Document:

Unassociated Document

    

    Robin
      F.
      Risser, Chief Financial Officer and Director

    Steven
      Williamson, Chief Technology Officer

    Advanced
      Photonix, Inc.

    2925
      Boardwalk

    Ann
      Arbor, MI 48104

    

    

    BY
      HAND

    Advanced
      Photonix, Inc. 

    2925
      Boardwalk

    Ann
      Arbor, MI 48104

    Attn:
      Richard D. Kurtz, CEO & President

    August
      31, 2007

    

     

    Advanced
      Photonix, Inc. Private Placement of

    Class
      A
      Common Stock and 2007 Series Warrants

    Insider
      Side Letter re: Registration Rights

     

    Dear
      Mr.
      Kurtz:

    

    We
      the
      undersigned officers and/or directors of Advanced Photonix, Inc. (the “Company”)
      have subscribed to participate in the Company’s offering (the “Offering”) of
      units (each a “Unit” consisting of four (4) shares of the Company’s Class A
      Common Stock (each a “Share”) and one (1) warrant exercisable for one (1) Share)
      to a limited number of accredited investors. In connection with such
      participation, we have executed and delivered to the Company Subscription
      Agreements and Registration Rights Agreements of even date herewith. All
      capitalized terms not otherwise defined herein shall have the meanings ascribed
      to them in the Subscription Agreement. 

    

    The
      Registration Rights Agreements contemplate that the Company will register for
      resale by the Investors the Shares issued in the Offering and the Shares
      issuable upon exercise of the warrants on a Registration Statement on Form
      S-3
      to be filed with the Securities and Exchange Commission (the “SEC”). In
      addition, the Registration Rights Agreements set forth certain penalties in
      the
      event such Registration Statement is not effective by the Effectiveness Deadline
      (as defined in the Registration Rights Agreements). 

    

    It
      is
      anticipated that the Company will include Shares issued to us in the Offering
      and Shares issuable to us upon exercise of the warrants (the “Insider Shares”)
      in such Registration Statement; however, in the event, the Company reasonably
      believes that it will not obtain SEC approval of the Registration Statement
      if
      it includes the Insider Shares, or in the event following the filing of the
      Registration Statement, the Company receives comments from the SEC which give
      the Company a reasonable basis to believe that approval of such Registration
      Statement will be withheld or delayed beyond the Effectiveness Deadline as
      a
      result of the inclusion of the Insider Shares, we hereby relieve the Company
      of
      any further obligation to register the Insider Shares with the SEC and the
      Registration Rights Agreements shall have no further force or effect. In such
      event, we acknowledge that the Insiders Shares will not be registered under
      the
      Securities Act of 1933, as amended or any similar law of any other jurisdiction
      (the “Act”), and we may only sell if an
      exemption from registration is otherwise available, including an exemption
      pursuant to Rule 144 promulgated under the Act. We further understand that
      the
      exemption from registration under Rule 144 will not be available for at least
      one (1) year from the date of purchase of the Insider Shares, and even then
      will
      not be available unless (i) a public trading market then exists for the Shares
      of the Company, (ii) adequate information concerning the Company is then
      available to the public, and (iii) other terms and conditions of Rule 144 are
      complied with; and that any sale of the Shares may be made only in limited
      amounts in accordance with such terms and conditions. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

      Advanced
        Photonix, Inc.

      Page
        2

       

    

     

    This
      Agreement may
      be
      executed in any number of counterparts, each of which when so executed and
      delivered shall be deemed to be an original and all of which together shall
      be
      deemed to be one and the same agreement. The Parties agree that facsimile
      signatures of this Agreement shall be deemed a valid and binding execution
      of
      this Agreement.

    

     

    
      	 	 	 	
              Very
                truly yours,

            
	 	 	 	 
	 	 	 	 
	 	 	 	/s/
              Robin F.
              Risser 
	
            	 	 	
              
Robin
              F. Risser 
	 	 	 	 

      	 	 	 	 
	 	 	 	/s/
              Steven
              Williamson
	
            	 	 	
              
Steven
              WilliamsonExhibit
      10.1

    PURCHASE
      AND SALE AGREEMENT

     

    This
      Purchase and Sale Agreement (“Agreement”)
      is
      made and entered into this 31st
      day of
      August, 2007, by and between Prime Natural Resources, Inc., a Texas corporation,
      (“Seller”),
      and
      ICF Energy Corporation, a Texas corporation (“Purchaser”)
      (sometimes herein Seller and Purchaser are collectively called the “Parties”
and
      individually called a “Party”).

     

    RECITALS

     

    Seller
      desires to sell to Purchaser, and Purchaser desires to purchase from Seller,
      certain oil and gas properties and related assets on the terms and conditions
      set forth in this Agreement.

     

    NOW,
      THEREFORE,
      for and
      in consideration of the premises and of the mutual covenants and agreements
      contained herein, Seller and Purchaser hereby agree as follows:

     

    ARTICLE
      1

    PURCHASE
      AND SALE

     

    1.1 Purchase
      and Sale of Assets.
      On the
      Closing Date (as defined below), but effective as of 7 a.m. Central Standard
      Time on the 1st day of July, 2007 (the “Effective
      Time”),
      subject to the terms and conditions of this Agreement, Seller agrees to sell,
      transfer, convey and deliver to Purchaser, and Purchaser agrees to purchase
      and
      pay for, the following assets:

     

    (a) The
      oil,
      gas and mineral leases and other mineral rights and interests described in
      Exhibit
      A-l,
      together with all of Seller’s rights and interests in respect of any pooled,
      communitized or unitized acreage of which any such interest described in this
      Section
      1.1(a)
      is a
      part and Seller has the right to transfer (collectively, the “Leasehold
      Interests”);

     

    (b) All
      of
      Seller’s right, title, and interest in and to all of the immovable, movable and
      mixed property of Seller, or in which Seller owns an interest, that is
      attributable or allocable to the Leasehold Interests and used or held for use
      in
      connection with the exploration, development, operation or maintenance of any
      of
      the Leasehold Interests or the production, treatment, measurement, storage,
      gathering, transportation or marketing of oil, gas or other hydrocarbons
      attributable to the Leasehold Interests (or the interests of others therein),
      including, without limitation: (i) all wells, platforms, equipment and
      facilities that, as of the Effective Time were used or held for use in
      connection with the exploration, development, operation or maintenance of any
      Leasehold Interests or the production, treatment, measurement, storage,
      gathering, transportation or marketing of oil, gas or other hydrocarbons
      attributable to the Leasehold Interests, including, without limitation, the
      wells described in Exhibit
      A-2,
      any
      other wells (including saltwater disposal wells), well equipment, casing, tanks,
      gas separation and field processing units, portable and permanent well test
      equipment, buildings, tubing, pumps, motors, fixtures, machinery, materials,
      supplies, inventories, telephone and communication equipment, computing
      equipment and other equipment, pipelines, gathering systems, power lines,
      telephone and telegraph lines, roads, vehicles, gas processing plants and other
      property used in the operation thereof; (ii) all oil and gas and other
      hydrocarbon volumes produced on or after the Effective Time; and (iii) all
      other
      rights, privileges, benefits, powers, tenements, hereditaments and appurtenances
      conferred upon Seller or the owner and holder of the Leasehold Interests,
      including, without limitation, all rights, privileges, benefits and powers
      of
      Seller with respect to the use and occupation of the surface of, and subsurface
      depths under, the land covered by each Leasehold Interest, which may be
      necessary, convenient or incidental to the possession and enjoyment of such
      Leasehold Interest (collectively, the “Related
      Property”);

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) All
      of
      Seller’s right, title, and interest in and to all original files, records, data,
      information and documentation of Seller (or if originals are not available,
      copies of such items) pertaining to or evidencing Seller’s use, ownership or
      operation of any of the assets, or the maintenance or operation thereof, or
      to
      any units in which any of the Leasehold Interests may be included or to the
      producing, treating, measuring, processing, storing, gathering, transporting
      or
      marketing of oil and gas and other hydrocarbons attributable to the Leasehold
      Interests or such units and water, brine or other minerals and products produced
      in association therewith, including, without limitation, lease files, land
      files, well files, production sales agreement files, division order files,
      title
      opinions and abstracts, legal records (excluding any records or information
      the
      disclosure of which would result in the waiver of an attorney-client privilege
      or the breach of any confidentiality obligations for which no waiver has been
      granted), tax records, financial and accounting records, governmental, tribal
      and regulatory filings and permits, licenses, environmental records, geological
      and geophysical data, seismic records, production reports, maps, and computer
      software (collectively, the “Records,”
but
      further excluding therefrom the transfer of any of the foregoing that would
      violate any applicable contractual restrictions); and

     

    (d) All
      rights of Seller in and to those instruments and agreements listed on
Exhibits
      A-l and A-3
      hereto,
      the other instruments and agreements under which Seller’s interests in the
      Leasehold Interests arise, and all other agreements and contractual rights,
      easements, rights-of-way, servitudes, and other rights, privileges, and benefits
      to the extent relating to any asset described in clauses (a)
      through
(c)
      above,
      including, without limitation, all rights of Seller in, to and under or derived
      from all production sales contracts, operating agreements, pooling, unitization
      or communitization agreements, purchase, exchange or processing agreements,
      production handling agreements, surface leases, easements or rights-of-way,
      farmout or farmin agreements, dry hole or bottom hole contribution agreements,
      seismic agreements, options, orders and all other contracts, agreements and
      instruments relating to the exploration for, or the development, production,
      storage, gathering, treatment, transportation, processing, or sale or disposal
      of oil, gas, other hydrocarbons, other minerals, water, brine or other
      substances from any Leasehold Interest or any units of which they are a part
      (collectively, the “Rights”).

     

    The
      Leasehold Interests, the Related Property, the Records, and the Rights are
      herein collectively called the “Assets.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      2

    PURCHASE
      PRICE

     

    2.1 Purchase
      Price; Method of Payment.
      The
      amount payable by Purchaser to Seller for the Assets shall be an aggregate
      amount equal to the Purchase Price (as defined below), plus or minus, as
      applicable, the adjustments made in accordance with Section
      2.2.

     

    (a) The
      “Purchase
      Price”
for
      the
      Assets shall be THREE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
      ($3,500,000) to be paid at Closing, as follows: (i) TWO MILLION EIGHT HUNDRED
      THOUSAND AND NO/100 DOLLARS ($2,800,000) in cash; and (ii) SEVEN HUNDRED
      THOUSAND AND NO/100 DOLLARS ($700,000) in the common stock of True North Energy
      Corporation, parent of Purchaser (the “Parent”),
      subject to Section
      2.1(c)
      of this
      Agreement.

     

    (b) All
      cash
      amounts required under this Article
      2
      to be
      paid by any Party hereto to another Party hereto shall be made by wire transfer
      of immediately available funds to an account designated by the payee thereof,
      which designation shall be made not later than two (2) Business Days prior
      to
      the date such payment is due (as used herein, the term “Business
      Day”
shall
      means any day that is not a Saturday, Sunday or other day on which commercial
      banks in Houston, Texas are authorized or required by law to remain
      closed).

     

    (c) All
      amounts required under this Article
      2
      to be
      paid to Seller by Purchaser in the form of shares of common stock of the Parent
      shall be paid by delivery on the Closing Date by the Parent of one or more
      stock
      certificates representing the number of shares derived by dividing SEVEN HUNDRED
      THOUSAND AND NO/100 DOLLARS ($700,000) by the average closing trading price
      of
      the common stock of the Parent for the ten (10) trading days immediately
      preceding the day on which this Agreement is executed. Seller shall be granted
      “piggyback” rights pursuant to which Seller may request that the Parent include
      the common stock consideration provided as part of the Purchase Price in any
      registration statement filed with the Securities and Exchange Commission to
      register other common stock of the Parent (other than a registration on Form
      S-4
      or S-8, or any successor or other forms promulgated for similar
      purposes).
      For
      purpose of clarification, the common stock portion of the Purchase Price shall
      not be subject to any adjustments provided in Section
      2.2. 

     

    2.2 Adjustments
      to Purchase Price.
      The cash
      portion of the Purchase Price for the Assets shall be adjusted as follows (the
      resulting amount, together with the common stock portion of the Purchase Price,
      being herein referred to as the “Adjusted
      Purchase Price”):

     

    (a) The
      Purchase Price shall be increased by an amount equal to the sum of the following
      amounts (determined without duplication):

     

    (i) the
      amount of all costs and expenses paid by Seller that are attributable to the
      ownership, maintenance, development, production or operation of the Assets
      during the period between the Effective Time and the Closing Date;
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) all
      reasonable prepaid costs and expenses attributable to the Assets that were
      actually paid by Seller prior to the Effective Time and which are attributable
      to the period of time from and after the Effective Time; 

     

    provided,
      however, that the following shall be excluded from the amounts referred to
      in
      this Section
      2.2(a):
      (1)
      general corporate overhead and administrative expenses of Seller (but not the
      overhead charges paid by Seller to any third party operator
      of any of the Leasehold Interests operated by such third party operator, or
      the
      overhead charges allocated by Seller for any of the Leasehold Interests operated
      by Seller), (2) franchise and income taxes, Property Taxes and other taxes
      covered by Sections
      2.2(d), 12.1
      and
      12.3,
      (3)
      interest on funds borrowed by Seller not related to the ownership, maintenance,
      development, production or operation of the Assets and attributable to any
      period of time prior to the Effective Time, (4) capital expenditures or
      operating expenses attributable to the period of time prior to the Effective
      Time, (5) that portion of payments to Affiliates of Seller for services or
      properties that exceeds the amount that would reasonably have been charged
      to
      Seller in an arm’s-length transaction with a third party that was not an
      Affiliate of Seller, (6) delay rentals, bonuses or shut-in royalties due prior
      to the Effective Time, (7) expenses and expenditures incurred in violation
      of
      the terms of this Agreement, (8) insurance premiums or the allocated cost of
      insurance covering risks associated with the Assets, other than any such costs
      that are included as direct charges under joint interest billings received
      by
      Seller from third party operators
      of any of the Leasehold Interests, (9) costs and expenses with respect to the
      negotiation and consummation of this Agreement and the transactions contemplated
      hereby, and (10) costs and expenses for which Seller is liable pursuant to
      the
      indemnification provisions set forth in Section 10.3(c)
      hereof.
      As used in this Agreement, the term “Affiliate”
shall
      mean, with respect to any person, any other person that, directly or indirectly,
      controls, is controlled by or is under common control with such first person.
      As
      used in the definition of “Affiliate,”
the
      term “person” shall mean any natural person, partnership, joint venture, limited
      partnership, corporation, limited liability partnership, limited liability
      company, trust, estate, association or other entity.

     

    (b) The
      Purchase Price shall be decreased by an amount equal to the sum of the following
      amounts (determined without duplication):

     

    (i) the
      amount of all proceeds received by Seller that are attributable to the
      ownership, maintenance, development, production or operation of the Assets
      after
      the Effective Time, it being agreed that such amount shall not include proceeds
      from any sale subsequent to the Effective Time of merchantable hydrocarbons
      in
      storage above the pipeline connection at the Effective Time;
      and

     

    (ii) the
      aggregate amount of all suspended funds described in Exhibit
      3.14,
      as may
      be increased or decreased by Seller prior to Closing in accordance with Seller’s
      accounting practice consistently applied (the “Suspended
      Funds”). 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) The
      Purchase Price shall also be adjusted by an amount equal to any net gas
      imbalance (including production, sales, processing and transportation
      imbalances) existing as of the Effective Time with respect to the Leasehold
      Interests, valuing the quantities of imbalance gas at $3.00 per MMBtu. If Seller
      is in a net overproduced production position as of the Effective Time, the
      Purchase Price shall be reduced by such amount; and if Seller is in a net
      underproduced position as of the Effective Time, the Purchase Price shall be
      increased by such amount. Notwithstanding the preceding, the Parties agree
      that
      the $3.00 per MMBtu amount is to be used solely for the purpose of purchase
      price adjustments for any net gas imbalance and is not intended to limit or
      stipulate the amount that may be otherwise sought or collected by Purchaser
      or
      Seller on the basis of any breach of representations and warranties and/or
      pursuant to any indemnities under this Agreement.

     

    (d) In
      addition to the adjustments specified in Sections
      2.2(a)-(c)
      above,
      the Purchase Price shall be further adjusted by an amount equal to the estimated
      net liability of Purchaser to Seller, or Seller to Purchaser, as applicable,
      in
      respect of Property Taxes and other taxes pursuant to Sections
      12.1
      and
      12.3.

     

    2.3 Payment
      and Calculation of Adjusted Purchase Price; Payment at
      Closing.

     

    (a) At
      least
      three (3) Business Days prior to the Closing Date, Seller shall prepare and
      deliver to Purchaser the statement attached as Exhibit
      2.3(a)
      identifying the adjustments specified in Sections
      2.2(a)
      -
      2.2(d)
      up to
      then (together with such backup or supporting information as may be necessary
      to
      permit Purchaser to understand how Seller determined the adjustments contained
      therein, the “Settlement
      Statement”).

     

    (b) On
      the
      Closing Date, Seller shall deliver to Purchaser any adjustments to the
      Settlement Statement (together with such backup or supporting information as
      may
      be necessary to permit Purchaser to understand how Seller determined the
      adjustments contained therein) in
      the
      form of Exhibit
      2.3(a)
      identifying the adjustments specified in Sections
      2.2(a)
      -
      2.2(d)
      from the
      date of the Settlement Statement to the Closing Date. The Settlement Statement,
      together with the adjustments provided in this Section
      2.3(b),
      shall
      evidence the Adjusted Purchase Price.

     

    (c) At
      Closing, Purchaser shall pay to Seller the Adjusted Purchase Price determined
      as
      set forth in Section
      2.3(b).

     

    2.4 Allocation
      of Purchase Price.
      Seller
      and Purchaser agree that the Purchase Price for the Assets sold hereunder for
      federal and state income tax purposes only shall be allocated as follows: (i)
      TWO MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($2,200,000) for Devon
      Fee
      Gas Unit; and (ii) ONE MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS
      ($1,300,000) for O’Leary Unit No.1, both as described in Exhibit
      A-1.
      The
      Parties further agree that, in the event of any adjustment to the Purchase
      Price
      as provided in Section
      2.2,
      the
      Adjusted Purchase Price shall be allocated for federal and state income tax
      purposes only as: (i) the Adjusted Purchase Price multiplied by 22/35 for Devon
      Fee Gas Unit; and (ii) the Adjusted Purchase Price multiplied by 13/35 for
      O’Leary Unit No.1. The Parties agree not to take a federal or state income tax
      reporting position inconsistent with such allocation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      3

    REPRESENTATIONS
      AND WARRANTIES OF SELLER

     

    Seller
      represents and warrants to Purchaser that, to Seller’s knowledge, the statements
      contained in this Article
      3
      are
      complete and correct as of the date of this Agreement and as of Closing, except
      as set forth in any exhibits referenced in this Article
      3:

     

    3.1 Existence.
      Seller
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Texas and is duly qualified to carry on its business in
      the
      jurisdiction where the Assets are located.

     

    3.2 Power. 
      Seller
      has the corporate power and authority to enter into this Agreement and perform
      this Agreement and the transactions contemplated hereby. The execution, delivery
      and performance of this Agreement by Seller, and the consummation of the
      transactions contemplated hereby, will not: (a) violate or conflict with any
      provision of the articles of incorporation, other organizational documents,
      or
      bylaws of Seller; (b) violate or conflict with any material agreement or
      instrument to which Seller is a party or by which Seller or any of the Leasehold
      Interests are bound; (c) violate or conflict with any judgment, order, ruling,
      or decree applicable to Seller as a party in interest; (d) violate or conflict
      with any law, rule or regulation applicable to Seller; or (e) result in the
      creation or imposition of any lien, charge or other encumbrance upon the Assets
      that is not discharged at Closing.

     

    3.3 Authorization.
      The
      execution, delivery and performance of this Agreement and the transactions
      contemplated hereby have been duly and validly authorized by all requisite
      corporate action on the part of Seller. This Agreement has been duly executed
      and delivered on behalf of Seller, and at Closing all documents and instruments
      required hereunder to be executed and delivered by Seller shall have been duly
      executed and delivered. This Agreement does, and such documents and instruments
      shall, constitute legal, valid and binding obligations of Seller enforceable
      against Seller in accordance with their terms, subject, however, to the effect
      of bankruptcy, insolvency, reorganization, moratorium and similar laws from
      time
      to time in effect relating to the rights and remedies of creditors, as well
      as
      to general principles of equity (regardless of whether such enforceability
      is
      considered in a proceeding in equity or at law) and the power of a court to
      deny
      enforcement of remedies generally based upon public policy.

     

    3.4 Brokers.
      Seller
      has incurred no obligation or liability, contingent or otherwise, for brokers’
or finders’ fees in respect of the matters provided for in this Agreement that
      will be the responsibility of Purchaser; and any such obligation or liability
      that might exist shall be the sole obligation of Seller.

     

    3.5 Foreign
      Person.
      Seller
      is not a “foreign person” within the meaning of the Internal Revenue Code of
      1986, as amended, (hereinafter called the “Code”),
      Section 1445 and 7701 (i.e., Seller is not a nonresident alien, foreign
      corporation, foreign partnership, foreign trust or foreign estate as those
      terms
      are defined in the Code and any regulations promulgated
      thereunder).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.6 Defensible
      Title.
      Seller
      has Defensible Title to all Leasehold Interests. As used herein, the term
“Defensible
      Title”
shall
      mean, in the case of the Leasehold Interests listed on Exhibit
      A-1,
      such
      right, title and interest that, except for Permitted Encumbrances (as defined
      below): (i) entitles Seller to receive, from its record title ownership in
      such
      Leasehold Interests, not less than the interest set forth in Exhibit
      A-2
      as the
“Net Revenue Interest” or “NRI” with respect to all of the oil, gas, and
      hydrocarbon minerals produced, saved and marketed from each unit or well, as
      the
      case may be, identified on Exhibit
      A-2,
      without
      reduction, suspension or termination throughout the productive life of such
      Leasehold Interests, except as expressly noted on Exhibit
      A-2;
      (ii)
      obligates Seller to bear no more than the percentage set forth in Exhibit
      A-2
      as the
“Working Interest” or “WI” with respect to all of the costs and expenses
      relating to the operations on and the maintenance and development of each unit
      or well, as the case may be, identified on Exhibit
      A-2,
      without
      increase throughout the productive life of such Leasehold Interests, except
      as
      expressly noted on Exhibit
      A-2;
      and
      (iii) is free and clear of all material liens, mortgages, pledges, claims,
      charges, options, calls on production, preferential purchase rights,
      requirements for consent to assignment which would apply to the transactions
      contemplated hereby and other encumbrances and title defects.

     

    3.7 Litigation.
      Except
      as set forth in Exhibit
      3.7:

     

    (a) there
      is
      no suit, action, investigation, hearing, or other proceeding pending or
      threatened against Seller or otherwise involving the Assets (except for suits,
      actions, investigations, hearings or proceedings relating to the oil and gas
      industry generally to which Seller is not a named party), that could reasonably
      be expected to adversely affect any of the Assets, including, without
      limitation, Seller’s title thereto, the value thereof, operations thereon, or
      the marketing of production therefrom;

     

    (b) there
      is
      no suit, action, investigation, hearing, or other proceeding pending or
      threatened against Seller that could reasonably be expected to adversely affect
      the ability of Seller to perform its obligations under this Agreement or that
      could reasonably be expected to prevent, delay or hinder the consummation of
      the
      transactions contemplated hereby; and

     

    (c) Seller
      has not received any notice that it has been charged with any violation of,
      or
      threatened with a charge of a violation of, any Legal Requirement (as defined
      below), which violation might reasonably be expected to adversely affect any
      of
      the Assets, and no third party has been charged with any violation of any Legal
      Requirement which violation might reasonably be expected to materially adversely
      affect the Assets.

     

    As
      used
      in this Agreement, “Legal
      Requirement”
shall
      mean any law, statute, ordinance, decree, requirement, order, judgment, rule
      or
      regulation of, including the terms of any license, permit or authorization
      issued by, any Governmental Authority. For
      purposes of this Agreement, the term “Governmental
      Authority”
shall
      include the United States, any state, county, city, tribal, political
      subdivision, agency, department, commission, board, bureau or instrumentality
      in
      which the Assets are located or which exercises jurisdiction over any of the
      Assets or the Parties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.8 Basic
      Documents.
      The
      documents and instruments creating or giving rise to the Leasehold Interests
      and
      all agreements, contracts, easements, rights-of-way and other surface use
      rights, and all governmental and tribal licenses, permits, approvals and other
      authorizations necessary to own, maintain and operate the Assets in compliance
      with applicable laws and in the manner in which they have historically been
      owned, maintained and operated (all such documents and instruments being herein
      referred to as the “Basic
      Documents”),
      are
      in full force and effect and no breach or default exists thereunder, except
      where the breach or default would not have a material adverse effect upon the
      value of the Assets. Except as set forth on Exhibit
      3.8,
      the
      Basic Documents: (a) do not subject all or any portion of the Assets to any
      tax
      partnership or to any obligation requiring a partnership income tax return
      to be
      filed under the application of Subchapter K of Chapter 1 of Subtitle A of the
      Code, or any similar state statute, and Seller has complied with all conditions
      necessary to maintain a valid election to be excluded from said Subchapter
      K;
      and (b) if assumed by Purchaser at Closing, would not subject Purchaser to
      any
      area of mutual interest, non-competition or similar provision restricting
      Purchaser from independently conducting operations in any geographic area,
      except where such subjection to any tax partnership or restriction on
      Purchaser’s independent operation would not have a material adverse effect upon
      the value of the Assets. Except as set forth in Exhibit
      3.8,
      neither
      Seller nor any other party to the Basic Documents: (i) is in breach or default,
      or with the lapse of time or the giving of notice, or both, would be in breach
      or default, with respect to any of its obligations thereunder; or (ii) has
      given
      or threatened to give notice of any default under, has made or threatened
      inquiry into any possible default under, or begun or threatened action to alter,
      terminate, rescind or procure a judicial reformation of, any Basic Document
      or
      any provision thereof, except where such breach or default or judicial
      reformation would not have a material adverse effect upon the value of the
      Assets. There are no material amounts claimed to be due to Seller in respect
      of
      the Assets that are being held in suspense because of a dispute as to title
      to
      such Assets or for any other reason, and Seller is currently being paid its
      Net
      Revenue Interest specified on Exhibit
      A-2
      for each
      unit or well listed thereon without indemnity or guarantee other than those
      customarily found in division orders and other similar agreements and documents.
      The representations and warranties contained in this Section
      3.8
      shall
      not be construed to be representations and warranties with respect to the
      accuracy of any estimates, forecasts or conclusions contained in any document,
      any such representations and warranties being expressly denied and
      disclaimed.

     

    3.9 Compliance
      with Laws.
      Except
      as set forth in Exhibit
      3.9
      and
      except where the failure to comply or conform would not have a material adverse
      effect upon the value of the Assets, all Seller’s or third-party operators’
operations (including, without limitation, the exploration and development
      of
      all leases, the drilling, completion and production of all wells thereon, and
      the marketing of all production therefrom) relating to the Leasehold Interests
      have been conducted in compliance with, and all items of tangible personal
      property and fixtures constituting part of the Assets conform with, all Legal
      Requirements, including, but not limited to, any Environmental Laws (as defined
      below).

     

    3.10 Governmental
      Licenses.
      Except
      as set forth in Exhibit
      3.10,
      Seller
      has obtained all material permits, licenses and other authorizations required
      by
      any Governmental Authority to own and operate the Assets; all such
      authorizations are in full force and effect; and no material violations exist
      thereunder. No proceeding is pending or threatened relating to the challenging,
      revocation or limitation of any such permit, license or other authorization,
      except where such challenging, revocation or limitation would not have a
      material adverse effect on the value of the Assets.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.11 Lease
      Obligations.
      Except
      as set forth in Exhibit
      3.11:
      (a)
      with respect to the oil, gas and other mineral leases included on Exhibit
      A-1,
      there
      are no royalty provisions (other than those allowing a lessor the right to
      take
      in kind and other than royalties due to governmental entities) requiring the
      payment of royalty on any basis other than proceeds actually received by the
      lessee; (b) there are no Leasehold Interests which are subject to a fixed term
      of duration; and (c) there are no unfulfilled drilling obligations affecting
      the
      Leasehold Interests, other than provisions requiring optional drilling as a
      condition of maintaining or earning all or a portion of a lease, and all
      royalties, rentals and other payments due in respect of the Leasehold Interests
      ending on the Closing Date have been or will be by Closing timely paid and
      all
      other conditions necessary to keep such properties and interests in full force
      and effect during their primary term, and thereafter if commercial production
      has been established thereon or on lands unitized or pooled therewith, have
      been
      fully performed in all material respects in accordance with applicable Legal
      Requirements.

     

    3.12 Obligations
      Relating to Operations.
      With
      respect to operations relating to the Assets, except as set forth on
Exhibit
      3.12:
      (a)
      there are no gas production, processing, sales, transportation or other
      imbalances as of the Effective Time between Seller and any third party; (b)
      there are no material non-consent operations with respect to any Leasehold
      Interest which have resulted or will result in a temporary or permanent increase
      or decrease in Seller’s interest in such Leasehold Interest from that set forth
      on Exhibit
      A-2
      for the
      applicable unit or well; (c) there are no binding commitments with respect
      to
      the Assets that will result in Purchaser incurring after the Closing Date
      capital expenditures with respect to any one unit or well in excess of $5,000,
      or $25,000 with
      respect to the Assets in the aggregate.

     

    3.13 Operations
      Since the Effective Time.
      Except
      as set forth in Exhibit
      3.13,
      since
      the Effective Time:

     

    (a) Seller
      has caused the Assets to be developed, maintained and operated in a reasonable
      and prudent manner and in substantially the same manner as the Assets were
      developed, maintained and operated prior to the Effective Time;

     

    (b) Seller
      has not sold, assigned, transferred, farmed out, conveyed or otherwise disposed
      of any of the Assets, except for the sale of hydrocarbons in the ordinary course
      of business, as required under any agreement or contract existing as of the
      Effective Time;

     

    (c) Seller
      has not, to the extent related to the Assets, made any major change in the
      character of its business or operations or otherwise conducted its business
      and
      operations other than in accordance with standard industry
      practices;

     

    (d) Seller
      has not permitted any leases or material rights with respect to the Assets
      to
      expire, or waived any material rights with respect to the Assets;

     

    (e) Seller
      has not entered into any agreement or made any commitment (other than this
      Agreement) to take any of the actions referred to in clauses (a)
      through
(d)
      above;
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f) there
      have been no fires, blow-outs or other casualties (above or below the surface
      of
      the ground) which materially affected any of the Assets.

     

    3.14 Marketing
      of Production; Suspended Funds.
      (a)
      Except
      as set forth in Exhibit
      3.14:

     

    (i) Seller
      has not received, as of the Effective Time, any advance, “take-or-pay,” or other
      similar payments under production sales contracts that entitle the purchasers
      to
“make-up” or otherwise receive deliveries of hydrocarbons at any time after the
      Effective Time without paying at such time the full market price therefor,
      nor
      has Seller received any payments with respect to, or in lieu of or in
      satisfaction for any take-or-pay obligations of purchasers of Seller’s
      hydrocarbons deliverable under any contracts covering any of the Leasehold
      Interests on or after the Effective Time;

     

    (ii) Seller
      has not received prior to the Effective Time payments for production which
      are
      currently subject to refund;

     

    (iii) none
      of
      the Leasehold Interests are subject to any: (A) dedication under production
      sales contracts with terms in excess of 31 days; (B) production gathering
      agreements not terminable without cause on 30 days advance written notice;
      or
      (C) calls on hydrocarbons produced therefrom.

     

    (b) Exhibit
      3.14
      sets
      forth a list of all Suspended Funds held by Seller on the date hereof that
      are
      attributable to the Leasehold Interests, a description of the source of such
      Suspended Funds and the reason they are being held in suspense, the agreement
      or
      agreements under which such Suspended Funds are being held and the name or
      names
      of the parties claiming such Suspended Funds or to whom such Suspended Funds
      are
      owed.

     

    3.15 Taxes.
      Except
      as set forth in Exhibit
      3.15,
      all ad
      valorem, property, production, severance, sales, use, and similar taxes and
      assessments based on or measured by the ownership of the Assets or the
      production of hydrocarbons or the receipt of proceeds therefrom that have become
      due and payable with respect to the Assets (collectively, “Taxes”)
      have
      been, or will by Closing be, paid timely and all tax and information returns
      to
      tax authorities required to be filed with respect to the Assets have been,
      or
      will by Closing be, filed timely, except as may be contested by Seller in good
      faith or where the failure to pay any Taxes or file any tax and information
      returns would not have a material adverse effect on the value of the Assets.
      Seller shall be responsible for paying all Taxes prorated through June 30,
      2007,
      based upon all assessments up to and including calendar year 2007, regardless
      of
      when: (i) the 2007 assessment is issued; and (ii) Taxes for 2007 are paid.
      Exhibit
      3.15
      identifies all audits or examinations pending or presently being conducted
      by
      any taxing jurisdiction or regulatory authority. Seller and Purchaser shall
      cooperate fully, as and to the extent reasonably requested, in connection with
      the filing of any tax returns relating to Taxes and any audit, litigation or
      other proceeding with respect to such tax returns.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.16 Preferential
      Rights and Restrictions on Assignment.
      Except
      as set forth in Exhibit
      3.16,
      none of
      the Leasehold Interests are subject to any preferential rights to purchase
      or
      restrictions on assignment, including, but not limited to, contractual or
      statutory requirements for consents from third parties, including, but not
      limited to, any Governmental Authority, to any assignment, which consents have
      not been obtained or rights have not been waived.

     

    3.17 Improvements,
      Personalty, Equipment and Fixtures.
      Except
      as set forth in Exhibit
      3.17,
      all
      wells, platforms, fixtures, facilities, improvements, pipelines, personal
      property and equipment constituting a part of the Assets: (a) are in a
      reasonably good and operable state of repair, ordinary wear and tear excepted,
      so as to be suitable for normal operations in accordance with standard industry
      practice in the areas in which they are operated; (b) have been constructed
      and
      maintained in accordance with the requirements of all applicable contracts,
      including sales contracts; and (c) meet and comply with all applicable Legal
      Requirements.

     

    3.18 Wells.
      Except
      as set forth in Exhibit
      3.18,
      all of
      the wells in which Seller has an interest by virtue of its ownership of the
      Leasehold Interests have been drilled and completed within the boundaries of
      such Leasehold Interests or within the limits otherwise permitted by contract,
      pooling or unit agreement, and by law, or, if any well has not been drilled
      or
      completed, such failure would not have a material adverse effect on the value
      of
      the Assets or the validity or ownership of Seller’s interest in the applicable
      Assets. Except as set forth on Exhibit
      3.18,
      no such
      drilled and completed well is subject to material penalties on allowables
      because of any over production or any other violation of applicable Legal
      Requirements that would prevent such well from being entitled to its full legal
      and regular allowable from and after the Effective Time as prescribed by any
      Governmental Authority. Exhibit
      3.18
      also
      sets forth the current production and allowable for each unit or well comprising
      a part of the Assets.

     

    3.19 Environmental
      Matters.
      Except
      as set forth in Exhibit
      3.19:

     

    (a) the
      Assets do not violate any order or requirement of any Governmental Authority
      or
      any Environmental Laws, nor are there any agreements or contracts covering
      any
      of the Assets or conditions existing on or resulting from the operations of
      the
      Assets that may give rise to any on-site or off-site surface restoration or
      remedial obligations under any Environmental Laws or any such agreements or
      contracts, except where such violation or agreements or contracts would not
      have
      a material adverse effect on the value of the Assets;

     

    (b) without
      limitation of clause (a)
      above,
      the Assets are not in violation of or subject to any existing, pending or
      threatened action, suit, investigation, inquiry or proceeding by or before
      any
      court, any applicable tribal authority or any other Governmental Authority,
      except where such violation or subjection would not have a material adverse
      effect on the value of the Assets;

     

    (c) during
      the term of Seller’s ownership of the Assets (and prior thereto to the knowledge
      of Seller), all notices, permits, licenses or similar authorizations, if any,
      required to be obtained or filed in connection with the Assets, including,
      without limitation, those relating to the past or present treatment, storage,
      disposal or release of a hazardous substance or solid waste into the
      environment, have been duly obtained or filed, and Seller is in compliance
      with
      the terms and conditions of all such notices, permits, licenses and similar
      authorizations, except where the failure to obtain or file or noncompliance
      would not have a material adverse effect on the value of the
      Assets;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d) during
      the term of Seller’s ownership of the Assets (and prior thereto to the knowledge
      of Seller), and since the effective date of the relevant requirements of RCRA,
      all hazardous substances or solid waste generated at or as a result of the
      Assets have been transported, treated and disposed of only by carriers
      maintaining valid authorizations under RCRA and any other Environmental Laws
      and
      only at treatment, storage and disposal facilities maintaining valid
      authorizations under RCRA and any other Environmental Law, except where the
      failure to do so would not have a material adverse effect on the value of the
      Assets; and

     

    (e) during
      the term of Seller’s ownership of the Assets (and prior thereto to the knowledge
      of Seller), no hazardous substance or solid waste has been disposed of or
      otherwise released (including, without limitation, discharges or releases into
      pits) and there has been no threatened release of any hazardous substances
      or
      solid waste on, to or as a result of the Assets (including the land covered
      by
      the Assets or on which any of the Assets are situated) except in compliance
      with
      Environmental Laws, and there are no storage tanks or other containers on or
      under any of the Assets from which hazardous substances, petroleum products
      or
      other contaminants may be released into the surrounding environment, except
      where such disposal or release would not have a material adverse effect on
      the
      value of the Assets. 

     

    As
      used
      herein, the term “Environmental
      Laws”
shall
      mean any and all Legal Requirements of any Governmental Authority pertaining
      to
      health or the environment, including, without limitation, the Clean Air Act,
      as
      amended, the Comprehensive Environmental, Response, Compensation, and Liability
      Act of 1980 (“CERCLA”),
      as
      amended, the Federal Water Pollution Control Act, as amended, the Occupational
      Safety and Health Act of 1970, as amended, the Resource Conservation and
      Recovery Act of 1976 (“RCRA”),
      as
      amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
      Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as
      amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
      the Hazardous Materials Transportation Act, as amended, any state laws
      pertaining to the handling of oil and gas exploration or production wastes
      or
      the use, maintenance and closure of pits and impoundments, and other
      environmental conservation or protection laws. For purposes of this Agreement,
      the terms “hazardous substance” and “release” (or “threatened release”) have the
      meanings specified in CERCLA, and the terms “solid waste” and “disposal” (or
“disposed”) have the meanings specified in RCRA;
      provided, however, that (i) to the extent the Legal Requirements of the
      jurisdiction wherein the Assets are located establish a meaning for “hazardous
      substance,” “release,” “solid waste” or “disposal” that is broader than that
      specified in either CERCLA or RCRA,
      such
      broader meaning shall apply and (ii) the terms “hazardous substance” and “solid
      waste” shall include all oil and gas exploration and production wastes that may
      present an endangerment to public health or welfare or the environment, even
      if
      such wastes are specifically exempt from classification as hazardous substances
      or solid wastes pursuant to CERCLA
      or
RCRA
      or the
      state statutory analogues to CERCLA
      or
RCRA.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.20 Accuracy
      of Information Furnished.
      Seller
      has not failed to make available any information or knowledge of any fact
      relating to the Assets or the transactions contemplated hereby which might
      reasonably be expected to affect the Assets materially and adversely. Seller
      has
      made and will continue to make available to Purchaser all reports, documents
      and
      other materials of Seller related to the Assets, and the information contained
      therein is true and complete and has been prepared in accordance with standards
      generally accepted standards in the domestic petroleum industry.

     

    3.21 Solvency.
      After
      giving effect to the transactions contemplated by this Agreement: (i) Seller
      is,
      and will be, able to pay its debts and other liabilities, contingent obligations
      and other commitments as they mature in the normal course of business; (ii)
      Seller does not intend to, and does not believe that it will, incur debts or
      liabilities beyond its ability to pay as such debts and liabilities mature
      in
      their ordinary course; and (iii) excluding the Assets, the present fair saleable
      value of the assets of the Company is not, and will not, be less than the amount
      that will be required to pay the probable liability on the debts of Seller
      as
      they become absolute and matured in the normal course of business.

     

    3.22 Other
      Warranties Disclaimed. EXCEPT
      AS SET FORTH IN SECTIONS
      3.1
      TO 3.21,
      PURCHASER ACKNOWLEDGES THAT SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
      OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ITSELF OR THE ASSETS, INCLUDING,
      WITHOUT ANY LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY
      PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
      EXPRESSLY DISCLAIMED.

     

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Purchaser
      represents and warrants (except with respect to Section
      4.8,
      which
      representation and warranty shall be made by Purchase and the Parent together)
      to Seller that, to Purchaser’s knowledge, the statements contained in this
Article
      4
      are
      complete and correct as of the date of this Agreement and as of
      Closing:

     

    4.1 Existence.
      Purchaser is a corporation duly organized, validly existing, and in good
      standing under the laws of the State of Texas, and is duly qualified to carry
      on
      its business in the jurisdiction where the Assets are located.

     

    4.2 Power.
      Purchaser has the corporate power and authority to enter into and perform this
      Agreement and the transactions contemplated hereby. The execution, delivery
      and
      performance of this Agreement by Purchaser, and the consummation of the
      transactions contemplated hereby, will not violate or conflict with: (a) any
      provision of the articles of incorporation, other organizational documents,
      or
      bylaws of Purchaser; (b) any material agreement or instrument to which Purchaser
      is a party or by which Purchaser is bound; (c) any judgment, order, ruling,
      or
      decree applicable to Purchaser as a party in interest; or (d) any law, rule,
      or
      regulation applicable to Purchaser.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

            4.3 Authorization.
      The
      execution, delivery and performance of this Agreement and the transactions
      contemplated hereby have been duly and validly authorized by all requisite
      corporate action on the part of Purchaser. This Agreement has been duly executed
      and delivered on behalf of Purchaser, and at Closing all documents and
      instruments required hereunder to be executed and delivered by Purchaser shall
      have been duly executed and delivered. This Agreement does, and such documents
      and instruments shall, constitute legal, valid and binding obligations of
      Purchaser enforceable against Purchaser in accordance with their terms, subject,
      however, to the effect of bankruptcy, insolvency, reorganization, moratorium
      and
      similar laws from time to time in effect relating to the rights and remedies
      of
      creditors, as well as to general principles of equity (regardless of whether
      such enforceability is considered in a proceeding in equity or at law) and
      the
      power of a court to deny enforcement of remedies generally based upon public
      policy.

     

           4.4 Brokers.
      Purchaser has incurred no obligation or liability, contingent or otherwise,
      for
      brokers’ or finders’ fees in respect of the matters provided for in this
      Agreement which will be the responsibility of Seller; and any such obligation
      or
      liability that might exist shall be the sole obligation of
      Purchaser.

     

    4.5 Litigation.
      There is
      no action, suit, proceeding, claim or, to Purchaser’s knowledge, investigation
      pending or, to Purchaser’s knowledge, threatened in writing against Purchaser in
      any court or by or before any Governmental Authority or arbitration or mediation
      that would impair Purchaser’s ability to consummate, or that would reasonably be
      expected to prevent, delay or hinder the consummation of the transactions
      contemplated hereby.

     

          
      4.6 Satisfaction
      With Due Diligence.
      Purchaser has retained and taken advice concerning the Assets and transactions
      herein from Purchaser’s Representatives (as defined below) which are
      knowledgeable about the oil and gas business and Purchaser is aware of its
      risks. Prior to entering into this Agreement, Purchaser and Purchaser’s
      Representatives have been afforded the access to the books, records and files
      of
      Seller for Purchaser’s due diligence investigation of the Assets, including, but
      not limited to: (a) the operational and environmental condition of the Assets;
      and (b) title to the Assets. In entering into this Agreement, Purchaser has
      not
      relied on any representation or warranty or undertaking which is not expressly
      contained in this Agreement.

     

    4.7 Common
      Stock.
      The
      common stock of the Parent has been duly and validly authorized for issuance
      by
      the Parent and when issued in accordance with the terms and conditions contained
      herein, it will be duly authorized, validly issued, fully paid and
      non-assessable and will not be subject to any preemptive or similar
      rights.

     

    4.8 No
      Securities Laws Violation.
      The
      common stock of the Parent offered as part of the Purchase Price shall be
      offered pursuant to: (i) a valid exemption from registration under the
      Securities Act of 1933, as amended; (ii) all other applicable federal and state
      securities or “blue sky” laws; and (iii) the applicable requirements of any
      stock exchange on which the Parent’s common stock may be listed at the time of
      such issuance or transfer. 

     

    4.9 Other
      Warranties Disclaimed. EXCEPT
      AS SET FORTH IN SECTIONS
      4.1
      TO 4.8,
      SELLER ACKNOWLEDGES THAT PURCHASER MAKES NO OTHER REPRESENTATION OR WARRANTY,
      EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, AND ANY SUCH OTHER REPRESENTATIONS
      OR
      WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      5

    PRE-CLOSING
      OBLIGATIONS OF SELLER

     

    5.1 Operations.
      From the
      date of this Agreement until Closing (the “Interim
      Period”)
      except
      as otherwise approved by Purchaser, Seller shall comply with the following
      covenants:

     

    (a) Subject
      to Section
      6.1,
      Seller
      will make available to Purchaser and Purchaser’s Representatives for reasonable
      examination and copying, at Purchaser’s expense, at Seller’s offices such
      accounting, tax, title, geological, geophysical, legal and other information
      relating to the Assets insofar as same are in the possession of Seller or
      hereafter acquired by Seller (including, but not limited to, information in
      Seller’s computer databases to the extent Seller has the right to do so), to the
      extent not otherwise restricted pursuant to the terms of this Agreement and,
      subject to the consent and cooperation of the operator or other third party,
      will use all commercially reasonable efforts to obtain, at Purchaser’s expense,
      such additional information relating to the Assets as Purchaser may reasonably
      request, to the extent in each case that Seller may do so without violating
      any
      obligation of confidence or other contractual commitments of Seller to a third
      party (and Seller shall use reasonable efforts to obtain waivers of any
      contractual commitments preventing such access).

     

    (b) Except
      as
      otherwise provided herein and unless specifically waived by Purchaser in
      writing:

     

    (i) Seller
      shall (or in the case of Assets that are operated by a third party, shall use
      reasonable efforts to cause the operator of such Assets to) develop, maintain
      and operate the Assets in a good and prudent manner and in substantially the
      same manner as such Assets have heretofore been developed, maintained and
      operated; 

     

    (ii) Seller
      shall (or in the case of Assets that are operated by a third party, shall use
      reasonable efforts to cause the operator of such Assets to) maintain and keep
      the Assets in reasonably good condition and working order, ordinary wear and
      tear excepted, preserving the Assets in full force and effect, and shall fully
      and timely perform all covenants and conditions imposed upon Seller (and shall
      use reasonable efforts to cause all third party operators of the Assets to
      perform all covenants and conditions imposed on such operators) in respect
      of
      the Assets, including, but not limited to, payment of royalties, delay rentals,
      shut-in royalties and any and all other required payments;

     

    (iii) Seller
      shall advise and consult with Purchaser on all material matters relating to
      the
      Assets, including, without limitation, all proposed authorizations for
      expenditures in excess of $5,000, farmout or farmin proposals or agreements,
      and
      amendments to agreements;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iv) Seller
      shall promptly notify Purchaser of any notice or threatened notice of which
      Seller becomes aware relating to any default, inquiry into any possible default,
      or action to alter, terminate, rescind or procure a judicial reformation of
      any
      Basic Document or any provision thereof; and

     

    (v) Seller
      shall pay timely (or in the case of Assets that are operated by a third party,
      shall use all reasonable efforts to cause the operator of such Assets to pay
      timely) all costs and expenses incurred in connection with the Assets, except
      to
      the extent such costs and expenses are contested in good faith utilizing
      appropriate action.

     

    (c) Unless
      specifically waived by Purchaser in writing, Seller shall not take (or in the
      case of Assets operated by a third party, shall use reasonable efforts to
      prevent such operator from taking) any of the following actions:

     

    (i) sell,
      assign, transfer, farmout, convey, mortgage, pledge or otherwise dispose of
      any
      of the Leasehold Interests or, except in the ordinary course of business and
      consistent with past practices, any other Assets, unless the disposition of
      any
      such Leasehold Interest or other Asset is required under any agreement or
      contract existing as of the Effective Time and to which Seller is a
      party; 

     

    (ii) voluntarily
      permit any leases or other material rights with respect to the Assets to expire,
      waive or release any material rights with respect to Assets, or relinquish
      its
      position as operator with respect to any property;

     

    (iii) to
      the
      extent related to the Assets, make any material change in the character of
      its
      business and operations or otherwise conduct its business and operations other
      than in accordance with standard industry practice or Seller’s prior business
      practice;

     

    (iv) enter
      into any agreement or contract relating to the Assets requiring, or committing
      to make, an expenditure (other than arising as a result of emergencies) in
      excess of $5,000 attributable to any individual Asset or $25,000 attributable
      to
      the Assets in the aggregate or enter into any agreement or contract except
      in
      the ordinary course of the operation of the Assets;

     

    (v) enter
      into any contract for the sale or other disposition, or any call or option
      for
      such purchase, of oil and gas, other hydrocarbons, minerals or other products
      produced or to be produced from the Leasehold Interests that is not terminable
      without penalty on thirty (30) days’ notice or less;

     

    (vi) supplement,
      modify, or amend in any material respect any of the Basic
      Documents;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (vii) commence
      any drilling, reworking or completing or similar operations on the Leasehold
      Interests (except emergency operations and operations required under presently
      existing contractual obligations);

     

    (viii) encumber
      any of the Assets other than Permitted Encumbrances (as defined below) or
      acquire any additional interests in any of the Assets other than non-consent
      interests; or

     

    (ix) commit
      to
      do any of the foregoing.

     

    As
      used
      herein, the term “Permitted
      Encumbrances”
shall
      mean: (a) lessors’ royalties, overriding royalties, reversionary interests and
      similar burdens (including calls on production or the right of a lessor to
      take
      production in kind) affecting a Leasehold Interest if the net cumulative effect
      of such burdens does not operate to reduce the interest of Seller with respect
      to all oil and gas produced from any units or wells below the “Net
      Revenue Interest”
or
      “NRI”
set
      forth in Exhibit
      A-2
      for such
      units or wells; (b) division orders and sales contracts terminable without
      penalty upon no more than 30 days’ notice to the purchaser of production; (c)
      subject to the obligations of Seller in Section
      10.1,
      materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s,
      tax, and other similar liens or charges arising in the ordinary course of
      business for obligations that are not yet due; and (d) easements, rights-of-way,
      servitudes, permits, surface leases and other rights of third parties in respect
      of surface operations, to the extent same do not have a material adverse affect
      on any of the Assets and/or the use and enjoyment thereof.

     

    (d) Seller
      shall give prompt written notice to Purchaser of (i) any notice of default
      (or
      written allegation of default, whether disputed or denied by Seller) received
      or
      given by Seller prior to the Closing Date under any instrument or agreement
      relating to the Assets, or (ii) anything else that Seller is or becomes aware
      of
      that would make any representation or warranty of Seller untrue, incorrect,
      or
      misleading in any material respect.

     

    (e) Seller
      shall afford Purchaser and Purchaser’s Representatives reasonable access to the
      Assets operated by Seller and the reasonable right to witness well tests thereon
      during normal business hours; provided that Seller shall not be obligated to
      give Purchaser more than twenty-four (24) hours advance notice of well tests
      if
      circumstances do not reasonably allow a longer notice period, and Seller shall
      use reasonable efforts to cause the operator of any portion of the Assets not
      operated by Seller to allow Purchaser reasonable access to such portion of
      the
      Assets and the records of such operator and the reasonable right to witness
      well
      tests thereon.

     

    (f) Prior
      to
      the Closing, Seller shall use its commercially reasonable efforts to obtain
      all
      authorizations and consents from applicable third parties, if any, required
      of
      Seller to permit it to consummate the transaction contemplated by this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) Seller
      will use its commercially reasonable efforts to cause all of the representations
      and warranties of Seller contained in this Agreement to remain true and correct
      in all respects.

     

    (h) Seller
      shall use its commercially reasonable efforts to satisfy the conditions to
      Closing set forth in Article
      8,
      to the
      extent same are within its control.

     

    (i) Seller
      shall keep in full force and effect until Closing insurance (including
      operator’s extra expense and casualty coverages for the Assets for which Seller
      is an operator) comparable in amount and scope of coverage to that now
      maintained by Seller.

     

    5.2 No
      Shop.
      Unless
      as otherwise provided in this Agreement, during the Interim Period, Seller
      shall
      not, directly or indirectly, seek, solicit or entertain competitive offers
      to
      purchase the Assets, or otherwise discuss the sale of the Assets with any party
      other than Purchaser.

     

    5.3 Suspended
      Funds. Seller
      shall notify Purchaser of any material increases or decreases to the Suspended
      Funds.

     

    ARTICLE
      6

    PRE-CLOSING
      OBLIGATIONS OF PURCHASER

     

    6.1 Purchaser’s
      Confidentiality Obligation.
      Purchaser agrees that information provided by Seller to Purchaser and its
      Affiliates and its or their lenders, and their respective officers, directors,
      employees, attorneys, accountants, engineers, agents, consultants, counsel
      and
      other representatives (collectively, “Purchaser’s
      Representatives”)
      in
      connection with this Agreement: (a) will be used only by Purchaser and
      Purchaser’s Representatives, and only for Purchaser’s investigation of the
      Assets; (b) will be held in strict confidence; (c) will not be used for any
      commercial purpose other than what is contemplated hereunder; and (d) will
      not,
      except as permitted hereunder, be provided to any third party. Purchaser shall
      use at least the same degree of care that Purchaser uses in protecting its
      own
      proprietary materials of a like kind. The foregoing obligation on Purchaser
      shall terminate on the earlier to occur of: (v) on the second anniversary of
      the
      Closing Date; (w) at the time of disclosure, if the information is in the public
      domain or hereinafter enters the public domain but not as a result of an
      unauthorized disclosure made directly or indirectly by Purchaser; (x) at the
      time of disclosure, if the information is or was available to Purchaser from
      a
      source other than Seller, provided that such source was not known by Purchaser
      to be bound by a confidentiality obligation to Seller; (y) the date on which
      Purchaser, in its good faith opinion, is required by law or applicable stock
      exchange regulation to disclose the information or data in question; or (z)
      on
      the date on which the information is or was independently acquired or developed
      by Purchaser not in violation of its confidentiality obligations hereunder.
      Purchaser shall reimburse, indemnify and hold Seller, its Affiliates, their
      respective officers, directors, employees, attorneys, accountants, engineers,
      agents, consultants, counsel and other representatives harmless from any damage,
      loss or expense incurred as a result of the use of the confidential information
      provided in connection with this Agreement, unless such damage, loss or expense
      arises from the gross negligence of Seller, its Affiliates, their respective
      officers, directors, employees, attorneys, accountants, engineers, agents,
      consultants, counsel and other representatives. Purchaser’s obligations under
      this Section
      6.1
      shall
      survive Closing and shall continue for a period of two (2) years from the
      Closing Date. The Parties acknowledge that the confidentiality provisions of
      this Agreement shall not apply to any disclosure required of, or reporting
      requirement applicable to, Purchaser or the Parent under the Securities and
      Exchange Act of 1934 or any other statutory reporting requirements of any
      Governmental Authority. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.2 Efforts
      Regarding Closing Conditions.
      Purchaser shall use commercially reasonable efforts to satisfy the conditions
      to
      Closing set forth in Article
      7,
      to the
      extent same are within its control.

     

    6.3 Consents.
      Prior to
      Closing, Purchaser shall use its commercially reasonable efforts to obtain
      all
      authorizations, consents and permits from applicable third parties, if any,
      required of Purchaser to permit it to consummate the transactions contemplated
      by this Agreement.

     

    6.4 Suspended
      Funds.
      If
      Closing occurs, Purchaser agrees to assume responsibility for the disbursement
      of all Suspended Funds.

     

    ARTICLE
      7

    SELLER’S
      CONDITIONS OF CLOSING

     

    Seller’s
      obligation to consummate the transactions provided for herein is subject to
      the
      satisfaction or waiver on or before the Closing Date of the following
      conditions:

     

    7.1 Representations
      and Warranties.
      The
      representations and warranties of Purchaser contained in Article
      4
      shall be
      true and correct in all material respects on the date of Closing as though
      made
      on and as of that date.

     

    7.2 Performance.
      Purchaser shall have performed in all material respects the obligations,
      covenants and agreements required hereunder to be performed by it at or prior
      to
      the Closing.

     

    7.3 Officer’s
      Certificate.
      Purchaser shall have delivered to Seller a certificate of a corporate officer,
      dated the date of Closing, certifying on behalf of Purchaser that the conditions
      set forth in Sections
      7.1 and 7.2
      have
      been fulfilled.

     

    7.4 Pending
      Matters.
      No suit,
      action or other proceeding by a non-affiliated third party or a Governmental
      Authority shall be pending or threatened which seeks substantial damages from
      Seller in connection with, or seeks to restrain, enjoin or otherwise prohibit,
      the consummation of the transactions contemplated by this Agreement.

     

    7.5 Certain
      Events.
      The sum
      of the aggregate reductions and allocated adjustments to the Purchase Price
      pursuant to Section
      2.3(a) and 2.3(b)
      shall
      not exceed $350,000.

     

    7.6 Purchaser’s
      Registration As Operator.
      Purchaser shall have delivered to Seller written evidence of Purchaser’s
      registration (subject only to the consummation of the transactions provided
      for
      herein) with the appropriate regulatory authorities as the operator of the
      Leasehold Interests in each instance in which Seller is the
      operator.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.7 Registration
      Rights Agreement.
      Purchaser shall have caused the Parent to execute and deliver to Seller a
      registration rights agreement in a form satisfactory to Seller, providing Seller
      “piggyback” registration rights with respect to the portion of the Purchase
      Price represented by the Parent’s common stock.

     

    ARTICLE
      8

    PURCHASER’S
      CONDITIONS OF CLOSING

     

    Purchaser’s
      obligation to consummate the transactions provided for herein is subject to
      the
      satisfaction or waiver on or before the Closing Date of the following
      conditions:

     

    8.1 Representations
      and Warranties.
      The
      representations and warranties of Seller contained in Article
      3
      shall be
      true and correct in all material respects on the date of Closing as though
      made
      on and as of that date.

     

    8.2 Performance.
      Seller
      shall have performed in all material respects the obligations, covenants and
      agreements required hereunder to be performed by it at or prior to the
      Closing.

     

    8.3 Officer’s
      Certificate.
      Seller
      shall have delivered to Purchaser a certificate of a corporate officer, dated
      the date of Closing, certifying on behalf of Seller that the conditions set
      forth in Sections
      8.1 and 8.2
      have
      been fulfilled and that none of the Assets nor any portion of them materially:
      (i) have been destroyed by fire; (ii) have experienced a blowout or other
      casualty; or (iii) have been subjected to any taking, or are subjected to any
      pending or threatened taking, in condemnation or under the right of eminent
      domain.

     

    8.4 Pending
      Matters.
      No suit,
      action or other proceeding by a non-affiliated third party or a Governmental
      Authority shall be pending or threatened which seeks substantial damages from
      Purchaser in connection with, or seeks to restrain, enjoin or otherwise
      prohibit, the consummation of the transactions contemplated by this Agreement.
      

     

    8.5 Certain
      Events.
      The sum
      of the aggregate reductions to the Purchase Price pursuant to Sections
      2.3(a) and 2.3(b)
      shall
      not exceed $350,000.

     

    8.6 Operatorship.
      Purchaser shall be satisfied in its reasonable discretion that it will succeed
      to or will become operator of all units and wells comprising a part of the
      Assets that were being operated by Seller at the Effective Time.

     

    8.7 No
      Material Adverse Change.
      Since
      the date of this Agreement, there shall have been no material adverse change
      in
      the value of the Assets and no event shall have occurred that has had, or is
      reasonably likely to have, a material adverse effect on the ability of Purchaser
      to own and operate the Assets, and enjoy the benefits associated therewith,
      in
      the same fashion as Seller has prior to the date hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      9

    CLOSING

     

    9.1 Time
      and Place of Closing.
      Subject
      to the conditions stated in this Agreement and unless the Parties agree
      otherwise, the consummation of the transactions contemplated hereby
      (“Closing”)
      shall
      occur no later than 10:00 a.m. on September 21, 2007; provided, however, that
      if
      all of the conditions to Closing set forth in Article
      7
      and
Article
      8
      have not
      been satisfied or waived by such date or any extended date for Closing, the
      Party whose obligation to close is subject to the conditions that have not
      been
      satisfied or waived shall have the right to extend the date of Closing for
      successive periods of up to five (5) Business Days each until such conditions
      shall have been satisfied or waived or until this Agreement shall have been
      terminated pursuant to Section
      11.1.
      The
      date Closing actually occurs is herein called the “Closing
      Date.”
The
      Closing shall be held at the Houston offices of counsel to Purchaser, Gordon,
      Arata, McCollam, Duplantis & Eagan, LLP, located at 2200 West Loop South,
      Suite 1050, Houston, Texas 77027, or at such other location as may be mutually
      agreed upon by Seller and Purchaser.

     

    9.2 Closing
      Obligations.
      At the
      Closing, the following events shall occur:

     

    (a) Seller
      and Purchaser shall execute, acknowledge and deliver to each other the
      Assignment, Bill of Sale, and Conveyance in the form of Exhibit
      9.2(a)
      conveying Defensible Title to the Assets to Purchaser (the “Conveyance”).
      In
      the Conveyance contemplated hereby, Seller shall bind itself and its successors
      and assigns to warrant title to the Assets unto Purchaser, its successors and
      assigns, against every person whomsoever lawfully claiming or to claim the
      same
      or any part thereof by, through and under Seller, but not otherwise, and with
      full substitution and subrogation of Purchaser in and to all warranties of
      title
      heretofore made by Seller’s predecessors in title in respect of the
      Assets.
      The
      Parties acknowledge and agree that the Conveyance shall be effective as of
      the
      Effective Time and recorded only if Closing occurs.

     

    (b) Seller
      and Purchaser shall execute, acknowledge and deliver to each other letters
      in
      lieu of transfer orders directing all parties paying for production to make
      payment to Purchaser of proceeds attributable to production from the Leasehold
      Interests after the Effective Time (to the extent such proceeds have not
      previously been disbursed to Seller);

     

    (c) Purchaser
      shall make the payment described in Section
      2.3 by
      a wire
      transfer of immediately available funds to an account designated by
      Seller;

     

    (d) Purchaser
      shall, or shall cause the Parent to, deliver the stock certificates described
      in
Section
      2.1(c);

     

    (e) Seller
      and Purchaser shall exchange the certificates described in Sections
      7.3 and 8.3;

     

    (f) Seller
      shall execute and deliver and Purchaser shall cause the Parent to execute and
      deliver a registration rights agreement in customary form providing Seller
      “piggyback” registration rights with respect to the portion of the Purchase
      Price represented by the Parent’s common stock;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) Seller
      shall execute such other instruments and take such other action as may be
      necessary to carry out its obligations under this Agreement; and

     

    (h) Purchaser
      shall execute such other instruments and take such other action as may be
      necessary to carry out its obligations under this Agreement.

     

    ARTICLE
      10

    ADDITIONAL
      AGREEMENTS

     

    10.1 Receipts,
      Credits,
      Costs and Expenses.
      Unless
      otherwise provided in this Agreement, all monies, proceeds, receipts, credits
      and income attributable to the Assets: (a) for all periods of time on and
      subsequent to the Effective Time (but only if Closing occurs) shall be the
      sole
      property and entitlement of Purchaser, and, to the extent received by Seller,
      Seller shall fully disclose, account for and transmit same to Purchaser
      promptly; and (b) for all periods of time prior to the Effective Time, shall
      be
      the sole property and entitlement of Seller and, to the extent received by
      Purchaser, Purchaser shall fully disclose, account for and transmit same to
      Seller promptly. Unless otherwise provided in this Agreement, all costs,
      expenses, disbursements, obligations and liabilities attributable to the Assets:
      (i) for periods of time prior to the Effective Time, regardless of when due
      or
      payable, shall be the sole obligation of Seller and Seller shall promptly pay,
      or if inadvertently paid by Purchaser and not contested by Seller, promptly
      reimburse Purchaser for and hold Purchaser harmless from and against same;
      and
      (ii) for periods of time on and subsequent to the Effective Time (but only
      if
      Closing occurs), regardless of when due or payable, shall be the sole obligation
      of Purchaser and Purchaser shall promptly pay, or if inadvertently paid by
      Seller and not contested by Purchaser, promptly reimburse Seller for and hold
      Seller harmless from and against same.

     

    10.2 Suspense
      Accounts.
      Seller
      shall transfer to Purchaser only those monies held in suspense by Seller at
      Closing that relate to royalties and overriding royalties as to which Purchaser
      shall be responsible for distribution after Closing. In addition to the
      information set forth on Exhibit
      3.14,
      Seller
      agrees to provide to Purchaser any information reasonably requested by Purchaser
      regarding all of Seller’s accounts holding monies in suspense that will be
      transferred to Purchaser. Purchaser agrees to take and apply such monies in
      a
      manner consistent with applicable Legal Requirements and with prudent oil and
      gas business practices and to indemnify the Seller Group (as defined below)
      against any claim relating to the failure to pay such funds after Closing in
      accordance with the instructions or information delivered to Purchaser by
      Seller.

     

    10.3 Cross
      Indemnity.
      If the
      Closing occurs, Seller and Purchaser agree as follows:

     

    (a) Subject
      to the terms of Article
      12,
      which
      shall control with respect to the tax matters covered thereby, Purchaser agrees
      to indemnify, defend and hold harmless Seller and its directors, officers,
      employees, agents and representatives (the “Seller
      Group”)
      from
      and against any and all claims, liabilities, losses, costs and expenses
      (including, without limitation, court costs and reasonable attorneys’ fees, but
      excluding any amounts reimbursed from third party insurance) (collectively,
      “Losses”),
      including Losses arising from the negligence (but not gross negligence) of
      Seller that are attributable to: (i) a breach by Purchaser of its
      representations and warranties or a failure by Purchaser to perform in all
      respects any of its covenants, agreements, or obligations in this Agreement
      or
      in any agreement delivered by Seller at Closing (disregarding any qualifications
      with respect to materiality or material adverse effect); or (ii) the ownership
      or operation of the Assets after the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Subject
      to the terms of
      Article 12,
      which
      shall control with respect to the tax matters covered thereby, Seller agrees
      to
      indemnify, defend and hold harmless Purchaser and its directors, officers,
      employees, agents and representatives from and against any and all Losses,
      including Losses arising from the negligence (but not gross negligence) of
      Purchaser that are attributable to: (i) a breach by Seller of its
      representations and warranties or a failure by Seller to perform in all respects
      any of its covenants, agreements, or obligations in this Agreement or in any
      agreement delivered by Purchaser at Closing (disregarding any qualifications
      with respect to materiality or material adverse effect); or (ii) the ownership
      or operation of the Assets prior to the Closing Date. 

     

    (c) The
      indemnity, defense and hold harmless obligations set forth in Sections
      10.3(a) and (b)
      above:
      (i) shall not limit or otherwise affect the scope of any indemnities given
      by
      Purchaser to Seller, or Seller to Purchaser, pursuant to the terms of this
      Agreement; (ii) shall not apply to either Party’s costs and expenses with
      respect to the negotiation and consummation of this Agreement and the
      transactions contemplated hereby; (iii) shall not apply to any amount that
      was
      taken into account as an adjustment to the Purchase Price pursuant to the
      provisions hereof, and (iv) are independent of and in addition to the rights
      and
      remedies that the Parties may have at law or in equity or otherwise for any
      default. 

     

    (d) In
      the
      event a Party receives written notice of the commencement of any action or
      proceeding, the assertion of any claim by a third party or the imposition of
      any
      penalty or assessment for which indemnity may be sought pursuant to this
      Agreement, and such Party intends to seek indemnity from the other Party
      pursuant to this Agreement, within a reasonable time after receipt of such
      notice (or such earlier time as might be required to avoid prejudicing the
      indemnifying Party’s position), such Party (the “Indemnified
      Party”)
      shall
      provide the other Party (the “Indemnifying
      Party”)
      with
      written notice of such action, proceeding, claim, penalty or assessment with
      respect to which such indemnity has been invoked, together with a copy of such
      claim, process or other legal pleading, and the Indemnified Party shall fully
      cooperate with the Indemnifying Party in connection therewith. In the event
      that
      the Indemnifying Party, by the thirtieth (30th)
      day
      after receipt of notice of any such claim (or, if earlier, by the tenth
      (10th)
      day
      preceding the day on which an answer or other pleading must be served in order
      to prevent judgment by default in favor of the person asserting such claim),
      does not elect to defend against such claim, the Indemnified Party shall (upon
      further notice to the Indemnifying Party) have the right to undertake the
      defense, compromise or settlement of such claim on behalf of and for the account
      and risk of the Indemnifying Party and at the Indemnifying Party’s expense,
      subject to the right of the Indemnifying Party to assume the defense of such
      claims at any time prior to settlement, compromise or final determination
      thereof. If the Indemnifying Party chooses to assume the entire defense of
      such
      claim or action (with counsel selected by it which is reasonably satisfactory
      to
      the Indemnified Party or person), the Indemnifying Party shall bear the entire
      cost of defending such claim or action. The Indemnifying Party shall not have
      the right to settle any such claim or action without the prior written consent
      of the Indemnified Party, which consent shall not be unreasonably withheld.
      In
      the event of the assumption of the defense by the Indemnifying Party, the
      Indemnifying Party shall not be liable for any further legal or other expenses
      subsequently incurred by the Indemnified Party or any person in connection
      with
      such defense unless otherwise agreed in writing by the Parties or as herein
      provided; provided, however, the Indemnified Party shall have the right to
      participate in such defense at its own cost. During any period when the
      Indemnifying Party is contesting any claim in good faith on behalf of the
      Indemnified Party, the Indemnified Party shall not pay, compromise or settle
      such claim without the Indemnifying Party’s consent (which shall not be
      unreasonably withheld or delayed); provided, that the Indemnified Party may
      nonetheless pay, compromise or settle the claim without consent during such
      period, in which event it shall be deemed to have, automatically and without
      any
      further action on its part, waived any right (whether or not pursuant to this
      Agreement) to indemnity in respect of all liabilities relating to the claim.
      Failure of a Party to give prompt notice of a claim for indemnification
      hereunder shall not affect such Party’s right to indemnification hereunder
      except to the extent that the Indemnifying Party shall have been materially
      prejudiced as a result of such failure.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    10.4 Purchaser
      Indemnity.
      If
      Closing occurs, Purchaser agrees as follows:

     

    (a) to
      assume
      responsibility for the disbursement of all Suspended Funds and to indemnify,
      defend, and hold harmless the Seller Group from and against any Losses
      attributable thereto; and;

     

    (b) to
      assume
      responsibility for plugging and abandonment of all wells described on
Exhibit
      A-2
      and to
      indemnify, defend, and hold harmless the Seller Group from and against any
      Losses attributable thereto.

     

    10.5 Assumption
      of Liabilities.
      Upon
      Closing, and subject to Seller’s indemnification obligation and limitations set
      forth in Sections
      10.3, 10.6 and 10.7
      for the
      period it remains in effect, Purchaser shall assume and timely and fully pay,
      perform and otherwise discharge, without recourse to the Seller Group, all
      obligations and liabilities, direct or indirect, known or unknown, asserted
      or
      unasserted, absolute or contingent, arising under or with respect to the
      ownership or operation of the Assets on or after the Effective Time, including,
      without limitation: 

     

    (a) the
      condition of the Assets on the date of Closing (including, without limitation,
      all obligations to properly plug and abandon, or replug and re-abandon, wells
      located on the Leasehold Interests, to restore the surface of the Leasehold
      Interests and to comply with, or to bring the Leasehold Interests into
      compliance with, Environmental Laws, including conducting any remediation
      activities which may be required on or otherwise in connection with activities
      on the Leasehold Interests), provided that such condition or the events giving
      rise to such condition arose or occurred on or after the Closing, and

     

    (b) the
      proper payment of any rentals and royalties with respect to the Leasehold
      Interests. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    10.6 Limitations
      on Indemnification.
      Notwithstanding anything herein to the contrary:

     

    (a) Seller
      shall have no liability or obligation for any Losses under any indemnification
      provided under this Agreement, including Section
      12.5,
      unless
      the aggregate Losses which Purchaser is entitled to recover under this
      Agreement, including Section
      12.5,
      exceed
      ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000). 

     

    (b) In
      addition, in no event shall Seller be obligated under this Agreement to
      indemnify Purchaser for an aggregate amount of Losses in excess of the Adjusted
      Purchase Price.

     

    10.7 Exclusive
      Remedy.
      The
      sole and exclusive remedy of Purchaser with respect to the Assets shall be
      pursuant to the express provisions of this Agreement. Without limitation of
      the
      foregoing, if Closing occurs, the sole and exclusive remedy of Purchaser, for
      any and all (a) claims relating to any representations, warranties, covenants
      and agreements that are contained in this Agreement or in any certificate
      delivered at Closing, (b) other claims pursuant to or in connection with this
      Agreement, and (c) other claims relating to the Assets and the purchase and
      sale
      thereof, shall be any right to indemnification from such claims that is
      expressly provided herein, and if no such right of indemnification is expressly
      provided, then such claims are hereby waived to the fullest extent permitted
      by
      law. If Closing occurs, Purchaser shall also be deemed to have waived, to the
      fullest extent permitted under applicable law, any right to contribution against
      Seller (including, without limitation, any contribution claim arising under
      any
      applicable Environmental Law) and any and all other rights, claims and causes
      of
      action it may have against Seller arising under or based on any Legal
      Requirements or common law or otherwise not provided under this
      Agreement.

     

    10.8 Indemnification
      Despite Negligence.
      THE
      INDEMNIFICATION PROVIDED IN SECTIONS
      10.3 TO 10.7
      AND SECTION
      12.5 WILL
      BE APPLICABLE WHETHER OR NOT THE SOLE, JOINT, OR CONTRIBUTORY NEGLIGENCE (BUT
      NOT GROSS NEGLIGENCE), OR STRICT LIABILITY OF THE INDEMNIFIED PARTY IS ALLEGED
      OR PROVEN. THE PARTIES AGREE THE PRECEDING SENTENCE IS COMMERCIALLY
      CONSPICUOUS.

     

    10.9 Further
      Assurances.
      After
      Closing, Seller and Purchaser agree to take such further actions and to execute,
      acknowledge and deliver such additional documents and instruments as may be
      necessary or useful in carrying out the purposes of this Agreement or of any
      document delivered pursuant hereto.

     

    10.10 Records.
      As soon
      as reasonably possible following Closing, but in any event prior to the 30th
      day
      following Closing, Seller shall make all Records available for delivery to
      Purchaser at Seller’s offices in Houston, Texas. Prior to the expiration of such
      thirty (30) day period, Seller shall give Purchaser full and complete access
      to
      such Records, except to the extent same have been sent off-site by Seller for
      copying. Seller may retain copies of the Records, provided that Seller shall
      protect the confidentiality of (i) geophysical and geological information
      relating to the Assets; and (ii) the Records, unless (y) such information is
      already in the public domain or hereinafter enters the public domain but not
      as
      a result of an unauthorized disclosure made directly or indirectly by Seller;
      or
      (z) Seller, in its good faith opinion, is required by law or applicable stock
      exchange regulation to disclose the information or data in question. In the
      event that Seller does not retain originals or copies of certain Records, Seller
      shall have the right to review and copy the Records during normal business
      hours
      upon reasonable notice for so long as Purchaser retains the Records. Purchaser
      agrees that the Records will be maintained in compliance with all applicable
      Legal Requirements governing document retention.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    10.11 Cooperation
      Regarding Operatorship.
      Prior
      to and following Closing, Seller agrees to use its commercially reasonable
      efforts to assist and cooperate with Purchaser in connection with Purchaser’s
      efforts to secure operatorship of the wells and units constituting a part of
      the
      Assets. 

     

    10.12 Mediation
      and Arbitration.
      The
      Parties will attempt in good faith to resolve any controversy or dispute arising
      out of or relating to this Agreement and all existing contracts between the
      Parties promptly by negotiations between themselves. The negotiation process
      may
      be started by the giving of written notice by any Party to the other Party
      in
      accordance with the terms of the notice provision of this Agreement, and the
      Parties agree to negotiate in good faith, and select an independent mediator
      to
      facilitate the negotiations and conduct up to eight (8) consecutive hours of
      mediated negotiations in Houston, Texas within thirty (30) days after the notice
      is first sent. If, within ten (10) days after the initial notice, the Parties
      are not able to agree upon a mediator, the Parties shall immediately proceed
      to
      arbitration. Fees and expenses of the mediator shall be borne equally by the
      Parties.

     

    No
      litigation or other proceeding may ever be instituted at any time in any court
      for any purpose, except as may be set forth in Section
      10.12(f)
      hereof.

     

    (a) If
      a
      controversy or dispute is not resolved after completion of the negotiation
      process described above, then, upon notice by any Party to the other Party
      (an
“Arbitration
      Notice”)
      and to
      the American Arbitration Association (the “AAA”),
      the
      controversy or dispute arising under or relating to this Agreement and all
      existing contracts between the Parties shall be submitted to an arbitration
      panel selected in accordance with Section
      10.12(b)
      for
      binding arbitration in Houston, Texas, in accordance with the AAA’s Commercial
      Arbitration Rules (the “Rules”).
      The
      Parties agree that they will faithfully observe this Agreement and the Rules
      and
      that they will abide by and perform any award rendered by the arbitration panel.
      The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C.
      Section 1-16. The award or judgment of the arbitration panel shall be final
      and
      binding on all Parties and judgment upon the award or judgment of the
      arbitration panel may be entered and enforced by any court having competent
      jurisdiction. If any Party becomes the subject of a bankruptcy, receivership
      or
      other similar proceeding under the laws of the United States of America, any
      state or commonwealth or any other nation or political subdivision thereof,
      then, to the extent permitted or not prohibited by applicable law, any factual
      or substantive legal issues arising in or during the pendency of any such
      proceeding shall be subject to all of the foregoing mandatory mediation and
      arbitration provisions and shall be resolved in accordance therewith. The
      agreements contained herein have been given for valuable consideration, are
      coupled with an interest and are not intended to be executory contracts. The
      fees and expenses of the arbitration panel shall be shared by all Parties
      engaged in the dispute or controversy on a basis determined to be fair and
      equitable by the arbitrators, taking into account the relative fault of each
      Party, the relative credibility and merit of all claims and defenses made by
      each Party and the cooperation, speed and efficiency of each Party in conducting
      the arbitration proceeding and complying with the Rules and with orders and
      requests of the arbitrators.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Promptly
      after the Arbitration Notice is given, each Party will select an arbitrator
      and
      the arbitrators so selected will in turn select an independent and impartial
      third arbitrator. If the arbitrators selected by the Parties are unable to
      agree
      on a third arbitrator, then either Party may notify the AAA and the AAA shall
      select the third arbitrator. Such third arbitrator selected in such manner
      shall
      not be entitled to compensation in excess of compensation paid to either of
      the
      other two arbitrators. The decision of the AAA with respect to the selection
      of
      the third arbitrator will be final and binding in such case. Such three (3)
      arbitrators will constitute the arbitration panel. 

     

    (c) Within
      ten (10) days after the selection of the arbitration panel, the Parties and
      their counsel will appear before the arbitration panel at a place and time
      in
      Houston, Texas, as may be designated by the arbitration panel for the purpose
      of
      each Party making a one (1) hour or less presentation and summary of the case.
      Thereafter, the arbitration panel shall set dates and times for additional
      hearings until the proceeding is concluded. The desire and goal of the Parties
      is, and the arbitration panel will be advised that its goal should be, to
      conduct and conclude the arbitration proceeding as expeditiously as
      possible. 

     

    (d) Any
      arbitral award may be enforced in a District Court of the State of Texas sitting
      in Houston, Texas or in the United States District for the Southern District
      of
      Texas, Houston Division, and, by execution and delivery of this Agreement,
      the
      Parties hereby accept for themselves and in respect of their property, generally
      and unconditionally, the nonexclusive jurisdiction of the aforesaid courts
      for
      said purpose and the Parties hereby irrevocably waive to the fullest extent
      permitted by law any objection, including, without limitation, any objection
      to
      the laying of venue or any objection based on the grounds of forum non
      conveniens, which they may now or hereafter have to the bringing of any such
      action or proceeding in such respective jurisdictions.

     

    (e) The
      arbitration panel will have no authority to award punitive or other damages
      not
      measured by the prevailing Party’s actual damages and may not, in any event,
      make any ruling, finding, or award that does not conform to the terms and
      conditions of this Agreement. This limitation of damages shall apply to any
      arbitration no matter when the proceeding is initiated and shall survive the
      termination of this Agreement without limit.

     

    (f) The
      provisions of this Section
      10.12
      relating
      to arbitration of disputes shall not apply to litigation that is instituted
      for
      the sole purpose of either: (i) compelling a Party to submit to arbitration
      in
      accordance with the provisions of this Section10.12;
      or (ii)
      obtaining enforcement of any award or judgment of the arbitrator(s) issued
      pursuant to this Section
      10.12.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    10.13 Removal
      of Name.
      As
      promptly as practicable, but in any case within thirty (30) days after the
      Closing Date, Purchaser shall eliminate the name “Prime Natural Resources, Inc.”
and any variants thereof from the Assets acquired pursuant to this Agreement
      and, except with respect to such grace period for eliminating existing usage,
      shall have no right to use any logos, trademarks or trade names belonging to
      Seller or any of its Affiliates.

     

    ARTICLE
      11

    TERMINATION

     

    11.1 Right
      of Termination.
      This
      Agreement and the transactions contemplated hereby may be
      terminated:

     

    (a) at
      any
      time at or prior to Closing by mutual consent of Seller and Purchaser;

     

    (b) by
      Seller
      if, on the Closing Date, the conditions to the obligations of Seller set forth
      in Article
      7
      have not
      been satisfied or have not been waived by Seller; 

     

    (c) by
      Purchaser if, on the Closing Date, the conditions to the obligations of Buyer
      set forth in Article
      8
      have not
      been satisfied or have not been waived by Purchaser; or

     

    (d) at
      any
      time at or after September 30, 2007, by Seller or Purchaser, by the delivery
      of
      a written notice to the other Party, if the Closing shall not have occurred
      by
      such date; 

     

    provided,
      however, no such Party may exercise any right of termination pursuant to this
      Section
      11.1
      if the
      event giving rise to such termination right shall be due to the willful failure
      of such Party to perform or observe in any material respect any of the covenants
      or agreements set forth herein to be performed or observed by such
      Party.

     

    11.2 Effect
      of Termination.
      If this
      Agreement is terminated pursuant to Section
      11.1,
      this
      Agreement shall become void and of no further force or effect (except for the
      provisions of Sections
      3.4, 4.4, 6.1,
      10.12(e), 11.3, 13.1 through 13.8, 13.10 to 13.12,
      which
      shall survive such termination and continue in full force and effect); provided,
      however, that, if either Party is in default of its obligations under this
      Agreement at the time this Agreement is so terminated, such defaulting Party
      shall continue to be liable to the other Party for damages (but in no event
      for
      specific performance) in respect of such default and such liability shall not
      be
      affected by such termination.

     

    11.3 Return
      of Data.
      Purchaser agrees that if this Agreement is terminated for any reason whatsoever,
      Purchaser shall promptly return to Seller all information furnished by or on
      behalf of Seller to Purchaser and Purchaser’s Representatives in connection with
      this Agreement or Purchaser’s investigation of the Assets, together with all
      copies, extracts or excerpts of such information.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      12

    TAXES

     

    12.1 Apportionment
      of Ad Valorem and Property Taxes.
      All ad
      valorem taxes, real property taxes, personal property taxes and similar
      obligations (“Property
      Taxes”)
      attributable to the Assets shall be apportioned as of the Effective Time between
      Seller and Purchaser as an adjustment to the Purchase Price pursuant to
Section
      2.2(d);
      provided, however, that any Property Taxes which are calculated based on the
      value or amount of production during a given period shall be apportioned to
      the
      period during which such production occurred, regardless of the date on which
      such taxes are assessed and/or payable. The owner of record on the assessment
      date shall file or cause to be filed all required reports and returns incident
      to the Property Taxes and shall pay or cause to be paid to the taxing
      authorities all Property Taxes relating to the tax periods during which such
      production occurred. If Seller is the owner of record on the assessment date,
      then Purchaser’s pro rata portion, if any, of such Property Taxes shall be taken
      into account as an adjustment to the Purchase Price pursuant to Section
      2.2.
      If
      Purchaser is the owner of record as of the assessment date then Seller shall
      pay
      to Purchaser Seller’s pro rata portion of such Property Taxes, if any, within
      fifteen (15) days from the date such taxes are required to be paid to the taxing
      authorities and after receipt of Purchaser’s invoice therefor, except to the
      extent Seller’s pro rata portion of such Property Taxes has been taken into
      account as an adjustment to the Purchase Price pursuant to Section
      2.2.

     

    12.2 Transfer
      Taxes.
      Purchaser shall be liable for all Transfer Taxes (as defined below) required
      to
      be paid in connection with the sale of the Assets pursuant to this Agreement.
      If
      the transfer of the Assets pursuant to this Agreement is exempt from applicable
      Transfer Taxes, Purchaser shall, at Closing, provide Seller with proof thereof.
      As used herein, the term “Transfer
      Taxes”
means
      any sales, use and excise taxes.

     

    12.3 Other
      Taxes.
      All
      taxes (other than franchise and income taxes and taxes covered by Section
      10.1)
      attributable to the Assets that are imposed on or with respect to the production
      of oil, natural gas or other hydrocarbons or minerals or the receipt of proceeds
      therefrom (including but not limited to severance, production, and excise taxes)
      shall be apportioned between the Parties based upon the respective shares of
      production taken by the Parties. All such taxes that have accrued with respect
      to the period prior to the Closing Date have been or will be properly paid
      by or
      on behalf of Seller and Seller shall be responsible for filing or causing to
      be
      filed all statements, returns, and documents incident thereto. Purchaser shall
      be responsible for paying or withholding or causing to be paid or withheld
      all
      such taxes which have accrued after the Closing Date and for filing all
      statements, returns, and documents incident thereto.

     

    12.4 Cooperation.
      Each
      Party shall provide the other Party with reasonable access to all relevant
      documents, data and other information (other than that which is subject to
      an
      attorney-client privilege) which may be required by the other Party for the
      purpose of preparing tax returns, filing refund claims and responding to any
      audit by any taxing jurisdiction with respect to the Assets. Each Party shall
      use commercially reasonable effort to cooperate with all reasonable requests
      of
      the other Party made in connection with contesting the imposition of any taxes
      with respect to the Assets. Notwithstanding anything to the contrary in this
      Agreement, neither Party shall be required at any time to disclose to the other
      Party any tax return or other confidential tax information. Except where
      disclosure is required by applicable law or judicial order, any information
      obtained by a Party pursuant to this Section
      12.4
      shall be
      kept confidential by such Party, except to the extent disclosure is required
      in
      connection with the filing of any tax returns or claims for refund or in
      connection with the conduct of an audit, or other proceedings in response to
      an
      audit, by a taxing jurisdiction with respect to the Assets.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    12.5 Indemnification
      for Tax.

     

    (a) Subject
      to the provisions of Sections
      10.6, 10.7 and 12.5(b),
      Seller
      shall indemnify Purchaser for all liabilities for taxes assessed by any
      governmental authorities in respect of the ownership or operation of the Assets
      prior to the Effective Time, together with penalties and interest thereon
      (provided such penalties and interest do not result from the negligence, late
      filing, fraud or acts of misfeasance or malfeasance of Purchaser); provided,
      however, that such indemnity shall not apply to: (i) income taxes arising out
      of
      the ownership of the Assets after the Effective Time; (ii) Property Taxes
      apportioned to Purchaser pursuant to Section
      12.1;
      and
      (iii) any taxes for any tax period beginning prior to the Closing Date and
      ending after the Closing Date which is allocable to the portion of such period
      occurring on or after the Closing Date. Seller shall be entitled to all refunds
      or rebates of taxes paid in respect of the ownership or operation of the Assets
      prior to the Effective Time. Subject to the provisions of Section
      12.5(b),
      Purchaser shall indemnify Seller for all liabilities for taxes assessed by
      any
      governmental authorities, together with penalties and interest thereon (provided
      such penalties and interest do not result from the negligence, late filing,
      fraud or acts of misfeasance or malfeasance of Seller), to the extent such
      liabilities relate to the ownership or operation of the Assets from and after
      the Effective Time; provided, however, that such indemnity shall not apply
      to:
      (i) income taxes arising out of the ownership of the Assets prior to the
      Effective Time; (ii) Property Taxes apportioned to Seller pursuant to
Section
      12.1;
      and
      (iii) any taxes for any tax period beginning prior to the Closing Date and
      ending after the Closing Date which is allocable to the portion of such period
      occurring prior to the Closing Date.

     

    (b) In
      order
      for Seller or Purchaser (“Claimant”)
      to
      make a claim against the other (“Indemnitor”)
      under
      this Article
      12,
      Claimant shall give prompt written notice to Indemnitor of any liability for
      which Claimant could claim indemnification under this Article
      12,
      which
      notice shall include the circumstances surrounding such liability. Indemnitor
      shall then have the right but not the obligation, to contest such liability
      at
      its sole cost and expense by giving written notice to Claimant of such election
      within thirty (30) days after Indemnitor receives Claimant’s notice. Should
      Indemnitor fail to notify Claimant within such 30-day period, Indemnitor shall
      be deemed to have elected not to contest such liability. Should Indemnitor
      elect
      (or be deemed to have elected) not to contest such liability, Indemnitor shall
      pay the full amount due under Section
      12.5(a)
      in
      respect of such liability to Claimant in cash within thirty (30) days after
      Indemnitor elects (or is deemed to have elected) not to contest such liability.
      Except as specifically provided in this Section
      12.5
      with
      respect to certain tax issues which must be combined or joined with other tax
      issues, if Indemnitor elects to contest any such liability, Claimant shall
      give
      Indemnitor full authority to defend, adjust, compromise or settle such liability
      and any action, suit, or proceeding in which Indemnitor contests such liability,
      in the name of Claimant or otherwise as Indemnitor shall elect. In any
      administrative or legal proceeding, Indemnitor shall employ counsel selected
      by
      it and reasonably acceptable to Claimant. With respect to tax issues incident
      to
      any such liability that must be combined or joined with one or more other tax
      issues which Claimant desires to contest, Claimant and Indemnitor shall
      cooperate fully, and control of any administrative legal proceeding shall rest
      with the Party having the greater ultimate liability (including liability under
      Section
      12.5(a))
      for the
      taxes in dispute. The Party in control may not adjust, compromise or settle
      taxes which are contested by or on behalf of the other Party without the written
      consent of the other Party. With respect to any liability contested by
      Indemnitor under the terms of this Section
      12.5(b),
      Indemnitor shall pay the full amount due under Section
      12.5(a)
      in
      respect of such liability to Claimant in cash within thirty (30) days after
      the
      liability is finally determined either by settlement or pursuant to the final,
      non-appealable judgment of a court of competent jurisdiction.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      13

    MISCELLANEOUS

     

    13.1 Governing
      Law.
      THIS
      AGREEMENT AND ALL INSTRUMENTS EXECUTED IN ACCORDANCE WITH IT SHALL BE GOVERNED
      BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
      REGARD TO ITS CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
      OF
      ANOTHER JURISDICTION, EXCEPT TO THE EXTENT THAT IT IS MANDATORY THAT THE LAW
      OF
      SOME OTHER JURISDICTION, WHEREIN ANY ASSETS ARE LOCATED, SHALL
      APPLY.
      The laws
      of the state wherein the Leasehold Interests are located shall control as to
      all
      matters pertaining to title and to the evaluation of encumbrances placed upon
      such Leasehold Interests.

     

    13.2 Entire
      Agreement.
      This
      Agreement, including all Exhibits attached hereto and made a part hereof
      constitute the entire agreement between the Parties with respect to the subject
      matter hereof and thereof and supersede all prior agreements, understandings,
      negotiations and discussions, whether oral or written, of the Parties with
      respect to same (including, without limitation, the Letter of Intent executed
      by
      Seller and the Parent and dated July 3, 2007). No supplement, amendment,
      alteration, modification, waiver or termination of this Agreement shall be
      binding unless executed in writing by the Parties hereto.

     

    13.3 Waiver.
      No
      waiver of any of the provisions of this Agreement shall be deemed or shall
      constitute a waiver of any other provisions hereof (whether or not similar),
      nor
      shall such waiver constitute a continuing waiver unless otherwise expressly
      provided.

     

    13.4 Captions.
      The
      captions in this Agreement are for convenience only and shall not be considered
      a part of or affect the construction or interpretation of any provision of
      this
      Agreement.

     

    13.5 Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the Parties hereto
      and their respective successors and assigns.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    13.6 Notices.
      Any
      notice provided or permitted to be given under this Agreement shall be in
      writing, and shall either be by Email at the Email address provided below with
      sender confirmation of transmission, as provided herein, or by facsimile at
      the
      facsimile number provided below with sender confirmation of receipt, or by
      personal delivery or by depositing same with the U.S. Postal Service, addressed
      to the Party to be notified at the municipal street address provided below,
      postage prepaid, and registered or certified with a return receipt requested.
      Notice deposited with the U.S. Postal Service in the manner hereinabove
      described shall be deemed to have been given and received on the date of the
      delivery as shown on the return receipt. Notice served in any other manner
      shall
      be deemed to have been given and received only if and when actually received
      by
      the addressee (except that notice given by facsimile shall be deemed given
      and
      received upon receipt only if received during normal business hours and if
      received other than during normal business hours shall be deemed received as
      of
      the opening of business on the next Business Day, and notice by Email shall
      be
      effective immediately upon transmittal to the other Party, provided that a
      printed copy of the Email sent is preserved showing the date and time of
      transmission). For purposes of notice, the Email addresses, facsimile numbers,
      and municipal street addresses of the Parties shall be as follows:

     

    For
      Seller

     

    
      	
              Prime
                Natural Resources, Inc.

            
	
              2500
                City West Boulevard, Suite 1750

            
	
              Houston,
                Texas 77042

            
	
              Attn:
                Kenneth B. Reed, Land Manager

            
	
              Email:
                 kreed@primeri.com

            
	
              Facsimile
                No.: 713/953-3240

            

    

    

    For
      Purchaser

     

    
      	
              ICF
                Energy Corporation

            
	
              1400
                Woodloch Forest Drive, Suite 530

            
	
              The
                Woodlands, Texas 77380

            
	
              Attn:
                John I. Folnovic, President and CEO

            
	
              Email: john@tnecorp.com

            
	
              Facsimile
                No.: 832/553-7244

            

    

    

    Each
      Party shall have the right, upon giving ten (10) days’ prior notice to the other
      in the manner hereinabove provided, to change its address and other contact
      information for purposes of notice.

     

    13.7 Expenses.
      Except
      as otherwise provided herein, each Party shall be solely responsible for all
      of
      its expenses incurred in connection with this Agreement and the transactions
      contemplated hereby, in particular, all expenses incurred in connection with
      any
      registration statement that may be filed, as contemplated in Section
      2.1(c)
      of this
      Agreement (including, without limitation, fees and expenses of its own counsel,
      brokers, finders, and consultants).

     

    13.8 Severability.
      If any
      term or other provision of this Agreement is invalid, illegal or incapable
      of
      being enforced under any rule of law, 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 a materially adverse manner with respect to either
      Party.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    13.9 Publicity.
      With
      regard to all publicity and other releases issued at or prior to the Closing
      concerning this Agreement and the transactions contemplated hereby, neither
      Party shall issue any publicity or other release without the prior written
      consent of the other Party, except as required by applicable law or the
      applicable rules or regulations of any governmental body or stock
      exchange.

     

    13.10 No
      Third-Party Beneficiary.
      Except
      as expressly provided herein, this Agreement is not intended to create, nor
      shall it be construed to create, any rights in any third party under doctrines
      concerning third-party beneficiaries. 

     

    13.11 Limitation
      of Damages.
      Notwithstanding any other provision of this Agreement (or any other agreement
      related hereto) to the contrary, in no event shall either Party be liable to
      the
      other or entitled to recover incidental, consequential, special, indirect,
      multiple, statutory, exemplary or punitive damages.

     

    13.12 Survival.
      The
      warranties, covenants and obligations of the Parties under this Agreement shall
      survive Closing. The special warranty of title (and representations of Seller
      set forth and contained in to the extent covered by the special warranty of
      title in Section
      9.2(a))
      shall
      survive Closing without limit. The representations of the Parties made in this
      Agreement shall survive Closing for a period of one (1) year except that: (i)
      those certain representations of Seller set forth and contained in Sections
      3.8,
      3.12
      and
3.14
      shall
      terminate at Closing; and (ii) those certain representations of Seller set
      forth
      and contained in Sections
      3.1
      to
3.5,
      Section
      3.11
      (to the
      extent covered by the special warranty of title in Section
      9.2(a)),
      Section
      3.22,
      Sections
      4.1
      to
      4.9,
      Section
      10.11(e),
      and
Section
      13.11
      shall
      survive Closing or termination of this Agreement and shall not
      expire.

     

    13.13 Counterparts;
      Exhibits.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. All Exhibits attached hereto are an integral part of this Agreement
      and are hereby made a part of this Agreement and incorporated herein by this
      reference. Any reference to this Agreement includes such Exhibits. All
      references in this Agreement to Exhibits shall be deemed to be references to
      the
      Exhibits attached hereto, as the same may be amended and supplemented by mutual
      agreement of the Parties at or prior to Closing. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      IN
        WITNESS WHEREOF,
        the
        Parties have executed this Agreement as of the day and year first set forth
        above.

       

      
        	
                SELLER:

              
	 	 
	
                Prime
                  Natural Resources, Inc.

              
	 	 
	
                By:

              	
                /s/
                  John
                  R. Hager

              
	
                Printed Name:
                  

              	
                John
                  R. Hager

              
	
                Title:
                  

              	
                Chief
                  Financial Officer

              
	 	 
	 	 
	
                PURCHASER:

              
	 	 
	
                ICF
                  Energy Corporation

              
	 	 
	
                By:

              	
                /s/
                  John Folnovic

              
	 	
                John
                  I. Folnovic,

              
	 	
                President
                  and CEO

              

      

       

      [Signatures
        continue on next page]

      

        Signature
          Page

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      The
        appearance herein and execution of this Agreement by the Parent is for the
        limited purpose of acknowledging the agreements of the Parties with respect
        to
        Sections ARTICLE
        22.1
        and 4.8
        of this Agreement insofar and only insofar as concerns the portion of the
        Purchase Price shall be paid in the common stock of the Parent and to agree
        to
        issue and deliver such stock in accordance with such provisions. Other than
        such
        limited appearance herein, the Parent makes no other agreements, covenants,
        representations or warranties whatsoever and such limited appearance shall
        not
        be construed by the Parties to have any other effect and the Parties hereby
        agree that such limited appearance by the Parent shall not create any other
        obligation or liability of, or with respect to, the Parent under this
        Agreement.

       

      
        	
                PARENT:

              
	 	 
	
                True
                  North Energy Corporation

              
	 	 
	
                By:

              	
                /s/
                  John Folnovic

              
	 	
                John
                  I. Folnovic,

              
	 	
                President
                  and CEO

              

      

       

      
        Signature
          Page

         

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    Exhibit
      2.3(a)

     

    Settlement
      Statement

     

    See
      attached.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      3.7

     

    Litigation

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.8

     

    Basic
      Documents

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.9

     

    Compliance
      with Laws

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.10

     

    Governmental
      Licenses

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      3.11

     

    Lease
      Obligations

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
      3.12

     

    Obligations
      Relating to Operations

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      3.13

     

    Operations
      Since Effective Time

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.14

     

    Marketing
      of Production; Suspense Funds

     

    See
      attached.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.15

     

    Taxes

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.16

     

    Preferential
      Rights and Restrictions on Assignment

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.17

     

    Improvements,
      Personalty, Equipment and Fixtures

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.18

     

    Wells

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      3.19

     

    Environmental
      Matters

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      9.2(a)

     

    ASSIGNMENT,
      BILL OF SALE AND CONVEYANCE

     

    STATE
      OF
      TEXAS

     

    COUNTY
      OF
      BRAZORIA

     

    This
      ASSIGNMENT,
      BILL OF SALE AND CONVEYANCE (this
      “Assignment”)
      is
      dated the ______ day of________, 2007, but effective as of the 1st day of July,
      2007, at 7:00 a.m., local time where the Properties (as such term is defined
      below) are located (the “Effective
      Time”),
      is
      from PRIME
      NATURAL RESOURCES, INC.,
      a
      Texas corporation, whose address is 2500 City West Boulevard, Suite 1750
      Houston, Texas 77042 (“Seller”)
      to ICF
      ENERGY CORPORATION, a Texas corporation, whose address is 1400 Woodloch Forest
      Drive, Suite 530, The Woodlands, Texas 77380 (“Purchaser”).

     

    FOR
      Ten
      Dollars and other good and valuable consideration, the receipt and sufficiency
      of which are hereby acknowledged, Seller has GRANTED,
      BARGAINED, SOLD, CONVEYED, ASSIGNED, TRANSFERRED, SET OVER
      and
DELIVERED
      and
      hereby GRANTS,
      BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS, SETS OVER
      and
DELIVERS
      unto
      Purchaser, effective as of the Effective Time, the following (collectively,
      the
“Properties,”
and
      individually, a “Property”):

     

    All
      of
      Seller’s right, title and interest in and to the oil and gas leases described or
      referred to in Exhibit
      A-1
      attached
      hereto and made a part hereof, and all other lands described or referred to
      in
Exhibit
      A-1,
      it
      being the intent of Seller to convey, and Seller does hereby convey to
      Purchaser, all right, title and interest in any wells and plants located on
      such
      leases and lands, including, without limitation, the wells described or referred
      to in Exhibit
      A-2
      attached
      hereto, and it also being the intent of Seller to convey, and Seller does hereby
      convey to Purchaser all of Seller’s right, title and interest in, to and under
      such leases, even though such interests, the lands covered thereby, or the
      leases themselves be incorrectly or qualitatively or quantitatively deficient
      and/or insufficiently described in, or a description of any such interest,
      leases or lands be omitted from Exhibit
      A-1,
      together with:

     

    (a)
      all
      of Seller’s right, title and interest in equipment, personal property and
      fixtures in, on and under the property described in Exhibits
      A-1 and A-2,
      including gas processing plants and gas gathering systems which are used with
      oil and/or gas operations thereon or thereunder, held for use in connection
      therewith or servicing the same, including, without limitation, the wells,
      injection wells, salt water disposal facilities, well heads, casing, tubing,
      pumps, motors, gauges, valves, heaters, treaters, gathering lines, flow lines,
      gas lines, water lines, vessels, tanks, boilers, equipment, separators,
      buildings, compressors, pipelines, power lines, machinery and other
      facilities;

     

    (b)
      all
      of Seller’s right, title and interest in, to and under or derived from
      unitization, pooling and operating agreements and the units created thereby
      (including any and all units formed under orders, regulations, rules or other
      official acts of the Governmental Authority having jurisdiction), whether
      recorded or unrecorded, insofar as the same cover or relate to the leases and
      lands described in Exhibit
      A-1;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)
      all
      of Seller’s right, title and interest, including future income, in, to and under
      or received from any production payments sales, purchase and processing
      contracts and agreements, including the gas processing rights and agreements
      associated with any gas processing plants, insofar as the same relate to any
      and
      all wells described in Exhibit
      A-2,
      including, without limitation, all permits, franchises, licenses, surface
      leases, servitudes, easements and rights-of-way relating to such wells or gas
      plants;

     

    (d)
      all
      of Seller’s right, title and interest in and to any rights which Seller may have
      under indemnifications, warranties, and covenants under prior conveyances
      affecting the interests sold, conveyed, transferred and assigned
      herein;

     

    (e)
      all
      of Seller’s right, title and interest in and to all petroleum and hydrocarbons
      stored upon or produced from the leases, lands, and wells described in
Exhibits
      A-1 and A-2
      or from
      any property pooled or unitized therewith which are attributable to the leases,
      lands, and wells described in Exhibits
      A-1 and A-2,
      pursuant to contract or otherwise;

     

    (f)
      all
      of Seller’s right, title and interest in and to all contracts and contractual
      rights relating to the leases, lands, and wells described in Exhibits
      A-1 and A-2
      and to
      the foregoing property to the extent valid and subsisting;

     

    (g)
      to
      the extent not prohibited by third party contracts, all of the files, records
      and data relating to the leases, lands, and wells described in Exhibits
      A-1 and A-2
      and to
      the items described in subsections (a) through (f) above (the “Records”),
      including, without limitation, title records (including abstracts of title
      and
      title curative documents); contracts; correspondence; microfiche lists; computer
      output; geological, geophysical and seismic records, plats, surveys, maps,
      cross-sections, data, and interpretive reports; engineering reports, whether
      produced by Seller’s personnel or outside consultants; and production records,
      electric logs, cuttings, cores, core data, pressure data and decline curves
      and
      graphical production curves, well files and all related matters; provided,
      that
      Seller has rights to make and retain copies of such Records as Seller may desire
      prior to the delivery of the Records to Purchaser and access to the Records
      as
      Purchaser may have in its possession in the future; and

     

    (h)
      the
      benefit of and the right to enforce the covenants and warranties, if any, which
      Seller is entitled to enforce with respect to the items described in the
      preceding paragraphs (a) through (g) against Seller’s predecessors in title
      thereto; and Purchaser and its successors, assigns and legal representatives
      shall be substituted and fully subrogated, to the extent assignable, in and
      to
      all covenants and warranties, if any, by Seller’s predecessors in title, with
      full subrogation of all rights accruing under the statutes of limitation or
      prescription. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Excluded
      Properties.
      The
      Properties do not include, and there is hereby expressly excepted and reserved
      to Seller (collectively the “Excluded
      Properties”):
      (A)
      all of Seller’s minute books, financial records, and other business records that
      relate to Seller’s business generally (excluding the ownership and operation of
      the Properties); (B) all trade credits, all accounts, receivables and all other
      proceeds, income or revenues attributable to the Properties with respect to
      any
      period of time prior to the Effective Time; (C) all claims and causes of action
      of Seller arising under or with respect to any contracts and agreements that
      are
      attributable to periods of time prior to the Effective Time (including claims
      for adjustments or refunds); (D) all rights and interests of Seller under any
      policy or agreement of insurance or indemnity, under any bond or to any
      insurance or condemnation proceeds or awards arising, in each case, from acts,
      omissions or events, or damage to or destruction of property prior to the
      Effective Time; (E) all oil, gas and other hydrocarbons produced and sold from
      the Properties with respect to all periods prior to the Effective Time; (F)
      all
      claims of Seller for refunds of or loss carry forwards with respect to
      production or any other taxes attributable to any period prior to the Effective
      Time, income or franchise taxes or any taxes attributable to the Excluded
      Properties; (G) all of Seller’s proprietary computer software, patents, trade
      secrets, copyrights, names, trademarks, logos and other intellectual property;
      (H) all documents and instruments of Seller that may be protected by an
      attorney-client privilege; (I) all audit rights arising under any of the
      contracts and agreements or otherwise with respect to any period prior to the
      Effective Time or to any of the Excluded Properties; (J) documents prepared
      or
      received by Seller with respect to lists of prospective purchasers for such
      transactions compiled by Seller, correspondence between or among Seller, its
      representatives, and any prospective purchaser other than Purchaser and
      correspondence between Seller or any of its respective representatives with
      respect to any of such prospective purchaser other than Purchaser, the
      prospective purchasers, or the transactions contemplated in that certain
      PURCHASE AND SALE AGREEMENT (a copy of which may be obtained from Purchaser
      at
      the above referenced address) dated the ____ day of August, 2007 by and between
      Seller and Purchaser (the “Purchase
      Agreement”);
      (K)
      all of Seller’s employee benefit plans, including all rights, obligations and
      assets related thereto; and (L) all of Seller’s rights and obligations under
      accounting and human resources outsource contracts.

     

    Purchaser
      shall not be responsible for, and Seller expressly retains, all liabilities
      related to the Excluded Properties, whether such liabilities arise before or
      after the Effective Time. It is understood that certain of the Excluded
      Properties may not be embraced by the term “Properties”. The fact that certain
      properties, rights and interests have been expressly excluded is not intended
      to
      suggest that had they not been excluded they would have constituted Properties
      and shall not be used to interpret the meaning of any word or phrase used in
      describing the Properties.

     

    TO
      HAVE
      AND TO HOLD
      the
      Properties unto Purchaser and its successors and assigns forever, and, and
      this
      Assignment is made with full rights of substitution and subrogation of Purchaser
      in and to all indemnifications, covenants, and warranties by others heretofore
      given or made with respect to the Properties, subject to the following terms
      and
      conditions:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1. Special
      Warranty of Title.
      Except
      with respect to matters to which this Assignment is made subject, Seller does
      hereby bind itself and its successors and assigns to WARRANT
      AND FOREVER DEFEND
      the
      interests in and to the Properties as set forth on Exhibits
      A-1 and A-2
      against
      every person whomsoever lawfully claiming the same or any part thereof by,
      through, or under Seller, but not otherwise, and does otherwise bind itself
      and
      its successors and assigns to WARRANT
      AND FOREVER DEFEND
      all and
      singular title to the Properties unto Purchaser, its successors and assigns,
      against every person whomsoever lawfully claiming the same or any part thereof
      by, through or under Seller, but not otherwise, as follows:

     

    (i) Seller
      is
      entitled to receive (free and clear of all royalties, overriding royalties,
      non-participating royalties, net profits interests, production payments, or
      other burdens on or measured by production of hydrocarbons) not less than the
      interest shown in Exhibit
      A-2
      (the
      decimal interest shown in the column in such Exhibit with the caption,
“NRI”)
      of all
      hydrocarbons produced, saved, and marketed from the applicable Property and
      of
      all hydrocarbons produced, saved and marketed from any unit of which the
      Property is a part and allocated to such Property, all without reduction,
      suspension, or termination of the interests in the relevant Property or Seller’s
      right to gross or net proceeds from the relevant Property throughout the
      duration of such Property, except as stated in Exhibit
      A-2;

     

    (ii) Seller
      is
      obligated to bear a percentage of the costs and expenses relating to the
      maintenance and development of, and operations relating to, the applicable
      Property and wells associated with the Property not greater than the working
      or
      expense-bearing interest shown in Exhibit
      A-2
      (the
      decimal interest shown in the column in such Exhibit with the caption,
“WI”)
      without increase of the working interest in the relevant Property throughout
      the
      duration of such Property, except as stated in Exhibit
      A-2;
      and

     

    (iii) the
      Properties are free and clear (except for Permitted Encumbrances, as such term
      is defined in the Purchase Agreement) of liens, encumbrances, obligations,
      or
      defects which arise as a result of actions taken (or effective) or omitted
      at or
      prior to the Effective Time, and (A) are otherwise subject only to contractually
      binding arrangements which are conventional, which are customarily experienced
      in the oil and gas industry, and (B) are not subject to any matters which will
      result in a breach of any representation or warranty of Seller made in this
      Assignment or to be contained in any documents to be delivered by Seller and
      connected with this Assignment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. DISCLAIMER.
      THE SPECIAL WARRANTY OF SELLER CONTAINED IN SECTION 1 ABOVE IS EXCLUSIVE AND
      IS
      IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY
      OR OTHERWISE, AND, WITHOUT LIMITATION ON THE SPECIAL WARRANTY CONTAINED IN
      SECTION 1 ABOVE, SELLER EXPRESSLY DISCLAIMS, AND PURCHASER HEREBY EXPRESSLY
      WAIVES ANY RIGHT OR CAUSE OF ACTION ARISING FROM OR RELATING TO, ANY AND ALL
      OTHER REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING,
      EXCEPT FOR THE SPECIAL WARRANTY CONTAINED IN SECTION 1 ABOVE, THE PROPERTIES
      SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHETHER
      EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO THE CONDITION, QUANTITY,
      QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES
      OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT FOR ITS FITNESS FOR ANY
      PURPOSE. SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, PURCHASER HAS
      INSPECTED, OR WAIVED ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES
      AND
      SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE
      AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED
      TO
      THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES,
      ASBESTOS AND OTHER MAN MADE MATERIAL FIBERS, OR NATURALLY OCCURRING RADIOACTIVE
      MATERIALS (COLLECTIVELY, “HAZARDOUS
      WASTES”).
      PURCHASER IS RELYING UPON ITS OWN INSPECTION OF THE PROPERTIES, AND PURCHASER,
      SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, HEREBY ACCEPTS ALL OF THE SAME
      IN THEIR “AS IS, WHERE IS” CONDITION. SELLER DISCLAIMS ALL LIABILITY ARISING IN
      CONNECTION WITH THE PRESENCE OF ANY HAZARDOUS WASTES ON THE PROPERTIES. IN
      ADDITION, SELLER AND ITS REPRESENTATIVES MAKE NO WARRANTY OR REPRESENTATION,
      EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION
      OR MATERIALS HERETOFORE OR HEREAFTER FURNISHED PURCHASER IN CONNECTION WITH
      THE
      PROPERTIES OR AS TO THE QUALITY OR QUANTITY OF OIL, GAS AND OTHER HYDROCARBON
      RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY OF THE
      PROPERTIES TO PRODUCE OIL, GAS AND OTHER HYDROCARBONS. ANY AND ALL SUCH DATA,
      INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER AND ITS REPRESENTATIVES
      WAS
      PROVIDED TO PURCHASER AS A CONVENIENCE AND ANY RELIANCE ON OR USE OF THE SAME
      HAS BEEN AND SHALL BE AT PURCHASER’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED
      BY LAW.

     

    3. Agreements.
      This
      Assignment is made subject to and shall be burdened by the terms, covenants
      and
      conditions contained in any contracts, agreements and instruments affecting
      the
      Properties; and at and after the Effective Time, with respect to the contracts,
      agreements, and instruments that are described on Exhibit
      A-3
      attached
      hereto, Purchaser agrees to be bound by, assume the obligations and rights
      arising under, and, from and after the Effective Time, perform all of the terms,
      covenants and conditions contained therein to which Seller is presently a
      party.

     

    4. Compliance
      With Laws:
      This
      Assignment is made subject to all applicable laws, statutes, ordinances,
      permits, decrees, orders, judgments, rules and regulations which are
      promulgated, issued or enacted by a governmental entity having appropriate
      jurisdiction, and Purchaser shall comply with the same from and after the date
      of this Assignment.

     

    5. Successors
      and Assigns.
      The
      terms, covenants and conditions contained in this Assignment shall be binding
      upon and inure to the benefit of the parties hereto and their respective
      successors, assigns, and legal representatives. 

     

    6. Covenants
      Running with the Land.
      The
      terms, covenants and conditions hereof shall be covenants running with the
      land
      and with each subsequent sale, conveyance, transfer or assignment of the
      Properties, or any part thereof. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7. Purchase
      Agreement.
      This
      Assignment is made in accordance with and is subject to the terms, covenants
      and
      conditions contained in the Purchase Agreement. Seller and Purchaser acknowledge
      and agree that in the event of any conflict or inconsistency between the terms
      and provisions of the Purchase Agreement and the terms and provisions of this
      Assignment, the terms and provisions of the Purchase Agreement shall control.
      

     

    8. Further
      Assurances.
      Seller
      and Purchaser agree to deliver or cause to be delivered to each other any
      additional instrument that the other party may reasonably request for the
      purpose of carrying out the intent of this Assignment. Seller shall execute,
      acknowledge and deliver all such further conveyances, transfer orders, division
      orders, notices, assumptions, releases and acquittances, and such other
      instruments, and shall take such further actions as may be necessary or
      appropriate to assure fully to Purchaser, its successors, assigns, and legal
      representatives, the conveyance of all of the Properties intended to be conveyed
      to Purchaser by the parties hereto. 

     

    9. No
      Rights Created in Third Parties.
      The
      references herein to liens, encumbrances, burdens, defects and other matters
      are
      for the purpose of defining the nature and extent of Seller’s warranty and shall
      not be deemed to ratify or create any rights in third parties. Except as
      otherwise provided herein, the terms and conditions of this Assignment shall
      inure to the benefit of, and be binding upon, the respective successors,
      assigns, and legal representatives of the parties hereto. Neither this
      Assignment nor any other agreement contemplated hereby shall be deemed to confer
      upon any person not a party hereto or thereto any rights or remedies hereunder
      or thereunder. 

     

    10. Counterparts;
      Exhibits.
      This
      Assignment may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. All Exhibits attached hereto are an integral part of this Assignment
      and are hereby made a part of this Assignment and incorporated herein by this
      reference. Any reference to this Assignment includes such Exhibits.

     

    11. Recording.
      Purchaser shall, at its own expense, record or cause to be recorded this
      Assignment in the county or counties in which the Properties are located.

     

    12. Governing
      Law.
      THIS
      ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF TEXAS, WITHOUT REGARD TO ITS CONFLICT OF LAW RULES THAT WOULD
      DIRECT APPLICATION OF THE LAWS OF ANOTHER JURISDICTION, EXCEPT TO THE EXTENT
      THAT IT IS MANDATORY THAT THE LAW OF SOME OTHER JURISDICTION, WHEREIN ANY OF
      THE
      PROPERTIES ARE LOCATED, SHALL APPLY.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, this Assignment is executed on the day and year first
      referenced above, but effective as of the Effective Time. 

     

    
      	 	SELLER: 
	 	 	 	 
	 	PRIME
              NATURAL RESOURCES, INC. 
	 	 	 	 
	 	By:  	 
	 	Printed
              Name: 	 
	 	Title:  	 
	 	 	 	 
	 	PURCHASER:
	 	 	 	 
	 	ICF
              ENERGY CORPORATION 
	 	 	 	 
	 	By: 	 
	 	 	John
              I. Folnovic,
	 	 	President
              and CEO

    

     

    STATE
      OF
      TEXAS

     

    COUNTY
      OF
      HARRIS

     

    BEFORE
      ME,
      on this
      _____________ day of ______________________, 2007, appeared
      ________________________, to me personally known, who, being by me duly sworn
      did say that he is the ____________________of PRIME
      NATURAL RESOURCES, INC.,
      a
      Texas corporation, and that said instrument was signed on behalf of said
      corporation by authority of its Board of Directors and such person acknowledged
      said instrument to be the free act and deed of said corporation.

     

    Given
      under my hand and seal of office the day and year last above
      written.

     

    
      	 
	Notary
              Public for the State of Texas
	Printed
              Name 	 

    

    
      	My commission expires:  	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    STATE
      OF
      TEXAS

     

    COUNTY
      OF
      HARRIS

     

    BEFORE
      ME,
      on this
      _____________ day of ______________________, 2007, appeared John I. Folnovic,
      to
      me personally known, who, being by me duly sworn did say that he is the
      President and CEO
      of
ICF
      ENERGY CORPORATION,
      a Texas
      corporation, and that said instrument was signed on behalf of said corporation
      by authority of its Board of Directors and such person acknowledged said
      instrument to be the free act and deed of said corporation.

     

    Given
      under my hand and seal of office the day and year last above
      written.

     

    
      
        	 
	Notary
                Public for the State of Texas
	Printed
                Name	 

      

      
        	My commission expires:  	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      EXHIBIT
        A-1

       

      LEASE
        SCHEDULE

       

      
        	
                Oil
                  and Gas Leases and Minerals

              
	
                Lessor

              	
                Lessee

              	
                Lease
                  Date

              	
                Recording
Information

              
	 	 	 	 
	
                Eugenia
                  T. Whitlock Trust

              	
                Roger
                  A Soape Inc

              	
                03/20/00

              	
                00
                  018426

              
	
                Cornelia
                  H. Decker , et al

              	
                Roger
                  A Soape Inc

              	
                03/20/00

              	
                00
                  021735

              
	
                Sylvia
                  A. Woodruff

              	
                Roger
                  A Soape Inc

              	
                03/02/00

              	
                00
                  013450

              
	
                Billie
                  Glenn Cornman

              	
                Roger
                  A Soape Inc

              	
                03/02/00

              	
                00
                  015575

              
	
                Vera
                  Carmel Brown

              	
                Roger
                  A Soape Inc

              	
                03/02/00

              	
                00
                  015576

              
	
                Ernest
                  E. Freeman, et ux

              	
                Roger
                  A Soape Inc

              	
                03/02/00

              	
                00
                  015577

              
	
                J.
                  H. Rayburn Jr, et al

              	
                Roger
                  A Soape Inc

              	
                02/17/00

              	
                00
                  013453

              
	
                Mary
                  L. Chase

              	
                Roger
                  A Soape Inc

              	
                02/24/00

              	
                00
                  024490

              
	
                J.
                  H. Rayburn, Jr.

              	
                Roger
                  A Soape Inc

              	
                02/17/00

              	
                00
                  018427

              
	
                Jack
                  S. Josey

              	
                Roger
                  A Soape Inc

              	
                07/25/00

              	
                00
                  044259

              
	
                J.
                  Shelby Bryan

              	
                Roger
                  A Soape Inc

              	
                07/28/00

              	
                00
                  044258

              
	
                Josephine
                  S Masterson

              	
                Roger
                  A Soape Inc

              	
                09/18/00

              	
                01
                  036412

              
	
                Kay
                  C. Foster

              	
                Roger
                  A Soape Inc

              	
                02/05/00

              	
                00
                  013451

              
	
                Marjorie
                  Persson, et al

              	
                Roger
                  A Soape Inc

              	
                02/06/00

              	
                00
                  013452

              
	
                Michael
                  M. Martin

              	
                Roger
                  A Soape Inc

              	
                03/17/00

              	
                00
                  018428

              
	
                William
                  Polk Martin

              	
                Roger
                  A Soape Inc

              	
                03/17/00

              	
                00
                  018429

              
	
                Thomas
                  Masterson, III, et al

              	
                Roger
                  A Soape Inc

              	
                07/17/00

              	
                00
                  033346

              
	
                Peter
                  M. Turnbull

              	
                Roger
                  A Soape Inc

              	
                07/11/00

              	
                00
                  039724

              
	
                Gloria
                  C. Wilburn

              	
                Roger
                  A Soape Inc

              	
                08/10/00

              	
                00
                  039725

              
	
                Lynne
                  Fisher Echegaray

              	
                Roger
                  A Soape Inc

              	
                08/15/00

              	
                00
                  044257

              
	
                Betsy
                  Schwarz Vaughan, et al

              	
                Roger
                  A Soape Inc

              	
                08/26/00

              	
                00
                  046881

              
	
                Compass
                  Bank Trustee

              	
                Prime
                  Natural Resources Inc

              	
                12/20/00

              	
                01
                  037779

              
	
                Mary
                  Nell Enlow Boyd

              	
                Roger
                  A Soape Inc

              	
                03/01/03

              	
                03
                  017685

              
	
                Robert
                  M. Davant Jr., et al

              	
                Roger
                  A Soape Inc

              	
                06/23/00

              	
                00
                  033342

              
	
                Elizabeth
                  L. Howe

              	
                Roger
                  A Soape Inc

              	
                07/01/00

              	
                00
                  033343

              
	
                Amelia
                  Ann Sundberg

              	
                Roger
                  A Soape Inc

              	
                07/01/00

              	
                00
                  033344

              
	
                Valerie
                  L. Hundley

              	
                Roger
                  A Soape Inc

              	
                07/01/00

              	
                00
                  033345

              
	
                Mary
                  L. Crecy

              	
                Prime
                  Natural Resources Inc

              	
                02/01/02

              	
                02
                  025904

              
	
                James
                  T. Little

              	
                Prime
                  Natural Resources Inc

              	
                02/03/02

              	
                02
                  025905

              
	
                Mary
                  Lou Eckerdt

              	
                Prime
                  Natural Resources Inc

              	
                02/02/02

              	
                02
                  025906

              
	
                Betty
                  Lou Patterson

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  025907

              
	
                John
                  W. Berry Jr

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  025908

              
	
                Robert
                  Little

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  025909

              
	
                Lewis
                  B. Demille

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  025910

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Norma
                  Lathrop

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  019489

              
	
                James
                  F. Lathrop, Jr.

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  019490

              
	
                Holy
                  Comforter Episcopal

              	
                Prime
                  Natural Resources Inc

              	
                02/05/02

              	
                02
                  019492

              
	
                Anne
                  H Mealey

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  019493

              
	
                Louise
                  A. Miller

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  019494

              
	
                George
                  Loe

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  029006

              
	
                Laura
                  Ruth Haynie

              	
                Prime
                  Natural Resources Inc

              	
                02/04/02

              	
                02
                  033083

              
	
                Paris
                  Eugene Smith

              	
                Prime
                  Natural Resources Inc

              	
                06/03/02

              	
                02
                  033084

              
	
                Sarah
                  Janin Wilson Zerr

              	
                Prime
                  Natural Resources Inc

              	
                06/03/02

              	
                02
                  039347

              
	
                K.
                  Wortham Smith

              	
                Prime
                  Natural Resources Inc

              	
                06/03/02

              	
                02
                  043286

              
	
                Floyd
                  Fiser, Jr.

              	
                Prime
                  Natural Resources Inc

              	
                10/23/02

              	
                03
                  003092

              
	
                Corinne
                  Laurie Brierley

              	
                Prime
                  Natural Resources Inc

              	
                10/23/02

              	
                03
                  003091

              
	
                Fern
                  Fletcher

              	
                Prime
                  Natural Resources Inc

              	
                02/21/03

              	
                03
                  022644

              
	
                Shirley
                  W. Fiser, et al

              	
                Prime
                  Natural Resources Inc

              	
                10/23/02

              	
                03
                  026623

              
	
                Herman
                  Bell, et ux

              	
                Prime
                  Natural Resources Inc

              	
                03/07/02

              	
                02
                  019491

              
	
                Jimmy
                  Phillips, Jr.

              	
                Prime
                  Natural Resources Inc

              	
                03/04/02

              	
                02
                  019495

              
	
                Michael
                  Phillips

              	
                Prime
                  Natural Resources Inc

              	
                03/04/02

              	
                02
                  019496

              
	
                Arthur
                  Ray Clark, Sr., et ux

              	
                Prime
                  Natural Resources Inc

              	
                03/09/02

              	
                02
                  029005

              
	
                Peggy
                  Gupton Boone

              	
                Prime
                  Natural Resources Inc

              	
                03/21/02

              	
                02-029001

              
	
                Dolores
                  Gupton Rader

              	
                Prime
                  Natural Resources Inc

              	
                03/21/02

              	
                02-029002

              
	
                Kirby
                  W. Gupton

              	
                Prime
                  Natural Resources Inc

              	
                03/06/02

              	
                02
                  029003

              
	
                Denise
                  Gupton Ingram

              	
                Prime
                  Natural Resources Inc

              	
                03/18/02

              	
                02
                  029004

              
	
                Earnestine
                  Grise Randon

              	
                Prime
                  Natural Resources Inc

              	
                03/09/02

              	
                02-029000

              
	
                Devon
                  Energy Production
                  Co.

              	
                Prime
                  Natural Resources Inc

              	
                04/29/02

              	
                02
                  049386

              
	
                Anthony
                  Alexander, Sr.

              	
                Prime
                  Natural Resources Inc

              	
                04/24/02

              	
                02
                  031957

              
	
                Josephine
                  Masterson

              	
                Prime
                  Natural Resources Inc

              	
                04/23/02

              	
                02
                  039348

              
	
                Jack
                  S. Josey

              	
                Prime
                  Natural Resources Inc

              	
                05/03/02

              	
                02
                  039349

              
	
                J.
                  Shelby Bryan

              	
                Prime
                  Natural Resources Inc

              	
                06/14/02

              	
                02
                  055294

              
	
                Eugenia
                  T. Whitlock Trust

              	
                Prime
                  Natural Resources Inc

              	
                04/22/02

              	
                03
                  010299

              
	
                Ethel
                  F. Graham, Indep. Exec.

              	
                Prime
                  Natural Resources Inc

              	
                11/15/03

              	
                03
                  078513

              
	
                Devon
                  Energy Production Co.

              	
                Prime
                  Natural Resources Inc

              	
                04/02/03

              	
                03
                  023650

              

      

      

      
        	
                Fee
                  Mineral Tract

              	
                All
                  of Prime Natural Resources, Inc. interest in 316.85 acres, more
                  or less
                  out of the S. F. Austin League No. 48. being the same lands conveyed
                  to
                  Prime Natural Resources, Inc. by Mineral and Royalty Deed from
                  Roger A.
                  Soape, Inc. dated July 18, 2003, recorded as Document No. 03 046145
                  of the
                  Official Records of Brazoria County,
                  Texas.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Units

              

      

       

      
        
          	
                  O’Leary
                    Unit No. 1

                	
                  662
                    acres of land, more or less, out of the Stephen F. Austin League
                    No. 48,
                    A-26 and the George Harrison Survey, A-73, Brazoria County, Texas,
                    described in that certain Designation of Unit (O’Leary Gas Unit) filed
                    June 13, 2003, recorded under Clerk’s File No. 03-035767, as amended by
                    documents recorded under Clerk’s File Nos. 03-046147 and 2004020014 of the
                    Official Records of Brazoria County, Texas.

                
	 	 
	
                  Devon
                    Fee Gas Unit

                	
                  401.85
                    acres, more or less, out of the Stephen F. Austin League No.
                    48, A-26,
                    Brazoria County, Texas, being the Devon Fee Gas Unit as described
                    in that
                    certain designation of Unit dated April 28, 2004, recorded at
                    Entry
                    2004024815, in the Official Records of Brazoria County,
                    Texas.

                

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A-2

       

      WELLS

       

      
        	
                Well

              	
                API
                  Well No.

              	
                Working
                  Interest

              	
                Net
                  Revenue Interest

              
	
                O’Leary
                  Unit No. 1

              	
                42-039-32803

              	
                40.6700%

              	
                29.0120%

              
	
                Devon
                  Fee No. 1

              	
                42-039-32823

              	
                75.0000%

              	
                60.4500%*

                 

                Includes
                  fee minerals

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      EXHIBIT
        A-3

       

      CONTRACTS

       

      DEVON
        FEE NO. 1

       

      
        	 	
                1.

              	
                Gas
                  Transportation Agreement
                  dated August 1, 2007, between Sweeny Gathering, L.P.. and Prime
                  Natural
                  Resources, Inc.

              

      

      

      
        	 	
                2.

              	
                Participation
                  Agreement
                  dated October 1, 2003 between Burk Davis Gulf Coast and Prime Natural
                  Resources, Inc.

              

      

      

      
        	 	
                3.

              	
                Joint
                  Operating Agreement
                  dated October 1, 2003 between Davis Gulf Coast and Prime Natural
                  Resources, Inc.

              

      

      

      
        	 	
                4.

              	
                Crude
                  Oil Sales Contract dated
                  May 24, 2004 between Cokinos Oil Company and Prime Natural Resources,
                  Inc.

              

      

      

      
        	 	
                5.

              	
                Gas
                  Sales Contract
                  dated May 24, 2004 between Prime Natural Resources, Inc. and Cokinos
                  Oil
                  Company

              

      

       

      O’LEARY
        GAS UNIT

      

      
        	 	
                1.

              	
                Crude
                  Oil Sales Contract dated
                  June 25, 2007 between Cokinos Oil Company and Prime Natural Resources,
                  Inc.

              

      

      

      
        	 	
                2.

              	
                Joint
                  Operating Agreement
                  dated February 14, 2003 between Davis Gulf Coast and Prime Natural
                  Resources, Inc.

              

      

      

      
        	 	
                3.

              	
                Letter
                  Agreement
                  dated May 2, 2003 between Davis Gulf Coast and Prime Natural Resources,
                  Inc.

              

      

      

      
        	 	
                4.

              	
                Letter
                  Agreement
                  dated March 13, 2003 between Davis Gulf Coast and Prime Natural
                  Resources,
                  Inc.

              

      

      

      
        	 	
                5.

              	
                Letter
                  of Intent
                  dated February 10, 2003 between Davis Gulf Coast and Prime Natural
                  Resources, Inc. 

              

      

      

      
        	 	
                6.

              	
                Sales
                  Letter
                  dated May 1, 2003 between Hilcorp and Prime Natural Resources,
                  Inc.
                  

              

      

      

      PROSPECTS
        

      

      
        	 	
                7.

              	
                Letter
                  Agreement
                  dated May 1, 2003 between Hilcorp and Prime Natural Resources,
                  Inc.
                  

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXPLORATION
        OPPORTUNITIES IN THE OLD OCEAN FIELD

       

      The
        following interests are described by and reserved in that certain Assignment,
        Conveyance and Bill of Sale, dated effective March 1, 2003 between Prime
        Natural
        Resources, Inc., as Assignor, and Hilcorp Energy I, L. P., as Assignee, filed
        for record and recorded May 13, 2003 in the Official Records of Brazoria
        County,
        Texas and filed for record on June 12, 2003 in the Official Records of Matagorda
        County, Texas, 

       

      
        	
                South
                  Sweeny Prospect

              	
                The
                  interests described in Exhibit A-4 of the above described Assignment.
                  This
                  interest is limited to the depths below the F-21 Sand and Prime
                  Natural
                  Resources, Inc. is obligated to P & A the Old Ocean Unit 238 well.
                  

              
	 	 

      

      
        	
                Old
                  Ocean Unit 240 Prospect Offset

              	
                The
                  interests described in Exhibit A-6 of the above described
                  Assignment

              
	 	 

      

      
        	
                Old
                  Ocean Unit 235 Prospect (F-24 Sand)

              	
                The
                  interests described in Exhibit A-7-I of the above described
                  Assignment

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]