Exhibit 10.1

AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF
AUGUST 9, 2006

AMONG

WHITTIER ENERGY CORPORATION,
AS BORROWER,

BNP PARIBAS,
AS ADMINISTRATIVE AGENT,

AND

THE LENDERS PARTY HERETO

SOLE  LEAD ARRANGER AND BOOKRUNNER

BNP PARIBAS

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

 

 

Page

ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS

 

 

 

 

 

Section 1.01

 

Terms Defined Above

 

1

Section 1.02

 

Certain Defined Terms

 

1

Section 1.03

 

Types and Classes of Loans and Borrowings

 

21

Section 1.04

 

Terms Generally

 

21

Section 1.05

 

Accounting Terms and Determinations; GAAP

 

22

 

 

 

 

 

ARTICLE II
THE CREDITS

 

 

 

 

 

Section 2.01

 

Commitments

 

22

Section 2.02

 

Loans and Borrowings

 

23

Section 2.03

 

Requests for Borrowings

 

25

Section 2.04

 

Interest Elections

 

25

Section 2.05

 

Funding of Borrowings

 

27

Section 2.06

 

Termination and Reduction of Aggregate Maximum Revolving Credit Amounts and Term
Loan Commitments

 

27

Section 2.07

 

Borrowing Base

 

28

Section 2.08

 

Letters of Credit

 

31

 

 

 

 

 

ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

 

 

 

 

Section 3.01

 

Repayment of Loans

 

36

Section 3.02

 

Interest

 

36

Section 3.03

 

Alternate Rate of Interest

 

37

Section 3.04

 

Prepayments

 

37

Section 3.05

 

Fees

 

40

 

 

 

 

 

ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.

 

 

 

 

 

Section 4.01

 

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

 

41

Section 4.02

 

Presumption of Payment by the Borrower

 

42

Section 4.03

 

Certain Deductions by the Administrative Agent

 

42

Section 4.04

 

Disposition of Proceeds

 

42

 

 

 

 

 

ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

 

 

 

 

 

Section 5.01

 

Increased Costs

 

43

Section 5.02

 

Break Funding Payments

 

44

Section 5.03

 

Taxes

 

44

Section 5.04

 

Designation of Different Lending Office

 

45

Section 5.05

 

Illegality

 

45

 

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ARTICLE VI
CONDITIONS PRECEDENT

 

 

 

 

 

Section 6.01

 

Effective Date

 

46

Section 6.02

 

Each Credit Event

 

48

 

 

 

 

 

ARTICLE VII
REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

Section 7.01

 

Organization; Powers

 

48

Section 7.02

 

Authority; Enforceability

 

49

Section 7.03

 

Approvals; No Conflicts

 

49

Section 7.04

 

Financial Condition; No Material Adverse Change

 

49

Section 7.05

 

Litigation

 

50

Section 7.06

 

Environmental Matters

 

50

Section 7.07

 

Compliance with the Laws and Agreements; No Defaults

 

51

Section 7.08

 

Investment Company Act

 

51

Section 7.09

 

Taxes

 

51

Section 7.10

 

ERISA

 

52

Section 7.11

 

Disclosure; No Material Misstatements

 

53

Section 7.12

 

Insurance

 

53

Section 7.13

 

Restriction on Liens

 

53

Section 7.14

 

Subsidiaries

 

53

Section 7.15

 

Location of Business and Offices

 

54

Section 7.16

 

Properties; Titles, Etc

 

54

Section 7.17

 

Maintenance of Properties

 

55

Section 7.18

 

Gas Imbalances, Prepayments

 

55

Section 7.19

 

Marketing of Production

 

55

Section 7.20

 

Swap Agreements

 

56

Section 7.21

 

Use of Loans and Letters of Credit

 

56

Section 7.22

 

Solvency

 

56

Section 7.23

 

Acquisition

 

56

 

 

 

 

 

ARTICLE VIII
AFFIRMATIVE COVENANTS

 

 

 

 

 

Section 8.01

 

Financial Statements; Ratings Change; Other Information

 

57

Section 8.02

 

Notices of Material Events

 

59

Section 8.03

 

Existence; Conduct of Business

 

60

Section 8.04

 

Payment of Obligations

 

60

Section 8.05

 

Performance of Obligations under Loan Documents

 

60

Section 8.06

 

Operation and Maintenance of Properties

 

60

Section 8.07

 

Insurance

 

61

Section 8.08

 

Books and Records; Inspection Rights

 

61

Section 8.09

 

Compliance with Laws

 

62

Section 8.10

 

Environmental Matters

 

62

Section 8.11

 

Further Assurances

 

63

Section 8.12

 

Reserve Reports

 

63

Section 8.13

 

Title Information

 

64

 

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Section 8.14

 

Additional Collateral; Additional Guarantors

 

65

Section 8.15

 

ERISA Compliance

 

66

Section 8.16

 

Swap Agreements

 

66

Section 8.17

 

Marketing Activities

 

67

 

 

 

 

 

ARTICLE IX
NEGATIVE COVENANTS

 

 

 

 

 

Section 9.01

 

Financial Covenants

 

67

Section 9.02

 

Debt

 

67

Section 9.03

 

Liens

 

68

Section 9.04

 

Dividends, Distributions and Redemptions

 

68

Section 9.05

 

Investments, Loans and Advances

 

69

Section 9.06

 

Nature of Business

 

69

Section 9.07

 

Limitation on Leases

 

70

Section 9.08

 

Proceeds of Notes

 

70

Section 9.09

 

ERISA Compliance

 

70

Section 9.10

 

Sale or Discount of Receivables

 

71

Section 9.11

 

Mergers, Etc

 

71

Section 9.12

 

Sale of Properties

 

71

Section 9.13

 

Environmental Matters

 

72

Section 9.14

 

Transactions with Affiliates

 

72

Section 9.15

 

Subsidiaries

 

72

Section 9.16

 

Negative Pledge Agreements; Dividend Restrictions

 

72

Section 9.17

 

Gas Imbalances, Take-or-Pay or Other Prepayments

 

73

Section 9.18

 

Swap Agreements

 

73

Section 9.19

 

Amendment of Contracts

 

73

Section 9.20

 

Acquisition Documents

 

73

 

 

 

 

 

ARTICLE X
EVENTS OF DEFAULT; REMEDIES

 

 

 

 

 

Section 10.01

 

Events of Default

 

73

Section 10.02

 

Remedies

 

73

 

 

 

 

 

ARTICLE XI
THE ADMINISTRATIVE AGENT

 

 

 

 

 

Section 11.01

 

Appointment; Powers

 

77

Section 11.02

 

Duties and Obligations of Administrative Agent

 

77

Section 11.03

 

Action by Administrative Agent

 

78

Section 11.04

 

Reliance by Administrative Agent

 

78

Section 11.05

 

Subagents

 

79

Section 11.06

 

Resignation or Removal of Administrative Agent

 

79

Section 11.07

 

Administrative Agent as Lender

 

79

Section 11.08

 

No Reliance

 

79

Section 11.09

 

Administrative Agent May File Proofs of Claim

 

80

Section 11.10

 

Authority of Administrative Agent to Release Collateral and Liens

 

81

Section 11.11

 

The Arranger

 

81

 

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ARTICLE XII
MISCELLANEOUS

 

 

 

 

 

Section 12.01

 

Notices

 

81

Section 12.02

 

Waivers; Amendments

 

82

Section 12.03

 

Expenses, Indemnity; Damage Waiver.

 

83

Section 12.04

 

Successors and Assigns

 

86

Section 12.05

 

Survival; Revival; Reinstatement

 

89

Section 12.06

 

Counterparts; Integration; Effectiveness

 

89

Section 12.07

 

Severability

 

90

Section 12.08

 

Right of Setoff

 

90

Section 12.09

 

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

 

90

Section 12.10

 

Headings

 

91

Section 12.11

 

Confidentiality

 

91

Section 12.12

 

Interest Rate Limitation

 

92

Section 12.13

 

EXCULPATION PROVISIONS

 

93

Section 12.14

 

Collateral Matters; Swap Agreements

 

93

Section 12.15

 

No Third Party Beneficiaries

 

94

Section 12.16

 

USA Patriot Act Notice

 

91

 

iv

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ANNEXES, EXHIBITS AND SCHEDULES

Annex I

 

List of Maximum Credit Amounts

 

 

 

Exhibit A-1

 

Form of Revolving Credit Note

Exhibit A-2

 

Form of Term Loan Note

Exhibit B

 

Form of Borrowing Request

Exhibit C

 

Form of Compliance Certificate

Exhibit D

 

Security Instruments

Exhibit E

 

Form of Assignment and Assumption

Exhibit F

 

Outstanding Letters of Credit

 

 

 

 

 

 

Schedule 1.02

 

Existing Letters of Credit

Schedule 7.14

 

Subsidiaries and Partnerships

Schedule 7.18

 

Gas Imbalances

Schedule 7.19

 

Marketing Contracts

 

v

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of August 9, 2006, is among
WHITTIER ENERGY CORPORATION, a corporation duly formed and existing under the
laws of the State of Nevada (the “Borrower”); each of the Lenders from time to
time party hereto; and BNP PARIBAS (in its individual capacity, “BNP Paribas”),
as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”).

RECITALS

A.            The Borrower, the Administrative Agent and other financial
institutions named and defined therein as lenders and agents, are parties to
that certain Credit Agreement dated as of June 15, 2005, as amended by the First
Amendment, dated May 31, 2006, pursuant to which such lenders provided certain
loans to and extensions of credit on behalf of the Borrower (as heretofore
amended, modified or supplemented, the “Existing Credit Agreement”).

B.            The Borrower has requested the Lenders, and the Lenders have
agreed, to amend and restate Existing Credit Agreement, subject to the terms and
conditions of this Agreement.

C.            Now, therefore, in consideration of the mutual covenants and
agreements herein contained and of the loans, extensions of credit and
commitments hereinafter referred to, the parties hereto agree as follows:

ARTICLE I
Definitions and Accounting Matters

Section 1.01           Terms Defined Above.  As used in this Agreement, each
term defined above has the meaning indicated above.

Section 1.02           Certain Defined Terms.  As used in this Agreement, the
following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Acquisition” means the acquisition of certain oil, gas and mineral Properties
pursuant to the terms and conditions of the Acquisition Documents.

“Acquisition Documents” means (a) the Purchase and Sale Agreement among Imperial
Petroleum, Inc., as seller, and Whittier Energy Company and Premier Natural
Resources, LLC, as buyers, dated May 1, 2006, and (b) all bills of sale,
assignments, agreements, instruments and documents executed and delivered in
connection therewith, as amended.

“Acquisition Properties” means the Oil and Gas Properties and other properties
acquired by the Borrower or any Guarantor pursuant to the Acquisition Documents.

--------------------------------------------------------------------------------

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affected Loans” has the meaning assigned such term in Section 5.05.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Agents” means, collectively, the Administrative Agent and any syndication
agent, documentation agent or similar agent that hereafter becomes a party
hereto; and “Agent” shall mean either the Administrative Agent or such other
agent, as the context requires.

“Aggregate Maximum Revolving Credit Amounts” at any time shall equal the sum of
the Maximum Revolving Credit Amounts, as the same may be reduced or terminated
pursuant to Section 2.06.

“Aggregate Revolving Credit Commitments” at any time shall equal the sum of the
Revolving Commitments of the Revolving Credit Lenders, as the same may be
reduced pursuant to Section 2.06.

“Aggregate Term Loan Commitments” at any time shall equal the sum of the Term
Loan Commitments of the Term Loan Lenders.

“Agreement” means this Amended and Restated Credit Agreement, as the same may
from time to time be amended, modified, supplemented or restated.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus ½ of 1%.  Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.

“Applicable Margin” means for any day, with respect to any ABR Revolving Credit
Loan or Eurodollar Revolving Credit Loan, as the case may be, the rate per annum
set forth in the Borrowing Base Utilization Grid below based upon the Borrowing
Base Utilization Percentage then in effect:

Borrowing Base Utilization Grid

Borrowing Base Utilization Percentage

 

<33

%

³33% <66

%

³66% <85

%

³85

%

Eurodollar Loans

 

1.50

%

1.75

%

2.00

%

2.25

%

ABR Loans

 

0.00

%

0.25

%

0.50

%

0.75

%

 

2

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Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change.

“Applicable Percentage” means (a) with respect to any Revolving Credit Lender,
the percentage of the Aggregate Maximum Revolving Credit Amounts represented by
such Lender’s Maximum Revolving Credit Amount as such percentage is set forth on
Annex I and (b) with respect to any Term Loan Lender, the percentage of the
Aggregate Term Loan Commitments represented by such Lender’s Term Loan
Commitment as such percentage is set forth on Annex I.

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person whose long term senior unsecured debt rating is A/A2 by S&P
or Moody’s (or their equivalent) or higher.

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

“Arranger” means BNP Paribas, in its capacities as the sole lead arranger and
bookrunner hereunder.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit E or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the Revolving Credit Termination Date.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

“Borrowing” means Loans of the same Type and Class, made, converted or continued
on the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(e), Section 8.13(c) or Section 9.12(d).

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.

3

--------------------------------------------------------------------------------

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

“Borrowing Request” means, with respect to the Revolving Credit Loans, a request
for Revolving Credit Loans or, with respect to the Term Loans, a request as of a
Business Day following the closing of the Acquisition, for the Term Loans, in
each case, in accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; and if such day relates to a Borrowing or continuation of, a
payment or prepayment of principal of or interest on, or a conversion of or
into, or the Interest Period for, a Eurodollar Loan or a notice by the Borrower
with respect to any such Borrowing or continuation, payment, prepayment,
conversion or Interest Period, any day which is also a day on which dealings in
dollar deposits are carried out in the London interbank market.

“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $100,000.

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof), of Equity Interests representing
more than 33 1/3 % of the aggregate ordinary voting power represented by the
issued and outstanding Equity Interests of the Borrower or (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or any Issuing Bank (or,
for purposes of Section 5.01(b)), by any lending office of such Lender or by
such Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

“Class” means as to any Loan, its nature as a Revolving Credit Loan or a Term
Loan.

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.

4

--------------------------------------------------------------------------------

“Commitment” means, as to any Lender, its Revolving Commitment and/or its Term
Loan Commitment, as applicable.

“Consolidated EBITDAX”:  with respect to the Borrower, for any period,
Consolidated Net Income for that period, plus (a) to the extent deducted from
revenues in determining Consolidated Net Income for that period, (i) the
aggregate amount of Consolidated Interest Expense for that period, (ii) the
aggregate amount of letter of credit fees paid during that period, (iii) the
aggregate amount of income Tax expense for that period (including franchise Tax
expense imposed on or measured by Borrower’s Consolidated Net Income) and (iv)
all amounts attributable to depreciation, depletion, exploration, amortization
and other non-cash charges and expenses for that period, minus (b) to the extent
included in revenues in determining Consolidated Net Income for that period, all
non-cash income during that period, in each case determined on a consolidated
basis in accordance with GAAP and without duplication of amounts.

For the purposes of calculating Consolidated EBITDAX for any period of four
consecutive fiscal quarters (each, a “Reference Period”) pursuant to any
determination of the covenants set forth in Section 9.01, (i) if at any time
after the first day of such Reference Period the Borrower or any Subsidiary
shall have made any Material Disposition, the Consolidated EBITDAX for such
Reference Period shall be reduced by an amount equal to the Consolidated EBITDAX
(if positive) attributable to the Property that is the subject of such Material
Disposition for such Reference Period and (ii) if at any time after the first
day of such Reference Period the Borrower or any Subsidiary shall have made a
Material Acquisition, Consolidated EBITDAX for such Reference Period shall be
calculated after giving pro forma effect thereto as if such Material Acquisition
occurred on the first day of such Reference Period.

“Consolidated Interest Expense”:  with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, the sum of (i) gross
interest expense (including all cash and accrued interest expense) of the
Borrower and its Subsidiaries for such period on a consolidated basis, including
to the extent included in interest expense in accordance with GAAP (x) the
amortization of debt discounts and (y) the portion of any payments or accruals
with respect to Capital Leases allocable to interest expense and (ii)
capitalized interest of the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP.

“Consolidated Net Income” means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
Taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any of the Consolidated Subsidiaries has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of the Borrower and the Consolidated
Subsidiaries in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in cash during such period by such
other Person to the Borrower or to any of the Consolidated Subsidiaries, as the
case may be; (b) the net income (but not loss) during such period of any
Consolidated Subsidiary to the extent that the declaration or payment of
dividends or similar distributions or transfers or loans by that Consolidated
Subsidiary is not at the time permitted by operation of the terms of its charter
or

5

--------------------------------------------------------------------------------

any agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary or is otherwise restricted or prohibited, in each case
determined in accordance with GAAP; (c) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (d) any extraordinary gains or losses during such period
and (e) any gains or losses attributable to writeups or writedowns of assets,
including ceiling test writedowns.

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person.  “Controlling” and
“Controlled” have meanings correlative thereto.

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) obligations to pay for goods or services even
if such goods or services are not actually received or utilized by such Person;
(k) any Debt of a partnership for which such Person is liable either by
agreement, by operation of law or by a Governmental Requirement but only to the
extent of such liability; (l) Disqualified Capital Stock; and (m) the
undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment.  The Debt
of any Person shall include all obligations of such Person of the character
described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.

6

--------------------------------------------------------------------------------

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
the United States of America or any state thereof or the District of Columbia.

“Effective Date” means the date on which the conditions specified in Section
6.01 are satisfied (or waived in accordance with Section 12.02).

“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment or the preservation or reclamation of
natural resources, in effect in any and all jurisdictions in which the Borrower
or any of its Subsidiaries is conducting or at any time has conducted business,
or where any Property of the Borrower or any of its Subsidiaries is located,
including without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended,
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 Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements. 
The term “oil” shall have the meaning specified in OPA, the terms “hazardous
substance” and “release” (or “threatened release”) have the meanings specified
in CERCLA, the terms “solid waste” and “disposal” (or “disposed”) have the
meanings specified in RCRA and the term “oil and gas waste” shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
(“Section 91.1011”); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (b) to the extent the laws of the state or
other jurisdiction in which any Property of the Borrower or any of its
Subsidiaries is located establish a meaning for “oil,” “hazardous substance,”
“release,” “solid waste,” “disposal” or “oil and gas waste” which is

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broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such
broader meaning shall apply.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or any of its Subsidiaries would be deemed to
be a “single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.

“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower or any
of its Subsidiaries or any ERISA Affiliate from a Plan during a plan year in
which it was a “substantial employer” as defined in section 4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under section 4041 of ERISA, (d) the institution
of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned such term in Section 10.01.

“Excepted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or

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exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any of its Subsidiaries or materially
impair the value of such Property subject thereto; (e) Liens arising solely by
virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash collateral account or
is subject to restrictions against access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by the Borrower or any of its Subsidiaries to provide collateral to the
depository institution; (f) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of the
Borrower or any of its Subsidiaries for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment,
which in the aggregate do not materially impair the use of such Property for the
purposes of which such Property is held by the Borrower or any of its
Subsidiaries or materially impair the value of such Property subject thereto;
(g) Liens on cash or securities pledged to secure performance of tenders, surety
and appeal bonds, government contracts, performance and return of money bonds,
bids, trade contracts, leases, statutory obligations, regulatory obligations and
other obligations of a like nature incurred in the ordinary course of business
and (h) judgment and attachment Liens not giving rise to an Event of Default,
provided that any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired and no action to enforce such Lien has been commenced; provided, further
that Liens described in clauses (a) through (e) shall remain “Excepted Liens”
only for so long as no action to enforce such Lien has been commenced and no
intention to subordinate the first priority Lien granted in favor of the
Administrative Agent and the Lenders is to be hereby implied or expressed by the
permitted existence of such Excepted Liens.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise Taxes imposed on (or measured
by) its net income by the United States of America or such other jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable lending
office is located, (b) any branch profits Taxes imposed by the United States of
America or any similar Tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located and (c) in the case of a Foreign Lender,
any withholding Tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or

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designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 5.03(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts with respect
to such withholding Tax pursuant to Section 5.03(a) or Section 5.03(c).

“Existing Credit Agreement” has the meaning assigned such term in paragraph A of
the Recitals.

“Existing Letters of Credit” means those Letters of Credit listed on Schedule
1.02.

“Existing Shell Hedges” means those Swap Agreements listed on Schedule 1.02 that
are between Shell Trading (US) Co. and the Borrower.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person.  Unless
otherwise specified, all references herein to a Financial Officer shall mean a
Financial Officer of the Borrower.

“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over the
Borrower or any of its Subsidiaries, any of their Properties, the Administrative
Agent, any Issuing Bank or any Lender.

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate,

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license, authorization or other directive or requirement, whether now or
hereinafter in effect, including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls, of any
Governmental Authority.

“Guarantors” means each Subsidiary that guarantees the Indebtedness pursuant to
Section 8.14(b).

“Guaranty Agreement” means an agreement executed by the Guarantors in form and
substance reasonably satisfactory to the Administrative Agent unconditionally
guarantying on a joint and several basis, payment of the Indebtedness, as the
same may be amended, modified or supplemented from time to time.

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

“Indebtedness” means any and all amounts owing or to be owing by the Borrower,
any of its Subsidiaries or any Guarantor (whether direct or indirect (including
those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising): (a) to the Administrative Agent, any Issuing
Bank or any Lender under any Loan Document; (b) to any Lender or any Affiliate
of a Lender under any Swap Agreement between the Borrower or any Subsidiary and
such Lender or Affiliate of a Lender while such Person (or in the case of its
Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
renewals, extensions and/or rearrangements of any of the above.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Reserve Report” means the report of HJ Gruy and Associates, Inc. dated
February 21, 2006 with respect to the value of certain Oil and Gas Properties of
the Borrower and its Subsidiaries.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.

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“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to,
assumption of Debt of, purchase or other acquisition of any other Debt or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
(c) the purchase or acquisition (in one or a series of transactions) of Property
of another Person that constitutes a business unit or (d) the entering into of
any guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

“Issuing Bank” means BNP Paribas and each Lender that agrees to act as an issuer
of Letters of Credit hereunder at the request of the Borrower, in each case, in
its capacity as an issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.08(i).  Any Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be

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issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank”
shall also include any such Affiliate with respect to Letters of Credit issued
by such Affiliate.

“LC Commitment” at any time means Five Million Dollars ($5,000,000).

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter
of Credit issued by such Issuing Bank.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time.  The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.

“Lenders” means the Revolving Credit Lenders and the Term Loan Lenders.

“Letter of Credit” means any letter of credit issued or deemed issued pursuant
to this Agreement, including the Existing Letters of Credit.

“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with any Issuing
Bank relating to any Letter of Credit issued by such Issuing Bank.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period.  In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which they have acquired or hold subject to a

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conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.

“Loans” means the loans as provided for by Sections 2.01(a) and (b).  “Loans”
shall include Revolving Credit Loans and Term Loans.

“Majority Lenders” means, at any time, Lenders having Revolving Credit and Term
Loans, a share of the LC Exposure and the unused Aggregate Revolving Credit
Commitments representing at least sixty-six and two-thirds percent (66-2/3%) of
the sum of (i) all Loans outstanding, (ii) the aggregate LC Exposure and (iii)
the unused Aggregate Revolving Credit Commitments.

“Majority Revolving Credit Lenders” means, at any time, Revolving Credit Lenders
having Revolving Credit Loans, a share of the LC Exposure and the unused
Aggregate Revolving Credit Commitments representing at least sixty-six and
two-thirds percent (66-2/3%) of the sum of (i) all Revolving Credit Loans
outstanding, (ii) the aggregate LC Exposure and (iii) the unused Aggregate
Revolving Credit Commitments.

“Material Acquisition”:  any acquisition of Property or series of related
acquisitions of Property that involves the payment of consideration (including,
without limitation, the issuance of Equity Interests of the Borrower) by the
Borrower and its Subsidiaries in excess of ten percent (10%) of the then current
Borrowing Base.

“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, liabilities (actual or
contingent), condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of the Borrower, any of its
Subsidiaries or any Guarantor to perform any of its obligations under any Loan
Document to which it is a party, (c) the validity or enforceability of any Loan
Document or (d) the rights and remedies of or benefits available to the
Administrative Agent, any other Agent, any Issuing Bank or any Lender under any
Loan Document.

“Material Disposition”:  any sale, transfer or other disposition of Property or
series of related sales, transfers or other dispositions of Property that yields
gross proceeds to the Borrower or any Subsidiaries in excess of ten percent
(10%) of the then current Borrowing Base.

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Subsidiaries in an aggregate principal amount exceeding
$500,000.  For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any of its Subsidiaries in respect
of any Swap Agreement at any time shall be the Swap Termination Value.

“Maturity Date” means June 15, 2009.

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“Maximum Revolving Credit Amount” means, as to each Revolving Credit Lender, the
amount set forth opposite such Revolving Credit Lender’s name on Annex I under
the caption “Maximum Revolving Credit Amounts”, as the same may be (a) reduced
or terminated from time to time in connection with a reduction or termination of
the Aggregate Maximum Revolving Credit Amounts pursuant to Section 2.06(b) or
(b) modified from time to time pursuant to any assignment permitted by Section
12.04(b).

“Mayfield Disposition” means that certain disposition of Oil & Gas Properties
located in Beckham County, Oklahoma to Chesapeake Exploration Limited
Partnership pursuant to the Letter Agreement dated July 5, 2006.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.

“Net Cash Proceeds” means in connection with any issuance or sale of Equity
Interests or Debt securities or instruments or the incurrence of loans, the cash
proceeds received from such issuance or incurrence, net of attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.

“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).

“Notes” means the Revolving Credit Notes and/or the Term Loan Notes, as
applicable.

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests; and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other

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similar temporary uses) and including any and all oil wells, gas wells,
injection wells or other wells, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.

“Other Taxes” means any and all present or future stamp or documentary Taxes or
any other excise or Property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.

“Participant” has the meaning set forth in Section 12.04(c)(i).

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, any of its Subsidiaries or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower, any of its Subsidiaries or an
ERISA Affiliate.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by BNP Paribas as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.  Such
rate is set by BNP Paribas as a general reference rate of interest, taking into
account such factors as BNP Paribas may deem appropriate; it being understood
that many of BNP Paribas’ commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or best rate actually charged
to any customer and that BNP Paribas may make various commercial or other loans
at rates of interest having no relationship to such rate.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i).

“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).

“Proved Reserves” means “Proved Reserves” as defined in the Definitions for Oil
and Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question.  “Proved

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Developed Reserves” means Proved Reserves which are categorized as “Developed”
in the Definitions, “Proved Developed Producing Reserves” means Proved Reserves
which are categorized as both “Developed” and “Producing” in the Definitions,
“Proved Developed Nonproducing Reserves” means Proved Reserves which are
categorized as both “Developed” and “Nonproducing” in the Definitions, and
“Proved Undeveloped Reserves” means Proved Reserves which are categorized as
“Undeveloped” in the Definitions.

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt.  “Redeem” has the correlative meaning thereto.

“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person’s Affiliates.

“Remedial Work” has the meaning assigned such term in Section 8.10(a).

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each January 1st or July 1st
(or such other date in the event of an Interim Redetermination) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and its
Subsidiaries, together with a projection of the rate of production and future
net income, Taxes, operating expenses and capital expenditures with respect
thereto as of such date, based upon the economic assumptions consistent with the
Administrative Agent’s lending requirements at the time.

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person.  Unless
otherwise specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries.

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“Revolving Borrowing” means any Borrowing by the Borrower of Revolving Credit
Loans.

“Revolving Commitment” means, with respect to each Revolving Credit Lender, the
commitment of such Revolving Credit Lender to make Revolving Credit Loans, and
to acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Revolving Credit Lender’s
Revolving Credit Exposure hereunder, as such commitment may be (a) modified from
time to time pursuant to Section 2.06 and (b) modified from time to time
pursuant to assignments by or to such Revolving Credit Lender pursuant to
Section 12.04(b).  The amount representing each Revolving Credit Lender’s
Revolving Commitment shall at any time be the lesser of such Revolving Credit
Lender’s Maximum Revolving Credit Amount and such Revolving Credit Lender’s
Applicable Percentage of the Revolving Credit then effective Borrowing Base.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and its LC
Exposure at such time.

“Revolving Credit Lenders” means the Persons listed on Annex I as such, any
Person that shall have become a party hereto pursuant to an Assignment and
Assumption by assigning a Revolving Commitment, but not any such Person that
ceases to be a party hereto pursuant to an Assignment and Assumption.

“Revolving Credit Loans” means the revolving credit loans made by each Revolving
Credit Lender pursuant to Section 2.01(a).

“Revolving Credit Notes” means the promissory notes of the Borrower described in
Section 2.02(d)(i) and being substantially in the form of Exhibit A-1, together
with all amendments, modifications, replacements, extensions and rearrangements
thereof.

“Revolving Credit Termination Date” means the earlier to occur of (i) the
Maturity Date or (ii) the date that the Aggregate Revolving Credit Commitments
are sooner terminated pursuant to Section 2.06 or Section 10.02.

“Scheduled Redetermination” has the meaning assigned such term in Section
2.07(b).

“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).

“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

“Security Instruments” means the Guaranty Agreement, mortgages, deeds of trust
and other agreements, instruments or certificates described or referred to in
Exhibit D, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by the Borrower or any
other Person (other than Swap Agreements with the Lenders or any Affiliate of a
Lender or participation or similar agreements between any Lender and any other
lender or creditor with respect to any Indebtedness pursuant to this Agreement)
in

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connection with, or as security for the payment or performance of the
Indebtedness, the Notes, this Agreement, or reimbursement obligations under the
Letters of Credit, as such agreements may be amended, modified, supplemented or
restated from time to time.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve
percentages shall include those imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation.  The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.

“Subsidiary” means:  (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner.  Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a Subsidiary of the Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement, whether exchange
traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no phantom stock or similar plan providing
for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Borrower or any of its
Subsidiaries shall be a Swap Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.

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“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income Taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Term Loan Commitment” shall mean, as to each Term Loan Lender, its obligation
to make its Term Loan in the amount set forth opposite its name under “Term
Loans” on Annex I, as the same may be modified from time to time to reflect any
assignment permitted by Section 12.04(b).

“Term Loan Lenders” shall mean each Person listed on Annex I as such and any
Person which purchases a Term Loan Commitment pursuant to Section 12.04(b).

“Term Loan Notes” means the promissory notes of the Borrower described in
Section 2.02(d)(ii) and being substantially in the form of Exhibit A-2, together
with all amendments, modifications, replacements, extensions and rearrangements
thereof.

“Term Loans” means the term loan made by each Term Loan Lender pursuant to
Section 2.01(b).

“Term Loan Termination Date” means the first Business Day that is eighteen (18)
months after the Effective Date.

“Total Debt” means, at any date, all Debt of the Borrower and the Consolidated
Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
FAS 133 and (ii) accounts payable and other accrued liabilities (for the
deferred purchase price of Property or services) from time to time incurred in
the ordinary course of business which are not greater than sixty (60) days past
the date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP.

“Total Reserve Value” means, with respect to any Proved Reserves expected to be
produced from any Oil and Gas Properties, the net present value, discounted at
10% per annum, of the future net revenues expected to accrue to the Borrower’s
and its Subsidiaries’ collective interests in such reserves during the remaining
expected economic lives of such reserves.  Total Reserve Value means, with
respect to the Borrower’s and its Subsidiaries’ separate interests in such
Proved Reserves, the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to such separate interests in such
reserves during the remaining expected economic lives of such reserves.  Each
calculation of such expected future net revenues shall be made in accordance
with the then existing standards of the Society of Petroleum Engineers, provided
that in any event (a) appropriate deductions shall be made for severance and

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ad valorem taxes, and for operating, gathering, transportation and marketing
costs required for the production and sale of such reserves, (b) appropriate
adjustments shall be made for hedging operations, provided that Swap Agreements
with non-investment grade counterparties shall not be taken into account to the
extent that such Swap Agreements improve the position of or otherwise benefit
the Borrower or any of its Subsidiaries, (c) the pricing assumptions used in
determining Total Reserve Value for any particular reserves shall be based upon
the following price decks:  (i) for natural gas, the lesser of (A) the quotation
for deliveries of natural gas for each such year from the New York Mercantile
Exchange for Henry Hub and (B) $6.50/Mcf, and (ii) for crude oil, the lesser of
(A) the quotation for deliveries of West Texas Intermediate crude oil for each
such calendar year from the New York Mercantile Exchange for Cushing, Oklahoma,
and (B) $45.00/Bbl and (d) the cash-flows derived from the pricing assumptions
set forth in clauses (b) and (c) above shall be further adjusted to account for
the historical basis differentials for each month during the preceding 12-month
period calculated by comparing realized crude oil and natural gas prices to
Cushing, Oklahoma and Henry Hub NYMEX prices for each month during such period;
provided that for purposes of this calculation, Proved Developed Reserves shall
constitute not less than 70% of the Total Reserve Value.

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, and each other Loan Document
and Acquisition Document to which it is a party, the Acquisition, the borrowing
of Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and
other Properties pursuant to the Security Instruments and (b) each Guarantor,
the execution, delivery and performance by such Guarantor of each Loan Document
and Acquisition Document to which it is a party, the Acquisition, the
guaranteeing of the Indebtedness and the other obligations under the Guaranty
Agreement by such Guarantor and such Guarantor’s grant of the security interests
and provision of collateral under the Security Instruments, and the grant of
Liens by such Guarantor on Mortgaged Properties and other Properties pursuant to
the Security Instruments.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

“Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding
Equity Interests (other than any directors’ qualifying shares mandated by
applicable law), on a fully-diluted basis, are owned by the Borrower or one or
more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or
more of the Wholly-Owned Subsidiaries.

Section 1.03           Types and Classes of Loans and Borrowings.  For purposes
of this Agreement, Loans and Borrowings, respectively, may be classified and
referred to by Type and/or Class (e.g., a “Eurodollar Term Loan” or a
“Eurodollar Revolving Borrowing”).

Section 1.04           Terms Generally.  The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined.  Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word

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“shall”.  Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person’s successors and assigns (subject to
the restrictions contained in the Loan Documents), (d) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word
“from” means “from and including” and the word “to” means “to and including” and
(f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Annexes, Exhibits
and Schedules to, this Agreement.  No provision of this Agreement or any other
Loan Document shall be interpreted or construed against any Person solely
because such Person or its legal representative drafted such provision.

Section 1.05           Accounting Terms and Determinations; GAAP.  Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial Statements except for changes in which the
Borrower’s independent certified public accountants concur and which are
disclosed to Administrative Agent on the next date on which financial statements
are required to be delivered to the Lenders pursuant to Section 8.01(a);
provided that, unless the Borrower and all of the Lenders shall otherwise agree
in writing, no such change shall modify or affect the manner in which compliance
with the covenants contained herein is computed such that all such computations
shall be conducted utilizing financial information presented consistently with
prior periods.

ARTICLE II
The Credits

Section 2.01           Commitments.

(a)           Revolving Credit Loans.  Each Revolving Credit Lender severally
agrees, on the terms and conditions of this Agreement, to make revolving credit
loans to the Borrower during the Availability Period in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the amount of such
Lender’s Revolving Commitment as then in effect; provided, however, that the
aggregate principal amount of all such Revolving Credit Loans by all Revolving
Credit Lenders hereunder at any one time outstanding together with the LC
Exposure shall not exceed the Aggregate Revolving Credit Commitments.  Subject
to the terms of this Agreement, during the Availability Period, the Borrower may
borrow, repay and reborrow the amount described in this Section 2.01(a).

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(b)           Term Loans.  Each Term Loan Lender severally agrees, subject to
the terms and conditions of this Agreement, to make a term loan to the Borrower
in a single Borrowing from the Term Loan Lender in an amount equal to its Term
Loan Commitment.

Section 2.02           Loans and Borrowings.

(a)           Borrowings; Several Obligations.  Each Revolving Credit Loan shall
be made by the Revolving Credit Lenders ratably in accordance with their
respective Revolving Commitments and each Term Loan shall be made by the Term
Loan Lenders ratably in accordance with their respective Term Loan Commitment. 
The failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
Commitments are several and no Lender shall be responsible for any other
Lender’s failure to make Loans as required.

(b)           Types of Loans.  Subject to Section 3.03, each Borrowing of any
Class shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith.  Each Lender at its option may make
any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan; provided that any exercise of such option shall
not affect the obligation of the Borrower to repay such Loan in accordance with
the terms of this Agreement.

(c)           Minimum Amounts; Limitation on Number of Borrowings.  At the
commencement of each Interest Period for any Eurodollar Borrowing of any Class,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $25,000.  At the time that each ABR Borrowing is made
of any Class, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $25,000; provided that an ABR Revolving
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Revolving Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.08(e). 
Borrowings of more than one Type may be outstanding at the same time; provided
that there shall not at any time be more than a total of five (5) Eurodollar
Revolver Borrowings outstanding and not more than two (2) Eurodollar Term
Borrowings.  Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

(d)           Notes.

(i)            The Revolving Credit Loans made by each Revolving Credit Lender
shall be evidenced by a single promissory note of the Borrower in substantially
the form of Exhibit A-1, dated, in the case of (A) any Revolving Credit Lender
party hereto as of the date of this Agreement, as of the date of this Agreement,
or (B) any Revolving Credit Lender that becomes a party hereto pursuant to an
Assignment and Assumption, as of the effective date of the Assignment and
Assumption, payable to the order of such Lender in a principal amount equal to
its Maximum Revolving Credit Amount as in effect on such date, and otherwise
duly completed.  In the event that any Revolving Credit Lender’s Maximum
Revolving Credit Amount increases or decreases for any reason (whether pursuant
to Section 2.06, Section 12.04(b) or otherwise), the Borrower shall deliver or
cause to be delivered on the effective date

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of such increase or decrease, a new Revolving Credit Note payable to the order
of such Lender in a principal amount equal to its Maximum Revolving Credit
Amount after giving effect to such increase or decrease, and otherwise duly
completed.

(ii)           The Term Loans made by each Term Loan Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit
A-2, dated as of (A) the Effective Date or (B) the effective date of an
Assignment pursuant to Section 12.04(b), payable to the order of such Lender and
otherwise duly completed.

(iii)          The date, amount, Type, Class, interest rate and, if applicable,
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Notes, and, prior to any transfer, may be endorsed by such Lender on a
schedule attached to such Notes or any continuation thereof or on any separate
record maintained by such Lender.  Failure to make any such notation or to
attach a schedule shall not affect any Lender’s or the Borrower’s rights or
obligations in respect of such Loans or affect the validity of such transfer by
any Lender of its Notes.

(e)           Loans and Borrowings under the Existing Credit Agreement.  On the
Effective Date (or as soon as practicable with respect to (iii)):

(i)            the Borrower shall pay all accrued and unpaid commitment fees,
break funding fees under Section 5.02 and all other fees that are outstanding
under the Existing Credit Agreement for the account of each “Lender” under the
Existing Credit Agreement;

(ii)           each “ABR Loan” and “Eurodollar Loan” outstanding under the
Existing Credit Agreement shall be deemed to be repaid with the proceeds of a
new ABR Revolving Credit Loan or Eurodollar Revolving Credit Loan, as
applicable, under this Agreement;

(iii)          the Administrative Agent shall use reasonable efforts to cause
such “Lender” under the Existing Credit Agreement to deliver to the Borrower as
soon as practicable after the Effective Date the Note issued by the Borrower to
it under the Existing Credit Agreement, marked “canceled” or otherwise similarly
defaced;

(iv)          any letters of credit outstanding under the Existing Credit
Agreement shall be deemed issued under this Agreement; and

(v)           the Existing Credit Agreement and the commitments thereunder shall
be superceded by this Agreement and such commitments shall terminate.

It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence repayment of any such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the obligations of the Borrower outstanding thereunder.

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Section 2.03           Requests for Borrowings.  To request a Borrowing of any
Class, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
Houston time, three Business Days before the date of the proposed Borrowing or
(b) in the case of an ABR Borrowing, not later than 11:00 a.m., Houston time, on
the date of the proposed Borrowing; provided that no such notice shall be
required for any deemed request of an ABR Borrowing to finance the reimbursement
of an LC Disbursement as provided in Section 2.08(e).  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
substantially in the form of Exhibit B and signed by the Borrower.  Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:

(i)            the aggregate amount of the requested Borrowing;

(ii)           the date of such Borrowing, which shall be a Business Day; and if
Borrowing of the Term Loans, the Effective Date;

(iii)          whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

(iv)          in the case of a Eurodollar Revolving Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period contemplated
by the definition of the term “Interest Period”;

(v)           in the case of a Eurodollar Revolving Borrowing, the amount of the
then effective Borrowing Base, the current total Revolving Credit Exposures
(without regard to the requested Borrowing) and the pro forma total Revolving
Credit Exposures (giving effect to the requested Borrowing); and

(vi)          the location and number of the Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of Section 2.05.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Revolving Borrowing.  If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month’s duration. 
Each Borrowing Request shall constitute a representation that the amount of the
requested Borrowing shall not cause the total Revolving Credit Exposures to
exceed the Aggregate Revolving Credit Commitments (i.e., the lesser of the
Aggregate Maximum Revolving Credit Amounts and the then effective Borrowing
Base).

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the relevant
Class and other details thereof and of the amount of such Lender’s Loan to be
made as part of the requested Borrowing.

Section 2.04           Interest Elections.

(a)           Conversion and Continuance.  Each Borrowing of any Class of Loan
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a

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Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
of any Class of Loan to a different Type or to continue such Borrowing and, in
the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section 2.04.  The Borrower may elect different options with
respect to different portions of the affected Borrowing of any Class of Loan, in
which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Class of Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.

(b)           Interest Election Requests.  To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone by the time that a Borrowing Request would be required
under Section 2.03 if the Borrower was requesting a Borrowing of the Type
resulting from such election to be made on the effective date of such election. 
Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in substantially a form approved by the
Administrative Agent and signed by the Borrower.

(c)           Information in Interest Election Requests.  Each telephonic and
written Interest Election Request shall specify the following information in
compliance with Section 2.02:

(i)            the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information to be specified pursuant to Section 2.04(c)(iii) and
(iv) shall be specified for each resulting Borrowing);

(ii)           the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

(iii)          whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and

(iv)          if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d)           Notice to Lenders by the Administrative Agent.  Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

(e)           Effect of Failure to Deliver Timely Interest Election Request and
Events of Default and Borrowing Base Deficiencies on Interest Election.  If the
Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Borrowing prior to the end of the

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Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing.  Notwithstanding any contrary provision hereof,
if an Event of Default or a Borrowing Base Deficiency has occurred and is
continuing:  (i) no outstanding Borrowing may be converted to or continued as a
Eurodollar Borrowing (and any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

Section 2.05           Funding of Borrowings.

(a)           Funding by Lenders.  Each Lender shall make each Loan of each
Class to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 1:00 p.m., Houston time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.  The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower and designated by the Borrower in the applicable
Borrowing Request; provided that ABR Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.08(e) shall be remitted by the
Administrative Agent to the Issuing Bank that made such LC Disbursement. 
Nothing herein shall be deemed to obligate any Lender to obtain the funds for
its Loan in any particular place or manner or to constitute a representation by
any Lender that it has obtained or will obtain the funds for its Loan in any
particular place or manner.

(b)           Presumption of Funding by the Lenders.  Unless the Administrative
Agent shall have received notice from a Lender prior to the proposed date of any
Borrowing of a Class that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.05(a) and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount.  In such event, if a Lender
has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans.  If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender’s Loan included in such Borrowing.

Section 2.06           Termination and Reduction of Aggregate Maximum Revolving
Credit Amounts and Term Loan Commitments.

(a)           Scheduled Termination of Commitments.  The Aggregate Term Loan
Commitments shall be terminated upon the funding of the Term Loans.  Unless
previously terminated, the Aggregate Revolving Credit Commitments shall
terminate on the Maturity Date.  If at any time the Aggregate Maximum Revolving
Credit Amounts or the Borrowing Base is

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terminated or reduced to zero, then the Commitments shall terminate on the
effective date of such termination or reduction.

(b)           Optional Termination and Reduction of Aggregate Credit Amounts.

(i)            The Borrower may at any time terminate, or from time to time
reduce, the Aggregate Maximum Revolving Credit Amounts; provided that (A) each
reduction of the Aggregate Maximum Revolving Credit Amounts shall be in an
amount that is an integral multiple of $500,000 and not less than $500,000 and
(B) the Borrower shall not terminate or reduce the Aggregate Maximum Revolving
Credit Amounts if, after giving effect to any concurrent prepayment of the Loans
in accordance with Section 3.04(c), the total Revolving Credit Exposures would
exceed the total Commitments.

(ii)           The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Aggregate Maximum Revolving Credit Amounts
under Section 2.06(b)(i) at least three Business Days prior to the effective
date of such termination or reduction, specifying such election and the
effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Revolving Credit Lenders of the contents
thereof.  Each notice delivered by the Borrower pursuant to this Section
2.06(b)(ii) shall be irrevocable.  Any termination or reduction of the Aggregate
Maximum Revolving Credit Amounts shall be permanent and may not be reinstated. 
Each reduction of the Aggregate Maximum Revolving Credit Amounts shall be made
ratably among the Revolving Credit Lenders in accordance with each Revolving
Credit Lender’s Applicable Percentage.

Section 2.07           Borrowing Base.

(a)           Initial Borrowing Base.  For the period from and including the
Effective Date to but excluding the next Scheduled Redetermination, the amount
of the Borrowing Base shall be $45,000,000.  Notwithstanding the foregoing, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to Section 2.07(e), Section 8.13(c) or Section 9.12(d).

(b)           Scheduled and Interim Redeterminations.  Subject to Section
2.07(d), the Borrowing Base shall be redetermined (a “Scheduled
Redetermination”) on April 1st and October 1st of each year, commencing October
1, 2005.  In addition, either the Borrower or the Administrative Agent may, or
the Administrative Agent shall at the direction of the Majority Lenders, one
time during each calendar year, each elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations (an “Interim Redetermination”)
in accordance with this Section 2.07.

(c)           Scheduled and Interim Redetermination Procedure.

(i)            Each Scheduled Redetermination and each Interim Redetermination
shall be effectuated as follows:  Upon receipt by the Administrative Agent of
(A) the Reserve Report and the certificate required to be delivered by the
Borrower to the Administrative Agent, in the case of a Scheduled
Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an
Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other
reports, data and supplemental

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information, including, without limitation, the information provided pursuant to
Section 8.12(c), as may, from time to time, be reasonably requested by the
Majority Lenders (the Reserve Report, such certificate and such other reports,
data and supplemental information being the “Engineering Reports”), the
Administrative Agent shall evaluate the information contained in the Engineering
Reports and shall, in good faith, propose a new Borrowing Base (the “Proposed
Borrowing Base”) based upon such information and such other information
(including, without limitation, the status of title information with respect to
the Oil and Gas Properties as described in the Engineering Reports and the
existence of any other Debt) as the Administrative Agent deems appropriate in
its sole discretion and consistent with its normal oil and gas lending criteria
as it exists at the particular time.  In no event shall the Proposed Borrowing
Base exceed the Aggregate Maximum Credit Amounts.

(ii)           The Administrative Agent shall notify the Borrower and the
Revolving Credit Lenders of the Proposed Borrowing Base (the “Proposed Borrowing
Base Notice”):

(A)          in the case of a Scheduled Redetermination (1) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then on or before the March 15th and September 15th of such
year following the date of delivery or (2) if the Administrative Agent shall not
have received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.12(a) and (c) in a timely and complete manner, then
promptly after the Administrative Agent has received complete Engineering
Reports from the Borrower and has had a reasonable opportunity to determine the
Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

(B)           in the case of an Interim Redetermination, promptly, and in any
event, within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.

(iii)          Any Proposed Borrowing Base that would increase the Borrowing
Base then in effect must be approved or deemed to have been approved by all of
the Revolving Credit Lenders as provided in this Section 2.07(c)(iii) and any
Proposed Borrowing Base that would maintain or decrease the Borrowing Base then
in effect must be approved or deemed to have been approved by the Majority
Revolving Credit Lenders as provided in this Section 2.07(c)(iii).  Upon receipt
of the Proposed Borrowing Base Notice, each Revolving Credit Lender shall have
fifteen (15) days to agree with the Proposed Borrowing Base or disagree with the
Proposed Borrowing Base by proposing an alternate Borrowing Base.  If at the end
of such fifteen (15) days, any Revolving Credit Lender has not communicated its
approval or disapproval in writing to the Administrative Agent, such silence
shall be deemed to be an approval of the Proposed Borrowing Base.  If, at the
end of such 15-day period, all of the Revolving Credit Lenders, in the case of a
Proposed Borrowing Base that would increase the Borrowing Base then in effect,
or the Majority Revolving Credit Lenders, in the case of a Proposed Borrowing
Base that would decrease or maintain the Borrowing Base then in effect, have
approved or deemed to have approved, as aforesaid, then the Proposed

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Borrowing Base shall become the new Borrowing Base and made available to the
Borrower, effective on the date specified in Section 2.07(d).  If, however, at
the end of such 15-day period, all of the Revolving Credit Lenders or the
Majority Revolving Credit Lenders, as applicable, have not approved or deemed to
have approved, as aforesaid, then the Administrative Agent shall poll the
Revolving Credit Lenders to ascertain the highest Borrowing Base then acceptable
to all of the Revolving Credit Lenders or the Majority Revolving Credit Lenders
and, so long as such amount does not increase the Borrowing Base then in effect,
such amount shall become the new Borrowing Base, effective on the date specified
in Section 2.07(d)

(d)           Effectiveness of a Redetermined Borrowing Base.  After a
redetermined Borrowing Base is approved or is deemed to have been approved by
all of the Revolving Credit Lenders or the Majority Revolving Credit Lenders
pursuant to Section 2.07(c)(iii), the Administrative Agent shall notify the
Borrower and the Revolving Credit Lenders of the amount of the redetermined
Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become
the new Borrowing Base, effective and applicable to the Borrower, the
Administrative Agent, each Issuing Bank and the Revolving Credit Lenders:

(A)          in the case of a Scheduled Redetermination, (1) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then on the April 1st or October 1st, as applicable, following
such notice, or (2) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on the Business Day next
succeeding delivery of such notice; and

(B)           in the case of an Interim Redetermination, on the Business Day
next succeeding delivery of such notice.

Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(e), Section 8.13(c) or
Section 9.12(d), whichever occurs first.  Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Borrowing Base Notice related thereto is received by the Borrower.

(e)           Amortization.  In each Proposed Borrowing Base Notice, the
Administrative Agent will also propose a new monthly amortization rate subject
to the approval of the Majority Revolving Credit Lenders.  Each Revolving Credit
Lender shall have fifteen (15) days to agree with such amortization rate or
disagree with the proposed monthly amortization rate by proposing an alternate
monthly amortization rate.  If at the end of such fifteen (15) days, any
Revolving Credit Lender has not communicated its approval or disapproval in
writing to the Administrative Agent, such silence shall be deemed to be an
approval of the new monthly amortization rate.  After the amortization rate is
approved or deemed to be approved, the proposed monthly amortization rate shall
then be effective as of the Business Day next succeeding notice of the new
monthly amortization rate, which shall be delivered concurrently

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with the New Borrowing Base Notice.  As of the Effective Date, until the first
Scheduled Redetermination or Interim Redetermination, the amortization rate will
be $0.00.

Section 2.08           Letters of Credit.

(a)           General.  Subject to the terms and conditions set forth herein,
the Borrower may request any Issuing Bank to issue Letters of Credit for its own
account or for the account of the Borrower or any of its Subsidiaries, in a form
reasonably acceptable to the Administrative Agent and such Issuing Bank, at any
time and from time to time during the Availability Period; provided that the
Borrower may not request the issuance, amendment, renewal or extension of
Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time
or would exist as a result thereof.  In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, an Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.

(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to any Issuing
Bank and the Administrative Agent (not less than five (5) Business Days in
advance of the requested date of issuance, amendment, renewal or extension) a
notice:

(i)            requesting the issuance of a Letter of Credit or identifying the
Letter of Credit issued by such Issuing Bank to be amended, renewed or extended;

(ii)           specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day);

(iii)          specifying the date on which such Letter of Credit is to expire
(which shall comply with Section 2.08(c));

(iv)          specifying the amount of such Letter of Credit;

(v)           specifying the name and address of the beneficiary thereof and
such other information as shall be necessary to prepare, amend, renew or extend
such Letter of Credit; and

(vi)          specifying the amount of the then effective Borrowing Base and
whether a Borrowing Base Deficiency exists at such time, the current total
Revolving Credit Exposures (without regard to the requested Letter of Credit or
the requested amendment, renewal or extension of an outstanding Letter of
Credit) and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).

Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC

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Commitment and (ii) the total Revolving Credit Exposures shall not exceed the
lesser of the Aggregate Maximum Revolving Credit Amounts and the then effective
Borrowing Base.

If requested by any Issuing Bank, the Borrower also shall submit a letter of
credit application on such Issuing Bank’s standard form in connection with any
request for a Letter of Credit.

(c)           Expiration Date.  Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.

(d)           Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank that issues such Letter of Credit
or the Revolving Credit Lenders, each Issuing Bank that issues a Letter of
Credit hereunder hereby grants to each Revolving Credit Lender, and each
Revolving Credit Lender hereby acquires from such Issuing Bank, a participation
in such Letter of Credit equal to such Lender’s Applicable Percentage of the
aggregate amount available to be drawn under such Letter of Credit.  In
consideration and in furtherance of the foregoing, each Revolving Credit Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of any Issuing Bank that issues a Letter of Credit hereunder,
such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing
Bank and not reimbursed by the Borrower on the date due as provided in Section
2.08(e), or of any reimbursement payment required to be refunded to the Borrower
for any reason.  Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this Section 2.08(d) in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default, the
existence of a Borrowing Base Deficiency or reduction or termination of the
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever

(e)           Reimbursement.  If any Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit issued by such Issuing Bank, the Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent an amount
equal to such LC Disbursement not later than 11:00 a.m., Houston time, on the
date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 9:00 a.m., Houston time, on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 11:00 a.m., Houston time, on (i) the Business Day
that the Borrower receives such notice, if such notice is received prior to 9:00
a.m., Houston time, on the day of receipt, or (ii) the Business Day immediately
following the day that the Borrower receives such notice, if such notice is not
received prior to such time on the day of receipt; provided that if such LC
Disbursement is not less than $1,000,000, the Borrower shall, subject to the
conditions to Borrowing set forth herein, be deemed to have requested, and the
Borrower does hereby request under such circumstances, that such payment be
financed with an ABR Borrowing in an equivalent amount and, to the extent so
financed, the Borrower’s obligation to make such payment shall be discharged and
replaced by the resulting ABR Borrowing.  If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and

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such Lender’s Applicable Percentage thereof.  Promptly following receipt of such
notice, each Revolving Credit Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.05 with respect to Loans made by such Lender
(and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of
the Revolving Credit Lenders), and the Administrative Agent shall promptly pay
to the Issuing Bank that issued such Letter of Credit the amounts so received by
it from the Revolving Credit Lenders.  Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section
2.08(e), the Administrative Agent shall distribute such payment to the Issuing
Bank that issued such Letter of Credit or, to the extent that Revolving Credit
Lenders have made payments pursuant to this Section 2.08(e) to reimburse such
Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear.  Any payment made by a Revolving Credit Lender pursuant to this Section
2.08(e) to reimburse any Issuing Bank for any LC Disbursement (other than the
funding of ABR Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.

(f)            Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a
Letter of Credit issued by such Issuing Bank against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or
any Letter of Credit Agreement, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section 2.08(f), constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder.  Neither the Administrative Agent, the Revolving Credit Lenders nor
any Issuing Bank, nor any of their Related Parties shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of any Issuing Bank; provided that the foregoing shall
not be construed to excuse any Issuing Bank from liability to the Borrower to
the extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof.  The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of any Issuing Bank (as finally determined by a court of
competent jurisdiction), such Issuing Bank shall be deemed to have exercised all
requisite care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing

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Bank that issued such Letter of Credit may, in its sole discretion, either
accept and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.

(g)           Disbursement Procedures.  Each Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit issued by such Issuing Bank.  Such
Issuing Bank shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether such
Issuing Bank has made or will make an LC Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse such Issuing Bank and the Revolving
Credit Lenders with respect to any such LC Disbursement.

(h)           Interim Interest.  If any Issuing Bank shall make any LC
Disbursement, then, until the Borrower shall have reimbursed such Issuing Bank
for such LC Disbursement (either with its own funds or a Borrowing under Section
2.08(e)), the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to ABR Loans.  Interest accrued pursuant to this Section 2.08(h)
shall be for the account of such Issuing Bank, except that interest accrued on
and after the date of payment by any Revolving Credit Lender pursuant to Section
2.08(e) to reimburse such Issuing Bank shall be for the account of such
Revolving Credit Lender to the extent of such payment.

(i)            Replacement of an Issuing Bank.  Any Issuing Bank may be replaced
or resign at any time by written agreement among the Borrower, the
Administrative Agent, such resigning or replaced Issuing Bank and, in the case
of a replacement, the successor Issuing Bank.  The Administrative Agent shall
notify the Revolving Credit Lenders of any such resignation or replacement of an
Issuing Bank.  At the time any such resignation or replacement shall become
effective, the Borrower shall pay all unpaid fees accrued for the account of the
resigning or replaced Issuing Bank pursuant to Section 3.05(b).  In the case of
the replacement of an Issuing Bank, from and after the effective date of such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the replaced Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the resignation or replacement of an Issuing Bank hereunder, the
resigning or replaced Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such
resignation or replacement, but shall not be required to issue additional
Letters of Credit.

(j)            Cash Collateralization.  If (i) any Event of Default shall occur
and be continuing and the Borrower receives notice from the Administrative Agent
or the Majority Revolving Credit Lenders demanding the deposit of cash
collateral pursuant to this Section 2.08(j), or (ii) the Borrower is required to
pay to the Administrative Agent the excess attributable to an LC Exposure in
connection with any prepayment pursuant to Section 3.04(c), then the Borrower
shall deposit, in an account with the Administrative Agent, in the name of the

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Administrative Agent and for the benefit of the Revolving Credit Lenders, an
amount in cash equal to, in the case of an Event of Default, the LC Exposure,
and in the case of a payment required by Section 3.04(c), the amount of such
excess as provided in Section 3.04(c), as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower or any of
its Subsidiaries described in Section 10.01(h) or Section 10.01(i).  The
Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the Revolving Credit Lenders, an exclusive first priority and
continuing perfected security interest in and Lien on such account and all cash,
checks, drafts, certificates and instruments, if any, from time to time
deposited or held in such account, all deposits or wire transfers made thereto,
any and all investments purchased with funds deposited in such account, all
interest, dividends, cash, instruments, financial assets and other Property from
time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor.  The Borrower’s obligation to deposit amounts
pursuant to this Section 2.08(j) shall be absolute and unconditional, without
regard to whether any beneficiary of any such Letter of Credit has attempted to
draw down all or a portion of such amount under the terms of a Letter of Credit,
and, to the fullest extent permitted by applicable law, shall not be subject to
any defense or be affected by a right of set-off, counterclaim or recoupment
which the Borrower or any of its Subsidiaries may now or hereafter have against
any such beneficiary, any Issuing Bank, the Administrative Agent, the Revolving
Credit Lenders or any other Person for any reason whatsoever.  Such deposit
shall be held as collateral securing the payment and performance of the
Borrower’s and the Guarantor’s obligations under this Agreement and the other
Loan Documents.  The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. 
Deposits in such account shall be invested at the direction of the Borrower in
an Investment of the type described in Section 9.05(c), Section 9.05(d), Section
9.05(e) or Section 9.05(f) and at the Borrower’s risk and expense.  Interest or
profits, if any, on such investments shall accumulate in such account.  Moneys
in such account shall be applied by the Administrative Agent to reimburse, on a
pro rata basis, each Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated, be applied to
satisfy other obligations of the Borrower and the Guarantors under this
Agreement or the other Loan Documents.  If the Borrower is required to provide
an amount of cash collateral hereunder as a result of the occurrence of an Event
of Default, and the Borrower is not otherwise required to pay to the
Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(c), then such amount (to the extent
not applied as aforesaid) shall be returned to the Borrower within three
Business Days after all Events of Default have been cured or waived.

(k)           Existing Letters of Credit.  On the Effective Date, the Existing
Letters of Credit listed on Schedule 1.02 shall be deemed to have been issued
under this Agreement by BNP Paribas, as an Issuing Bank, or Compass Bank, as an
Issuing Bank, as specified on Schedule 1.02, without payment of any fees
otherwise due upon the issuance of a Letter of Credit, and BNP Paribas and
Compass Bank shall be deemed, without further action by any party hereto, to
have sold to each Revolving Credit Lender, and each Revolving Credit Lender
shall be

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deemed, without further action by any party hereto, to have purchased from BNP
Paribas and Compass Bank, as Issuing Banks, a participation, to the extent of
such Revolving Credit Lender’s Applicable Percentage, in such Letters of Credit.

ARTICLE III
Payments of Principal and Interest; Prepayments; Fees

Section 3.01           Repayment of Loans.

(a)           On the Revolving Credit Termination Date, the Borrower shall repay
the outstanding aggregate principal under the Revolving Credit Notes. The
Borrower unconditionally promises to pay to the Administrative Agent for the
account of each Revolving Credit Lender the then unpaid principal amount of each
Revolving Credit Loan on the Revolving Credit Termination Date.

(b)           The aggregate principal amount of the Term Loan Notes shall be
payable in full on the Term Loan Termination Date.

Section 3.02           Interest.

(a)           ABR Revolving Credit Loans.  The Revolving Credit Loans comprising
each ABR Revolving Borrowing shall bear interest at the Alternate Base Rate plus
the Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(b)           Eurodollar Revolving Credit Loans.  The Revolving Credit Loans
comprising each Eurodollar Revolving Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Margin, but in no event to exceed the Highest Lawful Rate.

(c)           ABR Term Loans.  The Term Loans comprising each ABR Term Borrowing
shall bear interest at the Alternate Base Rate plus 2.75%, but in no event to
exceed the Highest Lawful Rate.

(d)           Eurodollar Term Loans.  The Term Loans comprising each Eurodollar
Term Borrowing shall bear interest at the LIBO Rate for the Interest Period in
effect for such Borrowing plus 3.75%, but in no event to exceed the Highest
Lawful Rate.

(e)           Post-Default and Borrowing Base Deficiency Rate.  Notwithstanding
the foregoing, (i) if an Event of Default has occurred and is continuing, or if
any principal of or interest on any Loan or any fee or other amount payable by
the Borrower or any Guarantor hereunder or under any other Loan Document is not
paid when due, whether at stated maturity, upon acceleration or otherwise, and
including any payments in respect of a Borrowing Base Deficiency under Section
3.04(c), then all Loans outstanding, in the case of an Event of Default, and
such overdue amount, in the case of a failure to pay amounts when due, shall
bear interest, after as well as before judgment, at a rate per annum equal to
two percent (2%) plus the rate applicable to ABR Loans or Borrowings set forth
in Section 3.02(a) and Section 3.02(c) above, as applicable, but in no event to
exceed the Highest Lawful Rate, and (ii)  during any Borrowing Base Deficiency,
the amount of such Borrowing Base Deficiency shall bear interest, after as well

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as before judgment, at the rate then applicable to the relevant Loan or Loans,
plus the Applicable Margin, if any, plus an additional two percent (2%), but in
no event to exceed the Highest Lawful Rate.

(f)            Interest Payment Dates.  Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and on the
Revolving Credit Termination Date for the Revolving Credit Loans and the Term
Loan Termination Date for the Term Loans; provided that (i) interest accrued
pursuant to Section 3.02(e) shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than an optional prepayment of an ABR
Revolving Credit Loan prior to the Revolving Credit Termination Date), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment, and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.

(g)           Interest Rate Computations.  All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), except that interest
computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).  The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.

Section 3.03           Alternate Rate of Interest.  If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:

(a)           the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
Period; or

(b)           the Administrative Agent is advised by the Majority Lenders that
the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

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Section 3.04           Prepayments.

(a)           Optional Prepayments.  The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with Section 3.04(b).

(b)           Notice and Terms of Optional Prepayment.  The Borrower shall
notify the Administrative Agent by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 11:00 a.m., Houston time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 11:00 a.m., Houston time, one Business Day before the date of prepayment. 
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid. 
Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof.  Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02.  Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by
accrued interest to the extent required by Section 3.02.

(c)           Mandatory Prepayments.

(i)            If, after giving effect to any termination or reduction of the
Aggregate Maximum Revolving Credit Amounts pursuant to Section 2.06(b), the
total Revolving Credit Exposures exceeds the Aggregate Revolving Credit
Commitments, then the Borrower shall (A) prepay the Revolving Borrowings on the
date of such termination or reduction in an aggregate principal amount equal to
such excess, and (B) if any excess remains after prepaying all of the Revolving
Borrowings as a result of an LC Exposure, pay to the Administrative Agent on
behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j).

(ii)           If, after giving effect to any change in the then effective
Borrowing Base as the result of monthly amortization established pursuant
Section 2.07(e), the total Revolving Credit Exposures exceeds the Borrowing
Base, as reduced, then the Borrower shall (A) prepay the Revolving Borrowings
three (3) Business Days following the date of such amortization in an aggregate
principal amount equal to such excess and (B) if any excess remains after
prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).

(iii)          Upon any redetermination of or adjustment to the amount of the
Borrowing Base in accordance with Section 2.07 or Section 8.13(c), if the total
Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base,
then the Borrower shall (A) prepay the Revolving Borrowings in an aggregate
principal amount equal to such excess, and (B) if any excess remains after
prepaying all of the Revolving Borrowings as a result of an LC Exposure, pay to
the Administrative Agent on behalf of the Revolving Credit Lenders an amount
equal to such excess to be held as cash collateral as provided in Section
2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit
of cash collateral within ninety days (90) following its receipt of the New
Borrowing Base Notice in accordance with Section 2.07(d)

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or the date the adjustment occurs; provided that all payments required to be
made pursuant to this Section 3.04(c)(iii) must be made on or prior to the
Revolving Credit Termination Date.

(iv)          Upon any adjustments to the Borrowing Base pursuant to Section
9.12(d), if the total Revolving Credit Exposures exceed the Borrowing Base as
adjusted, then the Borrower shall (A) prepay the Revolving Borrowings in an
aggregate principal amount equal to such excess, and (B) if any excess remains
after prepaying all of the Revolving Borrowings as a result of an LC Exposure,
pay to the Administrative Agent on behalf of the Revolving Credit Lenders an
amount equal to such excess to be held as cash collateral as provided in Section
2.08(j).  The Borrower shall be obligated to make such prepayment and/or deposit
of cash collateral on the date it receives cash proceeds as a result of such
disposition; provided that all payments required to be made pursuant to this
Section 3.04(c)(iv) must be made on or prior to the Revolving Credit Termination
Date.

(v)           Each prepayment of Revolving Borrowings pursuant to this Section
3.04(c) shall be applied, first, ratably to any ABR Revolving Borrowings then
outstanding, and, second, to any Eurodollar Revolving Borrowings then
outstanding, and if more than one Eurodollar Revolving Borrowing is then
outstanding, to each such Eurodollar Revolving Borrowing in order of priority
beginning with the Eurodollar Revolving Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Revolving Borrowing with the most number of days remaining in the
Interest Period applicable thereto.

(vi)          Each prepayment of Revolving Borrowings pursuant to this Section
3.04(c) shall be applied ratably to the Revolving Credit Loans of each Revolving
Credit Lender included in the prepaid Revolving Borrowings.  Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.

(vii)         The Borrower shall, to the extent such Net Cash Proceeds are not
required as prepayments by Section 3.04(c)(i) through (vi) above, prepay the
Term Loan Notes and accrued and unpaid interest thereon in amounts equal to:

(A)          100% of the Net Cash Proceeds of any sale or disposition of
Properties permitted by Section 9.12, provided, that the Borrower shall not be
required to make such prepayment of the Term Loan Notes for the Mayfield
Disposition.

(B)           100% of the Net Cash Proceeds of any Debt incurrence of the
Borrower or any of its Subsidiaries or of the sale or issuance of any Equity
Interests of the Borrower, excluding Debt permitted by Section 9.02.  Such
prepayment shall be made no later than the next Business Day after the receipt
of such proceeds.

(C)           100% of the Net Cash Proceeds of any Casualty Event related to the
Borrower or any of its Subsidiaries.

(D)          Notwithstanding anything herein to the contrary, if the amount of
any Net Cash Proceeds referred to in Section 3.04(c)(vii)(A) through (C) would
otherwise be payable under Section 3.04(c)(i) through (vi) but such payment is
waived, such amount shall be payable to the Borrower pursuant to this Section
3.04(c)(vii).

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(d)           No Premium or Penalty.  Prepayments permitted or required under
this Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.

Section 3.05           Fees.

(a)           Commitment Fees.  The Borrower agrees to pay to the Administrative
Agent for the account of each Revolving Credit Lender a commitment fee, which
shall accrue at a rate per annum equal to 0.375% on the average daily amount of
the unused amount of the Revolving Commitment of such Revolving Credit Lender
during the period from and including the date of this Agreement to but excluding
the Revolving Credit Termination Date.  Accrued commitment fees shall be payable
in arrears on the last day of March, June, September and December of each year
and on the Revolving Credit Termination Date, commencing on the first such date
to occur after the date hereof.  All commitment fees shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).

(b)           Letter of Credit Fees.  The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Revolving Credit Lender a
participation fee with respect to its participations in Letters of Credit, which
shall accrue at the same Applicable Margin used to determine the interest rate
applicable to Eurodollar Revolving Credit Loans on the average daily amount of
such Revolving Credit Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Revolving Commitment terminates and the date on which such
Lender ceases to have any LC Exposure, (ii) to each Issuing Bank a fronting fee
equal to 0.125% per annum on the face amount of each Letter of Credit issued by
such Issuing Bank hereunder, provided that in no event shall such fee be less
than $500 and (iii) to each Issuing Bank, for its own account, its standard fees
with respect to the issuance, amendment, renewal or extension of any Letter of
Credit issued by such Issuing Bank or processing of drawings thereunder. 
Participation fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
date of this Agreement and fronting fees with respect to any Letter of Credit
shall be payable at the time of issuance of such Letter of Credit; provided that
all such fees shall be payable on the Revolving Credit Termination Date and any
such fees accruing after the Revolving Credit Termination Date shall be payable
on demand.  Any other fees payable to an Issuing Bank pursuant to this Section
3.05(b) shall be payable within 10 days after demand.  All participation fees
and fronting fees shall be computed on the basis of a year of 360 days, unless
such computation would exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

(c)           Administrative Agent Fees.  The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.

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(d)           Borrowing Base Increase Fees.  The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender then party to this
Agreement, ratably in accordance with its Applicable Percentage, a Borrowing
Base increase fee to be agreed by the Lenders and the Borrower on the amount of
any increase of the Borrowing Base over the highest Borrowing Base previously in
effect, payable on the effective date of any such increase to the Borrowing
Base.

ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs.

Section 4.01           Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.

(a)           Payments by the Borrower.  The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 5.01,
Section 5.02, Section 5.03 or otherwise) prior to 11:00 a.m., Houston time, on
the date when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim.  Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances.  Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments
to be made directly to an Issuing Bank as expressly provided herein and except
that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section
12.03 shall be made directly to the Persons entitled thereto.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension.  All payments
hereunder shall be made in dollars.

(b)           Application of Insufficient Payments.  If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c)           Sharing of Payments by Lenders.  If any Lender of a Class shall,
by exercising any right of set-off or counterclaim or otherwise, obtain payment
in respect of any principal of or interest on any of its Loans or participations
in LC Disbursements resulting in such Lender of such Class receiving payment of
a greater proportion of the aggregate amount of its Loans and participations in
LC Disbursements and accrued interest thereon than the proportion received by
any other Lender of such Class, then the Lender of such Class receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders of the same Class
to the extent necessary so

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that the benefit of all such payments shall be shared by the Lenders of the same
Class ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this Section
4.01(c) shall not be construed to apply to any payment made by the Borrower
pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this Section 4.01(c) shall
apply).  The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender of such Class acquiring
a participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

Section 4.02           Presumption of Payment by the Borrower.  Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or any Issuing Bank that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or such Issuing Bank, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or such Issuing Bank, as the case may be, severally agrees
to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or such Issuing Bank with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.

Section 4.03           Certain Deductions by the Administrative Agent.  If any
Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02 then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

Section 4.04           Disposition of Proceeds.  The Security Instruments
contain an assignment by the Borrower and/or the Guarantors unto and in favor of
the Administrative Agent for the benefit of the Lenders of all of the Borrower’s
or each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property.  The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the

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Lenders will instead permit such proceeds to be paid to the Borrower and its
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or its Subsidiaries.

ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality

Section 5.01           Increased Costs.

(a)           Eurodollar Changes in Law.  If any Change in Law shall:

(i)            impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate); or

(ii)           impose on any Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

(b)           Capital Requirements.  If any Lender or any Issuing Bank
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or such Issuing
Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by such Issuing Bank, to a level below that which such Lender or
such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or
such Issuing Bank’s holding company with respect to capital adequacy), then from
time to time the Borrower will pay to such Lender or such Issuing Bank, as the
case may be, such additional amount or amounts as will compensate such Lender or
such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for
any such reduction suffered.

(c)           Certificates.  A certificate of a Lender or any Issuing Bank
setting forth the amount or amounts necessary to compensate such Lender or such
Issuing Bank or its holding company, as the case may be, as specified in Section
5.01(a) or (b) shall be delivered to the Borrower and shall be conclusive absent
manifest error.  The Borrower shall pay such Lender or such Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.

(d)           Effect of Failure or Delay in Requesting Compensation.  Failure or
delay on the part of any Lender or any Issuing Bank to demand compensation
pursuant to this Section

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5.01 shall not constitute a waiver of such Lender’s or such Issuing Bank’s right
to demand such compensation.

Section 5.02           Break Funding Payments.  In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than
on the last day of the Interest Period applicable thereto, or (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market.

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

Section 5.03           Taxes.

(a)           Payments Free of Taxes.  Any and all payments by or on account of
any obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

(b)           Payment of Other Taxes by the Borrower.  The Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

(c)           Indemnification by the Borrower.  The Borrower shall indemnify the
Administrative Agent, each Lender and each Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the
case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or

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Other Taxes imposed or asserted on or attributable to amounts payable under this
Section 5.03) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate of the Administrative Agent, a Lender or
an Issuing Bank as to the amount of such payment or liability under this Section
5.03 shall be delivered to the Borrower and shall be conclusive absent manifest
error.

(d)           Evidence of Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.

(e)           Foreign Lenders.  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding Tax under the law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement or any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

Section 5.04           Designation of Different Lending Office.  If any Lender
or Participant requests compensation under Section 5.01, or if the Borrower is
required to pay any additional amount to any Lender or Participant or any
Governmental Authority for the account of any Lender or Participant pursuant to
Section 5.03, then such Lender or Participant shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender or Participant, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and (ii)
would not subject such Lender or Participant to any unreimbursed cost or expense
and would not otherwise be disadvantageous to such Lender or Participant.  The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender or Participant in connection with any such designation or assignment.

Section 5.05           Illegality.  Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender’s obligation to make such Eurodollar Loans shall be
suspended (the “Affected Loans”) until such time as such Lender may again make
and maintain such Eurodollar Loans and (b) all Affected Loans which would
otherwise be made by such Lender shall be made instead as ABR Loans (and, if
such Lender so requests by notice to the Borrower and the Administrative Agent,
all Affected Loans of such Lender then outstanding shall be automatically
converted into ABR Loans on the date specified by such Lender in such notice)
and, to the extent that Affected Loans are so made as (or converted into) ABR
Loans, all

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payments of principal which would otherwise be applied to such Lender’s Affected
Loans shall be applied instead to its ABR Loans.

ARTICLE VI
Conditions Precedent

Section 6.01           Effective Date.  The obligations of the Lenders to make
Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 12.02):

(a)           The Arranger, the Administrative Agent and the Lenders shall have
received all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.

(b)           The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit C, duly and
properly executed by a Responsible Officer and dated as of the Effective Date.

(c)           The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.

(d)           The Administrative Agent shall have received duly executed (i)
Revolving Credit Notes payable to the order of each Revolving Credit Lender in a
principal amount equal to its Maximum Revolving Credit Amount dated as of the
date hereof and (ii) Term Loan Notes to the order of each Term Loan Lender in a
principal amount equal to its Term Loan Commitment dated as of the date hereof.

(e)           The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments.  In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (provided the Excepted Liens identified in clauses (a)
to (d) and (f) of the definition thereof may exist, but subject to the provisos
at the end of such definition) on at least 85% of the total value of the Oil and
Gas Properties evaluated in the most recently delivered Reserve Report.

(f)            The Administrative Agent shall have received an opinion of (i)
Thompson & Knight LLP, special counsel to the Borrower, in form and substance
satisfactory to the Administrative Agent and (ii) local counsel in each of the
following states: Mississippi and any other jurisdictions requested by the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent.

(g)           The Administrative Agent shall have received such information as
the Administrative Agent may reasonably require, all of which shall be
reasonably satisfactory to the Administrative Agent in form and substance, on
the title to the Oil and Gas Properties evaluated in the Initial Reserve Report.

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(h)           The Administrative Agent shall have received a certificate of a
Responsible Officer certifying that the Borrower has received all consents and
approvals required by Section 7.03.

(i)            The Administrative Agent shall have received (i) a certificate of
a Responsible Officer of the Borrower certifying:  (A) that the Borrower is
concurrently consummating the Acquisition in accordance with the terms of the
Acquisition Documents (with all of the material conditions precedent thereto
having been satisfied in all material respects by the parties thereto) and
acquiring substantially all of the Acquisition Properties contemplated by the
Acquisition Documents; (B) as to the final purchase price for the Acquisition
Properties after giving effect to all adjustments as of the closing date
contemplated by the Acquisition Documents and specifying, by category, the
amount of such adjustment; (C) that attached thereto is a true and complete list
of the Acquisition Properties which have been excluded from the Acquisition
pursuant to the terms of the Acquisition Documents, specifying with respect
thereto the basis of exclusion as (1) title defect, (2) preferential purchase
right, (3) environmental or (4) casualty loss; (D) that attached thereto is a
true and complete list of all Acquisition Properties for which any seller has
elected to cure a title defect, (E) that attached thereto is a true and complete
list of all Acquisition Properties for which any seller has elected to remediate
an adverse environmental condition, and (F) that attached thereto is a true and
complete list of all Acquisition Properties which are currently pending final
decision by a third party regarding purchase of such property in accordance with
any preferential right; (ii) a true and complete executed copy of each of the
Acquisition Documents; (iii) original counterparts or copies, certified as true
and complete, of the assignments, deeds and leases for all of the Acquisition
Properties; and (iv) such other related documents and information as the
Administrative Agent shall have reasonably requested.

(j)            The Administrative Agent shall have received evidence that the
Borrower has (a) cash or cash equivalents on hand and (b) there is an unused
amount of Revolving Commitment totaling $5,000,000.00 as of the Effective Date.

(k)           The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(c).

(l)            The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries.

(m)          The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent may
reasonably request.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of each Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 12.02) at or prior to 3:00 p.m., Houston time, on September
30, 2006 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

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Section 6.02           Each Credit Event.  The obligation of each Lender to make
a Loan on the occasion of any Borrowing (including the initial funding), and of
each Issuing Bank to issue, amend, renew or extend any Letter of Credit, is
subject to the satisfaction of the following conditions:

(a)           At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

(b)           At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Material Adverse Effect shall have occurred.

(c)           The representations and warranties of the Borrower and the
Guarantors set forth in this Agreement and in the other Loan Documents shall be
true and correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are
expressly limited to an earlier date, in which case, on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, such representations and warranties shall
continue to be true and correct as of such specified earlier date.

(d)           The making of such Loan or the issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, would not conflict with, or
cause any Lender or any Issuing Bank to violate or exceed, any applicable
Governmental Requirement, and no Change in Law shall have occurred, and no
litigation shall be pending or threatened, which does or, with respect to any
threatened litigation, seeks to, enjoin, prohibit or restrain, the making or
repayment of any Loan, the issuance, amendment, renewal, extension or repayment
of any Letter of Credit or any participations therein or the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

(e)           The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit in accordance
with Section 2.08(b), as applicable.

Each request for a Borrowing and each issuance, amendment, renewal or extension
of any Letter of Credit shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters specified in
Section 6.02(a) through (e).

ARTICLE VII
Representations and Warranties

The Borrower represents and warrants to the Lenders that:

Section 7.01           Organization; Powers.  Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as

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now conducted, and is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required, except where failure to
have such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.

Section 7.02           Authority; Enforceability.  The Transactions are within
the Borrower’s and each Guarantor’s corporate powers and have been duly
authorized by all necessary corporate and, if required, stockholder action
(including, without limitation, any action required to be taken by any class of
directors of the Borrower or any other Person, whether interested or
disinterested, in order to ensure the due authorization of the Transactions). 
Each Loan Document and Acquisition Document to which the Borrower and each
Guarantor is a party has been duly executed and delivered by the Borrower and
such Guarantor and constitutes a legal, valid and binding obligation of the
Borrower and such Guarantor, as applicable, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

Section 7.03           Approvals; No Conflicts.  The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person (including
shareholders or any class of directors of the Borrower or any other Person,
whether interested or disinterested), nor is any such consent, approval,
registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect, (b) will not violate any applicable law or regulation or the
charter, by-laws or other organizational documents of the Borrower or any of its
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon the Borrower or any of its Subsidiaries or their Properties, or give rise
to a right thereunder to require any payment to be made by the Borrower or such
Subsidiary and (d) will not result in the creation or imposition of any Lien on
any Property of the Borrower or any of its Subsidiaries (other than the Liens
created by the Loan Documents).

Section 7.04           Financial Condition; No Material Adverse Change.

(a)           The Borrower has heretofore furnished to the Lenders on or before
the date of this Agreement its audited consolidated balance sheet and statements
of income, stockholders equity and cash flows as of and for the fiscal year
ended December 31, 2005.  Such financial statement presents fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its Subsidiaries as of such date and for such period
in accordance with GAAP.

(b)           Since December 31, 2005, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.

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(c)           Neither the Borrower nor any of its Subsidiaries has on the date
hereof any material Debt (including Disqualified Capital Stock), or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for Taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments.

Section 7.05           Litigation.

(a)           There are no actions, suits, investigations or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries or involving the Acquisition (i) as to which there is a
reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect, (ii) that involve any Loan Document, any
Acquisition Document or the Transactions, or (iii) that could impair the
consummation of the Acquisition on the time and in the manner contemplated by
the Acquisition Documents.

Section 7.06           Environmental Matters.  Except as could not be reasonably
expected to have a Material Adverse Effect (or with respect to (c), (d) and (e)
below, where the failure to take such actions could not be reasonably expected
to have a Material Adverse Effect):

(a)           neither any Property of the Borrower or any of its Subsidiaries
nor the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws.

(b)           no Property of the Borrower or any of its Subsidiaries nor the
operations currently conducted thereon or, to the knowledge of the Borrower, by
any prior owner or operator of such Property or operation, are in violation of
or subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws.

(c)           all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrower and each of its
Subsidiaries, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed, and the Borrower and
each of its Subsidiaries are in compliance with the terms and conditions of all
such notices, permits, licenses and similar authorizations.

(d)           all hazardous substances, solid waste and oil and gas waste, if
any, generated at any and all Property of the Borrower or any of its
Subsidiaries have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and, to
the knowledge of the Borrower, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any Governmental
Authority in connection with any Environmental Laws.

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(e)           the Borrower has taken all steps reasonably necessary to determine
and has determined that no oil, hazardous substances, solid waste or oil and gas
waste, have been disposed of or otherwise released and there has been no
threatened release of any oil, hazardous substances, solid waste or oil and gas
waste on or to any Property of the Borrower or any of its Subsidiaries except in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.

(f)            to the extent applicable, all Property of the Borrower and each
of its Subsidiaries currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and the Borrower does not have any reason to
believe that such Property, to the extent subject to the OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement.

(g)           neither the Borrower nor any of its Subsidiaries has any known
contingent liability or Remedial Work in connection with any release or
threatened release of any oil, hazardous substance, solid waste or oil and gas
waste into the environment.

Section 7.07           Compliance with the Laws and Agreements; No Defaults.

(a)           Each of the Borrower and its Subsidiaries is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

(b)           Neither the Borrower nor any of its Subsidiaries is in default nor
has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or any of its Subsidiaries to Redeem or
make any offer to Redeem under any indenture, note, credit agreement or
instrument pursuant to which any Material Indebtedness is outstanding or by
which the Borrower or any of its Subsidiaries or any of their Properties is
bound.

(c)           No Default has occurred and is continuing.

Section 7.08           Investment Company Act.  Neither the Borrower nor any of
its Subsidiaries is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.

Section 7.09           Taxes.  Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.  The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower,

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adequate.  No Tax Lien has been filed and, to the knowledge of the Borrower, no
claim is being asserted with respect to any such Tax or other such governmental
charge.

Section 7.10           ERISA.

(a)           The Borrower, its Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.

(b)           Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.

(c)           No act, omission or transaction has occurred that could result in
imposition on the Borrower, any of its Subsidiaries or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i) or (l) of section 502 of ERISA or a Tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.

(d)           No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974.  No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any of its Subsidiaries or any ERISA Affiliate
has been or is expected by the Borrower, any of its Subsidiaries or any ERISA
Affiliate to be incurred with respect to any Plan.  No ERISA Event with respect
to any Plan has occurred.

(e)           Full payment when due has been made of all amounts which the
Borrower, any of its Subsidiaries or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such Plan
as of the date hereof, and no accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan.

(f)            The actuarial present value of the benefit liabili­ties under
each Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower’s most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities.  The term “actuarial
present value of the benefit liabilities” shall have the meaning specified in
section 4041 of ERISA.

(g)           Neither the Borrower, its Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, any of its Subsidiaries or any ERISA
Affiliate in its sole discretion at any time without any material liability.

(h)           Neither the Borrower, its Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.

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(i)            Neither the Borrower, its Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.

Section 7.11           Disclosure; No Material Misstatements.  The Borrower has
disclosed or made available to the Lenders all agreements, instruments and
corporate or other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect. 
None of the reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Administrative Agent, any other Agent or any Lender or any of their Affiliates
in connection with the negotiation of this Agreement or any other Loan Document
or delivered hereunder or under any other Loan Document (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.  There
is no fact peculiar to the Borrower or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect or in the future is
reasonably likely to have a Material Adverse Effect and which has not been set
forth in this Agreement or the Loan Documents or the other documents,
certificates and statements furnished to the Administrative Agent, any other
Agent or the Lenders by or on behalf of the Borrower or any of its Subsidiaries
prior to, or on, the date hereof in connection with the transactions
contemplated hereby.  There are no statements or conclusions in any Reserve
Report which are based upon or include misleading information or fail to take
into account material information regarding the matters reported therein.

Section 7.12           Insurance.  The Borrower has, and has caused all of its
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Subsidiaries. 
The Administrative Agent and the Lenders have been named as additional insureds
in respect of such liability insurance policies and the Administrative Agent has
been named as loss payee for the benefit of the Administrative Agent and the
Lenders with respect to Property loss insurance.

Section 7.13           Restriction on Liens.  Neither the Borrower nor any of
its Subsidiaries is a party to any material agreement or arrangement, or subject
to any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to the Administrative Agent and the Lenders
on or in respect of their Properties to secure the Indebtedness and the Loan
Documents.

Section 7.14           Subsidiaries.  Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower
has no Subsidiaries.  The Borrower has no Foreign Subsidiaries.

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Section 7.15           Location of Business and Offices.  The Borrower’s
jurisdiction of organization is Nevada; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Whittier Energy
Corporation; and the organizational identification number of the Borrower in its
jurisdiction of organization is C28115-2003 (or, in each case, as set forth in a
notice delivered to the Administrative Agent pursuant to Section 8.01(m) in
accordance with Section 12.01).  The Borrower’s principal place of business and
chief executive offices are located at the address specified in Section 12.01
(or as set forth in a notice delivered pursuant to Section 8.01(m) and Section
12.01(c)).  Each Subsidiary’s jurisdiction of organization, name as listed in
the public records of its jurisdiction of organization, organizational
identification number in its jurisdiction of organization, and the location of
its principal place of business and chief executive office is stated on Schedule
7.14 (or as set forth in a notice delivered pursuant to Section 8.01(m)).

Section 7.16           Properties; Titles, Etc.

(a)           Each of the Borrower and its Subsidiaries has good and defensible
title to the Oil and Gas Properties evaluated in the most recently delivered
Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 9.03.  After giving
full effect to the Excepted Liens, the Borrower or any of its Subsidiaries
specified as the owner owns the net interests in production attributable to the
Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate the Borrower or any of its Subsidiaries to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth in the
most recently delivered Reserve Report that is not offset by a corresponding
proportionate increase in the Borrower’s or any of its Subsidiaries’ net revenue
interest in such Property.

(b)           All material leases and agreements necessary for the conduct of
the business of the Borrower and its Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.

(c)           The rights and Properties presently owned, leased or licensed by
the Borrower and its Subsidiaries including, without limitation, all easements
and rights of way, include all rights and Properties necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material respects
in the same manner as their business has been conducted prior to the date
hereof.

(d)           All of the Properties of the Borrower and each of its Subsidiaries
that are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.

(e)           The Borrower and each of its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the

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rights of any other Person, except for any such infringements that, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.  The Borrower and its Subsidiaries either own or have valid
licenses or other rights to use all databases, geological data, geophysical
data, engineering data, seismic data, maps, interpretations and other technical
information used in their businesses as presently conducted, subject to the
limitations contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the
exploration and production of Hydrocarbons, with such exceptions as could not
reasonably be expected to have a Material Adverse Effect.

Section 7.17           Maintenance of Properties.  Except for such acts or
failures to act as could not be reasonably expected to have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all Government Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties.  Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) and (ii) none of the wells comprising a part of the Oil
and Gas Properties (or Properties unitized therewith) is deviated from the
vertical more than the maximum permitted by Government Requirements, and such
wells are, in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of wells located
on Properties unitized therewith, such unitized Properties).  All pipelines,
wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by the Borrower or any of its
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to
such of the foregoing which are operated by the Borrower or any of its
Subsidiaries, in a manner consistent with the Borrower’s or its Subsidiaries’
past practices (other than those the failure of which to maintain in accordance
with this Section 7.17 could not reasonably be expect to have a Material Adverse
Effect).  The representations and warranties of this Section 7.17 are limited to
the Borrower’s knowledge insofar as they relate to (i) any Acquisition
Properties prior to the date such properties were acquired and (ii) any Property
not operated by Borrower or one of its Subsidiaries.

Section 7.18           Gas Imbalances, Prepayments.  As of the date hereof,
except as set forth on Schedule 7.18 or on the most recent certificate delivered
pursuant to Section 8.12(c), on a net basis there are no gas imbalances, take or
pay or other prepayments which would require the Borrower or any of its
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor
exceeding 50,000 Mcf of gas (on an Mcf equivalent basis) in the aggregate.

Section 7.19           Marketing of Production.  Except for contracts listed and
in effect on the date hereof on Schedule 7.19, and thereafter either disclosed
in writing to the Administrative Agent or included in the most recently
delivered Reserve Report (with respect to all of which contracts the Borrower
represents that it or its Subsidiaries are receiving a price for all

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production sold thereunder which is computed substantially in accordance with
the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property’s delivery capacity), no material
agreements exist which are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower’s or its
Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other
rights to purchase, production, whether or not the same are currently being
exercised) that (a) pertain to the sale of production at a fixed price and (b)
have a maturity or expiry date of longer than six (6) months from the date
hereof.

Section 7.20           Swap Agreements.  Each report required to be delivered by
the Borrower pursuant to Section 8.01(e), sets forth, a true and complete list
of all Swap Agreements of the Borrower and each of its Subsidiaries, the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net mark to market value thereof, all
credit support agreements relating thereto (including any margin required or
supplied) and the counterparty to each such agreement.

Section 7.21           Use of Loans and Letters of Credit.  The proceeds of the
Loans and the Letters of Credit shall be used to provide funding in connection
with the Acquisition, to refinance existing debt of the Borrower, and for
general corporate purposes of the Borrower or any of its Subsidiaries (including
in connection with Investments permitted by Section 9.05(i)).  The Borrower and
its Subsidiaries are not engaged principally, or as one of its or their
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board).  No part of the
proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.

Section 7.22           Solvency.  After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement), at a fair valuation, of the Borrower and the
Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and
the Guarantors on a consolidated basis, as the Debt becomes absolute and
matures, (b) each of the Borrower and the Guarantors will not have incurred or
intended to incur, and will not believe that it will incur, Debt beyond its
ability to pay such Debt (after taking into account the timing and amounts of
cash to be received by each of the Borrower and the Guarantors and the amounts
to be payable on or in respect of its liabilities, and giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement) as such Debt becomes absolute and matures and (c) each
of the Borrower and the Guarantors will not have (and will have no reason to
believe that it will have thereafter) unreasonably small capital for the conduct
of its business.

Section 7.23           Acquisition.  The copies of the Acquisition Documents
previously delivered by the Borrower to the Administrative Agent are true,
accurate and complete and have not been amended or modified in any manner, other
than pursuant to amendments or modifications previously delivered to the
Administrative Agent.  Neither the Borrower nor any of its Subsidiaries is in
default in respect of any material term or obligation under any Acquisition
Document.

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ARTICLE VIII
Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

Section 8.01           Financial Statements; Ratings Change; Other Information. 
The Borrower will furnish to the Administrative Agent and each Lender:

(a)           Annual Financial Statements.  As soon as available, but in any
event in accordance with then applicable law and not later than 90 days after
the end of each fiscal year of the Borrower, its audited consolidated balance
sheet and related statements of operations, stockholders’ equity and cash flows
as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by independent
public accountants of recognized national standing and reasonably acceptable to
the Administrative Agent (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present fairly
in all material respects the financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied.

(b)           Quarterly Financial Statements.  As soon as available, but in any
event in accordance with then applicable law and not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrower, its unaudited, consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case, in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as presenting fairly
in all material respects the financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes.

(c)           Certificate of Financial Officer — Compliance.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit C hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 9.01 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since December 31, 2004 and,
if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.

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(d)           Certificate of Accounting Firm — Defaults.  Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of the
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the extent
required by accounting rules or guidelines).

(e)           Certificate of Financial Officer – Swap Agreements.  Concurrently
with any delivery of financial statements under Section 8.01(a) and Section
8.01(b), a certificate of a Financial Officer, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth as of a recent date, a
true and complete list of all Swap Agreements of the Borrower and each of its
Subsidiaries, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market
value therefor, any new credit support agreements relating thereto, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.

(f)            Certificate of Insurer – Insurance Coverage.  Concurrently with
any delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance reasonably satisfactory to the
Administrative Agent, and, if requested by the Administrative Agent or any
Lender, all copies of the applicable policies.

(g)           Other Accounting Reports.  Promptly upon receipt thereof, a copy
of each other report or letter submitted to the Borrower or any of its
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of the Borrower or any such
Subsidiary, and a copy of any response by the Borrower or any such Subsidiary,
or the Board of Directors of the Borrower or any such Subsidiary, to such letter
or report.

(h)           Filings; Reports to Shareholders.  Promptly after distribution
thereof, copies of all periodic and other reports and other materials
distributed by the Borrower to its shareholders generally.

(i)            Notices Under Material Instruments.  Promptly after the
furnishing thereof, copies of any financial statement, report or notice
furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.

(j)            Lists of Purchasers.  Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of
all Persons purchasing in the aggregate not less than 80% of the Hydrocarbons
from the Borrower or any of its Subsidiaries.

(k)           Notice of Sales of Oil and Gas Properties.  In the event the
Borrower or any of its Subsidiaries intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties or any Equity Interests in any
Subsidiary included in the most recently delivered Reserve Report during any
period between two successive Scheduled Redetermination Dates having a fair
market value, individually or in the aggregate, in excess of $500,000, prior
written

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notice of such disposition, the price thereof, the anticipated date of closing
and any other details thereof requested by the Administrative Agent or any
Lender.

(l)            Notice of Casualty Events.  Prompt written notice, and in any
event within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.

(m)          Information Regarding Borrower and Guarantors.  Prompt written
notice (and in any event within thirty (30) days prior thereto) of any change
(i) in the Borrower or any Guarantor’s corporate name or in any trade name used
to identify such Person in the conduct of its business or in the ownership of
its Properties, (ii) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor’s identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor’s federal taxpayer identification number.

(n)           Production Report and Lease Operating Statements.  Within 60 days
after the end of each quarter, a report setting forth, on an accrual basis for
each quarter during the then-current fiscal year to date, the volume of
production and sales attributable to production (and the prices at which such
sales were made and the revenues derived from such sales) for each such quarter
from the Oil and Gas Properties, and setting forth the related ad valorem,
severance and production Taxes and lease operating expenses attributable thereto
and incurred for each such quarter.

(o)           Notices of Certain Changes.  Promptly, but in any event within
five (5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
by-laws, any preferred stock designation or any other organic document of the
Borrower or any of its Subsidiaries.

(p)           Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries (including,
without limitation, any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA), or compliance with the terms of
this Agreement or any other Loan Document, as the Administrative Agent or any
Lender may reasonably request.

(q)           Notices Relating to Acquisition.  The Borrower shall promptly give
the Administrative Agent the Final Statement (as such term is defined in Section
11(c)(ii) of the Acquisition Documents) when such document is completed and the
details of any material additional adjustments made pursuant to Section 11(d) of
the Acquisition Documents.

Section 8.02           Notices of Material Events.  The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:

(a)           the occurrence of any Default;

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(b)           the filing or commencement of, or the threat in writing of, any
action, suit, investigation, arbitration or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Subsidiary thereof, or any material adverse development in any action, suit,
proceeding, investigation or arbitration (whether or not previously disclosed to
the Lenders), that, in either case, if adversely determined, could reasonably be
expected to result in liability in excess of $500,000;

(c)           the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$500,000; and

(d)           any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.

Section 8.03           Existence; Conduct of Business.  The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business and maintain, if necessary, its qualification to
do business in each other jurisdiction in which any of its Oil and Gas
Properties is located or the ownership of its Properties requires such
qualification, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.

Section 8.04           Payment of Obligations.  The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities of the Borrower and all of its Subsidiaries before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any material Property of the Borrower or any
of its Subsidiaries.

Section 8.05           Performance of Obligations under Loan Documents.  The
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and the Borrower will cause each of its Subsidiaries to
do and perform every act and discharge all of the obligations to be performed
and discharged by them under the Loan Documents, including, without limitation,
this Agreement, at the time or times and in the manner specified.

Section 8.06           Operation and Maintenance of Properties.  The Borrower
will, and will cause each of its Subsidiaries to:

(a)           operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance with all Governmental Requirements, including,

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without limitation, applicable pro ration requirements and Environmental Laws,
and all applicable laws, rules and regulations of every other Governmental
Authority from time to time constituted to regulate the development and
operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom, except, in each case, where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect.

(b)           keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted
and preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its material Oil and Gas Properties and
other material Properties, including, without limitation, all material
equipment, machinery and facilities.

(c)           promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.

(d)           promptly perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards and in all material
respects, the obligations required by each and all of the assignments, deeds,
leases, sub-leases, contracts and agreements affecting its interests in its Oil
and Gas Properties and other material Properties.

(e)           operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in accordance with the
practices of the industry and in material compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.

(f)            to the extent the Borrower or one of its Subsidiaries is not the
operator of any of its Property, the Borrower shall use reasonable efforts to
cause the operator to comply with this Section 8.06.

Section 8.07           Insurance.  The Borrower will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the Administrative
Agent.

Section 8.08           Books and Records; Inspection Rights.  The Borrower will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities.  The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives

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designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its Properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.

Section 8.09           Compliance with Laws.  The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to them or their Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

Section 8.10           Environmental Matters.

(a)           The Borrower shall: (i) comply, and shall cause its Properties and
operations and each of its Subsidiaries and each Subsidiary’s Properties and
operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
dispose of or otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each of its Subsidiaries to timely obtain or file, all notices,
permits, licenses, exemptions, approvals, registrations or other authorizations,
if any, required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each of its Subsidiaries to promptly commence and
diligently prosecute to completion, any assessment, evaluation, investigation,
monitoring, containment, cleanup, removal, repair, restoration, remediation or
other remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Borrower’s or its
Subsidiaries’ Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each of its Subsidiaries to
establish and implement, such procedures as may be necessary to continuously
determine and assure that the Borrower’s and its Subsidiaries’ obligations under
this Section 8.10(a) are timely and fully satisfied, which failure to establish
and implement could reasonably be expected to have a Material Adverse Effect.

(b)           The Borrower will promptly, but in no event later than five days
of the occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrower reasonably
anticipates that

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such action will result in liability (whether individually or in the aggregate)
in excess of $500,000, not fully covered by insurance, subject to normal
deductibles.

(c)           The Borrower will, and will cause each of its Subsidiaries to,
provide environmental audits and tests in accordance with American Society of
Testing Materials standards upon request by the Administrative Agent and the
Lenders and no more than once per year in the absence of any Event of Default
(or as otherwise required to be obtained by the Administrative Agent or the
Lenders by any Governmental Authority), in connection with any future
acquisitions of Oil and Gas Properties or other Properties.

Section 8.11           Further Assurances.

(a)           The Borrower at its sole expense will, and will cause each of its
Subsidiaries to, promptly execute and deliver to the Administrative Agent all
such other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any of its
Subsidiaries, as the case may be, in the Loan Documents, including the Notes, or
to further evidence and more fully describe the collateral intended as security
for the Indebtedness, or to correct any omissions in this Agreement or the
Security Instruments, or to state more fully the obligations secured therein, or
to perfect, protect or preserve any Liens created pursuant to this Agreement or
any of the Security Instruments or the priority thereof, or to make any
recordings, file any notices or obtain any consents, all as may be reasonably
necessary or appropriate, in the reasonable discretion of the Administrative
Agent, in connection therewith.

(b)           The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property without the signature of
the Borrower or any other Guarantor where permitted by law.  A carbon,
photographic or other reproduction of the Security Instruments or any financing
statement covering the Mortgaged Property or any part thereof shall be
sufficient as a financing statement where permitted by law.

Section 8.12           Reserve Reports.

(a)           On or before March 1st and September 1st of each year, commencing
September 1st, 2006, the Borrower shall furnish to the Administrative Agent and
the Lenders a Reserve Report as of the immediately preceding January 1 or July
1, as applicable.  The Reserve Report as of January 1 of each year shall be
prepared by one or more petroleum engineers reasonably acceptable to the
Administrative Agent and the July 1 Reserve Report of each year shall be
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
January 1 Reserve Report.

(b)           In the event of an Interim Redetermination, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately

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preceding January 1 Reserve Report.  For any Interim Redetermination requested
by the Administrative Agent or the Borrower pursuant to Section 2.07(b), the
Borrower shall provide such Reserve Report with an “as of” date as required by
the Administrative Agent as soon as possible, but in any event no later than
thirty (30) days following the receipt of such request.

(c)           With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer of the Borrower certifying that in all material respects:
(i) the information contained in the Reserve Report and any other information
delivered in connection therewith is true and correct, (ii) the Borrower or its
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to their Oil and Gas Properties evaluated in such Reserve Report that
would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Oil and Gas Properties have been sold since the date of the last Borrowing
Base determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the date hereof or the most recently delivered Reserve Report that the
Borrower could reasonably be expected to have been obligated to list on Schedule
7.19 had such agreement been in effect on the date hereof and (vi) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
Borrowing Base that the value of such Mortgaged Properties represent.

Section 8.13           Title Information.

(a)           On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), the Borrower will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total value of the Oil and Gas Properties
evaluated by such Reserve Report.

(b)           If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within 60 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to

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the Administrative Agent, satisfactory title information on at least 80% of the
value of the Oil and Gas Properties evaluated by such Reserve Report.

(c)           If the Borrower is unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 60-day period or
the Borrower does not comply with the requirements to provide acceptable title
information covering 80% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their reasonable discretion from time to time,
and any failure to so exercise this remedy at any time shall not be a waiver as
to future exercise of the remedy by the Administrative Agent or the Lenders.  To
the extent that the Administrative Agent or the Majority Lenders are not
satisfied with title to any Mortgaged Property after the 60-day period has
elapsed, such unacceptable Mortgaged Property shall not count towards the 80%
requirement, and the Administrative Agent may send a notice to the Borrower and
the Lenders that the then outstanding Borrowing Base shall be reduced by an
amount as determined by the Majority Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 80%
of the value of the Oil and Gas Properties evaluated in the most recent Reserve
Report.  This new Borrowing Base shall become effective immediately after
receipt of such notice.

Section 8.14           Additional Collateral; Additional Guarantors.

(a)           In connection with each redetermination of the Borrowing Base, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 85% of the total value of the Oil and
Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production.  In the event that the Mortgaged Properties do not
represent at least 85% of such total value, then the Borrower shall, and shall
cause its Subsidiaries to, grant to the Administrative Agent as security for the
Indebtedness a first-priority Lien (provided the Excepted Liens of the type
described in clauses (a) to (d) and (f) of the definition thereof may exist, but
subject to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
after giving effect thereto, the Mortgaged Properties will represent at least
85% of such total value.  All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes.

(b)           The Borrower shall promptly cause each Subsidiary, except those
Subsidiaries acquired in the Acquisition which will be dissolved shortly
thereafter, to guarantee the Indebtedness pursuant to the Guaranty Agreement. 
In connection with any such guaranty, the Borrower shall, or shall cause such
Subsidiary to, (A) execute and deliver the Guaranty Agreement or a supplement to
the Guaranty Agreement as required by the Administrative Agent, (B) pledge all
of the Equity Interests of such Subsidiary (including, without limitation,
delivery of original stock certificates evidencing the Equity Interests of such
Subsidiary, together with an appropriate undated stock powers for each
certificate duly executed in blank by the registered

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owner thereof) and (C) execute and deliver such other additional closing
documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.

(c)           If any Event of Default shall occur and be continuing, then the
Borrower shall, and shall cause each of its Subsidiaries to, within 10 Business
Days, grant to the Administrative Agent as security for the Indebtedness a
first-priority Lien (provided Excepted Liens of the type described in clauses
(a) to (d) and (f) of the definition thereof may exist, but subject to the
provisos at the end of such definition) on all of their Oil and Gas Properties
not already subject to a Lien of the Security Instruments such that after giving
effect thereto, the Mortgaged Properties will represent substantially all of the
Oil and Gas Properties of the Borrower and its Subsidiaries.  All such Liens
will be created and perfected by and in accordance with the provisions of deeds
of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.

Section 8.15           ERISA Compliance.  The Borrower will promptly furnish,
and will cause its Subsidiaries and any ERISA Affiliate to promptly furnish, to
the Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any “prohibited transaction,” as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer of the Borrower, its Subsidiaries or the ERISA Affiliate, as the case
may be, specifying the nature thereof, what action the Borrower, its
Subsidiaries or the ERISA Affiliate is taking or proposes to take with respect
thereto, and, when known, any action taken or proposed by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto, and (iii)
immediately upon receipt thereof, copies of any notice of the PBGC’s intention
to terminate or to have a trustee appointed to administer any Plan.  With
respect to each Plan (other than a Multiemployer Plan), the Borrower will, and
the Borrower will cause each of its Subsidiaries and ERISA Affiliates to, (i)
satisfy in full and in a timely manner, without incurring any late payment or
underpayment charge or penalty and without giving rise to any lien, all of the
contribution and funding requirements of section 412 of the Code (determined
without regard to subsections (d), (e), (f) and (k) thereof) and of section 302
of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and
(ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring
any late payment or underpayment charge or penalty, all premiums required
pursuant to sections 4006 and 4007 of ERISA.

Section 8.16           Swap Agreements.  The Borrower shall maintain the hedge
position established by the Swap Agreements currently in place during the period
specified therein and shall neither assign, terminate or unwind any such Swap
Agreements nor sell any Swap Agreements if the effect of such action (when taken
together with any other Swap Agreements executed contemporaneously with the
taking of such action) would have the effect of canceling its positions under
such Swap Agreements required hereby.

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Section 8.17           Marketing Activities.  The Borrower will not, and will
not permit any of its Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its Subsidiaries that the Borrower or one of its Subsidiaries
has the right to market pursuant to joint operating agreements, unitization
agreements or other similar contracts that are usual and customary in the oil
and gas business and (iii) other contracts for the purchase and/or sale of
Hydrocarbons of third parties (A) which have generally offsetting provisions
(i.e. corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (B) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.

ARTICLE IX
Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

Section 9.01           Financial Covenants.

(a)           Ratio of Total Debt to Consolidated EBITDAX.  The Borrower will
not, as of any date of determination, permit its ratio of Total Debt as of such
day to Consolidated EBITDAX for the most recent period of four fiscal quarters
then ending for which financial statements are available to be greater than 3.5
to 1.0.

(b)           Current Ratio.  The Borrower will not permit, as of the last day
of any fiscal quarter, its ratio of (i) consolidated current assets (including
the unused amount of the total Commitments, but excluding non-cash assets under
FAS 133) to (ii) consolidated current liabilities (excluding non-cash
obligations under FAS 133, asset and asset retirement obligations and current
maturities of Indebtedness under this Agreement) to be less than 1.0 to 1.0.

(c)           Asset Coverage Ratio.  So long as the Term Loan is outstanding,
the Borrower will not, as of any date of determination, permit its ratio of
Total Reserve Value for the most recent semi-annual period for which data is
available to Total Debt as of such date to be less than 1.5 to 1.0.

Section 9.02           Debt.  The Borrower will not, and will not permit any of
its Subsidiaries to, incur, create, assume or suffer to exist any Debt, except:

(a)           the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents.

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(b)           accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services from time
to time incurred in the ordinary course of business which are not outstanding
more than sixty (60) days past the date of receipt of the invoice or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP.

(c)           Debt under Capital Leases not to exceed $500,000.

(d)           Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and Gas
Properties.

(e)           intercompany Debt between the Borrower and any of its Subsidiaries
or between Subsidiaries to the extent permitted by Section 9.05(g); provided
that such Debt is not held, assigned, transferred, negotiated or pledged to any
Person other than the Borrower or one of their Wholly-Owned Subsidiaries, and,
provided further, that any such Debt owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Guaranty
Agreement.

(f)            endorsements of negotiable instruments for collection in the
ordinary course of business.

(g)           other Debt not to exceed $500,000 in the aggregate at any one time
outstanding.

Section 9.03           Liens.  The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or permit to exist any Lien on any of
its Properties (now owned or hereafter acquired), except:

(a)           Liens securing the payment of any Indebtedness.

(b)           Excepted Liens.

(c)           Liens securing Capital Leases permitted by Section 9.02(c) but
only on the Property under lease.

(d)           Liens on Property not constituting collateral for the Indebtedness
and not otherwise permitted by the foregoing clauses of this Section 9.03;
provided that the aggregate principal or face amount of all Debt secured under
this Section 9.03(d) shall not exceed $250,000 at any time.

Section 9.04           Dividends, Distributions and Redemptions.  The Borrower
will not, and will not permit any of its Subsidiaries to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, return any
capital to its stockholders or make any distribution of their Property to their
respective Equity Interest holders, except (i) the Borrower may declare and pay
cash dividends with respect to its Equity Interests payable solely in additional
shares of its Equity Interests (other than Disqualified Capital Stock); (ii)
Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests and (iii) the Borrower may declare and pay cash dividends to its
Equity Interest holders in an aggregate amount not to exceed $100,000

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in any fiscal year, so long as no Default or Borrowing Base Deficiency has
occurred and is continuing, or would result after giving effect to such payment.

Section 9.05           Investments, Loans and Advances.  The Borrower will not,
and will not permit any of its Subsidiaries to, make or permit to remain
outstanding any Investments in or to any Person, except that the foregoing
restriction shall not apply to:

(a)           Investments reflected in the Financial Statements.

(b)           accounts receivable arising in the ordinary course of business.

(c)           direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.

(d)           commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by S&P or Moody’s.

(e)           deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $500,000,000 (as of the date
of such bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody’s, respectively.

(f)            deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).

(g)           Investments (i) made by the Borrower in or to the Guarantors, and
(ii) made by any Subsidiary of the Borrower in or to the Borrower or any
Guarantor.

(h)           Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any of its Subsidiaries as a result of a bankruptcy or
other insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of its Subsidiaries;
provided that the Borrower shall give the Administrative Agent prompt written
notice in the event that the aggregate amount of all investments held at any one
time under this Section 9.05(h) exceeds $250,000.

(i)            other Investments not to exceed $250,000 in the aggregate at any
time.

Section 9.06           Nature of Business.  The Borrower will not, and will not
permit any of its Subsidiaries to, allow any material change to be made in the
character of its business as an independent oil and gas exploration and
production company.  The Borrower will not, and will not permit any of its
Subsidiaries to, operate its business outside the geographical boundaries of the
United States.

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Section 9.07           Limitation on Leases.  The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal but excluding leases of Hydrocarbon Interests),
under leases or lease agreements which would cause the aggregate amount of all
payments made by the Borrower and its Subsidiaries pursuant to all such leases
or lease agreements, including, without limitation, any residual payments at the
end of any lease, to exceed $750,000 in any period of twelve consecutive
calendar months during the life of such leases.

Section 9.08           Proceeds of Notes.  The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.21.  Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulations T, U or X or any other regulation of the Board
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

Section 9.09           ERISA Compliance.  The Borrower will not, and will not
permit any of its Subsidiaries to, at any time:

(a)           engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, any of its Subsidiaries or
any ERISA Affiliate could be subjected to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a Tax imposed
by Chapter 43 of Subtitle D of the Code.

(b)           terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Borrower, any of its Subsidiaries or any ERISA Affiliate
to the PBGC.

(c)           fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, any of its
Subsidiaries or any ERISA Affiliate is required to pay as contribu­tions
thereto.

(d)           permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.

(e)           permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, any of its Subsidiaries or any ERISA Affiliate which is regulated
under Title IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities.  The term “actuarial present value of the
benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

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(f)            contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any Multiemployer Plan.

(g)           acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Borrower or any of its Subsidiaries or with respect to any ERISA Affiliate
of the Borrower or any of its Subsidiaries if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such acquisition
has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2)
any other Plan that is subject to Title IV of ERISA under which the actuarial
present value of the benefit liabilities under such Plan exceeds the current
value of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities.

(h)           incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.

(i)            contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.

(j)            amend, or permit any ERISA Affiliate to amend, a Plan resulting
in an increase in current liability such that the Borrower, any of its
Subsidiaries or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.

Section 9.10           Sale or Discount of Receivables.  Except for receivables
obtained by the Borrower or any of its Subsidiaries out of the ordinary course
of business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, the Borrower will not, and will not
permit any of its Subsidiaries to, discount or sell (with or without recourse)
any of its notes receivable or accounts receivable.

Section 9.11           Mergers, Etc.  Except as contemplated by the Acquisition
Documents, the Borrower will not, and will not permit any of its Subsidiaries
to, merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person, except that any
Wholly-Owned Subsidiary may merge with any other Wholly-Owned Subsidiary and
that the Borrower may merge with any Wholly-Owned Subsidiary so long as the
Borrower is the survivor.

Section 9.12           Sale of Properties.  The Borrower will not, and will not
permit any of its Subsidiaries to, sell, assign, farm-out, convey or otherwise
transfer any Property except for: (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (c) the sale or transfer of equipment that is no

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longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use; (d) sales or other
dispositions (including Casualty Events) of Oil and Gas Properties or any
interest therein or Subsidiaries owning Oil and Gas Properties; provided that
(i) 100% of the consideration received in respect of such sale or other
disposition shall be cash, (ii) the consideration received in respect of such
sale or other disposition shall be equal to or greater than the fair market
value of the Oil and Gas Property, interest therein or Subsidiary subject of
such sale or other disposition (as reasonably determined by the board of
directors of the Borrower and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect), (iii) if such sale or other disposition of Oil and
Gas Property or Subsidiary owning Oil and Gas Properties included in the most
recently delivered Reserve Report during any period between two successive
Scheduled Redetermination Dates has a fair market value (as determined by the
Administrative Agent), individually or in the aggregate, in excess of five
percent (5%) of the Borrowing Base as then in effect, the Borrowing Base shall
be reduced, effective immediately upon such sale or disposition, by an amount
equal to the value, if any, assigned such Property as determined by the Majority
Lenders and (iv) if any such sale or other disposition is of a Subsidiary owning
Oil and Gas Properties, such sale or other disposition shall include all the
Equity Interests of such Subsidiary; and (e) sales and other dispositions of
Properties not regulated by Section 9.12(a) to (d) having a fair market value
not to exceed $500,000 during any 12-month period.

Section 9.13           Environmental Matters.  The Borrower will not, and will
not permit any of its Subsidiaries to, cause or permit any of its Property to be
in violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.

Section 9.14           Transactions with Affiliates.  The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of Property
or the rendering of any service, with any Affiliate (other than the Guarantors
and Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

Section 9.15           Subsidiaries.  The Borrower shall have no Subsidiaries
other than Wholly-Owned Subsidiaries.  The Borrower shall not, and shall not
permit its Subsidiaries to, create or acquire any additional Subsidiary unless
the Borrower gives written notice to the Administrative Agent of such creation
or acquisition and complies with Section 8.14(b).  The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, assign or otherwise dispose
of any Equity Interests in any of its Subsidiaries.  The Borrower shall have no
Foreign Subsidiaries.

Section 9.16           Negative Pledge Agreements; Dividend Restrictions.  The
Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any contract, agreement or understanding (other
than this Agreement or the Security Instruments)

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that in any way prohibits or restricts the granting, conveying, creation or
imposition of any Lien on any of its Property in favor of the Administrative
Agent and the Lenders or restricts any Subsidiary from paying dividends or
making distributions to the Borrower or any Guarantor, or which requires the
consent of or notice to other Persons in connection therewith.

Section 9.17           Gas Imbalances, Take-or-Pay or Other Prepayments.  The
Borrower will not, and will not permit any of its Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrower or any of its Subsidiaries that would require the
Borrower or such Subsidiary to deliver Hydrocarbons at some future time without
then or thereafter receiving full payment therefor to exceed 50,000 Mcf of gas
(on an Mcfe equivalent basis) in the aggregate.

Section 9.18           Swap Agreements.  The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any Swap Agreements with any
Person other than (a) Swap Agreements in respect of commodities (i) with an
Approved Counterparty and (ii) the notional volumes for which (when aggregated
with other commodity Swap Agreements then in effect other than basis
differential swaps on volumes already hedged pursuant to other Swap Agreements)
do not exceed, as of the date such Swap Agreement is executed, 85% of the
reasonably anticipated projected production from Proved Developed Producing
Reserves for each month during the period during which such Swap Agreement is in
effect for each of crude oil and natural gas, calculated separately, and (b)
Swap Agreements in respect of interest rates with an Approved Counterparty,
which effectively convert interest rates from floating to fixed, the notional
amounts of which (when aggregated with all other Swap Agreements of the Borrower
and its Subsidiaries then in effect effectively converting interest rates from
floating to fixed) do not exceed 75% of the then outstanding principal amount of
the Borrower’s Debt for borrowed money which bears interest at a floating rate. 
Other than the Existing Shell Hedges, in no event shall any Swap Agreement
contain any requirement, agreement or covenant for the Borrower or any of its
Subsidiaries to post collateral or margin to secure their obligations under such
Swap Agreement or to cover market exposures.

Section 9.19           Amendment of Contracts.  Neither the Borrower nor any of
its Subsidiaries will amend or permit any amendment to any contract that could
reasonably be expected to release, qualify, limit, make contingent or otherwise
detrimentally affect, in any material way, the rights and benefits of the
Administrative Agent, any other Agent, any Issuing Bank or the Lenders, under or
acquired pursuant to any of the Loan Documents.

Section 9.20           Acquisition Documents.  The Borrower will not, and will
not permit any of its Subsidiaries to, amend, modify or supplement any
Acquisition Document if the effect thereof could reasonably be expected to have
a Material Adverse Effect (and provided that the Borrower promptly furnishes to
the Administrative Agent a copy of such amendment, modification or supplement).

ARTICLE X
Events of Default; Remedies

Section 10.01         Events of Default.  One or more of the following events
shall constitute an “Event of Default”:

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(a)           the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise.

(b)           the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three (3)
Business Days.

(c)           any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect when made or deemed made.

(d)           the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in, Section 8.01(i),
Section 8.01(m), Section 8.02, Section 8.03, Section 8.15 or in ARTICLE IX.

(e)           the Borrower or any of its Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of the Borrower or any of its
Subsidiaries otherwise becoming aware of such default.

(f)            the Borrower or any of its Subsidiaries shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable.

(g)           any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of such Material Indebtedness or any trustee or agent on its
or their behalf to cause such Material Indebtedness to become due, or to require
the Redemption thereof or any offer to Redeem to be made in respect thereof,
prior to its scheduled maturity or require the Borrower or any of its
Subsidiaries to make an offer in respect thereof.

(h)           an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any of its Subsidiaries or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, and, in any such

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case, such proceeding or petition shall continue undismissed for 90 days or an
order or decree approving or ordering any of the foregoing shall be entered.

(i)            the Borrower or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any of its Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing; or any stockholder of the Borrower
shall make any request or take any action for the purpose of calling a meeting
of the stockholders of the Borrower to consider a resolution to dissolve and
wind-up the Borrower’s affairs.

(j)            the Borrower or any of its Subsidiaries shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due.

(k)           (i) one or more judgments for the payment of money in an aggregate
amount in excess of $500,000 (to the extent not covered by independent third
party insurance provided by insurers as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more
non-monetary judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, shall be rendered
against the Borrower, any of its Subsidiaries or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Borrower or any
of its Subsidiaries to enforce any such judgment.

(l)            the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by any
of them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the Oil and Gas Properties purported to be covered thereby,
except to the extent permitted by the terms of this Agreement, or the Borrower
or any of its Subsidiaries shall so state in writing.

(m)          an ERISA Event shall have occurred that, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding $500,000 in any year.

(n)           a Change in Control shall occur.

(o)           any event or events which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect shall occur.

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Section 10.02         Remedies.

(a)           In the case of an Event of Default other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Majority Lenders, shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times: 
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
the other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.

(b)           In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.

(c)           All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied: 

(i)            first, to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the
Administrative Agent in its capacity as such;

(ii)           second, pro rata to payment or reimbursement of that portion of
the Indebtedness constituting fees, expenses and indemnities payable to the
Lenders;

(iii)          third, pro rata to payment of accrued interest on the Revolving
Credit Loans and Term Loans;

(iv)          fourth, pro rata to payment of principal outstanding on the
Revolving Credit Loans and Term Loans and Indebtedness referred to in Clause (b)
of the definition of Indebtedness owing to a Lender or an Affiliate of a Lender;

(v)           fifth, pro rata to any other Indebtedness;

(vi)          sixth, to serve as cash collateral to be held by the
Administrative Agent to secure the LC Exposure; and

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(vii)         seventh, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement. 

ARTICLE XI
The Administrative Agent

Section 11.01         Appointment; Powers.  Each of the Lenders and each Issuing
Bank hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
hereof and the other Loan Documents, together with such actions and powers as
are reasonably incidental thereto.

Section 11.02         Duties and Obligations of Administrative Agent.  The
Administrative Agent shall have no duties or obligations except those expressly
set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term “agent” herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall have no duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in ARTICLE VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent, (vi) the existence, value, perfection
or priority of any collateral security or the financial or other condition of
the Borrower and its Subsidiaries or any other obligor or guarantor, or (vii)
any failure by the Borrower or any other Person (other than itself) to perform
any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or
conditions set forth herein or therein.  For purposes of determining compliance
with the conditions specified in ARTICLE VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received

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written notice from such Lender prior to the proposed closing date specifying
its objection thereto.

Section 11.03         Action by Administrative Agent.  The Administrative Agent
shall have no duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Majority Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) and in all cases the Administrative
Agent shall be fully justified in failing or refusing to act hereunder or under
any other Loan Documents unless it shall (a) receive written instructions from
the Majority Lenders or the Lenders, as applicable, (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) specifying the action to be taken and (b) be
indemnified to its satisfaction by the Lenders against any and all liability and
expenses which may be incurred by it by reason of taking or continuing to take
any such action.  The instructions as aforesaid and any action taken or failure
to act pursuant thereto by the Administrative Agent shall be binding on all of
the Lenders.  If a Default has occurred and is continuing, then the
Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith INCLUDING ITS OWN
ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

Section 11.04         Reliance by Administrative Agent.  The Administrative
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person.  The Administrative Agent also may rely upon any
statement made to it orally or by telephone and believed by it to be made by the
proper Person, and shall not incur any liability for relying thereon and each of
the Borrower, the Lenders and each Issuing Bank hereby waives the right to
dispute the Administrative Agent’s record of such statement, except in the case
of gross negligence or willful misconduct by the Administrative Agent.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.  The Administrative Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the

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assignment or transfer thereof permitted hereunder shall have been filed with
the Administrative Agent. 

Section 11.05         Subagents.  The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Agent.

Section 11.06         Resignation or Removal of Administrative Agent.  Subject
to the appointment and acceptance of a successor Administrative Agent as
provided in this Section 11.06, the Administrative Agent may resign at any time
by notifying the Lenders, each Issuing Bank and the Borrower, and the
Administrative Agent may be removed at any time with or without cause by the
Majority Lenders.  Upon any such resignation or removal, the Majority Lenders
shall have the right, in consultation with the Borrower, to appoint a
successor.  If no successor shall have been so appointed by the Majority Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation or removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders and each Issuing Bank, appoint a successor Administrative Agent. 
Upon the acceptance of its appointment as Administrative Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder.  The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor.  After the
Administrative Agent’s resignation hereunder, the provisions of this ARTICLE XI
and Section 12.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

Section 11.07         Administrative Agent as Lender.  BNP Paribas serving as
the Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.

Section 11.08         No Reliance.  Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent, any other
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and each other Loan Document to which it is a party.  Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, any other Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in

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taking or not taking action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished hereunder or
thereunder.  The Administrative Agent shall not be required to keep themselves
informed as to the performance or observance by the Borrower or any of its
Subsidiaries of this Agreement, the Loan Documents or any other document
referred to or provided for herein or to inspect the Properties or books of the
Borrower or its Subsidiaries.  Except for notices, reports and other documents
and information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Administrative
Agent or any of its Affiliates.  In this regard, each Lender acknowledges that
Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the
Administrative Agent only, except to the extent otherwise expressly stated in
any legal opinion or any Loan Document.  Each other party hereto will consult
with its own legal counsel to the extent that it deems necessary in connection
with the Loan Documents and the matters contemplated therein.

Section 11.09         Administrative Agent May File Proofs of Claim.  In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

(a)           to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and

(b)           to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or

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to authorize the Administrative Agent to vote in respect of the claim of any
Lender in any such proceeding.

Section 11.10         Authority of Administrative Agent to Release Collateral
and Liens.  Each Lender and each Issuing Bank hereby authorizes the
Administrative Agent to release any collateral that is permitted to be sold or
released pursuant to the terms of the Loan Documents.  Each Lender and each
Issuing Bank hereby authorizes the Administrative Agent to execute and deliver
to the Borrower, at the Borrower’s sole cost and expense, any and all releases
of Liens, termination statements, assignments or other documents reasonably
requested by the Borrower in connection with any sale or other disposition of
Property to the extent such sale or other disposition is permitted by the terms
of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

Section 11.11         The Arranger.  The Arranger shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than its duties, responsibilities and liabilities in its
capacity as the Administrative Agent and as a Lender hereunder.

ARTICLE XII
Miscellaneous

Section 12.01         Notices.

(a)           Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

(i)

 

if to the Borrower, to it at

 

 

 

 

 

Whittier Energy Corporation

 

 

333 Clay Street

 

 

Suite 1100

 

 

Houston, TX  77002

 

 

Attention:  Michael Young, Chief Financial Officer

 

 

Telecopy:  (713) 850-1879

 

 

 

 

 

with a copy to:

 

 

 

 

 

Whittier Energy Corporation

 

 

333 Clay Street

 

 

Suite 1100

 

 

Houston, TX  77002

 

 

Attention:  Daniel H. Silverman, Chief Operating Officer

 

 

Telecopy:  (713) 850-1879

 

 

 

(ii)

 

if to the Administrative Agent, to it at

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919 Third Avenue

 

 

New York, New York 10022

 

 

Attention: Dina Wilson, Loan Assistant

 

 

Telecopy:  212-841-2683

 

 

 

 

 

with a copy to the Administrative Agent at:

 

 

 

 

 

1200 Smith Street, Suite 3100

 

 

Houston, Texas  77002

 

 

Attention:  David Dodd/Betsy Jocher

 

 

Telecopy: 713-659-6915

 

(iii)          if to any other Lender, in its capacity as such, or any other
Lender in its capacity as an Issuing Bank, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.

(b)           Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V
unless otherwise agreed by the Administrative Agent and the applicable Lender. 
The Administrative Agent may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

(c)           Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto.  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

Section 12.02         Waivers; Amendments.

(a)           No failure on the part of the Administrative Agent, any other
Agent, any Issuing Bank or any Lender to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege, or any
abandonment or discontinuance of steps to enforce such right, power or
privilege, under any of the Loan Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any of the Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies of the
Administrative Agent, any other Agent, each Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by Section 12.02(b), and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.  Without limiting the generality of the foregoing, the making of a Loan
or issuance of a Letter of Credit shall not be construed as a

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waiver of any Default, regardless of whether the Administrative Agent, any other
Agent, any Lender or any Issuing Bank may have had notice or knowledge of such
Default at the time.

(b)           Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Revolving Commitment or the Maximum Revolving Credit Amount of any
Revolving Credit Lender without the written consent of such Lender, (ii)
increase the Borrowing Base without the written consent of each Revolving Credit
Lender, decrease or maintain the Borrowing Base without the consent of the
Majority Revolving Credit Lenders or modify in any manner Section 2.07 without
the consent of each Revolving Credit Lender, (iii) reduce the principal amount
of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, or reduce any other Indebtedness hereunder or under
any other Loan Document, without the written consent of each Lender affected
thereby, (iv) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Indebtedness hereunder or under any other
Loan Document, or reduce the amount of, waive or excuse any such payment, or
postpone or extend the Revolving Credit Termination Date without the written
consent of each Revolving Credit Lender affected thereby or the Maturity Date of
Term Loan without the written consent of each Term Loan Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender of each Class affected thereby, (vi) waive or amend Section 6.01,
Section 10.02(c) or Section 8.14 or change the definition of the terms “Domestic
Subsidiary”, “Foreign Subsidiary” or “Subsidiary”, without the written consent
of each Lender, (vii) release any Guarantor (except as set forth in the Guaranty
Agreement), release all or substantially all of the collateral (other than as
provided in Section 11.10), or reduce the percentage set forth in Section
8.14(a) to less than 85%, without the written consent of each Lender, or (viii)
change any of the provisions of this Section 12.02(b) or the definition of
“Majority Lenders”, “Majority Revolving Credit Lenders” or any other provision
hereof specifying the number or percentage of Lenders as a whole or of any Class
required to waive, amend or modify any rights hereunder or under any other Loan
Documents or make any determination or grant any consent hereunder or any other
Loan Documents, without the written consent of each Lender affected thereby;
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, any other Agent, or any
Issuing Bank hereunder or under any other Loan Document without the prior
written consent of the Administrative Agent, such other Agent or such Issuing
Bank, as the case may be.  Notwithstanding the foregoing, any supplement to
Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.

Section 12.03         Expenses, Indemnity; Damage Waiver.

(a)           The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and other
outside consultants for the Administrative

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Agent, the reasonable travel, photocopy, mailing, courier, telephone and other
similar expenses, and the cost of environmental audits and surveys and
appraisals, in connection with the syndication of the credit facilities provided
for herein, the preparation, negotiation, execution, delivery and administration
(both before and after the execution hereof and including advice of counsel to
the Administrative Agent as to the rights and duties of the Administrative Agent
and the Lenders with respect thereto) of this Agreement and the other Loan
Documents and any amendments, modifications or waivers of or consents related to
the provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes,
assessments and other charges incurred by the Administrative Agent or any Lender
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or
any other document referred to therein, (iii) all reasonable out-of-pocket
expenses incurred by each Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit issued by such Issuing
Bank or any demand for payment thereunder, (iv) all out-of-pocket expenses
incurred by the Administrative Agent, any Issuing Bank or any Lender, including
the reasonable fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement or any
other Loan Document, including its rights under this Section 12.03, or in
connection with the Loans made or Letters of Credit issued hereunder, including,
without limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

(b)           THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, EACH OTHER
AGENT, THE ARRANGER, EACH ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY
OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”)
AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE REASONABLE FEES,
CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR
ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE
PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF
THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE
OF THE BORROWER OR ANY OF ITS SUBSIDIARIES TO COMPLY WITH THE TERMS OF ANY LOAN
DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii)
ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT
OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A DEMAND FOR
PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUING BANK IF THE DOCUMENTS
PRESENTED IN CONNECTION WITH SUCH DEMAND DO

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NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT
OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE,
NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN
CONNECTION THEREWITH, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE
OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER
AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO
RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ITS SUBSIDIARIES OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE,
RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL
OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY OF ITS SUBSIDIARIES, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT
IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT,
DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT
OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE
OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER
OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY
TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY
ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO
ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.

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(c)           To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or any Issuing Bank under Section
12.03(a) or (b), each Lender severally agrees to pay to the Administrative Agent
or such Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent or such
Issuing Bank in its capacity as such.

(d)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.

(e)           All amounts due under this Section 12.03 shall be payable within
three (3) Business Days of written demand therefor.

Section 12.04         Successors and Assigns.

(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), except that (i)  the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, each Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

(b)           (i)  Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:

(A)          the Borrower, provided that no consent of the Borrower shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved
Fund or, if an Event of Default has occurred and is continuing, any other
assignee; and

(B)           the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment to an assignee that is
a Lender immediately prior to giving effect to such assignment.

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(ii)           Assignments shall be subject to the following additional
conditions:

(A)          except in the case of an assignment to a Lender or an Affiliate of
a Lender or an assignment of the entire remaining amount of the assigning
Lender’s Commitment, the amount of the Revolving Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 and amount of Term Loan
Commitment shall not be less than $1,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, provided that no such consent of the
Borrower shall be required if an Event of Default has occurred and is
continuing;

(B)           each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations relating
to a particular Class of Loan and Commitment under this Agreement;

(C)           the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D)          the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(iii)          Subject to Section 12.04(b)(iv) and the acceptance and recording
thereof, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of
the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03).  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).

                (iv)          The Administrative Agent, acting for this purpose
as an agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Maximum Revolving Credit Amount
or Term Loan Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”).  The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent, each Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary.  The Register shall be available for inspection by the
Borrower, any Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.  In connection with any changes to the
Register, if

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necessary, the Administrative Agent will reflect the revisions on Annex I and
forward a copy of such revised Annex I to the Borrower, each Issuing Bank and
each Lender.

(v)           Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee’s completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in Section 12.04(b)
and any written consent to such assignment required by Section 12.04(b), the
Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register.  No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this Section 12.04(b).

(c)           (i)            Any Lender may, without the consent of the
Borrower, the Administrative Agent or any Issuing Bank, sell participations to
one or more banks or other entities (a “Participant”) in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative Agent,
each Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant.  In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03.  Subject to Section 12.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b).  To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.

(ii)           A Participant shall not be entitled to receive any greater
payment under Section 5.01, Section 5.02 or Section 5.03 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent.  A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 5.03 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 5.03(e) as though it were a Lender.

(d)           Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest;

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provided that no such pledge or assignment of a security interest shall release
a Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

Section 12.05         Survival; Revival; Reinstatement.

(a)           All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, any Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving
Credit Termination Date has not occurred.  The provisions of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 and ARTICLE XI shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the termination of
this Agreement, any other Loan Document or any provision hereof or thereof.

(b)           To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

Section 12.06         Counterparts; Integration; Effectiveness.

(a)           This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.

(b)           This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR

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SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

(c)           Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

Section 12.07         Severability.  Any provision of this Agreement or any
other Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof or thereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

Section 12.08         Right of Setoff.  If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations (of
whatsoever kind, including, without limitations obligations under Swap
Agreements) at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower or any of its Subsidiaries against any of and all
the obligations of the Borrower or any of its Subsidiaries owed to such Lender
now or hereafter existing under this Agreement or any other Loan Document,
irrespective of whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be
unmatured.  The rights of each Lender under this Section 12.08 are in addition
to other rights and remedies (including other rights of setoff) which such
Lender or its Affiliates may have.

Section 12.09         GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

(a)           THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE,
RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE
WHERE SUCH LENDER IS LOCATED.

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND

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UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.

(c)           EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d)           EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

Section 12.10         Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

Section 12.11         Confidentiality.  Each of the Administrative Agent, each
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such

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Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement or any other Loan Document, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder, (f)
subject to an agreement containing provisions substantially the same as those of
this Section 12.11, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement or (ii) any actual or prospective counterparty (or its advisors) to
any Swap Agreement relating to the Borrower and their obligations, (g) with the
consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section 12.11 or
(ii) becomes available to the Administrative Agent, any Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Borrower.  For
the purposes of this Section 12.11, “Information” means all information received
from the Borrower or any of its Subsidiaries relating to the Borrower or any of
its Subsidiaries and their businesses, other than any such information that is
available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower or any of its
Subsidiaries; provided that, in the case of information received from the
Borrower, or any of its Subsidiaries after the date hereof, such information is
clearly identified at the time of delivery as confidential.  Any Person required
to maintain the confidentiality of Information as provided in this Section 12.11
shall be considered to have complied with its obligation to do so if such Person
has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

Section 12.12         Interest Rate Limitation.  It is the intention of the
parties hereto that each Lender shall conform strictly to usury laws applicable
to it.  Accordingly, if the transactions contemplated hereby would be usurious
as to any Lender under laws applicable to it (including the laws of the United
States of America and the State of Texas or any other jurisdiction whose laws
may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows:  (i) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower); and (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the

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Borrower).  All sums paid or agreed to be paid to any Lender for the use,
forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to such Lender, be amortized, prorated, allocated and spread
throughout the stated term of the Loans evidenced by the Notes until payment in
full so that the rate or amount of interest on account of any Loans hereunder
does not exceed the maximum amount allowed by such applicable law.  If at any
time and from time to time (i) the amount of interest payable to any Lender on
any date shall be computed at the Highest Lawful Rate applicable to such Lender
pursuant to this Section 12.12 and (ii) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Lender would
be less than the amount of interest payable to such Lender computed at the
Highest Lawful Rate applicable to such Lender, then the amount of interest
payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this Section
12.12.  To the extent that Chapter 303 of the Texas Finance Code is relevant for
the purpose of determining the Highest Lawful Rate applicable to a Lender, such
Lender elects to determine the applicable rate ceiling under such Chapter by the
weekly ceiling from time to time in effect.  Chapter 346 of the Texas Finance
Code does not apply to the Borrower’s obligations hereunder.

Section 12.13         EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”

Section 12.14         Collateral Matters; Swap Agreements.  The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
those Lenders or their Affiliates which are counterparties to any Swap Agreement
with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement while such

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Person or its Affiliate is a Lender, but only while such Person or its Affiliate
is a Lender, including any Swap Agreements between such Persons in existence
prior to the date hereof.  No Lender or any Affiliate of a Lender shall have any
voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.

Section 12.15         No Third Party Beneficiaries.  This Agreement, the other
Loan Documents, and the agreement of the Lenders to make Loans and the Issuing
Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for
the benefit of the Borrower, and no other Person (including, without limitation,
any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier
or materialsman) shall have any rights, claims, remedies or privileges hereunder
or under any other Loan Document against the Administrative Agent, any other
Agent, the Issuing Bank or any Lender for any reason whatsoever.  There are no
third party beneficiaries.

Section 12.16         USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

BORROWER:

WHITTIER ENERGY CORPORATION

 

 

 

 

 

By:

/s/ Michael B. Young

 

 

Name: Michael B. Young

 

 

Title: Vice President and Chief Financial Officer

 

 

--------------------------------------------------------------------------------

 

ADMINISTRATIVE AGENT:

BNP PARIBAS, as Administrative Agent,

AND LENDER

Revolving Credit Lender and Term Lender

 

 

 

 

 

By:

/s/ Gabe Ellisor

 

 

Name: Gabe Ellisor

 

Title: Vice President

 

 

 

 

 

By:

/s/ Polly Schott

 

 

Name: Polly Schott

 

Title: Vice President

 

--------------------------------------------------------------------------------

ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Revolving Credit Amounts

Name of Lender

 

Applicable Percentage

 

Maximum Revolving Credit
Amount

 

BNP Paribas

 

100.00

%

$

94,000,000.00

 

 

 

 

 

 

 

TOTAL

 

100.00

%

$

94,000,000.00

 

 

Term Loan Commitments

Name of Lender

 

Applicable Percentage

 

Term Loan Commitment

 

BNP Paribas

 

100.00

%

$

6,000,000.00

 

 

 

 

 

 

 

TOTAL

 

100.00

%

$

6,000,000.00

 

 

3

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EXHIBIT A-1
FORM OF REVOLVING CREDIT NOTE

$[          ]                                                                                                                                                
[          ], 200[     ]

FOR VALUE RECEIVED, Whittier Energy Corporation, a Nevada corporation (the
“Borrower”), hereby promises to pay to the order of [          ] (the “Lender”),
at the principal office of BNP Paribas, as administrative agent (the
“Administrative Agent”), the principal sum of [          ] Dollars
($[          ]) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Revolving Credit Loans made by the Lender to the
Borrower under the Credit Agreement, as hereinafter defined), in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Revolving Credit Loan, at
such office, in like money and funds, for the period commencing on the date of
such Revolving Credit Loan until such Revolving Credit Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, Interest Period and maturity of each
Revolving Credit Loan made by the Lender to the Borrower, and each payment made
on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Revolving Credit Note, may be endorsed
by the Lender on the schedules attached hereto or any continuation thereof or on
any separate record maintained by the Lender.  Failure to make any such notation
or to attach a schedule shall not affect any Lender’s or the Borrower’s rights
or obligations in respect of such Revolving Credit Loans or affect the validity
of such transfer by any Lender of this Revolving Credit Note.

This Revolving Credit Note is one of the Revolving Credit Notes referred to in
the Amended and Restated Credit Agreement dated as of August 9, 2006 among the
Borrower, the Administrative Agent, and the lenders signatory thereto (including
the Lender), and evidences the Revolving Credit Loan made by the Lender
thereunder (such Credit Agreement as the same may be amended, supplemented or
restated from time to time, the “Credit Agreement”).  Capitalized terms used in
this Revolving Credit Note have the respective meanings assigned to them in the
Credit Agreement.

This Revolving Credit Note is issued pursuant to the Credit Agreement and is
entitled to the benefits provided for in the Credit Agreement and the other Loan
Documents.  The Credit Agreement provides for the acceleration of the maturity
of this Revolving Credit Note upon the occurrence of certain events, for
prepayments of Revolving Credit Loans upon the terms and conditions specified
therein and other provisions relevant to this Revolving Credit Note.

THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS.

1

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WHITTIER ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

2

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EXHIBIT A-2
FORM OF TERM LOAN NOTE

$[],000,000.00                                                                                                                                       
[          ], 200[    ]

FOR VALUE RECEIVED, Whittier Energy Corporation, a Nevada corporation (the
“Borrower”) hereby promise to pay to the order of [              ] (the
“Lender”), at the principal office of BNP Paribas, as Administrative Agent (the
“Administrative Agent”), the principal sum of [    ] Million and no/100 Dollars
($[    ],000,000.00), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
the Term Loan, at such office, in like money and funds, for the period
commencing on the date of the Term Loan until it shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, Interest Period and maturity of the Term
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Term Loan Note, may be endorsed by the Lender on the
schedules attached hereto or any continuation thereof or on any separate record
maintained by the Lender.  Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of the Term Loans or affect the validity of such transfer by any
Lender of this Term Loan Note.

This Term Loan Note is one of the Term Loan Notes referred to in the Amended and
Restated Credit Agreement dated as of, August 9, 2006 among the Borrower, the
Administrative Agent, and the lenders signatory thereto (including the Lender),
and evidences the Term Loan made by the Lender thereunder (such Credit Agreement
as the same may be amended, supplemented or restated from time to time, the
“Credit Agreement”).  Capitalized terms used in this Term Loan Note have the
respective meanings assigned to them in the Credit Agreement.

This Term Loan Note is issued pursuant to the Credit Agreement and is entitled
to the benefits provided for in the Credit Agreement and the other Loan
Documents.  The Credit Agreement provides for the acceleration of the maturity
of this Term Loan Note upon the occurrence of certain events, for prepayments of
Term Loan upon the terms and conditions specified therein and other provisions
relevant to this Term Loan Note.

THIS TERM LOAN NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF TEXAS.

1

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WHITTIER ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

2

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EXHIBIT B
FORM OF BORROWING REQUEST

[                   ], 200[    ]

Whittier Energy Corporation, a Nevada corporation (the “Borrower”), pursuant to
Section 2.03 of the Amended and Restated Credit Agreement dated as of August 9,
2006 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, BNP Paribas,
as Administrative Agent, and the lenders (the “Lenders”) which are or become
parties thereto (unless otherwise defined herein, each capitalized term used
herein is defined in the Credit Agreement), hereby requests a Borrowing as
follows:

(i)            Aggregate amount of the requested Borrowing is
$[                   ];

(ii)           Date of such Borrowing is [                   ], 200[   ];

(iii)          Requested Type of Borrowing is to be [an ABR Borrowing] [a
Eurodollar Borrowing];

(iv)          Requested Class of Borrowing is to be [a Revolving Credit Loan] [a
Term Credit Loan]

(iv)          In the case of a Eurodollar Borrowing, the initial Interest Period
applicable thereto is [                   ];

(v)           Amount of Borrowing Base in effect on the date hereof is
$[                   ];(1)

(vi)          Total Revolving Credit Exposures on the date hereof (i.e.,
outstanding principal amount of Loans and total LC Exposure) is
$[                   ]; and

(vii)         Pro forma total Revolving Credit Exposures (giving effect to the
requested Borrowing) is $[                   ]; and

(viii)        Location and number of the Borrower’s account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

[                                                        ]

[                                                        ]

[                                                        ]

[                                                        ]

[                                                        ]

--------------------------------------------------------------------------------

(1) In the case of a Term Credit Loan, (v) through (vii) are inapplicable.

1

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The undersigned certifies that he/she is the [                ] of the Borrower,
and that as such he/she is authorized to execute this certificate on behalf of
the general partner of the Borrower.  The undersigned further certifies,
represents and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested Borrowing under the terms and conditions of the Credit
Agreement.

 

WHITTIER ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

2

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EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE

The undersigned hereby certifies that he/she is the [          ] of Whittier
Energy Corporation, a Nevada corporation (the “Borrower”), and that as such
he/she is authorized to execute this certificate on behalf of the Borrower. 
With reference to the Amended and Restated Credit Agreement dated as of August
9, 2006 (together with all amendments, supplements or restatements thereto being
the “Agreement”) among the Borrower, BNP Paribas, as Administrative Agent and
lenders (the “Lenders”) which are or become a party thereto, and such Lenders,
the undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified):

(a)           The representations and warranties of the Borrower contained in
Article VII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of the Borrower or any Guarantor pursuant to the
Agreement and the Loan Documents were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct in
all material respects at and as of the time of delivery hereof, except to the
extent such representations and warranties are expressly limited to an earlier
date or all of the Lenders have expressly consented in writing to the contrary.

(b)           The Borrower has performed and complied with all agreements and
conditions contained in the Agreement and in the Loan Documents required to be
performed or complied with by it prior to or at the time of delivery hereof [or
specify default and describe].

(c)           Since December 31, 2005, no change has occurred, either in any
case or in the aggregate, in the condition, financial or otherwise, of the
Borrower or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect [or specify event].

(d)           There exists no Default or Event of Default [or specify Default
and describe].

(e)           Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Section 9.01 and Section
8.14 as of the end of the [fiscal quarter][fiscal year] ending [          ].

1

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EXECUTED AND DELIVERED this [          ] day of [          ].

WHITTIER ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

2

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EXHIBIT D
SECURITY INSTRUMENTS

1)                                      Deed of Trust, Fixture Filing,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement (Mississippi and Texas) from Whittier Energy Company in favor of BNP
Paribas, as mortgagee and Administrative Agent.

2)                                      UCC-1s, with respect to item 1, filed
with the Nevada Secretary of State.

1

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EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part
of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a [Revolving Credit] [Term Loan] Lender under the
Credit Agreement and any other documents or instruments delivered pursuant
thereto to the extent related to the amount and percentage interest identified
below of all of such outstanding rights and obligations of the Assignor under
the respective facilities identified below (including any letters of credit and
guarantees included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a [Revolving Credit] [Term Loan]
Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby or in any
way based on or related to any of the foregoing, including contract claims, tort
claims, malpractice claims, statutory claims and all other claims at law or in
equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as the
“Assigned Interest”).  Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

1.

Assignor:

 

 

 

 

2.

Assignee:

 

 

 

[and is an Affiliate/Approved Fund of [identify Lender](2)]

 

 

 

3.

Borrower:

Whittier Energy Corporation

 

 

 

4.

Administrative Agent:

BNP Paribas, as the administrative agent under the Credit Agreement

 

 

 

5.

Credit Agreement:

Amended and Restated Credit Agreement dated as of August 9, 2006 among Whittier
Energy Corporation, the Lenders parties thereto, and BNP Paribas, as
Administrative Agent

 

--------------------------------------------------------------------------------

(2) Select as applicable.

1

--------------------------------------------------------------------------------

 

6.

Assigned Interest:

 

 

[Revolving] [Term
Loan] Commitment
Assigned

 

Aggregate Amount of
[Revolving] [Term
Loan]
Commitment/Loans for
all Lenders

 

Amount of [Revolving]
[Term Loan]
Commitment/Loans
Assigned

 

Percentage Assigned of
[Revolving] [Term
Loan]
Commitment/Loans(3)

 

      

 

$

 

 

$

 

 

 

%

      

 

$

 

 

$

 

 

 

%

      

 

$

 

 

$

 

 

 

%

 

Effective Date:                                           , 20     [TO BE
INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF
RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

By:

 

 

 

Title:

 

--------------------------------------------------------------------------------

(3) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Lenders thereunder.

2

--------------------------------------------------------------------------------

[Consented to and](4) Accepted:

BNP PARIBAS, as

Administrative Agent

 

 

By

 

 

Title:

 

 

By

 

 

Title:

 

 

[Consented to:](5)

 

WHITTIER ENERGY CORPORATION

 

 

By

 

 

Title:

 

--------------------------------------------------------------------------------

(4) To be added only if the consent of the Administrative Agent is required by
the terms of the Credit Agreement.

(5) To be added only if the consent of the Borrower and/or other parties is
required by the terms of the Credit Agreement.

3

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ANNEX 1

WHITTIER ENERGY CORPORATION $100 MILLION REVOLVING AND TERM LOAN

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.  Representations and Warranties.

1.1   Assignor.  The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

1.2.  Assignee.  The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

2.  Payments.  From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3.  General Provisions. This Assignment and Assumption shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.  This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument.  Delivery of an
executed counterpart of a signature page of this

4

--------------------------------------------------------------------------------

Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of Texas.

5

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