Exhibit
10.97


 


	
  

  	
  

  



 


CONFIDENTIAL AND PROPRIETARY


 


	
   

  	
  April 26,
  2010

  



 


Resaca
Exploitation, Inc.


1331
Lamar Street


Houston,
TX 77010-3122


(713)
650-1246


 


Attn:  Chris Work, Chief Financial Officer


 


Re:                               Amended and Restated Commitment Letter — Up to $200,000,000 Senior Secured Revolving
Credit Facility.


 


Ladies
and Gentlemen:


 


Reference is made to that
certain Commitment Letter between Union Bank, N.A. (“UB”) and Resaca Exploitation, Inc.,
a Texas corporation (“Company” or “you”) dated February 2,
2010 (“Existing
Commitment Letter”).  This letter (the
“Commitment Letter”) is entered into in
order to (a) extend the expiration date of the commitments provided
therein and (b) have Natixis New York Branch join in as a party thereto in
such capacities set forth herein.  The
parties hereto hereby agree that this Commitment Letter amends, restates and
supersedes the Existing Commitment Letter in its entirety as set forth herein.


 


As
discussed in the Existing Commitment Letter, in connection with the anticipated
merger between the Company and Cano Petroleum, Inc., a Delaware
corporation (the “Target”; and
such merger transaction being referred to herein as the “Merger”),
the Company advised Union Bank, N.A. (“UB” or a “Lead Arranger”) and Natixis New York Branch (“Natixis” or a “Lead Arranger”;
and together with UB, the “Lead Arrangers”,
“us” or “we”)
that the Company seeks financing to refinance certain existing indebtedness of
the Company and its subsidiaries and the Target and its subsidiaries, to pay
fees, commissions and expenses in connection with the Merger and such financing
and for ongoing working capital requirements and other general corporate
purposes, all as more
fully described in the Summary of Terms and Conditions attached hereto as Exhibit A
(the “Term Sheet”) which is incorporated
herein.  The Term Sheet sets forth the
proposed terms of a senior secured borrowing base revolving credit facility
with an aggregate note amount of $200,000,000 and subject to an initial
borrowing base which is expected to be approximately $90,000,000 (the “Facility”).  Unless
otherwise defined herein, all terms used herein which are defined in the Term
Sheet will have the meanings when used therein as so defined.


 


Commitment:  The Company has requested that UB and Natixis
severally commit to provide the Facility.  UB is pleased to advise you of its commitment
to (a) act as exclusive administrative agent (in such capacity, the “Administrative Agent”) under the Facility and (b) provide
50% of the principal amount of the Facility subject to the terms and conditions
set forth herein, including those specified in the Term Sheet, and to various
fees payable to UB as detailed in a separate letter agreement between UB and
the 


 


1

















 


Company
dated January 14, 2010 (the “Fee Letter”).  This Commitment Letter is the “Commitment
Letter” referred to in the Fee Letter.  Natixis
is pleased to advise you of its commitment to provide 50% of the principal
amount of the Facility subject to the terms and conditions set forth herein,
including those specified in the Term Sheet, and to various fees payable to Natixis
as the “Co-Underwriter” pursuant to and as detailed in the Fee Letter.  The commitments provided
for herein by UB and by Natixis are several and not joint.  UB shall only have liability to the Company
(as opposed to any other Person), and UB shall be liable solely in respect of
its own commitment to the Facility on a several, and not joint, basis with any
other Person.  Natixis shall only have liability
to the Company (as opposed to any other Person), and Natixis shall be liable
solely in respect of its own commitment to the Facility on a several, and not
joint, basis with any other Person.  This
Commitment Letter and the Term Sheet are not meant to be and shall not be
construed as an attempt to define all of the terms and conditions of the
Facility which shall be set forth in the definitive credit documentation
executed in connection with the Facility (the “Credit
Documents”).


 


The
commitment of UB and of Natixis hereunder and the agreement of the Lead
Arrangers to provide the services described herein are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to each of us in our respective sole discretion: (a) satisfaction
of the terms and conditions set forth herein and in the Term Sheet; (b) the
completion of all legal and business due diligence with respect to the Company,
its subsidiaries, the Target and its subsidiaries; (c) the absence of a
material breach of any representation, warranty or agreement made by the
Company set forth herein; (d) the negotiation, execution and delivery of
the Credit Documents in form and substance satisfactory to the Lead Arrangers; (e) no
change, occurrence or development that is reasonably likely to have a material
adverse effect on the business, prospects, assets, liabilities, operations, or
condition (financial or otherwise) of the Company and its affiliates or of the
Target and its subsidiaries, shall have occurred or become known to us; (f) neither
Lead Arranger becoming aware after the date hereof of any information or other
matter affecting the Company, any of its affiliates, the Target or any of its
affiliates, which in such Lead Arranger’s judgment is inconsistent in a
material and adverse manner with any information or other matter disclosed to such
Lead Arranger prior to the date hereof; and (g) the initial borrowing base
under the Facility is not greater than $90,000,000.00.


 


Syndication:  The
Lead Arrangers intend and reserve the right to syndicate the Facility and you
acknowledge and agree that the Lead Arrangers have commenced syndication
efforts promptly following your acceptance of the Existing Commitment Letter
and will continue their syndication efforts following your acceptance of this
Commitment Letter.  The Lead Arrangers
may, at their sole option, conduct or conclude such syndication before or after
the closing of the Facility.  You agree
to, and will use your reasonable best efforts to cause appropriate members of
management of the Target to, actively assist us in achieving a syndication of
the Facility that is satisfactory to us and you.  To assist us in our syndication efforts, and
to the extent necessary to achieve a “Successful Syndication” as defined in the
Fee Letter, you agree that you will, and will cause your representatives and
non-legal advisors to, and will use your reasonable best efforts to cause
appropriate members of management of the Target Company to, (a) promptly
provide the Lead Arrangers and the other lenders under the Facility (the “Lenders”) upon request with all information reasonably
deemed necessary by any Lead Arranger to assist the Lead Arrangers and each
Lender in their evaluation of the transactions contemplated hereby and to
complete the syndication, (b) make available to prospective Lenders senior
management of the Company and (to the extent reasonable and practical)
appropriate members of management of the Target) on reasonable prior notice and
at reasonable times and places, (c) host, with the Lead Arrangers, one or
more meetings with prospective Lenders, (d) assist, and cause your
affiliates and advisors to assist, the Lead Arrangers in the preparation of one
or more confidential information memoranda and other marketing materials to be
used in connection with the syndication, and (e) use your reasonable best


 


2

















 


efforts to ensure that the  syndication efforts of the Lead Arrangers
benefit materially from the existing lending relationships of the Company.


 


The
Lead Arrangers and/or one or more of their respective affiliates will
exclusively manage all aspects of the syndication of the Facility, including
decisions as to the selection and number of potential Lenders to be approached,
when they will be approached, whose commitments will be accepted, any titles
offered to the Lenders and the final allocations of the commitments and any
related fees among the Lenders, and the Lead Arrangers will exclusively perform
all functions and exercise all authority as is customarily performed and
exercised in such capacities.  No Lender
shall receive compensation from you with respect to the Facility outside the
terms contained herein and in the Fee Letter in order to obtain its commitment
to participate in the Facility and the Lead Arrangers shall have sole
discretion with respect to the allocation and distribution of fees among the
Lenders.


 


Representations
and Warranties:  The Company
hereby represents, warrants and covenants that (a) all written
information, other than Projections (defined below), which has been or is
hereafter made available to us by the Company or any of its subsidiaries or
affiliates in connection with the transactions contemplated hereby (the “Information”) (i) to the extent prepared by the Company
or such subsidiaries or affiliates, is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading, and (ii) to the extent prepared by, or
obtained from third parties, is and will be, to the Company’s knowledge,
complete and correct in all material respects and to the Company’s knowledge,
does not and will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained therein not
misleading, and (b) all financial or other projections concerning the
Company and its subsidiaries and affiliates (including those giving pro forma
effect to the Merger) or their respective businesses that have been or are
hereafter made available to us by the Company (the “Projections”)
have been or will be prepared in good faith based upon assumptions the Company
believes to be reasonable.  The Company
agrees to furnish us with such Information and Projections as we may reasonably
request and to supplement the Information and the Projections from time to time
until the later of (a) the closing date for the Facility (the “Closing Date”) and (b) the successful syndication of
the Facility.  The Company understands
that UB and Natixis will be using and relying on the Information and the
Projections without independent verification thereof.


 


Indemnification:  The Company agrees to indemnify and hold
harmless UB, Natixis and each of their respective, subsidiaries, affiliates and
each of the foregoing’s respective directors, officers, employees, advisors and
agents (each, an “Indemnified Party”)
from and against (and will reimburse each Indemnified Party as the same are
incurred) any and all losses, claims, damages, liabilities, and expenses
(including, without limitation, the fees and expenses of outside counsel) that
are incurred by or awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of a
defense in connection therewith) this Commitment Letter, the Existing
Commitment Letter, the Fee Letter, the Facility, any portion thereof, any of
the other transactions contemplated thereby, or any use made or proposed to be
made with the proceeds thereof, REGARDLESS OF
WHETHER THE INDEMNIFIED PARTY IS A PARTY THERETO AND INCLUDING ANY LOSSES,
CLAIMS, DAMAGES, LIABILITIES AND EXPENSES ARISING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF AN INDEMNIFIED PARTY but excluding any losses, claims,
damages, liabilities and expenses to the extent that they result primarily from
the gross negligence or willful misconduct of such Indemnified Party as
determined in a final, nonappealable judgment by a court of competent
jurisdiction.  In the case of any
investigation, litigation or proceeding to which the indemnity in this
paragraph applies, such indemnity shall be effective whether or not its


 


3

















 


investigation,
litigation or proceeding is brought by the Company or the Target, any
subsidiary or affiliate of the Company or the Target, any shareholder or creditor
of the Company or the Target, or an Indemnified Party and whether or not the
Facility is consummated.  The Company
agrees that no Indemnified Party shall have any liability to the Company or to
its subsidiaries, affiliates, security holders or creditors for any indirect or
consequential damages arising out of, related to or in connection with this
Commitment Letter, the Existing Commitment Letter, the Fee Letter, the Facility
or any portion hereof or thereof.


 


Confidentiality:  We shall be permitted to use information
related to the syndication and arrangement of the Facility in connection with
marketing, press releases or other transactional announcements or updates
provided to investor or trade publications, subject to confidentiality
obligations.  In connection with the
services and transactions contemplated hereby, the Company agrees that UB and
Natixis are permitted to access, use and share with any of their respective
bank or non-bank affiliates, agents, advisors (legal or otherwise) or representatives,
any information concerning any Company or any of its affiliates that is or may
come into the possession of UB, Natixis or any of their respective
affiliates.  Following your acceptance
hereof, (i) you may make public disclosure of the existence and terms of
this Commitment Letter to regulatory authorities to the extent required by such
regulatory authorities or applicable law, (ii) you may file a copy of this
letter in any public record in which it is required by law to be filed, and (iii) you
may disclose the terms hereof in any press release which shall be provided to UB
and Natixis for review prior to release; provided that, in any event, the terms
of the Fee Letter shall not be disclosed other than as permitted under the
terms thereof.  Under no circumstances
shall this Commitment Letter, including the Term Sheet, be disclosed by you or
your agents, directly or indirectly, to any other financial institution without
the prior written approval of UB.  In addition,
this Commitment Letter is delivered to you on the understanding that neither
this Commitment Letter (including the Term Sheet) nor any of their terms or
substance shall be disclosed, directly or indirectly, to any other person
except (a) to the extent required by law, (b) to your officers,
agents and advisors (including any counsels’ to such advisors) who are directly
involved in the consideration of this matter or (c) as may be compelled in
a judicial or administrative proceeding or as otherwise required by law (in
which case you agree to inform us promptly thereof).


 


Acknowledgments
and Agreements:  In
connection with all aspects of each transaction contemplated by this Commitment
Letter, you acknowledge and agree, and acknowledge your affiliates’
understanding, that: (a) the Facility and any related arranging or other
services described in this letter is an arm’s-length commercial transaction
between you and your affiliates, on the one hand, and UB and Natixis, on the
other hand, and you are capable of evaluating and understanding and understand
and accept the terms, risks and conditions of the transactions contemplated by
this letter; (b) in connection with the process leading to such
transaction, each of UB and Natixis is and has been acting solely as a
principal and neither UB nor Natixis has been acting as a financial advisor,
agent or fiduciary, for you or any of your affiliates, stockholders, creditors
or employees or any other party; (c) neither UB nor Natixis has assumed
nor will either such party assume an advisory, agency or fiduciary
responsibility in your or your affiliates’ favor with respect to any of the
transactions contemplated hereby or the process leading thereto (irrespective
of whether UB or Natixis has advised or is currently advising you or your
affiliates on other matters) and neither UB nor Natixis has any obligation to
you or your affiliates with respect to the transactions contemplated hereby
except those obligations expressly set forth in this letter; (d) UB,
Natixis and their respective affiliates may be engaged in a broad range of
transactions that involve interests that differ from yours and your affiliates
and neither UB nor Natixis has any obligation to disclose any of such interests
by virtue of any advisory, agency or fiduciary relationship; and (e) neither
UB nor Natixis has provided any legal, accounting, engineering, regulatory or
tax advice with respect to any of the transactions contemplated hereby and you
have consulted your own legal, accounting, 


 


4

















 


engineering,
regulatory and tax advisors to the extent you have deemed appropriate.  You hereby waive and
release, to the fullest extent permitted by law, any claims that you may have
against UB, Natixis and their respective affiliates with respect to any breach
or alleged breach of agency or fiduciary duty.


 


Expenses:  By
executing this Commitment Letter, the Company agrees to reimburse UB and
Natixis from time to time on demand for all reasonable third party fees and
expenses of UB and of Natixis incurred in connection with, or otherwise related
to, the Facility (including, without limitation, (a) all reasonable fees
and expenses of outside counsel, (b) service and other fees for “DebtX” or
other electronic communication or data link services in connection with the
syndication process, (c) service and other “Intralinks” fees for the
periodic distribution of compliance and financial information to the syndicate,
and (d) all other reasonable professional fees and expenses relating to
due diligence (including, without limitation, collateral review, asset
appraisals and fees related to engaging outside counsel for due diligence
purposes) and preparation of this Commitment Letter, the Existing Commitment
Letter, the Fee Letter, the other Credit Documents, or otherwise in connection
with, or related to, the Facility).


 


Waiver
of Jury Trial:  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE EXISTING
COMMITMENT LETTER, THE FEE LETTER, THE TERM SHEET, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS TAKEN OR NOT TAKEN BY UNION
BANK, N.A. OR NATIXIS NEW YORK BRANCH IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF OR THEREOF (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS COMMITMENT
LETTER AND THE FEE LETTER BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH.


 


Survival: The waiver, indemnification,
confidentiality and expense payment and reimbursement provisions contained
herein shall survive the closing of the Facility and the termination of this
Commitment Letter; provided that the indemnification and expense payment and
reimbursement provisions shall be superseded by the corresponding provisions in
the Credit Documents once such Credit Documents are executed and delivered by
the parties thereto, including the parties hereto.


 


UB hereby notifies you that,
pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L.
107-56 (signed into law on October 26, 2001) (the “Patriot Act”), we are
required to obtain, verify and record information that identifies the Company,
which information includes the name, address, tax identification number and
other information regarding the Company that will allow UB, Natixis and the
other Lenders to identify the Company in accordance with the Patriot Act.  This notice is given in accordance with the
requirements of the Patriot Act and is effective as to UB, Natixis and each other
Lender under the Facility.


 


This
Commitment Letter shall not be assignable by you without our prior written
consent (and any purported assignment without such consent shall be null and
void), is intended to be solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any rights in favor of, any


 


5

















 


person
other than the parties hereto.  This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of Texas.  The Company consents to the nonexclusive
jurisdiction and venue of the state or federal courts located in the State of
Texas.  This Commitment Letter (a) may
be modified or amended only by the written agreement of all of the parties
hereto, and (b) may be executed in any number of counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one agreement.


 


This
Commitment Letter and our commitments set forth herein will expire at 5:00 p.m.,
Houston, Texas time on April 30, 2010 unless the Company executes this
Commitment Letter and returns such to us prior to that time (which may be by
facsimile transmission which shall be effective upon receipt prior to such
time), whereupon this Commitment Letter (which may be signed in one or more
counterparts) shall become an agreement under the laws of the State of Texas.  Thereafter, the undertaking and commitments
set forth herein will expire on the earlier of (a) 5:00 pm, Houston, Texas
time on June 30, 2010 if the closing of the Facility shall not have
occurred by such time, (b) a material breach by the Company under this
Commitment Letter or the Fee Letter, and (c) the date on which the Credit
Documents are made effective.


 


This
Commitment Letter, together with the Term Sheet and the Fee Letter are the only
agreements that have been entered into among the parties hereto with respect to
the Facility which remain in full force and effect and set forth the entire
understanding of the parties with respect thereto.  THIS COMMITMENT LETTER AND THE FEE LETTER
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.


 


[Signature pages follow.]


 


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We
are pleased to have the opportunity to work with you in connection with this
important financing.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  UNION
  BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /BRIAN
  ZIMMER/

  
	
   

  	
   

  	
  Brian
  Zimmer, Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /PAUL
  CORNELL/

  
	
   

  	
   

  	
  Paul
  Cornell, Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NATIXIS
  NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donovan C.
  Broussard

  
	
   

  	
  Name:

  	
  Donovan C. Broussard

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy L. Polvado

  
	
   

  	
  Name:

  	
  Timothy L. Polvado

  
	
   

  	
  Title:

  	
  Senior Managing
  Director

  
	
   

  	
   

  	
   

  
				



 


Accepted and Agreed to


as
of April 27, 2010:


 


 


RESACA
EXPLOITATION, INC.


 


 


	
  By:

  	
  /CHRIS
  WORK/

  	
   

  
	
  Chris Work

  	
   

  
	
  Vice
  President and Chief Financial Officer

  	
   

  



 


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SUMMARY OF TERMS
AND CONDITIONS


 


	
  Resaca
  Exploitation, Inc.

  	
  CONFIDENTIAL

  



 


EXHIBIT A


 


SUMMARY
OF TERMS & CONDITIONS DATED APRIL 26, 2010


 


	
  Borrower:

  	
   

  	
  Resaca
  Exploitation, Inc. (“Resaca”, “Borrower” or the “Company”).

  
	
   

  	
   

  	
   

  
	
  Guarantors:

  	
   

  	
  Cano
  Petroleum, Inc. and all material subsidiaries.  Company and Guarantors are collectively
  referred to as “Loan Parties”.

  
	
   

  	
   

  	
   

  
	
  Administrative  

  Agent and Sole

  Lead Arrangers:

  	
   

  	
  Union Bank, N.A. (“UB”
  or “Agent”) and Natixis New York Branch (“Natixis”).

  
	
   

  	
   

  	
   

  
	
  Lenders:

  	
   

  	
  UB, Natixis and other
  financial institutions acceptable to the Agent and Borrower. UB and Natixis
  each intend to hold a maximum $40 million commitment in the Facility.

  
	
   

  	
   

  	
   

  
	
  Facility:

  	
   

  	
  Senior Secured
  Revolving Credit Facility (the “Facility”) in the amount of $200.0
  million.  Initial availability is
  limited to the lesser of the initial Borrowing Base or the aggregate
  commitments of the Lenders at closing.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Facility will be
  subject to a maximum Borrowing Base amount to be determined at inception (the
  “Initial Borrowing Base”) and at least semi-annually thereafter, with the
  first redetermination to take place on September 1, 2010.  The initial Borrowing Base is estimated to
  be $90.0 million at closing.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Facility will have
  a Letter of Credit Sublimit in an amount up to a maximum of $5 million.

  
	
   

  	
   

  	
   

  
	
  Interest Rate

  	
   

  	
  See Addendum I

  
	
  And Fees:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  July 1, 2012
  (approximately 3 months prior to the maturity of the Redeemable
  Preferreds).  Maturity shall be
  extended to the third anniversary of the closing date once all of the
  Redeemable Preferreds have been converted to common equity or the redemption
  date thereof has been extended to a date that is at least 91 days after the
  third anniversary of the closing date and no Default then exists.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  Proceeds will be used:
  (i) to refinance in full Resaca’s existing senior secured debt with CIT
  and NGP Capital Resources; (ii) to refinance in full Cano’s existing
  senior secured debt with UB and Natixis; (iii) to refinance in full
  Cano’s existing second lien debt with UnionBanCal Equities; (iv) for oil
  and gas exploration and production; and (v) for general corporate
  purposes, including working capital and acquisitions.

  
	
   

  	
   

  	
   

  
	
  Optional  

  Prepayments:

  	
   

  	
  Prepayments will be
  permitted at any time without premium or penalty (except for breakage and
  related costs associated with prepayments of Eurodollar Loans), subject to
  minimum amount requirements.

  



 


1

















 


	
  Required 

  Prepayments:

  	
   

  	
  See requirements under
  Borrowing Base.

  
	
   

  	
   

  	
   

  
	
  Collateral and 

  Security:

  	
   

  	
  The Facility will be
  secured by a first-priority lien on 80% of the value of the Loan Parties’
  existing oil and gas properties and related real property interests and a
  security agreement on all personal property assets of the Loan Parties.   A negative pledge shall exist on all other
  assets of the Loan Parties.

  
	
   

  	
   

  	
   

  
	
  Borrowing Base:

  	
   

  	
  The outstanding
  principal balance of the loans (the “Loans”) and letters of credit
  (the “L/Cs”) under the Facility may at no time exceed the Borrowing Base,
  which will be redetermined semi-annually by the Lenders in their sole
  discretion, subject to reduction by Borrower in its sole discretion.  Each of the Agent and the Borrower may
  request one additional Borrowing Base redetermination during the interval
  between each scheduled redetermination and the Agent may require additional
  redeterminations based upon certain material dispositions.  To assist the Lenders in setting the
  Borrowing Base, Borrower will furnish (a) by February 28 of each
  year, an annual engineering report on proved oil and gas properties of the
  Borrower, prepared internally by the Borrower and effective December 31
  of the preceding year, and (b) by August 1, 2010, and each
  August 31st thereafter, an engineering report on proved
  oil and gas properties of the Loan Parties prepared by independent petroleum
  engineers acceptable to the Agent effective June 30 of such year. In
  addition, the Borrower shall provide the Lender with supplemental engineering
  data as is necessary to perform the annual Borrowing Base redetermination.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In addition to the engineering reports, Borrower
  will furnish a quarterly report of production and associated lease operating
  statements for the oil and gas properties of the Loan Parties.  This information will be certified by an
  officer of the Borrower and submitted in conjunction with financial
  statements on a quarterly basis.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If the Borrowing Base
  ever falls below the “Aggregate Balance” (Aggregate Balance defined as the
  aggregate amount of outstanding Loans and letters of credit under the
  Facility and the amount by which the Aggregate Balance exceeds the Borrowing
  Base is herein called the “Borrowing Base Deficiency”), Borrower must
  either:  (1) prepay the Facility
  in the amount of the deficit in five equal monthly installments with each
  such installment equal to or in excess of one-fifth of such Borrowing Base
  Deficiency, and with the first such installment to be paid within thirty days
  after notice by Agent to Borrower of such Borrowing Base Deficiency and the
  subsequent installments to be due and payable at one month intervals
  thereafter until such Borrowing Base Deficiency has been eliminated;
  provided, however, Borrower shall have demonstrated to the satisfaction of
  Agent on or before the date of the first such payment that Borrower has
  sufficient available monthly cash from its projected PDP oil and gas
  production, proposed sales of assets permitted under the Facility, or from
  proposed contributions to its common equity capital (or any combination
  thereof) to make such payments, (2) pledge additional unencumbered
  collateral acceptable to Lenders which in their determination, based on their
  sole discretion, have sufficient value to eliminate the Borrowing Base
  Deficiency, or (3) some combination of (1) and (2) above.

  



 


2

















 


	
  Representations and Warranties

  	
   

  	
  Usual and customary for
  transactions of this type (and subject to materiality qualifiers to be
  agreed), to include without limitation: (i) corporate existence and
  status; (ii) corporate power and authority, enforceability;
  (iii) no violation of law, contracts or organizational documents; (iv) no
  material litigation; (v) accuracy and completeness of specified
  financial statements and no material adverse change; (vi) no required
  governmental or third party approvals or consents; (vii) use of proceeds
  and not engaging in business of purchasing/carrying margin stock;
  (viii) status under Investment Company Act; (ix) ERISA matters;
  (x) environmental matters; (xi) tax matters; (xii) ownership of property
  and insurance matters; (xiii) accuracy of disclosure; (xiv) compliance with
  laws; (xv) subsidiaries; (xvi) no default has occurred and is continuing;
  (xvii) perfected liens, security interests and charges (subject to permitted
  liens to be agreed); and (xviii)  solvency.

  
	
   

  	
   

  	
   

  
	
  Conditions 

  Precedent:

  	
   

  	
  Usual and customary
  (usual customary exceptions and qualifiers) including but not limited to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  Receipt of audited
  Financial Statements (including consolidated balance sheets, income
  statements and statements of cash flows as well as other information
  requested by Agent) for the fiscal year ended June 30, 2009 (if
  available) and the most recent quarterly Financial Statements.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  Existence,
  incorporation, organization and good standing of the Loan Parties and
  authorization to enter into the Credit Agreement and associated
  documents.  Additionally, receipt by
  the Agent and the Lender of all organizational documents of the Loan Parties.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  After giving effect to
  the borrowings on the closing date, initial availability under the Facility
  of at least $30 million.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.

  	
  Cash dividends on the
  Redeemable Preferreds cannot exceed $766,000 annually. The maturity date of
  the Redeemable Preferreds shall be no earlier than October 6, 2012.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.

  	
  The Second Lien Notes
  payable to UnionBanCal Equities have been repaid in full.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.

  	
  Absence of other
  indebtedness of the Borrower except as disclosed and approved prior to
  closing, which approved amounts shall include, contingent liabilities in the ordinary course of business,
  and tax assessments (the other indebtedness restriction referenced herein
  will not pertain to interest rate derivatives and/or commodity hedges, which
  might be classified as indebtedness pursuant to FAS 133).

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.

  	
  Full disclosure has
  been provided with respect to all written statements, certificates, documents
  or other written information in connection with this transaction.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.

  	
  Compliance with all
  applicable laws including, without limitation, all environmental laws.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9.

  	
  Absence of any material
  pending or threatened litigation other than those disclosed and accepted by
  the Agent on or prior to closing.

  



 


3

















 


	
   

  	
   

  	
  10.

  	
  No material adverse
  change.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  11.

  	
  Absence of default with
  respect to any other debt agreement or other material obligation of the
  Borrower or any of its subsidiaries.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  12.

  	
  Satisfactory legal
  opinion of Loan Parties’ counsel.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13.

  	
  Payment of taxes.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  14.

  	
  Delivery of certificate
  of Senior Officer of the Borrower stating that all representations and
  warranties are true, no default, or event of default currently exists, and
  the Loan Parties are complying with all respective obligations.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  15.

  	
  The Agent and the
  Lenders shall be satisfied with the title to at least 80% of oil and gas
  properties of the Loan Parties which are categorized as “proved”.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  16.

  	
  The Borrower shall have
  maintained certain hedges identified by the Agent to the Borrower as of the
  closing.  Furthermore, within 10
  business days after closing, Borrower will have entered into oil and gas
  price hedging contracts satisfactory to Agent on at least 75% of the Loan
  Parties’ forecasted oil PDP production at such prices acceptable to the
  Agent.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  17.

  	
  Such other documents
  and certificates that the Agent may reasonably request.

  
	
   

  	
   

  	
   

  	
   

  
	
  Affirmative  

  Covenants:

  	
   

  	
  The Credit Agreement
  and other loan documents governing the Facility will contain customary
  Affirmative Covenants with respect to the Loan Parties, including, but not
  limited to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  The Company will
  deliver the following financial statements and reports:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Annual audited
  consolidated financial statements of Company (with accountants’ certificate
  of no default and officers’ certificate of compliance) within 90 days after
  each fiscal year end.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Quarterly unaudited
  consolidated financial statements of the Company, (with officer’s certificate
  of compliance) within 45 days after each fiscal quarter.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Reports outlined under
  “Borrowing Base” above.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  The Lenders will have
  general access to additional information regarding the Loan Parties.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  Loan Parties will
  maintain insurance as is customary in the industry and satisfactory to Agent.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.

  	
  All transactions
  between Borrower and its affiliates or any Guarantor and its affiliates shall
  be on terms no more favorable than could be obtained from third parties in an
  arm’s length transaction.

  



 


4

















 


	
  Negative 

  Covenants:

  	
   

  	
  The Credit Agreement
  and other loan documents governing the Loans will contain Negative Covenants
  with respect to the Loan Parties, including but not limited to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  Indebtedness (other
  than trade debt and taxes, but including guaranties and obligations under or
  in respect of letters of credit) is limited to the Loans, the L/Cs and other
  indebtedness not to exceed types and amounts acceptable to Agent, Lenders and
  Borrower.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  No liens will be
  permitted, other than certain customary permitted liens.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  Mergers are prohibited.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.

  	
  Asset sales are
  prohibited other than (a) hydrocarbons or liquid investments in the
  ordinary course, (b) certain equipment, (c) dispositions among Loan
  Parties, (d) disposition of property that is
  not Proven Reserves so long as its
  not Collateral, and (e) disposition of property that is Proven Reserves so long as (i) aggregate
  dispositions between scheduled redetermination of the Borrowing Base shall
  not exceed 5% of the then effective Borrowing Base, (ii) at least fair
  market value is received, and (iii) if disposition is of a Guarantor
  owning such Proven Reserves, the disposition is 100% of the equity interest
  in such Guarantor.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.

  	
  Investments are limited
  to cash equivalents, trade accounts and other customary exceptions to be
  agreed to between Agent and Borrower. 
  Loans and new lines of business will be generally prohibited.  Acquisitions with cash considerations will
  be limited as agreed to between Agent and Borrower.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.

  	
  Limitation on certain
  changes of ownership of Borrower.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.

  	
  No material trade
  payable to exceed 90 days unless such payable is in good faith dispute.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.

  	
  Borrower will not enter
  into oil and gas price hedging contracts for more than 80% of Loan Parties
  forecasted oil and gas PDP production for a period of more than five years.
  If Borrower chooses to hedge with a Lender no additional collateral
  requirements are necessary.  Non-Lender
  hedges may not be secured or have margin requirements (of cash, letter of
  credit, or any other property). Borrower will not enter into any additional
  gas hedges in 2010 until in compliance with this covenant.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9.

  	
  Limitations on
  distributions, including payments, redemptions, purchase, or other defeasance
  of the Redeemable Preferreds.

  
	
   

  	
   

  	
   

  	
   

  
	
  Financial

  Covenants: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
  Minimum Current Ratio (as defined) not to be less than 1.0:1 as of the
  end of each fiscal quarter, commencing with 06/30/2010.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
  Minimum Interest Coverage (including cash dividends) not to be less
  than 3.0:1, commencing with the first full calendar quarter after closing and
  

  



 


5

















 


	
   

  	
   

  	
   

  	
  annualized for the first three quarters and on a rolling four quarter
  basis thereafter.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.

  	
  Commencing with the first full calendar quarter after closing, Maximum
  Debt to EBITDA ratio cannot exceed 4.5:1 for each of the first two full
  calendar quarters and 4.0:1 for each calendar quarter thereafter.  EBITDA shall be annualized for the first
  three quarters and shall be determined on a rolling four quarter basis thereafter.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For financial covenant purposes, EBITDA shall exclude transaction costs
  associated with this Facility and such other non-recurring transactions costs
  as agreed to between the Borrower and the Agent.

  
	
   

  	
   

  	
   

  
	
  Events of Default:

  	
   

  	
  The Credit Agreement
  and other loan documents will contain such events of default with respect to
  the Loan Parties as are usual and customary for transactions of this kind
  (with customary grace periods and materiality qualifiers), including without
  limitation defaults in payment or performance under the Facility,
  misrepresentations, cross-defaults to other debt or material obligations,
  events of default related to ERISA and insolvency, material judgments, change
  of ownership, change in management and any material adverse change affecting
  any Loan Party.

  
	
   

  	
   

  	
   

  
	
  Governing Law

  	
   

  	
  State of Texas

  
	
   

  	
   

  	
   

  
	
  Notice:

  	
   

  	
  BY RECEIPT OF THIS
  DOCUMENT AND EXCEPT AS EXPRESSLY PERMITTED UNDER THE TERMS OF THE COMMITMENT
  LETTER, RESACA EXPLOITATION, INC. AND SUBSIDIARIES AND AFFILIATES AGREE NOT
  TO DIVULGE OR DISCUSS THE CONTENTS OF THIS DOCUMENT TO OR WITH ANYONE OTHER
  THAN THEIR DIRECTORS, OFFICERS, EMPLOYEES, AND ADVISORS WITHOUT FIRST
  RECEIVING THE CONSENT OF UNION BANK, N.A. UNTIL AGREED OTHERWISE, THIS
  DOCUMENT SHALL REMAIN THE PROPERTY OF UNION BANK, N.A. AND SHALL BE TREATED
  AS CONFIDENTIAL AND PROPRIETARY TO UNION BANK, N.A.

  



 


6

















 


ADDENDUM
I


FEES AND
EXPENSES


 


	
  Interest Rate:

  	
   

  	
  The Interest Rate for
  the Facility will be based upon the following grid:

  
	
   

  	
   

  	
   

  
	 
	
  Usage
  as a %

  	
   

  	
  Applicable Margin

  	
   

  	
  Unused

  	
   

  	
   

  	
   

  	 

	 
	
  Borrowing
  Base

  	
   

  	
  LIBOR

  	
   

  	
  RR

  	
   

  	
  Fee

  	
   

  	 

	 
	
  Less
  than 50%

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  	
  0.50

  	
  %

  	 

	 
	
  >
  50 % but <
  75%

  	
   

  	
  2.75

  	
  %

  	
  1.75

  	
  %

  	
  0.50

  	
  %

  	 

	 
	
  >
  75 % but <
  90%

  	
   

  	
  3.00

  	
  %

  	
  2.00

  	
  %

  	
  0.50

  	
  %

  	 

	 
	
  >
  90%

  	
   

  	
  3.25

  	
  %

  	
  2.25

  	
  %

  	
  0.50

  	
  %

  	 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Interest will be
  payable at the maturity of the LIBOR-funding (30, 60 or 90 days) with respect
  to a LIBOR borrowing and payable quarterly at each quarter end (March 31,
  June 30, September 30 and December 31) with respect to any UB
  Reference Rate (“RR”) borrowing. 
  Interest to be calculated on a 365/366 day basis, except in the case
  of LIBOR borrowings, which will be calculated on a 360 day basis.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Letter of Credit
  fee will be equal to the Applicable Margin for LIBOR Advances in addition to
  a Fronting Fee payable to UB as issuing bank.

  
	
   

  	
   

  	
   

  
	
  Upfront/Agency/

  Arrangement Fee:

  	
   

  	
  As set forth in the Fee
  and Mandate Letter.

  
	
   

  	
   

  	
   

  
	
  Expenses:

  	
   

  	
  Borrower will pay all
  reasonable costs and expenses associated with the preparation, due diligence,
  administration, syndication and enforcement of all documentation executed in
  connection with the Facility, including without limitation, the legal fees of
  counsel to the Agent, regardless of whether or not the Facility is
  closed.  Borrower will also pay the
  expenses of each Lender in connection with the enforcement of any loan documentation
  for the Facility.

  



 


7