EXHIBIT 10.3

CREDIT AGREEMENT

THIS CREDIT AGREEMENT is entered into as of July 14, 2008, by and among SARATOGA
RESOURCES, INC., a Texas corporation, as the Borrower, the Guarantors (as herein
defined), the Lenders from time to time party hereto, and WAYZATA INVESTMENT
PARTNERS LLC, a Delaware limited liability company, as Administrative Agent.
 Certain terms used herein are defined in Section 1.1

RECITALS:

WHEREAS, the Administrative Agent and the Lenders are willing, on the terms and
subject to the conditions hereinafter set forth (including Article V), to make
Loans to Borrower and to provide funding for the Acquisitions and to pay related
fees, costs and expenses, to repay certain existing indebtedness of Harvest Oil
& Gas, LLC, a Louisiana limited liability company (“HOG”), and The Harvest Group
LLC, a Louisiana limited liability company (“THG”), and to provide for their
general corporate purposes;

NOW, THEREFORE, in consideration of the mutual promises herein contained and for
other valuable consideration, the receipt and adequacy of which are hereby
acknowledged as follows:

ARTICLE I

DEFINITIONS

1.1

Definitions.  The following terms, as used herein, have the following meanings:

“Acceptable Commodity Hedging Agreements” means Commodity Hedging Agreements:

(a)

meeting all the following criteria:

(i)

The notional quantity of gaseous and liquid hydrocarbons subject to Commodity
Hedging Agreements by the Borrower or its Subsidiaries, at the time of entering
into such Commodity Hedging Agreements, shall not be, without the prior written
approval of the Required Lenders, greater than 80% or less than 60% of the
monthly production of hydrocarbons from the Proved Developed Producing Oil and
Gas Properties of the Borrower and its Subsidiaries as determined by the
Administrative Agent for the nearest 36 month period from the time of such
calculation (which information shall be provided by the Administrative Agent to
Borrower upon request);

(ii)

The “strike prices” under any Commodity Hedging Agreements, at the time of
entering into such Commodity Hedging Agreements, shall not be less than the
lowest prices utilized in the most recent sensitivity case evaluation of the Oil
and Gas Properties of the Borrower and its Subsidiaries used by the Revolving
Credit Agent under the Revolving Credit Agreement (which sensitivity case
evaluation shall be reasonably acceptable to the Administrative Agent), except
that under certain downside conditions such lower strike price as the Required
Lenders may approve in writing following a written request by the Borrower may
be used;

(iii)

Any counterparty must be an Approved Counterparty;

(iv)

The Commodity Hedging Agreement shall not contain any anti-assignment provisions
restricting the Borrower or its Subsidiaries or if such Commodity Hedging
Agreement contains anti-assignment provisions which cannot be removed, such
provisions shall be modified to read substantially as follows:  “The interest
and obligations arising from this agreement are non-transferable and
non-assignable, except that [name of Person] may assign and grant a security
interest in its rights and interests hereunder to a contractual collateral agent
for itself and certain other lenders (collectively, “Lenders”) as security for
present and future obligations of [name of Person] to the Lenders.  Until hedge
provider is notified in writing by such collateral agent, to pay to such
collateral

- 1 -

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

agent, amounts due [name of Person] hereunder, hedge provider may continue to
make such payments to [name of Person].”

(v)

The Administrative Agent shall have received for the benefit of the Lenders
first and prior perfected security interests (subject only to the Liens
described in clause (n) of the definition of “Permitted Liens”) pursuant to
security agreements in form and substance reasonably satisfactory to the
Administrative Agent in the right, title and interest of such Person in and to
the Commodity Hedging Agreements of such Person;

(vi)

Neither the Borrower nor any of its Subsidiaries will sell any calls other than
calls corresponding to an existing permitted collar already executed or being
executed in conjunction with such purchased call;

(vii)

The Commodity Hedging Agreement is entered into in the ordinary course of
business for the purpose of protecting against fluctuations in commodity prices
or commodity basis risk and not for purposes of speculation; and

(viii)

The Commodity Hedging Agreement shall be unsecured (except to the extent
permitted under clause (n) of the definition of “Permitted Liens”);

(b)

identified and described on Schedule 1.1 and otherwise satisfying the
requirements of subclauses (iii), (iv), (v), (vi), (vii) and (viii) of
clause (a) of this definition;

(c)

in the form of minimum price guarantees or “floors,” limited to 100% of the
monthly production of hydrocarbons from the Proved Developed Producing Oil and
Gas Properties of the Borrower and its Subsidiaries which are not subject to
Commodity Hedging Agreements under clause (a) or (b) of this definition and
otherwise satisfying the requirements of subclauses (ii), (iii), (iv), (v),
(vi), (vii) and (viii) of clause (a) of this definition.

“Accounts”  means, with respect to any Person, all of such Person’s accounts, as
such term is defined in the UCC.

“Acquisitions” means the acquisition by Borrower and/or a wholly-owned
Subsidiary of the Borrower of the Target Assets pursuant to the terms and
conditions of the Acquisition Agreements.

“Acquisition Agreements” means the HOG Acquisition Agreement and the THG
Acquisition Agreement, in each case, together with all other documents,
agreements, instruments and certificates executed in connection therewith.

“Act” is defined in Section 10.10.

“Administrative Agent” means Wayzata Investment Partners LLC, in its capacity as
contractual representative of the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Administrative Agent
appointed pursuant to Article X.

“Administrative Questionnaire” means, with respect to each Lender, an
administrative detail reply form, if any, prepared by the Administrative Agent
and completed and submitted by such Lender to the Administrative Agent.

“Affiliate” means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person.

“Agents” means the Administrative Agent and any other “agent” appointed under
the Loan Documents.

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

- 2 -

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

“Annualized EBITDA” means (a) for the quarter ending December 31, 2008, the
product of 2 times the Borrower’s EBITDA for the six months ending December 31,
2008, (b) for the quarter ending March 31, 2009, the product of 4/3 times the
Borrower’s EBITDA for the nine months ending March 31, 2009 and (c) for any
quarter ending thereafter, the Borrower’s EBITDA for the twelve month period
ending on the last day of such quarter.  For the purposes of making the
calculations of EBITDA required in this definition, the Target Assets will be
deemed to have been acquired on the date hereof, regardless of whether the
actual date of the Acquisition occurs after that date.

“Approved Counterparties” means any counterparty to a Hedging Agreement with the
Borrower or its Subsidiaries that (a) is a Revolving Credit Lender or an
Affiliate of a Revolving Credit Lender or (b) has a credit rating of “A3” or
higher from Moody’s or “A-” or higher from S&P.

“Approved Engineer” means any independent petroleum engineer mutually
satisfactory to the Administrative Agent and the Borrower; provided that, solely
for purposes of the Initial Reserve Report, Collarini & Associates is
satisfactory to the Administrative Agent.

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

“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 13.3), and accepted by the Administrative Agent, in substantially the
form attached hereto as Exhibit A or any other form approved by the
Administrative Agent.

“Assumption Agreement” means an Assumption Agreement, substantially in the form
attached hereto as Exhibit E, executed by a Responsible Representative of the
newly formed Subsidiary and furnished to the Administrative Agent from time to
time in accordance with Section 7.18.2.

“Authorized Officer” means a Responsible Representative and any other Person
designated and properly authorized to request Loans.

“Benefited Lender” is defined in Section 12.2.3.

“Borrower” means Saratoga Resources, Inc., a Texas corporation.

“Borrower Materials” is defined in Section 10.10.

“Borrowing Date” means a date on which the Credit Extensions are made to the
Borrower hereunder.

“Budget” means for any period (a) a cash flow statement for the Borrower and its
Subsidiaries describing the projected cash flow for such period on a
month-by-month basis, including all line item categories, line item and
cumulative amounts, details and a statement of underlying assumptions and
estimates comparable in scope to that contained in the cash flow projections
delivered herewith to the Administrative Agent for the period commencing July 1,
2008 and ending September 30, 2011 and (b) a development plan for such period
identifying the projected capital expenditures on a project-by-project basis.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York, New York, are authorized or required by law
to remain closed.

“Capital Expenditures” means, as of any date for the applicable period then
ended, all capital expenditures of any Person for such period, as determined in
accordance with GAAP.

“Capitalized Lease Liabilities” means, with respect to any Person, all monetary
obligations of such Person and its Subsidiaries under any leasing or similar
arrangement which have been (or, in accordance with

- 3 -

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

GAAP, should be) classified as capitalized leases, and for purposes of each Loan
Document the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP, and the stated maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a premium or a penalty.

“Change of Control Event” means the occurrence of one or more of the following
events:

(a)

Any direct or indirect sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one transaction or a series
of related transactions, of all or substantially all of the properties or assets
of the Borrower (determined on a consolidated basis for the Borrower and its
Subsidiaries) to any Person or group of related Persons for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (a “Group”);

(b)

The Borrower consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, the Borrower, in any such
event pursuant to a transaction in which any outstanding Equity Interests of the
Borrower or such other Person are converted into or exchanged for cash,
securities or other property, other than any such transaction where the Equity
Interests of the Borrower outstanding immediately prior to such transaction
constitute, or are converted into or exchanged for, Equity Interests of the
surviving or transferee Person that represent a majority of the total voting
power of the outstanding Equity Interests of such surviving or transferee Person
(immediately after giving effect to such transaction);

(c)

the approval of the holders of Equity Interests of the Borrower of any plan or
proposal for the liquidation, winding up or dissolution of the Borrower;

(d)

the consummation of any transaction (including any merger or consolidation) the
result of which is that any Person or Group, other than any Permitted Holder, is
or becomes the beneficial owner, directly or indirectly, in the aggregate of
more than 40% of the total voting power of the Equity Interests of the Borrower;
or

(e)

individuals who on the date hereof constituted the board of directors of the
Borrower (together with any new directors whose election by such board of
directors or whose nomination for election by the stockholders of the Borrower
was approved pursuant to a vote of a majority of the directors then still in
office who were either directors on the date hereof or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors then in office.

“Claims” is defined in Section 10.8.

“Closing” means the consummation of the transactions contemplated herein.

“Collateral” means the Property pledged to the Administrative Agent or to the
Administrative Agent for the benefit of the Administrative Agent and the Lenders
(or to the Lenders directly) as security for the Loans and the other
Obligations.

“Collateral Value” means, with respect to any Oil and Gas Property, the positive
dollar amount which such Oil and Gas Property contributed to the most recently
determined Borrowing Base (as defined in the Revolving Credit Agreement).

“Commitment” means, relative to any Lender, such Lender’s obligation (if any) to
make Loans pursuant to Section 2.1.

“Commitment Amount” means, on any date, an amount equal to the aggregate amount
set forth in Schedule 1 hereto (as may be amended as provided in this Agreement)
or as set forth in any Assignment and Assumption relating to any assignment that
has become effective pursuant to Section 13.3.

- 4 -

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

“Commodity Hedging Agreements” means any swap agreement, cap, floor, collar,
exchange transaction, forward agreement, or other exchange or protection
agreement relating to Hydrocarbons or any option with respect to any such
transaction, including any derivative financial instruments.

“Compliance Certificate” means a certificate, substantially in the form attached
hereto as Exhibit B, executed by a Responsible Representative of the Borrower
and furnished to the Administrative Agent for the benefit of the Lenders from
time to time in accordance with Section 7.2.

“Consolidated Subsidiaries” means as to the Borrower at any date, each Guarantor
and any other Subsidiary of the Borrower, the accounts of which would be
consolidated with those of the Borrower in its consolidated financial statements
if such statements were prepared as of such date.

“Contingent Liability” means any agreement, undertaking or arrangement by which
any Person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the Debt of any other Person (other
than by endorsements of instruments in the course of collection), or guarantees
the payment of dividends or other distributions upon the Equity Interests of any
other Person.  The amount of any Person’s obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount of the debt, obligation or other liability
guaranteed thereby.

“Control,” “Controlling” and “Controlled by” mean the ability (directly or
indirectly through one or more intermediaries) to direct or cause the direction
of the management or affairs of a Person, whether through the ownership of
voting interests, by contract or otherwise.

“Controlled Group” means all members of a controlled group of Persons and all
members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended.

“Covered Properties” is defined in Section 7.2.2(e).

“Credit Extension” means the making of the Loans by the Lenders.

“Crude Oil” means all crude oil, condensate and other liquid hydrocarbon
substances.

“Current Assets” of any Person means, at any date, the current assets of the
Borrower and its Consolidated Subsidiaries.

“Current Liabilities” of any Person means, at any date, the current liabilities
of the Borrower and its Consolidated Subsidiaries, excluding the current portion
of the loans and letters of credit outstanding under the Revolving Credit
Agreement and the Loans hereunder.

“Debt” of any Person means at any date, without duplication:

(a)

all obligations of such Person for borrowed money, including, without
limitation, (i) the obligations of such Person for money borrowed by a
partnership of which such Person is a general partner, (ii) obligations, whether
or not assumed, which are secured in whole or in part by the Property of such
Person or payable out of the proceeds or production from Property of such
Person, and (iii) any obligations of such Person in respect of letters of credit
and repurchase agreements;

(b)

all obligations of such Person evidenced by notes, debentures, bonds or similar
instruments;

(c)

all obligations of such Person to pay the deferred purchase price of Property or
services (except trade accounts arising in the ordinary course of business if
interest is not paid or accrued thereon by such Person)

- 5 -

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

including obligations to pay for goods and services whether or not received or
utilized, provided that the obligation of such Person to pay under property
earn-in agreements shall not constitute Debt except to the extent such property
is so earned;

(d)

all Capitalized Lease Liabilities;

(e)

all liabilities which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet and are
payable more than one year from the date of creation or incurrence thereof;

(f)

all net obligations of such Person under Hedging Agreements;

(g)

all Guarantees by such Person of obligations of another Person;

(h)

obligations of such Person arising under Synthetic Leases;

(i)

all Contingent Liabilities of such Person; and

(j)

all obligations referred to in clauses (a) through (i) of this definition of
another Person secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) a Lien upon property owned by
such Person.

“Default” means the occurrence of an Event of Default or any event which with
notice, lapse of time or both would, unless cured or waived, become an Event of
Default.

“Default Rate” is defined in Section 3.3.

“Deposit Account” has the meaning ascribed to it in the UCC.

“Deposit Account Control Agreement” means a Deposit Account Control Agreement,
dated as of the Effective Date or otherwise delivered pursuant to the Loan
Documents, between the Administrative Agent, the Revolving Credit Agent, the
Borrower and each Guarantor, as applicable, and the applicable depository bank,
substantially in the form of Exhibit L or such other form as the depository bank
may require and acceptable to Administrative Agent, and covering the Deposit
Accounts (other than the Site Specific Trust Accounts) and Securities Accounts
described on Schedule 6.16, as amended, restated, restated and amended,
supplemented or otherwise modified from time to time in accordance with the Loan
Documents.  The term “Deposit Account Control Agreements” shall include each and
every Deposit Account Control Agreement executed and delivered pursuant to the
Loan Documents.

“Development Program Expenditures” of any Person means, as of any date of
determination during the applicable fiscal year, expenditures for the
development of the Loan Parties’ and their respective Subsidiaries’ Leases and
Wells of the nature requiring an authorization for such expenditure, including
all Capital Expenditures and all other development expenses made by such Person
during such fiscal year.

“Dollars” and “$” mean dollars in lawful currency of the United States of
America.

“EBITDA” means, for any applicable period and with the respect to the Borrower
and its Consolidated Subsidiaries, the sum of (a) Net Income, plus (b) to the
extent deducted in determining Net Income, the sum of (i) amounts attributable
to amortization, depletion and depreciation of assets, (ii) income tax expense,
and (iii) Interest Expense for such period.

“Effective Date” means the date on which the conditions specified in Section 5.1
are satisfied (or waived in accordance with Section 10.1).

- 6 -

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

“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an
Approved Fund; or (d) a Person which is consented to as an Eligible Assignee by
Administrative Agent.

“Environmental Laws” means (a) the following federal laws as they may be cited,
referenced, and amended from time to time:  the Clean Air Act, the Clean Water
Act, the Safe Drinking Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Superfund Amendments and Reauthorization Act, the Occupational Safety and Health
Act, and the Toxic Substances Control Act; (b) any and all equivalent
environmental statutes of any state in which Property of the Borrower or any of
its Subsidiaries is situated, as they may be cited, referenced, and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other equivalent federal,
state, or local statute or any requirement, rule, regulation, code, ordinance,
or order adopted pursuant thereto, including, without limitation, those relating
to the generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.

“Environmental Liability” means any claim, demand, obligation, cause of action,
accusation, allegation, order, violation, damage, injury, judgment, liability,
responsibility, suit, loss, penalty or fine, cost of enforcement, cost of
remedial action or any other cost or expense whatsoever, including reasonable
attorneys’ fees and disbursements, resulting from the violation or alleged
violation of any Environmental Law or the imposition of any Environmental Lien.

“Environmental Lien” means a Lien in favor of a Governmental Authority or other
Person (a) for any liability under an Environmental Law or (b) for damages
arising from or costs incurred by such Governmental Authority or other Person in
response to a release or threatened release of hazardous or toxic waste,
substance or constituent into the environment.

“Equity Interests” means, with respect to any Person, ownership and other equity
interests in such Person and rights to convert into ownership or other equity
interests in such Person or to otherwise acquire ownership or other equity
interests in such Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, together with all presently effective and future regulations
issued pursuant thereto.

“ERISA Affiliate” means the Borrower, the Guarantors, any other Subsidiaries of
the Borrower, and any other member of the Controlled Group.

“Event of Default” has the meaning stated in Section 8.1 hereof.

“Excess Cash Flow” means, for the Borrower and its Subsidiaries determined on a
consolidated basis for any fiscal year, (a) EBITDA for such fiscal year minus
(b) the sum of (i) Interest Expense for such fiscal year, (ii) prepayments or
repayments made in such fiscal year of Loans and, to the extent of a permanent
reduction of the commitments in respect thereof, loans under the Revolving
Credit Agreement, (iii) Taxes paid in cash during such fiscal year and (iv)
Capital Expenditures made during such fiscal year in accordance with Section
7.15.5.

“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.

“Final Maturity Date” or “Final Maturity” means the third anniversary of the
Effective Date, or such earlier date on which the Commitments are terminated.

- 7 -

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

“Financial Forecast” means a cash flow sources and uses forecast for the then
calendar year, and the immediately succeeding calendar year, substantially in
the form of the forecast prepared by the Borrower and delivered to the
Administrative Agent on or about the date hereof.

“GAAP” means those generally accepted accounting principles and practices which
are recognized as such by the American Institute of Certified Public Accountants
acting through its Accounting Principles Board or by the Financial Accounting
Standards Board or through other appropriate boards or committees thereof.  Any
accounting principle or practice required to be changed by the Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.  In the event of a change in
GAAP, the Loan Documents shall continue to be construed in accordance with GAAP
as in existence on the date hereof.

“General Intangibles” means, with respect to any Person, all of such Person’s
general intangibles, as such term is defined in the UCC.

“Governmental Authority” means any nation, country, commonwealth, territory,
government, state, county, parish, municipality, or other political subdivision
and any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.

“Guarantee” or “guaranty” by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing or in effect
guaranteeing any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, to
make reimbursement in connection with any letter of credit or to maintain
financial statement conditions, by “comfort letter” or other similar undertaking
of support or otherwise) or (b) entered into for the purpose of assuring in any
other manner the payment of such Debt or other obligation or to protect the
obligee against loss in respect thereof (in whole or in part).  The term
“Guarantee” or “guaranty” includes the pledging or other encumbrance of assets
by a Person to secure the obligations of another Person and restrictions or
limitations on a Person or its assets agreed to in connection with the
obligations of another Person, but does not include endorsements for collection
or deposit in the ordinary course of business; and “Guaranteed” or “guarantied”
by a Person means the act or condition of providing a Guarantee by such Person
or permitting a Guarantee of such Person to exist.

“Guarantors” means each of: HOG, THG, Lobo Operating and Lobo Resources or any
other Subsidiary of the Borrower which complies with the requirements of
Section 7.18.2.

“Hazardous Substances” means (a) any “hazardous substance,” as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (“CERCLA”); (b) any “hazardous waste,” as defined by the Resource
Conservation and Recovery Act, as amended; (c) any petroleum or petroleum
product (including Hydrocarbons); or (d) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material or substance within the meaning
of any applicable Environmental Law, including any applicable Environmental Law
relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, all as amended or
hereafter amended.

“Hedge Termination Value” means, in respect of any one or more Hedging
Agreements, after taking into account the effect of any legally enforceable
netting agreement relating to such Hedging Agreements, (a) for any date on or
after the date such Hedging 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) preceding, the amount(s)
determined as the mark-to-market value(s) for such Hedging Agreements, as
determined by the counterparties to such Hedging Agreements in accordance
therewith.

“Hedging Agreement” means a Commodity Hedging Agreement or an agreement for a
Rate Management Transaction.

- 8 -

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

“Highest Lawful Rate” means, as to any Lender, the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received by such Lender under applicable laws with respect
to an obligation, as such laws are presently in effect or, to the extent allowed
by applicable law, as such laws may hereafter be in effect and which allow a
higher maximum non-usurious interest rate than such laws now allow.  

“HOG” is defined in the recitals to this Agreement.

“HOG Acquisition Agreement” means that certain Purchase and Sale Agreement,
dated as of October 18, 2007, by and between Barry Ray Salsbury, Brian Carl
Albrecht and Shell Sibley, as seller, and HOG and the Borrower, as buyer, as
amended by those certain amendments dated as of December 12, 2007, January 18,
2008, February 18, 2008 and July 11, 2008.

“Hydrocarbons” means all Crude Oil and Natural Gas.

“Hydrocarbon Purchasers” means all Persons, including those Persons listed on
Schedule 1.3 or otherwise approved in writing by the Administrative Agent, who
purchase Hydrocarbons attributable or allocable to the Mortgaged Properties.

“Indemnified Parties” has the meaning given such term in Section 10.8.

“Initial Reserve Report” means, collectively, the reserve report concerning Oil
and Gas Properties of HOG prepared by the Approved Engineer and dated January
23, 2008 and the reserve report concerning Oil and Gas Properties of THG
prepared by the Approved Engineer and dated January 24, 2008.

“Insolvency Proceeding” of any Person means application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of such Person or of
all or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor’s
relief, or other similar law of the United States, the State of New York, or any
other jurisdiction.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of
even date herewith by and among the Borrower, each Guarantor, the Administrative
Agent on behalf of the Lenders and Term Loan Agent, as amended, restated,
amended and restated, supplemented or otherwise modified from time to time by
the parties thereto.

“Interest Expense” means, for any applicable period, the aggregate cash interest
expense accrued (net of interest income accrued during such period of the
Borrower and its Subsidiaries) of the Borrower and its Subsidiaries for such
applicable period, including the portion of any payments made in respect of
Capitalized Lease Liabilities allocable to interest expense.

“Interest Payment Date” means the last day of each calendar month; provided that
interest accrued on Loans or other monetary Obligations after the date such
amount is due and payable (whether on the Final Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.

“Inventory” means, with respect to any Person, all of such Person’s inventory,
as such term is defined in the UCC, in all of its forms, and wherever located,
together with all accessions or additions thereto and products thereof.

“Investment” means, as to any Person, the acquisition or holding of any stock,
bond, note, or other evidence of Debt, partnership interest or any other
Security (other than current trade and customer accounts) of another Person.
 For the avoidance of doubt, automatic investments by a depository bank in
overnight investment accounts shall not be deemed to be an “Investment” for
purposes of this Agreement.

- 9 -

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

“Lease” or “Leases” means, whether one or more, (a) those certain oil and gas
leases described or referred to in Schedule 6.10 hereto, and any other interests
in such or any other oil and gas leases, whether now owned or hereafter acquired
by Borrower, any Guarantor or any of their Subsidiaries, and any extension,
renewals, corrections, modifications, elections or amendments (such as those
relating to unitization) of any such lease or leases, or (b) other oil, gas
and/or mineral leases or other interests pertaining to the Oil and Gas
Properties of the Borrower or any of its Subsidiaries, whether now owned or
later acquired, which may now and hereafter be made subject to the lien of any
of the Security Documents and any extension, renewals, corrections,
modifications, elections or amendments (such as those relating to unitization)
of any such lease or leases.

“Lenders” means the financial institutions listed on the signature pages of this
Agreement and their respective successors and permitted assigns.

“Lending Installation” means, with respect to a Lender or the Administrative
Agent, the office, branch, subsidiary or affiliate of such Lender or the
Administrative Agent listed on the signature pages hereof or on a Schedule or
otherwise selected by such Lender or the Administrative Agent pursuant to the
provisions hereof.

“Lien” means, as to any Property of any Person, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, or security interest in, on or of such Property, or
any other charge or encumbrance on any such asset to secure Debt or liabilities,
but excluding any right to netting or set-off, (b) the interest of a vendor
under any conditional sale agreement or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such Property, (c) any lien deemed to be associated with
Capitalized Lease Liabilities, and (d) in the case of Securities, any purchase
option, call or similar right of a third party with respect to such Securities.

“Limitation Period” means, with respect to any Lender, any period while any
amount remains owing on any Obligation payable to such Lender when interest on
such amount, calculated at the applicable interest rate plus any fees or other
sums payable to such Lender under any Loan Document and deemed to be interest
under applicable law, would exceed the amount of interest which would accrue at
the Highest Lawful Rate.

“Loan” means, (a) with respect to a Lender, the amounts advanced to the Borrower
by such Lender pursuant to Section 2.1 and (b) collectively, the amounts
advanced to the Borrower by the Lenders in an amount not to exceed $97,500,000.

“Loan Documents” means, collectively, this Agreement, any Notes, the
Intercreditor Agreement, each Security Document, and each other agreement,
certificate, document or instrument delivered in connection with any Loan
Document, whether or not specifically mentioned herein or therein.

“Loan Parties” means the Borrower and the Guarantors.

“Lobo Operating” means Lobo Operating, Inc., a Texas corporation.

“Lobo Resources” means Lobo Resources, Inc., a Texas corporation.

“Make Whole Premium” means, with respect to each Loan, the amount equal to the
present value, as determined by the Borrower and certified by an officer of the
Borrower to the Administrative Agent, of (a) all required interest payments due
on such Loan from the date of prepayment through and including the Final
Maturity Date (excluding accrued interest) plus (b) 5% of the principal amount
of such Loan, in each case discounted to the date of prepayment on a quarterly
basis (assuming a 365/366, as applicable, day year and actual days elapsed) at a
rate equal to the treasury rate with a term closest (rounding up) to the
life-to-maturity of the Loans made hereunder plus 0.50%.

“Margin Regulations” means Regulations T, U and X of the Board of Governors of
the Federal Reserve System, as in effect from time to time.

- 10 -

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

“Material Adverse Effect” means for the Borrower and its Subsidiaries any
material adverse effect on (a) the business, operations, properties, results of
operations, condition (financial or otherwise), or prospects of the Borrower,
the Guarantors and their Subsidiaries, taken as a whole, (b) the Borrower's, or
any Guarantor's ability to pay any of the Obligations as and when due, (c) the
Collateral or the priority or enforceability of the Liens securing the
Obligations hereunder, (d) the ability of the Borrower, any Guarantor or any of
their Subsidiaries to perform any of its obligations under any Loan Documents,
or (e) the rights and remedies of or benefits available under any Loan Document.

“Material Agreement” means, with respect to any Person, any written or oral
agreement, contract, commitment, or understanding to which such Person is a
party, by which such Person is directly or indirectly bound, or to which any
Property of such Person may be subject, which is material to the business or
operations of such Person and is not cancelable by such Person upon notice of 90
days or less without (a) liability for further payment in excess of $500,000 or
(b) forfeiture of Property having an aggregate value in excess of $500,000.

“Material Debt” means, as to any Person, Debt (other than the Obligations
hereunder) of such Person aggregating in excess of $500,000.  For purposes of
determining Material Debt, the “principal amount” of the obligations of the
Borrower and its Subsidiaries in respect of any Hedging Agreement at any time
shall be the Hedge Termination Value.

“Mortgaged Property” and “Mortgaged Properties” mean any Oil and Gas Property
with respect to which a Lien is granted pursuant to a Mortgage in favor of the
Lenders (or in favor of the Administrative Agent for the benefit of the
Lenders).

“Mortgages” means (a) any Act of Mortgage, Assignment of Production and
As-Extracted Collateral, Security Agreement and Financing Statement (i) dated as
of the Effective Date or (ii) otherwise delivered pursuant to the Loan
Documents, in substantially the form of Exhibit G, executed and delivered by
Borrower, any Subsidiary or any other appropriate Person, pursuant to which the
Administrative Agent is granted a Lien on the collateral for the benefit of the
Lenders, or (b) any Deed of Trust, Mortgage, Assignment of Production, Security
Agreement and Financing Statement (i) dated as of the Effective Date or
(ii) otherwise delivered pursuant to the Loan Documents, in substantially the
form of Exhibit G, (appropriately modified for the state in which the deed of
trust properties are located), executed and delivered by Borrower, any
Subsidiary or any other appropriate Person, pursuant to which the Administrative
Agent is granted a Lien on the collateral for the benefit of the Lenders, as
amended, restated, amended and restated, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement and the other Loan
Documents.  The term “Mortgage” shall include each mortgage supplement after
execution and delivery of such mortgage supplement.  The term “Mortgages” shall
include each and every Mortgage executed and delivered by each of Borrower, any
Guarantor and any of their Subsidiaries.

“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining
agreement or any other arrangement to which more than one employer is obligated
to make contributions and which is subject to Title IV of ERISA.

“Natural Gas” means all natural gas, and any natural gas liquids and all
products recovered in the processing of natural gas (other than condensate)
including, without limitation, natural gasoline, casinghead gas, iso butane,
normal butane, propane and ethane (including such methane allowable in
commercial ethane) produced from or attributable to Oil and Gas Properties.

“Net Income” means, for any period, the aggregate of all amounts that would be
included as net income (or loss) on the consolidated financial statements of the
Borrower and its Subsidiaries for such period, but shall exclude effects on net
income attributable to any current non-cash income or expense (including in
respect of Hedging Agreements) described in or calculated pursuant to the
requirements of Statement of Financial Accounting Standards 133, 137, 138 and
143, in each case as amended (provided that, for the avoidance of doubt, the
calculation of Net Income shall include any income or expense in respect of the
termination of any Hedging Agreement).

“Note” means a promissory note issued pursuant hereto in substantially the form
attached hereto as Exhibit F, duly executed by the Borrower and payable to the
order of a Lender, including any amendment, modification, renewal or replacement
of such promissory note.

- 11 -

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

“Notes” means each Note issued pursuant to this Agreement.

“Obligations” means, without duplication, (a) all Debt evidenced hereunder,
(b) the obligation of the Borrower and any of its Subsidiaries for the payment
of the fees payable hereunder or under the other Loan Documents, (c) all other
obligations and liabilities of the Borrower and any of its Subsidiaries to any
Lender or Affiliate of a Lender relating to Hedging Agreements  whether or not
such Person is a Lender at the time of entering into the Hedging Agreements or
remains a Lender hereunder, and (d) all other obligations and liabilities
(monetary or otherwise, whether absolute or contingent, matured or unmatured) of
the Borrower and any of its Subsidiaries to the Administrative Agent and the
Lenders arising out of or in connection with any Loan Document, and to the
extent that any of the foregoing includes or refers to the payment of amounts
deemed or constituting interest, only so much thereof as shall have accrued,
been earned and which remains unpaid at each relevant time of determination
(including interest accruing (or which would have accrued) during the pendency
of any proceeding of the type described in Sections 8.1.4 or 8.1.5 whether or
not allowed in such proceeding).

“Officer’s Certificate” means a certificate signed by a Responsible
Representative.

“Oil and Gas Properties” means fee, leasehold, or other interests in or under
mineral estates or oil, gas, and other liquid or gaseous hydrocarbon leases with
respect to Properties situated in the United States or offshore from any State
of the United States, including, without limitation, overriding royalty and
royalty interests, leasehold estate interests, net profits interests, production
payment interests, and mineral fee interests, together with contracts executed
in connection therewith and all tenements, hereditaments, appurtenances and
Properties appertaining, belonging, affixed, or incidental thereto.

“Participants” has the meaning given such term in Section 13.2.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

“Percentage Share” means, relative to any Lender, the percentage set forth
opposite its name on Schedule 1 hereto under the “Percentage Share” column or
set forth in a Assignment and Assumption Agreement under the “Percentage Share”
column, as such percentage may be adjusted from time to time pursuant to
Assignment and Assumption Agreements executed by such Lender and its Assignee
Lender and delivered pursuant to Section 13.3.  A Lender shall not have any
Commitment if its Percentage Share is zero.

“Permitted Debt” means

(a)

the Obligations;

(b)

(i) accounts payable described on Schedule 1.4 in an aggregate amount not to
exceed $66,331.64, provided, that the same are paid in accordance with Section
7.6.3 of this Agreement, (ii) accounts payable in an amount not to exceed
$200,000 outstanding at any one time incurred in the ordinary course of
business, which are unpaid and outstanding more than 60 days beyond the invoice
date therefor, (iii) accounts payable incurred in the ordinary course of
business, which are outstanding and unpaid less than 60 days beyond the invoice
date therefor or (iv) accounts payable incurred in the ordinary course of
business which are being contested in good faith and as to which such reserve as
is required by GAAP has been made and on which interest charges are not paid or
accrued by any Loan Party or any of their respective Subsidiaries, in the case
of clauses (b)(i) through (b)(iv), subject to no Liens except those described in
clauses (c) and (d) of the definition of “Permitted Liens”;

(c)

Debt arising under Acceptable Commodity Hedging Agreements;

(d)

income and other taxes payable that are not overdue or are being contested in
good faith and as to which reserves have been made in accordance with GAAP;

(e)

accrued abandonment and remediation liabilities;

- 12 -

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

(f)

Debt in the form of royalties, overriding royalties, working interest expenses
and other liabilities, each in the ordinary course of the oil and gas business
that are due to non-Affiliates of the Borrower and, which, in the case of
royalties and overriding royalties, are in existence as of the Effective Date or
as otherwise approved by the Required Lenders;

(g)

Debt related to the Revolving Credit Facility in an aggregate principal amount
not to exceed at any one time $25,000,000;

(h)

Debt (i) evidencing the deferred purchase price of newly acquired property or
incurred to finance the acquisition of equipment of the Borrower and its
Subsidiaries (pursuant to purchase money mortgages or otherwise, whether owed to
the seller or a third party) used in the ordinary course of business of the
Borrower and its Subsidiaries (provided that such Debt is incurred within 60
days of the acquisition of such property) and (ii) in respect of Capitalized
Lease Liabilities; provided that the aggregate amount of all Debt outstanding
pursuant to this clause (h) shall not at any time exceed $500,000;

(i)

Debt of any Person that becomes a Subsidiary after the Effective Date; provided
that (i) such Debt exists at the time such Person becomes a Subsidiary and is
not created in contemplation of or in connection with such Person becoming a
Subsidiary and (ii) the aggregate principal amount of such Debt permitted by
this clause (i) shall not exceed $500,000 at any time outstanding;

(j)

letters of credit, performance bonds, or other financial assurance required to
be obtained by the Borrower or any of its Subsidiaries in the normal course of
its business to assure the proper plugging and abandonment of oil or gas
drilling or production locations or bonds required by any Governmental Authority
in the normal course of the Borrower’s or any of its Subsidiary’s business;

(k)

unsecured Debt among the Borrower and the Guarantors arising in the ordinary
course of business;

(l)

Debt of the Borrower or any Subsidiary owing in connection with deferred
payments of property insurance premiums, provided that all such Debt of the
Borrower and its Subsidiaries shall not exceed an aggregate of $3,000,000 in any
fiscal year; and

(m)

unsecured Debt of the Borrower to Thomas F. Cooke and Andrew C. Clifford
pursuant to the Subordinated Notes in an aggregate principal amount not to
exceed $620,912 and $157,500, respectively, subject to documentation and
subordinated to the Debt under this Agreement, in each case, in a manner
acceptable to the Administrative Agent in its sole discretion.

“Permitted Holder” means Thomas F. Cooke, A.C. Clifford and their respective
Affiliates, estates, heirs and devisees.

“Permitted Investments” means Investments in (a) Debt, evidenced by notes
maturing not more than 180 days after the date of issue, issued or guaranteed by
the government of the United States of America, (b) certificates of deposit
maturing not more than 180 days after the date of issue, issued by any Lender or
by commercial banking institutions each of which is a member of the Federal
Reserve System and which has combined capital and surplus and undivided profits
of not less than $500,000,000, (c) such other instruments, evidences of
indebtedness or investment securities as the Administrative Agent may approve,
or (d) wholly-owned Subsidiaries that are or become Guarantors hereunder.

“Permitted Liens” means, with respect to any Property:

(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
proceedings and for which adequate reserves have been maintained in accordance
with GAAP;

- 13 -

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

(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 proceedings
and for which adequate reserves have been maintained in accordance with GAAP;

(c)

landlord’s, operators’, royalty owners’, vendors’, carriers’, warehousemen’s,
repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or
other like Liens arising by operation of law or contract which do not secure any
Total Debt or any Debt described in clause (g) of the definition thereof, in
each case only to the extent arising in the ordinary course of business and
incident to the exploration, development, operation and maintenance of Oil and
Gas Properties each of which is in respect of Permitted Debt of the type
described in clause (b) of the definition thereof;

(d)

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 permitted hereunder, division orders, contracts for
sale, purchase, transportation or exchange of oil or natural gas, unitization
and pooling declarations and agreements, area of mutual interest agreements,
royalty and 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 proceedings
and for which adequate reserves have been maintained in accordance with GAAP;

(e)

Liens arising solely by virtue of any contractual, 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 such
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 bank
regulators and no such deposit account serves as collateral to any Person other
than the Administrative Agent and the Revolving Credit Agent;

(f)

easements, rights of way, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any of
its Subsidiaries that do not secure any monetary obligations and 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 such Subsidiary 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
(excluding, in each case, obligations constituting Debt);

(h)

judgment Liens in respect of judgments that do not constitute an Event of
Default;

(i)

Liens securing the payment of any Obligations;

(j)

rights reserved to or vested in a Governmental Authority having jurisdiction to
control or regulate any Oil and Gas Property in any manner whatsoever and all
laws of such Governmental Authorities, so long as the Borrower and its
Subsidiaries is in compliance with all such laws, except for any non-compliance
that would not result in a Material Adverse Effect;

(k)

consents to assignment and similar contractual provisions affecting an Oil and
Gas Property to the extent and only to the extent, such consents are not
affected by or required for the execution, delivery, performance and enforcement
of any Loan Document or, if affected or required, have been obtained;

- 14 -

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

(l)

preferential rights to purchase and similar contractual provisions affecting an
Oil and Gas Property to the extent and only to the extent, such consents are not
affected by delivery of any Loan Document or, if affected, have been waived;

(m)

all defects and irregularities affecting title to an Oil and Gas Property that
could not operate to reduce the net revenue interest of the Borrower and its
Subsidiaries for such Oil and Gas Property (if any), increase the working
interest of the Borrower and its Subsidiaries for such Oil and Gas Property (if
any) without a corresponding increase in the corresponding net revenue interest,
or otherwise interfere materially with the operation, value or use of such Oil
and Gas Property or cause a Material Adverse Effect;

(n)

Liens (i) securing Debt permitted pursuant to clause (c) of the definition of
“Permitted Debt”, provided that the Liens in respect thereof are in favor of a
Revolving Credit Lender or an Affiliate of a Revolving Credit Lender and (ii)
securing Debt permitted pursuant to clause (g) of the definition of “Permitted
Debt”;

(o)

Liens securing the Debt permitted pursuant to clause (h) of the definition of
“Permitted Debt;” provided, however, that (i) no such Lien shall extend to or
cover any other Property of the Borrower or any of its Subsidiaries, and (ii)
the principal amount of the Debt secured by any such Lien shall not exceed the
lesser of 80% of the fair market value or the cost of the Property so held or
acquired;

(p)

Liens securing the Debt permitted pursuant to clause (i) of the definition of
“Permitted Debt;” provided that such Liens exist at the time such Person becomes
a Subsidiary and are not created in contemplation of or in connection with such
Person becoming a Subsidiary; and

(q)

Liens securing the Debt permitted pursuant to clause (j) of the definition of
“Permitted Debt;”

provided that Liens described in clauses (a) through (e) and (o) above shall not
constitute Permitted Liens upon the initiation of any foreclosure proceedings
with regard to the Property encumbered by such Liens and; provided, further, no
intention to subordinate the first priority Lien granted in favor of the Lender
is hereby implied or expressed or is to be inferred by the permitted existence
of such Permitted Liens.

“Person” means a corporation, an association, a joint venture, a limited
liability company, a partnership, an organization, a business, an individual or
a government or political subdivision thereof or any Governmental Authority.

“Plan” means any employee benefit plan which is covered by Title IV of ERISA.

“Platform” is defined in Section 10.10.

“Pledge Agreement” means a Pledge Agreement, (a) dated as of the Effective Date
or (b) otherwise delivered pursuant to the Loan Documents, between the
Administrative Agent and Borrower or a Subsidiary of the Borrower, substantially
in the form of Exhibit H, as amended, supplemented, restated or otherwise
modified from time to time in accordance with the Loan Documents.  The term
“Pledge Agreements” shall include each and every Pledge Agreement executed and
delivered pursuant to the Loan Documents.

“POGM” means Professional Oil & Gas Marketing, LLC.

“POGM Deposit Accounts” means, collectively, (a) the Capital One Account #
2081340016 styled “Professional Oil & Gas Marketing, LLC on behalf of Harvest
Oil & Gas LLC”, (b) the Capital One Account # 2081340024 styled “Professional
Oil & Gas Marketing, LLC on behalf of The Harvest Group LLC” and (c) the Capital
One Account # 20813404486 styled “The Harvest Group LLC Aviva Marketing”.

“Possible Reserves” means Possible Reserves as defined in the Reserve
Definitions.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.

- 15 -

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

“Probable Reserves” means Probable Reserves as defined in the Reserve
Definitions.

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

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

“Proved Reserves” means “Proved Reserves” as defined in the Reserve Definitions.

“Proved Undeveloped Reserves” means Proved Reserves which are categorized as
“Undeveloped” in the Reserve Definitions.

“Public Lender” is defined in Section 10.10.

“Purchasers” has the meaning given such term in Section 13.3.

“PV10 Value” means, as of any date of determination, as to any Person the
present value, discounted at a rate of 10%, of the future net revenues expected
to accrue to such Person’s interests in its Oil and Gas Properties during the
remaining expected economic lives of such properties as determined by the
Administrative Agent in connection with the most recently completed Reserve
Report.  Each calculation of such expected future net revenues shall be made in
accordance with the then existing standards of the Society of Petroleum
Engineers and (a) with appropriate adjustments made for (i) severance and ad
valorem taxes, (ii) operating, gathering, transportation and marketing costs
required for the production and sale of such reserves and (iii) risk associated
with such future net revenues as determined in the sole discretion of the
Administrative Agent and (b) assuming that future produced volumes of oil and
gas will be sold (i) in the case of unhedged volumes, at the 24 month NYMEX
strip (i.e., the average of the prices quoted on the New York Mercantile
Exchange for WTI crude oil or Henry Hub natural gas for the upcoming 24 contract
months following the time of calculation of PV10 Value), (ii) in the case of
volumes subject to a swap or other fixed priced hedge, at the applicable fixed
price and (iii) in the case of volumes subject to a floor or ceiling hedge
(including a collar), at the price set out in the preceding clause (b)(i), but
not to exceed such ceiling or to be less than such floor.

“Rate Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered into by the Borrower or any
of its Subsidiaries which is a rate swap, basis swap, forward rate transaction,
equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, equity prices or other financial measures.

“Register” is defined in Section 13.1.

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

“Related Rights” means all chattel papers, electronic chattel papers, payment
intangibles, promissory notes, letter of credit rights, supporting obligations,
documents and instruments relating to the Accounts or the General Intangibles
and all rights now or hereafter existing in and to all security agreements,
leases, and other contracts securing or otherwise relating to any Accounts or
General Intangibles or any such chattel papers, electronic chattel papers,
payment intangibles, promissory notes, letter of credit rights, documents and
instruments.

- 16 -

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

“Release of Hazardous Substances” means any emission, spill, leak, release,
disposal, or discharge, except in accordance with a valid permit, license,
certificate, or approval of the relevant Governmental Authority, of any
Hazardous Substance into or upon (a) the air, (b) soils or any improvements
located thereon, (c) surface water or groundwater, or (d) the sewer or septic
system, or the waste treatment, storage, or disposal system servicing any
Property of the Borrower or any of its Subsidiaries.

“Required Lenders” means Lenders (one of whom must be the Administrative Agent)
in the aggregate holding at least 66-2/3% of the Loans.

“Requirement of Law” means, as to any Person, any applicable law, treaty,
ordinance, order, judgment, rule, decree, regulation, or determination of an
arbitrator, court, or other Governmental Authority, including, without
limitation, rules, regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now exist or
may be hereafter amended and are applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is subject.

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

“Reserve Report” means the Initial Reserve Report and each other report (in hard
copy and electronic format) setting forth, as of each January 1st or July 1st
(or such other date as required pursuant to Section 7.2.2(c) and the other
provisions of this Agreement), the oil and gas reserves attributable to the Oil
and Gas Properties owned directly by the Borrower and its Subsidiaries, together
with a projection of the rate of production and future net income, severance and
ad valorem taxes, operating expenses and capital expenditures with respect
thereto as of such date, consistent with SEC reporting requirements at the time
(using pricing assumptions consistent with the definition of “PV10 Value”),
provided that each such report hereafter delivered must (a) separately report on
the Proved Developed Producing Reserves, Proved Developed Nonproducing Reserves,
Proved Undeveloped Reserves, Probable Reserves and Possible Reserves of the
Borrower and its Subsidiaries, (b) take into account the Borrower’s actual
experiences with leasehold operating expenses and other costs in determining
projected leasehold operating expenses and other costs, (c) identify and take
into account any “overproduced” or “under-produced” status under gas balancing
arrangements, (d) contain information and analysis comparable in scope to that
contained in the Initial Reserve Report, including any information regarding any
field descriptions, or the numerical output from the proved reserve calculations
and summary information to the reasonable satisfaction of the Administrative
Agent, and (e) include copies of all electronic data and/or files used or
produced in connection with the calculations.

“Responsible Representative” means as to any Person, its chief executive
officer, its president and its chief financial officer.

“Restricted Payment” means:

(a)

the declaration or payment of any dividend on, or the incurrence of any
liability to make any other payment or distribution in respect of, any shares of
or other ownership interests in the Borrower, other than dividends or
distributions payable in capital stock, or options, warrants or other rights to
purchase the capital stock, of the Borrower;

(b)

any payment or distribution on account of the purchase, redemption or other
retirement of any Equity Interests in the Borrower, or of any warrant, option or
other right to acquire such Securities or such other ownership interests, or any
other payment or distribution made in respect thereof, other than by means of
capital stock of the Borrower, either directly or indirectly;

(c)

the issuance of any Equity Interests by any Subsidiary of the Borrower (other
than by any Subsidiary to the Borrower or a Guarantor); or

(d)

the repayment by the Borrower of any subordinated Debt or Debt owed to an
Affiliate (other than Debt owed to a Subsidiary), except as specifically
permitted in the Loan Documents.

- 17 -

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

“Revolving Credit Agent” means Macquarie Bank Limited, its successors and
assigns.

“Revolving Credit Agreement” means that certain Amended and Restated Credit
Agreement dated as of July 14, 2008 among the Borrower, the designated borrowers
named therein, the Revolving Credit Agent and the Revolving Credit Lenders, as
amended, restated, amended and restated, supplemented or modified from time to
time in accordance with the terms of this Agreement

“Revolving Credit Facility” means the revolving facility with Revolving Credit
Agent in an aggregate principal amount not exceeding $25,000,000, the proceeds
of which shall be used by the Borrower for working capital and general corporate
purposes, as amended, restated, amended and restated, supplemented or otherwise
modified from time to time in accordance with the terms of this Agreement.

“Revolving Credit Lenders” means the lenders from time to time party to the
Revolving Credit Agreement.

“Securities Account” has the meaning ascribed to it in the UCC.

“Security” means any stock, share, voting trust certificate, limited or general
partnership interest, member interest, bond, debenture, note, or other evidence
of indebtedness, secured or unsecured, convertible, subordinated or otherwise,
or in general any instrument commonly known as a “security” or any certificate
of interest, share or participation in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.

“Security Agreement” means any Security Agreement, (a) dated as of the Effective
Date or (b) otherwise delivered pursuant to the Loan Documents, between the
Administrative Agent and Borrower, a Guarantor or a Subsidiary of the Borrower,
substantially in the form of Exhibit I, as amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms of this
Agreement and the other Loan Documents.  The term “Security Agreements” shall
include each and every Security Agreement executed and delivered by Borrower, a
Guarantor or a Subsidiary of the Borrower.

“Security Documents” or “Security Instruments” means the security instruments
executed and delivered in satisfaction of the condition set forth in Article IV
and Section 5.1.2, including, without limitation, any Mortgage, any Pledge
Agreement, any Security Agreement or any Deposit Account Control Agreement, and
all other documents, instruments and guaranties, including, without limitation,
any Mortgage, any Pledge Agreement, any Security Agreement or any Deposit
Account Control Agreement, at any time executed as security for all or any
portion of the Obligations, as such instruments may be amended, restated,
amended and restated or supplemented or modified from time to time.

“Site Specific Trust Accounts” means, collectively, (a) Crooked Bayou – Site
Specific Trust Account # 05-01, (b) the Vermillion 16 – Site Specific Trust
Account # 05-09, (c) the South Atchafalaya Bay – Site Specific Trust Account #
05-12 and (d) the Little Bay –Site Specific Trust Account # 07-01.

“Subject Leases” is defined in Section 7.19.1.

“Subordinated Notes” means (a) that certain Subordinated Promissory Note
(Cooke), dated as of the date hereof, executed by the Borrower in favor of
Thomas F. Cooke in the original principal amount of $620,912.00 and (b) that
certain Subordinated Promissory Note (Clifford Deferred Compensation), dated as
of the date hereof, executed by the Borrower in favor of Andrew C. Clifford in
the original principal amount of $157,500.00.

“Subsidiary” means for any Person, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned, collectively, by such Person and
any Subsidiaries of such Person.  The term Subsidiary shall include Subsidiaries
of Subsidiaries (and so on).

- 18 -

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

“Synthetic Lease” means, as applied to any Person, any lease (including leases
that may be terminated by the lessee at any time) of any property (whether real,
personal or mixed) (a) that is not a capital lease in accordance with GAAP and
(b) in respect of which the lessee retains or obtains ownership of the property
so leased for federal income tax purposes, other than any such lease under which
that Person is the lessor.

“Target Assets” means the equity interests in HOG and THG which are to be
acquired by Borrower pursuant to the Acquisition Agreements.

“Taxes” means all taxes, assessments, filing or other fees, levies, imposts,
duties, deductions, withholdings, stamp taxes, interest equalization taxes,
capital transaction taxes, foreign exchange taxes or charges, or other charges
of any nature whatsoever from time to time or at any time imposed by any law or
Governmental Authority.

“THG” is defined in the recitals to this Agreement .

“THG Acquisition Agreement” means that certain Purchase and Sale Agreement,
dated as of October 24, 2007, by and between Barry Ray Salsbury, Brian Carl
Albrecht, Shell Sibley, Willie Willard Powell and Carolyn Monica Greer, as
seller, and THG and the Borrower, as buyer, as amended by amendments dated
December 12, 2007, January 18, 2008, February 18, 2008 and July 11, 2008.  

“Total Debt” of any Person means, at any date, Debt of the Borrower and its
Consolidated Subsidiaries as of such day described in clauses (a), (b), (c), (f)
(but excluding any current non-cash asset or liability (including in respect of
Hedging Agreements) described in or calculated pursuant to the requirements of
Statement of Financial Accounting Standards 133, 137, 138 and 143, in each case
as amended (provided that, for the avoidance of doubt, the calculation of Total
Debt shall include any current assets or liabilities in respect of the
termination of any Hedging Agreement)) or (h) of the definition of Debt
(including amounts under this Agreement and letter of credit exposure).

“Total Proved PV10 Value” means at any time the lesser of (a) the PV10 Value of
the Borrower’s and the Guarantors’ Proved Reserves as calculated by the
Administrative Agent using the most recent Reserve Report, and (b) the product
of two (2) times the PV10 Value of the Borrower’s and the Guarantors’ Proved
Developed Producing Reserves as calculated by the Administrative Agent using the
most recent Reserve Report.

“Transactions” means the Acquisitions, the execution and delivery by the
Borrower, the Guarantors and the other Subsidiaries of the Borrower of this
Agreement and the other Loan Documents, the making and repayment of Loans and
the use of the proceeds thereof.

“Transferee” shall have the meaning given such term in Section 13.4.

“UCC” means the Uniform Commercial Code as from time to time in effect in the
State of New York.

“Warrant Agreement” means that certain Warrant to Purchase Common Shares of
Saratoga Resources, Inc. dated as of the date hereof in favor of Wayzata
Investment Partners LLC.

“Wells” means, with respect to the Leases, the oil and/or gas wells located
thereon, including those described on Exhibit “A” to the THG Acquisition
Agreement and the HOG Acquisition Agreement.

- 19 -

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

“Withholding Form” is defined in Section 10.13.4.

1.2

Accounting Terms and Determinations; Changes in Accounting.

1.2.1

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the independent public accountants and with respect to which the
Borrower shall have promptly notified the Administrative Agent on becoming aware
thereof) with the most recent financial statements of the Borrower and its
Subsidiaries delivered to the Administrative Agent, provided that in the event
of a change in GAAP that would affect calculation of any of the financial
covenants in Section 7.15, such change shall be disregarded in making such
calculation unless the Borrower and the Required Lenders shall agree on an
amendment to such covenant that takes such change in GAAP into account.

1.2.2

The Borrower and its Subsidiaries will not change their method of accounting,
other than immaterial changes in methods, changes permitted by GAAP in which the
Borrower’s independent public accountants concur and changes required by a
change in GAAP, without the prior written consent of the Administrative Agent
and the Required Lenders, which consent shall not be unreasonably withheld or
delayed by any Lender.

1.2.3

During such times that the Borrower is required to deliver financial information
to the Lenders in accordance with GAAP, neither Current Assets nor Current
Liabilities shall include the amount of or any liabilities respecting any
non-cash items (including with respect to Hedging Agreements) as a result of the
application of Financial Accounting Standards Board Statement Nos. 133, 137, 138
and 143 and any subsequent amendments thereto (provided that, for the avoidance
of doubt, the calculation of consolidated current assets shall include any
current assets in respect of the termination of any Hedging Agreement).

1.3

References.  References in this Agreement to Exhibits, Schedules, Annexes,
Appendixes, Attachments, Articles, Sections or clauses shall be to exhibits,
schedules, annexes, appendixes, attachments, articles, sections or clauses of
this Agreement, unless expressly stated to the contrary.  References in this
Agreement to “hereby,” “herein,” “hereinafter,” “hereinabove,” “hereinbelow,”
“hereof,” “hereunder” and words of similar import shall be to this Agreement in
its entirety and not only to the particular Exhibit, Schedule, Annex, Appendix,
Attachment, Article, or Section in which such reference appears.  This
Agreement, for convenience only, has been divided into Articles and Sections,
and it is understood that the rights and other legal relations of the parties
hereto shall be determined from this instrument as an entirety and without
regard to the aforesaid division into Articles and Sections and without regard
to headings prefixed to such Articles or Sections.  Whenever the context
requires, reference herein made to the single number shall be understood to
include the plural, and likewise, the plural shall be understood to include the
singular.  Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be, unless
otherwise indicated.  Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; specific
enumeration shall not exclude the general but shall be construed as cumulative;
the word “or” is not exclusive; the word “including” (in its various forms)
shall mean “including, without limitation,” in the computation of periods of
time, the word “from” means “from and including” and the words “to” and “until”
mean “to but excluding,” and all references to money refer to the legal currency
of the United States of America.  The Exhibits, Schedules, Annexes, Appendixes
and Attachments attached to this Agreement and items referenced as being
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.

ARTICLE II

TERMS OF FACILITIES

2.1

Commitments.  On the terms and subject to the conditions of this Agreement, the
Lenders severally agree to make Loans as set forth below.

- 20 -

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

2.1.1

Loan Commitment.

(a)

On the Effective Date, each Lender severally agrees that it will make Loans to
the Borrower in an aggregate amount equal to such Lender’s Commitment.

On the terms and subject to the conditions hereof, the Borrower may from time to
time prepay or repay Loans.  Amounts borrowed under this Section 2.1 and repaid
or prepaid may not be reborrowed.

2.2

Method of Borrowing.

2.2.1

[Reserved].

2.2.2

[Reserved].

2.2.3

(a)

Each Lender shall make each Loan to be made by it hereunder on the Effective
Date by wire transfer of immediately available funds by 1:00 p.m., Central time,
to the account of the Administrative Agent 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 subject to a Deposit Account Control Agreement or,
if directed by the Borrower, directly to a Person to which such payment would be
permitted under Section 7.1.  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)

Unless the Administrative Agent shall have received notice from a Lender prior
to the proposed date of any Loan that such Lender will not make available to the
Administrative Agent such Lender’s Percentage Share of such Loan, the
Administrative Agent may assume that such Lender has made such Loan available on
such date in accordance with Section 2.2.3 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 Loan 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 the Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan.

2.3

[Reserved].

2.4

Repayment of Loans; Evidence of Debt.  

2.4.1

The Borrower hereby unconditionally promises to pay to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each Loan on
the Final Maturity Date.

2.4.2

Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the Debt of the Borrower to such Lender resulting from each
Loan made by such Lender, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.

2.4.3

The Administrative Agent shall maintain accounts in which it shall record (a)
the amount of each Loan made hereunder, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (c) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share thereof.

2.4.4

The entries made in the accounts maintained pursuant to Sections 2.4.2 and 2.4.3
shall be prima facie evidence of the existence and amounts of the obligations
recorded therein; provided that the

- 21 -

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

failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.

2.4.5

Any Lender may request that Loans made by it be evidenced by a Note.  In such
event, the Borrower shall prepare, execute and deliver to such Lender a Note
payable to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns).  Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 13.3) be represented by one or more Notes in such
form payable to the order of the payee named therein (or, if such Note is a
registered note, to such payee and its registered assigns).

2.5

Interest Rate.

2.5.1

Each Loan and each other monetary Obligation shall bear interest on the
outstanding principal amount thereof, for each day from and including the case
of an Obligation, the date such Loan is made or Obligation is incurred to but
excluding the date it is paid at a rate per annum equal to the lesser of (a)
20.0% percent per annum or, if applicable, such higher rate as is specified in
Section 3.3 or (b) the Highest Lawful Rate.

2.5.2

Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and on the Final Maturity Date; provided that
interest accrued pursuant to Section 3.3 shall be payable on demand.

2.5.3

Each change in the rate of interest charged hereunder shall become effective
automatically and without notice to the Borrower upon the effective date of any
change in the Highest Lawful Rate.

2.6

[Reserved].

2.7

[Reserved].

2.8

Termination of Commitments; Maturity of Loans.

2.8.1

Unless previously terminated, the Loan Commitments shall terminate on July 14,
2008 at 5:00 p.m. (Central time).

2.8.2

The Loans shall mature no later than the Final Maturity Date and any unpaid
principal of the Loans and accrued, unpaid interest thereon shall be due and
payable on the Final Maturity Date.

ARTICLE III

GENERAL PROVISIONS

3.1

General Provisions as to Payments and Loans.

3.1.1

All payments of principal and interest on the Loans and of fees hereunder shall
be made, without set-off, deduction or counterclaim, by 12:00 noon, Central
time, on the date such payments are due in federal or other funds immediately
available to an account of the Administrative Agent in New York, New York
designated by the Administrative Agent in writing. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered promptly
by the Administrative Agent to such Lender in the same type of funds that the
Administrative Agent received at such Lender’s address specified pursuant to
Article XIV.  Except as otherwise provided herein, whenever any payment of
principal or interest on the Loans or fees hereunder shall be due on a day which
is not a Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day.  If the date for any payment is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.

- 22 -

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

3.1.2

All payments made by the Borrower or any Guarantor on the Loans, and the other
Obligations shall be made free and clear of, and without reduction by reason of,
any “Taxes” as defined in Section 10.13.

3.1.3

All requests for Credit Extensions shall be made on a Business Day.

3.1.4

All Loans shall be made available to the Borrower on a Business Day at the
Administrative Agent’s address referred to in Article XIV.

3.1.5

All payments and fundings shall be denominated in United States of America
dollars.

3.2

Computation of Interest.  Each determination hereunder of interest on the Loans
and fees hereunder based on per annum calculations shall be computed on the
basis of a year of 365/366, as applicable, days and paid for the actual number
of days elapsed (including the first day but excluding the last day), subject to
the limitations of the Highest Lawful Rate.  The Federal Funds Effective Rate
shall be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.

3.3

Default Interest.  After the date any Event of Default has occurred and for so
long as such Event of Default is continuing, the rate of interest that otherwise
would be applicable to such Loan plus 4% per annum shall apply as provided in
Section 2.5 but only to the extent permitted by law (the “Default Rate”).

3.4

Repayments and Prepayments; Application.  The Borrower agrees that the Loans
shall be repaid and prepaid pursuant to the following terms.

3.4.1

Repayments and Prepayments.  The Borrower shall repay in full the unpaid
principal amount of each Loan upon the Final Maturity Date.  Prior thereto,
payments and prepayments of the Loans shall or may be made only as set forth
below.

(a)

From time to time on any Business Day, subject to the provisions of Section
3.4.2, the Borrower may make a voluntary prepayment, in whole or in part, of the
outstanding principal amount of any Loans; provided that, (i) all such voluntary
prepayments shall require at least one (1) Business Day’s prior notice (such
notice to be delivered before 12:00 noon (Central time) on such day and in any
case not more than five (5) Business Days’ prior irrevocable notice to the
Administrative Agent; and (ii) all such voluntary partial prepayments shall be
in an aggregate minimum amount of $1,000,000 and an integral multiple of
$1,000,000.  Each notice of prepayment sent pursuant to this clause (a) shall
specify the prepayment date and the principal amount of the Loan to be prepaid.
 Each such notice shall be irrevocable and shall commit the Borrower to prepay
such Loan by the amount stated therein on the date stated therein.  All
prepayments under this clause shall be accompanied by accrued and unpaid
interest on the principal amount to be prepaid to but excluding the date of
payment.

(b)

Without limiting prepayments that the Borrower may make pursuant to Section
3.4.1(a), the Borrower may, following the first anniversary of the Effective
Date and on or prior to the second anniversary of the Effective Date, make a
voluntary prepayment of up to $34,125,000 with the net cash proceeds of any
issuance by Borrower of any Equity Interests.

(c)

The Borrower shall, on the earlier of (i) ninety (90) days after the end of each
fiscal year of the Borrower and (ii) the date of the delivery of the financial
information required under Section 7.2.1 with respect to each fiscal year,
prepay the Loans in an amount equal to twenty-five percent (25%) of Excess Cash
Flow for such fiscal year; provided however, that the amount of any prepayment
required under this Section 3.4.1(c) shall be reduced on a dollar-for-dollar
basis if, at the Borrower’s election, such Excess Cash Flow proceeds are used to
make a prepayment of the loans under the Revolving Credit Agreement on such
date.  Notwithstanding anything herein to the contrary, any Lender may elect, by
notice to the Administrative Agent within at least two (2) Business Days of the
applicable prepayment date, to decline (in whole but not in part) any prepayment
of its Loans pursuant to this Section 3.4.1(c), in which case the aggregate
amount of the prepayment that would have been applied to prepay the Loans of
such declining Lender shall be re-offered to those Lenders under this Agreement
(if any) who

- 23 -

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

have initially accepted such prepayment (such re-offer to be made to each such
Lender based on the percentage which such Lender’s Loans represents of the
aggregate Loans of all Lenders who initially accepted such prepayment).  In the
event of such re-offer, the relevant Lenders may elect, by notice to the
Administrative Agent within one (1) Business Day of receiving notification of
such re-offer, to decline (in whole but not in part) the amount of such
prepayment that is re-offered to them.  The aggregate amount of the prepayment
that would have been applied to prepay accepting Lenders but was so declined
shall be retained by the Borrower.

(d)

Immediately upon any acceleration of the Final Maturity Date of any Loans
pursuant to Section 8.1, the Borrower shall repay all the Loans.

Each prepayment of any Loans made pursuant to this Section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid.

3.4.2

Call Protection.  (1)  In the event that the Loans are prepaid pursuant to
Section 3.4.1(a), either in whole or in part, prior to the Final Maturity Date,
Borrower shall pay to the Lenders a prepayment premium (expressed as a
percentage of the prepayment amount) on the amount so prepaid as follows:

Date

Prepayment Premium

Effective Date through July __, 2010

Make Whole Premium

July __, 2010 until Final Maturity Date

5.0%

(b)

In the event that the Loans are prepaid pursuant to Section 3.4.1(b), either in
whole or in part, Borrower shall pay to the Lenders a prepayment premium of
10.0% (expressed as a percentage of the prepayment amount) on the amount so
prepaid.

3.5

Limitation Period.  Notwithstanding anything herein to the contrary, during any
Limitation Period with respect to any Lender, the interest rate to be charged on
amounts in respect of Obligations owing to such Lender shall be the Highest
Lawful Rate, and the obligation, if any, of the Borrower for the payment of fees
or other charges deemed to be interest under applicable law shall be suspended.
 During any period or periods of time following a Limitation Period, to the
extent permitted by applicable laws, the interest rate to be charged hereunder
by such Lender shall remain at the Highest Lawful Rate until such time as there
has been paid to such Lender (a) the amount of interest in excess of that
accruing at the Highest Lawful Rate that such Lender would have received during
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (b) the amount of all other interest and fees otherwise payable to
such Lender but for the effect of such Limitation Period.

3.6

Telephonic Notices.

3.6.1

If permitted by this Agreement, the Borrower hereby authorizes the
Administrative Agent to extend Credit Extensions, and to transfer funds, and
hereby authorizes the Lenders to make Loans, based on telephonic, e-mail or
other electronic notices made by any Person which the Administrative Agent or
any Lender in good faith believes to be acting on behalf of the Borrower.  The
Borrower agrees to deliver promptly to the Administrative Agent a written
confirmation of each telephonic, e-mail or other electronic notices, signed by
an Authorized Officer.  If the written confirmation differs in any material
respect from the action taken by the Administrative Agent and the Lenders, the
records of the Administrative Agent and the Lenders shall be prima facie, but
not conclusive, evidence of the matter notwithstanding anything to the contrary
in such confirmation.

3.6.2

The Administrative Agent will give each Lender and the Borrower prompt notice of
each change in the interest rate applicable to the Loans.

3.6.3

Each Lender may book its Loans at any Lending Installation selected by such
Lender and may change its Lending Installation from time to time by notice in
writing to the Administrative Agent.  All terms of this Agreement shall apply to
any such Lending Installation, and the Note, if any, payable to

- 24 -

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

such Lender shall be deemed held by each Lender for the benefit of its Lending
Installation.  Each Lender may, by written or facsimile notice to the
Administrative Agent and the Borrower, designate, or change any previous
designation of, the Lending Installation through which Loans will be made by it
and for whose account Loan payments are to be made.

3.6.4

Unless the Borrower or a Lender, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to the
Administrative Agent of (a) in the case of a Lender, the proceeds of a Loan or
(b) in the case of the Borrower a payment of principal, interest or fees to the
Administrative Agent for the account of the Lenders, that it does not intend to
make such payment, the Administrative Agent may assume that such payment has
been made.  The Administrative Agent may, but shall not be obligated to, make
the amount of such payment available to the intended recipient in reliance upon
such assumption.  If such Lender or the Borrower, as the case may be, has not in
fact made such payment to the Administrative Agent, the recipient of such
payment shall, on demand by the Administrative Agent, repay to the
Administrative Agent the amount so made available together with interest thereon
in respect of each day during the period commencing on the date such amount was
so made available by the Administrative Agent until the date the Administrative
Agent recovers such amount at a rate per annum equal to (i) in the case of
payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in
the case of payment by the Borrower, the interest rate applicable to the Loans.

ARTICLE IV

COLLATERAL

4.1

Security.  To secure full and complete payment and performance of the
Obligations of the Borrower and the Guarantors to the Lenders, each of the
Borrower and the Guarantors will cause the appropriate Person to execute and
deliver to the Administrative Agent the following documents and instruments:

4.1.1

Mortgages.  Mortgages executed by the Borrower or any Subsidiary, if any,
granting to the Administrative Agent for the benefit of the Administrative Agent
and the Lenders a first and prior Lien, subject to Permitted Liens, covering (a)
no less than 90% of the Total Proved PV10 Value of the Oil and Gas Properties of
the Borrower and its Subsidiaries included in the most recent Reserve Report and
(b) all related equipment, contracts, accounts, licenses and other property,
both real and personal.  Upon and during the continuance of an Event of Default,
the Administrative Agent may revoke any Mortgagee’s license under any Mortgage
to receive the proceeds of production and notify the purchasers of production
from Mortgaged Properties to make such payments directly to the Administrative
Agent as provided in the Mortgage.

4.1.2

Pledge Agreements; UCC Filings.  (a) Pledge Agreements executed by the Borrower,
any Guarantor and any other Subsidiary, granting to the Administrative Agent for
the benefit of the Administrative Agent and the Lenders a first and prior Lien,
subject to Permitted Liens, on covering the Equity Interests of the Subsidiaries
of such Person, (b) stock certificates or other instruments representing all the
Equity Interest of such Subsidiary and stock powers and instruments of transfer,
endorsed in blank, with respect to such stock certificates or other instruments,
or, if any Equity Interests pledged pursuant to such Pledge Agreement are
uncertificated securities, confirmation and evidence satisfactory to the
Administrative Agent that the security interest in such uncertificated
securities has been transferred to and perfected by the Administrative Agent in
accordance with the UCC, and (c) authorization for the Administrative Agent to
file Uniform Commercial Code Financing Statements (Form UCC 1), naming Borrower
or such Subsidiary as the debtor and the Administrative Agent as the secured
party, or other similar instruments or documents, filed or to be under the
Uniform Commercial Code of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the security interest
of the Administrative Agent pursuant to such Pledge Agreement.

4.1.3

Security Agreements; UCC Filings.  (a) Security Agreements executed by the
Borrower, any Guarantor and any other Subsidiary (collectively, the "Debtor"),
granting to the Administrative Agent for the benefit of the Administrative Agent
and the Lenders a first and prior Lien, subject to Permitted Liens, on personal
property of the Borrower or such Subsidiary, respectively, and (b) authorization
for the Administrative Agent to file Uniform Commercial Code Financing
Statements (Form UCC 1), naming Borrower

- 25 -

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

or such Subsidiary as the debtor and the Administrative Agent as the secured
party, or other similar instruments or documents, filed or to be under the
Uniform Commercial Code of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the security interest
of the Administrative Agent pursuant to such Security Agreement.

4.1.4

Deposit Account Control Agreement.  (2) Deposit Account Control Agreements
executed by the Borrower, any Guarantor and any other Subsidiary, granting to
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders a first and prior Lien, subject to Permitted Liens, on and covering the
Deposit Accounts (other than the Site Specific Trust Accounts) and Securities
Accounts of the Borrower or such Subsidiary, respectively, including those
described on Schedule 6.16.

4.1.5

Notice of Payment Instructions.  All account debtors  (including any operator
and Hydrocarbon Purchasers) relating to Mortgaged Property will receive
notification from the relevant Loan Party, in form and substance satisfactory to
the Administrative Agent, that all proceeds from sales of all production or
transmission of Hydrocarbons from or allocable to such Mortgaged Properties are
to be paid into a deposit account or accounts applicable to the relevant Loan
Party, or other Subsidiary which is (i) covered by a Deposit Account Control
Agreement or (ii) maintained by the Administrative Agent; provided, that payment
notifications need not be sent to those account debtors making payments into the
POGM Deposit Accounts for oil, gas and other hydrocarbons marketed by POGM, so
long as the POGM Deposit Accounts are subject to a Deposit Account Control
Agreement.  Each of the Borrower and each Guarantor shall use its best efforts
to cause all other Hydrocarbon Purchasers and POGM to execute the payment
notifications to confirm their agreement to remit all proceeds from sales of all
production from or allocable to the Mortgaged Properties into the applicable
deposit account within thirty (30) days after the Effective Date.  Subject to
applicable contractual restrictions, without the written consent of the
Administrative Agent, none of Borrower, any Guarantor or any Subsidiary shall be
permitted to sell any Hydrocarbons from or allocable to the Mortgaged Properties
to any Hydrocarbon Purchaser who refuses to timely acknowledge and abide by the
payment instructions set forth in any notice under this Section.

4.1.6

Form.  All Security Documents delivered or to be delivered under this Agreement
shall be in form and substance satisfactory to the Administrative Agent and its
counsel and shall be supported by such legal opinions either delivered pursuant
to Section 5.1.6 or substantially similar to the legal opinion delivered
pursuant to Section 5.1.6.

4.1.7

Priority of Liens.  All Liens to be created by delivery of the documents
referred to in this Section shall be first and prior perfected Liens in favor of
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders, subject only to Permitted Liens.

4.2

Financing Statements.  The Administrative Agent is authorized to complete and
file financing statements in any state or other jurisdiction to perfect the
security interests granted by the Loan Documents and as otherwise contemplated
in Section 4.1.

4.3

Covenants Relating to Certain Collateral.

4.3.1

Each Account hereafter arising will represent, in all material respects, and to
the best knowledge of Debtor, each Account now existing represents, in all
material respects, the valid and legally enforceable obligations of a bona fide
account debtor and is not and will not be subject to contra accounts, set-offs,
defenses or counterclaims by or available to account debtors obligated on the
Accounts except for those that have arisen in the ordinary course of Debtor’s
business, are not otherwise prohibited under any other Loan Document, and for
which adequate reserves have been taken in substantially the same amount as are
shown in all material respects in the most recently delivered financial
statements to the Secured Party (“Set-offs”); and the amount shown as to each
Account on Debtor’s books will be the true and undisputed amount owing and
unpaid thereon, subject to (a) any applicable Set-offs and (b) any discounts,
allowances, rebates, credits and adjustments to which the account debtor has a
right and which have arisen in Debtor’s ordinary course of business or which
have otherwise been disclosed to Administrative Agent in writing.

- 26 -

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

4.3.2

All Related Rights are, and those hereafter arising will be, valid and genuine
in all material respects.

4.3.3

None of the Inventory is, and at the time the security interest in favor of
Administrative Agent attaches, none of the Inventory hereafter acquired will be,
covered by any document (as defined in the UCC), other than Inventory being
transported in the ordinary course of business.

4.3.4

Debtor will transmit promptly to Administrative Agent all information that
Debtor may have or receive with respect to (a) the Collateral or (b) account
debtors or obligors in respect of the Accounts, the General Intangibles and the
Related Rights, in each case which could reasonably be expected to materially
and adversely affect the aggregate value of the Collateral or Administrative
Agent's rights or remedies with respect thereto.

4.3.5

Debtor will not adjust, settle or compromise any of the Accounts, the General
Intangibles or the Related Rights without the prior written consent of
Administrative Agent, other than in the ordinary course of business.

4.3.6

Debtor will duly perform or cause to be performed, in accordance with the terms
thereof, all material obligations of Debtor under every material contract,
agreement, or other arrangement (oral or written) to which Debtor is a party or
by which it or any of its Collateral is bound.

4.3.7

If any of the Collateral is in the possession of a third-party, Debtor will, at
the request of Administrative Agent upon the occurrence and during the
continuance of an Event of Default, join with Administrative Agent in notifying
the third-party of Administrative Agent's security interest and obtaining an
acknowledgment in form and substance satisfactory to Administrative Agent from
such third-party that it is holding the Collateral for the benefit of the
Administrative Agent.  Debtor will fully cooperate with Administrative Agent in
obtaining a control agreement in form and substance reasonably satisfactory to
Administrative Agent with respect to any Collateral consisting of deposit
accounts, securities accounts, investment property, electronic chattel paper or
letter of credit rights.

ARTICLE V

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

5.1

Conditions Precedent.  The obligation of each Lender to make Loans shall be
subject to the satisfaction of each of the following conditions:

5.1.1

receipt by the Administrative Agent of the following:

(a)

copies of the Certificate of Incorporation (or the equivalent thereto), and all
amendments thereto, of the Borrower and each Guarantor, accompanied by a
certificate that such copies are correct and complete, issued by the Secretary
of State of the state of incorporation or formation of the Borrower and the
Guarantors dated a current date;

(b)

copies of the Bylaws (or the equivalent thereto), and all amendments thereto, of
the Borrower and each Guarantor, accompanied by a certificate that such copies
are correct and complete of an authorized representative of the Borrower and
each Guarantor dated the Effective Date (which Bylaws (or equivalent) shall be
in form and substance reasonably satisfactory to the Administrative Agent);

(c)

certificates of the appropriate Governmental Authority of each jurisdiction in
which the Borrower and each Guarantor has an executive office or principal place
of business, the Borrower and each Guarantor was formed or in which any
Collateral is located (if the Borrower or each Guarantor is required to qualify
to do business in such state), each dated a current date, to the effect that the
Borrower and each Guarantor is in good standing therein (including, if such
certificates are issued, good standing with respect to the payment of franchise
and/or other Taxes) and, if required by law, is duly qualified to transact
business in such jurisdiction;

- 27 -

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

(d)

certificates of incumbencies and signatures of all officers of the Borrower and
each Guarantor who will be authorized to execute or attest any of the Loan
Documents on behalf of the Borrower or each Guarantor, executed by an authorized
representative of the Borrower or each Guarantor, dated the Effective Date;

(e)

copies of resolutions approving the execution of the Loan Documents and
authorizing the transactions contemplated therein, duly adopted by the Board of
Directors of the Borrower and each Guarantor, accompanied by a certificate of an
authorized representative of the Borrower and each Guarantor that such copies
are true and correct copies of resolutions duly adopted at the meeting of, or by
the unanimous written consent of, the Board of Directors (or authorized body
serving a similar function) of the Borrower and each Guarantor, and that such
resolutions, have not been amended, modified or revoked in any respect, and are
in full force and effect as of the Effective Date;

5.1.2

receipt by the Administrative Agent of the Loan Documents and the other
documents, instruments and any deliveries described in Section 4.1, each duly
executed and delivered by the appropriate Person;

5.1.3

receipt by the Administrative Agent of the Warrant Agreement and any other
documents, instruments or agreements related thereto, each duly executed and
delivered by the appropriate Person;

5.1.4

receipt by the Administrative Agent of (a) such title opinions or other reports
or other evidence of title as the Administrative Agent may reasonably request,
in form and substance and from attorneys or other Persons reasonably acceptable
to the Administrative Agent, covering and confirming marketable title in the
Borrower or a Guarantor to no less than 90% of the Total Proved PV10 Value of
the Oil and Gas Properties of the Borrower and its Subsidiaries included in the
Initial Reserve Report and such other documentation and information reasonably
required by the Administrative Agent to satisfy the Administrative Agent of the
status of the title of such portion of the Collateral, and (b) a list of such
Leases comprising the Oil and Gas Properties as requested by Administrative
Agent and such Maps indicating the location of such Leases as requested by
Administrative Agent, each including such other information as is reasonably
requested by Administrative Agent;

5.1.5

receipt by the Administrative Agent of the results of searches of the UCC
records of the state in which the Borrower and each Guarantor was organized and
of each state in which any Collateral is situated reflecting no Liens on the
Collateral except Liens in favor of the Administrative Agent and Permitted
Liens;

5.1.6

receipt by the Administrative Agent of (a) the opinions of counsel to the
Borrower and each Guarantor in form and substance reasonably satisfactory to the
Administrative Agent and its counsel, including the opinions of local counsel in
each jurisdiction in which the Mortgages are to be recorded and (b) a reliance
letter in respect of the opinions of counsel provided to the Borrower in
connection with the Acquisitions.  The Borrower and each Guarantor hereby
requests such counsel to deliver its opinions to the Administrative Agent;

5.1.7

receipt by the Administrative Agent of certificates or binders of insurance from
the Borrower’s insurance broker for the Borrower and each Subsidiary as of the
Effective Date meeting the standards of Section 7.4 together with a certificate
from a Responsible Officer of the Borrower stating that such policies are in
full force and effect, in the required coverage amounts and that all premiums
then due and payable have been paid;

5.1.8

receipt of evidence reasonably satisfactory to the Administrative Agent that
Acceptable Commodity Hedging Agreements satisfactory to the Administrative Agent
are in place on the Effective Date;

- 28 -

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

5.1.9

receipt by the Administrative Agent of any financial statements of the Borrower,
its Subsidiaries and any affiliated entities as requested by Administrative
Agent, including, without limitation, (a) a pro forma balance sheet of the
Borrower and its Subsidiaries effective as of the Closing, certified as being
true and correct by the Borrower’s president or chief financial officer as
accurately showing the financial position of the Borrower and its Subsidiaries
as of that date, and (b) satisfaction by the Administrative Agent with such
financial statements;

5.1.10

receipt by the Administrative Agent of satisfactory environmental reports or
such other environmental information, in either case as requested by the
Administrative Agent and in form and substance satisfactory to the
Administrative Agent in its sole discretion, regarding the environmental status
of the Properties of the Borrower and its Subsidiaries;

5.1.11

receipt by the Administrative Agent of a Responsible Representative of each
Guarantor or of the Borrower certifying that, except as permitted by this
Agreement, there are no past due bills for improvements or services to the
Mortgaged Properties of the Borrower and its Subsidiaries that could give rise
to mechanic’s or materialman’s liens or any similar Lien except to the extent
such bills are being contested in good faith and for which adequate reserves
have been made;

5.1.12

receipt by the Administrative Agent of reimbursement from the Borrower for 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;

5.1.13

receipt by the Administrative Agent of copies of the Acquisition Agreements in
form and substance reasonably satisfactory to the Administrative Agent, which
Acquisition Agreements shall be certified by a Responsible Representative of
Borrower as being complete and correct, and in full force and effect..  The
Acquisitions shall have been, or substantially simultaneously with the making of
the Loans on the Effective Date shall be, consummated as contemplated by and
pursuant to the Acquisition Agreements and applicable law (without any amendment
to or waiver of any material terms or conditions of the Acquisition Agreements
not acceptable to the Administrative Agent), and evidence therefor has been
provided to the Administrative Agent in form and substance reasonably
satisfactory to the Administrative Agent;

5.1.14

all Governmental Approvals necessary or advisable in connection with the
Transactions, including, without limitation, the Acquisitions, shall have been
obtained, and all applicable waiting periods and appeal periods shall have
expired, in each case without the imposition of any conditions that have not
been satisfied.  There shall be no actual government or judicial action
restraining, preventing or imposing conditions on the Transactions, including,
without limitation, the Acquisitions;

5.1.15

receipt by the Administrative Agent of the Intercreditor Agreement, duly
executed and delivered by the appropriate Persons, in form and substance
satisfactory to the Administrative Agent, in its sole discretion;

5.1.16

receipt by the Administrative Agent of copies of all loan agreements,
instruments, pledge agreements, mortgages, warrants, security documents,
guarantees and other documents, instruments and agreements evidencing, securing
or guaranteeing the Revolving Credit Facility or otherwise material thereto,
certified by a Responsible Officer of Borrower as complete and correct.  The
Revolving Credit Facility shall have been, or substantially simultaneously with
the Loans hereunder on the Effective Date shall be, issued by the Borrower
(without any amendment to or waiver of any material terms or conditions of the
Revolving Credit Facility not acceptable to the Administrative Agent and the
Required Lenders), and evidence therefor has been provided to the Administrative
Agent in form and substance reasonably satisfactory to the Administrative Agent;

5.1.17

receipt by the Administrative Agent of a sources and uses chart and funds flow
memorandum with respect to the application of the proceeds of the Loans;

- 29 -

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

5.1.18

receipt by the Administrative Agent of a Financial Forecast for calendar years
2008 and 2009;

5.1.19

satisfactory completion by the Administrative Agent of its business, financial,
legal, title, engineering and environmental due diligence regarding the Borrower
and its Subsidiaries and their assets;

5.1.20

receipt by the Administrative Agent of undated letters from each Loan Party in
form and substance satisfactory to the Administrative Agent, to purchasers of
production and disbursers of the proceeds of production from or attributable to
the Mortgaged Properties, with the addressees left blank, authorizing and
directing the addressees to make future payments attributable to production from
the Mortgaged Properties directly to a deposit account in accordance with the
provisions of Section 4.1.5;

5.1.21

receipt by the Administrative Agent of (a) a report setting forth all accounts
receivable and accounts payable of the Loan Parties and their Subsidiaries as of
May 31, 2008 and (b) a report setting forth all accounts payable of the Loan
Parties and their Subsidiaries as of June 30, 2008, in each case, showing the
age of such accounts and such other information as the Administrative Agent may
reasonably request;

5.1.22

receipt by the Administrative Agent of that certain Subordination Agreement,
dated as of the Effective Date, duly executed and delivered by Thomas F. Cooke
and the Borrower, in form and substance satisfactory to the Administrative
Agent, in its sole discretion;

5.1.23

receipt by the Administrative Agent of copies of each of the Subordinated Notes
duly executed and delivered by the Borrower and acknowledged and agreed to by
Thomas F. Cooke and Andrew C. Clifford, as applicable, in form and substance
satisfactory to the Administrative Agent, in its sole discretion;

5.1.24

receipt by the Administrative Agent of evidence of the termination of all
existing Debt other than Permitted Debt, including, without limitation, the
existing line of credit with Capital One;

5.1.25

receipt by the Administrative Agent of a copy of any existing promissory notes
(other than the Subordinated Notes) issued by any Loan Party to Thomas F. Cooke
marked cancelled or paid in full;

5.1.26

receipt by the Administrative Agent of any instruments, documents or additional
information as reasonably requested by the Administrative Agent;

5.1.27

immediately before such requested Credit Extension, no Default shall have
occurred and be continuing and that the making of any such Credit Extension will
not cause a Default, including, for clarification, the fact that the making of
such Credit Extension shall not cause, nor with the passage of time be expected
to cause, a breach of the financial covenants included in Section 7.15 as of the
time of such Credit Extension;

5.1.28

the representations and warranties of the Borrower and its Subsidiaries
contained in this Agreement and the other Loan Documents shall be true on and as
of the Effective Date (except any representations made as of a specified date in
which case they shall be true of such specified date); and

5.1.29

receipt by the Administrative Agent of any instruments or documents reasonably
requested by the Administrative Agent, in addition to those described in this
Section 5.1 including lien waivers, certificates, consents and other approvals
required from third parties, copies of all insurance policies required under
this Agreement, together with certificates showing that the Administrative
Agent, on behalf of itself and the Lenders, is a loss payee and additional
insured thereunder, title opinions or other legal opinions.

- 30 -

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

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES

Each Loan Party hereby represents and warrants to the Administrative Agent, any
other Agent and each Lender as follows:

6.1

Existence and Power.  Each Loan Party and each of its respective Subsidiaries:

6.1.1

is a Person, duly organized, validly existing and in good standing under the
laws of the state of its organization;

6.1.2

has all organizational powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and to undertake the Transactions;

6.1.3

is duly qualified to transact business as a foreign entity in each jurisdiction
where the nature of its business requires the same; and

6.1.4

owns all of its assets reflected in its financial statements most recently
delivered to the Lenders, except for assets disposed of since the date thereof
in accordance with this Agreement.

6.2

Corporate and Governmental Authorization; Contravention.  The Transactions and
the execution, delivery and performance by each Loan Party and each of its
Subsidiaries of this Agreement and the other Loan Documents are within such Loan
Party’s or such Subsidiary’s organizational power, have been duly authorized by
all necessary action, require no action by or in respect of, or filing with, any
Governmental Authority (except that the perfection of Liens created by certain
of the Security Documents may require the filing of financing statements,
mortgages or similar instruments in the appropriate recordation offices), and do
not contravene, or constitute a default under, any material provision of
applicable law or regulation (including, without limitation, the Margin
Regulations) or any provision of any agreement creating or governing such Loan
Party or such Subsidiary or any agreement, judgment, injunction, order, decree
or other instrument binding upon such Loan Party or such Subsidiary or result in
the creation or imposition of any Lien on any Property of such Loan Party or
such Subsidiary, except Liens securing the Obligations.

6.3

Binding Effect.  This Agreement and each other Loan Document to which it is a
party, including, without limitation, any and all Security Documents when
executed and delivered in accordance with this Agreement, is a valid and binding
agreement of each Loan Party party thereto, enforceable against such Loan Party,
in accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.

6.4

Subsidiaries.  Schedule 6.4 sets forth the name, the identity or corporate
structure and the ownership interest of each direct or indirect Subsidiary of
the Borrower as of the Effective Date.  As of the Effective Date, no Loan Party
has any Subsidiaries other than the Subsidiaries described on Schedule 6.4.

6.5

Disclosure.  Taken as a whole, the documents, certificates and statements
delivered to the Administrative Agent by or on behalf of the any Loan Party or
any of their respective Subsidiaries in connection with the transactions
contemplated hereby do not contain any untrue statement of a material fact as of
the date of such delivery.  All information heretofore furnished by or on behalf
of any Loan Party or any of their respective Subsidiaries to the Administrative
Agent or any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by or on behalf of any Loan Party or any of their respective Subsidiaries to the
Administrative Agent or any Lender will be, as of the date of delivery thereof,
true and accurate in every material respect or based on reasonable estimates on
the date as of which such information is stated or certified.  The Borrower has
disclosed to the Administrative Agent and each Lender in writing any and all
facts known to the Borrower’s management (except facts of general public
knowledge) which

- 31 -

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

materially and adversely affect or may affect (to the extent the Borrower can
now reasonably foresee) the business, operations, prospects or condition,
financial or otherwise, of the Loan Parties and their respective Subsidiaries or
the ability of the Borrower and its Subsidiaries to perform their obligations
under this Agreement and the other Loan Documents.

6.6

Financial Information.

6.6.1

The financial information of the Borrower and its Subsidiaries delivered to the
Administrative Agent and each Lender in connection with the request for this
credit facility fairly present in all material respects, in conformity with
GAAP, the financial position of the Borrower and its Subsidiaries, provided that
certain information and note disclosures normally included with annual financial
statements may be condensed or omitted provided that the disclosures made are
adequate to make the information presented not misleading and, provided, further
that, with respect to projected financial information, the Borrower represents
only that such information was prepared in good faith based on assumptions
believed to be reasonable at the time.

6.6.2

The Borrower has heretofore furnished to the Lenders audited statements of
revenues and direct operating expenses of HOG, of THG and of the Borrower, LOBO
Operating and LOBO Resources as of and for the fiscal years' ended December 31,
2007 and December 31, 2006.  Such statements of revenues and direct operating
expenses present fairly, in all material respects, the revenues and direct
operating expenses for HOG, for THG and for the Borrower, LOBO Operating and
LOBO Resources.

6.6.3

Except as disclosed in writing by the Borrower to the Administrative Agent prior
to the execution and delivery of this Agreement, since December 31, 2007 there
has been no Material Adverse Effect with respect to the Borrower, any Guarantor,
the Borrower and its Subsidiaries, or the Target Assets.

6.7

Litigation.  Except as set forth on Schedule 6.7 hereto, there is no action,
suit or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting any Loan Party or any of their respective
Subsidiaries before any Governmental Authority or arbitrator which could
reasonably be expected to result in a material liability or which reasonably
could in any material manner draw into question the validity of this Agreement,
any other Loan Documents or the Transactions.

6.8

ERISA Plans.  No Loan Party nor any ERISA Affiliate of any Loan Party currently
sponsors, maintains or contributes to or has at any time sponsored, maintained
or contributed to any Plan or any Multiemployer Plan.

6.9

Taxes and Filing of Tax Returns.

6.9.1

Each Loan Party and its respective Subsidiaries have filed or properly extended
all returns required to have been filed or extended with respect to Taxes and,
except as described on Schedule 6.18, has paid all Taxes shown to be due and
payable by it on such returns, including interest and penalties, and all other
Taxes which are payable by it, to the extent the same have become due and
payable (unless, with respect to such other Taxes, the criteria set forth in
Section 7.5 are being met).  No Loan Party knows of any proposed assessment of
Taxes of a material amount against it or any of its Subsidiaries and all
liabilities for Taxes of the Loan Parties and their respective Subsidiaries are
adequately provided for.

6.9.2

The Borrower does not intend to treat the Loans as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4).

6.10

Title to Properties; Liens; Environmental Liability.

6.10.1

The Loan Parties and their respective Subsidiaries, including the Target Assets,
have good and defensible title to all Property evaluated in the most recent
Reserve Report, including, with respect to the Effective Date, the Initial
Reserve Report, except for Permitted Liens.  All Property of the Loan Parties
and their respective Subsidiaries, including the Target Assets, is free and
clear of all Liens other than Permitted Liens.  The interests and properties
described on Schedule 6.10 constitute substantially all of the fee, leasehold,
or other

- 32 -

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

interests in or under mineral estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States or
offshore from any State of the United States, including, without limitation,
overriding royalty and royalty interests, leasehold estate interests, net
profits interests, production payment interests, and mineral fee interests,
owned by the Loan Parties and their respective Subsidiaries as of the date of
this Agreement.  Upon the recordation of the Security Documents in the
appropriate recordation offices, the Liens covering the Collateral will be
valid, enforceable, first and prior, perfected Liens in favor of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders, subject only to Permitted Liens.  Except as set forth in Schedule 6.10,
after giving full effect to the Permitted Liens, the Loan Parties and their
respective Subsidiaries own the net interests in production attributable to the
Oil and Gas Properties reflected in the most recently delivered Reserve Report
and the ownership of such Properties shall not obligate any Loan Party or any of
their respective 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 without a corresponding (or greater) increase in its
net revenue interest.  All information contained in the most recently delivered
Reserve Report is true and correct in all material respects as of the date
thereof.

6.10.2

No Loan Party nor any of their respective Subsidiaries has (a) received notice
or otherwise learned of any Environmental Liability which could individually or
in the aggregate reasonably be expected to have a Material Adverse Effect
arising in connection with (i) any non-compliance with or violation of the
requirements of any Environmental Law or (ii) the release or threatened release
of any Hazardous Substance or constituent, or other substance into the
environment in violation of Environmental Law, or (b) received written notice or
otherwise learned of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release or threatened release of any
Hazardous Substance or constituent into the environment for which any Loan Party
or any of their respective Subsidiaries is or may be liable which could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.

6.10.3

Except in accordance with applicable Requirements of Law or the terms of a valid
permit, license, certificate, or approval of the relevant Governmental
Authority, no Release of Hazardous Substances by any Loan Party or any of their
respective Subsidiaries from, affecting, or related to any Property of any Loan
Party or any of their respective Subsidiaries or adjacent to any Property of any
Loan Party or any of their respective Subsidiaries has occurred which could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.

6.10.4

The rights, Mortgaged Properties and other assets currently owned, leased or
licensed by the Loan Parties and any of their respective Subsidiaries,
including, without limitation, all easements and rights of way, include all
rights, Oil and Gas Properties and Properties necessary to permit the Loan
Parties and any of their respective Subsidiaries to conduct their business in
all material respects in the same manner as their business has been conducted
prior to the Effective Date.

6.11

Business; Compliance.  Each Loan Party and each of its respective Subsidiaries
has performed and abided by all obligations required to be performed by it under
any license, permit, order, authorization, grant, contract, agreement, or
regulation to which it is a party or by which it or any of its Property is
bound, in each case, in all material respects.

6.12

Licenses, Permits, Etc.  Each Loan Party and each of its respective Subsidiaries
possesses all material valid franchises, certificates of convenience and
necessity, operating rights, licenses, permits, consents, authorizations,
exemptions and orders of Governmental Authorities as are necessary to carry on
its business as now being conducted, to own its Properties and to consummate the
Transactions.

6.13

Compliance with Law.  The business and operations of each Loan Party and each of
its respective Subsidiaries have been and are being conducted in accordance in
all material respects with all applicable laws, rules and regulations of all
Governmental Authorities.

6.14

Investment Company Act.  No Loan Party nor any of its respective Subsidiaries is
an “investment company,” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended.

- 33 -

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

6.15

Refunds; Certain Contracts.

6.15.1

No orders of, proceedings pending before, or other requirements of, the Federal
Energy Regulatory Commission or any other Governmental Authority exist which
could result in any Loan Party or any of its respective Subsidiaries being
required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons constituting part of the Collateral.

6.15.2

No Loan Party nor any of its respective Subsidiaries (a) is obligated in any
material respect by virtue of any prepayment made under any contract containing
a “take-or-pay” or “prepayment” provision or under any similar agreement to
deliver Hydrocarbons produced from or allocated to any of the Collateral at some
future date without receiving full payment therefor within 90 days of delivery,
and (b) has produced Natural Gas, in any material amount, subject to, and no
Loan Party nor any of the Collateral is subject to, balancing rights of
underproduced third parties except as disclosed from time to time in connection
with a Reserve Report and except for current balancing obligations as of the
date of the most recent Reserve Report.

6.16

Deposit Accounts; Securities Accounts.  Except as set forth on Schedule 6.16 or
disclosed from time to time to the Administrative Agent, none of the Loan
Parties nor any of their respective Subsidiaries maintains any Deposit Accounts
or Securities Accounts or has any rights, including signature rights, with
respect to any other Deposit Accounts or Securities Accounts.  No Person other
than an officer of a Loan Party shall be permitted to be a signatory on any
Deposit Account or Securities Account; provided, that THG and HOG shall be
permitted to allow POGM to share joint signatory authority on any POGM Deposit
Account for so long as such POGM Deposit Account is subject to a Deposit Account
Control Agreement.

6.17

No Default.  No Default has occurred which is continuing, and the receipt by the
Borrower of the Loans and the use of the proceeds thereof will not cause a
Default to exist.

6.18

Mortgaged Property.  With respect to each Mortgage, each Loan Party and each of
their respective Subsidiaries, as applicable, is the lawful owner of the
Mortgaged Property described therein and has good right and authority to grant,
bargain, sell, transfer, assign and mortgage the same; with respect to each
Mortgaged Property described in Exhibit A to each Mortgage, its interests in
each such Mortgaged Property is no less than that Net Revenue Interest and no
greater than the Working Interest set forth in Exhibit A to such Mortgage for
such Mortgaged Property; all oil, gas and/or mineral lease and leasehold
estates, gas purchase and sales contracts, pipeline easements and rights-of-way,
processing contracts, franchises, licenses and other agreements comprising or
relating to such Mortgaged Property or any portion thereof are valid and
subsisting and are in full force and effect and, except as described on
Schedule 6.18, no default now exists under such estates, contracts, easements,
rights-of-way, franchises, licenses or other agreements and none of Borrower,
any other Loan Party or their respective Subsidiaries has (a) received any
notice of default or claimed default thereunder and (b) any knowledge of any
event or circumstance which with notice or passage of time or both could
constitute a default thereunder; such leases are subject to no overriding
royalties or other burdens or charges, except as reflected herein or in the
Exhibit A to such Mortgage and ,except as described on Schedule 6.18, all
material rents, royalties and other payments due and payable by any Loan Party
or any of their respective Subsidiaries, as applicable, under such Mortgaged
Property have been properly and timely paid and all ad valorem, property, oil
and gas production, excise and severance taxes payable by any Loan Party or any
of their respective Subsidiaries, as applicable, have been duly paid; such
Mortgaged Property is free and clear from all Liens except the Permitted Liens,
and except as shown in Exhibit A for such Mortgage; all producing wells located
on such Mortgaged Property or properties unitized therewith have been legally
drilled in all material respects and are not deviated in any material respect
from the vertical more than the maximum permitted by applicable laws, rules and
regulations, and such wells are in fact bottomed under and are producing from
lands and, if applicable, depths described in said Exhibit A or lands unitized
therewith.

6.19

Acquisition Agreements.  As of the Effective Date, each Acquisition Agreement
has been duly executed and delivered by the Borrower and is in full force and
effect.  To the Borrower’s knowledge the sellers party to each Acquisition
Agreement have not defaulted with respect to, and there has not occurred any
event which with the giving of notice of lapse of time would constitute a
default by the sellers thereunder with respect to, their representations,
warranties or covenants in the Acquisition Agreements.  There is no default by
the Borrower with

- 34 -

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

respect to, nor has there occurred any event which with the giving of notice of
lapse of time would constitute a default by the Borrower with respect to, its
representations, warranties or covenants in the Acquisition Agreements.

6.20

Call on Production.  There are no calls on production affecting the Leases,
Wells, Units or other interests included within the Oil and Gas Properties of
the Loan Parties and their respective Subsidiaries.

6.21

Payment of Royalties.  Schedule 3.10 attached to the HOG Acquisition Agreement
and Schedule 3.10 attached to the THG Acquisition Agreement each sets forth an
accurate and complete list of all parties with an interest in production
associated with the Oil and Gas Properties of HOG and THG, respectively,
including, without limitation, all overriding royalty interest owners.  Except
for those royalties as set forth on Schedule 6.18, all royalties have been, and
are being, paid timely, unless such royalties are being disputed in good faith
by the Loan Parties and their respective Subsidiaries and adequate reserves have
been established therefor in accordance with GAAP.

6.22

Wells.  To the best of the knowledge of the Loan Parties and their respective
Subsidiaries, all Wells on the Oil and Gas Properties of the Loan Parties and
their respective Subsidiaries have been drilled and completed within the limits
permitted by all applicable Leases, contracts, pooling or unit agreements and by
legal requirements.  To the best of the knowledge of the Loan Parties and their
respective Subsidiaries, no Well existing prior to the Closing on the Oil and
Gas Properties of the Loan Parties and their respective Subsidiaries is, or
after the Closing will be, subject to penalties on allowables because of any
overproduction or any other violation of legal requirements.  Except as set
forth on Schedule 6.22, there are no Wells, platforms or other Equipment located
on the Oil and Gas Properties of the Loan Parties and their respective
Subsidiaries that (a) any Loan Party or any Subsidiary is currently obligated by
any legal requirement or contract to currently plug and abandon, (b) are subject
to exceptions to a requirement to plug and abandon issued by a Governmental
Authority or (c) have been plugged and abandoned in a manner that does not
comply in all material respects with legal requirements.

6.23

Leases.  Except as identified on Schedule 6.23, all leasehold and other mineral
interests included within the Oil and Gas Properties of the Loan Parties and
their respective Subsidiaries are presently being maintained, developed and
operated  pursuant to the terms of each individual Lease, and there are no
outstanding demands for a release pending by any lessor.

6.24

Accounts Payable.  Set forth on Schedule 6.24 is a true, correct and complete
list of accounts payable of the Loan Parties and their Subsidiaries as of June
30, 2008.  Except to the extent permitted by Section 7.6.3, there is no more
than $200,000 of accounts payable of the Loan Parties and their Subsidiaries
which are unpaid in excess of 60 days beyond the invoice date therefor other
than accounts payable which are being contested in good faith and as to which
such reserve as is required by GAAP has been made and on which interest charges
are not paid or accrued by any Loan Party or any of their respective
Subsidiaries.

6.25

Liabilities.  As of the Effective Date, no Loan Party nor any of their
respective Subsidiaries owes any obligation or has any liability to Jefferies &
Co. or Sanders Morris Harris Group, or any of their respective Affiliates.

6.26

Farm-out Agreements.  Set forth on Schedule 6.26 is a true, correct and complete
list of all farm-out agreements to which any of the Loan Parties or any of their
respective Subsidiaries is a party as of the Effective Date.

ARTICLE VII

COVENANTS

So long as the Lenders are required to make Loans hereunder or any Obligations
remain outstanding, each Loan Party will duly perform and observe or cause each
of its Subsidiaries to perform and observe each and all of the covenants and
agreements hereinafter set forth:

- 35 -

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

7.1

Use of Proceeds.

7.1.1

Each Loan Party will use the proceeds of the Loans to provide funding for the
Acquisitions and to pay related fees, costs and expenses, to repay certain
existing indebtedness of HOG and THG, and to provide for its working capital and
general corporate purposes including drilling, completing and equipping wells
and paying related operating expenses, paying transaction expenses and acquiring
additional acreage not currently owned within the limits defined in
Section 7.8.2.

7.1.2

No Loan Party will, directly or indirectly, use any of the proceeds of the Loans
for the purpose of purchasing or carrying any “margin stock” within the meaning
of the Margin Regulations (12 C. F. R. 221, as amended).  The Loans are not
secured, directly or indirectly, in whole or in part, by collateral that
includes any “margin stock” within the meaning of the Margin Regulations.  No
Loan Party will, nor will it permit any of its Subsidiaries, to engage
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any “margin stock” within the
meaning of such Margin Regulations.

7.2

Financial Statements; Reserve Reports; Compliance Certificates; Certain Notice;
Additional Information.  The Borrower will furnish to the Administrative Agent:

7.2.1

(a)

as soon as available and in any event within one hundred five (105) days after
the end of each fiscal year of the Borrower, copies of the consolidated and
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries
as of the end of such fiscal year, and copies of the related statements of
operations and comprehensive income, changes in stockholders’ capital and cash
flow for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP; which consolidated financial statements shall be audited
by Malone & Bailey or other firm of independent certified public accountants
selected by the Borrower and reasonably acceptable to the Administrative Agent
and accompanied by the unqualified opinion of such accountants.

(b)

As soon as available and in any event within fifty (50) days after the last day
of each fiscal quarter of the Borrower, a copy of (a) the unaudited consolidated
and consolidating balance sheets of the Borrower and its Consolidated
Subsidiaries as at the close of such quarter and (b) the related statements of
operations and comprehensive income, changes in stockholders’ capital and cash
flows for the quarter just ended and for that portion of the year ending on such
last day, all in reasonable detail and prepared on a basis consistent with the
financial statements previously delivered by the Borrower under this
Section 7.2.1.

(c)

simultaneously with the delivery of each set of financial statements pursuant to
the preceding clauses of this Section, a Compliance Certificate of the Borrower
and an unaudited statement of contingent liabilities of the Borrower and its
Consolidated Subsidiaries.

(d)

within thirty (30) days after each filing thereof by the Borrower and each of
its Consolidated Subsidiaries with any Governmental Authority, complete copies
of the federal and state income tax returns so filed.

(e)

simultaneously with the delivery of audited financial statements pursuant to
clause (a) of this Section 7.2.1, a Financial Forecast.

(f)

(i) on or before the date that is 30 days before the end of each fiscal year of
the Borrower, a draft Budget for the next succeeding fiscal year and (ii) on or
before the date that is the last day of such fiscal year of the Borrower, a
final Budget for such next succeeding fiscal year as mutually agreed by the
Borrower and the Administrative Agent.

(g)

within thirty (30) days after the end of each month, a monthly management report
and a comparison of the Budget and actual expenditures for such month and a
comparison on a cumulative basis for that portion of the year ending on the last
day of such month.

- 36 -

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

7.2.2

(a)

within thirty (30) days following the last day of each month end, production
reports and lease operating statements for the previous one or six month time
period, as applicable, as of such last day in form and substance satisfactory to
the Administrative Agent in its reasonable judgment, prepared by the Borrower
containing data concerning production volumes, revenues and lease operating
expenses for the Oil and Gas Properties of the Loan Parties and their
Subsidiaries and such other information with respect thereto as the
Administrative Agent may reasonably request.

(b)

within fifteen (15) days following each request therefor by the Administrative
Agent (but no more frequently than once every month), a report setting forth all
accounts receivable and accounts payable of the Loan Parties and their
respective Subsidiaries as of the date specified by the Administrative Agent,
such report to show the age of such accounts and such other information as the
Administrative Agent shall reasonably request.

(c)

(i)

promptly after January 1 of each calendar year and in any event prior to April 1
of each calendar year, the Borrower shall furnish to the Administrative Agent
and the Lenders a Reserve Report in form and substance satisfactory to the
Administrative Agent, prepared by an Approved Engineer, which Reserve Report
shall be dated as of January 1 of such calendar year, together with additional
data concerning pricing, hedging, quantities and purchasers of production, and
other information and engineering and geological data as the Administrative
Agent may request.

(ii)

Within ninety (90) days after each July 1, commencing July 1, 2008, the Borrower
will make available for review by the Administrative Agent a Reserve Report in
form and substance satisfactory to the Administrative Agent prepared by the
Borrower’s petroleum engineers (or, if Borrower elects, an Approved Engineer),
which report shall be dated as of July 1 of such calendar year, together with
additional data concerning pricing, hedging, quantities and purchasers of
production, and other information and engineering and geological data as the
Administrative Agent may request.  If the semi-annual Reserve Report pursuant to
this Section 7.2.2(c) is not prepared by an Approved Engineer, the assumptions
and methodology use for, among other things, classifying the reserves as Proved
Developed Producing; Proved Developed Non-producing and Proved Undeveloped shall
be consistent with the assumptions used by the Approved Engineer in its most
recent report.  

(iii)

In addition to the foregoing scheduled annual and semi-annual deliveries of the
Reserve Report, in the event the Revolving Credit Lenders shall elect to make a
discretionary redetermination of the Borrowing Base (as defined in the Revolving
Credit Agreement) the Borrower shall as quickly as practical, and in any event
contemporaneously with delivery thereof to the Revolving Credit Agent, deliver
to the Administrative Agent a copy of the Reserve Report prepared in connection
with such redetermination.  

(iv)

In addition to the foregoing, the Borrower will furnish to the Administrative
Agent copies of any other Reserve Reports delivered in connection with the
Revolving Credit Agreement concurrently with delivery thereof to the Revolving
Credit Agent or the lenders thereunder.

(d)

concurrently with the delivery of financial statements under Section 7.2.1(b), a
report setting forth the Leases with expiration dates within 90 days of the end
of such fiscal quarter.

(e)

simultaneously with the delivery of any reports under above clauses of
Section 7.2.2, an Officer’s Certificate from the Borrower certifying that such
reports are true, accurate and complete in all material respects for the periods
covered in such report.  In addition, with the delivery of the Reserve Reports
pursuant to Section 7.2.2(c), the Officer’s Certificate shall certify that with
respect to (i) the Oil and Gas Properties evaluated in such Reserve Report (in
this Section, collectively called the “Covered Properties”), except as set forth

- 37 -

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

on an exhibit to the certificate, on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to the Covered Properties (other
than those permitted by the Security Documents) that would require any Loan
Party or any Subsidiary to deliver hydrocarbons produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor, (ii) none of the Covered Properties has been sold since the date of
such Reserve Report except as set forth on an exhibit to the certificate, which
certificate shall list all of such properties sold and in such detail as
reasonably required by the Administrative Agent, (iii) set forth on a schedule
attached to such Officer’s Certificate is the present discounted value of all
Covered Properties (delineated by classification: Proved Developed Producing
Reserves, Proved Developed Non Producing Reserves, Proved Undeveloped Reserves)
that are part of the Mortgaged Properties, and (iv) that Borrower is in
compliance with Section 0.

(f)

no later than the thirtieth (30th) day after the renewal or purchase of the
policies reflected thereon, a certificate of insurance coverage from each
insurer with respect to the insurance required by Section 7.4, in form and
substance satisfactory to the Administrative Agent, and, if requested by the
Administrative Agent or any Lender, all copies of the applicable policies.

7.2.3

(a)

within five (5) days after any Responsible Representative of the Borrower
becomes aware of the occurrence of any condition or event which constitutes a
Default, an Officer’s Certificate of the Borrower specifying the nature of such
condition or event, the period of existence thereof, what action the Borrower
and its Subsidiaries has taken or is taking and proposes to take with respect
thereto and the date, if any, on which it is estimated the same will be
remedied.

(b)

if and when any Loan Party (i) gives or is required to give notice to the PBGC
of any “reportable event” (as defined in Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
which liability could reasonably be expected to result in a liability in excess
of $250,000 or a Material Adverse Effect, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice.

(c)

within ten (10) days following a Responsible Representative learning that
Borrower or one of its Subsidiaries has received notice or otherwise learned of
any claim, demand, action, event, condition, report or investigation indicating
any potential or actual liability arising in connection with (i) the
non-compliance with or violation of the requirements of any Environmental Law,
(ii) the release by any Loan Party or any of its respective Subsidiaries or from
any Property of any Loan Party or any of its respective Subsidiaries or
threatened release of any Hazardous Substance into the environment, or (iii) the
existence of any Environmental Lien on any Properties of any Loan Party or any
of its respective Subsidiaries, notice thereof.

(d)

within ten (10) days of a Responsible Representative learning of any of the
following, notice of (i) the filing or commencement of (in excess of $250,000),
any action, suit, investigation, inquiry, arbitration or proceeding by or before
any arbitrator or Governmental Authority against or affecting any Loan Party,
any Subsidiary thereof or any of their Properties; (ii) any material adverse
development in any such action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lenders); or (iii) any demand or
lawsuit (in excess of $250,000 or which could reasonably be expected to have a
Material Adverse Effect) by any landowner or other third party threatened in
writing against any Loan Party, any Subsidiary thereof or any of their
Properties in connection with any Environmental Laws.

(e)

within five (5) days after the occurrence thereof, notice of any Change of
Control Event.

(f)

prompt written notice (and in any event within thirty (30) days prior thereto)
of any change (i) in any Loan Party’s corporate name or in the ownership of any
Mortgaged Property, (ii) in the location of any Loan Party’s chief executive
office, (iii) in any Loan Party’s identity or corporate structure, (iv) in any
Loan Party’s jurisdiction of organization or such Person’s organizational
identification number in such jurisdiction of organization, and (v) in any Loan
Party’s federal taxpayer identification number;

- 38 -

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

(g)

concurrently with any delivery of financial statements under Sections 7.2.1(a)
and 0, a certificate of an Authorized Officer of the Borrower, in form and
substance satisfactory to the Administrative Agent, setting forth as of the last
Business Day of such fiscal year or fiscal quarter, a true and complete list of
all Hedging Agreements (including, without limitation, trade confirmations) of
each Loan Party and each Subsidiary, 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 not listed on Schedule 1.1, any margin required or supplied
under any credit support document, and the counterparty to each such agreement
and (b) within five (5) Business Days after any execution of any new Hedging
Agreements or any assignment, termination or unwinding of any existing Hedging
Agreements, notice thereof to the Administrative Agent, which notice shall be in
form and substance and with details reasonably acceptable to the Administrative
Agent;

(h)

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 any Loan Party or any Subsidiary; and

(i)

concurrently with delivery to the Revolving Credit Agent, copies of any
certificate, instrument, agreement or other documents delivered to Revolving
Credit Agent pursuant to the terms of, or in connection with, the Revolving
Credit Facility.

7.2.4

with reasonable promptness, such other information relating directly or
indirectly to the financial condition, business or Properties of any Loan Party
or any of their respective Subsidiaries as from time to time may reasonably be
requested by the Administrative Agent.

7.3

Inspection of Properties and Books.  Each Loan Party and each Subsidiary will
keep accurate books and records in accordance with GAAP in which full, true and
correct entries shall be promptly made, permit any officer, employee or agent of
the Administrative Agent to visit and inspect any of its Properties, to examine
its books of account (and to make copies thereof and take extracts therefrom (a)
at the expense of the Borrower for the first two such visits in any calendar
year and thereafter, so long as no Default has occurred and is continuing at the
expense of the Administrative Agent or (b) at the expense of the Borrower, if a
Default has occurred and is continuing on the date of such visit, inspection or
examination) and to discuss its affairs, finances and accounts (including
transactions, agreements and other relations with any shareholders) with, and to
be advised as to the same by, its officers and independent public accountants,
all upon reasonable notice and at such reasonable times and intervals as the
Administrative Agent may desire.

7.4

Maintenance of Security; Insurance; Operating Accounts; Transfer Orders.

7.4.1

(a) Each Loan Party shall execute and deliver, or cause the appropriate Person
to execute and deliver, to the Administrative Agent for the benefit of the
Administrative Agent and the Lenders all Mortgages, Pledge Agreements, Security
Agreements, and Deposit Account Control Agreements and such other documents and
instruments (including division and transfer orders), and supplements and
amendments thereto, and take such other actions as the Administrative Agent
reasonably deems necessary or desirable in order to (i) maintain as valid,
enforceable, first-priority, perfected Liens (subject only to the Permitted
Liens), all Liens granted to secure the Obligations or (ii) monitor or control
the proceeds therefrom.  Each Loan Party authorizes the Administrative Agent to
complete and file, from time to time, financing statements naming any Loan Party
or any of their respective Subsidiaries as debtor to perfect Liens granted by
the Loan Parties or any of their respective Subsidiaries to the Administrative
Agent.  Each Loan Party shall at all times have the proceeds of production from
the Mortgaged Properties paid into one of the accounts set forth on Schedule
6.16 or other account approved by the Administrative Agent for which a Deposit
Account Control Agreement has been executed and delivered to the Administrative
Agent.

(b)

Each Loan Party and each of their respective Subsidiaries shall maintain, or
cause to be in effect at all times, first and prior Liens, subject only to
Permitted Liens, in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders by instruments properly recorded in the
applicable jurisdictions covering no less than 90% of the Total Proved PV10
Value of the Oil and Gas Properties of the Loan Parties and their respective
Subsidiaries included in the most recent Reserve Report,

- 39 -

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

and all related equipment, contracts, accounts, licenses and other property,
both real and personal whether now owned or hereafter acquired.  The Borrower
shall use the values in the Reserve Report to determine whether it is in
compliance with this covenant.

(c)

Each Loan Party and each of their respective Subsidiaries will at all times
maintain or cause to be maintained with financially sound and reputable
insurance companies insurance covering such risks as are customarily carried by
businesses similarly situated, including, without limitation, risks of loss or
damage by fire and against other hazards customarily insured against, but in no
event shall maintain insurance coverage which is materially less beneficial to
such Loan Party or such Subsidiary than the insurance described on Schedule 7.4
hereto.  The Administrative Agent, on behalf of itself and the Lenders, will be
named as loss payee and additional insured, as appropriate, with respect to such
insurance.  Subject to the terms of the Intercreditor Agreement, all proceeds of
such insurance shall be paid to the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, to be retained by the Administrative Agent
at its option, for application to the payment of such portion of the Obligations
as the Administrative Agent may determine in its reasonable discretion or shall
be applied to repair, restore or replace any such insurable loss or damage,
provided that, so long as no Event of Default shall have occurred and be
continuing, at the request of Borrower, such proceeds shall be disbursed to
Borrower upon such terms and conditions as the Administrative Agent may
reasonably deem appropriate for its protection to pay the cost of repairing,
replacing or restoring Collateral or purchasing replacement Collateral;
provided, further, that the proceeds of any control of well insurance or similar
insurance shall be used to pay for the costs remediating the problem insured
against.  Borrower will furnish to the Administrative Agent, upon request of the
Administrative Agent, information in reasonable detail as to the insurance so
maintained.

7.4.2

Each Loan Party shall and shall cause its respective Subsidiaries, upon request
of the Administrative Agent, to execute such transfer orders, letters-in-lieu of
transfer orders or division orders as the Administrative Agent reasonably may
from time to time request in respect of the Collateral and to deliver such
documents to the purchaser of production from the Mortgaged Properties.

7.4.3

Each Loan Party shall give the Administrative Agent at least thirty (30) days
prior written notice if a Person not listed on Schedule 1.3 intends to become a
Hydrocarbon Purchaser.  The notice will contain the Person’s name and address
(including contact person) and specify the Oil and Gas Properties to which the
purchases relate.

7.4.4

No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to,
open any new Deposit Account or Securities Account without first (a) giving
prior written notice to the Administrative Agent and (b) delivering to the
Administrative Agent a fully executed Deposit Account Control Agreement with
respect thereto.

7.5

Payment of Taxes and Claims.  Each Loan Party will and will cause its respective
Subsidiaries pay (a) all Taxes imposed upon it or any of its assets or with
respect to any of its franchises, business, income or profits before any
material penalty or interest accrues thereon and (b) all material claims
(including, without limitation, claims for labor, services, materials and
supplies and under any operating agreements) for sums which have become due and
payable and which have or might become a Lien (other than a Permitted Lien) on
any of its assets; provided, however, that no payment of such Taxes or claims
shall be required if (i) the amount, applicability or validity thereof is
currently being contested in good faith by appropriate action promptly initiated
and diligently conducted, (ii) the Borrower shall have set aside on its books
reserves (segregated to the extent required by GAAP) reasonably deemed by it to
be adequate with respect thereto, and (iii) if material, the Borrower has
notified the Administrative Agent of such circumstances, in detail reasonably
satisfactory to the Administrative Agent.

7.6

Payment of Debt; Additional Debt; Payment of Accounts.

7.6.1

Each Loan Party and each Subsidiary will (a) pay, renew or extend or cause to be
paid, renewed or extended the principal of, and the prepayment charge, if any,
and interest on all Material Debt heretofore or hereafter incurred or assumed by
it when and as the same shall become due and payable unless such payment is
prohibited by the Loan Documents or would cause a Default hereunder; (b)
faithfully perform, observe and discharge all unwaived covenants, conditions and
obligations imposed on it by any instrument

- 40 -

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

evidencing such Debt or by any indenture or other agreement securing such Debt
or pursuant to which such Debt is issued unless such performance, observance or
discharge would cause a Default hereunder; and (c) not permit the occurrence of
any act or omission which would constitute a material default under any such
instrument, indenture or agreement, in each case prior to the time that the
holders of such Debt (or any agent or trustee for such holders) would be
entitled to declare such Debt due and payable in full.

7.6.2

No Loan Party nor any Subsidiary will create, incur or suffer to exist any Debt,
except without duplication (a) Debt to the Lenders under this Agreement and
(b) Permitted Debt.

7.6.3

Each Loan Party and each Subsidiary shall pay all of its trade and other
accounts payable within 90 days after the invoice date therefor, unless such
payables are being contested in good faith by appropriate proceedings and as to
which such reserve as is required by GAAP has been made; provided that, except
to the extent permitted by clause (b)(i) of the definition of “Permitted Debt”,
no more than $200,000 of trade and other accounts payable shall remain unpaid
more than 60 days after the invoice date unless such payables are being
contested in good faith by appropriate proceedings and as to which such reserve
as is required by GAAP has been made; provided, further, that the accounts
payable set forth on Schedule 1.4 shall not be permitted to remain unpaid more
than 30 days after the Effective Date.

7.6.4

No Loan Party nor any Subsidiary will permit or allow the terms and provisions
of the Revolving Credit Facility to be amended without the consent of the
Administrative Agent and the Required Lenders, except as permitted under the
terms of the Intercreditor Agreement.

7.7

Negative Pledge.  No Loan Party nor any Subsidiary will create, suffer to exist
or otherwise allow any Liens to be on or otherwise to affect any of its Property
whether now owned or hereafter acquired, except Permitted Liens.

7.8

Loans and Advances to Others; Investments; Restricted Payments.

7.8.1

No Loan Party nor any of their respective Subsidiaries will make or suffer to
exist any loan, advance or extension of credit to any Person except (a) trade
and customer accounts receivable which are for goods furnished or services
rendered in the ordinary course of business and which are payable in accordance
with customary trade terms, (b) Permitted Investments, (c) advances to employees
of such Loan Party or such Subsidiary for payment of expenses in the ordinary
course of business and (d) other extensions of credit customary in the oil and
gas business, including payments as operator for operating expenses to be
reimbursed by non-operators.

7.8.2

No Loan Party nor any of their respective Subsidiaries will make any capital
contribution to or to acquire any Investment in, or to purchase or agree to
purchase any interest in or Debt of, any Person; provided that the foregoing
restriction will not prohibit (a) any transaction permitted by clauses (a) and
(b) of Section 7.8.1, (b) the purchase or acquisition of producing Oil and Gas
Properties, or (c) Investments received by any Loan Party or any of its
respective Subsidiaries in connection with workouts with, or bankruptcy,
insolvency or other similar proceedings with respect to, customers, working
interest owners or other industry partners in the ordinary course of business in
an aggregate amount not to exceed $2,000,000 at any one time outstanding.

7.8.3

No Loan Party will, directly or indirectly, make any Restricted Payment;
provided, however, that payments may be made to each of Thomas F. Cooke and
Andrew C. Clifford in accordance with the terms of the Subordinated Notes
described in clauses (a) and (b), respectively, of the definition thereof.

7.9

Consolidation, Merger, Maintenance, Change of Control; Disposition of Property;
Restrictive Agreements; Hedging Agreements; Modification of Organizational
Documents.

7.9.1

No Loan Party nor any of their respective Subsidiaries will (a) consolidate or
merge with or into any other Person (other than the merger of any Subsidiary of
the Borrower into the Borrower

- 41 -

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

where the Borrower is the surviving Person or into a Guarantor where a Guarantor
is the surviving Person or the surviving person becomes a Guarantor), (b) sell,
lease or otherwise transfer all or substantially all of its Property to any
other Person, (c) terminate, or fail to maintain, its existence as a corporation
in its state of incorporation or (d) terminate, or fail to maintain, its good
standing and qualification to transact business in all jurisdictions where the
nature of its business requires the same.

7.9.2

No Loan Party nor any of their respective Subsidiaries will sell or otherwise
transfer, remove or destroy all or any portion of the Collateral or, any
Property having Collateral Value without the prior written consent of the
Required Lenders, which consent, with respect to Property not having Collateral
Value, shall not be unreasonably withheld, conditioned or delayed by any Lender
or the Administrative Agent, except for (a)  sales of Hydrocarbons after
severance in the ordinary course of business, provided that no contract for the
sale of Hydrocarbons shall obligate the Borrower or any of its Subsidiaries to
deliver Hydrocarbons produced from any of the Collateral at some future date
without receiving full payment therefor within 90 days of delivery, (b) the sale
or other disposition of its personal Property destroyed, worn out, damaged, or
having only salvage value or no longer used or useful in the business of the
Borrower or any Subsidiary, (c) dispositions of claims against customers,
working interests owners, other industry partners or any other Person in
connection with workouts or bankruptcy, insolvency or other similar proceedings
with respect of such Person thereto not affecting Collateral, (d) the assignment
or participation to a non-Affiliate of any working interest in Oil and Gas
Properties not constituting Collateral that have no Proved Reserves, in the
ordinary course of business, on customary terms and in arms’ length
transactions, or (e) the abandonment of Oil and Gas Properties that are not
capable of producing Hydrocarbons in paying quantities after expiration of their
primary terms.  In the event of any disposition of Property permitted under this
Section 7.9.2, the Administrative Agent is authorized on behalf of the Lenders
to release and shall promptly release any Liens in favor of the Administrative
Agent for the benefit of the Lenders or any other Persons covering such Property
upon the written request from an authorized representative of the Borrower which
specifically identifies the subject Property and certifies that such disposition
complies with the terms of this Section.

7.9.3

No Loan Party nor any of their respective Subsidiaries will be or become party
to or bound by any agreement (including, without limitation, any undertaking in
connection with the incurrence of Debt or issuance of securities) which imposes
any limitation on the disposition of the Collateral which in any way would be
contravened by the Loan Parties’ or any of their respective Subsidiaries’
performance of its obligations hereunder or under the other Loan Documents or
which contains any prohibition on pledging all or any portion of the Loan
Parties’ or any Subsidiary’s Property to the Administrative Agent for the
benefit of the Lenders.

7.9.4

(a) No Loan Party will enter into any Hedging Agreement, other than Acceptable
Commodity Hedging Agreements.  No Subsidiary (other than Guarantors) shall enter
into any Hedging Agreements.

(b)

No Loan Party will cause or permit any Commodity Hedging Agreement now existing
or hereafter entered into by such Loan Party to be amended or modified in any
material respect or terminated prior to its stated expiration date or liquidated
without the prior written consent of the Administrative Agent, which consent
will not be unreasonably withheld, or as required to remain in compliance with
clause (a) preceding.

7.9.5

The Borrower will not (a) prepay or otherwise satisfy prior to the schedule
maturity thereof in any manner any of the Subordinated Notes, (b) make any
payment in violation of any subordination terms applicable thereto or (c) amend,
restate, supplement or otherwise modify the Subordinated Notes, in each case,
without the prior written consent of the Administrative Agent.

7.9.6

The Loan Parties will promptly, and in any event within ten (10) days after the
occurrence, deliver notice to the Administrative Agent of any amendment or other
modification to the certificate of incorporation, bylaws or other organizational
documents of any Loan Party or any of their respective Subsidiaries in any
material or in any respect which could be adverse to the interests of the
Administrative Agent or the Lenders.

- 42 -

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

7.10

Primary Business; Location of Borrower’s Office; Ownership of Assets.

7.10.1

The primary business of the Loan Parties and each of their Subsidiaries shall be
and remain the oil and gas exploration, development, production, transportation
and gathering business and the operation of oil and gas properties.

7.10.2

The location of the principal place of business and executive office of (a) each
Loan Party (other than THG and HOG) shall remain at 2304 Hancock Drive, Suite 5,
Austin, Texas  78756 and (b) each of THG and HOG shall remain at 67201 Industry
Lane, Covington, Louisiana  70433, in each case, unless at least ten (10) days
prior to any change in such address such Loan Party provides the Administrative
Agent with written notice of such pending change, provided, however, that each
Loan Party’s principal place of business and executive office shall remain in
the United States of America.

7.10.3

Except as a result of sales, transfers or other dispositions permitted
hereunder, the Borrower and its Consolidated Subsidiaries will at all times own,
both beneficially and of record, all real property comprising Oil and Gas
Properties reflected in its financial statements delivered to the Administrative
Agent from time to time, subject only to Permitted Liens.

7.11

Operation of Properties and Equipment; Compliance with and Maintenance of
Contracts; Duties as Non-Operator.

7.11.1

(a) Each Loan Party and each of its respective Subsidiaries shall maintain,
develop and operate its Oil and Gas Properties in a good and workmanlike manner
and will observe and comply in all material respects with all of the terms and
provisions, express or implied, of all oil and gas leases relating to such
Properties in order to keep such leases in effect for so long as such Crude Oil
and Natural Gas Leases are capable of producing Hydrocarbons in commercial
quantities.

(b)

Except to the extent replaced by another Loan Party, Loan Party nor any of its
Subsidiaries shall resign as the named operator for each well in which it now or
hereafter owns an interest if it is the operator thereof on the date hereof or
becomes the operator thereof subsequent hereto.

(c)

Each Loan Party and each of its respective Subsidiaries shall at all times,
maintain, preserve and keep all operating equipment used or useful with respect
to the Oil and Gas Properties of the Loan Parties or the Subsidiaries in proper
repair, working order and condition, ordinary wear and tear excepted, and make
all necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such operating equipment shall at
all times be properly preserved and maintained, ordinary wear and tear excepted,
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if the Borrower shall in good faith determine
that such action is not necessary or desirable for the continued efficient and
profitable operation of the business of the Loan Parties and their respective
Subsidiaries.

7.11.2

Each Loan Party and each of its respective Subsidiaries shall comply in all
material respects with all agreements, easements, licenses, franchises, permits
and contracts (both existing and future) applicable to or relating to its Oil
and Gas Properties or the production and sale of Hydrocarbons therefrom and all
applicable proration and conservation laws of the jurisdictions in which such
Properties are located.

7.11.3

With respect to the Oil and Gas Properties referred to in this Section which are
operated by operators other than the Loan Parties or one of their respective
Subsidiaries, no Loan Party nor any of their respective Subsidiaries shall be
obligated itself to perform any undertakings contemplated by the covenants and
agreements contained in this Section which are performable only by such
operators and are beyond the control of such Loan Party or such Subsidiary, but
such Loan Party or such Subsidiary shall use reasonable efforts to cause such
operators to perform such undertakings.

- 43 -

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

7.11.4

No Loan Party nor any of their respective Subsidiaries will amend, alter or
change in any respect adverse to the interests of the Loan Parties and their
Subsidiaries, taken as a whole, or the Administrative Agent and the Lenders any
agreements relating to the operations or business arrangements of the Loan
Parties or any of their Subsidiaries, including, without limitation, any
agreements relating to the compression, gathering, sale or transportation of
Crude Oil and Natural Gas.

7.12

Transactions with Affiliates.  No Loan Party nor any of their respective
Subsidiaries will engage in any transaction with an Affiliate (other than a Loan
Party) unless such transaction is at least as favorable to such Loan Party or
such Subsidiary as could be obtained in an arm’s length transaction with an
unaffiliated third party.

7.13

Plans.  No Loan Party nor any of their respective Subsidiaries will assume or
otherwise become subject to an obligation to contribute to or maintain any Plan
or Multiemployer Plan or acquire any Person which has at any time had an
obligation to contribute to or maintain any Plan or Multiemployer Plan.

7.14

Compliance with Laws and Documents.  No Loan Party nor any of their respective
Subsidiaries will, directly or indirectly, violate in any material respect the
provisions of any laws or any of its Material Agreements or violate its
certificate of incorporation or bylaws.

7.15

Certain Financial Covenants.

7.15.1

Quarterly EBITDA to Cash Interest Expense.  The Borrower will not permit the
ratio of EBITDA to cash Interest Expense (i) to be less than 1.50 to 1.00,
determined as of the end of each calendar quarter of the Borrower ending on or
after September 30, 2008 and before March 31, 2009, and (ii) to be less than
2.75 to 1.00, determined as of the end of each calendar quarter of the Borrower
ending on or after March 31, 2009.

7.15.2

Current Ratio.  The Borrower will not permit at any time the ratio of its
Current Assets to its Current Liabilities to be less than 1.00 to 1.00.

7.15.3

Total Debt to Annualized EBITDA.  The Borrower will not permit the ratio of
Total Debt to Annualized EBITDA (i) to be greater than 3.50 to 1.0, determined
as of the end of each calendar quarter of the Borrower ending on or after
December 31, 2008 and before June 30, 2009, and (ii) to be greater than 3.0 to
1.0, determined as of the end of each calendar quarter of the Borrower ending on
or after June 30, 2009.

7.15.4

Minimum EBITDA.  The Borrower will not permit its EBITDA as of the last day of
each calendar quarter to be less than the amounts specified below for the
respective calendar quarter:

Calendar Quarter ending:

Minimum EBITDA

Sep-08

6,151,000

Dec-08

5,457,000

Mar-09

6,717,000

Jun-09

7,382,000

Sep-09

6,986,000

Dec-09

6,126,000

Mar-10

6,000,000

Jun-10

6,000,000

Sep-10

6,000,000

Dec-10

6,000,000

- 44 -

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

7.15.5

Maximum Development Program Expenditures.  The Borrower will not permit the
aggregate Development Program Expenditures of the Borrower and its Subsidiaries
on a consolidated basis in any fiscal year to be greater than the amount (such
amount, the “Development Cap”) set forth in, and will not make such Development
Program Expenditures except in accordance with, and as described in, the Budget
approved pursuant to Section 7.2.1(f)(ii); provided that the Development Cap may
be increased by an amount not to exceed the net cash proceeds received by the
Borrower and its Subsidiaries in any fiscal year (from and after the Effective
Date) in respect of any issuance by the Borrower of its common Equity Interests
after the Effective Date and not otherwise applied to pay, repay or prepay Debt
or utilized in any prior fiscal year to increase the Development Cap.

7.15.6

Total Proved PV10 Value to Net Total Debt.  The Borrower will not permit the
ratio of Total Proved PV10 Value to Total Debt (net of unrestricted cash and
cash equivalents) in each case, on a consolidated basis as of the last day of
each fiscal quarter to be less than 1.25 to 1.00.

7.15.7

Budget Variance.

(a)

The Borrower will not, and will not permit its Subsidiaries to, (i) disburse
monies for line items not itemized in the Budget, (ii) in any fiscal quarter,
disburse monies in an aggregate amount exceeding on a line item-by-line item
basis in respect of the line items described as “Operating Expenses”, “G&A” and
“Development Program Expenditures” the disbursements set forth on the Budget for
such fiscal quarter by more than ten percent (10%) (or such greater percentage
as may be agreed by the Administrative Agent, in its sole discretion) or (iii)
in any fiscal year, disburse monies in an aggregate amount exceeding on a line
item-by-line item basis in respect of the line items described as “Operating
Expenses”, “G&A” and “Development Program Expenditures” the disbursements set
forth on the Budget for such fiscal year by more than seven and one-half percent
(7.5%) (or such greater percentage as may be agreed by the Administrative Agent,
in its sole discretion).

(b)

Except for reasons of weather-related force majeure, the Borrower will not
permit actual "Production" (i) in any fiscal quarter, to be less than 90% (or
such lesser percentage as may be agreed by the Administrative Agent, in its sole
discretion) of the amount set forth on the Budget for such fiscal quarter in
respect of the line item described as "Production", or (ii) in any fiscal year,
to be less than 92.5% (or such lesser percentage as may be agreed to by the
Administrative Agent, in its sole discretion) of the amount set forth on the
Budget for such fiscal year in respect of the line item described as
"Production".

7.16

Tax Shelter.  In the event the Borrower determines to take any action
inconsistent with the representation in Section 6.9.2, it will promptly notify
the Administrative Agent thereof.  Accordingly, if the Borrower so notifies the
Administrative Agent, the Borrower acknowledges that the Administrative Agent
and the Lenders may treat the Loans as part of a transaction that is subject to
Treasury Regulation Section 301.6112-1, and the Administrative Agent and the
Lenders will maintain the lists and other records required by such Treasury
Regulation.

7.17

Additional Documents; Quantity of Documents; Title Data; Additional Information.

7.17.1

Each Loan Party promptly shall execute and deliver or cause to be executed and
delivered such other and further instruments or documents as in the reasonable
judgment of the Administrative Agent may be required to cure any defects in the
Loan Documents, to further evidence and more fully describe the Collateral, to
correct omissions in the Loan Documents or to perfect, protect or preserve any
Liens created pursuant to the Loan Documents.

7.17.2

Each Loan Party will deliver all instruments, certificates, opinions, reports
and documents required hereunder in such number of counterparts as the
Administrative Agent may reasonably request.

7.17.3

Upon the request of the Administrative Agent following either (i) the
acquisition of any Oil and Gas Properties by any Loan Party or any of their
respective Subsidiaries or (ii) the recharacterization of any Oil and Gas
Property as a “Proved Reserve,” the Borrower and/or the Guarantors shall cause
to be delivered to the Administrative Agent any additional or supplemental title
opinions, in form and

- 45 -

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

substance and from attorneys reasonably acceptable to the Administrative Agent,
or other confirmation of title acceptable to the Administrative Agent, which
when considered in connection with all title opinions or materials previously
delivered to the Administrative Agent, cover no less than 90% of the Total
Proved PV10 Value of the Oil and Gas Properties of the Loan Parties and their
respective Subsidiaries included in the most recent Reserve Report, as adjusted
for any such acquisitions, and promptly, but in any event within thirty (30)
days following notice from the Administrative Agent of any defect, material in
the opinion of the Administrative Agent, in the title of the mortgagor under any
Mortgage to any Oil and Gas Property covered thereby, clear such title defect,
and in the event any such title defects are not cured in a timely manner, pay
all related costs and fees incurred by the Administrative Agent and the Lenders
in attempting to do so.

7.17.4

Each Loan Party shall furnish to the Administrative Agent, promptly upon the
request of the Administrative Agent, such additional financial or other
information concerning the assets, liabilities, operations, and transactions of
the Borrower and its Subsidiaries as the Administrative Agent may from time to
time reasonably request.

7.18

Subsidiaries.  

7.18.1

No Loan Party nor any of their respective Subsidiaries shall form or acquire any
Subsidiaries without the prior written consent of the Administrative Agent and
the Required Lenders, other than the formation or acquisition by the Borrower of
wholly-owned Subsidiaries after compliance with Section 7.18.2.

7.18.2

Concurrently with the acquisition or formation of any subsidiary which is to be
a Subsidiary and prior to the Borrower’s advancing or contributing any amounts
to or into such Subsidiary, the Borrower shall cause to be delivered to the
Administrative Agent for the benefit of the Lenders, (a) the Assumption
Agreement executed by such Subsidiary, (b) a Pledge Agreement duly executed by
the Borrower or a Subsidiary of the Borrower, as applicable, covering the Equity
Interests of such Subsidiary, (c) stock certificates or other instruments
representing all the Equity Interest of such Subsidiary and stock powers and
instruments of transfer, endorsed in blank, with respect to such stock
certificates or other instruments, or, if any Equity Interests pledged pursuant
to such Pledge Agreement are uncertificated securities, confirmation and
evidence satisfactory to the Administrative Agent that the security interest in
such uncertificated securities has been transferred to and perfected by the
Administrative Agent in accordance with the UCC, (d) a Security Agreement duly
executed by such Subsidiary covering all personal property of such Subsidiary,
(e) all documents and instruments, including Uniform Commercial Code Financing
Statements (Form UCC-1), or reasonably requested by the Administrative Agent to
be filed, registered or recorded to create or perfect the Liens intended to be
created under each Pledge Agreement and Security Agreement, (f) UCC Searches,
all dated reasonably close to the date of the Pledge Agreement and Security
Agreement and in form and substance satisfactory to the Administrative Agent,
and evidence reasonably satisfactory to the Administrative Agent that any Liens
indicated in such UCC Searches are Permitted Liens or have been released, (g) a
Deposit Account Control Agreement duly executed by such Subsidiary of the
Borrower and the Administrative Agent regarding the Deposit Account applicable
to such Subsidiary, (h) notices of payment instructions addressed to all
purchasers of Hydrocarbons produced from the Oil and Gas Properties of such
Subsidiary, (i) letter-in-lieu of transfer order with respect to the Oil and Gas
Properties of such Subsidiary and (j) if required by the Administrative Agent,
title opinion or other title information relating to such Oil and Gas
Properties.

7.19

Mortgaged Property.  

7.19.1

Each Loan Party will observe and comply with all of the terms and provisions,
express or implied, of the Crude Oil, Natural Gas or Crude Oil and Natural Gas
(or Crude Oil, Natural Gas and mineral) leases included in or relating to the
Mortgaged Property (herein called “Subject Leases”) and assignments constituting
a part of the Mortgaged Property in order to keep the same in full force and
effect.  Each Loan Party will also, and will cause its respective Subsidiaries
to, protect all Oil and Gas Properties included in the Mortgaged Property
against drainage of Hydrocarbons thereunder by reason of production on other
properties.

7.19.2

Promptly upon receipt of any written request from the Administrative Agent, the
Loan Parties and their respective Subsidiaries will furnish and deliver,
pursuant to such request, all title materials

- 46 -

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

in the possession of such Loan Party and its respective Subsidiaries or to which
such Loan Party and its respective Subsidiaries has access, including all title
opinions and abstracts of title prepared by competent abstractors and covering
title to the real property hereby mortgaged.  Should any Loan Party or any
Subsidiary fail to furnish such title opinions and abstracts upon such request,
the Administrative Agent may proceed to obtain such title materials, and any and
all costs so incurred shall be added to and included in the indebtedness secured
hereby and shall be payable by such Loan Party and its respective Subsidiaries
upon demand, the obligation for such payment being secured by all liens and
remedies granted in any Mortgage.  Any abstracts furnished by any Loan Party or
any Subsidiary or so acquired by the Administrative Agent shall be and
constitute a part of the Mortgaged Property, as above defined.

7.19.3

The Loan Parties and their respective Subsidiaries will, if requested by the
Administrative Agent, furnish the Administrative Agent any information or data
possessed by such Loan Party and its respective Subsidiaries with respect to the
Mortgaged Property, and in the case of Crude Oil and Natural Gas Leases full
information, including independent engineering reports and seismic data and
interpretation, shall be furnished with regard to the wells drilled or reworked
or drilling or reworking operations being conducted thereon, including, without
limitation, electrical logs, core analyses, well pressure reports and copies of
any electronic data and/or files used or produced in connection with reserve
calculations; provided that the Loan Parties and their respective Subsidiaries
shall not be obligated to disclose information subject to a valid and binding
confidentiality agreement with a third party without first obtaining the consent
of such third party, and each Loan Party and its respective Subsidiaries, to the
extent requested by the Administrative Agent, will use its reasonable efforts to
obtain such consent.

7.19.4

The Loan Parties and their respective Subsidiaries shall make available to the
Administrative Agent, or its engineers, attorneys or representatives, at any
time requested, its complete files and contracts on the Mortgaged Properties and
the wells, pipelines and other property located thereon, or regarding the
operations of (or the production from) the Mortgaged Property, and in the event
the Administrative Agent should take possession of the Mortgaged Property
pursuant to a Mortgage or applicable law, or a keeper appointed pursuant to a
Mortgage or applicable law should take possession of the Mortgaged Property, the
Administrative Agent shall be entitled to possess as Collateral of all such
files and contracts including seismic data and interpretation.  Should any
Mortgage be foreclosed (howsoever such foreclosure may be affected), the
purchaser at the foreclosure sale shall be entitled to all such files as
provided pursuant to the terms of such foreclosure and such Mortgage.

7.20

Farm-Out Agreements.  Neither the Borrower nor any of its Subsidiaries will,
after the Effective Date, enter into any farm-out agreements.

7.21

Exceptions to Covenants.  No Loan Party nor any of its respective Subsidiaries
shall be permitted to take any action which is permitted by any of the covenants
contained in this Agreement if such action is in breach of any other covenant
contained in this Agreement.

7.22

Barry Ray Salsbury.  Until the second anniversary of the Effective Date, the
Borrower shall cause Barry Ray Salsbury to be employed as the President of HOG
and THG or otherwise employed by HOG and THG in a substantially similar
position, in each case, responsible for the obligations and performing in a
capacity substantially similar to that in which he participates as of the
Effective Date; provided, however, that, in the event that Mr. Salsbury shall be
terminated by the Borrower for cause or as a result of his resignation,
retirement, death or disability, the Borrower shall not be in default of this
Section 7.22 so long as within 180 days of such termination, resignation,
retirement, death or disability a replacement reasonably acceptable to the
Required Lenders shall have been made.

ARTICLE VIII

DEFAULTS; REMEDIES

8.1

Events of Default; Acceleration of Maturity.  If any one or more of the
following events (each an “Event of Default”) shall have occurred and be
continuing (whatever the reason for such Event of Default and

- 47 -

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

whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or Governmental Authority or otherwise):

8.1.1

(a) any Loan Party shall fail to pay, when due, any principal portion of any
Obligation; or

(b)

any Loan Party shall fail to pay when due, any interest on any Loan, if such
failure shall continue unremedied for a period of three (3) days; or

(c)

any Loan Party shall fail to pay when due, any fees or other amounts payable
hereunder and not covered by clauses (a) or (b) above, if such failure shall
continue unremedied for a period of ten (10) days; or

8.1.2

any Loan Party or any Subsidiary shall fail to observe or perform any covenant
or agreement contained in Sections  7.1, 7.2.3, 7.4.4, 7.6.2, 7.7, 7.8, 7.9,
7.15, or 7.17.3, or

8.1.3

any Loan Party or any Subsidiary shall fail to observe or perform any covenant
or agreement contained in this Agreement or the other Loan Documents (other than
those covered by Sections 8.1.1 or 8.1.2), for a period of thirty (30) days from
the earlier of (a) the date on which such failure shall first become known to
any Loan Party or any of its Subsidiaries and (b) written notice thereof is
given to the Borrower by the Administrative Agent; or

8.1.4

any Loan Party or any of its respective Subsidiaries shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall  fail generally to pay its debts as they
become due, or shall take any corporate or other action to authorize any of the
foregoing; or

8.1.5

an involuntary case or other proceeding shall be commenced against any Loan
Party or any of its respective Subsidiaries seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed or unstayed for a period of 60 days; or an order for
relief shall be entered against any Loan Party or any of its respective
Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; or

8.1.6

any Loan Party shall fail to observe the covenant contained in Section 7.13 and
such failure could reasonably be expected to have in a Material Adverse Effect;
or

8.1.7

(i) any Loan Party or any of its respective Subsidiaries shall default in the
payment of any of any Material Debt (other than the Loans), including, without
limitation, the Revolving Credit Facility, and such default shall continue
beyond any applicable cure period or (ii) any other event or condition occurs
which results in the acceleration of a Material Debt or which permits the holder
thereof to accelerate a Material Debt of the Borrower or any of its
Subsidiaries; or

8.1.8

one or more judgments or orders for the payment of money aggregating in excess
of $500,000 shall be rendered against any Loan Party or any of its respective
Subsidiaries which is not covered by insurance as to which the insurer has
acknowledged full coverage therefor (subject to customary deductibles) and
coverage of which such insurer is not disputing and such judgment or order (a)
shall continue unsatisfied or unstayed (unless bonded with a supersedeas bond at
least equal to such judgment or order) for a period of thirty (30) days, or
(b) is not fully paid and satisfied to the date on which any of its Property may
be lawfully sold to satisfy such judgment or order; or

- 48 -

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

8.1.9

any representation, warranty, certification or statement made or deemed to have
been made by or on behalf of any Loan Party or any other Person in this
Agreement or by any Loan Party or any other Person in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made; or

8.1.10

any material license, franchise, permit, or authorization issued to the Borrower
or any of its Subsidiaries by any Governmental Authority, the loss of which
could reasonably be expected to result in a Material Adverse Effect, is
forfeited, revoked, or not renewed; or any proceeding with respect to such
forfeiture or revocation is instituted and is not resolved or dismissed within
ninety (90) days of the date of the publication of the order instituting such
proceeding; or a default shall occur under any Material Agreement, other than
this Agreement, to which the Borrower or any of its Subsidiaries is a party or
by which any of its Property is bound which could reasonably be expected to have
a Material Adverse Effect;

8.1.11

a Change of Control Event shall occur; or

8.1.12

(a) this Agreement, any Security Document or any other Loan Document ceases to
be in full force and effect (except in accordance with its terms) or is declared
null and void or the validity or enforceability is contested or challenged by
any Loan Party, any Affiliate of any Loan Party or any of their respective
members, partners or shareholders; (b) any Loan Party denies that it has any
liability or obligation under this Agreement, any of the Security Documents or
any other Loan Document; or (c) any of the Liens and security interests granted
to the Administrative Agent  under the Security Documents cease to be valid or
perfected or cease to have the priority required hereby or under the Security
Documents;

then, and in every such event, the Administrative Agent shall if requested by
the Required Lenders, declare the outstanding principal balance of and accrued
interest on the Loans and the other Obligations to be, and the same shall
thereupon forthwith become, due and payable 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;
provided that in the case of any of the Events of Default specified in Sections
8.1.4 and 8.1.5 with respect to the Borrower or any Guarantor, without any
notice to the Borrower or any other act by the Administrative Agent or the
Lenders, the Loans and the other Obligations (together with accrued interest
thereon) shall become immediately due and payable 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 each of the Borrower and each
Guarantor.  The Administrative Agent agrees to give prompt written notice to the
Borrower of any remedial actions taken pursuant to Section 8.1.

8.2

Suits for Enforcement.  In case any one or more of the Events of Default
specified in Section 8.1 shall have occurred and be continuing, the
Administrative Agent may proceed to protect and enforce its rights and the
rights of the Lenders either by suit in equity or by action of law, or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or the other Loan Documents or in aid of the exercise of any
power granted in this Agreement or the other Loan Documents.  Upon the
occurrence and during the continuation of an Event of Default, Lender may (i)
enter the premises of the Borrower or any Guarantor at any time, and (ii) until
it completes the enforcement of its rights in the Collateral subject to its
security interest or lien under the Security Documents and the sale or other
disposition of any Property subject to those documents, take possession of those
premises without charge, rent or payment, or place custodians in control of any
of the premises, remain on and use the premises and any of Collateral for the
purpose of completing any work in progress, preparing any Collateral for
disposition or collecting any Collateral.

8.3

Remedies Cumulative.  No remedy herein conferred upon the Administrative Agent
or the Lenders is intended to be exclusive of any other remedy and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.

8.4

Remedies Not Waived.  No course of dealing and no delay in exercising any rights
under this Agreement or under the other Loan Documents shall operate as a waiver
of any rights hereunder or thereunder of the Administrative Agent or the
Lenders.

- 49 -

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

ARTICLE IX

GUARANTEE

9.1

Guarantee.  

9.1.1

The Borrower and each of the Guarantors hereby unconditionally and irrevocably
guarantees to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders and each of their respective permitted
successors, endorsees, transferees and assigns, the prompt and complete payment
by the Borrower and the Guarantors when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, provided, however, that each of
the Guarantors shall be jointly and severally liable under this Article for the
maximum amount of such liability that can be hereby incurred without rendering
this Guarantee, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount.  This is a guarantee of payment and not collection and the
liability of the Borrower and each Guarantor is primary and not secondary.

9.1.2

The guarantee contained in this Article shall remain in full force and effect at
all times when Loans are outstanding.

9.1.3

No payment made by the Borrower, any Guarantor or any other Person, or received
or collected by any Agent or any Lender from the Borrower, any Guarantor or any
other Person, by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations shall, except to the extent of such payment, be
deemed to modify, reduce, release or otherwise affect the liability of the
Borrower or such Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by the Borrower or such Guarantor in
respect of the Obligations or any payment received or collected from the
Borrower or such Guarantor in respect of the Obligations), remain liable for the
Obligations (except to the extent of such payment).

9.1.4

The Borrower and each Guarantor hereby unconditionally and irrevocably agree
that in the event any payment shall be required to be made to any Agent or any
Lender hereunder or under any other guaranty, the Borrower or such Guarantor
will contribute, to the maximum extent permitted by law, such amounts to each
other Guarantor or Borrower so as to maximize the aggregate amount paid to such
Agent or Lender under or in respect of the Loan Documents.

9.2

No Subrogation.  Notwithstanding any payment made by the Borrower or any
Guarantor under this Article, under any Loan Document or any set-off or
application of funds of the Borrower or any Guarantor by any Agent or any
Lender, the Borrower or the applicable Guarantor shall not be entitled to be
subrogated to any of the rights of any Agent or any Lender against the Borrower
or any Guarantor or any collateral security or guarantee or right of offset held
by any Agent or any Lender for the payment of the Obligations, nor shall the
Borrower or such Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower or any Guarantor in respect of payments made by
the Borrower or such Guarantor hereunder.  If any amount shall be paid to the
Borrower or such Guarantor on account of such subrogation rights, such amount
shall be held by the Borrower or such Guarantor in trust for the Agents and the
Lenders, segregated from other funds of the Borrower or such Guarantor, and
shall, forthwith upon receipt by the Borrower or such Guarantor, be turned over
to the Administrative Agent in the exact form received by the Borrower or such
Guarantor (duly indorsed by the Borrower or such Guarantor to the Administrative
Agent, if required), to be applied against the Obligations, whether matured or
unmatured), in such order as the Administrative Agent may determine but subject
in any event to the terms and provisions of this Agreement.

9.3

Amendments, etc. with respect to the Obligations.  The Borrower and each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Borrower or such Guarantor and without notice
to or further assent by the Borrower or such Guarantor, any demand for payment
of any of the Obligations made by any Agent or any Lender may be rescinded by
such Agent or such Lender and any of the Obligations continued, and the
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in

- 50 -

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

part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by any Agent or any Lender, and this Agreement and the
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Required Lenders or all
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by any Agent
or any Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent, nor any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for the guarantee contained in
this Article or any property subject thereto.

9.4

Guarantees Absolute and Unconditional.  Each of the Borrower and each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by any Agent or any Lender
upon the guarantee contained in this Article or acceptance of the guarantee
contained in this Article; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Article; and
all dealings between the Borrower and any of the Guarantors, on the one hand,
and the Agents and the Lenders, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Article.  Each of the Borrower and each Guarantor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Borrower and the Guarantors with respect to the
Obligations. Each of the Borrower and the Guarantors understands and agrees that
the guarantee contained in this Article shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of this Agreement or any other Loan Document, any of
the Obligations or any other collateral security therefor or guarantee or right
of offset with respect thereto at any time or from time to time held by any
Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Borrower or any Guarantor or any other Person against any Agent
or any Lender, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Guarantors or the Borrower), other than payment or
performance, which constitutes, or might be construed to constitute, an
equitable or legal discharge of any of the Borrower or the Guarantors for the
Obligations, or of the Borrower or the Guarantors under the guarantee contained
in this Article, in bankruptcy or in any other instance.  When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against the
Borrower or such Guarantor any Agent or any Lender may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Borrower or any Guarantor or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Agent or any
Lender to make any such demand, to pursue such other rights or remedies or to
collect any payments from the Borrower or any Guarantor or any other Person or
to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrower or any Guarantor or any
other Person or any such collateral security, guarantee or right of offset,
shall not relieve the Borrower or such Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of any Agent or any Lender
against the Borrower or such Guarantor. For the purposes hereof “demand” shall
include the commencement and continuance of any legal proceedings.

9.5

Reinstatement.  The guarantee contained in this Article shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by any Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or any Guarantor or any
substantial part of its or their respective property, or otherwise, all as
though such payments had not been made.

9.6

Additional Guarantors.  Each Subsidiary of the Borrower (as required to become a
party to this Agreement pursuant to Section 7.18 of this Agreement) shall become
a Guarantor for all purposes of this Agreement upon execution and delivery by
such Subsidiary of an Assumption Agreement and shall thereafter have the same
rights, benefits and obligations as a Guarantor party hereto on the date hereof.

- 51 -

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

ARTICLE X

MISCELLANEOUS

10.1

Amendments and Waivers.  Any provision of this Agreement or the other Loan
Documents may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Lenders (and, if the
rights or duties of the Administrative Agent, by the Administrative Agent);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) increase or decrease the Commitments of any Lender (except for a
ratable decrease in the Commitments of all Lenders) or subject any Lender to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or other Obligation, or any fees hereunder, (iii) postpone the date fixed
for any payment of principal of or interest on any Loan, or any fees hereunder,
(iv) change the amount or the percentage of the Commitments, the definition of
“Required Lenders,” or the percentage of Lenders which shall be required for the
Lenders or any of them to take any action under this Section or any other
provision of this Agreement, (v) amend this Section 10.1 or (vii) effect a
release of all or substantially all of the Collateral other than to facilitate
the provisions of Section 7.9.2.  Delivery of an executed counterpart of such
written instrument by telecopy or other electronic means shall be effective
delivery of a manually executed counterpart of such written instrument.

10.2

Compliance with Laws.  It is the intention of the parties to comply with
applicable usury laws (now or later enacted).  Accordingly, and notwithstanding
any provision to the contrary in this Agreement, the other Security Documents or
any other Loan Document, in no event will this Agreement or any other Loan
Document require the payment or permit the collection of interest in excess of
the maximum amount permitted by those laws.  If, under any circumstances, the
fulfillment of any provision of this Agreement or of any other Loan Document
will involve exceeding the limit prescribed by applicable law for the
contracting for or charging or collecting interest, then the obligation to be
fulfilled will, ipso facto, be reduced to the allowable limit, and if, under any
circumstances, the Administrative Agent or any Lender ever receives pursuant to
any of the Loan Documents anything of value as interest or that is deemed to be
interest under applicable law that would exceed the highest lawful rate, the
amount that would otherwise be excessive interest will be applied to the
reduction of the principal amount owing on the Loans or on account of any other
indebtedness owed by Borrower to the Administrative Agent or such Lender, and
not to the payment of interest; or, if any portion of the excessive interest
exceeds the unpaid balance of principal of that indebtedness, then the excess
amount will be refunded to Borrower.  In determining whether or not the interest
paid or payable with respect to any indebtedness owed by Borrower to the
Administrative Agent or such Lender exceeds the highest lawful rate, Borrower
and Lender will, to the maximum extent permitted by applicable law, (a)
characterize any non principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects of them, (c)
amortize, prorate, allocate and spread the total amount of interest throughout
the full term of the indebtedness so that the actual rate of interest on account
of the indebtedness does not exceed the maximum amount permitted by applicable
law, and (d) allocate interest between portions of the indebtedness so that no
portion will bear interest at a rate greater than that permitted by applicable
law.

10.3

INDEMNITY.

10.3.1

WHETHER OR NOT ANY CREDIT EXTENSIONS ARE EVER FUNDED AND IN ADDITION TO ANY
OTHER INDEMNIFICATIONS HEREIN OR IN ANY OTHER LOAN DOCUMENTS, THE BORROWER AND
EACH GUARANTOR, JOINTLY AND SEVERALLY, AGREE TO INDEMNIFY AND DEFEND AND HOLD
HARMLESS ON A CURRENT BASIS THE INDEMNIFIED PARTIES, FROM AND AGAINST ANY AND
ALL LIABILITIES, LOSSES, DAMAGES, COSTS, INTEREST, CHARGES, COUNSEL FEES AND
OTHER EXPENSES AND PENALTIES OF ANY KIND WHICH ANY OF THE INDEMNIFIED PARTIES
MAY SUSTAIN OR INCUR IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR
JUDICIAL PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT OR ANY LENDER SHALL
BE DESIGNATED A PARTY THERETO) OR OTHERWISE BY REASON OF OR ARISING OUT OF THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
AND/OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  THE
INDEMNIFICATION PROVISIONS IN THIS SECTION SHALL BE ENFORCEABLE REGARDLESS OF
WHETHER THE LIABILITY IS BASED ON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL
REQUIREMENTS (INCLUDING ANY PAST, PRESENT

- 52 -

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

OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT,
OCCUPATIONAL SAFETY AND HEALTH LAW, OR PRODUCTS LIABILITY, SECURITIES OR OTHER
LEGAL REQUIREMENT), AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON
FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT,
CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR
OF ANY OTHER INDEMNIFIED PARTY, OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED ON THE PERSON SEEKING INDEMNIFICATION OR ON ANY OTHER INDEMNIFIED PARTY,
BUT SHALL NOT APPLY TO ANY LIABILITIES, LOSSES, DAMAGES, COSTS, INTEREST,
CHARGES, FEES, EXPENSES OR PENALTIES ARISING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY SEEKING INDEMNIFICATION
UNDER THIS SECTION; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT UNLESS ALL SUCH OBLIGATIONS
HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND THE DESIGNATED
BORROWERS AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE
OF ANY PROPERTY IN LIEU THEREOF, AND PROVIDED THAT SUCH INDEMNITY SHALL NOT
EXTEND TO ANY CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING,
ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISING FROM THE ACTS OR OMISSIONS OF
ANY INDEMNIFIED PARTY SUBSEQUENT TO ANY INDEMNIFIED PARTY BECOMING THE OWNER OF
SUCH PROPERTY.

10.3.2

Any amount to be paid under Section 10.3 to the Administrative Agent or any
other Agent or any of the Lenders shall be a demand obligation owing by the
Borrower and the Guarantors, jointly and severally, and if not paid within
fifteen (15) days of demand shall bear interest from the date of expenditure by
such Agent or the Lenders, as the case may be, until paid at a per annum rate
equal to the Default Rate.  The obligations of the Borrower and the Guarantors
under Section 10.3 shall survive payment of the Obligations and the assignment
of any right hereunder.

10.4

Expenses.

10.4.1

Whether or not any Credit Extensions is ever funded, the Borrower and each
Guarantor, jointly and severally, shall pay (a) all reasonable out-of-pocket
expenses of the Administrative Agent, including, without limitation, fees and
disbursements of counsel for the Administrative Agent in connection with the
preparation of this Agreement and the other Loan Documents (including, without
limitation, the furnishing of any written or oral opinions or advice incident to
this transaction) and, if appropriate, the recordation of the Loan Documents,
any waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder), and (b) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Administrative Agent, including, without
limitation, fees and disbursements of counsel in connection with such Event of
Default and collection and other enforcement proceedings resulting therefrom,
fees of auditors, consultants, engineers and other Persons incurred in
connection therewith (including, without limitation, the supervision,
maintenance or disposition of the Collateral) and investigative expenses
incurred by the Administrative Agent in connection therewith, which amounts
shall be deemed compensatory in nature and liquidated as to amount upon notice
to the Borrower by the Administrative Agent and which amounts shall include, but
not be limited to (i) all court costs, (ii) attorneys’ fees, (iii) fees and
expenses of auditors and accountants incurred to protect the interests of the
Lenders, and (iv) fees and expenses incurred in connection with the
participation by the Administrative Agent as a member of the creditors’
committee in a case commenced under any Insolvency Proceeding, together with
interest at the per annum interest rate equal to the Default Rate, calculated on
a basis of a calendar year of 365 or 366 days, as the case may be, counting the
actual number of days elapsed, on each such amount from the date of notification
to Borrower that the same was expended, advanced, or incurred by the
Administrative Agent until the date it is repaid to the Administrative Agent,
with the obligations under Section 10.4 surviving the non-assumption of this
Agreement in a case commenced under any Insolvency Proceeding and being binding
upon the Borrower, each Guarantor, and/or a trustee, receiver, custodian, or
liquidator of the Borrower or any Guarantor appointed in any such case.

10.4.2

THE BORROWER AND EACH GUARANTOR, JOINTLY AND SEVERALLY, SHALL INDEMNIFY EACH
LENDER AGAINST ANY TRANSFER TAXES,

- 53 -

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

DOCUMENTARY TAXES, ASSESSMENTS OR CHARGES MADE BY ANY GOVERNMENTAL AUTHORITY BY
REASON OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS.

10.4.3

Any amount to be paid under Section 10.4 to any Lender shall be a demand
obligation owing by the Borrower and each Guarantor and if not paid within
fifteen (15) days of demand shall bear interest from the date of expenditure by
the Lender until paid at a per annum rate equal to the Default Rate.  The
obligations of the Borrower and each Guarantor under Section 10.4 shall survive
payment of the Obligations and the assignment of any right hereunder.

10.5

Survival.  All representations, warranties and covenants made by or on behalf of
the Borrower or any of its Subsidiaries in this Agreement or the other Loan
Documents herein or in any certificate or other instrument delivered by it or in
its behalf under the Loan Documents shall be considered to have been relied upon
by the Administrative Agent and the Lenders shall survive the delivery to the
Administrative Agent and the Lenders of such Loan Documents or the extension of
the Loans (or any part thereof), regardless of any investigation made by or on
behalf of the Administrative Agent or any other Agent or the Lenders.

10.6

Applicable Law; Venue; Waiver of Jury Trial.

10.6.1

THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND PERFORMED IN NEW
YORK, AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO
THE EXTENT ANOTHER JURISDICTION’S LAW IS EXPRESSLY ELECTED IN ANY LOAN DOCUMENT
TO GOVERN OR APPLY TO SUCH LOAN DOCUMENT OR TO THE EXTENT THE LAWS OF ANY
JURISDICTION WHERE COLLATERAL IS LOCATED REQUIRE APPLICATION OF SUCH LAWS WITH
RESPECT TO SUCH COLLATERAL.

10.6.2

ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, ANY OTHER
AGENT, THE LENDERS OR THE BORROWER OR ANY GUARANTOR IN CONNECTION HEREWITH OR
THEREWITH MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED THAT, ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  THE
BORROWER AND EACH GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN
SECTION 14.1.  THE BORROWER AND EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT THE BORROWER OR SUCH
GUARANTOR, AS APPLICABLE, HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER AND EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.

10.6.3

THE BORROWER, EACH GUARANTOR, THE ADMINISTRATIVE AGENT, ANY OTHER AGENT AND EACH
LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION

- 54 -

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

THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT, OR THE LENDERS IN
THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO.  THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT’S, EACH OTHER AGENT’S
AND, EACH LENDER’S ENTERING INTO THIS AGREEMENT.

10.7

Invalid Provisions, Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term hereof or thereof, such
provision shall be fully severable, this Agreement and the other Loan Documents
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
hereof and thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom.  Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part of this Agreement or the
other Loan Documents a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid and
enforceable.

10.8

ENVIRONMENTAL INDEMNIFICATION.  THE BORROWER AND EACH GUARANTOR, JOINTLY AND
SEVERALLY, SHALL INDEMNIFY, DEFEND AND HOLD THE ADMINISTRATIVE AGENT, EACH OTHER
AGENT AND EACH LENDER AND EACH OF THEIR SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE
ADMINISTRATIVE AGENT OR THE LENDERS OR THE ISSUER UNDER ANY SECURITY DOCUMENT
(COLLECTIVELY, THE “INDEMNIFIED PARTIES”) HARMLESS ON A CURRENT BASIS FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES,
CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL
ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND
EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS’ FEES AND EXPENSES) (THE “CLAIMS”), ARISING DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS
SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE BORROWER OR ANY OF ITS
SUBSIDIARIES, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY
CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER OR ANY OF ITS
SUBSIDIARIES, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE
BORROWER, ANY SUBSIDIARY, OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY
OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY (BUT EXCLUDING
INDEMNIFIED PARTIES), IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL,
STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER ANY PROPERTY OF THE
BORROWER OR ANY SUBSIDIARY OF THE BORROWER, (C) ANY RESIDUAL CONTAMINATION ON OR
UNDER ANY PROPERTY OF THE BORROWER OR ANY SUBSIDIARY OF THE BORROWER, OR (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY SUBSIDIARY OF THE BORROWER OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY SUBSIDIARY
OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR
RELATIONSHIP WITH THE BORROWER OR ANY SUBSIDIARY OF THE BORROWER, IRRESPECTIVE
OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, INCLUDING ANY OF THE FOREGOING IN THIS SECTION
ARISING FROM THE SOLE NEGLIGENCE, COMPARATIVE NEGLIGENCE OR CONCURRENT
NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES OR THE SOLE OR CONCURRENT STRICT
LIABILITY IMPOSED ON ANY OF THE INDEMNIFIED PARTIES, BUT NOT ANY OF THE
FOREGOING IN THIS SECTION ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY

- 55 -

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

SEEKING INDEMNIFICATION UNDER THIS SECTION.  THE FOREGOING INDEMNITY SHALL
SURVIVE THE SATISFACTION OF ALL OBLIGATIONS, THE TERMINATION OF THIS AGREEMENT
AND ANY TRANSFER OF THE PROPERTY OF THE BORROWER, ANY GUARANTOR OR ITS
SUBSIDIARIES BY FORECLOSURE OR BY A DEED IN LIEU OF FORECLOSURE FOR ANY LENDER’S
ENVIRONMENTAL LIABILITY, REGARDLESS OF WHETHER CAUSED BY, OR WITHIN THE CONTROL
OF, THE BORROWER AND EACH GUARANTOR OR SUCH SUBSIDIARY UNLESS, AFTER SUCH
FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, SUCH AGENT OR LENDER HAS CAUSED SUCH
ENVIRONMENTAL LIABILITY AND FURTHER EXCLUDING CLAIMS THAT RESULT FROM ACTIONS
TAKEN BY A PERSON (OTHER THAN THE BORROWER OR ANY AFFILIATES OF THE BORROWER)
AFTER SUCH FORECLOSURE OR DEED IN LIEU THEREOF.

10.9

Communications Via Internet.  The Borrower and each Guarantor hereby authorize
the Administrative Agent and each other Agent and each Lender and their
respective counsel, engineers and advisors to communicate and transfer documents
and other information (including, without limitation, confidential information)
concerning this transaction or the Borrower and its Subsidiaries and the
Property or the business affairs of the Borrower and its Subsidiaries via the
Internet or other electronic communication without regard to the lack of
security of such communications.

10.10

USA Patriot Act Notice Public Material.  Each Lender hereby notifies the
Borrower and each Guarantor 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 and such Guarantor, which information includes the name and address
of the Borrower and such Guarantor, as applicable, and other information that
will allow such Lender to identify the Borrower and such Guarantor in accordance
with the Act.  The Borrower and each of its Subsidiaries agrees promptly to
comply with each such request.

The Borrower and each Guarantor hereby acknowledge that (a) the Administrative
Agent will make available to the Lenders materials and/or information provided
by or on behalf of the Borrower or each Guarantor hereunder (collectively,
“Borrower Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the Lenders may be
“public side” Lenders (i.e., Lenders that do not wish to receive material non
public information with respect to the Borrower, any Guarantor or their
securities) (each, a “Public Lender”).  The Borrower and each Guarantor hereby
agrees that (w) all Borrower Materials (other than SEC Reports) that are to be
made available to Public Lenders shall be clearly and conspicuously marked
“PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof, (x) by marking Borrower Materials
“PUBLIC,” the Borrower and each Guarantor shall be deemed to have authorized the
Administrative Agent and the Lenders to treat such Borrower Materials as either
publicly available information or not containing any material non-public
information (although it may be sensitive and proprietary) with respect to the
Borrower or such Guarantor or their securities for purposes of United States
Federal and state securities laws; (y) all SEC Reports and all Borrower
Materials marked “PUBLIC” are permitted to be made available through a portion
of the Platform designated “Public Investor;” and (z) the Administrative Agent
shall be entitled to treat any Borrower Materials (other than SEC Reports) that
are not marked “PUBLIC” as being suitable only for posting on a portion of the
Platform not designated “Public Investor.” The Borrower and each Guarantor shall
be in compliance with all requirements to deliver information under this
Agreement if they have made such information available to the Administrative
Agent and, to the extent required, Lenders other than Public Lenders, and the
failure of Public Lenders to receive information made available to other Lenders
shall not result in any breach of this Agreement.

10.11

EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY 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

- 56 -

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

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.”

10.12

Increased Cost and Reduced Return.

10.12.1

If on or after the date hereof, in the case of any Loan, the adoption of any
applicable law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Administrative
Agent or any other Agent or any Lender (or its Lending Installation) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System), special
deposit, insurance assessment or similar requirement against assets of, deposits
with or for the account of, or credit extended by, the Administrative Agent or
any other Agent or any Lender (or its Lending Installation) and the result of
any of the foregoing is to reduce the amount of any sum received or receivable
by the Administrative Agent or any other Agent or Lender (or its Lending
Installation) under this Agreement with respect thereto, by an amount reasonably
deemed by the Administrative Agent or any other Agent or Lender to be material,
then, within fifteen (15) days after demand by the Administrative Agent or any
other Agent or Lender (with a copy to the Administrative Agent), the Borrower
and each Guarantor, jointly and severally, shall pay to the Administrative Agent
or any other Agent or Lender such additional amount or amounts as will
compensate the Administrative Agent or any other Agent or Lender for such
increased cost or reduction.

10.12.2

If the Administrative Agent or any other Agent or any Lender shall have
reasonably determined that, after the date hereof, the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change in
any such rule or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of the Administrative Agent or
any other Agent or any Lender as a consequence of the Administrative Agent’s,
any other Agent’s or Lender’s obligations hereunder to a level below that which
the Administrative Agent or any other Agent or any Lender could have achieved
but for such adoption, change, request or directive (taking into consideration
its policies with respect to capital adequacy) by an amount deemed by the
Administrative Agent or any other Agent or any Lender to be material, then from
time to time, within fifteen (15) days after demand by the Administrative Agent
or any other Agent or any Lender (with a copy to the Administrative Agent), the
Borrower and each Guarantor, jointly and severally, shall pay to the
Administrative Agent or any other Agent or any Lender such additional amount or
amounts as will compensate the Administrative Agent or any other Agent or any
Lender for such reduction.

10.12.3

Each Lender, the Administrative Agent or any other Agent will promptly notify
the Borrower and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle the
Administrative Agent or any other Agent or Lender to compensation pursuant to
this Section and will designate a different Lending Installation if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole judgment of the Administrative Agent or any other
Agent or Lender, as the case may be, be otherwise disadvantageous to the
Administrative Agent or any other Agent or Lender.  A certificate of the
Administrative Agent or any other Agent or Lender, as the case may be, claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.  In determining such amount, the Administrative Agent or any
other Agent or Lender, as the case may be, may use any reasonable averaging and
attribution methods.

- 57 -

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

10.13

Taxes.

10.13.1

For the purpose of Section 10.13, the following terms have the following
meanings:

“Taxes” means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the Borrower
or any Guarantor pursuant to this Agreement or under any other Loan Document,
and all penalties and interest with respect thereto, excluding (a) in the case
of each Lender and the Administrative Agent or any other Agent, taxes imposed on
its income, and franchise or similar taxes imposed on it, by a jurisdiction
under the laws of which such Lender or the Administrative Agent or any other
Agent (as the case may be) is organized or in which its principal executive
office is located, in which its Lending Installation is located or in which it
would be subject to tax due to some connection other than that created by this
Agreement and (b) in the case of each Lender, any United States withholding tax
at the time such Lender first becomes a party to this Agreement.

“Other Taxes” means any present or future stamp or documentary taxes and any
other excise or property taxes, or similar charges or levies and all penalties
and interest with respect thereto, which arise from the making of any payment
pursuant to this Agreement or under any other Loan Document or from the
execution or delivery of this Agreement or any other Loan Document.

10.13.2

Any and all payments by the Borrower or any Guarantor to or for the account of
any Lender or the Administrative Agent hereunder or under any other Loan
Document shall be made without deduction for any Taxes or Other Taxes; provided
that, if the Borrower or any Guarantor shall be required by law to deduct any
Taxes or Other Taxes from any such payments, the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under Section 10.12) such Lender or the
Administrative Agent or any other Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (a)
the Borrower or such Guarantor shall make such deductions, (b) the Borrower or
such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (c) the
Borrower or such Guarantor shall furnish to the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof.

10.13.3

The Borrower and each Guarantor, jointly and severally, agree to indemnify each
Lender, the Administrative Agent and any other Agent for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes on
amounts payable under this Section) paid by such Lender or the Administrative
Agent or any other Agent (as the case may be).  This indemnification shall be
paid within fifteen (15) days after such Lender or the Administrative Agent or
any other Agent (as the case may be) makes appropriate demand therefor.

10.13.4

At least five (5) Business Days prior to the first date on which interest or
fees are payable hereunder for the account of any Lender, each Lender that is
not incorporated under the laws of the United States of America, or a state
thereof, agrees that it will deliver to each of the Borrower and the
Administrative Agent two duly completed copies of United States Internal Revenue
Service Form W-8 BEN or W-8 ECI or W-8 IMY or W-8 EXP or such other form as may
be applicable and allowable under the Internal Revenue Code and the regulations
thereunder (collectively, a “Withholding Form”), certifying in either case that
such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes.  Each Lender
which so delivers a Withholding Form further undertakes to deliver to each of
the Borrower and the Administrative Agent two additional copies of such form (or
a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent Withholding Form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the Borrower or
the Administrative Agent, in each case certifying that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such Withholding Forms inapplicable or which would prevent such Lender from duly
completing and delivering any such Withholding Form with respect to it and such
Lender advises the Borrower

- 58 -

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

and the Administrative Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax.

10.13.5

For any period with respect to which a Lender has failed to provide the Borrower
or the Administrative Agent with the appropriate form pursuant to
Section 10.13.4 (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided which renders all such Withholding Forms inapplicable or
which would prevent such Lender from duly completing and delivering any such
Withholding Form with respect to it), such Lender shall not be entitled to
indemnification under Section 10.13.2 or 10.13.3 with respect to Taxes imposed
by the United States; provided that if a Lender, which is otherwise exempt from
or subject to a reduced rate of withholding tax, becomes subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps (at the expense of such Lender) as such Lender shall reasonably
request to assist such Lender to recover such Taxes.

10.13.6

If the Borrower or any Guarantor is required to pay additional amounts to or for
the account of any Lender pursuant to Section 10.13, then such Lender will
change the jurisdiction of its Lending Installation if, in the judgment of such
Lender, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Lender in its sole judgment.

10.13.7

The Obligations of Borrower and each Guarantor under this Section shall survive
the payment of the Obligation and the assignment of any right hereunder.

10.14

Collateral Matters; Hedging Agreements.   The benefit of the Security Documents
and of the provisions of this Agreement relating to the Collateral shall also
extend to and be available to those Lenders or their Affiliates which are
counterparties to the Hedging Agreements on a pro rata basis in respect of any
Hedging Agreement Obligations of Borrower or any of its Subsidiaries, whether or
not such Person is a Lender at the time of entering into the Hedging Agreement
or remains a Lender hereunder; provided that it is the intention of the Lenders
that receipt of payment in respect of Hedging Agreement Obligations of Borrower
and its Subsidiaries under any Hedging Agreement with a Lender or any Affiliate
of a Lender from realization of any Collateral, shall be subject to the terms of
the Intercreditor Agreement and the Security Documents.  Any Person which is not
a signatory to the Credit Agreement which is seeking to benefit from this
Section or any of the Security Documents acknowledges and agrees that the
Administrative Agent has entered into the Intercreditor Agreement and the
Security Documents on behalf of such Person, the Agents, Lenders and Affiliates
thereof, and by their acceptance of the benefits of the Security Documents
hereby agrees to be bound by the terms of this Agreement, the Intercreditor
Agreement and such Security Documents, acknowledges receipt of copies of the
Intercreditor Agreement and such Security Documents and consents to the rights,
powers, remedies, indemnities and exculpations given to the Administrative Agent
thereunder.

10.15

Intercreditor Agreement; Loan Documents.  Each Lender on behalf of itself and
any Affiliate which is a counterparty to a Hedging Agreement acknowledges and
agrees that the Administrative Agent has entered into the Intercreditor
Agreement and the Security Documents on behalf of itself, any other Agents, if
any, Lenders and Affiliates thereof, and each of them (by their signature hereto
or acceptance of the benefits of the Security Documents) hereby agrees to be
bound by the terms of the Intercreditor Agreement and such Security Documents,
acknowledge receipt of copies of the Intercreditor Agreement and such Security
Documents and consents to the rights, powers, remedies, indemnities and
exculpations given to the Administrative Agent thereunder.  For so long as the
Intercreditor Agreement shall be in effect, the terms and conditions of this
Agreement and the other Loan Documents are subject to the terms of the
Intercreditor Agreement.  In the event of any inconsistency between this
Agreement or any other Loan Document and the terms of the Intercreditor
Agreement, the Intercreditor Agreement shall control.  In the event of any
inconsistency between this Agreement and the terms of any other Loan Document
(other than the Intercreditor Agreement), this Agreement shall control.

10.16

Arranger and other Agents.  None of the Persons identified on the facing page or
the signature pages of this Agreement as the “Lead Arranger and Sole Book
Runner” or as an Agent (other than the Administrative Agent) shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
or any other Loan Document other than, except in the case of the Arranger, those
applicable to all Lenders as such.  Without limiting the foregoing, none of the
Arranger or any Agent (other than the Administrative Agent) shall have

- 59 -

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

or be deemed to have any fiduciary relationship with any Lender or Borrower or
any of its Subsidiaries.  Borrower and each Lender acknowledges that it has not
relied, and will not rely, on any of the Arranger or any Agent (other than the
Administrative Agent) in deciding to enter into this Agreement or in taking or
not taking any action hereunder or under the Loan Documents.

ARTICLE XI

AGENTS AND ISSUER

11.1

Appointment.  Wayzata Investment Partners LLC is hereby appointed Administrative
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the Administrative
Agent of such Lender.  The Administrative Agent or any other Agent agree to act
as such upon the express conditions contained in this Article X.  The
Administrative Agent or any other Agent shall have no fiduciary relationship in
respect of any Lender by reason of this Agreement or any other Loan Document.

11.2

Powers of the Agents.  The Administrative Agent and any other Agents shall have
and may exercise such powers under the Loan Documents as are specifically
delegated to them by the terms of each thereof, together with such powers as are
reasonably incidental thereto.  The Administrative Agent and any other Agents
shall have no implied duties to the Lenders, or any obligation to the Lenders to
take any action thereunder except any action specifically provided by the Loan
Documents to be taken by them.

11.3

General Immunity.  Neither the Administrative Agent or any other Agent nor any
Lender nor any of their directors, officers, agents or employees shall be liable
to the Lenders or any Lender for any action taken or omitted to be taken by it
or them hereunder or under any other Loan Document or in connection herewith or
therewith (INCLUDING ANY OF THE FOREGOING ARISING FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE ADMINISTRATIVE AGENT OR SUCH OTHER AGENT, THE ISSUER OR SUCH
DIRECTORS, OFFICERS, ADMINISTRATIVE AGENTS OR EMPLOYEES), unless such action or
omission arises from the gross negligence or willful misconduct of the
Administrative Agent, such other Agent or such directors, officers, agents or
employees.

11.4

No Responsibility for Loans, Recitals, etc.  Neither the Administrative Agent or
any other Agent nor any Lender nor any of their respective directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (a) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder; (b) the
performance or observance of any of the covenants or agreements of any obligor
under any Loan Document, including, without limitation, any agreement by the
Borrower or any Guarantor to furnish information directly to each Lender; (c)
the satisfaction of any condition specified in Article V; or (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith.

11.5

Action on Instructions of Lenders.  The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Lenders or the Required Lenders, as the case may be, and such instructions and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.  The Administrative Agent and any other Agents shall be fully
justified in failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its satisfaction by
the Lenders pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.

11.6

Employment of Agents and Counsel.  The Administrative Agent and any other Agent
may execute any of their respective duties hereunder and under any other Loan
Document by or through employees, agents, and attorneys-in-fact and shall not be
responsible to the Lenders, except as to money or securities received by it or
its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Administrative Agent
and any other Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties hereunder and
under any other Loan Document.

- 60 -

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

11.7

Reliance on Documents, Counsel.  The Administrative Agent and any other Agent
shall be entitled to rely upon any notice, consent, certificate, affidavit,
letter, telegram, electronic transmission, facsimile, e-mail, statement, paper
or document believed by it to be genuine and correct and to have been signed or
sent by the proper Person, and, in respect to legal matters, upon the opinion of
counsel selected by the Administrative Agent, which counsel may be employees of
the Administrative Agent.

11.8

Reimbursement and Indemnification of Agents.  The Lenders agree to REIMBURSE and
INDEMNIFY the Administrative Agent and each other Agent on a current basis
ratably in proportion to their Percentage Shares (a) for any amounts not
reimbursed by the Borrower or any Guarantor for which such Agent is entitled to
reimbursement by the Borrower or any Guarantor under the Loan Documents, and (b)
for any other expenses incurred by such Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents.  The Lenders also agree to REIMBURSE and
INDEMNIFY the Administrative Agent, each other Agent on a current basis ratably
in proportion to their Percentage Shares for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against such Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith or
the transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents (INCLUDING, WITHOUT LIMITATION, ANY OF
THE FOREGOING ARISING OUT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF SUCH
AGENT), provided that no Lender shall be liable to such Agent for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of such Agent.  The obligations of the Lenders under this
Section 11.8 shall survive payment of the Obligations and termination of this
Agreement.

11.9

Rights as a Lender.  The Administrative Agent and each other Agent shall have
the same rights and powers hereunder and under any other Loan Document as any
Lender and may exercise the same as though it were not an Agent, and the terms
“Lender” and “Lenders” shall, unless the context otherwise indicates, include
each Agent in its individual capacity.  The Administrative Agent, each other
Agent and each other Lender may accept deposits from, lend money or otherwise
extend credit to, and generally engage in any kind of trust, debt, equity or
other transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its Affiliates unless the
Borrower or such Affiliate is specifically restricted hereunder.  Neither the
Administrative Agent or any other Agent, in its individual capacity, is
obligated to remain a Lender hereunder.

11.10

Lender Credit Decision.  Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Agent or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents.  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 deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents.

11.11

Successor Agent.  The Administrative Agent and any other Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower, such
resignation to be effective upon the appointment of a successor Agent or, if no
successor Agent has been appointed, forty-five days after the retiring Agent
gives notice of its intention to resign.  Upon any such resignation, the
remaining Lenders by majority in interest shall have the right to appoint, with
the approval of the Borrower if no default then exists hereunder, which approval
will not be unreasonably withheld or delayed, on behalf of the Borrower and the
Lenders, a successor Agent.  If no successor Agent shall have been so appointed
by the Lenders with a majority in interest within thirty (30) days after the
resigning Agent’s giving notice of its intention to resign, then the resigning
Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
 If any Agent has resigned or been removed and no successor Agent has been
appointed, the Lenders may perform all the duties of such Agent hereunder and
the Borrower shall make all payments in respect of the Obligations to the
applicable Lender and for all other purposes shall deal directly with the
Lenders.  No successor Agent shall be deemed to be appointed hereunder until
such successor Agent has accepted the appointment.  Upon the acceptance of any
appointment as an Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning or removed Agent.  Upon the effectiveness
of the resignation or removal of any Agent, the resigning

- 61 -

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

or removed Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents.  After the effectiveness of the resignation or
removal of an Agent, the provisions of this Article X shall continue in effect
for the benefit of such Agent in respect of any actions taken or omitted to be
taken by it while it was acting as an Agent hereunder and under the other Loan
Documents.

11.12

Applicable Parties.  The provisions of this Article are solely for the benefit
of the Administrative Agent, any other Agents and the Lenders, and, except with
respect to the appointment of a successor Agent, the Borrower shall not have any
rights as a third party beneficiary or otherwise under any of the provisions of
this Article.  In performing functions and duties hereunder and under the other
Loan Documents, each of the Administrative Agent and any other Agent shall each
act solely as the contractual agent of the Lenders and does not assume, nor
shall either of them be deemed to have assumed, any obligation or relationship
of trust or agency with or for the Borrower or any legal representative,
successor, and assign of the Borrower.

ARTICLE XII

SET-OFF; RATABLE TREATMENTS

12.1

Set-off.  In addition to, and without limitation of, any rights of the Lenders
under applicable law, if any Event of Default occurs and is continuing, any and
all deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Debt at any time held or
owing by any Lender or any Affiliate thereof to or for the credit or account of
the Borrower or any Guarantor may be offset and applied toward the payment of
the Obligations, whether or not the Obligations, or any part hereof, shall then
be due.  Each Lender or Affiliate thereof making such an offset and application
shall give the Borrower and the other Lenders written notice of such offset and
application promptly after effecting it.

12.2

Ratable Treatments; Adjustments.

12.2.1

Except to the extent otherwise expressly provided herein, (a) the Loans pursuant
to this Agreement shall be made from the Lenders pro rata in accordance with
their respective Commitments, (b) each payment by the Borrower or any Guarantor,
as applicable, of fees payable to the Lenders shall be made for the account of
the Lenders pro rata in accordance with their Percentage Shares, (c) each
payment of principal of Loans shall be made for the account of the Lenders pro
rata in accordance with the principal balances of their Loans, and (d) each
payment of interest on the Loans shall be made for the account of the Lenders
pro rata in accordance with their respective shares of the aggregate amount of
interest due and payable to the Lenders under the Loans.

12.2.2

The Administrative Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received.  In
the event that any payments made hereunder by the Borrower or any Guarantor at
any particular time are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (a) first, to fees and
expenses due pursuant to the terms of this Agreement or any other Loan Document,
(b) second, to accrued interest, (iii) third, to the principal of the Loans, and
(iv) last, to any other Obligations.

12.2.3

If any Lender (for purposes of this Section, a “Benefited Lender”) shall at any
time receive any payment of all or part of its portion of the Obligations, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
Section 8.1.4 or 8.1.5, or otherwise) in an amount greater than such Lender was
entitled to receive pursuant to the terms hereof, such Benefited Lender shall
purchase for cash from the other Lenders such portion of the Obligations of such
other Lenders, or shall provide such other Lenders with the benefits of any such
Collateral or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such Collateral or
proceeds with each of the Lenders according to the terms hereof.  If all or any
portion of such excess payment or benefits is thereafter recovered from such
Benefited Lender, such purchase shall be rescinded and the purchase price and
benefits returned by such Lender, to the extent of such recovery, but without
interest.  The Borrower and each Guarantor agrees that each such Lender so
purchasing a portion of the Obligations of another Lender may exercise all
rights of payment (including rights of set-off) with respect to

- 62 -

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

such portion as fully as if such Lender were the direct holder of such portion.
 If any Lender ever receives, by voluntary payment, exercise of rights of
set-off or banker’s lien, counterclaim, cross-action or otherwise, any funds of
the Borrower or any Guarantor to be applied to the Obligations, or receives any
proceeds by realization on or with respect to any Collateral, all such funds and
proceeds shall be forwarded immediately to the Administrative Agent for
distribution in accordance with the terms of this Agreement.

ARTICLE XIII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

13.1

Successors and Assigns.  The terms and provisions of the Loan Documents shall be
binding upon and inure to the benefit of the Borrower, each Guarantor, each
other Subsidiary of the Borrower, the Administrative Agent, any other Agents and
the Lenders and their respective successors and assigns, except that (a) the
Borrower and each Guarantor shall not have any right to assign its rights or
obligations under the Loan Documents and (b) any assignment by any Lender must
be made in compliance with Section 13.3.  Notwithstanding clause (a) of this
Section 13.1, any Lender may at any time, without the consent of the Borrower,
any Guarantor or the Administrative Agent, assign all or any portion of its
rights under this Agreement and its Note, if any, to a Federal Reserve Bank or
an Affiliate of a Lender or an Approved Fund.  Any assignee by executing an
Assignment and Assumption agrees by acceptance thereof to be bound by all the
terms and provisions of the Loan Documents.  The Administrative Agent, acting
for this purpose as an agent of the Borrower and each Guarantor, shall maintain
at one of its offices a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders and
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the “Register”). The entries in the Register shall be conclusive absent
clearly demonstrable error, and the Borrower, each Guarantor and each of the
Administrative Agent and each Lender 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 and any Lender or any
of the Agents, at any reasonable time and from time to time upon reasonable
prior notice.

13.2

Participations; Voting Rights; Set-offs by Participants.

13.2.1

Any Lender may, in accordance with applicable law, at any time sell to one or
more banks or other entities (“Participants”) participating interests in any
Loan owing to such Lender, any Note held by such Lender or any other interest of
such Lender under the Loan Documents.  In the event of any such sale by a Lender
of participating interests to a Participant, such Lender’s obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such Loan for all purposes under the
Loan Documents, all amounts payable by the Borrower and each Guarantor under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under the Loan Documents.

13.2.2

Each Lender shall retain the sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with respect to any
Loan in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with respect to
any such Loan or Commitment, or postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on, any such
Loan or Commitment.

13.2.3

The Borrower and each Guarantor agree that each Participant shall be deemed to
have the right of set-off provided in Section 12.1 in respect of its
participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, and each Lender shall retain the right of
set-off provided in Section 12.1 with respect to the amount of participating
interests sold to each Participant.  The Lenders agree to share with each
Participant, and each Participant, by exercising the right of set-off provided
in Section 12.1, agrees to share with

- 63 -

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

each Lender, any amount received pursuant to the exercise of its right of
set-off, such amounts to be shared in accordance with Section 12.2 as if each
Participant were a Lender.

13.3

Assignments.

13.3.1

Any Lender may, in accordance with applicable law, at any time assign to one or
more banks or other entities (“Purchasers”) all or any part of its rights and
obligations under the Loan Documents by completing and executing an Assignment
and Assumption.  The consent of the Borrower and the Administrative Agent, which
consents shall not be unreasonably withheld or delayed, shall be required prior
to an assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate of a Lender or an Approved Fund; except that, if a
Default has occurred and is continuing, the consent of the Borrower shall not be
required. Each such assignment shall (unless it is to a Lender or an Affiliate
thereof, or each of the Borrower and the Administrative Agent otherwise
consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the
remaining amount of the assigning Lender’s Loans (calculated as at the date of
such assignment).

13.3.2

Upon (a) execution of such Assignment and Assumption by the Administrative Agent
or, in circumstances where the consent of the Administrative Agent is not
required, the delivery to the Administrative Agent of the Assignment and
Assumption, fully completed and executed, and (b) unless waived by the
Administrative Agent, payment of a $3,500 processing fee to the Administrative
Agent for its sole account for processing such Assignment and Assumption, such
Assignment and Assumption shall become effective on the effective date specified
in such Assignment and Assumption.  The Assignment and Assumption shall contain
a representation by the Purchaser to the effect that none of the consideration
used to purchase the Loans under the applicable Assignment and Assumption are
“plan assets” as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be “plan assets” under ERISA.
 On and after the effective date of such Assignment and Assumption, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the Borrower,
the Lenders or the Administrative Agent shall be required to release the
transferor Lender with respect to the Loans assigned to such Purchaser.  Upon
the consummation of any assignment to a Purchaser pursuant to this
Section 13.3.2, the transferor Lender, the Administrative Agent and the Borrower
shall, if requested, make appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Purchaser reflecting such assignment.

13.4

Dissemination of Information.  The Borrower and each Guarantor authorizes each
Lender to disclose to any Participant or Purchaser or any other Person acquiring
an interest in the Loan Documents by operation of law (each a “Transferee”) and
any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Borrower and its Subsidiaries.

13.5

Tax Treatment.  If any interest in any Loan Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 10.13.4.

13.6

Disclosure of Information.  Notwithstanding any of the other provisions of this
Agreement or the other Loan Documents, the Administrative Agent and any other
Agents and each Lender (and each employee, representative, or other agent of the
Administrative Agent and each such Lender) may disclose to any and all Persons,
without limitation of any kind, the “tax treatment” and “tax structure” (in each
case, within the meaning of Treasury Regulation Section 1.6011-4) of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to the Administrative Agent,
any other Agents or the Lenders relating to such tax treatment and tax
structure; provided that, with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this authorization shall only
apply to such portions of the document or similar item that relate to the tax
treatment or tax structure of the Loans and transactions contemplated hereby.

- 64 -

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

ARTICLE XIV

NOTICES

14.1

Notices.  Except as otherwise specifically permitted herein, all notices,
requests and other communications to any party hereunder shall be in writing
(including electronic transmission, facsimile transmission or similar writing)
and shall be given to such party: (a) in the case of the Borrower, each
Guarantor or the Administrative Agent, at its address or facsimile number set
forth on the signature pages hereof, (b) in the case of any Lender, at its
address or facsimile number set forth on the signature pages hereof or in any
Assignment and Assumption which has become effective pursuant to Article XIII or
(c) in the case of any party, at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Borrower in accordance with the provisions of this Section 14.1.
 Each such notice, request or other communication shall be effective (i) if
given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received (the receipt
thereof shall be deemed to have been acknowledged upon the sending Person’s
receipt of its facsimile machine’s confirmation of successful transmission;
provided that if the day on which such facsimile is received in not a Business
Day or is after 4:00 p.m. on a Business Day, then the receipt of such facsimile
shall be deemed to have been acknowledged on the next following Business Day),
(ii) if given by mail, three (3) Business Days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid,
or (iii) if given by any other means, when delivered (or, in the case of
electronic transmission, received) at the address specified in this Section;
except that notices to the Administrative Agent under Article II shall not be
effective until received by the Administrative Agent.

14.2

Change of Address.  The Borrower, each Guarantor, the Administrative Agent and
any Lender may each change the address for service of notice upon it by a notice
in writing to the other parties hereto.

ARTICLE XV

COUNTERPARTS

15.1

Counterparts.  This Agreement may be executed in any number of counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.  This Agreement shall become effective at such time
as the counterparts hereof which, when taken together, bear the signature of the
Borrower, each Guarantor, the Administrative Agent and each Lender, shall be
delivered to the Administrative Agent.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic means shall be
effective as a delivery of a manually executed counterpart of this Agreement.

15.2

ENTIRE AGREEMENT.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND THEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF OR THEREOF.
 FURTHERMORE, IN THIS REGARD, THIS AGREEMENT  REPRESENTS THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

- 65 -

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

IN WITNESS WHEREOF, the Borrower, each Guarantor, the Lenders and the
Administrative Agent have executed this Agreement as of the date first above
written.

 

BORROWER:

SARATOGA RESOURCES, INC.

By  /s/ Thomas F. Cooke
Name: Thomas F. Cooke
Title:   Chairman and Chief Executive Officer

Address:

2304 Hancock Drive, Suite 5
Austin, Texas  78756
Attention: President

Telephone: (512) 478-5717
Telecopy:   (512) 445-2365
E-mail: accsri@yahoo.com

With a copy to:

P.O. Box 19279
Houston, Texas  77224-9279
Attention: President

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

 

GUARANTORS:

HARVEST OIL AND GAS, LLC

By: /s/ Thomas F. Cooke
Name: Thomas F. Cooke
Title:    Operating Manager

Address:

67201 Industry Lane
Covington, Louisiana  70433
Attention: President

Telephone: (512) 478-5717
Telecopy:   (512) 445-2365
E-mail: accsri@yahoo.com

With a copy to:

P.O. Box 19279
Houston, Texas  77224-9279
Attention: President

 

THE HARVEST GROUP LLC

By: /s/ Thomas F. Cooke
Name: Thomas F. Cooke
Title:   Operating Manager

Address:

67201 Industry Lane
Covington, Louisiana  70433
Attention: President

Telephone: (512) 478-5717
Telecopy:   (512) 445-2365
E-mail: accsri@yahoo.com

With a copy to:

P.O. Box 19279
Houston, Texas  77224-9279
Attention: President

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

 

LOBO OPERATING, INC.

By: /s/ Thomas F. Cooke
Name: Thomas F. Cooke
Title:   President

Address:

2304 Hancock Drive, Suite 5
Austin, Texas  78756
Attention: President

Telephone: (512) 478-5717
Telecopy:   (512) 445-2365
E-mail: accsri@yahoo.com

With a copy to:

P.O. Box 19279
Houston, Texas  77224-9279
Attention: President

 

LOBO RESOURCES, INC.

By: /s/ Thomas F. Cooke
Name: Thomas F. Cooke
Title:   President

Address:

2304 Hancock Drive, Suite 5
Austin, Texas  78756
Attention: President

Telephone: (512) 478-5717
Telecopy:   (512) 445-2365
E-mail: accsri@yahoo.com

With a copy to:

P.O. Box 19279
Houston, Texas  77224-9279
Attention: President

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

 

ADMINISTRATIVE AGENT

WAYZATA INVESTMENT PARTNERS LLC

By:   /s/ Blake Carlson
Name:  Blake Carlson
Title:    Authorized Signatory

Address:

701 East Lake Street, Suite 300
Wayzata, Minnesota 55391
Attention: Raphael Wallander

Telephone: (952) 345-0727
Telecopy:  (952) 345-8901
E-mail: rwallander@wayzpartners.com

and

Attention:  Linda Gans
Telephone: (952) 345-0718
Telecopy: (952) 345-8901
E-mail: lgans@wayzpartners.com

With a copy to:

Fulbright & Jaworski L.L.P.
2100 IDS Center
80 South Eight Street
Minneapolis, Minnesota 55402
Attention: Joseph T. Kinning

Telephone: (612) 321-2254
Telecopy:  (612) 321-2288
E-mail: joseph.kinning@fulbright.com

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

 

LENDER:

WAYZATA OPPORTUNITIES FUND II, L.P., as a Lender
By:  WOF II GP, L.P., its General Partner
By:  WOF II GP, LLC, its General Partner

By:   /s/ Blake Carslon
Name:  Blake Carlson
Title:    Authorized Signatory

Address:

701 East Lake Street, Suite 300
Wayzata, Minnesota 55391
Attention: Raphael Wallander
Telephone: (952) 345-0727
Telecopy:  (952) 345-8901
E-mail: rwallander@wayzpartners.com
Attention: Susan Peterson

Telephone: (952) 345-0716
Telecopy:  (952) 345-8901
E-mail: speterson@wayzpartners.com

With a copy to:

Fulbright & Jaworski L.L.P.
2100 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attention: Joseph T. Kinning

Telephone: (612) 321-2254
Telecopy:  (612) 321-2288
E-mail: joseph.kinning@fulbright.com

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

 

LENDER:

WAYZATA OPPORTUNITIES FUND LLC, as a Lender
By:  Wayzata Investment Partners LLC, its
       Manager

By:  /s/ Blake Carlson
Name: Blake Carlson
Title:   Authorized Signatory

Address:

701 East Lake Street, Suite 300
Wayzata, Minnesota 55391
Attention: Raphael Wallander
Telephone: (952) 345-0727
Telecopy:  (952) 345-8901
E-mail: rwallander@wayzpartners.com
Attention: Susan Peterson

Telephone: (952) 345-0716
Telecopy:  (952) 345-8901
E-mail: speterson@wayzpartners.com

With a copy to:

Fulbright & Jaworski L.L.P.
2100 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attention: Joseph T. Kinning

Telephone: (612) 321-2254
Telecopy:  (612) 321-2288
E-mail: joseph.kinning@fulbright.com

[SIGNATURE PAGE TO SARATOGA RESOURCES, INC. CREDIT AGREEMENT]

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

EXHIBIT L - Page 1