop Resort GS,
LLC

    

    500 North
Capital of Texas Highway

    Building
#3, Suite 100

    Austin,
Texas 78746

    Attn:
Elias F. Urbina

    Telephone:
(512) 415-9090

    Facsimile:
(512) 328-9410

    

    500 North
Capital of Texas Highway

    Building
#3, Suite 100

    Austin,
Texas 78746

    Attn: Gilbert
Burciaga

    Telephone:
(512) 415-9090

    Facsimile:
(512) 328-9410

    
      
        Exhibit B

      

      
        Page
1

        
          

        

      

      
         

      

    

    Schedule
1

     

    GATHERING
FEES

     

    
      
        
          
            
              
                
                  	
                          Cumulative
      Receipt of Producer’s Gas and Quarterly

                          Third
      Party Credit Volumes Equals 70% of the 

                          Following
      Volumes**

                        	 	
                          Gathering Fee (in $/Mcf)

                        	 
	 	 	 	 	 	 	 
	 	
                          0-25

                        	
                          Bcf

                        	 	$	0.325	 
	 	 	 	 	 	 	 
	 	
                          25-50

                        	
                          Bcf

                        	 	$	0.300	 
	 	 	 	 	 	 	 
	 	
                          50-100

                        	
                          Bcf

                        	 	$	0.275	 
	 	 	 	 	 	 	 
	 	
                          100-200

                        	
                          Bcf

                        	 	$	0.275	 
	 	 	 	 	 	 	 
	 	
                          200-300

                        	
                          Bcf

                        	 	$	0.250	 
	 	 	 	 	 	 	 
	 	
                          300-600

                        	
                          Bcf

                        	 	$	0.225	 

                

              

            

          

        

      

    

     

    **The
volume thresholds in this column will be met (and the reduced Gathering Fee will
become applicable) when the sum of (i) the volume of Producer’s Gas delivered
to, and gathered on, the Gathering System and (ii) Quarterly Third Party Credit
Volumes equals or exceeds 70% of the volumes shown in this
column.

    
      
        Schedule
1

      

      
        Page
1Exhibit
10.2

     

    PURCHASE
AND SALE AGREEMENT

     

    between

     

    GASTAR
EXPLORATION TEXAS, LP,

     

    as
Seller,

     

    and

     

    HILLTOP
RESORT GS, LLC

     

    as
Buyer,

     

    dated
November 16, 2009

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    TABLE
OF CONTENTS

     

    
      
        
          
            
              
                
                  
                    	
                            Article
      1 Definitions

                          	1	 
	 
      	 
      	 	 
	
                            Section
      1.1.

                          	
                            Certain
      Defined Terms

                          	1	 
	
                            Section
      1.2.

                          	
                            References,
      Gender, Number

                          	1	 
	 
      	 	 
	
                            Article
      2 Purchase And Sale

                          	1	 
	 
      	 
      	 	 
	
                            Section
      2.1.

                          	
                            Purchase
      and Sale

                          	1	 
	
                            Section
      2.2.

                          	
                            No
      Assumed Liabilities

                          	1	 
	
                            Section
      2.3.

                          	
                            Excluded
      Liabilities

                          	2	 
	 
      	 	 
	
                            Article
      3 Purchase Price And Payment

                          	2	 
	 
      	 
      	 	 
	
                            Section
      3.1.

                          	
                            Purchase
      Price

                          	2	 
	
                            Section
      3.2.

                          	
                            Closing
      Statement and Payment

                          	2	 
	
                            Section
      3.3.

                          	
                            Post-Closing
      Adjustment to the Purchase Price

                          	3	 
	
                            Section
      3.4.

                          	
                            Expense
      Adjustment

                          	4	 
	
                            Section
      3.5.

                          	
                            Revenue
      Adjustment

                          	4	 
	 
      	 	 
	
                            Article
      4 Representations And Warranties

                          	4	 
	 
      	 
      	 	 
	
                            Section
      4.1.

                          	
                            Representations
      and Warranties of Seller

                          	4	 
	
                            Section
      4.2.

                          	
                            Representations
      and Warranties of Buyer

                          	9	 
	 
      	 	 
	
                            Article
      5 Access Before Closing

                          	10	 
	 
      	 	 
	
                            Article
      6 Covenants of Seller and Buyer

                          	10	 
	 
      	 
      	 	 
	
                            Section
      6.1.

                          	
                            Conduct
      of Business Pending Closing

                          	10	 
	
                            Section
      6.2.

                          	
                            Public
      Announcements

                          	11	 
	
                            Section
      6.3.

                          	
                            Actions
      by Parties

                          	11	 
	
                            Section
      6.4.

                          	
                            Further
      Assurances

                          	11	 
	
                            Section
      6.5.

                          	
                            Records

                          	11	 
	
                            Section
      6.6.

                          	
                            Certain
      Filings

                          	12	 
	
                            Section
      6.7.

                          	
                            Regulatory
      Approvals

                          	12	 
	
                            Section
      6.8.

                          	
                            Expenses
      And Revenues

                          	12	 
	
                            Section
      6.9.

                          	
                            Conveyance
      of Certain Excluded Assets

                          	12	 
	
                            Section
      6.10.

                          	
                            Certain
      Rights of Way

                          	13	 
	
                            Section
      6.11.

                          	
                            Certain
      Consents

                          	13	 
	 
      	 	 
	
                            Article
      7 Closing Conditions

                          	13	 
	 
      	 
      	 	 
	
                            Section
      7.1.

                          	
                            Seller’s
      Closing Conditions

                          	13	 
	
                            Section
      7.2.

                          	
                            Buyer’s
      Closing Conditions

                          	14	 
	 
      	 	 
	
                            Article
      8 Closing

                          	15	 
	 
      	 
      	 	 
	
                            Section
      8.1.

                          	
                            Closing

                          	15	 
	
                            Section
      8.2.

                          	
                            Seller’s
      Closing Deliverables

                          	15	 
	
                            Section
      8.3.

                          	
                            Buyer’s
      Closing Deliverables

                          	15	 
	 
      	 	 
	
                            Article
      9 Indemnification

                          	15	 
	 
      	 
      	 	 
	
                            Section
      9.1.

                          	
                            Indemnification
      by Buyer

                          	15	 
	
                            Section
      9.2.

                          	
                            Indemnification
      by Seller

                          	16	 
	
                            Section
      9.3.

                          	
                            Third
      Party Claims

                          	16	 
	
                            Section
      9.4.

                          	
                            Survival

                          	16	 
	
                            Section
      9.5.

                          	
                            Purchase
      Price Adjustment

                          	16	 
	
                            Section
      9.6.

                          	
                            Exclusive
      Remedy

                          	16	 

                  

                

              

            

          

        

      

    

    
      

      
        
          
             

          

          
            i

            
              

            

          

          
             

          

        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Section
      9.7.

                              	
                                Disclaimers

                              	17	 
	
                                Section
      9.8.

                              	
                                Waiver

                              	17	 
	 
      	 	 
	
                                Article
      10 Termination

                              	17	 
	 
      	 
      	 	 
	
                                Section
      10.1.

                              	
                                Termination
      of Agreement

                              	17	 
	
                                Section
      10.2.

                              	
                                Effect
      of Termination

                              	18	 
	 	 	 
	
                                Article
      11 Taxes

                              	18	 
	 	 	 	 
	
                                Section
      11.1.

                              	
                                Allocation
      of Taxes

                              	18	 
	
                                Section
      11.2.

                              	
                                Cooperation

                              	19	 
	 
      	 	 
	
                                Article
      12 Other Provisions

                              	19	 
	 
      	 
      	 	 
	
                                Section
      12.1.

                              	
                                Counterparts

                              	19	 
	
                                Section
      12.2.

                              	
                                Governing
      Law

                              	19	 
	
                                Section
      12.3.

                              	
                                Arbitration

                              	19	 
	
                                Section
      12.4.

                              	
                                Casualty
      Loss Prior to Closing

                              	20	 
	
                                Section
      12.5.

                              	
                                Entire
      Agreement

                              	21	 
	
                                Section
      12.6.

                              	
                                Expenses

                              	21	 
	
                                Section
      12.7.

                              	
                                Notices

                              	21	 
	
                                Section
      12.8.

                              	
                                Successors
      and Assigns

                              	21	 
	
                                Section
      12.9.

                              	
                                Amendments
      and Waivers

                              	21	 
	
                                Section
      12.10.

                              	
                                Appendices,
      Schedules and Exhibits

                              	21	 
	
                                Section
      12.11.

                              	
                                Interpretation
      and Rules of Construction

                              	22	 
	
                                Section
      12.12.

                              	
                                Agreement
      for the Parties’ Benefit Only

                              	22	 
	
                                Section
      12.13.

                              	
                                Severability

                              	22	 
	
                                Section
      12.14.

                              	
                                Time
      of Essence

                              	23	 

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
          
             

          

          
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    PURCHASE
AND SALE AGREEMENT

     

    THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as
of November 16, 2009, is by and between Gastar Exploration Texas, LP, a Delaware
limited partnership (“Seller”), and Hilltop
Resort GS, LLC, a Delaware limited liability company (“Buyer”).  Buyer
and Seller are sometimes referred to herein individually as a “Party” and
collectively as the “Parties”.

     

    Recital:

     

    Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, Seller’s
portion of the Hilltop Resort Gas Gathering System in Leon and Robertson
Counties, Texas (the “Hilltop Resort Gathering
System”) and all related assets, rights, and interests, as such assets,
rights, and interests are more fully described herein, upon the terms and
subject to the conditions set forth in this Agreement.

     

    NOW,
THEREFORE, in consideration of the mutual covenants and agreements in this
Agreement, and for other good and valuable consideration, Seller and Buyer agree
as follows:

     

    Article
1

    Definitions

     

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

     

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

     

    Article
2

    Purchase
And Sale

     

    Section
2.1.       Purchase and Sale
On and
subject to the terms and conditions of this Agreement, Seller agrees to sell,
transfer, assign, convey, and deliver to Buyer, free and clear of all Liens,
other than the Permitted Encumbrances, and Buyer agrees to purchase or cause to
be purchased from Seller, in consideration of the payment of the Purchase Price
by Buyer, all of Seller’s right, title, and interest in and to the Subject
Assets.

     

    Section
2.2.       No Assumed Liabilities
Notwithstanding
anything to the contrary set forth in this Agreement, Buyer is not assuming any
liability or obligation relating to, arising out of, or attributable to the
ownership or operation of the Subject Assets prior to the Closing Date, of
whatever nature, whether presently in existence or arising
hereafter.

    

    
      
        
           

        

        
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1

          
            

          

        

        
           

        

      

    

     

    Section
2.3.        Excluded Liabilities
Notwithstanding
anything to the contrary in this Agreement, all liabilities and obligations of
Seller and its Affiliates relating to, arising out of, or attributable to the
ownership or operation of the Subject Assets prior to the Closing Date, whether
presently in existence or arising hereafter, shall be retained by and remain
obligations of Seller and its Affiliates (the “Excluded
Liabilities”).  The Excluded Liabilities shall include, without
limitation, the following:

     

    (a)         all
liabilities and obligations to the extent relating to or incurred in connection
with the Excluded Assets;

     

    (b)         all
liabilities and obligations with respect to Taxes that are the responsibility of
Seller pursuant to Section 11.1;
and

     

    (c)         all
liabilities and obligations arising out of or related to the Navasota Proceeding
or the subject matter thereof.

     

    Article
3

    Purchase
Price And Payment

     

    Section
3.1.        Purchase Price The
purchase price for the sale and conveyance of the Subject Assets to Buyer is
$19,250,000 (the “Purchase Price”),
subject to adjustment under this Agreement.  The “Adjusted Purchase
Price” shall be the Purchase Price adjusted as follows:

     

    (i)         
adjusted for costs and expenses in accordance with Section
3.4;

     

    (ii)        
adjusted for revenues in accordance with Section
3.5;

     

    (iii)       
adjusted downward by the amount referred to in Section 12.4 in
connection with any Casualty, if applicable; and

     

    (iv)      
  adjusted by any other amount specifically provided for in this Agreement
or agreed upon in writing by Buyer and Seller.

     

    Section
3.2.         Closing Statement and Payment
Not later
than five (5) Business Days prior to the Closing Date, Seller shall prepare and
deliver to Buyer a reasonably detailed statement (the “Closing Statement”)
of the estimated Purchase Price adjustments and the estimated Adjusted Purchase
Price (the “Estimated
Adjusted Purchase Price”).  At the Closing, Buyer shall wire
transfer the Estimated Adjusted Purchase Price in immediately available funds to
an account or accounts specified by Seller to Buyer at least three (3) Business
Days immediately preceding the Closing Date.

     

    
      
        
        

      

      
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2

        
          

        

      

      
        
        

      

    

     

    Section
3.3.      Post-Closing Adjustment to the
Purchase Price Revised Closing Statement.  On or before the
date that is sixty (60) days after the Closing Date, Seller shall prepare and
deliver to Buyer a revised Closing Statement setting forth the Purchase Price
adjustments and Seller’s calculation of such amount.  To the extent
reasonably required by Seller, Buyer shall assist in the preparation of the
revised Closing Statement.  Seller shall provide to Buyer such data
and information and access to Seller’s personnel as Buyer may reasonably request
supporting the amounts reflected on the revised Closing Statement to permit
Buyer to perform or cause to be performed an audit at Buyer’s
expense.  The revised Closing Statement shall become final and binding
upon the parties on the date (the “Final Settlement
Date”) that is sixty (60) days following receipt thereof by Buyer unless
Buyer gives written notice of its disagreement (“Notice of
Disagreement”) to Seller prior to such date.  Any Notice of
Disagreement shall specify in detail the dollar amount, nature, and basis of any
disagreement so asserted.  If a Notice of Disagreement is received by
Seller, then the Closing Statement (as revised in accordance with paragraph (b) below)
shall become final and binding on the parties on, and the Final Settlement Date
shall be, the earlier of (i) the date upon which Seller and Buyer agree in
writing with respect to all matters specified in the Notice of Disagreement or
(ii) the date upon which the Arbitrator’s Closing Statement (as hereinafter
defined) is issued by the Closing Statement Arbitrator (as hereinafter
defined).

     

    (b)           Final Closing
Statement.  During the thirty (30) days following the date upon
which Seller received the Notice of Disagreement, Seller and Buyer shall use
their reasonable best efforts to attempt to resolve in writing any differences
that they may have with respect to all matters specified in the Notice of
Disagreement.  If at the end of such thirty (30) day period (or
earlier by mutual agreement to arbitrate), Buyer and Seller have not reached
agreement on such matters, the matters that remain in dispute shall be submitted
to an arbitrator (the “Closing Statement
Arbitrator”) for review and final and binding resolution.  The
Closing Statement Arbitrator shall be the accounting firm of KPMG, or if unable
or unwilling to act or if representing Seller or Buyer in another matter, such
other nationally recognized independent public accounting firm as shall be
agreed upon by Buyer and Seller in writing (but if the parties have not so
agreed by the date that is forty-five (45) days after the date upon which Seller
received the Notice of Disagreement, then the Closing Statement Arbitrator shall
be selected, upon the application of Buyer or Seller, by the accounting firm of
KPMG within ten (10) days of its receipt of such application).  Buyer
and Seller shall, not later than seven (7) days prior to the hearing date set by
the Closing Statement Arbitrator, each submit a brief to the Closing Statement
Arbitrator with dollar figures for settlement of the disputes as to the amount
of the Adjusted Purchase Price (together with a proposed Closing Statement that
reflects such figures) consistent with their respective calculations delivered
pursuant to this Section
3.3(b).  The hearing will be scheduled seven (7) days following
submission of the settlement briefs, or as soon thereafter as is acceptable to
the Closing Statement Arbitrator, and shall be conducted on a confidential
basis.  The Closing Statement Arbitrator shall consider only those
items or amounts in the Closing Statement as to which the parties disagreed and
render a decision resolving the matters in dispute (which decision shall include
a written statement of findings and conclusions) promptly after the conclusion
of the hearing, unless the parties reach agreement prior thereto and withdraw
the dispute from arbitration.  The Closing Statement Arbitrator shall
provide to the parties explanations in writing of the reasons for its decisions
regarding the Adjusted Purchase Price and shall issue the Final Closing
Statement reflecting such decision.  The decision of the Closing
Statement Arbitrator shall be final and binding on the parties.  The
cost of any arbitration (including the fees and expenses of the Closing
Statement Arbitrator) under this Section 3.3(b) shall
be borne equally by Buyer and Seller.  The fees and disbursements of
Seller’s independent auditors incurred in connection with the services performed
with respect to the Closing Statement shall be borne by Seller and the fees and
disbursements of Buyer’s independent auditors incurred in connection with their
preparation of the Notice of Disagreement shall be borne by Buyer.  As
used in this Agreement, the term “Final Closing
Statement” shall mean the revised Closing Statement described in Section 3.3(a), as
prepared by Seller and as may be subsequently adjusted to reflect any subsequent
written agreement between the parties with respect thereto, or if submitted to
the Closing Statement Arbitrator, the Arbitrator’s Closing Statement (“Arbitrator’s Closing
Statement”) as described in this Section
3.3(b).

    

    
      
        
           

        

        
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3

          
            

          

        

        
           

        

      

    

    

    (c)           Final
Settlement.  If the amount of the Adjusted Purchase Price as
set forth on the Final Closing Statement exceeds the amount of the Estimated
Adjusted Purchase Price, then Buyer shall pay to Seller, within five (5)
Business Days after the Final Settlement Date, the amount by which the Adjusted
Purchase Price as set forth on the Final Closing Statement exceeds the amount of
the Estimated Adjusted Purchase Price, together with interest at the Agreed Rate
on such excess amount from the Closing Date until paid.  If the amount
of the Adjusted Purchase Price as set forth on the Final Closing Statement is
less than the amount of the Estimated Adjusted Purchase Price, then Seller shall
pay to Buyer, within five (5) Business Days after the Final Settlement Date, the
amount by which the Adjusted Purchase Price, as set forth on the Final Closing
Statement, is less than the amount of the Estimated Adjusted Purchase Price,
together with interest at the Agreed Rate on such deficiency amount from the
Closing Date until paid.  Any post-Closing payment made under this
Section 3.3(c)
shall be made by means of a wire transfer of immediately available funds to a
bank account designated by the party receiving the funds.

     

     (d)           Allocation
Statement.  Buyer and Seller agree that the Purchase Price
shall be allocated among the Subject Assets in accordance with Section 1060 of
the Code and the Treasury regulations thereunder, as set forth on Schedule
3.3(d) of this Agreement (the “Purchase Price
Allocation”), and any subsequent adjustments to the Purchase Price shall
be made consistent with such allocation.  Buyer and Seller shall duly
prepare and timely file such reports and information returns as may be required
under Section 1060 of the Code and any regulations thereunder and any
corresponding provisions of applicable state income tax laws to report the
Purchase Price Allocation.  The Purchase Price Allocation shall be
binding on Buyer and Seller for Tax reporting purposes, provided that no Party
shall be unreasonably impeded in its ability and discretion to negotiate,
compromise and/or settle any Tax audit, claim or similar
proceedings.

     

    Section
3.4.          Expense Adjustment
The
Purchase Price shall be adjusted (i) upward by an amount equal to all costs and
expenses paid by Seller for any period after November 1, 2009 and attributable
to the ownership or operation of the Subject Assets after November 1, 2009
(other than Buyer’s portion of Property Taxes paid to Seller pursuant to Section 11.1(b)) and
(ii) downward for all costs and expenses paid by Buyer for any period prior to
November 1, 2009 and attributable to the ownership or operation of the Subject
Assets prior to the close of business on November 1, 2009.

     

    Section
3.5.          Revenue Adjustment
The
Purchase Price shall be adjusted (a) downward by an amount equal to all
revenues, proceeds, and other monies received by Seller attributable to the
ownership or operation of the Subject Assets after November 1, 2009 and (b)
upward by an amount equal to all revenues, proceeds and other monies received by
Buyer attributable to the ownership or operation of the Subject Assets prior to
the close of business on November 1, 2009.

     

    Article
4

    Representations
And Warranties

     

    Section
4.1.           Representations and Warranties of
Seller As of the
date of this Agreement and as of the Closing Date, Seller represents and
warrants to Buyer as follows:

     

    (a)           Organization and Good
Standing.  Each of Seller and its general partner, Gastar
Exploration Texas LLC, (the “General Partner”) is
duly formed, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation.

     

    (b)           Qualification of
Seller.  Each of Seller and the General Partner has the
requisite corporate or partnership power and authority, as applicable, required
to carry on the business of owning and operating its assets, including the
Subject Assets, as such business is now being conducted.  Each of
Seller and the General Partner is qualified to do business and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified would not be material to
Seller and the General Partner.

     

    (c)           Authority.  Seller
has all requisite power and authority to execute and deliver this Agreement and
the Transaction Agreements to which it is a party and to perform its obligations
hereunder and thereunder.  The execution, delivery, and performance of
this Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite action
on the part of Seller and the General Partner.

     

    
      
        
           

        

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

     

    (e)           No Violation or
Breach.  Except as shown in Schedule 4.1(e),
neither the execution and delivery of this Agreement or the Transaction
Agreements nor the consummation of the transactions and performance of the terms
and conditions contemplated hereby and thereby shall (i) conflict with or result
in a violation or breach of any provision of the certificate of formation,
regulations, or other similar governing documents of Seller or any material
agreement, indenture, or other instrument under which Seller is bound, or
(ii) assuming the obtaining of all Required Consents, constitute a material
default under or give rise to any right of termination, cancellation, or
acceleration of any material right or obligation of Buyer or to a loss of any
material benefit relating to the ownership or operation of the Subject Assets to
which Seller is entitled under any provision of any agreement or other
instrument binding upon Seller or by which any of the Subject Assets is or may
be bound, (iii) violate in any material respect any Law applicable to Seller or
the Subject Assets, or (iv) result in the creation or imposition of any Lien on
the Subject Assets.

     

    (f)           Consents.  Except
for the consents, approvals, authorizations, permits filings, or notices
described in Schedule
4.1(f) (“Required Consents”),
no material consent, or filing with, or notification to, any Person is required
for or in connection with the execution and delivery of this Agreement or any
Transaction Agreement by Seller or for or in connection with the consummation of
the transactions and performance of the terms and conditions contemplated hereby
or thereby by Seller.

     

    (g)           Actions.  Except as
set forth on Schedule
4.1(g), there is no Action pending against, or to the knowledge of
Seller, threatened against or affecting, the operation of the Subject Assets or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement or the Transaction
Agreements.

     

    (h)           Compliance with
Laws.  Except as set forth on Schedule 4.1(h),
Seller has operated and maintained its business and the Subject Assets in
compliance with all Laws in all material respects and to the knowledge of Seller
is not under investigation with respect to or has been threatened to be charged
with or given notice of any violation of any Law.  Except as set forth
on Schedule
4.1(h), Seller has not received written notice of any violation of any
Laws, or to the knowledge of Seller, is under investigation with respect to and
has not been threatened to be charged with any violation of any Law in respect
of its ownership and operation of the Subject Assets.

     

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

     

    (j)           Bankruptcy.  There
are no bankruptcy, reorganization, or arrangement proceedings pending against,
being contemplated by, or to the knowledge of Seller, threatened against
Seller.

     

    (k)          Material
Contracts.  Except for the contracts disclosed in Schedule 4.1(k),
with respect to the ownership or operation of the Subject Assets, Seller is not
a party to or bound by:

     

    (i)           any
lease (whether of real or personal property) providing for annual rentals of
$25,000 or more;

     

    (ii)           any
agreement or contract for the gathering, treating, transportation, processing,
or storage of natural gas or other hydrocarbons;

    

    
      
        
           

        

        
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5

          
            

          

        

        
           

        

      

    

     

    (iii)        any
agreement for the purchase or sale of materials, supplies, goods, services,
equipment or other assets that provides for either expenditures or payments of
$25,000 or more;

     

    (iv)        any
partnership, joint venture, or other similar agreement or
arrangement;

     

    (v)         any
agreement relating to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets, or otherwise);

     

    (vi)        any
agreement relating to indebtedness for borrowed money or the deferred purchase
price of property (in either case, whether incurred, assumed, guaranteed or
secured by any asset);

     

    (vii)       any
option, license, franchise, or similar agreement;

     

    (viii)      any
agency, dealer, sales representative, marketing or other similar
agreement;

     

    (ix)         any
agreement that limits the freedom of Seller to compete in any line of business
or with any Person or in any area or to own, operate, sell, transfer, pledge or
otherwise dispose of or encumber any Subject Assets or which would so limit the
freedom of Buyer after the Closing Date;

     

    (x)    
     any agreement with or for the benefit of any
Affiliate of Seller; or

     

    (xi)         any
other agreement, commitment, or arrangement not made in the ordinary course of
business that is material to the operation of the Subject Assets.

     

    (l)           Environmental
Matters.  Except as set forth in Schedule
4.1(l):

     

    (i)           the
Subject Assets are and, during all surviving periods of applicable statutes of
limitation, have been during Seller’s period of ownership or operation in
compliance in all material respects with all Environmental Laws and
Environmental Permits, and to the knowledge of Seller, the Subject Assets are
not under investigation by any Governmental Authority with respect to, and have
not been the subject of any notice issued to Seller that remains pending
regarding violation of any Environmental Law;

     

    (ii)          Seller
has obtained or timely applied for all material Environmental Permits that, to
the knowledge of Seller,  are necessary for operation of the Subject
Assets as they are currently being operated by Seller and, to the knowledge of
Seller,  all such Environmental Permits obtained are valid and in full
force and effect;

     

    (iii)         Seller
has not received any written notice of a request for information, order,
complaint, violation, penalty or investigation issued by a Governmental
Authority pursuant to Environmental Law with respect to the Subject Assets that
remains unresolved as of the Closing Date, and there are no lawsuits or
proceedings pending or, to knowledge of Seller, threatened under Environmental
Law by any Person against Seller with respect to the Subject
Assets;

     

    (iv)        there
are no material Environmental Liabilities existing in connection with the
Subject Asset and, to the knowledge of Seller, there are no events or conditions
that could reasonably be expected to result in or be the basis for any such
material liability;

     

    (v)         no
Hazardous Material has been discharged, disposed of, dumped, injected, pumped,
deposited, spilled, leaked, emitted or released at, on or under any of the real
property included in the Subject Assets by Seller or its Affiliates that is in
violation of Environmental Law or that requires Seller to perform any material
investigatory or remedial, cleanup or similar corrective activities under
Environmental Law; and

    

    
      
        
           

        

        
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    (vi)        Seller
has made available to Buyer copies of all environmental site assessment reports,
studies and analyses on alleged environmental matters including Hazardous
Materials that are in the Seller’s possession and relating to its operation of
the Subject Assets.

     

    Notwithstanding
any other provisions of this Agreement to the contrary, this Section 4.1(l)
contains the sole and exclusive representations and warranties of Seller on
environmental matters, including Environmental Laws, Environmental Permits, and
Hazardous Materials.

     

    (m)        Tax
Matters.  Except as set forth in Schedule
4.1(m),

     

    (i)          all
Tax Returns required to be filed on or before the Closing Date by Seller with
respect to any Taxes payable in respect of the Subject Assets have been or will
be timely filed with the appropriate Governmental Authority in the jurisdictions
in which such Tax Returns are required to be filed, such Tax Returns are or will
be true and correct in all material respects, and all Taxes required to be paid
on or before the Closing Date by the Seller with respect to the Subject Assets
have been or will be paid;

     

    (ii)         there
are no claims, assessments, levies, administrative proceedings, or lawsuits
pending, or to the knowledge of Seller, threatened by any taxing authority with
respect to the Subject Assets; and

     

    (iii)        no
audit or investigation of any Tax Return of Seller with respect to the Subject
Assets is currently underway, or to the knowledge of Seller,
threatened.

     

    (n)          Property
Matters.

     

    (i)           Except
as set forth in Schedule 4.1(n),
Seller has good and indefeasible title, or a valid leasehold interest in, or
otherwise has the valid right to use the real property and personal property
included in the Subject Assets, free and clear of all Liens, other than
Permitted Encumbrances.

     

    (ii)          Exhibit A correctly
describes all rights of way and easements included in the Subject Assets, which
shall be assigned by Seller to Buyer under special warranty
assignments.  Except as set forth in Schedule 4.1(n), (A)
the rights of way and easements disclosed in Exhibit A constitute
all of the easements, servitudes, rights of way, leases, licenses, and similar
agreements held by Seller relating to real property constituting parts of the
Subject Assets; (B) each right of way or easement disclosed in Exhibit A is valid
and binding and in full force and effect; (C) Seller is not in breach of or
default under, and to Seller’s knowledge, no other party to any such right of
way or easement is in breach of or default under, in any material respect, any
of the provisions of any such right of way or easement; (D) all rentals and
other payments due under such rights of way and easement have been paid; (E) the
consummation of the transactions contemplated by this Agreement and the
Transaction Agreements and the performance of the provisions hereof or thereof
will not constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation under, or give rise to
any loss of any benefit under, any such right of way; and (F) except as set
forth in Schedule
4.1(n)(ii)(F), such rights of way and easements cover the entire and
continuous length of the Hilltop Resort Gathering System as it exists and is
used today, and there are no spatial gaps in any of such rights of way or
easements and such rights of way and easements grant Seller the right to
construct, operate, maintain the Hilltop Resort Gathering System as it exists
and is used today in, over, and across the real property covered thereby, and to
receive, gather, and redeliver Seller’s gas from lands in the AMI (as such term
is defined in the Gas Gathering Agreement).

     

    (iii)         To
Seller’s knowledge, there are no condemnation or similar proceedings pending or
threatened against any of the Subject Assets.

    

    
      
        
           

        

        
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    (iv)         Except
as set forth in Schedule 4.1(n), to
the knowledge of Seller, the personal property, fixtures, and improvements
included in the Subject Assets are in good repair, working order and operating
condition in all material respects, ordinary wear and tear
excepted.

     

    (v)          To
Seller’s knowledge, no portion of the gathering system included in the Subject
Assets encroaches in any respect on property of others (other than encroachments
that would not materially impair the ownership or operation of the Subject
Assets).

     

    (vi)         Except
as set forth in Schedule 4.1(n), no
portion of the Subject Assets is subject to any preferential purchase rights or
purchase options.

     

    (o)          Permits. Schedule 4.1(o)
correctly describes each license, franchise, permit, certificate, approval, or
other similar authorization, excluding Environmental Permits of Seller or its
Affiliates, affecting, or relating in any way to, the Subject Assets (the “Permits”) together
with the name of the Governmental Authority issuing such
Permit.  Except as set forth on Schedule 4.1(o), (i)
each material Permit is valid and in full force and effect, (ii) Seller is not
in default, and no condition exists that with notice or lapse of time or both
would constitute a default, under any such Permits, (iii) no such Permit will be
terminated or impaired or become terminable, in whole or in part, as a result of
the transactions contemplated hereby or by the Transaction Agreements, and (iv)
to the knowledge of Seller, the Permits constitute all of the licenses,
franchises, permits, certificates, approvals, or other similar authorizations,
excluding Environmental Permits, used or necessary for the ownership and
operation of the Hilltop Resort Gathering System.

     

    (p)          Insurance
Coverage.  Seller has furnished to Buyer a list of, and true
and complete copies of, all insurance policies and fidelity bonds relating to
the ownership or operation of the Subject Assets.  There is no claim
by Seller pending under any of such policies or bonds as to which coverage has
been questioned, denied, or disputed by the underwriters of such policies or
bonds or in respect of which such underwriters have reserved their
rights.  All premiums payable under all such policies and bonds have
been timely paid and Seller has otherwise complied fully with the terms and
conditions of all such policies and bonds.  Such policies of insurance
and bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since November 1, 2008 and remain in full force
and effect.  Such policies and bonds are of the type and in amounts
customarily carried by Persons conducting operations similar to the operation of
the Subject Assets.  Seller does not know of any threatened
termination of, premium increase with respect to, or material alteration of
coverage under, any of such policies or bonds.  After Closing, Seller
shall continue to have coverage under such policies and bonds with respect to
events occurring prior to the Closing.

     

    (q)          Regulatory
Status.  No segment of the Subject Assets (i) has been acquired
through the use or threatened use of the power of eminent domain, or (ii) is
subject to regulation by (x) the Texas Railroad Commission as to the rates or
tariffs that can or must be charged or imposed or the services that can or must
be performed or (y) the Federal Energy Regulatory Commission as a natural gas
company under the Natural Gas Act or a Section 311 transporter under the Natural
Gas Policy Act of 1978.

     

    (r)           No Fraudulent
Transfer.  Neither Seller nor any of its Affiliates is
“insolvent” (and will not become “insolvent” as a result of consummation of the
transactions contemplated under this Agreement), and the Purchase Price
constitutes “reasonable equivalent value” and “fair consideration” for the
Subject Assets, in each case for the purposes of Section 548(a)(1)(B) of
the United States Bankruptcy Code or any other applicable fraudulent conveyance
or similar laws.

     

    (s)           Books and
Records.  The books and records necessary for the ownership and
operation of the Subject Assets are complete and correct in all material
respects and true, correct, and complete copies of such books and records have
been provided to Buyer.

    

    
      
        
           

        

        
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    (t)           Reserve Report and
Production.  The factual, non-interpretive production data, and
information (excluding interpretive data, projections, and estimates) supplied
by Seller and its Affiliates to the Reserve Engineers for purposes of preparing
the reserve report, dated June 30, 2009, of the proved natural gas and oil
reserve estimates of Seller and its Affiliates in Robertson and Leon Counties,
Texas was true and correct in all material respects on the date supplied. Such
factual, non-interpretive production data and information consisted
of:  a description of the producing wells connected to the Hilltop
Resort Gathering System; historical monthly and daily production data for such
wells; the net revenue interests and working interests of Seller and its
Affiliates in such wells; and the number of drilling rigs active as of the date
of the report.  Schedule 4.1(t) sets
forth the aggregate throughput data for the Hilltop Resort Gathering System
included in the Subject Assets for the month of September 2009.

     

    Section
4.2.          Representations and Warranties of
Buyer As of the
date hereof, Buyer represents and warrants to Seller as follows:

     

    (a)          Organization and
Qualification.  Buyer is a limited liability company, duly
formed, validly existing, and in good standing under the laws of the State of
Delaware and has the requisite power to carry on its business as it is now being
conducted.

     

    (b)          Qualification of
Buyer.  Buyer has the requisite limited liability company power
and authority required to carry on the business of owning and operating its
assets, as such business is now being conducted.  Buyer is qualified
to do business and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not be material to Buyer.

     

    (c)           Authority.  Buyer
has all requisite power and authority to execute and deliver this Agreement and
to perform its obligations under this Agreement.  The execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite action on the part
of Buyer.

     

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

     

    (e)           No Conflict or
Violation.  Neither the execution and delivery of this
Agreement or the Transaction Agreements nor the consummation of the transactions
and performance of the terms and conditions contemplated hereby or thereby by
Buyer (i) conflict with or result in a violation or breach of any provision of
the certificate of formation, regulations, or other similar governing documents
of Buyer or any agreement, indenture or other instrument under which Buyer is
bound or (ii) violate or conflict with any Law applicable to Buyer or the
properties or assets of Buyer.

     

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

     

    (g)           Actions.  There is
no Action (or any basis therefor) pending against Buyer, or to the knowledge of
Buyer threatened against Buyer, which could reasonably expected to have a
material adverse effect on Buyer or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Transaction Agreements.

     

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

    

    
      
        
           

        

        
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    Article
5

    Access
Before Closing

     

    Promptly
following the execution of this Agreement and until the Closing Date (or earlier
termination of this Agreement), Seller shall permit Buyer and its
representatives (i) to have reasonable access at reasonable times in Seller’s
offices to records relating to the Subject Assets, and (ii) subject to any
required consent of any third Person, to conduct at reasonable times and at
Buyer’s cost and expense, in the presence of representatives of Seller,
reasonable inspections (but excluding any ground water or soil sampling or any
other invasive testing of the Subject Assets including the real property upon
which the Subject Assets are located, unless such sampling or testing is
approved in advance in writing by Seller, which approval may be refused by
Seller in its sole discretion) of the Subject Assets. Buyer shall indemnify the
Seller Indemnified Parties from and against any and all Losses incurred or
suffered by any of the Seller Indemnified Parties as a result of Buyer’s and its
representatives’ access and inspections, except to the extent caused by the
intentional misconduct or gross negligence of the Seller Indemnified
Parties.

     

    Article
6

    Covenants
of Seller and Buyer

     

    Section
6.1.        Conduct of Business Pending Closing
From the
date hereof through the Closing, except as disclosed in Schedule 6.1 or as
otherwise consented to or approved by Buyer, such consent not to be unreasonably
withheld, delayed or conditioned, Seller covenants and agrees as provided
below.

     

    (a)         Changes in
Business.  From the date hereof until the Closing Date, Seller
shall operate the Subject Assets in the ordinary course consistent with past
practice and shall use its reasonable best efforts to preserve intact the
business organizations and relationships with third parties (including but not
limited to, suppliers, customers, and Governmental Authorities) and to keep
available the services of the present employees assigned to the operation of the
Subject Assets.  Without limiting the generality of the foregoing and
except as otherwise expressly set forth herein, from the date hereof until the
Closing Date, Seller shall not:

     

    (i)     
      make any material change in the conduct of
the business related to the Subject Assets; and

     

    (ii)           sell,
lease, or otherwise dispose of any of the Subject Assets, except (a) any Subject
Assets sold, leased, or otherwise disposed of in the ordinary course of business
consistent with past practice and (b) any Subject Assets having an individual
value not exceeding $20,000 and an aggregate value not exceeding
$100,000.

     

    (b)         No Liens.  Seller
shall not create any express lien or security interest on any Subject Assets,
except for Permitted Encumbrances created in the ordinary course of
business.

     

    (c)         Operation of
Assets.  Seller shall:

     

    (i)      
     cause the Subject Assets to be maintained and
operated in the ordinary course of business in accordance with Seller’s past
practices (including the repair or replacement of damaged, destroyed, obsolete,
depreciated, non-working or non-economical items of equipment or other personal
property and the investigation, monitoring and remediation of the Subject Assets
as required by Environmental Laws), maintain insurance now in force with respect
to the Subject Assets, and pay or cause to be paid all costs and expenses in
connection therewith promptly when due in the ordinary course of business in
accordance with Seller’s past practices;

    
       

      (ii)           duly
and timely file or cause to be filed all reports and returns required to be
filed with a Governmental Authority and timely pay all amounts due in connection
therewith, unless such amounts are being contested by Seller in good faith;
and

    

    

    
      
        
           

        

        
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    (iii)          cause
the value of the spare parts and inventory that are part of the Subject Assets
to be maintained at levels consistent with past practices, if
applicable.

     

    Section
6.2.         Public Announcements
Prior to
the Closing Date, without the prior written approval of the other party hereto
(which approval shall not be unreasonably withheld, delayed or conditioned), no
party hereto will issue, or permit any agent, representative, or Affiliate of it
to issue, any press releases or otherwise make, or cause any agent or Affiliate
of it to make, any public statements with respect to this Agreement, its
existence, or the transactions contemplated hereby, except where such release or
statement is deemed in good faith by the releasing party to be required by Law
or under the rules and regulations of any applicable public stock exchange on
which the shares of such party or any of its Affiliates are
listed.  In each case to which such exception applies, the releasing
party will use its reasonable efforts to provide a copy of such release or
statement to the other parties prior to releasing or making the
same.  After the Closing Date, to the extent permitted by Applicable
Law and under the rules and regulations of any applicable public stock exchange
on which the shares of a party or any of its Affiliates are listed, the parties
will confer with each other in advance regarding the respective initial public
announcements proposed to be made by the parties in connection with the
transactions contemplated hereby.

     

    Section
6.3.        Actions by Parties
Each
party agrees to use its reasonable best efforts to satisfy the conditions to
Closing set forth in Article 7 and take,
or cause to be taken, and do, or cause to be done, all things reasonably
necessary, proper, or advisable under applicable Laws to satisfy all of its
obligations hereunder, and to cause the transactions contemplated hereunder to
occur as soon as reasonably practicable, and to refrain from taking, or omit
from taking, any action within its reasonable control which would cause a breach
of a representation or warranty set forth herein.

     

    Section
6.4.         Further Assurances
Seller
and Buyer each agree that from time to time after the Closing Date it will
execute and deliver, or cause its respective Affiliates to execute and deliver,
such documents, certificates, instruments and other writings, and take (or cause
its respective Affiliates to take) such other actions, as may be necessary or
desirable to carry out the purposes and intents of this Agreement and to
consummate or implement expeditiously the transactions contemplated by this
Agreement and to vest in Buyer (or Buyer’s Affiliates) good and marketable title
to the Subject Assets.

     

    Section
6.5.         Records Buyer
agrees to maintain the Records until the fifth anniversary of the Closing Date,
or if any of the Records pertain to any claim or dispute pending on the fifth
anniversary of the Closing Date, Buyer shall maintain any of the Records
designated by Seller until such claim or dispute is finally resolved and the
time for all appeals has been exhausted.  Buyer shall provide Seller
and its representatives reasonable access to, and the right to copy the
applicable portion of, the Records for the purposes of:

     

    (i)    
       preparing and delivering any
accounting Records or reports provided for under this Agreement and adjusting,
prorating, and settling the charges and credits provided for in this
Agreement;

     

    (ii)           complying
with any Law affecting the Subject Assets prior to the Closing
Date;

     

    (iii)          preparing
any audit of the books and records of any third party relating to Subject Assets
prior to the Closing Date, or responding to any audit prepared by such third
parties;

     

    (iv)          preparing
Tax Returns;

     

    (v)           responding
to or disputing any Tax audit or otherwise dealing with any Tax matters;
or

     

    (vi)       
  asserting, defending, or otherwise dealing with any claim, dispute,
or Action under this Agreement or with respect to the Subject
Assets.

     

    In no
event shall Buyer or any of its Affiliates destroy any Records without giving
Seller sixty (60) days’ advance written notice thereof and the opportunity, at
Seller’s expense, to obtain such Records prior to their
destruction.

    

    
      
        
           

        

        
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    Section
6.6.         Certain Filings Seller and Buyer shall
cooperate with one another and assist each other: 

     

    (i)        
   in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals in connection with the consummation of the transactions contemplated
by this Agreement; and

     

    (ii)           in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers, including giving all notices to third parties and using
its reasonable best efforts to obtain all third party consents necessary,
proper, or advisable to consummate the transactions contemplated
hereunder.

     

    Section
6.7.         Regulatory Approvals If Buyer
or Seller decide that approval of a Governmental Authority is required to permit
Seller or Buyer to continue to use any Permits with respect to the Subject
Assets after Closing, Buyer and Seller shall, as promptly as practicable after
the date of this Agreement, cooperate in filing the required applications and
notices with the appropriate Governmental Authorities seeking authorization to
confirm Seller’s continued right to use such Permits or to transfer or assign
such Permits to Buyer (the “Regulatory
Approvals”) as necessary.  Each party agrees to use its
reasonable best efforts to obtain the Regulatory Approvals and the parties agree
to cooperate fully with each other and with all Governmental Authorities to
obtain the Regulatory Approvals at the earliest practicable date.

     

    Section
6.8.         Expenses And Revenues
Expenses.  To the extent there are any costs and expenses
attributable to the ownership or operation of the Subject Assets that have not
already been taken into  account in determining the Adjusted Purchase
Price, (i) Seller shall be entitled to be reimbursed by Buyer for any costs and
expenses paid by Seller for any period after the Closing Date and attributable
to the ownership or operation of the Subject Assets after the Closing Date;
provided, however, that Seller shall not be entitled to be reimbursed for any
Taxes paid by Seller under Article 11 hereof and
(ii) Buyer shall be entitled to be reimbursed by Seller for any costs and
expenses paid by Buyer for any period prior to the Closing Date and attributable
to the ownership or operation of the Subject Assets prior to the close of
business on the Closing Date.  Buyer and Seller agree to reimburse
each other for all such costs and expenses within ten (10) Business Days after
receipt from Buyer or Seller, as appropriate, of a notice of reimbursement
accompanied by written evidence of the underlying payment on account of such
costs and expenses.

     

    (b)     
   Revenues.  To the
extent there are any revenues, proceeds, and monies attributable to the
ownership or the operation of the Subject Assets that have not already been
taken into account in determining the Adjusted Purchase Price, (i) Buyer shall
be entitled to be reimbursed by Seller for any revenues, proceeds, and other
monies received by Seller attributable to the ownership or operation of the
Subject Assets after the Closing Date and (ii) Seller shall be entitled to be
reimbursed by Buyer for any revenues, proceeds, and other monies received by
Buyer attributable to the ownership or operation of the Subject Assets prior to
the close of business on the Closing Date.  To the extent that either
Buyer or Seller receives such revenue, proceeds and monies, Buyer and Seller
agree to promptly (within ten (10) Business Days) remit such proceeds to the
designated bank account of Seller or Buyer, as appropriate.

     

    Section
6.9.         Conveyance of Certain Excluded Assets
If Buyer obtains a right of way from the surface owner with respect to
the pipeline assets set forth on Exhibit B, Seller shall convey to Buyer all of
its right, title and interest in the relevant pipeline assets set forth on
Exhibit B. In the event that Buyer is unable to obtain any such right of way,
Seller hereby agrees to use commercially reasonable efforts to partially assign
to Buyer Seller’s surface rights under the oil and gas lease relating to such
pipeline assets, provided that (i) any such assignment shall not be a violation
of the oil and gas lease, (ii) any such assignment shall be non-exclusive and
only for the term of the Gas Gathering Agreement, (iii) the use of such surface
rights and pipeline assets shall be only as permitted by the oil and gas lease
and shall be limited to moving oil and gas produced from such lease, (iv) Buyer
shall be responsible for removing such pipeline assets at its sole cost if the
oil and gas lease terminates prior to the Gas Gathering Agreement and (v) Buyer
shall indemnify and hold Seller harmless against any and all Losses incurred by
any Seller Indemnified Party in connection with the granting of such assignment
or the use of such surface rights.

    

    
      
        
           

        

        
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    Section
6.10.       Certain Rights of Way
Seller
hereby agrees to acquire, in the name of Buyer, promptly after Closing and
except as set forth in the following sentence at no cost to Buyer, fully
recordable, paid-up, right of way instruments from the appropriate surface
owners to connect the gaps set forth on Schedule
4.1(n)(ii)(F).  In the event Seller is not able to recover from
Navasota and/or Presco their share of the costs incurred to satisfy Seller’s
obligation under this Section together with any costs associated with its
obligations under Section 6.11 to obtain certain consents (after the exercise of
its good faith efforts), Buyer shall promptly reimburse Seller for such
unrecovered amounts from Navasota and/or Presco (i.e., up to thirty percent
(30%) of the aggregate paid by Seller) in an aggregate amount not to exceed
$150,000 (the “Reimbursement
Obligation”). If Seller does not obtain fully recordable, paid-up, right
of way instruments from the appropriate surface owners to connect the gaps set
forth on Schedule
4.1(n)(ii)(F) within 90 days after the Closing Date, Buyer may acquire or
obtain such right of way instruments or, if such right of way instruments cannot
be acquired or obtained within forty-five (45) days, may seek other cure of such
defects (including obtaining alternative rights of way and construction of
alternative pipelines; provided that such pipelines are of substantially similar
size, quality and specifications), and, subject to the following sentence, such
cure costs to Buyer shall be deemed Losses subject to indemnification by Seller
pursuant to Section
9.2 in addition to any other Losses covered under Section
9.2.  In the event Seller is not able to recover from Navasota
and or/Presco their share of such costs after the exercise of its good faith
efforts, Buyer shall be responsible for the Reimbursement Obligation in respect
of such costs.

     

    Section
6.11.       Certain Consents Seller
shall use commercially reasonable efforts to obtain, promptly after Closing and
at no cost to Buyer, the consents set forth on Schedule
4.1(f).  In the event Seller does not obtain such consents
within 90 days, Buyer may seek to obtain such consents and, subject to the
following sentence, any costs to Buyer in obtaining such consents shall be
deemed Losses subject to indemnification by Seller pursuant to Section 9.2 in
addition to any other Losses covered under Section 9.2. In the
event Seller is not able to recover from Navasota and or/Presco their share of
such costs after the exercise of its good faith efforts, Buyer shall be
responsible for the Reimbursement Obligation in respect of such costs together
with costs incurred to satisfy Seller's obligation under Section
6.10.

     

    Article
7

    Closing
Conditions

     

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

     

    (a)           Representations, Warranties, and
Covenants.  (i) The representations and warranties of Buyer
contained in Section
4.2 of this Agreement and in any certificate or other writing delivered
by Buyer pursuant hereto shall be true and correct in all material respects on
and as of the Closing Date (after excluding the effect of any materiality
qualifications set forth in any such representation or warranty), and (ii) the
covenants and agreements of Buyer to be performed on or before the Closing Date
shall have been duly performed in all material respects in accordance with this
Agreement.

     

    (b)           Officer’s
Certificate.  Seller shall have received a certificate dated as
of the Closing Date, executed by a duly authorized officer of Buyer, to the
effect that the conditions set forth in Section 7.1(a) have
been satisfied and attaching evidence of the requisite corporate actions of
Buyer authorizing the execution, delivery and performance of this Agreement and
the Transaction Agreements and the transactions contemplated hereby and
thereby.

     

    (c)           Closing
Documents.  On or prior to the Closing Date, Buyer or its
Affiliates shall have executed and delivered, or be standing ready to execute
and deliver at Closing, all agreements, instruments, and other documents
required to be delivered by Buyer or its Affiliates under Section
8.3.

     

    (d)           No Action.  No
suit, action, or other proceeding shall be pending or threatened before any
court or Governmental Authority or body of competent jurisdiction seeking to
enjoin or restrain the consummation of the Closing or recover damages from
Seller or its Affiliates resulting therefrom and no written notice shall have
been received from any Governmental Authority indicating an intent to prevent,
materially delay, or restructure the transactions contemplated
hereunder.

     

    
      
        
           

        

        
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    (e)           Consents.  All
consents, waivers, authorizations, and approvals listed in Schedule 7.1(e) shall
have been obtained or waived on or before the Closing Date, in each case in form
and substance reasonably satisfactory to Seller.

     

    (f)           Other Regulatory
Approvals.  All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the Closing shall
have been taken, made or obtained.

     

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

     

    (a)           Representations, Warranties, and
Covenants.  (i) The representations and warranties of Seller in
Section 4.1 of
this Agreement and in any certificate or other writing delivered by Seller
pursuant hereto shall be true and correct in all material respects on and as of
the Closing Date (after excluding the effect of any materiality qualifications
set forth in any such representation or warranty), and (ii) covenants and
agreements of Seller to be performed on or before the Closing Date in accordance
with this Agreement shall have been duly performed in all material respects in
accordance with this Agreement.

     

    (b)           Officer’s
Certificate.  Buyer shall have received a certificate dated as
of the Closing Date, executed by a duly authorized officer of Seller, to the
effect that the conditions set forth in Section 7.2(a) have
been satisfied and attaching evidence of the requisite corporate actions of the
General Partner authorizing the execution, delivery and performance of this
Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby.

     

    (c)           Closing
Documents.  On or prior to the Closing Date, Seller shall have
executed and delivered, or be standing ready to execute and deliver at the
Closing, all agreements, instruments, and documents required to be delivered by
Seller under Section
8.2.

     

    (d)           No Action.  No
suit, action, or other proceeding shall be pending or threatened before any
court or Governmental Authority or body of competent jurisdiction seeking to
enjoin or restrain the consummation of the Closing or recover damages from Buyer
or any Affiliate of Buyer resulting therefrom and no written notice shall have
been received from any Governmental Authority indicating an intent to prevent,
materially delay, or restructure the transactions contemplated
hereunder.

     

    (e)           Consents.  All
consents, waivers, authorizations, and approvals set forth in Schedule 7.2(e) shall
have been obtained or waived on or before the Closing Date, in each case in form
and substance reasonably satisfactory to Buyer.

     

    (f)           Other Regulatory
Approvals.  All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the Closing shall
have been taken, made or obtained.

     

    (g)           Gas Gathering
Agreements.  Gastar shall have executed and delivered the Gas
Gathering Agreement and each of Navasota and Presco shall have executed and
delivered a separate gas gathering agreement in a form that is acceptable to
Buyer, and each such gas gathering agreement shall be in full force and
effect.

     

    (h)           Conveyances and Purchase and Sale
Agreements.  Gastar shall have conveyed a portion of the
Hilltop Resort Gathering System to each of Navasota and Presco, and each of
Navasota and Presco shall have executed and delivered a separate purchase and
sale agreement in a form that is acceptable to Buyer for the purchase and sale
of the portion of the Hilltop Resort Gathering System owned by each such party,
and each such purchase and sale shall be consummated concurrently with the
Closing.

    

    
      
        
           

        

        
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    Article
8

    Closing

     

    Section
8.1.         Closing The
Closing shall be held on the Closing Date at 10:00 a.m., Houston time, at the
offices of Andrews Kurth LLP at 600 Travis Street, Suite 4200, Houston, Texas,
77002 or at such other time or place as Seller and Buyer may otherwise agree in
writing.

     

    Section
8.2.         Seller’s Closing Deliverables
At
Closing, Seller shall execute and deliver, or cause to be executed and
delivered, to Buyer the following:

     

    (i)           the
assignment agreement and bill of sale in substantially the form of Exhibit 8.2(i) (the
“Assignment and Bill
of Sale”) and such other conveyance and transfer instruments under which
the Subject Assets will be assigned and transferred to Buyer;

     

    (ii)          the
officer’s certificates referred to in Section
7.2(b);

     

    (iii)         a
non-foreign affidavit, as such affidavit is referred to in Section 1445(b)(2) of
the IRC, in form attached hereto as Exhibit 8.2(iii),
dated as of the Closing Date; and

     

    (iv)         the
Gas Gathering Agreement.

     

    Section
8.3.         Buyer’s Closing Deliverables
At
Closing, Buyer shall deliver, or cause to be delivered, the Estimated Adjusted
Purchase Price and the Closing Property Tax Payment to Seller in immediately
available funds to the bank account as provided in Section 3.2, and
Buyer shall execute and deliver, or cause to be executed and delivered, to
Seller the following:

     

    (i)           the
Assignment and Bill of Sale executed by Buyer;

     

    (ii)          the
officer’s certificate of Buyer referred to in Section 7.1(b);
and

     

    (iii)         the
Gas Gathering Agreement.

     

    Article
9

    Indemnification

     

    Section
9.1.         Indemnification by Buyer
From and
after the Closing Date, Buyer shall indemnify and hold harmless Seller, its
Affiliates, and its and their directors, officers, employees, representatives,
agents, successors, and permitted assigns (collectively, the “Seller Indemnified
Parties”) from and against any and all Losses incurred or suffered by any
of Seller Indemnified Parties (i) for any breach of Buyer’s representations or
warranties made in this Agreement and (ii) for any breach of the covenants or
obligations made or to be performed by Buyer under this Agreement.

     

    
      
        
           

        

        
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    Section
9.2.      Indemnification by Seller
From and after the Closing Date, Seller shall indemnify and hold harmless
Buyer, its Affiliates, and its and their directors, officers, employees,
representatives, agents, successors, and permitted assigns (collectively, the
“Buyer Indemnified
Parties”) from and against any and all Losses incurred or suffered by any
of Buyer Indemnified Parties (i) for any breach of Seller’s representations or
warranties made in this Agreement, (ii) for any breach of the covenants or
obligations made or to be performed by Seller and its Affiliates pursuant to
Section 2.3,
(iii) for any breach of the remaining covenants or obligations made or to be
performed by Seller and its Affiliates under this Agreement, (iv) for the
Excluded Liabilities and (v) relating to connecting the gaps in the pipeline set
forth in Section
4.1(n)(ii)(F) or obtaining the consents set forth on Schedule 4.1(f)
(other than Losses that are subject to the Reimbursement Obligation if
applicable) or the ownership, operation, maintenance or other use of the
applicable Subject Assets prior to the acquisition of right of way instruments
connecting such gaps or obtaining such consents.  Notwithstanding
anything in this Agreement to the contrary, Seller shall not be required to
indemnify any Buyer Indemnified Party pursuant to clause 9.2(i) or
(ii) (a) unless
and only to the extent the aggregate of all Losses for which Seller would be
liable under clause
9.2(i) or (ii) exceeds one
percent (1%) of the Purchase Price, and (b) to the extent Losses for which
Seller would be liable under clause 9.2(i) or
(ii) exceed
$3,500,000 in the
aggregate; provided, that, such limitations shall not apply to Losses incurred
or suffered for any breach of the representations and warranties contained in
Section 4.1(c)
(Authority), Section
4.1(d) (Enforceability), Section 4.1(i)
(Brokerage Fees and Commissions), or Section 4.1(m) (Tax
Matters). Notwithstanding anything in this Agreement to the contrary, with
respect to Losses relating to the Hilltop Resort Gathering System (other than
Losses described in Section 9.2(v)), Seller’s liability to Buyer pursuant to
this Agreement shall be limited to a proportionate share of such Losses equal to
the proportionate interest in the Hilltop Resort Gathering System conveyed by
Seller to Buyer.

     

    Section
9.3.       Third Party Claims
If a
claim by a third party a (“Third Party Claim”)
is made against a Seller Indemnified Party or a Buyer Indemnified Party (an
“Indemnified
Party”), and if such party intends to seek indemnity with respect thereto
under Section
9.1 or Section
9.2, such Indemnified Party shall promptly furnish written notice to the
indemnifying party (the “Indemnitor”) of such
claims.  The Indemnitor shall have thirty (30) days after receipt of
such notice to undertake, conduct, and control (through counsel of its own
choosing and at its own expense) the defense thereof.  If the
Indemnitor elects to undertake the defense of any Third Party Claim, the
Indemnified Party shall cooperate with it in connection therewith; provided that
the Indemnitor shall not settle any such Third Party Claim without the prior
written consent of the Indemnified Party (which consent will not be unreasonably
withheld or delayed) unless the relief consists solely of money damages and
includes a provision whereby the plaintiff or claimant in the matter releases
Buyer Indemnified Parties or Seller Indemnified Parties, as applicable, from all
liability with respect thereto.  The Indemnitor shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by such Indemnified Party (however, the fees and expenses of such counsel
shall be borne by such Indemnified Party except if (i) the Indemnified Party
shall have determined reasonably and in good faith that an actual or potential
conflict of interest makes representation by the same counsel or the counsel
selected by the Indemnitor inappropriate or (ii) the Indemnitor shall have
authorized the Indemnified Party to employ separate legal counsel at the
Indemnitor’s expense).  So long as the Indemnitor, at Indemnitor’s
cost and expense, (i) has undertaken the defense of such claim, (ii) is
reasonably contesting such claim in good faith, by appropriate proceedings, and
(iii) has taken such action (including the posting of a bond, deposit, or other
security) as may be necessary to prevent any action to foreclose a lien against
or attachment of the property of the Indemnified Party for payment of such
claim, the Indemnified Party shall not pay or settle any such
claim.  If within thirty (30) days after the receipt of the
Indemnified Party’s notice of a claim of indemnity hereunder, the Indemnitor
does not notify the Indemnified Party that it elects (at Indemnitor’s cost and
expense) to undertake the defense thereof or gives such notice and thereafter
fails to contest such claim in good faith or to prevent action to foreclose a
lien against or attachment of the Indemnified Party’s property as contemplated
above, the Indemnified Party shall have the right to contest but shall not
settle and/or compromise the claim and, to the extent the actions taken by the
Indemnified Party in settling or compromising such claim are reasonable and in
good faith, the Indemnified Party shall not thereby waive any right to indemnity
therefor pursuant to this Agreement.

     

    Section
9.4.      Survival The representations
and warranties of the parties in this Agreement or in any certificate or other
writing delivered in connection herewith shall survive until eighteen (18)
months after the Closing; provided, that the representations and warranties
contained in Section
4.1(m) (Tax Matters) shall survive the Closing until thirty (30) days
after the expiration of the applicable statute of limitations (including any
extensions thereof).  The covenants and agreements contained herein
shall expire as of the Closing Date; provided that agreements or covenants in
this Agreement that by their terms contemplate performance after Closing shall
survive until performed in full.

     

    Section
9.5.      Purchase Price Adjustment Any
amount paid by Seller or Buyer under this Article 9 will be
treated as an adjustment to the Purchase Price.

     

    Section
9.6.      Exclusive Remedy Except as
otherwise provided in Article 5, after the
Closing Date, the remedies provided in this Article 9 shall be
the sole and exclusive remedies hereunder for any breach hereof, and shall
preclude assertion by an Indemnified Party of any other rights or the seeking of
any and all other remedies against an Indemnifying Party for claims for breach
hereof, whether arising in contract, tort or otherwise.

     

    
      
        
           

        

        
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    Section
9.7.        Disclaimers BUYER
ACKNOWLEDGES AND AGREES THAT BUYER IS EXPERIENCED IN THE OWNERSHIP AND OPERATION
OF PROPERTIES SIMILAR TO THE SUBJECT ASSETS AND THAT BUYER PRIOR TO THE CLOSING
DATE WILL HAVE INSPECTED THE SUBJECT ASSETS TO ITS SATISFACTION AND IS QUALIFIED
TO MAKE SUCH INSPECTION.  WITHOUT LIMITING ANY OF SELLER’S
REPRESENTATIONS IN THIS AGREEMENT OR THE OTHER TRANSACTION AGREEMENTS, BUYER
ACKNOWLEDGES THAT IT IS FULLY RELYING ON BUYER’S (OR BUYER’S REPRESENTATIVES’)
INSPECTIONS, EXAMINATIONS AND EVALUATIONS OF THE SUBJECT ASSETS AND NOT UPON ANY
STATEMENTS (ORAL OR WRITTEN) WHICH MAY HAVE BEEN MADE OR MAY BE MADE (OR
PURPORTEDLY MADE) BY SELLER OR ANY OF ITS REPRESENTATIVES.  BUYER
ACKNOWLEDGES THAT BUYER HAS (OR BUYER’S REPRESENTATIVES HAVE), OR PRIOR TO THE
CLOSING DATE WILL HAVE, THOROUGHLY INSPECTED AND EXAMINED THE SUBJECT ASSETS TO
THE EXTENT DEEMED NECESSARY BY BUYER IN ORDER TO ENABLE BUYER TO EVALUATE THE
CONDITION OF THE SUBJECT ASSETS AND ALL OTHER ASPECTS OF THE SUBJECT ASSETS
(INCLUDING, BUT NOT LIMITED TO, THE ENVIRONMENTAL CONDITION OF THE SUBJECT
ASSETS), AND BUYER ACKNOWLEDGES THAT BUYER IS RELYING SOLELY UPON ITS OWN (OR
ITS REPRESENTATIVES’) INSPECTION, EXAMINATION AND EVALUATION OF THE SUBJECT
ASSETS (EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE OTHER TRANSACTION
AGREEMENTS).  AS A MATERIAL PART OF THE CONSIDERATION FOR THIS
AGREEMENT AND THE PURCHASE, BUYER HEREBY AGREES TO ACCEPT THE SUBJECT ASSETS ON
THE CLOSING DATE IN ITS AS-IS, WHERE-IS CONDITION, WITH ALL FAULTS AND DEFECTS
(KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND WITHOUT
REPRESENTATIONS AND WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OR ARISING BY
OPERATION OF LAW, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS,
FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS
OF ANY ASSETS, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE OTHER
TRANSACTION AGREEMENTS. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, THE PROVISIONS OF THIS SECTION 9.7 SHALL
SURVIVE THE CLOSING.

     

    Section
9.8.        Waiver EACH PARTY HEREBY
AGREES THAT THE OTHER PARTY SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT,
INDIRECT, CONSEQUENTIAL, OR OTHER DAMAGES) RESULTING OR ARISING FROM OR RELATED
TO THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT OR THE SUBJECT ASSETS OR
THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR OR OPERATION
THEREOF.  EXCEPT ONLY AS MAY BE DIRECTLY AND PROXIMATELY CAUSED BY ANY
BREACH BY SELLER OF ITS REPRESENTATIONS AND WARRANTIES PROVIDED IN THIS
AGREEMENT OR THE OTHER TRANSACTION AGREEMENTS, BUYER EXPRESSLY RELEASES AND
AGREES NOT TO SUE ANY OF THE SELLER INDEMNIFIED PARTIES FOR (TO THE EXTENT
ALLOWED BY APPLICABLE LAW) ANY CLAIMS UNDER FEDERAL, STATE OR OTHER LAW
(INCLUDING, BUT NOT LIMITED TO COMMON LAW, WHETHER SOUNDING IN CONTRACT OR TORT,
AND ANY AND ALL ENVIRONMENTAL LAWS) THAT BUYER MIGHT OTHERWISE HAVE OR LATER
ACQUIRE AGAINST SELLER INDEMNIFIED PARTIES RELATING TO THE USE, CHARACTERISTICS
OR CONDITION OF THE SUBJECT ASSETS.  NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, THE PROVISIONS OF THIS SECTION 9.8 SHALL
SURVIVE THE CLOSING.

     

    Article
10

    Termination

     

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

     

    (i)           by
Buyer, as provided in Section
12.4;

     

    
      
        
           

        

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

     

    (iii)           if
the Closing has not occurred by the close of business on December 1, 2009, then
(a) by Seller if any condition specified in Section 7.1 has not
been satisfied on or before such close of business, and shall not theretofore
have been waived in writing by Seller, or (b) by Buyer if any condition
specified in Section
7.2 has not been satisfied on or before such close of business, and shall
not theretofore have been waived in writing by Buyer; provided, in each case,
that the failure to consummate the transactions contemplated hereby on or before
such date did not result from the failure by the party or parties or its
Affiliates seeking termination of this Agreement to fulfill any undertaking or
commitment provided for herein on the part of such party or parties that is
required to be fulfilled on or prior to Closing.

     

    Section
10.2.       Effect of Termination
In the
event of termination of this Agreement by Seller or Buyer under Section 10.1, written
notice thereof shall forthwith be given by the terminating Party to the other
Party, and this Agreement shall thereupon terminate; provided that each Party
shall remain liable for any material breach by such Party of this Agreement
prior to the date of termination.  Following such termination, the
provisions of this Section 10.2, Section 12.2, and
Section 12.6
shall survive any termination hereof.  If this Agreement is terminated
as provided herein all filings, applications, and other submissions made to any
Governmental Authority shall, to the extent practicable, be withdrawn from the
Governmental Authority to which they were made.

     

    Article
11

    Taxes

     

    Section
11.1.        Allocation of Taxes Transfer Taxes.  Any Transfer Taxes incurred in connection with the
transactions contemplated by this Agreement shall be borne by
Buyer.

     

    (b)           Property
Taxes.  Property Taxes for any taxable period in which the
Closing Date occurs shall be prorated between Seller and Buyer on a per diem
basis (with Seller liable for the Property Taxes for the portion of the taxable
period prior to November 1, 2009 (the “Pre-Closing Tax
Period”) and Buyer liable for the Property Taxes for the portion of the
taxable period beginning on November 1, 2009 (the “Post-Closing Tax
Period”)).  Not later than five (5) days prior to the Closing
Date, Seller shall deliver to Buyer Seller’s calculation of the portion of the
Property Taxes owed to each Governmental Authority for the Post-Closing Tax
Period (in the aggregate, the “Closing Property Tax
Payment”) and any Tax bills or other information supporting such
calculation.  At the Closing, Buyer shall pay to Seller the Closing
Property Tax Payment. Seller shall pay or cause to be paid to the appropriate
Governmental Authorities the Property Taxes relating to the tax period in which
the Closing Date occurs.  To the extent any Property Taxes imposed on
or with respect to the Subject Assets for a taxable period that contains the
Closing Date are not finally determined as of the Closing Date, the prorated
Property Taxes shall be calculated by multiplying (i) the Property Tax appraised
values for the current taxable period, if determined as of Closing Date, or the
Property Tax appraised values for the immediately preceding taxable period if
such values have not been determined for the current taxable period as of
Closing Date, by (y) the Property Tax rates for the relevant taxing units in
which the Subject Asset are located for the current taxable period if such rates
have been determined or, to the extent such Tax rates have not been determined,
the Tax rates for the immediately preceding taxable period.  Upon
receipt of the Property Tax bills for the taxable period that contains the
Closing Date, Seller shall calculate the prorated Property Taxes and shall bill
Buyer for the amount, if any, by which Buyer’s prorated Property Taxes for the
Post-Closing Tax Period exceed the estimated amount of Buyer’s prorated Property
Taxes for the Post-Closing Tax Period paid at Closing, with Buyer making such
payment within twenty (20) days of receipt of such bill, or shall refund to
Buyer within twenty (20) days the amount, if any, by which Buyer’s prorated
Property Taxes for the Post-Closing Tax Period are less than the estimated
amount of Buyer’s prorated Property Taxes for the Post-Closing Tax Period paid
at Closing.  Buyer shall promptly forward to Seller any Property Tax
bills for the taxable period that contains the Closing Date that are received by
Buyer.

    

    
      
        
           

        

        
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    (c)           Allocation of Other
Taxes.  Except as set forth in Section 11.1(a) and
(b), Seller
shall be responsible for all Taxes imposed on or with respect to the Subject
Assets that are attributable to any whole or partial taxable period before
November 1, 2009, and Buyer shall be responsible for all Taxes imposed on or
with respect to the Subject Assets that are attributable to any whole or partial
taxable period on or after November 1, 2009.

     

    Section
11.2.       Cooperation Buyer and
Seller will cooperate with each other and with each other’s respective agents,
including accounting firms and legal counsel, in connection with the preparation
or audit of any Tax Return or report and any Tax claim or litigation in respect
of the Subject Assets that include whole or partial taxable periods, activities,
operations, or events on or prior to the Closing Date, which cooperation shall
include, but not be limited to, making available during normal business hours
employees, if any, or original documents, or either or both of them, for the
purpose of providing testimony and advice (the cost of which shall be borne by
the requesting party).  In the event of a contest with a Tax authority
regarding Taxes relating to the Subject Assets for which Seller is wholly
responsible hereunder, Seller shall have the right to control the contest;
provided, however that Seller shall not settle any such contest in a manner that
would materially adversely affect the Subject Assets or Buyer for any tax period
after the Closing Date.  In a contest with a Tax authority regarding
Taxes related to the Subject Assets for which Seller and Buyer are jointly
responsible hereunder, Seller and Buyer shall jointly control the contest in
good faith with each other.  Reasonable out-of-pocket expenses with
respect to such contests shall be borne by the parties pro-rata in accordance
with their responsibility for such Taxes as set forth in this
Agreement.

     

    Article
12

    Other
Provisions

     

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

     

    Section
12.2.       Governing Law This
Agreement and the respective rights and obligations of the parties to this
transaction shall be governed by, interpreted, and enforced in accordance with
the laws of the State of Texas.

     

    Section
12.3.        Arbitration Agreement to
Arbitrate.  Any claim, counterclaim, demand, cause of action,
dispute, or any other controversy arising out of or relating in any way to this
Agreement, the subject matter of this Agreement, or the relationship between the
Parties created by this Agreement (each a “Dispute”), shall be
resolved by binding arbitration in accordance with the terms of this Section
12.3.  A Dispute must be resolved through arbitration
regardless of whether the Dispute involves claims that the Agreement is
unlawful, unenforceable, void, or voidable or involves claims sounding in tort,
contract, statute or common law.  The validity, construction and
interpretation of this agreement to arbitrate, and all other procedural aspects
of the arbitration conducted pursuant hereto, shall be decided by the arbitral
tribunal.

     

    (b)           Rules and Applicable
Law.  Any arbitration of a Dispute shall be administered by the
American Arbitration Association (“AAA”) and conducted
in accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in
existence at the time of the arbitration.  In resolving any Dispute,
the arbitral tribunal shall refer to the governing law as specified in Section 12.2,
provided that legal issues relating to arbitration procedure or the scope or
enforceability of the arbitration agreement shall be governed by the Federal
Arbitration Act.  The arbitral tribunal shall not be empowered to
award exemplary, punitive, indirect, consequential, remote, speculative, treble,
multiple or special damages, and the Parties waive any right they may have to
recover such damages from one another.

     

    (c)           Location of the
Proceeding.  The seat (or legal place) and venue of the
arbitration shall be in Houston, Texas.

     

    (d)           Parties.  This
Section 12.3
shall apply to any Dispute between the Parties, and it shall also apply to any
(a) Dispute between a Party and any Affiliate of the other Party, (b) Dispute
between a Party and any officer, director, employee, representative, agent,
successor or assign of the other Party or of an Affiliate of such other Party,
(c) Dispute between an Affiliate of one Party and an Affiliate of the other
Party, and (d) Dispute between an Affiliate of a Party and an officer, director,
employee, representative, agent, successor or assign of the other Party or of an
Affiliate of the other Party.  With regard to any Dispute, the
Affiliates of the Parties and the officers, directors, employees,
representatives, agents, successors and assigns of the Parties, and their
Affiliates, are intended third party beneficiaries of the agreement to arbitrate
set out in this Section
12.3.

    

    
      
        
           

        

        
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    (e)           Selection of the Arbitral
Tribunal.  The Dispute shall be decided by a panel of three
neutral arbitrators.  The claimant shall nominate an arbitrator at the
time it serves its request for arbitration.  The respondent shall
nominate an arbitrator at the time it serves its response to the request for
arbitration.  If a Party fails to appoint an arbitrator, then that
arbitrator shall be appointed in accordance with the Rules.  The two
arbitrators shall together agree upon a third arbitrator to recommend to the AAA
to chair the arbitration.  If the two party-appointed arbitrators are
unable to agree upon an arbitrator within fifteen (15) days of the respondent’s
appointment of an arbitrator, then the chairman shall be chosen according to the
Rules.

     

    (f)           Interim Measures and Provisional
Remedies. The arbitral tribunal is authorized to award interim measures,
provisional remedies or injunctive relief, which may be enforced by the arbitral
tribunal or by a court of law.  In the event of an emergency or if one
of the arbitrators is unavailable, then the chairman is authorized to award
interim measures or injunctive relief, which may upon the request of a Party be
reviewed by the entire arbitral tribunal.

     

    (g)           The Award.  The
award shall be final and binding.  The award shall be required to be
in writing, stating the award and the reasons therefor.

     

    (h)           Enforcement of Award by a
Court.  Any arbitration award may be enforced by the courts
sitting in Houston, Texas or any other court of competent subject matter
jurisdiction (including any jurisdiction in which a Party holds or keeps
assets).  The Parties further agree that any action to challenge,
vacate or set aside the Award in whole or in part must be brought in the courts
sitting in Houston, Texas.  The Parties agree to waive any objections
they may have to personal jurisdiction, venue, or forum non-conveniens for any
action brought to enforce the award in the courts sitting in Houston, Texas or
any other jurisdiction where a Party holds or keeps assets.

     

    (i)           Costs and Attorneys
Fees.  The arbitral tribunal is authorized to award costs of
the arbitration in its award and to allocate costs between the Parties,
including (a)  the fees and expenses of the arbitrators; (b) the costs
of assistance required by the tribunal, including the fees and expenses of its
experts; (c) the fees and expenses of the AAA; (d)  the reasonable
costs for legal representation of a successful Party, including attorneys’ fees,
expert witness fees, out of pocket costs and other expenses; and (e) any such
costs incurred in connection with an application for interim or emergency
measures.

     

    (j)           Severability.  If
any provision of this arbitration provision is found by a court to be
unenforceable or unlawful, then it shall be severed from this Agreement and the
remaining terms shall be enforced as written.

     

    Section
12.4.       Casualty Loss Prior to
Closing Non-Material
Casualty.  If, prior to Closing, any part of the Subject Assets
is damaged or destroyed by fire, flood, storm, or other casualty, are taken in
condemnation or under the right of eminent domain or proceedings for such
purposes are pending or threatened (a “Casualty”), if in
Buyer’s reasonable good faith estimation the amount of aggregate damage caused
by one or more Casualties does not exceed $1,000,000 (the “Casualty Threshold”),
Buyer shall proceed to purchase the Subject Assets and, at Seller’s election,
either (i) the Purchase Price shall be reduced by the amount of the repair or
replacement cost thereof, as applicable, of the damaged or destroyed Subject
Assets or (ii) Seller shall diligently proceed to make the applicable repairs or
restoration at Seller’s sole cost and expense.

     

    (b)           Material
Casualty.  If, prior to Closing, any part of the Subject Assets
is damaged or destroyed by a Casualty and the amount of aggregate damage caused
by one or more Casualties exceeds the Casualty Threshold, Seller shall promptly
notify Buyer of such Casualty.  Buyer will then have a right to
terminate this Agreement by written notice to Seller.  If Buyer does
not elect to so terminate this Agreement, Buyer shall proceed to purchase the
Subject Assets, and the Purchase Price shall be reduced by the repair cost or
replacement cost, as applicable, of such damaged or destroyed Subject
Assets.  All repair and replacement costs shall be determined jointly
by Seller and Buyer.

     

    
      
        
           

        

        
          Page
20

          
            

          

        

        
           

        

      

    

     

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

     

    Section
12.6.   Expenses Except as otherwise
provided herein, all other costs and expenses incurred by each party hereto in
connection with all things required to be done by it hereunder, including
attorney’s fees, accountant fees and the expense of environmental and title
examination, shall be borne by the party incurring such costs and
expenses.

     

    Section
12.7.    Notices All notices hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, by United States Mail, telecopy, telefax, or other
electronic transmission service to the appropriate address or number as set
forth below.  Notices to Seller shall be addressed as
follows:

     

    Gastar
Exploration Ltd.

    1331
Lamar, Suite 1080

    Houston,
Texas 77010

    Attention:  Mr.
Michael Gerlich

    Telecopy
No.: (713) 739-0458

     

    or at
such other address and to the attention of such other Person as Seller may
designate by written notice to Buyer.  Notices to Buyer shall be
addressed to:

     

    Hilltop
Resort GS, LLC

    500 North
Capital of Texas Highway

    Building
#3, Suite 100

    Austin,
Texas 78746

    Attention:  President

    Telecopy
No.:  (512) 328-9410

     

    or at
such other address and to the attention of such other Person as Buyer may
designate by written notice to Seller.

     

    Section
12.8.    Successors and Assigns This
Agreement shall be binding upon and inure to the benefit of the Parties and
their successors and permitted assigns.  Neither Buyer nor Seller may
assign any of its rights or obligations under this Agreement without the prior
consent of the other; provided that Buyer may assign any or all of its rights
and interests hereunder to one or more of its Affiliates or designate one or
more of its Affiliates; provided further that Buyer shall remain liable for its
obligations hereunder.  Seller will execute and deliver such documents
or instruments as may be reasonably requested by Buyer to effectuate any such
assignment. Any such assignment in violation of this Section 12.8 shall be
void and of no force or effect.

     

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

     

    Section
12.10.   Appendices, Schedules and Exhibits
All Appendices, Schedules, and Exhibits hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such
reference.

    

    
      
        
           

        

        
          Page
21

          
            

          

        

        
           

        

      

    

    

    Section
12.11.     Interpretation and Rules of
Construction This Agreement shall not be construed against any party, and
no consideration shall be given or presumption made, on the basis of who drafted
this Agreement or any particular provision hereof or who supplied the form of
Agreement.  Each party agrees that this Agreement has been
purposefully drawn and correctly reflects such party’s understanding of the
transaction that it contemplates.  In construing this
Agreement:

     

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

     

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

     

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

     

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

     

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

     

    Section
12.12.      Agreement for the Parties’ Benefit
Only Except as specified in Article 9, which are
also intended to benefit and to be enforceable by any of the indemnified parties
under Article
9, this Agreement is not intended to confer upon any Person not a party
hereto any rights or remedies hereunder, and no Person, other than the parties
hereto or the indemnified parties is entitled to rely on any representation,
warranty, covenant, or agreement contained herein.  In each case, such
third party beneficiary may only bring suit against the defaulting party or
parties.

     

    Section
12.13.     Severability If any term or
other provision of this Agreement is invalid, illegal, or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any adverse manner to any party.  Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.

     

    
      
        
           

        

        
          Page
22

          
            

          

        

        
           

        

      

    

     

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

     

    [Signature
pages follow.]

     

    
      
        
           

        

        
          Page
23

          
            

          

        

        
           

        

      

    

     

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

     

    
      
        
          
            
              
                	
                        Seller:

                      
	 
      
	
                        GASTAR
      EXPLORATION TEXAS, LP

                      
	 
      
	
                        BY:
      GASTAR EXPLORATION TEXAS LLC, its general partner

                      
	 
      	 
      
	
                        By:

                      	
                        /s/
      Michael
      A. Gerlich

                      
	Name: 
      Michael
      A. Gerlich
	Title:   
      Secretary
      and
Treasurer

              

            

          

        

      

    

    

    Signature
Page to Purchase and Sale Agreement – Gastar and Hilltop

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    
      
        	
                Buyer:

              
	 
      
	
                HILLTOP
      RESORT GS, LLC

              
	 
      	 
      
	
                By:

              	
                /s/ Gilbert
      Burciaga__________________

              
	
                Name: 
      Gilbert Burciaga

              
	
                Title:
      Chief Executive Officer

              

      

    

     

    Signature
Page to Purchase and Sale Agreement – Gastar and Hilltop

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    APPENDIX
A

    TO

    PURCHASE
AND SALE AGREEMENT

    DEFINITIONS

     

    “AAA” is defined in
Section
12.3(b).

     

    “Action” means any
action, suit, proceeding, investigation, condemnation, or audit by or before any
court or other Governmental Authority or any arbitration
proceeding.

     

    “Adjusted Purchase
Price” is defined in Section
3.1.

     

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

     

    “Agreed Rate” means an
annual rate of interest equal to the lesser of (i) the interest rate that is
publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime
rate and (ii) the maximum rate of interest allowed from time to time by
Law.

     

    “Agreement” is defined
in the preamble.

     

    “Arbitrator’s Closing
Statement” is defined in Section
3.3(b).

     

    “Assets” means all of
Seller’s right, title and interest to:

     

    (i)           the
easements, rights of way, servitudes, licenses, permits, other real property
rights and similar instruments owned or held by Seller or its Affiliates in
connection with the Hilltop Resort Gathering System, including but not limited
to the pipeline system and related facilities located thereon, all as more fully
described in Exhibit A;

     

    (ii)          all
equipment, personal property, fixtures and other improvements held for use or
used by Seller or its Affiliates in connection with the Hilltop Resort Gathering
System, whether owned or leased, including all pipes, valves, compressors,
meters, machinery, pumps, dehydrators, towers, liquids extractors, storage
tanks, storage sheds, pump houses, instrumentation, and other equipment and
facilities, in each case including those listed on Exhibit
A;

     

    (iii)         all
Permits;

     

    (iv)      
  supplies, inventory, and other spare parts and materials used or
held for use in connection with the Hilltop Resort Gathering
System;

     

    (v)         
all existing financial, operating, Tax, environmental, safety, marketing and
other data, files, computer tapes, discs, papers, books and records of Seller to
the extent relating to the Hilltop Resort Gathering System, in Seller’s
possession or control, including deeds, property records, title policies, maps,
charts, surveys, permits, certificates, filings with Governmental Authorities,
reports, process safety management records and records regarding the
construction, maintenance and testing of the Subject Assets, together with
copies of budgets, journals, ledger and customer and supplier lists; provided
that this shall not include any personnel or employment records;

    
       

      
        Appendix
A to

        Purchase
and Sale Agreement

        Page
1

      

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    (vi)    
    all of Seller’s rights, claims, credits, causes of
action, or rights of set-off against third parties relating to the
Assets.

     

    “Assignment and Bill of
Sale” is defined in Section
8.2(i).

     

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

     

    “Buyer” is defined in
the preamble.

     

    “Buyer Indemnified
Parties” is defined in Section
9.2.

     

    “Casualty” is defined
in Section
12.4(a).

     

    “Casualty Threshold”
is defined in Section
12.4(a).

     

    “Closing” means the
consummation of the transaction contemplated by Article
8.

     

    “Closing Date” means
the first day of the month following the date on which the conditions to Closing
in Article 8
are either satisfied or waived by the Party entitled to waive such conditions,
or such other date mutually agreed to by Seller and Buyer.

     

    “Closing Property Tax
Payment” is defined in Section
11.1(b).

     

    “Closing Statement” is
defined in Section
3.2.

     

    “Closing Statement
Arbitrator” is defined in Section
3.3(b).

     

    “Code” means the
Internal Revenue Code of 1985, as amended from time to time and the regulations
promulgated thereunder.

     

    “Dispute” is defined
in Section
12.3(a).

     

    “Dedicated Properties”
means the oil and gas leases and other interests described in Exhibit
C.

     

    “Environmental Laws”
means any and all applicable Laws, judgments or legally enforceable directives
of any Governmental Authority with lawful jurisdiction over the Subject Assets
and relating to: (i) pollution, protection of the environment (including air,
water and land), natural resources or human health and safety (but only to the
extent that human health and safety relate to exposure to Hazardous Materials);
and (ii) generation, processing, use, distribution, handling, treatment,
storage, disposal, transportation, or release, of Hazardous
Materials.  “Environmental Laws”
shall include the Clean Air Act, 42 U.S.C. § 7401 et seq., the Resource
Conservation Recovery Act, 42 U.S.C. § 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. § 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. §
300f et seq., and the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. § 9601 et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. §§11001 et seq., and the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. §§136 et seq, each as amended and in effect as of the
Closing Date and all related regulations or legally enforceable formal
governmental interpretations thereof.

     

    “Environmental
Liabilities” means any and all costs (including, but not limited to,
remediation and monitoring costs), damages, liabilities, monetary settlement
amounts, expenses, penalties, fines, prejudgment and post-judgment interest,
court costs and reasonable attorneys’ fees (i) pursuant to any order, notice of
violation, legally enforceable directive, injunction, judgment, or settlement by
any Governmental Authority to the extent arising under Environmental Laws, (ii)
pursuant to any claim, demand or cause of action brought by a Governmental
Authority or other third Person for personal injury, property damage, damage to
natural resources, or remedial obligations pursuant to Environmental Law, or
(iii) otherwise arising out of unlawful disposal, or unauthorized release of any
Hazardous Material.

     

    
      Appendix
A to

      Purchase
and Sale Agreement

      Page
2

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    “Environmental
Permits” means any and all permits, licenses, certificates, approvals and
other similar authorizations of Governmental Authorities required by
Environmental Laws.

     

    “Estimated Adjusted Purchase
Price” is defined in Section
3.2.

     

    “Excluded Assets”
means the properties, assets, rights, and interests described in Exhibit B.

     

    “Excluded Liabilities”
is defined in Section
2.3.

     

    “Final Closing
Statement” is defined in Section
3.3(b).

     

    “Final Settlement
Date” is defined in Section
3.3(a).

     

    “Gas Gathering
Agreement” means the Gas Gathering Agreement attached hereto as Exhibit
7.2.

     

    “General Partner” is
defined in Section
4.1(a).

     

    “Governmental
Authority” means (i) the United States of America, (ii) any state,
county, municipality or other governmental subdivision within the United States
of America, and (iii) any court or any governmental department, commission,
board, bureau, agency or other instrumentality of the United States of America
or of any state, county, municipality or other governmental subdivision within
the United States of America.

     

    “Hazardous Material”
means any substance, waste, material, chemical, pollutant or contaminant
regulated under any Environmental Law including: (i) any “pollutant”,
“contaminant”, “toxic substance”, “hazardous waste”, “solid waste”, “hazardous
substance” or “hazardous material” as defined under any Environmental Law, and
(ii) any radioactive material, radon, asbestos, asbestos-containing material,
polychlorinated biphenyls and petroleum, its derivatives, products, byproducts
and hydrocarbons.

     

    “Hilltop Resort Gathering
System” is defined in the recital.

     

    “Indemnified Party” is
defined in Section
9.3.

     

    “Indemnitor” is
defined in Section
9.3.

     

    “IRC” means the
Internal Revenue Code of 1986, as amended.

     

    “knowledge of Seller”,
“Seller’s
knowledge” or any phrase of similar import means the actual knowledge of
J. Russell Porter (CEO), Michael A. Gerlich (CFO), Henry Hansen (VP Land) or
David Rhodes (VP Completions and Operations).

     

    “knowledge of Buyer”,
“Buyer’s
knowledge” or any phrase of similar import means the actual knowledge of
Gilbert Burciaga (CEO), Elias F. Urbina (CFO) or Zachary D. Lee
(President).

     

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

     

    “Lien” means, with
respect to any property or asset, any mortgage, lien, pledge, charge, security
interest or other encumbrance of any kind in respect of such property or
asset.

     

    “Losses” means all
claims, liabilities, losses, causes of action, judgments, demands, settlements,
taxes, fines, penalties, damages, obligations, litigation, lawsuits,
administrative proceedings, administrative investigations, costs, and expenses,
including reasonable attorneys’ consultants’ and experts’ fees, court costs, and
other costs of suit.

    
       

      
        Appendix
A to

        Purchase
and Sale Agreement

        Page
3

      

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    “Material Adverse
Effect” means any change, event, or effect that is or would reasonably
expected to be, individually or in the aggregate, materially adverse to the
business related to, results of operations of or condition (financial or
otherwise) of, or prospects for, the Subject Assets, taken as a whole, excluding
any effect resulting from any change in economic, industry or market conditions
(whether general or regional in nature).

     

    “Navasota” means
Navasota Resources Ltd., LLP.

     

    “Navasota Proceeding”
means Navasota Resources, L.P.
v. First SourceTexas, Inc. et al, Cause No. 0-05-451, in the 12th
Judicial District Court of Leon County, Texas.

     

    “Notice of
Disagreement” is defined in Section
3.3(a).

     

    “Party” and “Parties” is defined
in the preamble.

     

    “Permits” is defined
in Section
4.1(o).

     

    “Permitted
Encumbrances” means any of the following matters:

     

    (i)           any
(a) undetermined or inchoate liens or charges constituting or securing the
payment of expenses which were incurred incidental to maintenance or operation
of the Subject Assets and (b) materialman’s, mechanics’, repairman’s,
employees’, contractors’, operators’ or other similar liens, security interests
or charges for liquidated amounts arising in the ordinary course of business
incidental to construction, maintenance or operation of the Subject Assets that
are not due and payable and that will be paid in the ordinary course of
business, in each case other than with respect to amounts being contested in
good faith;

     

    (ii)          any
liens for Taxes, assessments or other government charges that are not yet due
and payable, other than with respect to amounts being contested in good
faith;

     

    (iii)         any
easements, rights of way, servitudes, permits, licenses, leases and other rights
with respect to operations to the extent such matters do not interfere in any
material respect with the operation of the portion of the Subject Assets
burdened thereby; and

     

    (iv)         rights
reserved to or vested in any Governmental Authority to control or regulate any
of the Subject Assets and all applicable Laws.

     

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

     

    “Post-Closing Tax
Period” is defined in Section
11.1(b).

     

    “Pre-Closing Tax
Period” is defined in Section
11.1(b).

     

    “Presco” means Presco,
Inc.

     

    “Property Taxes” means all ad valorem,
property (whether real or personal), and similar Taxes with respect to the
Subject Assets.

     

    “Purchase Price” is
defined in Section
3.1.

     

    “Purchase Price
Allocation” is defined in Section
3.3(d).

    
       

      
        Appendix
A to

        Purchase
and Sale Agreement

        Page
4

      

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

     

    “Records” means any
and all of the books, records, contracts, agreements, documents, and files of
Seller existing on the Closing Date which are part of the Subject Assets and all
additions thereto after the Closing Date, including computer records and
electronic copies of such information maintained by Buyer or its
Affiliates.

     

    “Regulatory Approvals”
is defined in Section
6.7.

     

    “Reimbursement
Obligation” is defined in Section
6.10.

     

    “Required Consents” is
defined in Section
4.1(f).

     

    “Reserve Engineers”
means Netherland, Sewel and Associates or such other third party engineering
firm that after the date hereof prepares reports of the proved natural gas and
oil reserve estimates of Seller and its Affiliate in connection with disclosure
of such data in Seller’s or any of its Affiliates’ reports to the Securities and
Exchange Commission.

     

    “Rules” is defined in
Section
12.3(b).

     

    “Seller” is defined in
the preamble.

     

    “Seller Indemnified
Parties” is defined in Section
9.1.

     

    “Subject Assets” means
all Assets other than the Excluded Assets.

     

    “Tax” or “Taxes” means all
taxes, however, denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local, parish or foreign government or any agency
or political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profits taxes
(including federal income taxes and state income taxes), real property gains
taxes, payroll and employee withholding taxes, unemployment insurance taxes,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation taxes,
real and personal property taxes, environmental taxes, Transfer Taxes, workers’
compensation, and other obligations of the same or of a similar nature to any of
the foregoing.

     

    “Tax Return” means all
returns, reports, declarations, statements, bills, schedules, or written
information of or with respect to any Tax which is required to be supplied to
any taxing authority or depository.

     

    “Third Party Claim” is
defined in Section
9.3.

     

    “Transaction
Agreements” means this Agreement, the Gas Gathering Agreement, and the
Assignment and Bill of Sale.

     

    “Transfer Taxes” means
all transfer Taxes (excluding Taxes measured by net income), including sales,
use, excise stock, stamp, documentary, filing, recording, permit, license,
authorization and similar Taxes, filing fees and similar charges.

     

    “Working Interest
Owner” means any Person that owns or controls a working interest in the
Dedicated Properties.

     

    
      Appendix
A to

      Purchase
and Sale Agreement

      Page
5

    

    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    

    LIST
OF EXHIBITS AND SCHEDULES

     

    
      
        
          
            
              	
                      Exhibits:

                    	 
      	 	 
      
	 	 	 	 
	
                      Exhibit
      A

                    	
                      -

                    	 	
                      Description
      of Rights of Way and Pipeline System

                    
	
                      Exhibit
      B

                    	
                      -

                    	 	
                      Description
      of Excluded Assets

                    
	
                      Exhibit
      C

                    	
                      -

                    	 	
                      Dedicated
      Properties

                    
	
                      Exhibit
      7.2

                    	
                      -

                    	 	
                      Gas
      Gathering Agreement

                    
	
                      Exhibit
      8.2(i)

                    	
                      -

                    	 	
                      Assignment
      and Bill of Sale

                    
	
                      Exhibit
      8.2(iii)

                    	
                      -

                    	 	
                      Affidavit
      Non-Foreign Status

                    

            

          

        

        
           

          
            
              	
                      Schedules:

                    	 
      	 	 
      
	 	 	 	 
	
                      Schedule
      4.1(e)

                    	
                      -

                    	 	
                      Violations
      or Breaches

                    
	
                      Schedule
      4.1(f)

                    	
                      -

                    	 	
                      Consents

                    
	
                      Schedule
      4.1(g)

                    	
                      -

                    	 	
                      Pending
      Actions

                    
	
                      Schedule
      4.1(h)

                    	
                      -

                    	 	
                      Compliance
      with Laws

                    
	
                      Schedule
      4.1(k)

                    	
                      -

                    	 	
                      Material
      Contracts

                    
	
                      Schedule
      4.1(l)

                    	
                      -

                    	 	
                      Environmental
      Matters

                    
	
                      Schedule
      4.1(m)

                    	
                      -

                    	 	
                      Tax
      Matters

                    
	
                      Schedule
      4.1(n)

                    	
                      -

                    	 	
                      Property
      Matters

                    
	
                      Schedule
      4.1(n)(ii)(F)

                    	 
      	 	
                      Spatial
      Gaps

                    
	
                      Schedule
      4.1(o)

                    	
                      -

                    	 	
                      Permits

                    
	
                      Schedule
      4.1(t)

                    	
                      -

                    	 	
                      Throughput

                    
	
                      Schedule
      6.1

                    	
                      -

                    	 	
                      Preclosing
      Matters

                    
	
                      Schedule 7.1(e)

                    	
                      -

                    	 	
                      Seller’s
      Required Consents

                    
	
                      Schedule
      7.2(e)

                    	
                      -

                    	 	
                      Buyer’s
      Required
Consents

                    

            

          

        

      

    

     

    
      Appendix
A to

      Purchase
and Sale Agreement

      Page
6

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