Exhibit 10.75

                                CREDIT AGREEMENT

                                   DATED AS OF
                                  JULY 28, 2014

                                      AMONG

                               BARON ENERGY, INC.,
                                   AS PARENT,

                              BARON PRODUCTION LLC,
                                  AS BORROWER,

                        PETRO CAPITAL ENERGY CREDIT, LLC
                            AS ADMINISTRATIVE AGENT,

                                       AND

                            THE LENDERS PARTY HERETO
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                                TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----
                                   ARTICLE I
                       DEFINITIONS AND ACCOUNTING MATTERS

Terms Defined Above.........................................................1

Certain Defined Terms.......................................................1

Terms Generally; Rules of Construction.....................................24

Accounting Terms and Determinations; GAAP..................................25

                                   ARTICLE II
                              THE LOANS AND ORI'S

Commitments................................................................25

Loans and Borrowings.......................................................25

Requests for Borrowings....................................................26

Funding of Borrowings......................................................26

Defaulting Lenders.........................................................27

ORI's......................................................................28

                                  ARTICLE III
             PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Repayment of Loans.........................................................29

Interest...................................................................29

Prepayments................................................................30

Fees.......................................................................31

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

Payments Generally; Pro Rata Treatment; Sharing of Set-offs................31

Presumption of Payment by the Borrower.....................................32

Disposition of Production Proceeds.........................................33

                                   ARTICLE V
                             INCREASED COSTS; TAXES

Increased Costs............................................................33

Taxes......................................................................34

                                   ARTICLE VI
                              CONDITIONS PRECEDENT

Effective Date.............................................................35

Each Loan..................................................................40

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                                   ARTICLE VII
                         REPRESENTATIONS AND WARRANTIES

Organization; Powers.......................................................41

Authority; Enforceability..................................................41

Approvals; No Conflicts....................................................41

Financial Condition; No Material Adverse Change............................42

Litigation.................................................................43

Environmental Matters......................................................43

Compliance with the Laws and Agreements; No Defaults.......................44

Investment Company Act.....................................................44

Taxes......................................................................45

ERISA......................................................................45

Disclosure; No Material Misstatements......................................46

Insurance..................................................................46

Restriction on Liens.......................................................47

Subsidiaries...............................................................47

Location of Business and Offices...........................................47

Properties; Titles, Etc....................................................47

Maintenance of Properties..................................................48

Gas Imbalances, Prepayments................................................49

Marketing of Production....................................................49

Swap Agreements............................................................49

Use of Loans...............................................................49

Solvency...................................................................50

OFAC.......................................................................50

Projections................................................................51

Affiliate Transactions.....................................................51

Security Documents.........................................................51

Material Contracts; Operating Agreements...................................51

Acquisition Documents......................................................52

Location of Deposit and Securities Accounts; Etc...........................52

                                  ARTICLE VIII
                              AFFIRMATIVE COVENANTS

Financial Statements; Other Information....................................52

Notices of Material Events.................................................56

                                      iii
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Existence; Conduct of Business.............................................56

Payment of Obligations.....................................................57

Performance of Obligations under Loan Documents............................57

Operation and Maintenance of Properties; Material Contracts................57

Insurance..................................................................58

Books and Records; Inspection Rights.......................................58

Compliance with Laws.......................................................59

Environmental Matters......................................................59

Further Assurances.........................................................60

Reserve Reports............................................................60

Title Information..........................................................61

Additional Collateral; Additional Guarantors...............................62

ERISA Compliance...........................................................63

Key Man Life Insurance.....................................................63

Observation Rights.........................................................63

Deposit Accounts; Etc......................................................64

Additional Equity Issuance.................................................64

Riggan Lease...............................................................64

                                   ARTICLE IX
                               NEGATIVE COVENANTS

Financial Covenants........................................................64

Indebtedness...............................................................66

Liens......................................................................67

Restricted Payments........................................................68

Investments................................................................68

Nature of Business; International Operations...............................69

Proceeds of Notes..........................................................69

Limitation on Leases.......................................................69

ERISA Compliance...........................................................70

Sale or Discount of Receivables............................................70

Mergers, Etc...............................................................70

Sale of Properties.........................................................71

Environmental Matters......................................................71

Transactions with Affiliates...............................................71

Subsidiaries...............................................................71

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Negative Pledge Agreements; Dividend Restrictions..........................71

Gas Imbalances, Take-or-Pay or Other Prepayments...........................72

Swap Agreements............................................................72

Accounting Changes; Organization Documents; Material
Contracts; Operating Agreements............................................72

Marketing Activities.......................................................73

Well Drilling Costs........................................................73

                                    ARTICLE X
                           EVENTS OF DEFAULT; REMEDIES

Events of Default..........................................................73

Remedies...................................................................75

                                   ARTICLE XI
                            THE ADMINISTRATIVE AGENT

Appointment; Powers........................................................77

Duties and Obligations of Administrative Agent.............................77

Action by Administrative Agent.............................................78

Reliance by Administrative Agent...........................................78

Subagents..................................................................79

Resignation of Administrative Agent........................................79

Administrative Agent as Lender.............................................79

No Reliance................................................................80

Administrative Agent May File Proofs of Claim..............................80

Authority of Administrative Agent to Release Collateral and Liens..........81

Withholding Tax............................................................81

                                   ARTICLE XII
                                  MISCELLANEOUS

Notices....................................................................82

No Waivers; Amendments; Cumulative Remedies; Enforcement...................83

Expenses, Indemnity; Damage Waiver.........................................84

Successors and Assigns.....................................................87

Survival; Revival; Reinstatement...........................................90

Counterparts; Integration; Effectiveness; Etc..............................91

Severability...............................................................91

Right of Setoff............................................................91

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.................92

                                        v
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Headings...................................................................93

Confidentiality............................................................93

Interest Rate Limitation...................................................94

EXCULPATION PROVISIONS.....................................................95

No Third Party Beneficiaries...............................................95

USA Patriot Act Notice.....................................................96

Flood Insurance Provisions.................................................96

Advertising and Publicity..................................................96

ANNEXES, EXHIBITS AND SCHEDULES

Annex I Commitments

Exhibit A            Form of Note
Exhibit B            Form of Borrowing Request
Exhibit C            Form of Compliance Certificate
Exhibit D            Security Documents
Exhibit E            Form of Assignment and Assumption

Schedule 1.01A       Scheduled Capital Expenditures
Schedule 7.05        Litigation
Schedule 7.06        Environmental Matters
Schedule 7.12        Insurance
Schedule 7.14        Subsidiaries
Schedule 7.18        Gas Imbalances
Schedule 7.19        Marketing Contracts
Schedule 7.20        Swap Agreements
Schedule 7.25        Affiliate Transactions
Schedule 7.27        Material Contracts and Operating Agreements
Schedule 7.29        Deposit and Securities Accounts, Etc.
Schedule 8.07        Insurance
Schedule 9.05        Investments

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<PAGE>
     CREDIT  AGREEMENT dated as of July 28, 2014, is among BARON PRODUCTION LLC,
a Texas limited liability company (the "Borrower"), BARON ENERGY, INC., a Nevada
corporation (the "Parent"),  each of the Lenders from time to time party hereto,
and PETRO CAPITAL ENERGY CREDIT, LLC ("PCEC"),  as administrative  agent for the
Lenders (in such capacity,  together with its  successors in such capacity,  the
"Administrative Agent").

                                 R E C I T A L S

     A. The Borrower has requested that the Lenders  provide  certain term loans
to the Borrower.

     B. The  Lenders  have  agreed to make such  loans  subject to the terms and
conditions of this Agreement.

     C. In consideration of the mutual covenants and agreements herein contained
and of the loans and  commitments  hereinafter  referred to, the parties  hereto
agree as follows:

                                    ARTICLE I
                       DEFINITIONS AND ACCOUNTING MATTERS

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

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

     "Acquisition"  means the  acquisition of certain Oil and Gas Properties and
other  Property  pursuant  to  the  terms  and  conditions  of  the  Acquisition
Documents.

     "Acquisition Agreement" means the Purchase and Sale Agreement dated May 29,
2014,  between Ricochet  Energy,  Inc., a Texas  corporation,  the other sellers
specified therein, and the Parent.

     "Acquisition  Documents"  means  (a)  the  Acquisition  Agreement  and  all
schedules,  exhibits  and annexes  thereto and all side  letters and  agreements
affecting the terms thereof or entered into in connection therewith, and (b) all
bills of sale, assignments,  agreements,  instruments and documents executed and
delivered in connection therewith.

     "Acquisition  Properties"  means  the  Oil  and Gas  Properties  and  other
Properties acquired by the Borrower pursuant to the Acquisition Documents.

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

     "Affiliate" means, with respect to a specified Person,  another Person that
directly,  or  indirectly  through  one or more  intermediaries,  Controls or is
Controlled by or is under common Control with the Person specified.
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     "Aggregate  Exposure"  means with  respect  to any  Lender at any time,  an
amount equal to such Lender's  Commitment  then in effect or, if the Commitments
have been  terminated  or  expired,  the  amount  of such  Lender's  Loans  then
outstanding.

     "Aggregate  Exposure  Percentage"  means with  respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's  Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.

     "Agreement" means this Credit Agreement,  as the same may from time to time
be amended, modified, supplemented or restated.

     "Applicable Make Whole Percentage" means 0.50% (50 basis points).

     "Applicable  Percentage" means, as to any Lender, the percentage which such
Lender's  Commitment then constitutes of the Commitments of all the Lenders (or,
after the Loans are made, the percentage which the outstanding  principal amount
of such Lender's Loan then  constitutes  of the  aggregate  principal  amount of
Loans of all the Lenders then outstanding). The initial Applicable Percentage of
each Lender is set forth  opposite the name of such Lender on Annex I, or in the
Assignment and Assumption  pursuant to which such Lender becomes a party hereto,
as applicable.

     "Approved Petroleum Engineers" means (a) Cawley,  Gillespie and Associates,
(b) Haas Petroleum  Engineering  Services,  Inc., and (c) any other  independent
petroleum engineers reasonably acceptable to the Administrative Agent.

     "Asset  Sale"  means  the  sale,  lease,  conveyance,   exchange  or  other
disposition of assets or property of any kind whatsoever, whether real, personal
or mixed and whether  tangible  or  intangible,  whether now owned or  hereafter
acquired,  of  the  Borrower  or  any  Subsidiary  other  than  (a)  any  single
transaction or series of related transactions that involves assets having a fair
market value of less than $50,000; (b) a transfer of assets between or among the
Borrower and its Subsidiaries that are Wholly-Owned  Subsidiary Guarantors;  (c)
the sale of Hydrocarbons as produced in the ordinary course of business; and (d)
any sale or other disposition of damaged, worn-out, obsolete or no longer useful
assets or properties.

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

     "Availability  Period"  means the period from and  including  the Effective
Date to but excluding October 31, 2015.

     "Blocked  Account  Agreement  (DSR)" means the Blocked  Account  Agreement,
dated as of July 28,  2014,  among  PlainsCapital  Bank,  the  Borrower  and the
Administrative Agent with respect to the Debt Service Reserve Account.

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

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     "BOE" means one barrel of oil equivalent,  calculated by converting natural
gas to oil  equivalent  barrels at a ratio of six (6) Mcf of natural  gas to one
barrel of oil.

     "Borrower's Designated Account" means account number 1738421930 standing in
the name of the Borrower at Wells Fargo Bank, N.A..

     "Borrowing" means any borrowing of Loans on the same date.

     "Borrowing  Date" means any  Business  Day  specified  by the Borrower in a
Borrowing  Request as a date on which the Borrower  requests the Lenders to make
Loans hereunder.

     "Borrowing  Request"  means a request by the  Borrower  for a Borrowing  in
accordance with Section 2.03.

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

     "Called  Principal"  means,  with  respect to any  prepayment  of the Loans
pursuant  to Section  3.03 (other than  pursuant to Section  3.03(c)(iii)),  the
principal  amount  of the  Loans so  prepaid,  and in the  event  the  Loans are
accelerated,  or have  become or have been  declared to be  immediately  due and
payable  pursuant to Section 10.02 or otherwise,  or in respect of which a claim
has  arisen in any  proceeding  under any  Debtor  Relief  Law,  as the  context
requires,  the principal  amount of the Loans so accelerated,  or that have been
declared,  or have become,  due and payable  pursuant to Section 10.02, or as to
which a claim has arisen in any Insolvency Proceeding.

     "Called Principal Determination Date" means, with respect to any prepayment
of  the  Loans  pursuant  to  Section  3.03  (other  than  pursuant  to  Section
3.03(c)(iii)),  the  date of such  prepayment,  and in the case  the  Loans  are
accelerated,  or have become or are declared to be  immediately  due and payable
pursuant  to  Section  10.02 or  otherwise,  or in  respect of which a claim has
arisen in any proceeding  under any Debtor Relief Law, as the context  requires,
the date of such  acceleration,  or the date that the  Loans  were  declared  or
became  due and  payable,  or the date that such claim in a  proceeding  under a
Debtor Relief Law arose, as applicable.

     "Called Principal  Determination  Period" means, as to any Called Principal
and related  Projected  Interest  Payments,  the period from the relevant Called
Principal Determination Date to and including the Maturity Date.

     "Capital  Expenditures"  means for any period,  with respect to any Person,
the aggregate of all  expenditures by such Person and its  Subsidiaries  for the
acquisition or leasing  (pursuant to a capital lease) of fixed or capital assets
or additions  to  equipment  (including  replacements,  capitalized  repairs and
improvements  during such  period)  that should be  capitalized  under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.

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

                                       3
<PAGE>
     "Cash Equivalents" "means, as at any date of determination,  (i) marketable
securities (a) issued or directly and unconditionally  guaranteed as to interest
and  principal by the United States  Government,  or (b) issued by any agency of
the  United  States  the  obligations  of which are backed by the full faith and
credit of the United  States,  in each case maturing  within one year after such
date;  (ii)  marketable  direct  obligations  issued by any state of the  United
States of America or any political  subdivision  of any such state or any public
instrumentality  thereof,  in each case maturing within one year after such date
and having,  at the time of the  acquisition  thereof,  a rating of at least A-1
from S&P or at least P-1 from Moody's;  (iii)  commercial paper maturing no more
than one year from the date of creation  thereof and having,  at the time of the
acquisition  thereof,  a rating  of at least  A-1 from S&P or at least  P-1 from
Moody's;  (iv) certificates of deposit or bankers'  acceptances  maturing within
one year  after  such  date and  issued  or  accepted  by any  Lender  or by any
commercial  bank organized under the laws of the United States of America or any
state  thereof or the  District  of  Columbia  that (a) is at least  "adequately
capitalized"  (as  defined in the  regulations  of its primary  Federal  banking
regulator),  and (b) has Tier 1 capital (as defined in such  regulations) of not
less than $250,000,000;  and (v) shares of any money market mutual fund that (a)
has at least ninety five percent (95%) of its assets  invested  continuously  in
the types of investments  referred to in clauses (i) and (ii) above, (b) has net
assets of not less than $500,000,000,  and (c) has the highest rating obtainable
from either S&P or Moody's.

     "Certificate of Designation" means the Certificate of Designation of Series
A Convertible Preferred Shares of the Parent.

     "Change of Control" means an event or series of events by which:

     (a) the  Permitted  Investors  shall cease to own and  control  legally and
beneficially  (free and clear of all  Liens),  either  directly  or  indirectly,
Equity Interests in the Parent representing more than 25% of the combined voting
power of all of Equity  Interests  entitled  to vote for members of the board of
directors or equivalent  governing body of the Parent on a  fully-diluted  basis
(and taking into account all such  securities  that the Permitted  Investors and
PCEC and  Affiliates  of PCEC have the right to acquire  pursuant  to any option
right (as defined in clause (b) below)); or

     (b) any  "person" or "group" (as such terms are used in Sections  13(d) and
14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit
plan of such person or its subsidiaries,  and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
other than the Permitted Investors becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities  Exchange Act of 1934,  except that a
person or group shall be deemed to have "beneficial ownership" of all securities
that  such  person  or group has the right to  acquire,  whether  such  right is
exercisable  immediately  or only  after the  passage of time  (such  right,  an
"option  right")),  directly  or  indirectly,  of 25%  or  more  of  the  equity
securities of the Parent  entitled to vote for members of the board of directors
or equivalent  governing body of the Parent on a fully-diluted basis (and taking
into account all such  securities that such "person" or "group" has the right to
acquire pursuant to any option right); or

     (c) any Person or two or more Persons acting in concert shall have acquired
by contract or otherwise,  or shall have entered into a contract or  arrangement

                                       4
<PAGE>
that, upon consummation  thereof, will result in its or their acquisition of the
power to exercise,  directly or  indirectly,  a controlling  influence  over the
management or policies of the Parent,  or control over the equity  securities of
the Parent  entitled to vote for members of the board of directors or equivalent
governing body of the Parent on a  fully-diluted  basis (and taking into account
all such  securities  that such  Person  or  Persons  have the right to  acquire
pursuant to any option right)  representing  25% or more of the combined  voting
power of such securities; or

     (d) the Parent  shall  cease,  directly or  indirectly,  to own and control
legally and beneficially all of the Equity Interests issued by the Borrower free
and clear of all Liens,  other  than Liens  created  pursuant  to, or  expressly
permitted by, the Security Documents).

     "Change  in Law"  means  (a)  the  adoption  of any  law,  treaty,  rule or
regulation after the date of this Agreement,  (b) any change in any law, treaty,
rule or  regulation  or in the  interpretation  or  application  thereof  by any
Governmental Authority after the date of this Agreement or (c) compliance by any
Lender (or,  for  purposes of Section  5.01(b)),  by any lending  office of such
Lender or by such Lender's holding company, if any) with any request,  guideline
or  directive  (whether  or not  having  the  force of law) of any  Governmental
Authority  made or  issued  after  the  date of this  Agreement;  PROVIDED  that
notwithstanding  anything herein to the contrary, (i) the Dodd-Frank Wall Street
Reform  and  Consumer  Protection  Act  and  all  requests,  rules,  guidelines,
requirements or directives thereunder or issued in connection therewith (whether
or not  having  the  force of law) or in  implementation  thereof,  and (ii) all
requests,  rules,  regulations,   guidelines,   interpretations,   requirements,
interpretations  and or  directives  promulgated  by the Bank for  International
Settlements,  the Basel  Committee on Banking  Supervision  (or any successor or
similar  authority)  or the  United  States or  foreign  regulatory  authorities
(whether  or not having the force of law),  in each case  pursuant to Basel III,
shall in each case be deemed to be a  "Change  in Law",  regardless  of the date
enacted, adopted, issued or implemented.

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

     "Collateral" means all Property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.

     "Collateral  Addition  Date"  means any date or dates  that  Administrative
Agent  requests  that  the  Borrower  cause  all Oil and Gas  Properties  of the
Borrower and its Subsidiaries not subject to the Lien of the Security  Documents
to become subject to such Lien.

     "Commitment" means as to any Lender, the obligation of such Lender, if any,
to make Loans to the Borrower  hereunder in a principal amount not to exceed the
amount set forth under the heading  "Commitment"  opposite such Lender's name on
the Annex I. The original  aggregate  amount of the  Commitments  is $5,000,000,
provided,  however,  that if, during the Availability  Period,  (a) the Borrower
obtains a valid assignment of the Riggan Lease from Ricochet  Energy,  Inc., (b)
grants to the Administrative Agent a perfected first priority lien on the Riggan
Lease, and (c) the  Administrative  Agent is satisfied with the Borrower's title
to the Riggan Lease, the aggregate amount of the Commitments  shall be increased
by $150,000 and each Lender's  Commitment shall be increased  proportionately in

                                       5
<PAGE>
accordance with its then existing Applicable Percentage.  In connection with any
such increase, the Administrative Agent may supplement Annex I hereto to reflect
such increase.

     "Consolidated  Current  Assets" means, at any time, the total assets of the
Borrower  and its  Subsidiaries  which  would be shown as  current  assets  on a
balance sheet of the Borrower and its  Subsidiaries  prepared in accordance with
GAAP at such time.

     "Consolidated   Current   Liabilities"   means,  at  any  time,  the  total
liabilities of the Borrower and its Subsidiaries which would be shown as current
liabilities on a balance sheet of the Borrower and its Subsidiaries  prepared in
accordance  with  GAAP at such  time;  but in any  event  excluding  as  current
liabilities current maturities of the principal of the Loans and the VPP (to the
extent that the VPP would  otherwise  be included  within  Consolidated  Current
Liabilities).

     "Consolidated  Debt Ratio" means,  as at the last day of any calendar month
and subject to the  provisions  of Section  1.04(b),  the ratio of (a) an amount
equal to Consolidated Total Indebtedness on such day, to (b) Consolidated EBITDA
for the 12-month period then ended.

     "Consolidated  EBITDA" means,  for any period and subject to the provisions
of Section 1.04(b), Consolidated Net Income for such period, without duplication
and to the extent  reflected as a charge in the  statement of such  Consolidated
Net Income for such  period,  the sum of (a) income tax  expense,  (b)  interest
expense, and (c) depreciation and amortization expense; provided,  however, that
for purposes of determining the Consolidated  Interest Coverage Ratio in Section
9.01(a)  and the  Consolidated  Debt  Ratio in Section  9.01(b),  (i) on each of
October 31, 2014,  November 30, 2014 and December 31, 2014,  Consolidated EBITDA
shall be deemed equal to  Consolidated  EBITDA for the three month period ending
on such date  multiplied  by 4, (ii) on each of January 31,  2015,  February 28,
2015  and  March  31,  2015,  Consolidated  EBITDA  shall  be  deemed  equal  to
Consolidated  EBITDA for the six month period ending on such date  multiplied by
2, (iii) on each of April 30, 2015,  May 31, 2015 and June,  2015,  Consolidated
EBITDA  shall be deemed equal to  Consolidated  EBITDA for the nine month period
ending on such date multiplied by 4/3, and (iv) on the last day of each calendar
month after June 30, 2014,  Consolidated  EBITDA shall be equal to  Consolidated
EBITDA for the twelve month period ending on such date.

     "Consolidated  Interest Coverage Ratio" means, for any period, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.

     "Consolidated  Interest  Expense" means,  for any period and subject to the
provisions  of  Section  1.04(b),   total  interest   expense   (including  that
attributable  to Capital Leases) of the Borrower and its  Subsidiaries  for such
period with  respect to all  outstanding  Indebtedness  of the  Borrower and its
Subsidiaries.

     "Consolidated  Net  Income"  means,  for  any  period  and  subject  to the
provisions  of Section  1.04(b),  the  consolidated  net income (or loss) of the
Borrower and its Subsidiaries,  determined on a consolidated basis in accordance
with GAAP;  provided that there shall be excluded (a) the income (or deficit) of
any Person  accrued prior to the date it becomes a Subsidiary of the Borrower or
is merged into or consolidated with the Borrower or any of its Subsidiaries, (b)
the income (or deficit) of any Person  (other than a Subsidiary of the Borrower)

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<PAGE>
in which the  Borrower or any of its  Subsidiaries  has an  ownership  interest,
except to the extent that any such income is actually  received by the  Borrower
or such  Subsidiary in the form of cash dividends or similar cash  distributions
and (c) the  undistributed  earnings of any  Subsidiary  of the  Borrower to the
extent that the declaration or payment of dividends or similar  distributions by
such  Subsidiary  is not at the time  permitted by the terms of any  Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary.

     "Consolidated  Total  Indebtedness"  means,  at any date and subject to the
provisions  of  Section   1.04(b),   the  aggregate   principal  amount  of  all
Indebtedness of the Borrower and its Subsidiaries at such date,  determined on a
consolidated basis in accordance with GAAP.

     "Contractual  Obligation"  means,  as to any Person,  any  provision of any
security  issued  by  such  Person  or of any  agreement,  instrument  or  other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

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

     "Debtor  Relief  Laws" means the  Bankruptcy  Code of the United  States of
America, and all other liquidation, conservatorship,  bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement,  receivership,  insolvency,
reorganization,  or similar  debtor  relief  Laws of the United  States or other
applicable jurisdictions from time to time in effect.

     "Debt Service  Reserve  Account"  means the segregated  account  3100050594
standing in the name of the Borrower at PlainsCapital  Bank. The  Administrative
Agent shall have sole dominion and control over the Debt Service Reserve Account
pursuant  to   documentation   satisfactory   in  form  and   substance  to  the
Administrative Agent.

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

     "Defaulting Lender" means, subject to Section 2.05, any Lender that (a) has
failed to (i) fund all or any  portion of the Loans  required to be funded by it
hereunder  within two Business  Days of the date such Loans were  required to be
funded  hereunder unless such Lender notifies the  Administrative  Agent and the
Borrower  in  writing  that  such  failure  is  the  result  of  such   Lender's
determination  that one or more  conditions  precedent to funding (each of which
conditions   precedent,   together  with  any  applicable   default,   shall  be
specifically  identified in such writing) has not been satisfied, or (ii) pay to
the  Administrative  Agent or any other Lender any other  amount  required to be
paid by it  hereunder  within two  Business  Days of the date when due,  (b) has
notified  the Borrower or the  Administrative  Agent in writing that it does not
intend to comply with its funding  obligations  hereunder,  or has made a public
statement to that effect  (unless such  writing or public  statement  relates to

                                       7
<PAGE>
such Lender's  obligation to fund a Loan hereunder and states that such position
is based on such Lender's  determination  that a condition  precedent to funding
(which  condition  precedent,  together with any  applicable  default,  shall be
specifically   identified  in  such  writing  or  public  statement)  cannot  be
satisfied),  (c) has failed, within three Business Days after written request by
the  Administrative  Agent  or  the  Borrower,  to  confirm  in  writing  to the
Administrative  Agent and the Borrower that it will comply with its  prospective
funding  obligations  hereunder  (provided  that such Lender shall cease to be a
Defaulting  Lender  pursuant  to this  clause (c) upon  receipt of such  written
confirmation by the Administrative Agent and the Borrower), or (d) has, or has a
direct or  indirect  parent  company  that has,  (i)  become  the  subject  of a
proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver,
custodian,  conservator,  trustee,  administrator,  assignee  for the benefit of
creditors or similar  Person charged with  reorganization  or liquidation of its
business or assets,  including the FDIC or any other state or federal regulatory
authority  acting  in such a  capacity;  PROVIDED  that a Lender  shall not be a
Defaulting Lender solely by virtue of the ownership or acquisition of any Equity
Interest in that Lender or any direct or indirect  parent  company  thereof by a
Governmental  Authority so long as such ownership interest does not result in or
provide such Lender with  immunity  from the  jurisdiction  of courts within the
United States or from the enforcement of judgments or writs of attachment on its
assets or  permit  such  Lender  (or such  Governmental  Authority)  to  reject,
repudiate,  disavow or  disaffirm  any  contracts or  agreements  made with such
Lender.  Any  determination  by the  Administrative  Agent  that a  Lender  is a
Defaulting  Lender under clauses (a) through (d) above shall be  conclusive  and
binding  absent  manifest  error,  and  such  Lender  shall  be  deemed  to be a
Defaulting  Lender  (subject to Section 2.10) upon delivery of written notice of
such determination to the Borrower and each Lender.

     "Default Rate" shall mean a rate of interest per annum equal to 17%.

     "Disbursement Letter" has the meaning specified in Section 6.01(bb).

     "Discounted Yield Value" means, with respect to Projected Interest Payments
on any Called  Principal of the Loan,  the amount  obtained by  discounting  the
aggregate Projected Interest Payments that would accrue on such Called Principal
during the Called Principal  Determination  Period therefor at a discount factor
(applied on monthly  basis for each calendar  month during the Called  Principal
Determination  Period)  equal to the  Reinvestment  Yield  with  respect to such
Projected Interest Payments.

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

     "dollars",  "Dollars" or "$" refers to lawful money of the United States of
America.

                                       8
<PAGE>
     "Effective  Date"  means  the date on which  the  conditions  specified  in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).

     "ECF Percentage" means 50%.

     "Environmental  Laws" means any and all  Requirements  of Law pertaining in
any way to health,  safety the  environment,  the preservation or reclamation of
natural  resources,  or the  management,  release or  threatened  release of any
hazardous  substance,  in  effect  in any and all  jurisdictions  in  which  the
Borrower or any Subsidiary is conducting or at any time has conducted  business,
or where any Property of the Borrower or any  Subsidiary  is located,  including
without limitation, the Oil Pollution Act of 1990 ("OPA"), as amended, the Clean
Air Act, as amended, the Comprehensive  Environmental,  Response,  Compensation,
and Liability Act of 1980  ("CERCLA"),  as amended,  the Federal Water Pollution
Control  Act, as amended,  the  Occupational  Safety and Health Act of 1970,  as
amended,  the  Resource  Conservation  and  Recovery  Act of 1976  ("RCRA"),  as
amended,  the Safe Drinking Water Act, as amended,  the Toxic Substances Control
Act, as amended,  the Superfund  Amendments and  Reauthorization Act of 1986, as
amended,  the  Hazardous  Materials  Transportation  Act, as amended,  and other
environmental  conservation  or protection  Requirements  of Law. The term "oil"
shall have the meaning  specified in OPA, the terms  "hazardous  substance"  and
"release" (or "threatened  release") have the meanings  specified in CERCLA, the
terms "solid waste" and "disposal" (or "disposed")  have the meanings  specified
in RCRA and the term "oil and gas waste"  shall have the  meaning  specified  in
Section  91.1011  of the  Texas  Natural  Resources  Code  ("Section  91.1011");
provided,  however,  that (a) in the event either OPA,  CERCLA,  RCRA or Section
91.1011 is amended so as to broaden  the  meaning of any term  defined  thereby,
such  broader  meaning  shall apply  subsequent  to the  effective  date of such
amendment and (b) to the extent the laws of the state or other  jurisdiction  in
which any  Property of the  Borrower or any  Subsidiary  is located  establish a
meaning for "oil," "hazardous  substance,"  "release," "solid waste," "disposal"
or "oil and gas  waste"  which is broader  than that  specified  in either  OPA,
CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

     "Environmental Permit" means any permit,  registration,  license, approval,
consent,  exemption,  variance, or other authorization  required under or issued
pursuant to applicable Environmental Laws.

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

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

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

                                       9
<PAGE>
     "Event of Default" has the meaning assigned such term in Section 10.01.

     "Excepted  Liens"  means:  (a)  Liens  for  Taxes,   assessments  or  other
governmental  charges  or  levies  which are not  delinquent  or which are being
contested in good faith by appropriate  action and for which  adequate  reserves
have been  maintained in  accordance  with GAAP;  (b) Liens in  connection  with
workers' compensation,  unemployment insurance or other social security, old age
pension or public  liability  obligations  which are not delinquent or which are
being  contested  in good faith by  appropriate  action  and for which  adequate
reserves have been maintained in accordance with GAAP; (c) statutory  landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation  of law  in  the  ordinary  course  of  business  or  incident  to the
exploration,  development,  operation and  maintenance of Oil and Gas Properties
each of which is in respect of obligations  that are not delinquent or which are
being  contested  in good faith by  appropriate  action  and for which  adequate
reserves have been  maintained in accordance  with GAAP; (d)  contractual  Liens
which arise in the ordinary course of business under operating agreements, joint
venture  agreements,  oil and gas  partnership  agreements,  oil and gas leases,
farm-out agreements,  division orders, contracts for the sale, transportation or
exchange of oil and  natural  gas,  unitization  and  pooling  declarations  and
agreements,  area of mutual interest agreements,  overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements,   gas  balancing  or  deferred  production  agreements,   injection,
repressuring and recycling agreements,  salt water or other disposal agreements,
seismic or other geophysical  permits or agreements,  and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate  action
and for which adequate  reserves have been  maintained in accordance  with GAAP,
provided  that any such Lien  referred  to in this  clause  does not  materially
impair the use of any  material  Property  covered by such Lien for the purposes
for which such Property is held by the Borrower or any  Subsidiary or materially
impair the value of such Property subject  thereto;  (e) Liens arising solely by
virtue of any  statutory  or common law  provision  relating to banker's  liens,
rights of set-off or similar  rights and  remedies  and  burdening  only deposit
accounts  or other  funds  maintained  with a creditor  depository  institution,
provided that no such deposit account is a dedicated cash collateral  account or
is subject to  restrictions  against  access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by Borrower or any of its  Subsidiaries  to provide  collateral  to the
depository  institution;  (f)  easements,  restrictions,   servitudes,  permits,
conditions,  covenants,  exceptions  or  reservations  in  any  Property  of the
Borrower or any  Subsidiary  for the purpose of roads,  pipelines,  transmission
lines,  transportation  lines,  distribution  lines for the removal of gas, oil,
coal or other minerals or timber,  and other like purposes,  or for the joint or
common use of real estate, rights of way, facilities and equipment,  that do not
secure any monetary  obligations  and which in the  aggregate do not  materially
impair the use of any material  Property for the purposes of which such Property
is held by the Borrower or any Subsidiary or materially  impair the value of any
material  Property subject thereto;  (g) Liens on cash or securities  pledged to
secure performance of tenders,  surety and appeal bonds,  government  contracts,
performance and return of money bonds, bids, trade contracts,  leases, statutory
obligations,  regulatory  obligations  and other  obligations  of a like  nature
incurred in the ordinary  course of business  and (h)  judgment  and  attachment
Liens not giving  rise to an Event of  Default,  provided  that any  appropriate
legal  proceedings  which may have been duly  initiated  for the  review of such
judgment shall not have been finally  terminated or the period within which such

                                       10
<PAGE>
proceeding may be initiated shall not have expired and no action to enforce such
Lien has been commenced;  provided,  further that Liens described in clauses (a)
through  (e)  shall  remain  "Excepted  Liens"  only for so long as no action to
enforce such Lien has been commenced and no intention to  subordinate  the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to
be hereby  implied or expressed  by the  permitted  existence  of such  Excepted
Liens.

     "Excess Cash Flow" means,  for any calendar month,  Consolidated Net Income
for such month plus  depreciation and  amortization  expense of the Borrower and
its Subsidiaries for such month, plus reasonable cash reserves for pending field
work  determined  in  good  faith  by  the  Borrower,  minus  Scheduled  Capital
Expenditures of the Borrower and its  Subsidiaries  for such month. For purposes
of this definition,  "Scheduled  Capital  Expenditures"  means scheduled Capital
Expenditures of the Borrower and its Subsidiaries set forth on Schedule 1.01A.

     "Excluded  Taxes"  means,  with respect to the  Administrative  Agent,  any
Lender, or any other recipient of any payment to be made by or on account of any
obligation  of the Borrower or any  Guarantor  hereunder or under any other Loan
Document,  (a) income or  franchise  taxes  imposed on (or  measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or,  in the case of any  Lender,  in which  its  applicable  lending  office  is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other  jurisdiction  in which the Borrower or any
Guarantor is located and (c) any U.S.  federal  withholding  Taxes imposed under
FATCA.

     "FAS 133" means  Statement  of Financial  Accounting  Standard 133 (and any
statements  replacing,  modifying or superseding such statement)  adopted by the
Financial Accounting Standards Board.

     "FATCA"  means  Sections  1471 through 1474 of the Code,  as of the date of
this  Agreement  (or any  amended or  successor  version  that is  substantively
comparable  and not  materially  more  onerous to comply  with),  any current or
future  regulations  or  official  interpretations  thereof  and any  agreements
entered into pursuant to Section 1471(b)(1) of the Code.

     "FDIC" means the Federal Deposit  Insurance  Corporation,  or any successor
thereto.

     "Financial Officer" means, for any Person, any president or vice president,
the chief executive officer,  the chief financial officer,  principal accounting
officer, treasurer or controller of such Person. Unless otherwise specified, all
references  herein to a  Financial  Officer  means a  Financial  Officer  of the
Borrower.

     "Financial  Statements" means the financial  statement or statements of the
Parent and its Subsidiaries referred to in Section 7.04(a).

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect  from time to time  subject to the terms and  conditions
set forth in Section 1.04.

                                       11
<PAGE>
     "Governmental  Authority"  means the  government  of the  United  States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government  over the Borrower,  any  Subsidiary,  any of their  Properties,  the
Administrative Agent, or any Lender.

     "Guarantee  Obligation" as to any Person (the "guaranteeing  person"),  any
obligation,  including a reimbursement,  counterindemnity or similar obligation,
of the guaranteeing Person that guarantees or in effect guarantees,  or which is
given to  induce  the  creation  of a  separate  obligation  by  another  Person
(including  any bank under any letter of credit)  that  guarantees  or in effect
guarantees,  any  Indebtedness,  leases,  dividends  or other  obligations  (the
"primary  obligations") of any other third Person (the "primary obligor") in any
manner,  whether  directly  or  indirectly,  including  any  obligation  of  the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property  constituting  direct or indirect security  therefor,
(ii) to  advance  or supply  funds (1) for the  purchase  or payment of any such
primary  obligation or (2) to maintain  working capital or equity capital of the
primary  obligor or  otherwise  to  maintain  the net worth or  solvency  of the
primary obligor,  (iii) to purchase  property,  securities or services primarily
for the  purpose of assuring  the owner of any such  primary  obligation  of the
ability of the primary  obligor to make  payment of such primary  obligation  or
(iv)  otherwise  to  assure  or hold  harmless  the  owner of any  such  primary
obligation  against loss in respect thereof;  provided,  however,  that the term
Guarantee  Obligation shall not include  endorsements of instruments for deposit
or  collection in the ordinary  course of business.  The amount of any Guarantee
Obligation of any guaranteeing  person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable  amount of the primary  obligation in
respect of which such  Guarantee  Obligation is made and (b) the maximum  amount
for which such  guaranteeing  person may be liable  pursuant to the terms of the
instrument embodying such Guarantee  Obligation,  unless such primary obligation
and the maximum amount for which such guaranteeing  person may be liable are not
stated or  determinable,  in which case the amount of such Guarantee  Obligation
shall be such guaranteeing person's maximum reasonably  anticipated liability in
respect thereof as determined by the Borrower in good faith.

     "Guarantors"  means the  Parent and each  Subsidiary  that  guarantees  the
Obligations pursuant to Section 8.14(b).

     "Guaranty  Agreement" means that certain Guaranty and Collateral  Agreement
among the Borrower and its  Subsidiaries  and  Administrative  Agent pursuant to
which the  Guarantors  (other than the Parent) have  guaranteed  the payment and
performance of the Obligations

     "Hazardous Material" means any substance regulated or as to which liability
might  arise  under any  applicable  Environmental  Law and  including,  without
limitation: (a) any chemical, compound, material, product, byproduct,  substance
or waste  defined as or  included  in the  definition  or meaning of  "hazardous
substance,"  "hazardous  material,"  "hazardous  waste,"  "solid  waste," "toxic
waste,"  "extremely  hazardous  substance,"  "toxic  substance,"  "contaminant,"
"pollutant,"  or words of  similar  meaning  or import  found in any  applicable
Environmental Law; (b) petroleum  hydrocarbons,  petroleum  products,  petroleum
substances,  natural gas, oil, oil and gas waste, crude oil, and any components,

                                       12
<PAGE>
fractions,  or derivatives  thereof;  and (c)  radioactive  materials,  asbestos
containing materials, polychlorinated biphenyls, or radon.

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

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

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

     "Indebtedness"  means,  for any Person,  the sum of the following  (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances,  debentures, notes or other similar instruments;
(b) all obligations of such Person (whether  contingent or otherwise) in respect
of letters of credit,  surety or other  bonds and similar  instruments;  (c) all
accounts payable and all accrued  expenses,  liabilities or other obligations of
such  Person  to pay the  deferred  purchase  price  of  Property  or  services,
including earnout obligations; (d) all obligations under Capital Leases; (e) all
Synthetic  Lease  Obligations;  (f) all  Indebtedness  (as  defined in the other
clauses  of this  definition)  of others  secured by (or for which the holder of
such Indebtedness has an existing right,  contingent or otherwise, to be secured
by) a Lien on any Property of such Person,  whether or not such  Indebtedness is
assumed by such Person; (g) all Guarantee  Obligations of such Person in respect
of Indebtedness  (as defined in the other clauses of this  definition);  (h) all
obligations  to  deliver  commodities,  goods or  services,  including,  without
limitation,  Hydrocarbons,  in  consideration  of one or more advance  payments,
other than gas balancing  arrangements in the ordinary  course of business;  (i)
all  obligations to pay for goods or services even if such goods or services are
not actually received or utilized by such Person (other than firm transportation
or storage,  or drilling  contracts);  (j) any Indebtedness of a partnership for
which such Person is liable  either by  agreement,  by  operation of law or by a
governmental  requirement  but only to the  extent  of such  liability;  (k) all
Disqualified   Stock  issued  by  such  Person,   valued,  as  of  the  date  of
determination,  at the greater of (i) the maximum aggregate amount that would be
payable  upon  maturity,  redemption,  repayment  or  repurchase  thereof (or of
Disqualified  Stock  or  Indebtedness  into  which  such  Disqualified  Stock is
convertible or exchangeable) and (ii) the maximum liquidation preference of such
Disqualified  Stock;  and (l) all  obligations of such Person in respect of Swap
Agreements,  valued at the Swap Termination  Value thereof.  The Indebtedness of
any  Person  shall  include  all  obligations  of such  Person of the  character
described  above to the extent such  Person  remains  legally  liable in respect
thereof  notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.

                                       13
<PAGE>
     "Indemnified Taxes" means (a) Taxes, other than Excluded Taxes,  imposed on
or with  respect to any payment made by or on account of any  obligation  of any
Loan Party under any Loan Document and (b) to the extent not otherwise described
in (a), Other Taxes.

     "Indemnitee" has the meaning assigned such term in Section 12.03(b).

     "Information" has the meaning assigned such term in Section 12.11.

     "Initial  Reserve  Report" means the report of the Borrower with respect to
certain Oil and Gas Properties of the Borrower and its Subsidiaries  prepared by
Cawley, Gillespie and Associates as of January 31, 2014.

     "Interest  Payment Date" means (a) the last day of each  calendar  month to
occur while any principal of this Note is outstanding,  commencing on August 31,
2014, and (b) the Maturity Date.

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

     "Lenders"  means the  Persons  listed on Annex I and any Person  that shall
have become a party hereto pursuant to an Assignment and Assumption,  other than
any such Person that ceases to be a party hereto  pursuant to an Assignment  and
Assumption.

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

                                       14
<PAGE>
purposes of this Agreement, the Borrower and the Subsidiaries shall be deemed to
be the  owner of any  Property  which it has  acquired  or  holds  subject  to a
conditional  sale  agreement,  or  leases  under  a  financing  lease  or  other
arrangement  pursuant to which  title to the  Property  has been  retained by or
vested in some other Person in a transaction intended to create a financing.

     "Loans" has the meaning specified in Section 2.01.

     "Loan Documents" means this Agreement,  the Notes, the Security  Documents,
the ORI Conveyances, the Warrant Agreement, and the Warrant.

     "Loan  Parties" means the Parent,  the Borrower and each  Subsidiary of the
Borrower that is a party to a Loan Document.

     "Make-Whole  Premium"  means,  with respect to any Called  Principal of the
Loan,  an amount  equal to the  Discounted  Yield  Value  thereon for the Called
Principal Determination Period.

     "Material  Adverse Effect" means a material  adverse change in, or material
adverse effect on (a) the business, operations, Property, prospects or condition
(financial or otherwise) of the Borrower and the  Guarantors,  taken as a whole,
(b) the  ability of the  Borrower  and the  Guarantors  to perform  any of their
obligations  under any Loan Document,  (c) the validity or enforceability of any
Loan  Document or (d) the rights and  remedies of or benefits  available  to the
Administrative Agent, any other Agent or any Lender under any Loan Document.

     "Material Contract" means, with respect to any Person, (a) each contract to
which such Person is a party involving aggregate  consideration payable to or by
such  Person  of  $50,000  or more  in any  year or  otherwise  material  to the
business,   condition   (financial  or  otherwise),   operations,   performance,
properties or prospects of such Person, and (b) the Acquisition Documents.

     "Material  Indebtedness"  means  Indebtedness  (other than the  Loans),  or
obligations in respect of one or more Swap Agreements, of any one or more of the
Parent,  the Borrower and the  Subsidiaries  in an  aggregate  principal  amount
exceeding  $100,000.  For purposes of  determining  Material  Indebtedness,  the
"principal  amount"  of the  obligations  of the  Parent,  the  Borrower  or any
Subsidiary  in  respect  of any Swap  Agreement  at any  time  shall be the Swap
Termination Value owed by the Borrower or any Subsidiary, as applicable.

     "Maturity Date" means July 31, 2016; provided,  however,  that if such date
is not a Business  Day, the Maturity Date shall be the next  preceding  Business
Day.

     "Mcf" means one thousand cubic feet.

     "Moody's" means Moody's Investors  Service,  Inc. and any successor thereto
that is a nationally recognized rating agency.

                                       15
<PAGE>
     "Mortgaged  Properties"  means  any  Oil and Gas  Properties  owned  by the
Borrower or any  Guarantor  which is subject to the Liens  existing and to exist
under the terms of the Security Documents.

     "Net Cash  Proceeds"  means (a) in  connection  with any Asset  Sale or any
Recovery Event,  the proceeds  thereof in the form of cash and Cash  Equivalents
(including  any such proceeds  received by way of deferred  payment of principal
pursuant  to a note or  installment  receivable  or  purchase  price  adjustment
receivable  or otherwise,  but only as and when  received) of such Asset Sale or
Recovery Event, net of attorneys' fees,  accountants'  fees,  investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien  expressly  permitted  hereunder on any asset that is the subject of such
Asset  Sale or  Recovery  Event  (other  than any Lien  pursuant  to a  Security
Document) and other customary fees and expenses  actually incurred in connection
therewith  and net of taxes  paid or  reasonably  estimated  to be  payable as a
result  thereof  (after  taking  into  account  any  available  tax  credits  or
deductions  and any tax sharing  arrangements)  and (b) in  connection  with any
issuance or sale of Equity Interests or any incurrence of Indebtedness, the cash
proceeds  received from such  issuance or  incurrence,  net of attorneys'  fees,
investment  banking  fees,   accountants'  fees,   underwriting   discounts  and
commissions  and  other  customary  fees  and  expenses   actually  incurred  in
connection therewith.

     "Non-Defaulting  Lender"  means,  at any time,  each  Lender  that is not a
Defaulting Lender at such time.

     "Notes"  means the  promissory  notes of the Borrower  described in Section
2.02(d)  and being  substantially  in the form of Exhibit A,  together  with all
amendments, modifications, replacements, extensions and rearrangements thereof.

     "Newton  Note"  means  the  Consolidated   Combined  and  Restated  Secured
Promissory  Note dated April 23,  2014,  between  the Parent and Newton  Energy,
Inc., a California corporation, in the original principal amount of $785,108.47.

     "Obligations" means all advances to, and debts,  liabilities,  obligations,
covenants  and  duties of, any Loan Party  arising  under any Loan  Document  or
otherwise  with  respect to any Loan,  in each case  whether  direct or indirect
(including  those acquired by  assumption),  absolute or  contingent,  due or to
become due, now existing or hereafter  arising and  including  interest and fees
and Make-Whole Premium that accrue or arise after the commencement by or against
any Loan  Party or any  Affiliate  thereof  of any  proceeding  under any Debtor
Relief Laws naming such Person as the debtor in such  proceeding,  regardless of
whether such interest,  fees and  Make-Whole  Premium are allowed claims in such
proceeding.

     "OFAC" means the U.S. Department of the Treasury's Office of Foreign Assets
Control.

     "Oil  and  Gas  Properties"  means  (a)  Hydrocarbon  Interests;   (b)  the
Properties now or hereafter pooled or unitized with Hydrocarbon  Interests;  (c)
all  presently   existing  or  future   unitization,   pooling   agreements  and
declarations  of pooled units and the units created thereby  (including  without
limitation  all  units  created  under  orders,  regulations  and  rules  of any
Governmental  Authority)  which may affect all or any portion of the Hydrocarbon

                                       16
<PAGE>
Interests;  (d)  all  operating  agreements,  contracts  and  other  agreements,
including  production  sharing contracts and agreements,  which relate to any of
the  Hydrocarbon  Interests  or the  production,  sale,  purchase,  exchange  or
processing of Hydrocarbons  from or attributable to such Hydrocarbon  Interests;
(e) all  Hydrocarbons  in and  under  and  which  may be  produced  and saved or
attributable to the Hydrocarbon  Interests,  including all oil in tanks, and all
rents, issues, profits, proceeds,  products,  revenues and other incomes from or
attributable to the  Hydrocarbon  Interests;  (f) all tenements,  hereditaments,
appurtenances and Properties in any manner appertaining,  belonging,  affixed or
incidental to the Hydrocarbon Interests and (g) all Properties,  rights, titles,
interests  and estates  described  or referred to above,  including  any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used,  held for use or useful  in  connection  with the  operating,  working  or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs,  automotive  equipment,  rental equipment or other personal Property which
may be on such  premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells,  injection wells
or other wells,  structures,  fuel separators,  liquid extraction plants,  plant
compressors,  pumps,  pumping units,  field  gathering  systems,  tanks and tank
batteries,  fixtures,  valves, fittings,  machinery and parts, engines, boilers,
meters,  apparatus,  equipment,  appliances,  tools, implements,  cables, wires,
towers,  casing, tubing and rods, surface leases,  rights-of-way,  easements and
servitudes together with all additions, substitutions,  replacements, accessions
and attachments to any and all of the foregoing. References in this Agreement to
Oil  and  Gas  Properties  of the  Borrower  and its  Subsidiaries  include  the
Acquisition Properties.

     "Operating  Agreements"  means  operating  agreements  or  joint  operating
agreements  among or between the Borrower or any  Subsidiary  and other  working
interest owners.

     "Organization  Documents"  means, (a) with respect to any corporation,  the
certificate  or articles of  incorporation,  the bylaws and any  certificate  of
designation (or equivalent or comparable  constitutive documents with respect to
any non-U.S.  jurisdiction);  (b) with respect to any limited liability company,
the  certificate  or  articles  of  formation  or  organization   and  operating
agreement;  and (c) with respect to any  partnership,  joint  venture,  trust or
other  form  of  business  entity,  the  partnership,  joint  venture  or  other
applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect  thereto filed in connection with its formation or
organization with the applicable  Governmental  Authority in the jurisdiction of
its formation or organization and, if applicable, any certificate or articles of
formation or organization of such entity.

     "ORI" means the limited term  overriding  royalty  interests to be conveyed
from the Borrower to the  Administrative  Agent, for the pro rata benefit of the
Lenders, pursuant to an ORI Conveyance.

     "ORI Conveyance" means each ORI conveyance by and between Borrower and or a
Subsidiary, as grantor, and Administrative Agent, as grantee, for the benefit of
the Lenders,  required under Section 2.06 of this Agreement. Each ORI Conveyance
shall be in form and substance satisfactory to the Administrative Agent.

     "Other  Taxes"  means any and all  present or future  stamp or  documentary
taxes or any other excise or Property  taxes,  charges or similar levies arising

                                       17
<PAGE>
from any payment made hereunder or from the  execution,  delivery or enforcement
of, or otherwise  with respect to, this  Agreement and any other Loan  Document;
provided  that,  for the  avoidance  of doubt,  "Other  Taxes" shall not include
Excluded Taxes

     "Paid in Full" means (i) the irrevocable and  indefeasible  payment in full
in cash of all  principal,  interest  (including  interest  accruing  during the
pendency of an  insolvency  or  liquidation  proceeding,  regardless  of whether
allowed  or  allowable  in  such  insolvency  or  liquidation   proceeding)  and
Make-Whole Premium, if any, on all Loans outstanding under the Credit Agreement,
(ii) the payment in full in cash or posting of cash collateral in respect of all
other Obligations or amounts that are outstanding under the Credit Agreement and
the other Loan Documents, and (iii) the termination of all Commitments under the
Credit Agreement.

     "Parent" has the meaning specified in the preamble of this Agreement.

     "Parent Guaranty" has the meaning specified on Exhibit D.

     "Parent Pledge Agreement" has the meaning specified on Exhibit D.

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

     "Participant Register" has the meaning specified in Section 12.04(c)(iii).

     "PCEC Sub 1" means PCEC Sub 1, LLC, a Texas limited liability company.

     "Permitted Investors" means (a) Ronnie L. Steinocher and Lisa Hamilton, and
(b) PCEC and its Affiliates.

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

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

     "Pro Forma Balance Sheet" has the meaning specified in Section 7.04(b).

     "Projected  Interest  Payments"  means,  as to any Called  Principal of the
Loans,  the  aggregate  amount of interest  that would accrue  during the Called
Principal  Determination  Period therefor  assuming that (x) such interest would
accrue on each day during such Called Principal Determination Period at the rate
of 12% per annum,  and (y) such Called  Principal  remained  outstanding in full
during the entire Called Principal Determination Period.

     "Projections" has the meaning specified in Section 7.24.

                                       18
<PAGE>
     "Property"  means any  interest in any kind of  property or asset,  whether
real,  personal  or  mixed,  or  tangible  or  intangible,   including,  without
limitation, cash, securities, accounts and contract rights.

     "Recovery  Event"  means any  settlement  of or  payment  in respect of any
property or casualty insurance claim or any condemnation  proceeding relating to
any asset of the Borrower or any Subsidiary.

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

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

     "Registration  Rights  Agreement" means the Registration  Rights Agreement,
dated as of the Effective Date, among the Parent, the  Administrative  Agent and
PCEC.

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

     "Reinvestment  Deferred  Amount"  means with  respect  to any  Reinvestment
Event,  the  aggregate  Net  Cash  Proceeds  received  by  the  Borrower  or any
Subsidiary in connection therewith that are not applied to prepay Loans pursuant
to Section 3.03(c)(ii) as a result of the delivery of a Reinvestment Notice.

     "Reinvestment  Event"  means any  Recovery  Event in  respect  of which the
Borrower has delivered a Reinvestment Notice.

     "Reinvestment  Notice"  means a written  notice  executed by a  Responsible
Officer of the  Borrower  stating  that no Event of Default has  occurred and is
continuing and that the Borrower  (directly or indirectly  through a Subsidiary)
intends and expects to use all or a specified  portion of the Net Cash  Proceeds
of a Recovery Event to acquire or repair assets useful in its business.

     "Reinvestment  Prepayment  Amount"  means with respect to any  Reinvestment
Event,  the  Reinvestment  Deferred  Amount  relating  thereto  less any  amount
expended prior to the relevant Reinvestment Prepayment Date to acquire or repair
assets useful in the Borrower's business.

     "Reinvestment  Prepayment  Date"  means with  respect  to any  Reinvestment
Event,  the earlier of (a) the date  occurring  90 days after such  Reinvestment
Event and (b) the date on which the Borrower  shall have  determined  not to, or
shall  have  otherwise  ceased  to,  acquire  or  repair  assets  useful  in the
Borrower's  business  with  all or any  portion  of  the  relevant  Reinvestment
Deferred Amount.

     "Reinvestment  Yield" means, with respect to Projected Interest Payments on
any Called  Principal,  the sum of the (x) Applicable Make Whole Percentage plus
(y) the One Month LIBO Rate.  For purposes of this  definition,  "One Month LIBO
Rate" means the rate per annum equal to the rate of  interest  published  on the
Effective  Date in the Money Rates section of THE WALL STREET  JOURNAL under the

                                       19
<PAGE>
caption "London interbank offered rate" or "Libor Rate" for Dollars for a period
of one month.

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

     "Release"  means  any  depositing,  spilling,  leaking,  pumping,  pouring,
placing, emitting, discarding,  abandoning,  emptying,  discharging,  migrating,
injecting, escaping, leaching, dumping, or disposing.

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

     "Required Lenders" means, at any time, the holders of at least 66-?% of (a)
the  Commitments  then in effect and (b) if the  Commitments  have terminated or
expired,  the aggregate unpaid  principal amount of the Loans then  outstanding;
provided  that the portion of the  Commitments  or Loans held by any  Defaulting
Lender  shall be excluded  for  purposes of making a  determination  of Required
Lenders.

     "Requirement of Law" means, as to any Person, the Organization Documents of
such Person,  and any law,  treaty,  rule or regulation or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case 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 Report" means the Initial Reserve Report and a report, in form and
substance reasonably satisfactory to the Administrative Agent, setting forth, as
of each  August 1 or February 1 the oil and gas  reserves  located in the United
States  attributable  to the Oil  and Gas  Properties  of the  Borrower  and the
Subsidiaries,  together with a projection  of the rate of production  and future
net income,  taxes,  operating  expenses and capital  expenditures  with respect
thereto as of such date, based upon the economic assumptions consistent with the
Administrative Agent's lending requirements at the time.

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

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

     "Riggan Lease" means the Oil and Gas Lease entered into on August 18, 2010,
between  James  Riggan,  Yvonne  Riggan,  the other  lessors  party  thereto and

                                       20
<PAGE>
Ricochet Energy, Inc., as to which a Memorandum of Oil and Gas Lease is recorded
Volume 79, Page 460 of the Official Records of Frio County, Texas.

     "Sanctioned  Country"  means  a  country  subject  to a  sanctions  program
identified    on   the   list    maintained    by   OFAC   and    available   at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx,
or as otherwise published from time to time.

     "Sanctioned  Person"  means  (a) a Person  named on the list of  "Specially
Designated  Nationals  and Blocked  Persons"  maintained  by OFAC  available  at
http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx,
or as  otherwise  published  from  time to  time,  or (b) (i) an  agency  of the
government  of a  Sanctioned  Country,  (ii)  an  organization  controlled  by a
Sanctioned  Country,  or (iii) a person resident in a Sanctioned Country, to the
extent subject to a sanctions program administered by the U.S. Department of the
Treasury's Office of Foreign Assets Control.

     "S&P" means  Standard & Poor's Ratings Group, a division of The McGraw Hill
Corporation, and any successor thereto.

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

     "Secured  Parties"  means,  collectively,  the  Administrative  Agent,  the
Lenders,  each co-agent or sub-agent appointed by the Administrative  Agent from
time to time pursuant to Section  11.05,  and the other Persons the  Obligations
owing to which are or are  purported to be secured by the  Collateral  under the
terms of the Security Documents.

     "Security Documents" means the Guaranty Agreement, Parent Guaranty, Blocked
Account Agreement (DSR), Parent Pledge Agreement,  mortgages, deeds of trust and
other  agreements,  instruments  or  certificates  described  or  referred to in
Exhibit  D,  and  any  and  all  other  agreements,   instruments,  consents  or
certificates  now or  hereafter  executed  and  delivered by the Borrower or any
other Person as security for the payment or performance of the Obligations,  the
Notes,  and/or this  Agreement,  as such  agreements  may be amended,  modified,
supplemented or restated from time to time.

     "Series A  Convertible  Preferred  Stock"  means the  Series A  Convertible
Preferred Stock of the Parent, par value $0.001 per share.

     "Solvent" when used with respect to any Person,  means that, as of any date
of  determination,  (a) the amount of the "present fair  saleable  value" of the
assets  of  such  Person  will,  as of  such  date,  exceed  the  amount  of all
"liabilities of such Person,  contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing  determinations  of the  insolvency  of debtors,  (b) the present fair
saleable  value of the assets of such Person will,  as of such date,  be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured,  (c) such Person will not have,
as of such date, an  unreasonably  small amount of capital with which to conduct
its business,  and (d) such Person will be able to pay its debts as they mature.
For purposes of this  definition,  (i) "debt" means liability on a "claim",  and
(ii)  "claim"  means any (x) right to  payment,  whether  or not such a right is

                                       21
<PAGE>
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured,  disputed,  undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to  payment,  whether  or not such  right to an  equitable  remedy is
reduced  to  judgment,  fixed,  contingent,   matured  or  unmatured,  disputed,
undisputed, secured or unsecured.

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

     "Subsidiary Guarantor" means each Subsidiary of the Borrower.

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

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

     "Synthetic  Lease  Obligation"  means the monetary  obligation  of a Person
under (a) a so-called  synthetic,  off-balance  sheet or tax retention lease, or
(b) an  agreement  for the use or  possession  of property  (including  sale and
leaseback  transactions),  in each case, creating obligations that do not appear
on the  balance  sheet of such  Person but which,  upon the  application  of any
Debtor Relief Laws to such Person, would be characterized as the indebtedness of
such Person (without regard to accounting treatment).

     "Taxes"  means  all  present  or future  taxes,  levies,  imposts,  duties,
deductions,  withholdings (including backup withholding),  assessments,  fees or
other charges  imposed by any  Governmental  Authority,  including any interest,
additions to tax or penalties applicable thereto.

     "Total G&A Expense" means,  for any period,  normal and customary  expenses
and costs satisfactory to Administrative Agent, paid in cash, that in accordance

                                       22
<PAGE>
with  GAAP  are  classified  as  general  and  administrative  costs,  including
consulting fees, salary, bonuses,  employee benefits, rent, supplies, travel and
entertainment,  insurance,  accounting,  legal,  engineering  and broker related
fees, required to manage the affairs of the Loan Parties; provided, that, to the
extent any of the  foregoing  are  capitalized,  they shall be  included  in the
definition of Total G&A Expense.

     "Transactions" means the collective reference to:

     (a) with respect to the Borrower,  the execution,  delivery and performance
by the Borrower of this  Agreement and each other Loan Document to which it is a
party,  the  borrowing of Loans,  and the use of the proceeds  thereof,  and the
grant of Liens by the  Borrower on  Mortgaged  Properties  and other  Properties
pursuant to the Security Documents;

     (b) with respect to each Guarantor, the execution, delivery and performance
by such Guarantor of each Loan Document to which it is a party, the guaranteeing
of the  Obligations  and such  Guarantor's  grant of the security  interests and
provision of collateral under the Security Documents,  and the grant of Liens by
such  Guarantor on Mortgaged  Properties  and other  Properties  pursuant to the
Security Documents;

     (c)  the  consummation  of  the  Acquisition  and  the  other  transactions
contemplated by the Acquisition Documents;

     (d) the issuance by the Parent of the Warrants to the Administrative Agent,
for the benefit of the Lenders, pursuant to the Warrant Agreement;

     (e) the sale of the VPP by the  Borrower to PCEC Sub 1 pursuant to, and the
consummation of the other transactions contemplated by, the VPP Documents;

     (f) the assignment by the Parent of the Shaffer leases to the Borrower; and

     (g) the payment of the fees and expenses  incurred in  connection  with the
consummation of the foregoing.

     "U.S.  Person" means any Person that is a "United States Person" as defined
in Section 7701(a)(30) of the Code.

     "VPP" means the Production Payment (as defined in the VPP Conveyance).

     "VPP Conveyance"  means the Conveyance of Term Overriding  Royalty Interest
dated the date hereof, from the Borrower, as grantor, to PCEC Sub 1, as grantee.

     "VPP  Documents"  means  (a)  the  VPP  Purchase  Agreement,  (b)  the  VPP
Conveyance,  (c)  the  VPP  Production  and  Marketing  Agreement,  (d)  the VPP
Mortgage,  and  (e)  all  assignments,  agreements,  instruments  and  documents
executed and delivered in connection therewith.

     "VPP Mortgage" means the Mortgage (as defined in the VPP Conveyance).

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<PAGE>
     "VPP Production and Marketing Agreement" means the Production and Marketing
Agreement dated the date hereof between the Borrower and PCEC Sub 1.

     "VPP Purchase  Agreement"  means the Purchase and Sale Agreement  dated the
date hereof between the Borrower, as seller, and PCEC Sub 1, as buyer.

     "Warrant  Agreement"  means that certain Warrant  Agreement dated as of the
date hereof between the Parent and the Administrative  Agent, as the same may be
amended, restated, modified or supplemented from time to time.

     "Warrants" means all warrants to purchase common shares of the Parent under
the Warrant Agreement.

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

     "Wholly Owned Subsidiary  Guarantor" means any Subsidiary Guarantor that is
a Wholly-Owned Subsidiary of the Borrower.

     Section 1.03 Terms  Generally;  Rules of  Construction.  The definitions of
terms herein  shall apply  equally to the singular and plural forms of the terms
defined.  Whenever  the  context may  require,  any  pronoun  shall  include the
corresponding  masculine,  feminine  and  neuter  forms.  The  words  "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation".  The word "will"  shall be  construed  to have the same meaning and
effect as the word  "shall".  Unless  the  context  requires  otherwise  (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement,  instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments,  supplements or modifications  set forth in the
Loan  Documents),  (b) any  reference  herein to any law shall be  construed  as
referring to such law as amended,  modified,  codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person's  successors and assigns  (subject to
the  restrictions  contained  in the Loan  Documents),  (d) the words  "herein",
"hereof" and  "hereunder",  and words of similar  import,  shall be construed to
refer to this  Agreement  in its entirety  and not to any  particular  provision
hereof,  (e) with  respect to the  determination  of any time  period,  the word
"from" means "from and including" and the word "to" means "to and including" and
(f) any reference herein to Articles,  Sections, Annexes, Exhibits and Schedules
shall be construed  to refer to Articles and Sections of, and Annexes,  Exhibits
and Schedules to, this  Agreement.  No provision of this  Agreement or any other
Loan  Document  shall be  interpreted  or  construed  against any Person  solely
because such Person or its legal representative drafted such provision.

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<PAGE>
     Section  1.04  Accounting  Terms  and  Determinations;   GAAP.  (a)  Unless
otherwise   specified  herein,   all  accounting  terms  used  herein  shall  be
interpreted,  all  determinations  with respect to accounting  matters hereunder
shall be made, and all financial  statements and  certificates and reports as to
financial  matters required to be furnished to the  Administrative  Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial  Statements except for changes in which Borrower's
independent  certified  public  accountants  concur and which are  disclosed  to
Administrative Agent on the next date on which financial statements are required
to be  delivered  to the Lenders  pursuant to Section  8.01(a);  provided  that,
unless the Borrower and the Required  Lenders shall  otherwise agree in writing,
no such change  shall modify or affect the manner in which  compliance  with the
covenants  contained herein is computed such that all such computations shall be
conducted  utilizing  financial  information  presented  consistently with prior
periods.

     (b) Notwithstanding  anything to the contrary under GAAP, (i) no portion of
the VPP shall be treated as interest  expense in  calculating  (x)  Consolidated
EBITDA, or (y) the Consolidated Interest Coverage Ratio in Section 9.01(a), (ii)
no portion of the VPP shall be included in  Consolidated  Total  Indebtedness in
calculating the Consolidated  Debt Ratio in Section  9.01(b),  and (iii) neither
the  production  allocated to the VPP, nor the proceeds from the sale of the VPP
pursuant  to the VPP  Purchase  and Sale  Agreement,  shall be  included  in the
calculation of Consolidated EBITDA and Consolidated Net Income.

                                   ARTICLE II
                               THE LOANS AND ORI'S

     Section 2.01 Commitments.  Subject to the terms and conditions hereof, each
Lender  severally  agrees to make one or more term  loans (the  "Loans")  to the
Borrower  from time to time  during  the  Availability  Period  in an  aggregate
principal  amount  not to exceed the amount of the  Commitment  of such  Lender.
Amounts prepaid or repaid on account of the Loans may not be reborrowed.

     Section 2.02 Loans and Borrowings.

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

     (b) Notes.  The Loans made by each Lender  shall be  evidenced  by a single
promissory note of the Borrower in  substantially  the form of Exhibit A, dated,
in the case of (i) any Lender party hereto as of the date of this Agreement,  as
of the date of this  Agreement  or (ii) any Lender that  becomes a party  hereto
pursuant  to an  Assignment  and  Assumption,  as of the  effective  date of the
Assignment and Assumption,  payable to such Lender and its registered assigns in
a principal  amount equal to its Commitment or, if its Commitment has expired or
terminated,  in the amount of its outstanding  Loans on such date, and otherwise
duly completed.  The date,  amount,  and interest rate of each Loan made by each
Lender,  and all payments  made on account of the  principal  thereof,  shall be
recorded by such Lender on its books for its Note,  and,  prior to any transfer,

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<PAGE>
may be  endorsed  by such  Lender  on a  schedule  attached  to such Note or any
continuation  thereof  or on any  separate  record  maintained  by such  Lender.
Failure to make any such  notation or to attach a schedule  shall not affect any
Lender's or the  Borrower's  rights or  obligations  in respect of such Loans or
affect the validity of such transfer by any Lender of its Note.  The accounts or
records  maintained  by the  Administrative  Agent  and  each  Lender  shall  be
conclusive  absent manifest error of the amount of the Loans made by the Lenders
to the Borrower and the interest and payments thereon.

     Section  2.03  Requests for  Borrowings.  The Borrower may borrow under the
Commitments  during the Availability  Period on any Business Day,  provided that
the Borrower shall give the Administrative  Agent irrevocable notice pursuant to
a Borrowing Request (which notice must be received by the  Administrative  Agent
prior to 10:00 a.m. (Dallas,  Texas time), at least ten (10) Business Days prior
to the requested  Borrowing  Date)  specifying (i) the amount of the Loans to be
Borrowed,  (ii) the requested Borrowing Date, and (iii) the purpose of the Loans
in reasonable detail. Each Borrowing under the Commitments shall be in an amount
equal not less than $250,000 (or, if the then aggregate  unused  Commitments are
less than  $250,000,  such  lesser  amount).  Promptly  following  receipt  of a
Borrowing Request in accordance with this Section 2.03, the Administrative Agent
shall  advise  each  Lender of the  details  thereof  and of the  amount of such
Lender's Loan to be made as part of the requested  Borrowing.  No more than four
Borrowings may be requested under this Agreement. The aggregate principal amount
of the Loans borrowed on the Effective Date shall not exceed $3,000,000.

     Section 2.04 Funding of Borrowings.

     (a) Funding by Lenders.  Each Lender  shall make each Loan to be made by it
hereunder  on the  Borrowing  Date  thereof  by  wire  transfer  of  immediately
available  funds  by 1:00  p.m.,  Dallas,  Texas  time,  to the  account  of the
Administrative  Agent most recently  designated by it for such purpose by notice
to the Lenders.  The Administrative  Agent will make such Loans available to the
Borrower by, at the discretion of the  Administrative  Agent,  (i)  transferring
immediately  available  funds equal to the amount of such Loan to the Borrower's
Designated  Account,  or (ii) wire  transfer  of such funds in  accordance  with
instructions provided to (and reasonably acceptable to) the Administrative Agent
by the Borrower; provided that the Administrative Agent may deduct from proceeds
of the Loans made on the Effective Date all fees, costs and expenses  (including
attorneys'  fees) that are payable by the Borrower  under the Loan Documents and
the amount  required to fund the Debt Service Reserve Account in accordance with
Section 3.02(d). Nothing herein shall be deemed to obligate any Lender to obtain
the funds for its Loans 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 Loans in any particular place or manner.

     (b) Presumption of Funding by the Lenders.  Unless the Administrative Agent
shall have  received  notice  from a Lender  prior to the  proposed  date of any
Borrowing that such Lender will not make available to the  Administrative  Agent
such Lender's share of such Borrowing,  the Administrative Agent may assume that
such  Lender  has made such  share  available  on such date in  accordance  with
Section 2.04(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable  Borrowing  available to the  Administrative  Agent,

                                       26
<PAGE>
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 interest rate then payable on the
Notes  pursuant  to this  Agreement  or (ii) in the  case of the  Borrower,  the
interest  rate then  payable on the Notes  pursuant to this  Agreement.  If such
Lender  pays such amount to the  Administrative  Agent,  then such amount  shall
constitute such Lender's Loan included in such Borrowing.

     Section 2.05 Defaulting Lenders.

     (a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary
contained in this Agreement,  if any Lender becomes a Defaulting  Lender,  then,
until such time as such Lender is no longer a Defaulting  Lender,  to the extent
permitted by Requirement of Law:

     (i) Waivers and Amendments.  Such  Defaulting  Lender's right to approve or
disapprove any amendment, waiver or consent with respect to this Agreement shall
be restricted as set forth in the definition of Required Lenders.

     (ii) Reallocation of Payments. Any payment of principal,  interest, fees or
other  amounts  received  by the  Administrative  Agent for the  account of such
Defaulting  Lender  (whether  voluntary or mandatory,  at maturity,  pursuant to
ARTICLE  X or  otherwise,  or  received  by  the  Administrative  Agent  from  a
Defaulting  Lender pursuant to Section 12.08),  shall be applied at such time or
times as may be determined by the  Administrative  Agent (or, in the case of the
second clause below,  as requested by the  Borrower) as follows:  first,  to the
payment of any amounts  owing by that  Defaulting  Lender to the  Administrative
Agent hereunder;  second,  as the Borrower may request (so long as no Default or
Event of Default  exists),  to the  funding of any Loan in respect of which such
Defaulting  Lender has failed to fund its  portion  thereof as  required by this
Agreement, as determined by the Administrative Agent; third, if so determined by
the Administrative Agent and the Borrower,  to be held in a non-interest bearing
deposit account and released in order to satisfy  obligations of such Defaulting
Lender to fund its Loan  under this  Agreement;  fourth,  to the  payment of any
amounts owing to the Lenders as a result of any judgment of a court of competent
jurisdiction  obtained by any Lender against such Defaulting  Lender as a result
of that  Defaulting  Lender's  breach of its  obligations  under this Agreement;
fifth, so long as no Default or Event of Default  exists,  to the payment of any
amounts  owing  to the  Borrower  as a  result  of any  judgment  of a court  of
competent  jurisdiction  obtained by the Borrower against that Defaulting Lender
as a result of that Defaulting  Lender's  breach of its  obligations  under this
Agreement;  and sixth, to such Defaulting  Lender or as otherwise  directed by a
court of competent jurisdiction. Any payments, prepayments or other amounts paid
or payable to a Defaulting Lender that are applied (or held) to pay amounts owed
by a Defaulting Lender shall be deemed paid to and redirected by that Defaulting
Lender, and each Lender irrevocably consents hereto.

     (b) Defaulting  Lender Cure. If the Borrower and the  Administrative  Agent
agree  in  writing  in  their  sole  discretion  that a  Lender  is no  longer a
Defaulting Lender,  the Administrative  Agent will so notify the parties hereto,
whereupon as of the effective  date  specified in such notice and subject to any
conditions  set forth  therein,  that  Lender  will,  to the extent  applicable,

                                       27
<PAGE>
purchase at par that portion of  outstanding  Loans of the other Lenders or take
such other actions as the Administrative  Agent may determine to be necessary to
cause the Loans to be held on a pro rata basis by the Lenders in accordance with
their  Applicable  Percentages,  whereupon  such  Lender  will  cease  to  be  a
Defaulting Lender;  provided that no adjustments will be made retroactively with
respect to fees accrued or payments  made by or on behalf of the Borrower  while
that Lender was a Defaulting Lender; and provided,  further,  that except to the
extent otherwise  expressly agreed by the affected parties,  no change hereunder
from  Defaulting  Lender to Lender  will  constitute  a waiver or release of any
claim of any party hereunder arising from that Lender's having been a Defaulting
Lender.

     Section  2.06  ORI's(a)  . As  partial  consideration  for  the  respective
Commitment of each Lender,  so long as any of the  Obligations  are  outstanding
(other than customary indemnity obligations with respect to which no amounts are
currently  due),  the Borrower  agrees to, and shall cause each  Subsidiary  to,
convey to  Administrative  Agent for the pro-rata  benefit of the Lenders a 2.0%
ORI (based on 100% of the working  interest) in each well of the Borrower or any
Subsidiary now existing or completed or recompleted  after the Effective  Date..
Each ORI shall terminate at 11:59 p.m., Central time, on July 31, 2017, provided
that if at any time  before  such time and date an Event of Default  shall occur
and be continuing  for a period in excess of 60 days, the term of each ORI shall
automatically be extended to 11:59 p.m.,  Central time, on July 31, 2018 and the
Borrower shall  promptly  execute and deliver such documents as may be requested
by the Administrative Agent to evidence such extension.

     Once the Obligations have been Paid in Full, Borrower shall have no further
obligation  to grant or convey,  and  neither the  Administrative  Agent nor any
Lender shall be entitled to, any further  conveyance  of ORI,  other than as may
have been conveyed hereunder on or prior to the date of such repayment.

                                   ARTICLE III
              PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

     Section  3.01  Repayment  of Loans.  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 Maturity Date.

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<PAGE>
     Section 3.02 Interest.

     (a) Interest Rate. Subject to the provisions of Section 3.02(b),  the Loans
shall bear interest at a per annum rate equal to 12%.

     (b) Default  Rate.  (i) If any amount of principal of the Loans is not paid
when due (without  regard to any applicable  grace  periods),  whether at stated
maturity,  by  acceleration  or  otherwise,  such amount shall  thereafter  bear
interest  at a rate per  annum at all  times  equal to the  Default  Rate to the
fullest extent permitted by applicable law.

     (ii) If any amount  (other  than  principal  of the  Loans)  payable by the
Borrower  under any Loan  Document is not paid when due  (without  regard to any
applicable  grace  periods),  whether at stated  maturity,  by  acceleration  or
otherwise,  then such amount shall  thereafter bear interest at a rate per annum
at all times  equal to the  Default  Rate to the  fullest  extent  permitted  by
applicable law.

     (iii) Upon the request of the Administrative Agent (which request may apply
retroactively  from  the  date  that  the  applicable  Event  of  Default  first
occurred), while any Event of Default exists, the Borrower shall pay interest on
the  principal  amount of all  outstanding  Obligations  hereunder at a rate per
annum at all times equal to the Default Rate to the fullest extent  permitted by
applicable law.

     (c) Interest Payment Dates.  Accrued interest on each Loan shall be payable
in arrears on each Interest Payment Date for such Loan and on the Maturity Date;
provided that interest accrued pursuant to Section 3.02(b) shall be payable from
time  to  time  on  demand.  The  Borrower  hereby  irrevocably  authorizes  the
Administrative Agent to, and the may, at any time and from time to time, without
notice to the Borrower,  withdraw and apply funds from the Debt Service  Reserve
Account to pay any  principal  of and/or  interest on the Loans that is then due
and payable (including on each Interest Payment Date).

     (d) Interest Rate Computations. All interest hereunder shall be computed on
the  basis of a year of 360 days,  unless  such  computation  would  exceed  the
Highest  Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year).

     (e)  Debt  Service  Reserve  Account.  The  Borrower  shall  establish  and
maintain,  at the  Borrower'  expense,  the Debt  Service  Reserve  Account with
PlainsCapital  Bank.  Pursuant to the Blocked  Account  Agreement  (DSR) and the
other Loan  Documents,  the  Administrative  Agent  shall have at all times sole
dominion and control over the Debt Service  Reserve  Account.  Contemporaneously
with the funding of the Loans on the Effective  Date, the Borrower shall deposit
into the Debt  Service  Reserve  Account  proceeds of the Loans in the amount of

                                       29
<PAGE>
$150,000.  With respect to the Debt Service Reserve Account,  the Administrative
Agent shall receive copies of the Borrower's monthly bank account statements and
such other supporting information as shall from time to time be requested by the
Administrative Agent and, if available, internet access to information regarding
such account. As security for the Obligations, the Borrower hereby grants to the
Administrative  Agent, for the benefit of the Secured Parties,  a first priority
security interest in the Debt Service Reserve Account and all funds from time to
time on deposit in the Debt Service  Reserve  Account.  Once the Stewart1-H well
achieves for a continuous  period of 30 calendar  days a minimum  average  daily
gross  production  of 175 BOE  calculated  as  gross  barrels  of oil and Mcf of
natural gas  converted at a ratio of 6 Mcf of natural gas per barrel,  all funds
on deposit in the Debt Service Reserve Account shall be released to the Borrower
if no Default shall have occurred and be continuing.

     Section 3.03 Prepayments.

     (a) Optional Prepayments. The Borrower shall have the right at any time and
from time to time to  prepay  the  Loans in whole or in part,  subject  to prior
notice in accordance with Section 3.03(b).

     (b) Notice and Terms of Optional Prepayment.  The Borrower shall notify the
Administrative  Agent in writing  of any  prepayment  hereunder,  not later than
12:00  noon,  Dallas,  Texas  time,  ten (10)  Business  Days before the date of
prepayment.  Each  such  notice  shall be  irrevocable  and  shall  specify  the
prepayment  date and the principal  amount of the Loans or portion thereof to be
prepaid.  Promptly following receipt of any such notice relating to a Borrowing,
the Administrative Agent shall advise the Lenders of the contents thereof.  Each
partial  prepayment  of the  Loans  shall be shall be in a  principal  amount of
$500,000 or a whole  multiple of $50,000 in excess  thereof or, in each case, if
less, the entire principal amount of the Loans then outstanding. Each prepayment
of the Loans shall be applied ratably to the Loans.

     (c) Mandatory  Prepayments.  (i) If any Equity Interests (excluding (x) any
issuance of Series A Convertible  Preferred  Stock in exchange for  Indebtedess,
(y) any Equity  Interests  issued  pursuant to Section 8.19, and (z) any Warrant
Shares  (as  defined  in  the  Warrant)  issued  pursuant  to  the  Warrant)  or
Indebtedness  (excluding any  Indebtedness  incurred in accordance  with Section
9.02) shall be issued or incurred by the Parent or any of its  Subsidiaries,  an
amount equal to 100% of the Net Cash  Proceeds  thereof  shall be applied on the
date of such issuance or incurrence toward the prepayment of the Loans.

     (ii) If on any  date  any the  Borrower  or any of its  Subsidiaries  shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then,  except in
the case of a Recovery  Event where the  Borrower has  delivered a  Reinvestment
Notice to the  Administrative  Agent, such Net Cash Proceeds shall be applied on
such date toward the prepayment of the Loans; provided that on each Reinvestment
Prepayment  Date with  respect  to a  Recovery  Event,  an  amount  equal to the
Reinvestment  Prepayment Amount with respect to the relevant  Reinvestment Event
shall be applied toward the prepayment of the Loans.

     (iii)  If,  for any  calendar  month of the  Borrower  commencing  with the
calendar month ending on January 31, 2015,  there shall be Excess Cash Flow, the
Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF

                                       30
<PAGE>
Percentage  of such Excess Cash Flow toward the  prepayment  of the Loans.  Each
such  prepayment  and commitment  reduction  shall be made on a date (an "Excess
Cash Flow  Application  Date") no later  than five (5)  Business  Days after the
earlier  of (i) the date on  which  the  financial  statements  of the  Borrower
referred to in Section  8.01(d),  for the  calendar  month with respect to which
such  prepayment  is made,  are required to be  delivered to the  Administrative
Agent and the Lenders and (ii) the date such  financial  statements are actually
delivered.

     (iv) The  application of any  prepayment  pursuant to Section 3.03 shall be
accompanied  by accrued  interest to the date of such  prepayment  on the amount
prepaid.

     (d) Make-Whole  Premium.  The Make-Whole  Premium (if any) shall be due and
payable  with  respect  to  any  Called   Principal  on  the  Called   Principal
Determination Date for such Called Principal.

     Section 3.04 Fees.

     (a) Commitment  Fee. As  consideration  for the  Commitments,  the Borrower
agrees to pay to the  Administrative  Agent, for the account of each Lender,  on
the Effective Date a commitment fee in the aggregate amount of $100,000.

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

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

     (a) Payments by the Borrower. The Borrower shall make each payment required
to be made by it hereunder (whether of principal,  interest, fees, or otherwise)
prior to 12:00 noon,  Dallas,  Texas time, on the date when due, in  immediately
available   funds,   without   defense,   deduction,   recoupment,   set-off  or
counterclaim. Fees, once paid, shall be fully earned and shall not be refundable
under any  circumstances  absent manifest error. Any amounts received after such
time on any date may, in the discretion of the  Administrative  Agent, be deemed
to have been  received  on the next  succeeding  Business  Day for  purposes  of
calculating   interest  thereon.   All  such  payments  shall  be  made  to  the
Administrative  Agent at its offices  specified  in Section  12.01,  except that
payments  pursuant to ARTICLE V and Section  12.03 shall be made directly to the
Persons entitled  thereto.  The  Administrative  Agent shall distribute any such
payments  received by it for the account of any other Person to the  appropriate
recipient promptly following receipt thereof.  If any payment hereunder shall be
due on a day that is not a Business  Day, the date for payment shall be extended
to the next  succeeding  Business Day, and, in the case of any payment  accruing
interest,  interest  thereon shall be payable for the period of such  extension.
All payments hereunder shall be made in dollars.

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

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<PAGE>
     (c) Sharing of Payments by Lenders.  If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise,  obtain payment in respect of any
principal of or interest on any of its Loans resulting in such Lender  receiving
payment of a greater proportion of the aggregate amount of its Loans and accrued
interest  thereon than the  proportion  received by any other  Lender,  then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit  of all  such  payments  shall  be  shared  by the  Lenders  ratably  in
accordance  with the  aggregate  amount of principal of and accrued  interest on
their  respective  Loans;  provided  that  (i) if any  such  participations  are
purchased  and  all or any  portion  of  the  payment  giving  rise  thereto  is
recovered,  such  participations  shall  be  rescinded  and the  purchase  price
restored  to the  extent  of such  recovery,  without  interest,  and  (ii)  the
provisions  of this  Section  4.01(c)  shall  not be  construed  to apply to any
payment  made by the  Borrower  pursuant to and in  accordance  with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or  participant,  other than to the  Borrower  or any  Subsidiary  or  Affiliate
thereof (as to which the  provisions of this Section  4.01(c) shall apply).  The
Borrower  consents to the foregoing and agrees, to the extent it may effectively
do so under  Requirement  of Law,  that any  Lender  acquiring  a  participation
pursuant to the foregoing  arrangements may exercise against the Borrower rights
of set-off and  counterclaim  with respect to such  participation as fully as if
such  Lender  were a direct  creditor  of the  Borrower  in the  amount  of such
participation.

     Section  4.02   Presumption   of  Payment  by  the  Borrower.   Unless  the
Administrative  Agent shall have received  notice from the Borrower prior to the
date on which any payment is due to the Administrative  Agent for the account of
the Lenders that the Borrower  will not make such  payment,  the  Administrative
Agent  may  assume  that the  Borrower  has made  such  payment  on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrower has not in fact made such
payment,   then  each  of  the  Lenders   severally   agrees  to  repay  to  the
Administrative  Agent  forthwith  on demand  the amount so  distributed  to such
Lender with  interest  thereon,  for each day from and  including  the date such
amount  is  distributed  to it to but  excluding  the  date  of  payment  to the
Administrative Agent, at the interest rate then payable on the Notes pursuant to
this Agreement.

     Section 4.03  Disposition of Production  Proceeds.  The Security  Documents
contain an assignment by the Borrower and/or the Guarantors unto and in favor of
the Administrative Agent for the benefit of the Lenders of all of the Borrower's
or each Guarantor's interest in and to production and all proceeds  attributable
thereto which may be produced from or allocated to the Mortgaged  Property.  The
Security  Documents  further  provide in  general  for the  application  of such

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<PAGE>
proceeds to the satisfaction of the Obligations and other obligations  described
therein and secured thereby.  Notwithstanding  the assignment  contained in such
Security  Documents,  until  the  occurrence  of an  Event of  Default,  (a) the
Administrative  Agent and the Lenders  agree that they will  neither  notify the
purchaser or  purchasers of such  production  nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders  will  instead  permit such  proceeds to be paid to the Borrower and the
Subsidiaries  and (b) the Lenders hereby authorize the  Administrative  Agent to
take such actions as may be  necessary to cause such  proceeds to be paid to the
Borrower and/or such Subsidiaries.

                                   ARTICLE V
                             INCREASED COSTS; TAXES

     Section 5.01 Increased Costs.

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

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

     (c) Effect of Failure or Delay in Requesting Compensation. Failure or delay
on the part of any Lender to demand  compensation  pursuant to this Section 5.01
shall  not  constitute  a waiver  of such  right to  demand  such  compensation;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this Section 5.01 for any increased  costs or  reductions  incurred more than
365 days prior to the date that such Lender, notifies the Borrower of the Change
in Law giving rise to such  increased  costs or reductions  and of such Lender's
intention to claim compensation  therefor;  provided further that, if the Change
in Law giving rise to such increased  costs or reductions is  retroactive,  then
the 365-day period  referred to above shall be extended to include the period of
retroactive effect thereof.

     Section 5.02 Taxes.

     (a)  Payments  Free of Taxes.  Any and all payments by or on account of any
obligation  of the Borrower or any Guarantor  under any Loan  Document  shall be
made free and clear of and without  deduction for any Indemnified Taxes or Other
Taxes;  provided  that if the  Borrower  or any  Guarantor  shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum

                                       33
<PAGE>
payable  shall be  increased  as  necessary  so that after  making all  required
deductions  (including  deductions  applicable to additional  sums payable under
this Section 5.02(a)), the Administrative Agent and each Lender (as the case may
be)  receives  an amount  equal to the sum it would  have  received  had no such
deductions  been  made,  (ii) the  Borrower  or such  Guarantor  shall make such
deductions  and (iii) the Borrower or such  Guarantor  shall pay the full amount
deducted to the relevant  Governmental  Authority in accordance with Requirement
of Law.

     (b) Payment of Other Taxes by the Loan Parties.  The Borrower and the other
Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in
accordance with Requirement of Law.

     (c) Indemnification by the Loan Parties. THE BORROWER AND EACH OF THE OTHER
LOAN PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER, WITHIN 10
DAYS AFTER WRITTEN DEMAND THEREFOR, FOR THE FULL AMOUNT OF ANY INDEMNIFIED TAXES
OR OTHER TAXES PAID BY THE ADMINISTRATIVE  AGENT OR SUCH LENDER, AS THE CASE MAY
BE, ON OR WITH RESPECT TO ANY PAYMENT BY OR ON ACCOUNT OF ANY  OBLIGATION OF THE
BORROWER  HEREUNDER  (INCLUDING  INDEMNIFIED  TAXES OR OTHER  TAXES  IMPOSED  OR
ASSERTED ON OR  ATTRIBUTABLE TO AMOUNTS PAYABLE UNDER THIS SECTION 5.02) AND ANY
PENALTIES,  INTEREST AND REASONABLE  EXPENSES ARISING  THEREFROM OR WITH RESPECT
THERETO. A written demand under this Section 5.02(c) shall include a certificate
of the Administrative Agent or a Lender specifying the amount and calculation of
such  payment or  liability  under this  Section  5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error.

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

     (e) Survival.  Each Loan Party's  obligations under this Section 5.02 shall
survive  the  resignation  or  replacement  of the  Administrative  Agent or any
assignment of rights by, or the replacement of, a Lender, the termination of the
Commitments  and the  repayment,  satisfaction  or discharge of all  obligations
under any Loan Document.

                                       34
<PAGE>
                                   ARTICLE VI
                              CONDITIONS PRECEDENT

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

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

     (b) Closing  Certificates.  The Administrative  Agent shall have received a
certificate of a Responsible  Officer of the Borrower and each Guarantor setting
forth (i)  resolutions  of its board of  directors,  board of  managers or other
appropriate governing body, with respect to the authorization of the Borrower or
such  Guarantor to execute and deliver the Loan Documents to which it is a party
and to enter into the  transactions  contemplated in those  documents,  (ii) the
officers of the Borrower or such  Guarantor  (A) who are  authorized to sign the
Loan  Documents to which the  Borrower or such  Guarantor is a party and (B) who
will,  until  replaced by another  officer or officers duly  authorized for that
purpose,  act as its  representative  for the purposes of signing  documents and
giving notices and other  communications  in connection  with this Agreement and
the  transactions   contemplated  hereby,  (iii)  specimen  signatures  of  such
authorized  officers,  and (iv) the  Organization  Documents of the Borrower and
such  Guarantor,  certified  as being true and  complete  as of the date of such
certificate.  The Administrative  Agent and the Lenders may conclusively rely on
each such certificate until the Administrative  Agent receives notice in writing
from the Borrower or such Guarantor to the contrary.

     (c) Certificates of Good Standing, Etc. The Administrative Agent shall have
received  certificates  of the  appropriate  State  agencies with respect to the
existence, qualification and good standing of the Borrower and each Guarantor.

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

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

     (f) Security Documents.  The Administrative  Agent shall have received from
each  party  thereto  duly  executed  counterparts  (in  such  number  as may be
requested by the  Administrative  Agent) of the Security Documents on Exhibit D.
In connection  with the execution  and delivery of the Security  Documents,  the
Administrative Agent shall:

     (i) be  reasonably  satisfied  that the  Security  Documents  create  first
priority,  perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the

                                       35
<PAGE>
end of such  definition)  on all Property of the Borrower and its  Subsidiaries;
and

     (ii) have received certificates,  together with undated, blank stock powers
for each such certificate, representing all of the issued and outstanding Equity
Interests of each of the Guarantors.

     (g) Notes. The Administrative Agent shall have received duly executed Notes
payable to each Lender and its registered assigns in a principal amount equal to
its Commitment dated as of the date hereof.

     (h) Warrants and Warrant Purchase Agreement. The Administrative Agent shall
have  received  (i)  counterparts  (in such  number as may be  requested  by the
Administrative Agent) of the Warrant Agreement, duly executed by the Parent, and
(ii) the Warrant duly executed by the Parent.

     (i)  Certificate  of  Designation.  The  Administrative  Agent  shall  have
received   evidence  that  the  Parent  shall  have  filed  the  Certificate  of
Designation with the Secretary of State of the State of Nevada,

     (j) Legal Opinions. The Administrative Agent shall have received an opinion
of Stewart & Bonnet,  LLP, special Texas counsel to the Loan Parties, an opinion
of Lionel Sawyer & Collins,  special Nevada counsel to the Parent, and Corporate
Legal,  LLC,  special  counsel to the  Parent,  each in a form and of  substance
reasonably satisfactory to the Administrative Agent.

     (k) Insurance.  The Administrative  Agent shall have received  satisfactory
evidence  that the  Borrower is carrying  insurance in  accordance  with Section
7.12.

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

     (m) Financial  Statements;  Pro Forma Balance Sheet;  Projections;  Initial
Reserve  Report.  The  Administrative  Agent shall have  received the  financial
statements  referred to in Section  7.04(a),  the Pro Forma Balance  Sheet,  the
Projections,  and  the  Initial  Reserve  Report  accompanied  by a  certificate
covering the matters described in Section 8.01(j).

     (n) Lien Searches. The Administrative Agent shall have received appropriate
UCC and Tax Lien search  certificates  reflecting no prior Liens encumbering (i)
the  Properties of the Borrower and the  Subsidiaries,  or (ii) the  Acquisition
Properties (other than Liens permitted by Section 9.03).

     (o) Indebtedness.  The  Administrative  Agent shall be satisfied that after
the making of the initial Loans hereunder and giving effect to the Transactions,
the Borrower shall not have any outstanding  Indebtedness other than Obligations
arising  under the Loan  Documents and other  Indebtedness  permitted by Section
9.02.

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<PAGE>
     (p) Title to Oil and Gas  Properties.  The  Administrative  Agent  shall be
reasonably  satisfied  with the  status  of title to the Oil and Gas  Properties
evaluated in the Initial Reserve Report and the Acquisition  Properties and that
the Borrower owns at a minimum a 74% net revenue interest,  on an 8/8ths working
interest basis, in the foregoing Properties.

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

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

     (s) Shaffer Leases. The  Administrative  Agent shall have received evidence
that the Shaffer  leases have been  assigned by the Parent to the Borrower  free
and  clear  of any  Liens  pursuant  to  assignments  satisfactory  in form  and
substance to the Administrative Agent.

     (t) Due Diligence. The Administrative Agent shall be satisfied with its due
diligence  review of the Parent,  the  Borrower and the  Subsidiaries  and their
respective  Properties,  including,  without  limitation,  with  respect  to (i)
engineering,  (ii)  operations,  (iii)  title to Oil and Gas  Properties  of the
Borrower and its  subsidiaries,  (iv)  environmental  matters,  (v)  outstanding
liabilities,  (vi) Taxes and (vii) all  agreements  relating  to the Oil and Gas
Properties of the Borrower and its Subsidiaries, including operating agreements,
marketing agreements,  transportation agreements and processing agreements.  The
Administrative  Agent  shall  be  satisfied  with  the  potential  plugging  and
abandonment  liabilities  associated  with  the Oil and  Gas  Properties  of the
Borrower  and its  Subsidiaries,  including  the  bonding  or  collateralization
obligations  of the  Borrower and its  Subsidiaries  associated  therewith.  The
Administrative  Agent shall be satisfied with the results of complete background
checks on certain members of management and Affiliates of the Borrower.

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<PAGE>
     (u)  Governmental  Approvals.  Each Loan  Party  shall  have  obtained  all
governmental and regulatory authorizations and all consents of other Persons, in
each case that are  necessary or advisable in connection  with the  Transactions
and each of the  foregoing  shall be in full  force and  effect  and in form and
substance  satisfactory to Administrative  Agent. All applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain,  prevent or otherwise impose adverse  conditions
on the  Transactions or the financing  thereof and no action,  request for stay,
petition for review or rehearing, reconsideration, or appeal with respect to any
of the foregoing  shall be pending,  and the time for any  applicable  agency to
take action to set aside its consent on its own motion shall have expired.

     (v)  Litigation.  There  shall not exist any action,  suit,  investigation,
litigation or proceeding or other legal or regulatory  developments,  pending or
threatened in any court or before any arbitrator or Governmental Authority that,
in the opinion of Administrative  Agent, singly or in the aggregate,  materially
impairs any of the Transactions,  or that could reasonably be expected to have a
Material Adverse Effect.

     (w) Capital  Contribution.  The  Administrative  Agent shall have  received
evidence that the Parent shall have  contributed  cash in the amount of $500,000
to the equity capital of the Borrower to fund a portion of the  Acquisition  and
related expenses.

     (x) VPP. The Administrative Agent shall have received evidence satisfactory
to it that the  transactions  contemplated  by the VPP Purchase  Agreement  will
close on the Effective Date concurrently with the other Transactions.

     (y) Series A  Convertible  Preferred  Stock;  Post-  Closing  Matters.  The
Administrative  Agent shall have (i) received  evidence  satisfactory to it that
certain  holders of  Indebtedness  of the Parent,  to the extent required by the
Administrative Agent, have (A) executed and delivered letters of intent with the
Parent to exchange such  Indebtedness for Series A Convertible  Preferred Stock,
and  (B)  executed   consents   whereby  such  holders  have  consented  to  the
Transactions,  and (ii) received a post-closing  letter  agreement ( executed by
the Borrower and the Parent that addresses the foregoing and other  post-closing
matters. The foregoing letters of intent,  consents and letter agreement must be
satisfactory in form and substance to the Administrative Agent.

     (z) Blocked Account Agreement (DSR). The Administrative shall have received
the Blocked Account Agreement (DSR), duly executed and delivered by the Borrower
and  PlainsCapital  Bank,  and the  Administrative  Agent  shall  have  received
satisfactory  evidence  that the  Borrower  shall  have  deposited  $150,000  in
immediately available funds in the Debt Service Reserve Account.

     (aa) Consent of Sellers.  The Administrative  Agent shall have a received a
consent  duly  executed  and  delivered  by the  sellers  under the  Acquisition
Agreement to the security interest in the Acquisition Agreement created pursuant
to the Security  Documents,  which  consent  shall be  satisfactory  in form and
substance to the Administrative Agent.

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<PAGE>
     (bb)  Disbursement  Letter.  The Agent shall have  received a  disbursement
letter (the "Disbursement  Letter") executed by the Borrower with respect to the
disbursement  of the  proceeds  of the Loans to be made on the  Effective  Date,
which  disbursement  letter shall be  satisfactory  in form and substance to the
Administrative Agent.

     (cc)  No  Material  Adverse  Change.   Since  April  30,  2014,  no  event,
circumstance or change shall have occurred that has caused or evidences,  either
in any case or in the aggregate, a Material Adverse Effect.

     (dd)  Accounts  Payable.  The  Administrative  Agent  shall  have  received
evidence that as of the Effective Date all accounts  payable of the Borrower and
its  Subsidiaries  have  been  paid in full  (excluding  those  that  have  been
outstanding for less than 60 days from the original invoice date);

     (ee) Employment  Agreements.  The Administrative  Agent shall have received
copies of employment  agreements between the Parent and Ronnie L. Steinocher and
Lisa Hamilton,  certified by the Parent, and such employment agreements shall be
satisfactory in form and substance to the Administrative Agent

     (ff) Total G&A Expense Budget. The Administrative Agent shall have received
a monthly Total G&A Expense  budget for the Borrower and its  Subsidiaries  from
the Effective  Date through July 31, 2016,  certified by the  Borrower,  that is
satisfactory to the Administrative Agent.

     (gg)  Newton  Note;  Payoff  Letter.  The  Administrative  Agent shall have
received (i) a payoff letter executed by Newton Energy, Inc. and the Parent with
respect to the Newton Note,  and (ii) releases of all Liens  securing the Newton
Note executed by Newton Energy, Inc. and in recordable form, which payoff letter
and  Lien  releases  shall  be   satisfactory  in  form  and  substance  to  the
Administrative Agent.

     (hh) Lien Releases.  The Administrative  Agent shall have received evidence
satisfactory  to it that  all  Liens on the  Acquisition  Properties  and  other
Properties  of the Borrower and its  Subsidiaries  (if any) (other than Excepted
Liens  identified  in clauses  (a) to (d),  and (f) of the  definition  thereof)
associated with any Indebtedness have been released or terminated,  subject only
to the filing of applicable terminations, releases or assignments.

     (ii) ORI Conveyance.  The  Administrative  Agent shall have received an ORI
Conveyance for the existing wells of the Borrower, duly executed by the Borrower
and in recordable form.

     (jj) Assignments of Overriding Royalty Interests.  The Administrative Agent
shall have received  copies of the Assignments of Overriding  Royalty  Interests
executed by the Borrower in favor of Frank M. Saldana and Overton Capital Corp.,
which shall be  satisfactory  to the  Administrative  Agent and certified by the
Borrower.

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

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<PAGE>
     Each Lender, by delivering its signature page to this Agreement and funding
a Loan on the Effective Date, shall be deemed to have  acknowledged  receipt of,
and  consented  to and  approved,  each Loan  Document  and each other  document
required to be approved by the Required Lenders or Lenders, as applicable on the
Effective  Date.  The  Administrative  Agent shall  notify the  Borrower and the
Lenders of the Effective  Date, and such notice shall be conclusive and binding.
Notwithstanding  the  foregoing,  the  obligations  of each  Lender  to make its
initial Loan on the Effective Date shall not become effective unless each of the
foregoing  conditions is satisfied (or waived  pursuant to Section  12.02) at or
prior to 2:00 p.m., Dallas, Texas time, on July 31, 2014 (and, in the event such
conditions are not so satisfied or waived,  the  Commitments  shall terminate at
such time).

     Section 6.02 Each Loan. The obligation of each Lender to make a Loan on any
Borrowing Date  (including the initial Loans) is subject to the  satisfaction of
the following conditions:

     (a) At the time of and  immediately  after giving effect to such Borrowing,
no Default or Event of Default shall have occurred and be continuing.

     (b) At the time of and  immediately  after giving effect to such Borrowing,
no event,  development or circumstance has occurred or shall then exist that has
resulted in, or could reasonably be expected to have, a Material Adverse Effect.

     (c) The  representations  and warranties of the Borrower and the Guarantors
set forth in this  Agreement and in the other Loan  Documents  shall be true and
correct in all material respects (except to the extent such  representations and
warranties  are  qualified  by  materiality)  on  and  as of the  date  of  such
Borrowing,  except to the extent any such  representations  and  warranties  are
expressly  limited to an earlier  date,  in which case, on and as of the date of
such Borrowing such representations and warranties shall continue to be true and
correct as of such specified earlier date.

     (d) The making of such Loan would not conflict with, or cause any Lender to
violate or exceed, any applicable Requirement of Law, and no Change in Law shall
have occurred, and no litigation shall be pending or threatened,  which does or,
with  respect  to any  threatened  litigation,  seeks to,  enjoin,  prohibit  or
restrain,  the  making or  repayment  of any Loan,  or the  consummation  of the
Transactions contemplated by this Agreement or any other Loan Document.

     (e) The  receipt  by the  Administrative  Agent of a  Borrowing  Request in
accordance with Section 2.03.

     Each request for a Borrowing shall be deemed to constitute a representation
and  warranty  by the  Borrower  and the  Parent on the date  thereof  as to the
matters specified in Section 6.02(a) through (c).

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<PAGE>
                                  ARTICLE VII
                         REPRESENTATIONS AND WARRANTIES

     To induce  the  Administrative  Agent and the  Lenders  to enter  into this
Agreement  and to make the  Loans,  the  Parent  and the  Borrower  jointly  and
severally  represent  and  warrant to the  Administrative  Agent and the Lenders
that:

     Section 7.01 Organization;  Powers. The Parent and each of its Subsidiaries
is duly organized,  validly  existing and in good standing under the laws of the
jurisdiction of its  organization,  have all requisite power and authority,  and
have  all  governmental   licenses,   authorizations,   consents  and  approvals
necessary, to own its assets and to carry on its business as now conducted,  and
is qualified to do business in, and is in good  standing in, every  jurisdiction
where such  qualification is required,  except where failure to have such power,
authority,  licenses,  authorizations,  consents,  approvals and  qualifications
could not reasonably be expected to have a Material Adverse Effect.

     Section 7.02 Authority;  Enforceability.  The  Transactions  are within the
Borrower's  and  each  Guarantor's  organizational  powers  and have  been  duly
authorized  by  all  necessary   organizational   action   (including,   without
limitation,  any action  required to be taken by any class of  directors  of the
Parent,  the Borrower or any other Person,  whether interested or disinterested,
in order  to  ensure  the due  authorization  of the  Transactions).  Each  Loan
Document  to which  the  Borrower  and each  Guarantor  is a party has been duly
executed  and  delivered  by the  Borrower  and each  Guarantor  that is a party
thereto and  constitutes a legal,  valid and binding  obligation of the Borrower
and each such  Guarantor,  as  applicable,  enforceable  in accordance  with its
terms,  subject  to  applicable  Debtor  Relief  Laws  and  subject  to  general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

     Section 7.03 Approvals;  No Conflicts.  The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person (including  shareholders or
any class of directors, whether interested or disinterested,  of the Parent, the
Borrower or any other Person), nor is any such consent, approval,  registration,
filing or other action necessary for the validity or  enforceability of any Loan
Document  or the  consummation  of the  Transactions,  except  such as have been
obtained or made and are in full force and effect  other than (i) the  recording
and filing of the Security  Documents and the ORI Conveyance as required by this
Agreement,  (ii) those third party  approvals or consents  which, if not made or
obtained, would not cause a Default hereunder,  could not reasonably be expected
to have a  Material  Adverse  Effect  or do not have an  adverse  effect  on the
enforceability  of the Loan Documents or any of the Transactions and (iii) those
consents,  approvals or filings that are customarily  obtained after the closing
of an  acquisition  of  Oil  and  Gas  Properties,  (b)  will  not  violate  any
Requirement of Law or any of the Organization Documents of any Loan Party or any
Subsidiary  of any Loan Party or any order of any  Governmental  Authority,  (c)
will not violate or result in a default under any indenture,  agreement or other
instrument  binding upon the any Loan Party or any  Subsidiary of any Loan Party
or any of their  respective  Properties,  or give rise to a right  thereunder to
require  any  payment to be made by any Loan Party or such  Subsidiary,  and (d)
will not result in the creation or imposition of any Lien on any Property of any
Loan Party (other than the Liens created by the Loan Documents).

                                       41
<PAGE>
     Section 7.04 Financial Condition; No Material Adverse Change.

     (a) The  Borrower  has  heretofore  furnished  to the Lenders the  Parent's
consolidated  balance sheet and  statements of income,  stockholders  equity and
cash flows (1) as of and for the fiscal year ended  December 31, 2011,  reported
on by GBH CPAs,  independent  public  accountants,  (2) as of and for the fiscal
years ended July 31, 2012 and July 31, 2013,  prepared internally by the Parent,
and (3) as of and for the fiscal  quarter  and the  portion  of the fiscal  year
ended April 30, 2014,  certified by the Parent's chief executive  officer.  Such
financial  statements  present fairly, in all material  respects,  the financial
position  and  results  of  operations  and  cash  flows of the  Parent  and its
Subsidiaries  as of such  dates and for such  periods in  accordance  with GAAP,
subject to year-end audit  adjustments  and the absence of footnotes in the case
of the unaudited quarterly financial statements.

     (b) The unaudited pro forma consolidated  balance sheet of the Borrower and
its consolidated Subsidiaries as at July 31, 2014, (including the notes thereto)
(the "Pro Forma Balance Sheet"),  copies of which have heretofore been furnished
to each Lender,  has been prepared giving effect (as if such events had occurred
on such date) to (i) the  consummation of the Transactions on the Effective Date
and the use of proceeds  thereof,  and (ii) the payment of fees and  expenses in
connection  with the  foregoing.  The Pro Forma  Balance Sheet has been prepared
based  on the  best  information  available  to the  Borrower  as of the date of
delivery  thereof,  and  presents  fairly  on a pro forma  basis  the  estimated
financial position of Borrower and its consolidated  Subsidiaries as at July 31,
2014,  assuming that the events specified in the preceding sentence had actually
occurred at such date.

     (c) Since  April 30,  2014,  (i)  there has been no event,  development  or
circumstance  that has had or could  reasonably  be  expected to have a Material
Adverse Effect and (ii) the business of the Parent and its Subsidiaries has been
conducted only in the ordinary course, in all material respects, consistent with
past business practices.

     (d) Neither the Parent nor any of its  Subsidiaries  has on the date hereof
any  material  Indebtedness  (including  Disqualified  Stock) or any  contingent
liabilities,  off-balance  sheet  liabilities or  partnerships,  liabilities for
taxes,  unusual  forward or long-term  commitments  or unrealized or anticipated
losses from any unfavorable commitments that are, in the aggregate,  material to
the balance sheet and statements of income,  stockholders  equity and cash flows
of the Parent and its Subsidiaries on a consolidated basis and are not reflected
in the Financial Statements.

     Section 7.05 Litigation.  There are no actions,  suits,  investigations  or
proceedings  by or before  any  arbitrator  or  Governmental  Authority  pending
against or, to the  knowledge of the Borrower,  threatened  against or affecting
any Loan Party or any of its Subsidiaries  (collectively,  "Litigation") (i) not
fully covered by insurance (except for normal  deductibles) as to which there is
a  reasonable  possibility  of  an  adverse  determination  that,  if  adversely
determined,  could reasonably be expected,  individually or in the aggregate, to
result in a Material  Adverse Effect,  or (ii) that involve any Loan Document or
any of the  Transactions.  Except as set  forth on  Schedule  7.05,  there is no
Litigation  pending  or, to the  Borrower's  knowledge,  threatened,  that seeks
damages in excess of $50,000 or injunctive  relief against,  or alleges criminal
misconduct of, any Loan Party or any Subsidiary or any Affiliate thereof.

                                       42
<PAGE>
     Section  7.06  Environmental   Matters.   Except  for  such  matters  that,
individually  or in the  aggregate,  could not  reasonably be expected to have a
Material Adverse Effect:

     (a) the  Borrower  and  the  Subsidiaries  and  each  of  their  respective
Properties  and  operations  thereon are, and within all  applicable  statute of
limitation  periods have been, in compliance  with all applicable  Environmental
Laws;

     (b) the  Borrower and the  Subsidiaries  have  obtained  all  Environmental
Permits required for their respective  operations and each of their  Properties,
with all such  Environmental  Permits being  currently in full force and effect,
and neither the Borrower nor the Subsidiaries has received any written notice or
otherwise has  knowledge  that any such  existing  Environmental  Permit will be
revoked or that any application for any new  Environmental  Permit or renewal of
any existing Environmental Permit will be protested or denied;

     (c) there are no claims, demands, suits, orders,  inquiries, or proceedings
concerning  any  violation  of, or any  liability  (including  as a  potentially
responsible  party) under, any applicable  Environmental Laws that is pending or
threatened  against the Borrower or the  Subsidiaries or any of their respective
Properties or as a result of any operations at the Properties;

     (d) none of the Properties  contain or have contained any: (i)  underground
storage tanks;  (ii)  asbestos-containing  materials;  (iii) landfills or dumps;
(iv)  hazardous  waste  management  units  as  defined  pursuant  to RCRA or any
comparable  state law; or (v) sites on or nominated  for the  National  Priority
List  promulgated  pursuant  to  CERCLA  or any  state  remedial  priority  list
promulgated or published pursuant to any comparable state law;

     (e) there has been no Release or threatened Release, of Hazardous Materials
at, on, under or from any of Borrower's or the Subsidiaries'  Properties,  there
are no investigations,  remediations,  abatements,  removals,  or monitorings of
Hazardous  Materials  required  under  applicable  Environmental  Laws  at  such
Properties and none of such Properties are adversely  affected by any Release or
threatened  Release of a Hazardous  Material  originating  or emanating from any
other real property;

     (f) neither the  Borrower  nor the  Subsidiaries  has  received any written
notice  asserting  an  alleged  liability  or  obligation  under any  applicable
Environmental  Laws with respect to the investigation,  remediation,  abatement,
removal,  or  monitoring of any  Hazardous  Materials at, under,  or Released or
threatened to be Released from any real properties offsite the Borrower's or the
Subsidiaries' Properties and there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written notice.

     (g) there has been no exposure  of any Person or property to any  Hazardous
Materials as a result of or in connection  with the operations and businesses of
any of the Borrower's or the  Subsidiaries'  Properties that would reasonably be
expected to form the basis for a claim for damages or compensation and there are
no conditions or  circumstances  that would  reasonably be expected to result in
the receipt of notice regarding such exposure; and

     (h) the Borrower and the Subsidiaries have provided to Lenders complete and
correct copies of all  environmental  site assessment  reports,  investigations,
studies,  analyses,  and  correspondence  on  environmental  matters  (including
matters  relating  to  any  alleged   non-compliance  with  or  liability  under

                                       43
<PAGE>
Environmental  Laws)  that  are in any of the  Borrower's  or the  Subsidiaries'
possession or control and relating to their respective  Properties or operations
thereon.

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

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

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

     (c) No Default has occurred and is continuing.

     Section  7.08  Investment   Company  Act.  Neither  the  Borrower  nor  any
Subsidiary nor the Parent is an "investment  company" or a company  "controlled"
by an  "investment  company,"  within the meaning  of, or subject to  regulation
under, the Investment Company Act of 1940, as amended.  No Loan Party is subject
to  regulation  under any  Requirement  of Law (other than  Regulation  X of the
Board) that limits its ability to incur Indebtedness.

     Section  7.09 Taxes.  Each of the Borrower  and the  Guarantors  has timely
filed or caused to be filed all Tax returns  and  reports  required to have been
filed and has paid or caused to be paid all Taxes  required to have been paid by
it,  except (a) Taxes  that are being  contested  in good  faith by  appropriate
proceedings and for which the Borrower or such Guarantor, as applicable, has set
aside on its  books  adequate  reserves  in  accordance  with GAAP or (b) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges,  accruals and reserves on the books of the
Borrower and the Guarantors in respect of Taxes and other  governmental  charges
are, in the reasonable opinion of the Borrower,  adequate.  No Tax Lien has been
filed and, to the  knowledge of the  Borrower,  no claim is being  asserted with
respect to any such Tax or other such governmental charge.

     Section 7.10 ERISA.  Except for such matters that,  individually  or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:

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

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

                                       44
<PAGE>
     (c) No act,  omission or  transaction  has  occurred  which could result in
imposition  on the Borrower,  any  Subsidiary  or any ERISA  Affiliate  (whether
directly  or  indirectly)  of (i) either a civil  penalty  assessed  pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary  duty liability
damages under section 409 of ERISA with civil penalty or tax could reasonably be
expected to result in a Material Adverse Effect.

     (d) Full payment when due has been made of all amounts  which the Borrower,
the Subsidiaries or any ERISA Affiliate is required under the terms of each Plan
or Requirement of Law to have paid as  contributions to such Plan as of the date
hereof.

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

     (f)  Neither  the  Borrower,  the  Subsidiaries  nor  any  ERISA  Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored,  maintained or contributed to, any employee
pension plan,  as defined in section 3(2) of ERISA,  that is subject to Title IV
of ERISA, section 302 of ERISA or section 412 of the Code.

     Section  7.11  Disclosure;  No Material  Misstatements.  The  Borrower  has
disclosed  to  the   Administrative   Agent  and  the  Lenders  all  agreements,
instruments and corporate or other  restrictions to which each Loan Party or any
of its  Subsidiaries is subject that,  individually  or in the aggregate,  could
reasonably  be  expected  to result in a Material  Adverse  Effect.  None of the

                                       45
<PAGE>
reports,  financial  statements,   certificates  or  other  written  information
furnished  by or on behalf of any Loan Party or any of its  Subsidiaries  to the
Administrative Agent or any Lender or any of their Affiliates in connection with
the  negotiation  of this  Agreement  or any other Loan  Document  or  delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements  therein,  in the light
of the circumstances under which they were made, not misleading;  provided that,
with respect to projected  financial  information,  the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be  reasonable  at the time.  There is no fact known to the  Borrower  or any
other Loan Party which could  reasonably be expected to have a Material  Adverse
Effect or in the future is reasonably  likely to have a Material  Adverse Effect
and which has not been set forth in this  Agreement or the Loan Documents or the
other  documents,  certificates and statements  furnished to the  Administrative
Agent  or the  Lenders  by or on  behalf  of the any  Loan  Party  or any of its
Subsidiaries   prior  to,  or  on,  the  date  hereof  in  connection  with  the
Transactions.  As  of  the  date  hereof,  the  representations  and  warranties
contained  in the  Acquisition  Documents  and the VPP  Documents  are  true and
correct in all material  respects  There are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail to
take into account material  information  regarding the matters reported therein,
it being understood that projections  concerning volumes attributable to the Oil
and Gas Properties  and production and cost estimates  contained in each Reserve
Report  are  necessarily  based  upon  professional   opinions,   estimates  and
projections  and  that the Loan  Parties  do not  warrant  that  such  opinions,
estimates and projections will ultimately prove to have been accurate.

     Section  7.12  Insurance.  The  Borrower  has,  and has  caused  all of the
Subsidiaries to have, (a) all insurance  policies  sufficient for the compliance
by each of them with all Requirements of Law and all material agreements and (b)
insurance coverage in at least amounts and against such risk (including, without
limitation,  public  liability)  that are usually  insured  against by companies
similarly  situated and engaged in the same or a similar business for the assets
and operations of the Borrower and the Subsidiaries.  The  Administrative  Agent
and the  Lenders  have been  named as  additional  insureds  in  respect of such
liability insurance policies and the Administrative Agent has been named as loss
payee with respect to Property  loss  insurance.  Schedule 7.12 sets forth as of
the  Effective  Date a complete and  accurate  list of all policies of insurance
maintained  by the Borrower and its  Subsidiaries,  showing with respect to each
such policy the type of insurance,  the coverage  amount,  the carrier,  and the
duration of coverage.  All premiums  with respect to such  policies of insurance
have been fully paid. As of the Effective Date, no Recovery Event has occurred.

     Section  7.13  Restriction  on Liens.  Neither the  Borrower nor any of the
Subsidiaries  is a party to any  agreement  or  arrangement  (other than Capital
Leases or  purchase  money  obligations  creating  Liens  permitted  by  Section
9.03(c), but then only on the Property subject of such Capital Lease or purchase

                                       46
<PAGE>
money  obligation),  or subject to any order,  judgment,  writ or decree,  which
either  restricts  or  purports  to  restrict  its ability to grant Liens to the
Administrative  Agent and the  Lenders on or in respect of their  Properties  to
secure the Obligations and the Loan Documents.

     Section  7.14  Subsidiaries.  Except  as set forth on  Schedule  7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower
has  no  Subsidiaries.   Each  Subsidiary  identified  in  Schedule  7.14  is  a
Wholly-Owned Subsidiary.

     Section 7.15 Location of Business and Offices. The Borrower's  jurisdiction
of organization is the State of Texas; the name of the Borrower as listed in the
public records of its  jurisdiction of organization is Baron Production LLC; and
the organizational  identification number of the Borrower in its jurisdiction of
organization is 801793395 (or, in each case, as set forth in a notice  delivered
to the  Administrative  Agent  pursuant to Section  8.01(m) in  accordance  with
Section 12.01).  The Borrower's  principal place of business and chief executive
offices are located at the address  specified in Section  12.01 (or as set forth
in a notice delivered  pursuant to Section 8.01(m) and Section  12.01(c)).  Each
Subsidiary's jurisdiction of organization,  name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction  of  organization,  and the  location  of its  principal  place  of
business and chief executive  office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(m)).

     Section 7.16 Properties; Titles, Etc.

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

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

     (c) The rights and Properties  presently  owned,  leased or licensed by the
Borrower and the Subsidiaries including,  without limitation,  all easements and
rights of way,  include  all  rights  and  Properties  necessary  to permit  the

                                       47
<PAGE>
Borrower and the Subsidiaries to conduct their business in all material respects
in the same manner as its business has been conducted prior to the date hereof.

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

     (e) The  Borrower  and each  Subsidiary  owns,  or is licensed to use,  all
trademarks,  trade names,  copyrights,  patents and other intellectual  Property
material  to its  business,  and  the  use  thereof  by the  Borrower  and  such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate,  could not reasonably
be  expected  to result in a  Material  Adverse  Effect.  The  Borrower  and the
Subsidiaries  either  own or have  valid  licenses  or other  rights  to use all
databases,  geological data,  geophysical data,  engineering data, seismic data,
maps,  interpretations and other technical  information used in their businesses
as presently conducted,  subject to the limitations  contained in the agreements
governing  the use of the same,  which  limitations  are customary for companies
engaged in the business of the exploration and production of Hydrocarbons.

     Section 7.17  Maintenance  of Properties.  The Oil and Gas Properties  (and
Properties  unitized  therewith) of the Borrower and the Subsidiaries  have been
maintained,  operated  and  developed  in a good and  workmanlike  manner and in
conformity with all Requirements of Law and in conformity with the provisions of
all leases,  subleases or other  contracts  comprising a part of the Hydrocarbon
Interests and other  contracts and agreements  forming a part of the Oil and Gas
Properties of the Borrower and the Subsidiaries. Specifically in connection with
the foregoing,  (i) no Oil and Gas Property of the Borrower or any Subsidiary is
subject  to having  allowable  production  reduced  below  the full and  regular
allowable   (including  the  maximum  permissible   tolerance)  because  of  any
overproduction  (whether or not the same was  permissible  at the time) and (ii)
none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized  therewith)  of the  Borrower or any  Subsidiary  is deviated  from the
vertical more than the maximum  permitted by Requirements of Law, and such wells
are, in fact,  bottomed  under and are  producing  from,  and the well bores are
wholly  within,  the Oil and Gas  Properties (or in the case of wells located on
Properties unitized therewith, such unitized Properties) of the Borrower or such
Subsidiary.  All pipelines,  wells, gas processing  plants,  platforms and other
material  improvements,  fixtures and equipment owned in whole or in part by the
Borrower  or any of its  Subsidiaries  that  are  necessary  to  conduct  normal
operations  are  being   maintained  in  a  state  adequate  to  conduct  normal
operations,  and with respect to such of the foregoing which are operated by the
Borrower or any of its Subsidiaries,  in a manner consistent with the Borrower's
or its Subsidiaries' past practices.

     Section 7.18 Gas Imbalances,  Prepayments.  Except as set forth on Schedule
7.18 or on the most recent certificate delivered pursuant to Section 8.12(b), on
a net basis there are no gas imbalances,  take or pay or other prepayments which
would require the Borrower or any of the  Subsidiaries  to deliver  Hydrocarbons
produced  from the Oil and Gas  Properties  at some future time  without then or
thereafter receiving full payment therefor.

                                       48
<PAGE>
     Section 7.19  Marketing of Production.  Except for contracts  listed and in
effect on the date hereof on Schedule 7.19, and thereafter  either  disclosed in
writing to the  Administrative  Agent or included in the most recently delivered
Reserve Report (with respect to all of which  contracts the Borrower  represents
that it or the  Subsidiaries  are  receiving  a price  for all  production  sold
thereunder  which is computed  substantially in accordance with the terms of the
relevant contract and are not having deliveries  curtailed  substantially  below
the subject  Property's  delivery  capacity),  no agreements exist which are not
cancelable on 60 days' notice or less without  penalty or detriment for the sale
of production from the Borrower's or the Subsidiaries'  Hydrocarbons (including,
without limitation, calls on or other rights to purchase, production, whether or
not the same are  currently  being  exercised)  that (a)  pertain to the sale of
production  at a fixed  price and (b) have a maturity  or expiry  date of longer
than six (6) months from the date hereof.

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

     Section 7.21 Use of Loans.  (a) The  proceeds of the Loans  borrowed on the
Effective Date shall be used by the Borrower to:

     (i) finance a portion of the Acquisition;

     (ii) pay Transaction fees and expenses;

     (iii) fund the Debt  Service  Reserve  Account in  accordance  with Section
3.02(d); and

     (iv) provide funding for general corporate purposes,

in each case  under  this  paragraph  (a) in  accordance  with the  Disbursement
Letter.

     (b) The proceeds of the Loans  borrowed  after the Effective  Date shall be
used by the Borrower to:

     (i)  finance  the  drilling  of the Petty 1H PUD Well  pursuant to a budget
approved by the Administrative Agent; and

     (ii)  finance  other  Capital  Expenditures  approved  in  writing  by  the
Administrative Agent.

     (c) The Borrower and the  Subsidiaries are not engaged  principally,  or as
one of its or their important  activities,  in the business of extending  credit
for the  purpose,  whether  immediate,  incidental  or  ultimate,  of  buying or
carrying margin stock (within the meaning of Regulation T, U or X of the Board).
No part of the proceeds of any Loan will be used for any purpose which  violates
the provisions of Regulations T, U or X of the Board.

                                       49
<PAGE>
     Section 7.22  Solvency.  After giving effect to the  Transactions,  (a) the
aggregate  assets  (after  giving  effect to amounts  that could  reasonably  be
received by reason of indemnity,  offset, insurance or any similar arrangement),
at a fair valuation, of the Borrower and the Guarantors,  taken as a whole, will
exceed the  aggregate  Indebtedness  of the  Borrower  and the  Guarantors  on a
consolidated basis, as the Indebtedness  becomes absolute and matures,  (b) each
of the Borrower and the Guarantors  will not have incurred or intended to incur,
and will not believe that it will incur,  Indebtedness beyond its ability to pay
such  Indebtedness  (after taking into account the timing and amounts of cash to
be received by each of the  Borrower  and the  Guarantors  and the amounts to be
payable on or in respect of its  liabilities,  and giving effect to amounts that
could  reasonably be received by reason of indemnity,  offset,  insurance or any
similar  arrangement) as such Indebtedness  becomes absolute and matures and (c)
each of the Borrower and the  Guarantors  will not have (and will have no reason
to believe  that it will have  thereafter)  unreasonably  small  capital for the
conduct of its business.

     Section 7.23 OFAC.  Neither the Borrower nor any of its Subsidiaries (i) is
an  "enemy" or an "ally of the  enemy"  within  the  meaning of section 2 of the
Trading  with the Enemy Act of the United  States (50 U.S.C.  App.  ss.ss.  1 et
seq.),  as amended,  (ii) is in violation of (A) the Trading with the Enemy Act,
as amended,  (B) any of the foreign  assets  control  regulations  of the United
States  Treasury  Department (31 CFR,  Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto or (C) the PATRIOT Act,
(iii) is a Sanctioned Person, (ii) has more than 10% of its assets in Sanctioned
Countries,  or  (iii)  derives  more  than  10% of  its  operating  income  from
investments in, or transactions with Sanctioned Persons or Sanctioned Countries.
No part of the  proceeds  of any  extension  of  credit  hereunder  will be used
directly or indirectly to fund any  operations  in,  finance any  investments or
activities  in or make any  payments  to, a  Sanctioned  Person or a  Sanctioned
Country.

     Section 7.24 Projections.  On and as of the Effective Date, the projections
of Borrower and its  Subsidiaries for the period of fiscal year 2014 through and
including fiscal year 2016,  including monthly projections for each month during
the fiscal year in which the Effective Date takes place (the "Projections"), are
based on good faith estimates and assumptions made by the management of Borrower
and  as of  the  Effective  Date,  management  of  Borrower  believes  that  the
Projections  are reasonable  and attainable (it being  understood by the Lenders

                                       50
<PAGE>
that such  Projections  are not to be viewed  as facts  and that  estimates  are
subject to significant  uncertainties and contingencies,  that no assurances can
be given that any  Projections  will be attained and that  variances from actual
results may be material).

     Section 7.25 Affiliate Transactions.  Except as set forth on Schedule 7.25,
there are no existing or proposed agreements,  arrangements,  understandings, or
transactions between any Loan Party and any of the officers,  members, managers,
directors,   stockholders,   parents,  other  interest  holders,  employees,  or
Affiliates  (other than  Subsidiaries) of any Loan Party or any members of their
respective immediate families and, except as set forth on Schedule 7.25, none of
the foregoing Persons are directly or indirectly  indebted to or have any direct
or indirect ownership,  partnership,  or voting interest in any Affiliate of any
Loan Party or any Person  with which any Loan Party has a business  relationship
or which competes with any Loan Party.

     Section 7.26 Security  Documents.  The provisions of this Agreement and the
Security  Documents  are  effective  to create  legal and valid Liens on all the
Collateral  in favor of  Administrative  Agent,  for the  benefit of the Secured
Parties,  and in the case of  Collateral  in which a  security  interest  may be
perfected  by  filing  a  financing  statement,  when  financing  statements  in
appropriate form are filed in the appropriate  office,  such security  interests
constitute  perfected  and  continuing  security  interests  on the  Collateral,
securing the Obligations,  enforceable against the applicable Loan Party and all
third parties, and having priority over all other Liens on the Collateral except
in the case of Excepted  Liens, to the extent any such Excepted Liens would have
priority  over  the  Liens  in favor of  Administrative  Agent  pursuant  to any
applicable law.

     Section 7.27 Material  Contracts;  Operating  Agreements.  Schedule 7.27(a)
contains a correct and complete list of all the Material  Contracts  (other than
oil and gas leases,  oil,  gas and mineral  leases,  or other  liquid or gaseous
hydrocarbon   leases)  and   Operating   Agreements  of  the  Borrower  and  its
Subsidiaries  in  effect on the  Effective  Date.  On the  Effective  Date,  all
Material Contracts and the Operating Agreements are in full force and effect and
no defaults of the  Borrower,  any  Subsidiary  party  thereto or, to Borrower's
knowledge, of any other party thereto, currently exist thereunder (other than as
described in Schedule  7.27(a).  Schedule 7.27(b)  contains a true,  correct and
complete list of all the Material Contracts (other than oil and gas leases, oil,
gas and  mineral  leases,  or other  liquid or gaseous  hydrocarbon  leases) and
Operating Agreements requiring consent from the counterparty thereto, or payment
of any  fee  or sum to the  counterparty  thereto,  prior  to an  assignment  to
Administrative  Agent or a Lender pursuant to a foreclosure action or that would
otherwise prohibit,  restrict or hinder  Administrative Agent or the Lenders, or
any  successor  in  interest  to  Administrative   Agent  or  any  Lender,  from
foreclosing upon such contract or agreement.

     Section 7.28 Acquisition Documents. The copies of the Acquisition Documents
delivered by Borrower to  Administrative  Agent are true,  accurate and complete
and have not been  amended or  modified in any  manner,  other than  pursuant to
amendments or modifications  previously  delivered to and approved in writing by
the Administrative  Agent. No party to any Acquisition Document is in default in
respect of any term or obligation thereunder.

                                       51
<PAGE>
     Section 7.29 Location of Deposit and  Securities  Accounts;  Etc. As of the
Effective  Date,  Schedule  7.29 sets forth a complete and accurate  list of all
deposit,  checking and other bank  accounts,  all  securities and other accounts
maintained with any broker dealer and all other similar  accounts  maintained by
the Borrower and each Subsidiary, together with a description thereof (i.e., the
bank or broker dealer at which such deposit or other  account is maintained  and
the account number and the purpose thereof).

                                  ARTICLE VIII
                              AFFIRMATIVE COVENANTS

     Until the Commitments  have expired or been terminated and the principal of
and interest on each Loan and all fees payable  hereunder  and all other amounts
payable under the Loan  Documents  shall have been Paid in Full,  the Parent and
the Borrower  jointly and severally  covenant and agree with the  Administrative
Agent and the Lenders that:

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

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

     (b) Quarterly Financial Statements.  As soon as available, but in any event
in accordance with then  Requirement of Law and not later than 60 days after the
end of each of the  first  three  fiscal  quarters  of each  fiscal  year of the
Borrower,  its consolidated  balance sheet and related statements of operations,
members'  equity and cash flows as of the end of and for such fiscal quarter and
the then  elapsed  portion of the  fiscal  year,  setting  forth in each case in
comparative form the figures for the corresponding  period or periods of (or, in
the case of the balance sheet,  as of the end of) the previous  fiscal year, all
certified by one of its Financial  Officers as presenting fairly in all material
respects the  financial  condition and results of operations of the Borrower and
its  Subsidiaries on a consolidated  basis in accordance with GAAP  consistently
applied,  subject  to normal  year-end  audit  adjustments  and the  absence  of
footnotes.

     (c) Certificate of Financial  Officer -- Compliance.  Concurrently with any
delivery of financial  statements under Section 8.01(a) or Section  8.01(b),  or

                                       52
<PAGE>
Section 8.01(d),  a certificate of a Financial Officer in substantially the form
of Exhibit C hereto (i)  certifying as to whether a Default has occurred and, if
a Default has occurred,  specifying the details  thereof and any action taken or
proposed  to be taken  with  respect  thereto,  (ii)  setting  forth  reasonably
detailed calculations  demonstrating compliance with Section 8.13(b) and Section
9.01 and (iii) stating whether any change in GAAP or in the application  thereof
has occurred since the date of the audited financial  statements  referred to in
Section 7.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate.

     (d) Monthly Financial  Statements.  As soon as available,  but in any event
within 45 days after the end of each month, its consolidated  balance sheet, and
related  statements of operations,  members' equity and cash flows as of the end
of and for such  month,  setting  forth  in each  case in  comparative  form the
figures  for the  corresponding  period or  periods  of (or,  in the case of the
balance sheet,  as of the end of) the previous fiscal year, all certified by one
of its  Financial  Officers as  presenting  fairly in all material  respects the
financial   condition  and  results  of  operations  of  the  Borrower  and  its
Subsidiaries  on a  consolidated  basis in  accordance  with  GAAP  consistently
applied,  subject  to normal  year-end  audit  adjustments  and the  absence  of
footnotes.

     (e) Certificate of Financial  Officer - Swap Agreements.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial  Officer,  in form and substance  satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such quarter,
a true  and  complete  list of all  Swap  Agreements  of the  Borrower  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  7.20,  any  margin  required  or  supplied  under any  credit  support
document, and the counterparty to each such agreement.

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

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

     (h) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become  publicly  available,  copies of all  periodic and other  reports,  proxy
statements and other  materials  filed by the Parent or any of its  Subsidiaries
with the SEC, or with any national  securities  exchange,  or distributed by the
Parent to its shareholders generally, as the case may be.

                                       53
<PAGE>
     (i) Notices  Under  Material  Instruments.  Promptly  after the  furnishing
thereof, copies of any financial statement,  report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation,  indenture,
loan or credit or other  similar  agreement,  other than this  Agreement and not
otherwise  required  to be  furnished  to the  Lenders  pursuant  to  any  other
provision of this Section 8.01.

     (j) Lists of Hydrocarbon Purchasers.  Concurrently with the delivery of any
Reserve Report to the  Administrative  Agent pursuant to Section 8.12, a list of
all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.

     (k) Notice of Sales of Oil and Gas Properties. In the event the Borrower or
any Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil
or Gas Properties or any Equity  Interests in any Subsidiary in accordance  with
Section 9.12,  prior written notice of such  disposition,  the price thereof and
the  anticipated  date of  closing  and any  other  details  thereof  reasonably
requested by the Administrative Agent or any Lender.

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

     (m) Information Regarding Borrower and Guarantors. Prompt written notice of
(and in any event at least twenty (20) days prior thereto) any change (i) in the
Borrower or any Guarantor's corporate name or in any trade name used to identify
such  Person  in  the  conduct  of  its  business  or in  the  ownership  of its
Properties,  (ii) in the  location  of the  Borrower  or any  Guarantor's  chief
executive  office or principal  place of business,  (iii) in the Borrower or any
Guarantor's identity or corporate structure or in the jurisdiction in which such
Person is  incorporated  or  formed,  (iv) in the  Borrower  or any  Guarantor's
jurisdiction  of  organization  or such Person's  organizational  identification
number in such  jurisdiction  of  organization,  and (v) in the  Borrower or any
Guarantor's federal taxpayer identification number.

     (n) Production Report and Lease Operating Statements.  Within 30 days after
the end of each calendar month, a report setting forth,  for each calendar month
during the then current  fiscal year to date, the volume of production and sales
attributable to production (and the prices at which such sales were made and the
revenues  derived from such sales) for each such calendar month from the Oil and
Gas  Properties  of the Borrower  and its  Subsidiaries,  and setting  forth the
related ad valorem,  severance and production taxes and lease operating expenses
attributable thereto and incurred for each such calendar month.

     (o) Notice of Certain  Changes.  Promptly,  but in no event within five (5)
Business Days after the execution thereof, copies of any amendment, modification
or supplement to any of the Organization  Documents of the Parent,  the Borrower
or any Subsidiary.

     (p) Notice of Swap  Agreement  Modifications.  Prompt written notice of any
amendment to or other  modification  of any Swap  Agreement or the terms thereof
since  the  delivery  of  the  last  certificate  pursuant  to  Section  8.01(e)
(including a summary of the terms of such amendment or modification  and the net
mark-to-market value therefor).

                                       54
<PAGE>
     (q) Drilling Reports. As soon as available,  and in any event within twenty
(20) days after the end of each month,  reports on active field  operations on a
field and well basis, as applicable,  including but not limited to any drilling,
completions,  well  workovers,  installation,  modification or repair of surface
facilities  and flowlines,  and pipeline  hookups,  including a "daily  drilling
report",  as  applicable,  and  information  related to pipe  depth,  completion
percentage, perforation intervals, updated spud date or date of first production
(as applicable), flow-rates, upon request copies of any well logs across the pay
sectors and such other information as may be reasonably  requested,  in form and
substance  satisfactory to  Administrative  Agent (including a discussion of any
current material  operating  problems with any wells and any proposed  solutions
and any material technical studies conducted during the month).

     (r) Title Opinions.  Upon the request of Administrative Agent, the Borrower
shall  provide to  Administrative  Agent  copies of such  division  order  title
opinions  or such  other  title  information  in form and  substance  reasonably
satisfactory to the Administrative Agent, evidencing the applicable Loan Party's
good and defensible title to any of the Mortgaged Properties.

     (s) Notices Relating to Acquisition.  In the event that after the Effective
Date: (i) the Borrower is required or elects to purchase any of the  Acquisition
Properties  which  had been  excluded  from,  or return  any of the  Acquisition
Properties which had been included in, the Acquisition  Properties in accordance
with the terms of the  Acquisition  Documents,  (ii) the Borrower is required to
honor any  preferential  purchase or consent right in respect of any Acquisition
Property  which  has not  been  waived,  (iii)  any  matter  being  disputed  in
accordance with the terms of the  Acquisition  Documents is resolved or (iv) the
Borrower and the seller(s) calculate and agree upon a "final statement", if any,
contemplated by the Acquisition Documents, then, in each such case, the Borrower
shall  promptly give  Administrative  Agent notice in reasonable  detail of such
circumstances.

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

     (u) Annual  Business  Plan and Budget.  As soon as  practicable  and in any
event within sixty (60) days after the end of each fiscal year, a business  plan
and operating and capital  budget of the Borrower and its  Subsidiaries  for the
ensuing four (4) fiscal  quarters,  such plan to be prepared in accordance  with
GAAP and to include, on a quarterly basis, the following:  a quarterly operating
and capital budget,  a projected income  statement,  statement of cash flows and
balance  sheet,   calculations   demonstrating  projected  compliance  with  the
financial   covenants  set  forth  in  Section  9.01  and  a  report  containing
management's discussion and analysis of such budget with a reasonable disclosure
of the key assumptions and drivers with respect to such budget, accompanied by a
certificate  from a Responsible  Officer of the Borrower to the effect that such
budget  contains  good faith  estimates  (utilizing  assumptions  believed to be

                                       55
<PAGE>
reasonable  at the time of delivery of such budget) of the  financial  condition
and operations of the Borrower and its Subsidiaries for such period.

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

     (a) the occurrence of any Default;

     (b) the occurrence of any Recovery Event;

     (c) the filing or commencement of, or the threat in writing of, any action,
suit,  proceeding,  investigation  or arbitration by or before any arbitrator or
Governmental  Authority  against or  affecting  the  Borrower  or any  Affiliate
thereof  not  previously  disclosed  in writing to the  Lenders or any  material
adverse  development  in  any  action,   suit,   proceeding,   investigation  or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case could  reasonably  be expected to result in liability in excess of $50,000,
not fully covered by insurance, subject to normal deductibles; and

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

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

     Section 8.03  Existence;  Conduct of Business.  The Borrower will, and will
cause  each  Subsidiary  to,  do or  cause to be done all  things  necessary  to
preserve,  renew and keep in full force and effect its legal  existence  and the
rights, licenses,  permits, privileges and franchises material to the conduct of
its business and maintain,  if necessary,  its  qualification  to do business in
each other  jurisdiction  in which its Oil and Gas  Properties is located or the
ownership  of its  Properties  requires  such  qualification,  except  where the
failure  to so  qualify  could not  reasonably  be  expected  to have a Material
Adverse  Effect;  provided  that the  foregoing  shall not  prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.11.

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

                                       56
<PAGE>
expected to result in a Material Adverse Effect or result in the seizure or levy
of any material  Property of the Borrower or any Subsidiary,  provided that that
Borrower  shall not permit any of the trade  payables of the  Borrower or any of
its  Subsidiaries to be outstanding for more than 60 days from the original date
of invoice unless the validity or amount thereof is being challenged pursuant to
clause (a) of this Section.

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

     Section 8.06 Operation and Maintenance of Properties;  Material  Contracts.
The Borrower, at its own expense, will, and will cause each Subsidiary to:

     (a) operate its Oil and Gas  Properties  and other  material  Properties or
cause such Oil and Gas Properties  and other material  Properties to be operated
in a careful  and  efficient  manner in  accordance  with the  practices  of the
industry and in compliance  with all applicable  contracts and agreements and in
compliance  with  all  Requirements  of  Law,  including,   without  limitation,
applicable pro ration  requirements and Environmental  Laws, and all laws, rules
and  regulations  of  every  other  Governmental  Authority  from  time  to time
constituted  to  regulate  the  development  and  operation  of its  Oil and Gas
Properties  and the  production  and sale of  Hydrocarbons  and  other  minerals
therefrom.

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

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

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

                                       57
<PAGE>
     (e) to the extent the  Borrower is not the  operator of any  Property,  the
Borrower  shall use  commercially  reasonable  efforts to cause the  operator to
comply with this Section 8.06.

     (f)  perform  and observe  all the terms and  provisions  of each  Material
Contract to be performed or observed by it, maintain each such Material Contract
in full force and effect, enforce each such Material Contract in accordance with
its  terms,  take  all  such  action  to such  end as may be  from  time to time
requested by the  Administrative  Agent and, upon request of the  Administrative
Agent,  make to each other party to each such Material Contract such demands and
requests for information and reports or for action as the Borrower or any of its
Subsidiaries is entitled to make under such Material Contract, and cause each of
its Subsidiaries to do so.

     (g) drill  three  PUD  locations  on the Frio  County,  Texas,  Oil and Gas
Properties  (including  the  Stewart 1-H  recompletion)  within 18 months of the
Effective Date, unless this requirement is waived by the  Administrative  Agent;
provided,  however,  that it shall not be a breach of this  paragraph (g) if (i)
the  Borrower  fails to  comply  with  this  paragraph  solely  as a result of a
Defaulting  Lender not funding a portion of its  Commitment  after the Effective
Date,  and (ii) the Borrower does not  otherwise  have (or have access to) funds
sufficient for it to comply with this paragraph (g).

     Section 8.07  Insurance.  The Borrower will, and will cause each Subsidiary
to,  maintain,   with  financially  sound  and  reputable  insurance  companies,
insurance in such amounts and against such risks as are  customarily  maintained
by companies engaged in the same or similar businesses  operating in the same or
similar locations and otherwise in form and amounts and with insurers acceptable
to the  Administrative  Agent,  including  insurance of the types and  coverages
described  in  Schedule  8.07 and with limits of coverage no less than those set
out in Schedule 8.07.  The loss payable  clauses or provisions in said insurance
policy  or  policies  insuring  any of the  collateral  for the  Loans  shall be
endorsed  in  favor  of and  made  payable  to the  Administrative  Agent as its
interests may appear and such policies shall name the  Administrative  Agent and
the Lenders as "additional  insureds" and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the  Administrative
Agent.

     Section 8.08 Books and Records;  Inspection  Rights. The Borrower will, and
will cause each  Subsidiary to, keep proper books of record and account in which
full,  true  and  correct  entries  are  made in  conformity  with  GAAP and all
Requirements of Law of all dealings and transactions in relation to its business
and activities. The Borrower will, and will cause each Subsidiary to, permit any
representatives  designated  by the  Administrative  Agent or any  Lender,  upon
reasonable  prior notice,  to visit and inspect its  Properties,  to examine and
make extracts from its books and records,  and to discuss its affairs,  finances
and  condition  with  its  officers  and  independent  accountants,  all at such
reasonable times and as often as reasonably requested.

     Section 8.09  Compliance  with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all  Requirements or Law (including all  Requirements
of Law relating to plugging and  abandonment)  and all  Contractual  Obligations
applicable  to  it  or  its  Property,  except  where  the  failure  to  do  so,
individually or in the aggregate,  could not reasonably be expected to result in
a Material Adverse Effect.

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     Section 8.10 Environmental Matters.

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

     (b) The Borrower will promptly,  but in no event later than five days after
the  Borrower's  knowledge of the occurrence of a triggering  event,  notify the
Administrative  Agent and the  Lenders  in  writing  of any  threatened  action,
investigation or inquiry by any Governmental  Authority or any threatened demand
or  lawsuit  by  Person  against  the  Borrower  or the  Subsidiaries  or  their
Properties  of  which  the  Borrower  has  knowledge  in  connection   with  any
Environmental Laws if the Borrower reasonably  anticipates that such action will
result in liability  (whether  individually  or in the  aggregate)  in excess of
$50,000, not fully covered by insurance, subject to normal deductibles.

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

     Section 8.11 Further Assurances.

(a) The Borrower at its sole expense will,  and will cause each  Subsidiary  to,
promptly  execute  and  deliver  to the  Administrative  Agent  all  such  other
documents, agreements and instruments reasonably requested by the Administrative

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<PAGE>
Agent to comply with,  cure any defects or accomplish the conditions  precedent,
covenants and agreements of the Borrower or any Subsidiary,  as the case may be,
in the Loan  Documents,  including  the Notes,  or to further  evidence and more
fully describe the collateral  intended as security for the  Obligations,  or to
correct any omissions in this Agreement or the Security  Documents,  or to state
more fully the obligations secured therein,  or to perfect,  protect or preserve
any Liens created pursuant to this Agreement or any of the Security Documents or
the priority thereof, or to make any recordings,  file any notices or obtain any
consents,  all  as may be  reasonably  necessary  or  appropriate,  in the  sole
discretion of the Administrative Agent, in connection therewith.

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

     Section 8.12 Reserve Reports.

     (a) On or before  April 1 and October 1 of each year,  commencing  April 1,
2015, the Borrower shall furnish to the  Administrative  Agent and the Lenders a
Reserve  Report  evaluating  the Oil and Gas  Properties of the Borrower and its
Subsidiaries  as of the  immediately  preceding  February  1 and  August  1. The
Reserve  Report  as of August 1 of each year  shall be  prepared  by one or more
Approved  Petroleum  Engineers,  and the February 1 Reserve  Report of each year
shall be prepared,  in a form reasonably acceptable to the Administrative Agent,
by or under the  supervision  of the chief  engineer of the  Borrower  who shall
certify such Reserve Report to be true and accurate in all material respects and
to have been prepared in accordance  with the procedures used in the immediately
preceding August 1 Reserve Report.

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

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<PAGE>
recently  delivered  Reserve  Report  which the  Borrower  could  reasonably  be
expected to have been obligated to list on Schedule 7.19 had such agreement been
in effect on the date hereof and (vi) attached  thereto is a schedule of the Oil
and  Gas  Properties  evaluated  by  such  Reserve  Report  that  are  Mortgaged
Properties  and  demonstrating  the percentage of the total proved value of such
Mortgaged Properties represent in compliance with Section 8.14(a).

     Section 8.13 Title Information.

     (a) On or before the delivery to the  Administrative  Agent and the Lenders
of each Reserve Report  required by Section  8.12(a),  the Borrower will deliver
title   information  in  form  and  substance   reasonably   acceptable  to  the
Administrative  Agent covering enough of the Oil and Gas Properties evaluated by
such Reserve Report that were not included in the immediately  preceding Reserve
Report, so that the Administrative Agent shall have received together with title
information  previously  delivered  to  the  Administrative  Agent,   reasonably
satisfactory title information on at least 90% of the total value of the Oil and
Gas Properties evaluated by such Reserve Report.

     (b)  If  the  Borrower  has  provided  title   information  for  additional
Properties under Section 8.13(a),  the Borrower shall,  within 60 days of notice
from the  Administrative  Agent that  title  defects  or  exceptions  exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions  (including  defects  or  exceptions  as to  priority)  which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged  Properties  with no title defects or  exceptions  except for Excepted
Liens (other than Excepted  Liens  described in clauses (e), (g) and (h) of such
definition)  having an equivalent  value or (iii) deliver title  information  in
form and substance reasonably acceptable to the Administrative Agent so that the
Administrative  Agent  shall have  received,  together  with  title  information
previously delivered to the Administrative Agent,  reasonably satisfactory title
information on at least 90% of the value of the Oil and Gas Properties evaluated
by such Reserve Report.

     Section 8.14 Additional Collateral; Additional Guarantors.

     (a) The  Borrower  shall review  promptly  each  Reserve  Report  delivered
pursuant to this Agreement after the Effective and the list of current Mortgaged
Properties  (as  described  in Section  8.12(b)(vi))  to  ascertain  whether the
Mortgaged  Properties  represent  at least 90% of the total value of the Oil and
Gas  Properties  evaluated in the most recently  completed  Reserve Report after
giving  effect  to   exploration   and  production   activities,   acquisitions,
dispositions and production.  In the event that the Mortgaged  Properties do not
represent at least 90% of such total value,  then the Borrower shall,  and shall
cause the  Subsidiaries  to,  grant,  within thirty (30) days of delivery of the
certificate  required  under Section  8.12(b),  to the  Administrative  Agent as
security for the Obligations a first-priority Lien (provided that Excepted Liens
of the type  described in clauses (a) to (d) and (f) of the  definition  thereof
may  exist,  but  subject  to the  provisos  at the end of such  definition)  on
additional Oil and Gas Properties not already  subject to a Lien of the Security
Documents such that after giving effect thereto,  the Mortgaged  Properties will
represent at least 90% of such total  value.  All such Liens will be created and
perfected by and in accordance  with the provisions of deeds of trust,  security
agreements and financing statements or other Security Documents, all in form and

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<PAGE>
substance  satisfactory to the Administrative  Agent and in sufficient  executed
(and  acknowledged  where necessary or appropriate)  counterparts  for recording
purposes. In order to comply with the foregoing, if any Subsidiary places a Lien
on its Oil and Gas  Properties and such  Subsidiary is not a Guarantor,  then it
shall become a Guarantor and comply with Section 8.14(b).

     (b) The Borrower  shall  promptly  cause each  Subsidiary  to guarantee the
Obligations  pursuant to the Guaranty  Agreement.  In  connection  with any such
guaranty,  the Borrower shall, or shall cause such Subsidiary to (A) execute and
deliver a supplement to the Guaranty Agreement executed by such Subsidiary,  (B)
pledge all of the Equity  Interests of such new Subsidiary  (including,  without
limitation,  delivery (if  applicable) of original  certificates  evidencing the
Equity Interests of such Subsidiary,  together with an appropriate undated stock
powers for each  certificate  duly  executed  in blank by the  registered  owner
thereof) and (C) execute and deliver such other  additional  closing  documents,
certificates  and legal  opinions as shall be  requested  by the  Administrative
Agent.

     (c) On each  Collateral  Addition  Date,  the Borrower and each  Subsidiary
shall take all such actions and execute and deliver, or cause to be executed and
delivered,  all such Security Documents that Administrative  Agent shall request
to create in favor of  Administrative  Agent,  for the  benefit  of the  Secured
Parties, a valid and, subject to any filing and/or recording referred to herein,
perfected  first  priority  Lien  on and  security  interest  in all Oil and Gas
Properties of the Borrower and its Subsidiaries not already subject to a Lien of
the Security  Documents (subject only to Excepted Liens of the type described in
clause (a) to (d) and (f) of the definition thereof, but subject to the provisos
at the end of such definition).  All such Liens will be created and perfected by
and in accordance with the provisions of deeds of trust, security agreements and
financing  statements  or other  Security  Documents,  all in form and substance
satisfactory  to the  Administrative  Agent and in  sufficiently  executed  (and
acknowledged   where  necessary  or  appropriate)   counterparts  for  recording
purposes.  If requested by Administrative  Agent, each Affiliate of a Loan Party
who is an  operator  under any  Operating  Agreement  shall  have  executed  and
delivered  a  subordination  agreement  to  Administrative  Agent,  in form  and
substance reasonably satisfactory to Administrative Agent.

     Section 8.15 ERISA Compliance.  The Borrower will promptly furnish and will
cause the  Subsidiaries  and any ERISA  Affiliate  to  promptly  furnish  to the
Administrative  Agent (a)  promptly  after the  filing  thereof  with the United
Stated Secretary of Labor or the Internal Revenue Service, copies of each annual
and other report with respect to each Plan or any trust created thereunder,  and
(b)  immediately  upon  becoming  aware  of the  occurrence  of any  "prohibited
transaction,"  as  described  in section 406 of ERISA or in section  4975 of the
Code, in connection  with any Plan or any trust  created  thereunder,  a written
notice  signed  by  the  President  or  the  principal  Financial  Officer,  the
Subsidiary or the ERISA  Affiliate,  as the case may be,  specifying  the nature
thereof,  what action the Borrower,  the  Subsidiary  or the ERISA  Affiliate is
taking or proposes to take with respect  thereto,  and,  when known,  any action
taken or proposed by the Internal  Revenue  Service or the  Department  of Labor
with respect thereto.

     Section 8.16 Key Man Life  Insurance.  Commencing on the date  occurring 60
days after the Effective  Date and at all times  thereafter,  the Borrower shall
maintain,  at its  expense,  key man life  insurance  policies on each of Ronnie
Steinocher and Lisa Hamilton.  Each such key man life insurance  policy shall be
in the amount of at least $3,000,000, shall be for a term of at least two years,

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<PAGE>
shall be issued  by an  insurance  company  satisfactory  to the  Administrative
Agent, shall be otherwise  reasonably  satisfactory in form and substance to the
Administrative  Agent, and shall be collaterally  assigned to the Administrative
Agent,  for the  benefit  of the  Secured  Parties,  pursuant  to  documentation
satisfactory in form and substance to the Administrative Agent.

     Section 8.17  Observation  Rights.  Upon  reasonable  advance  notice,  the
Administrative  Agent  shall  be  entitled  to have one or more  observers  (the
"Observers")  attend and  participate in all meetings of the board of directors,
managing members,  managers, general partners, or other governing authorities of
each Loan Party (and all committees  thereof) and its equity owners (each, if it
involves more than one person, a "Meeting"). The Observers shall not be entitled
to vote on matters presented to or discussed at any Meeting. The Observers shall
be timely  notified of the time and place of each  Meeting,  if any, and will be
given written notice of all proposed  actions to be taken at each Meeting.  Each
such notice shall describe in reasonable  detail the nature and substance of the
matters to be  discussed  and/or voted upon at any such Meeting (or the proposed
actions to be taken by written consent  without a Meeting).  The Observers shall
have the right to receive all  information  provided to any  director,  manager,
managing member, committee member, or general partner,  partner, member or other
equity  owner of the  Borrower,  in  addition  to copies of the  records  of the
proceedings  or minutes of any such  Meeting  when  provided  to the  applicable
Meeting  participants.  The  Borrower  will  also  furnish  or will  cause to be
furnished to the  Administrative  Agent a copy of each written consent without a
meeting  adopted by the board of  directors  or other  managers  of the any Loan
Party or any committee  thereof or the partners,  members or other equity owners
of the  Borrower,  as  applicable,  not later  than  five (5) days  before it is
effective.  The board of  directors  or other  managers of each Loan Party shall
hold regularly scheduled Meetings quarterly.

     Section 8.18 Deposit  Accounts;  Etc. In the event that the Borrower or any
Subsidiary  establishes a deposit  account  other than the Debt Service  Reserve
Account or a securities account, such Loan Party will, prior to transferring any
funds or assets into such account,  execute and deliver a control  agreement and
grant in favor of Administrative  Agent all the rights necessary to control such
account,  provided  that with  respect to deposit  accounts  of the  Borrower in
effect on the Effective  Date,  the Borrower shall comply with this Section 8.18
on or before August 1, 2014.  Each such control  agreement shall be satisfactory
in form and substance to the Administrative Agent.

     Section 8.19 Additional Equity Issuance. On or before January 31, 2015, the
Borrower  shall receive in cash gross  proceeds of at least  $2,000,000  from an
issuance of Equity Interests by the Parent, unless the Borrower has sold its Oil
and Gas  Properties  in Taylor  County,  Texas for Net Cash Proceeds of at least
$3,000,000.

     Section 8.20 Riggan Lease. The Borrower shall exercise  reasonable  efforts
to acquire the Riggan Lease within 90 days after the Effective Date.

                                   ARTICLE IX
                               NEGATIVE COVENANTS

     Until the  Commitments  have expired or terminated and the principal of and
interest  on each Loan and all fees  payable  hereunder  and all  other  amounts
payable  under the Loan  Documents  have been Paid in Full,  the  Parent and the
Borrower jointly and severally covenant and agree with the Administrative  Agent
and the Lenders that:

     Section 9.01 Financial Covenants.

     (a) Consolidated  Interest Coverage Ratio. The Borrower will not permit the
Consolidated  Interest  Coverage Ratio on the last day of any calendar month set
forth below to be less than the ratio set forth  below  opposite  such  calendar
month:

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           Month Ending On                  Consolidated Interest Coverage Ratio
           ---------------                  ------------------------------------

     10/31/2014                                           1.20

     11/31/2014                                           1.40

     12/31/2014                                           1.60

     1/31/2015                                            1.75

     2/28/2015 and 3/31/2015                              2.00

     4/30/2015, 5/31/2015 and 6/30/2015                   2.25

     7/31/2015, 8/31/2015 and 9/31/2015                   2.50

     10/31/2015 and on the last day of
     each calendar month thereafter                       3.00

     (b) Consolidated  Debt Ratio. The Borrower will not permit the Consolidated
Debt Ratio on the last day of any  calendar  month set forth below to exceed the
ratio set forth below opposite such calendar month:

           Month Ending On                        Consolidated Debt Ratio
           ---------------                        -----------------------

     10/31/2014                                           7.00

     11/31/2014                                           5.50

     12/31/2014                                           5.00

     1/31/2015                                            4.50

     2/28/2015                                            4.00

     3/31/2015                                            3.50

     4/30/2015                                            3.00

     5/31/2015 and 6/30/2015                              2.50

     7/31/2015, 8/31/2015 and 9/30/2015                   2.00

     10/31/2015 and on the last day of each
     Calendar month  thereafter                           1.75

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<PAGE>
     (c) Current Ratio.  Commencing on September 30, 2014, the Borrower will not
permit, as of the last day of any fiscal quarter,  the ratio of (i) Consolidated
Current Assets  (excluding  non-cash assets under FAS 133) to (ii)  Consolidated
Current Liabilities  (excluding  non-cash  obligations under FAS 133 and current
maturities under this Agreement) to be less than 1.0 to 1.25.

     (d)  Minimum  Monthly  Production.  On the last day of any  calendar  month
occurring  during any period set forth below,  the Borrower  will not permit the
average monthly gross production  (calculated as gross barrels of oil and BOE of
natural gas) from the Oil and Gas  Properties of the Borrower and the Subsidiary
Guarantors during the three month period ending on such date to be less than the
BOE  (calculated  as gross  barrels of oil and Mcf of natural gas converted at a
ratio of 6 Mcf of natural  gas per barrel of oil) set forth below  opposite  the
relevant period:

                  Period                         Oil and BOE Production
                  ------                         ----------------------

 10/1/2014 through and including 1/31/2015                4,500

 2/1/2015 through and including 3/31/2015                 6,000

 4/1/2015 through and including 6/30/2015                 8,000

 On 7/31/2015 and on the last day of each
 calendar month thereafter                               10,000

     (e) Minimum  Cash  Balances.  The  Borrower  will not permit the  aggregate
amount of unrestricted  cash and Cash Equivalents of the Borrower  (exclusive of
funds on deposit in the Debt  Service  Reserve  Account)  to at any time be less
than $35,000.

     (f) Maximum  Monthly  Total G&A Expense.  On the last day of each  calendar
month  (commencing  on October 31,  2014),  for the three month period ending on
such date,  the Borrower  will not permit the average  monthly Total G&A Expense
during such three month period to exceed $60,000.

     (g) Maximum Consolidated Total Indebtedness.  The Borrower shall not at any
time permit Consolidated Total Indebtedness to exceed $5,450,000.

     Section 9.02 Indebtedness. Neither the Borrower nor any of its Subsidiaries
will incur, create, assume or suffer to exist any Indebtedness, except:

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

     (b) Indebtedness of the Borrower and the Subsidiaries  existing on the date
hereof that is reflected in the Financial Statements.

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

     (d) Indebtedness under Capital Leases and purchase money obligations not to
exceed $250,000 in the aggregate at any time outstanding.

     (e) Indebtedness  associated with bonds or surety  obligations  required by
Requirements  of Law in  connection  with  the  operation  of the  Oil  and  Gas
Properties.

     (f)  intercompany  Indebtedness  between the Borrower and any  Wholly-Owned
Subsidiary Guarantor or between Wholly-Owned Subsidiary Guarantors to the extent
permitted by Section 9.05(d);  provided that any such  Indebtedness  owed by the
Borrower or a Guarantor  Wholly-Owned  Subsidiary  shall be  subordinated to the
Obligations on terms set forth in the Guaranty Agreement.

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

     (h) other unsecured  Indebtedness not to exceed $50,000 in the aggregate at
any one time outstanding.

     Section 9.03 Liens.  Neither the Borrower nor any  Subsidiary  will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:

     (a) Liens securing the payment of any Obligations.

     (b) Excepted Liens.

     (c) Liens securing Capital Leases or purchase money  obligations  permitted
by Section 9.02(d) but only on the Property financed by such Indebtedness.

     (d) Liens on Property not  constituting  collateral for the Obligations and
not otherwise  permitted by the foregoing clauses of this Section 9.03; provided
that the aggregate  principal or face amount of all  Indebtedness  secured under
this Section 9.03(e) shall not exceed $50,000 at any time.

     (e) the VPP and the VPP Mortgage,  provided that the VPP Mortgage  shall at
all times be  subordinate  to the Liens of the  Security  Documents  pursuant to
documents satisfactory to the Administrative Agent.

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<PAGE>
     Section  9.04  Restricted  Payments.  The  Borrower  will not, and will not
permit any Subsidiary to, declare or make, or agree to pay or make,  directly or
indirectly,  any Restricted Payment, return any capital or make any distribution
of its Property to its Equity Interest holders, except for the following:

     (a) the Borrower may declare and pay  dividends  with respect to its Equity
Interests  payable solely in additional  shares of its Equity  Interests  (other
than Disqualified Stock).

     (b) Subsidiaries of the Borrower may declare and pay dividends ratably with
respect to their Equity Interests.

     (c) the Borrower may make Restricted Payments pursuant to and in accordance
with stock option plans or other  benefit  plans for  management or employees of
the Borrower and its Subsidiaries.

     (d) the Borrower may make tax distributions to it's the Parent in an amount
equal to the highest  marginal rate  applicable  to aggregate  federal and state
income tax liability of the Parent,  as calculated in accordance  with the terms
thereof, attributable to the Consolidated Net Income.

     (e) the Borrower may make cash  distributions  to the Parent to pay for the
portion of the Parent's Total G&A Expense that is reasonably attributable to the
Borrower.

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

     (a)  Investments  reflected  in  the  Financial  Statements  or  which  are
disclosed to the Lenders in Schedule 9.05.

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

     (c) Investments in cash and Cash Equivalents.

     (d)  Investments  (i) made by the Borrower in or to the  Guarantors  and/or
(ii) made by any  Subsidiary  in or to the Borrower or any  Guarantor  that is a
Subsidiary.

     (e) subject to the limits in Section 9.06,  Investments in direct ownership
interests in additional Oil and Gas Properties and gas gathering systems related
thereto  or  related  to  farm-out,  farm-in,  participation  agreements,  joint
operating,  joint  venture  or area of  mutual  interest  agreements,  gathering
systems,  pipelines or other similar  arrangements which are usual and customary
in the oil and gas  exploration  and  production  business  located  within  the
geographic boundaries of the United States of America.

     (f) loans or advances to  employees,  officers or directors in the ordinary
course of  business  of the  Borrower  or any  Subsidiary,  in each case only as

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permitted by Requirement of Law, including section 402 of the Sarbanes Oxley Act
of 2002, but in any event not to exceed $50,000 in the aggregate at any time.

     (g) Investments in stock,  obligations or securities received in settlement
of debts arising from Investments permitted under this Section 9.05 owing to the
Borrower or any  Subsidiary as a result of a Debtor Relief Law of the obligor in
respect  of such  debts  or upon  the  enforcement  of any  Lien in favor of the
Borrower or any of its  Subsidiaries;  provided that the Borrower shall give the
Administrative  Agent  prompt  written  notice in the event  that the  aggregate
amount  of all  Investments  held at any one time  under  this  Section  9.05(k)
exceeds $50,000.

     (h) the Acquisition.

     (i) other Investments not to exceed $50,000 in the aggregate at any time.

     Section 9.06 Nature of  Business;  International  Operations.  The Borrower
will not, and will not permit any Subsidiary to, allow any material change to be
made in the character of its business as an independent  oil and gas exploration
and  production  company.  From and after the date hereof,  the Borrower and the
Subsidiaries  will not  acquire  or make any  other  expenditure  (whether  such
expenditure  is capital,  operating or  otherwise) in or related to, any Oil and
Gas  Properties  not located  within the  geographical  boundaries of the United
States.

     Section 9.07  Proceeds of Notes.  The Borrower will not permit the proceeds
of the Notes to be used for any purpose  other than those  permitted  by Section
7.21.  Neither the Borrower nor any Person  acting on behalf of the Borrower has
taken or will take any action  which  might cause any of the Loan  Documents  to
violate Regulations T, U or X or any other regulation of the Board or to violate
section  7 of the  Securities  Exchange  Act of 1934 or any  rule or  regulation
thereunder,  in each case as now in effect or as the same may  hereinafter be in
effect. If requested by the  Administrative  Agent, the Borrower will furnish to
the Administrative  Agent and each Lender a statement to the foregoing effect in
conformity  with the  requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

     Section 9.08  Limitation  on Leases.  The  Borrower  will not, and will not
permit  any  Subsidiary  to,  create,  incur,  assume  or  suffer  to exist  any
obligation  for the payment of rent or hire of  Property of any kind  whatsoever
(real or personal but excluding  Capital  Leases,  leases of corporate and field
office  space  utilized by the  Borrower  and its  Subsidiaries  in the ordinary
course of business and leases of Hydrocarbon  Interests),  under leases or lease
agreements  which would cause the  aggregate  amount of all payments made by the
Borrower and the Subsidiaries  pursuant to all such leases or lease  agreements,
including, without limitation, any residual payments at the end of any lease, to
exceed  $5,000 in any period of twelve  consecutive  calendar  months during the
life of such leases.

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

     (a) engage in, or permit any ERISA  Affiliate to engage in, any transaction
in connection with which the Borrower, a Subsidiary or any ERISA Affiliate could

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be subjected to either a material civil penalty assessed pursuant to subsections
(c),  (i),  (l) or (m) of  section  502 of ERISA or a  material  tax  imposed by
Chapter 43 of Subtitle D of the Code.

     (b) fail to make,  or permit  any  ERISA  Affiliate  to fail to make,  full
payment when due of all material  amounts  which,  under the  provisions  of any
Plan,  agreement  relating  thereto  or  Requirement  of Law,  the  Borrower,  a
Subsidiary or any ERISA Affiliate is required to pay as contributions thereto.

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

     (d) create or sponsor any  employee  pension  benefit  plan,  as defined in
section  3(2) of ERISA,  that is  subject to Title IV of ERISA,  section  302 of
ERISA or section 412 of the Code.

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

     Section 9.11  Mergers,  Etc. (a) The Borrower will not, and will not permit
any Subsidiary to, merge into or with or consolidate  with any other Person,  or
sell, transfer,  lease or otherwise dispose of (whether in one transaction or in
a series of transactions)  all or substantially all of its Property to any other
Person,  or liquidate,  wind up or dissolve itself (or suffer any liquidation or
dissolution),  except that any Wholly-Owned  Subsidiary Guarantor may merge with
any  other  Subsidiary  so long as the  survivor  is a  Wholly-Owned  Subsidiary
Guarantor  and that the Borrower may merge with any  Wholly-Owned  Subsidiary so
long as the Borrower is the survivor.

     (b) The Parent  will not merge into or with or  consolidate  with any other
Person,  or sell,  transfer,  lease or  otherwise  dispose  of  (whether  in one
transaction  or in a series of  transactions)  all or  substantially  all of its
Property to any other  Person,  or  liquidate,  wind up or  dissolve  itself (or
suffer any liquidation or dissolution).

     Section 9.12 Sale of Properties. The Borrower will not, and will not permit
any  Subsidiary to, (i) sell,  assign,  farm-out,  convey or otherwise  transfer
(including  sale-and-lease  back transactions) any Property,  or (ii) enter into
any agreement to do any of the foregoing, except for the following:

     (a) the sale of Hydrocarbons in the ordinary course of business.

     (b) the sale of the VPP pursuant to the VPP Purchase Agreement.

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     (c) the sale or transfer of equipment  that is no longer  necessary for the
business of the  Borrower or such  Subsidiary  or is replaced by equipment of at
least comparable value and use.

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

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

     Section 9.15  Subsidiaries.  The Borrower will not, and will not permit any
Subsidiary to, create or acquire any additional  Subsidiary  unless the Borrower
gives written notice to the Administrative Agent of such creation or acquisition
and complies with Section 8.14(b) and Section  8.14(c).  The Borrower shall not,
and shall not permit any Subsidiary to, sell, assign or otherwise dispose of any
Equity Interests in any Subsidiary except in compliance with Section 9.12(d).

     Section  9.16  Negative  Pledge  Agreements;   Dividend  Restrictions.  The
Borrower will not, and will not permit any Subsidiary to, create,  incur, assume
or suffer to exist any contract, agreement or understanding (other than (i) this
Agreement and the Security  Documents (ii) Capital  Leases or other  obligations
creating  Liens  permitted  by  Section  9.03(c)  and  (d),  provided  that  the
restriction or prohibition is limited to the Property  financed  thereby,  (iii)
any leases or licenses or similar  contracts as they affect any Property or Lien
subject to a lease or license, (iv) any restriction with respect to a Subsidiary
imposed pursuant to an agreement entered into for the direct or indirect sale or
disposition of all or substantially all the Equity Interests or Property of such
Subsidiary  (or the Property  that is subject to such  restriction)  pending the
closing of such sale or disposition, or (v) customary provisions with respect to
the  distribution  of Property  in joint  venture  agreements)  which in any way
prohibits or restricts  the granting,  conveying,  creation or imposition of any
Lien on any of its Property in favor of the Administrative Agent and the Lenders
or restricts any Subsidiary from paying dividends or making distributions to the
Borrower or any Subsidiary Guarantor, or which requires the consent of or notice
to other Persons in connection therewith.

     Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower
will  not,  and will  not  permit  any  Subsidiary  to,  allow  gas  imbalances,
take-or-pay or other  prepayments  with respect to the Oil and Gas Properties of
the  Borrower  or any  Subsidiary  that  would  require  the  Borrower  or  such
Subsidiary  to  deliver  Hydrocarbons  at  some  future  time  without  then  or
thereafter receiving full payment therefor.

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     Section 9.18 Swap Agreements.

     (a) The  Borrower  will not, and will not permit any  Subsidiary  to, enter
into any Swap  Agreements  with any Person other than Swap Agreements in respect
of commodities that have been approved in writing by the Administrative Agent.

     (b) No Swap Agreements shall be entered into for speculative purposes.

     Section  9.19  Accounting   Changes;   Organization   Documents;   Material
Contracts; Operating Agreements.

     (a) The Borrower  will not change its fiscal year end, or make any material
change in its accounting treatment and reporting practices except as required by
GAAP.

     (b) The Borrower will not, and will not permit any Subsidiary to, (i) amend
or permit any amendments to its  Organization  Documents,  except any amendments
not adverse to the  interests  of the Lenders;  or (ii) enter into,  or amend or
permit any  amendments  to, or terminate or waive any provision of any Operating
Agreement or Material Contract, except any amendment that (x) does not amend any
financial or economic terms of such Operating Agreement or Material Contract and
(y) is not adverse to the interests of the Administrative Agent and the Lenders.

     Section 9.20  Marketing  Activities.  The  Borrower  will not, and will not
permit any Subsidiaries to, engage in marketing  activities for any Hydrocarbons
or enter into any  contracts  related  thereto  other than (a) contracts for the
sale of Hydrocarbons scheduled or reasonably estimated to be produced from their
proved Oil and Gas Properties during the period of such contract,  (b) contracts
for the sale of  Hydrocarbons  scheduled or reasonably  estimated to be produced
from proved Oil and Gas  Properties of third  parties  during the period of such

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contract  associated  with the Oil and Gas  Properties  of the  Borrower and the
Subsidiaries  that the  Borrower  or one of the  Subsidiaries  has the  right to
market pursuant to joint operating agreements,  unitization  agreements or other
similar  contracts  that are usual and customary in the oil and gas business and
(c) other  contracts  for the  purchase  and/or  sale of  Hydrocarbons  of third
parties (i) which have  generally  offsetting  provisions  (i.e.,  corresponding
pricing  mechanics,  delivery  dates  and  points  and  volumes)  such  that  no
"position" is taken and (ii) for which appropriate credit support has been taken
to alleviate the material credit risks of the counterparty thereto.

     Section 9.21 Well  Drilling  Costs.  The Borrower  will not permit the well
drilling  costs of the Borrower and its  Subsidiaries  to materially  exceed the
well drilling costs set forth in the Projections.

                                   ARTICLE X
                           EVENTS OF DEFAULT; REMEDIES

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

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

     (b) the Borrower  shall fail to pay any interest on any Loan,  any fee, any
Make-Whole  Premium or any other  amount  (other  than an amount  referred to in
Section  10.01(a))  payable under any Loan Document,  when and as the same shall
become due and payable.

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

     (d) the  Borrower  or any  Subsidiary  shall fail to observe or perform any
covenant,  condition or agreement contained in Section 8.01(i), Section 8.01(m),
Section 8.02, Section 8.03, Section 8.14 or in ARTICLE IX.

     (e) the Parent,  the  Borrower or any  Subsidiary  shall fail to observe or
perform any covenant,  condition or agreement contained in this Agreement (other

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than those specified in Section 10.01(a),  Section 10.01(b) or Section 10.01(d))
or any other Loan  Document,  and such failure shall  continue  unremedied for a
period of 15 days  after the  earlier to occur of (A)  notice  thereof  from the
Administrative  Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible  Officer of the Borrower or such  Subsidiary
otherwise becoming aware of such default.

     (f) the  Parent,  the  Borrower  or any  Guarantor  shall  fail to make any
payment  (whether of principal or interest and  regardless of amount) in respect
of any Material Indebtedness,  when and as the same shall become due and payable
and such failure continues beyond any applicable grace period.

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

     (h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed  seeking  (i)  liquidation,  reorganization  or other  relief  in
respect of the Parent,  the  Borrower or any  Subsidiary  or its debts,  or of a
substantial  part of its  assets,  under any  Federal,  state or foreign  Debtor
Relief Laws now or  hereafter in effect or (ii) the  appointment  of a receiver,
trustee,  custodian,  sequestrator,  conservator  or  similar  official  for the
Parent,  the Borrower or any Subsidiary or for a substantial part of its assets,
and, in any such case,  such  proceeding or petition shall continue  undismissed
for thirty  (30) days or an order or decree  approving  or  ordering  any of the
foregoing shall be entered.

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

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

     (k) (i) one or more  judgments  for the  payment  of money in an  aggregate
amount in excess of  $100,000  (to the extent not covered by  independent  third
party  insurance  provided by insurers of the highest  claims  paying  rating or
financial  strength as to which the insurer does not dispute coverage and is not

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subject  to an  insolvency  proceeding)  or (ii)  any  one or more  non-monetary
judgments that have, or could reasonably be expected to have, individually or in
the aggregate,  a Material Adverse Effect, shall be rendered against the Parent,
the  Borrower,  any  Subsidiary  or any  combination  thereof and the same shall
remain  undischarged  for a period of 30 consecutive days during which execution
shall not be  effectively  stayed,  or any action  shall be  legally  taken by a
judgment creditor to attach or levy upon any assets of the Parent,  the Borrower
or any Subsidiary to enforce any such judgment.

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

     (m) a Change of Control shall occur.

     (n) there is filed  against  any Loan Party any civil or  criminal  action,
suit or proceeding under any federal or state racketeering  (including,  without
limitation,  the Racketeer  Influenced and Corrupt  Organization Act of 1970) or
any other statute, which action, suit or proceeding could, in the opinion of the
Administrative  Agent,  result in the  confiscation  or forfeiture of any of the
Collateral.

     (o) the  Borrower  shall  (i) fail to  observe  or  perform  any  covenant,
condition or agreement contained in any of the VPP Documents, or (ii) breach any
representation or warranty in any of the VPP Documents.

     Section 10.02 Remedies.

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

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interest thereon and all fees and the other  obligations of the Borrower and the
Guarantors  accrued  or owing  hereunder  and under the Notes and the other Loan
Documents  (including  Make-Whole  Premium),  shall automatically become due and
payable, without presentment, demand, protest, notice of acceleration, notice of
intent to accelerate or other notice of any kind, all of which are hereby waived
by the Borrower and each Guarantor.

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

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

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

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

     (iii) THIRD, pro rata to payment of Make-Whole Premium and accrued interest
on the Loans;

     (iv) FOURTH, pro rata to payment of principal outstanding on the Loans;

     (v) FIFTH, to the payment of all other Obligations; and

     (vi) SIXTH, any excess,  after all of the Obligations  shall have been Paid
in  Full,  shall  be  paid  to the  Borrower  or as  otherwise  required  by any
applicable Requirements of Law.

     (d) In addition to all rights and remedies under this Agreement,  any other
Loan Document,  at law and in equity, if any Event of Default shall occur and be
continuing and Administrative  Agent, or its designee or  representative,  shall
exercise any remedies  under the Security  Documents with respect to any portion
of the  Mortgaged  Properties  (or any Loan Party shall  transfer any  Mortgaged
Properties "in lieu of" foreclosure),  the Administrative  Agent and the Lenders
shall have the right to request  that any operator of any  Mortgaged  Properties
which is either a Loan Party or an  Affiliate of a Loan Party resign as operator
under the joint operating agreement  applicable thereto; and no later than sixty
(60) days after receipt by a Loan Party of any such request,  such Loan Party or
its Affiliate  shall resign (or cause such other party to resign) as operator of
such Mortgaged Properties.

                                   ARTICLE XI
                            THE ADMINISTRATIVE AGENT

     Section 11.01 Appointment;  Powers.  Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such  actions  on its behalf and to  exercise  such  powers as are

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delegated  to the  Administrative  Agent by the terms  hereof and the other Loan
Documents,  together with such actions and powers as are  reasonably  incidental
thereto.

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

     Section 11.03 Action by  Administrative  Agent.  The  Administrative  Agent
shall  have  no  duty  to  take  any   discretionary   action  or  exercise  any
discretionary   powers,   except   discretionary  rights  and  powers  expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Required  Lenders (or such
other  number or  percentage  of the  Lenders  as shall be  necessary  under the
circumstances as provided in Section 12.02) and in all cases the  Administrative

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

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

     Section 11.05 Subagents.  The Administrative  Agent may perform any and all
its duties  and  exercise  its  rights and powers by or through  any one or more
sub-agents  appointed by the Administrative  Agent. The Administrative Agent and
any such  sub-agent  may perform any and all its duties and  exercise its rights
and powers through their respective Related Parties. The exculpatory  provisions
of the preceding  Sections of this ARTICLE XI shall apply to any such  sub-agent
and to the Related Parties of the  Administrative  Agent and any such sub-agent,

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and  shall  apply  to  their  respective   activities  in  connection  with  the
syndication of the credit  facilities  provided for herein as well as activities
as Administrative Agent.

     Section  11.06  Resignation  of  Administrative   Agent.   Subject  to  the
appointment  and  acceptance  of a successor  Agent as provided in this  Section
11.06, the Administrative  Agent may resign at any time by notifying the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have the
right,  in  consultation  with the  Borrower,  to  appoint  a  successor.  If no
successor  shall have been so appointed  by the Required  Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation,  then the retiring Administrative Agent may, on
behalf  of the  Lenders,  appoint a  successor  Administrative  Agent.  Upon the
acceptance of its appointment as Administrative  Agent hereunder by a successor,
such successor  shall succeed to and become vested with all the rights,  powers,
privileges  and duties of the retiring  Agent,  and the retiring  Administrative
Agent shall be discharged  from its duties and obligations  hereunder.  The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor  unless  otherwise  agreed between the Borrower
and such successor.  After the Administrative Agent's resignation hereunder, the
provisions of this ARTICLE XI and Section 12.03 shall continue in effect for the
benefit  of  such  retiring  Administrative  Agent,  its  sub-agents  and  their
respective  Related  Parties in respect  of any  actions  taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

     Section 11.07  Administrative  Agent as Lender.  The Person  serving as the
Administrative  Agent  hereunder  shall  have the same  rights and powers in its
capacity as a Lender as any other  Lender and may exercise the same as though it
were not the  Administrative  Agent and the term  "Lender" or  "Lenders"  shall,
unless otherwise  expressly  indicated or unless the context otherwise requires,
include  the  Person  serving  as  the  Administrative  Agent  hereunder  in its
individual  capacity.  Such Person and its Affiliates may accept  deposits from,
lend money to, act as the financial  advisor or in any other  advisory  capacity
for and generally  engage in any kind of business with the Parent,  the Borrower
or any  Subsidiary or other  Affiliate of any of the foregoing as if such Person
were not the  Administrative  Agent  hereunder  and  without any duty to account
therefor to the Lenders.

     Section 11.08 No Reliance.

     (a)  Each  Lender  acknowledges  that it  has,  independently  and  without
reliance upon the Administrative  Agent, any other Agent or any other Lender and
based on such documents and information as it has deemed  appropriate,  made its
own credit  analysis  and decision to enter into this  Agreement  and each other
Loan  Document to which it is a party.  Each Lender  also  acknowledges  that it
will,  independently  and without  reliance upon the  Administrative  Agent, any
other Agent or any other Lender and based on such  documents and  information as
it shall from time to time deem appropriate,  continue to make its own decisions
in taking or not taking  action  under or based upon this  Agreement,  any other
Loan  Document,  any related  agreement or any document  furnished  hereunder or
thereunder.  The  Administrative  Agent  shall not be  required  to keep  itself
informed  as to the  performance  or  observance  by the  Borrower or any of its
Subsidiaries  of this  Agreement,  the  Loan  Documents  or any  other  document
referred to or provided for herein or to inspect the  Properties or books of the
Borrower or its  Subsidiaries.  Except for notices,  reports and other documents

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and  information  expressly  required  to be  furnished  to the  Lenders  by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or  responsibility  to provide any Lender  with any credit or other  information
concerning the affairs,  financial condition or business of the Borrower (or any
of its  Affiliates)  which may come into the  possession  of the  Administrative
Agent or any of its Affiliates.  In this regard,  each Lender  acknowledges that
Condon  Thornton  Sladek  Harrell PLLC is acting in this  transaction as special
counsel to the  Administrative  Agent only. Each other party hereto will consult
with its own legal  counsel to the extent that it deems  necessary in connection
with the Loan Documents and the matters contemplated therein.

     (b) The Lenders acknowledge that the Administrative  Agent is acting solely
in  administrative  capacity with respect to the  structuring and syndicating of
this Agreement and has no duties,  responsibilities  or  liabilities  under this
Agreement and the other Loan  Documents  other than its  administrative  duties,
responsibilities and liabilities specifically as set forth in the Loan Documents
and  in its  capacity  as a  Lender  hereunder.  In  structuring,  arranging  or
syndicating this Agreement,  each Lender  acknowledges  that the  Administrative
Agent  may be an  agent  or  lender  under  these  Notes,  other  loans or other
securities  and waives any existing or future  conflicts of interest  associated
with the its role in such other debt instruments.

     Section 11.09 Administrative Agent May File Proofs of Claim.

     In  case of the  pendency  of any  proceeding  under a  Debtor  Relief  Law
relative to any Loan Party, the  Administrative  Agent  (irrespective of whether
the  principal of any Loan shall then be due and payable as herein  expressed or
by declaration or otherwise and irrespective of whether the Administrative Agent
shall have made any demand on the Borrower) shall be entitled and empowered,  by
intervention in such proceeding or otherwise:

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

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

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

     Nothing  contained  herein shall be deemed to authorize the  Administrative
Agent to  authorize or consent to or accept or adopt on behalf of any Lender any

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plan of  reorganization,  arrangement,  adjustment or composition  affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent
to vote in respect of the claim of any Lender in any such proceeding.

     Section 11.10 Authority of Administrative  Agent to Release  Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent (i) to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan  Documents,  (ii) to release  any  Guarantor  from its  Guaranty  Agreement
pursuant  to the  terms  thereof  and  (iii)  to  subordinate  any  Lien  on any
collateral  granted  to or held  by the  Administrative  Agent  under  any  Loan
Document  to the holder of any Lien  permitted  pursuant to Section  9.03.  Each
Lender hereby authorizes the Administrative  Agent to execute and deliver to the
Borrower,  at the  Borrower's  sole cost and  expense,  any and all  releases of
Liens,  termination  statements,   assignments  or  other  documents  reasonably
requested by the Borrower in connection  with any sale or other  disposition  of
Property to the extent such sale or other  disposition is permitted by the terms
of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

     Section 11.11  Withholding  Tax. To the extent  required by any  applicable
law, the  Administrative  Agent may  withhold  from any payment to any Lender an
amount  equivalent to any applicable  withholding  tax. If the Internal  Revenue
Service  or any other  authority  of the  United  States  or other  jurisdiction
asserts a claim that the Administrative Agent did not properly withhold tax from
amounts  paid to or for the  account of any  Lender  for any reason  (including,
without  limitation,  because  the  appropriate  form was not  delivered  or not
property  executed,  or because such Lender failed to notify the  Administrative
Agent of a change in circumstance that rendered the exemption from, or reduction
of withholding tax  ineffective),  such Lender shall indemnify and hold harmless
the Administrative  Agent (to the extent that the  Administrative  Agent has not
already been  reimbursed  by the Borrower and without  limiting or expanding the
obligation  of  the  Borrower  to do so)  for  all  amounts  paid,  directly  or
indirectly,  by the  Administrative  Agent as Taxes or otherwise,  including any
interest,  additions to Tax or  penalties  thereto,  together  with all expenses
incurred, including legal expenses and any other out-of-pocket expenses, whether
or not such taxes were correctly or legally  imposed or asserted by the relevant
Government  Authority.  A  certificate  as to the  amount  of  such  payment  or
liability  delivered  to  any  Lender  by  the  Administrative  Agent  shall  be
conclusive absent manifest error.

                                  ARTICLE XII
                                  MISCELLANEOUS

     Section 12.01 Notices.

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

     (i) if to the Borrower or the Parent, to it at:

         Baron Production LLC

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         300 S. CM Allen Pkwy, Suite 400
         San Marcos, TX 78666
         Attention: Lisa Hamilton
         (Facsimile: (512) 392-7238)
         Email:

     (ii) if to the Administrative Agent, to it at:

         Petro Capital Energy Credit, LLC
         3710 Rawlins Street, Suite 1000
         Dallas, Texas 75219
         Attention: Mr. Rosser Newton
         (Facsimile: (214) 661-7765)
         Email:

     (iii) if to any other Lender,  to it at its address (or telecopy  number or
email address) set forth in its Administrative Questionnaire.

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

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

     Section 12.02 No Waivers; Amendments; Cumulative Remedies; Enforcement.

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

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be  construed  as  a  waiver  of  any   Default,   regardless   of  whether  the
Administrative  Agent or any  Lender may have had  notice or  knowledge  of such
Default at the time.

     (b) Neither  this  Agreement  nor any  provision  hereof nor any other Loan
Document nor any  provision  thereof may be waived,  amended or modified  except
pursuant to an  agreement  or  agreements  in writing  entered into by each Loan
Party that is a party to the relevant Loan Document and the Administrative Agent
with the consent of the Required Lenders;  provided that no such agreement shall
(i) increase the  Commitment of any Lender  without the written  consent of such
Lender,  (ii)  reduce  the  principal  amount of any Loan or reduce  the rate of
interest thereon,  or reduce any fees or Make-Whole  Premium payable  hereunder,
without the written consent of each Lender affected thereby,  (iii) postpone the
scheduled date of payment or prepayment of the principal  amount of any Loan, or
any interest thereon,  or any fees or Make-Whole Premium payable  hereunder,  or
reduce the amount of,  waive or excuse any such  payment,  or postpone or extend
the Maturity Date without the written consent of each Lender  affected  thereby,
provided,  however,  that only the  consent  of the  Required  Lenders  shall be
necessary to amend the  definition of "Default  Rate" or to waive any obligation
of the Borrower to pay interest at the Default Rate, (iv) change Section 4.01(b)
or Section 4.01(c) in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (v) waive or amend
Section  3.04(c),  Section 3.04 (d),  Section  6.01,  Section  8.14,  or Section
10.02(c) or Section 12.14 or change the definition of the term  "Subsidiary"  or
"Subsidiary  Guarantor",  without the written consent of each Lender (other than
any Defaulting  Lender),  (vi) release any Guarantor (except as set forth in the
Guaranty Agreement), release all or substantially of the collateral, without the
written  consent of each Lender  (other than any  Defaulting  Lender),  or (vii)
change any of the  provisions  of this  Section  12.02(b) or the  definition  of
"Required  Lenders"  or any other  provision  hereof  specifying  the  number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan  Documents or make any  determination  or grant any consent
hereunder  or any other Loan  Documents,  without  the  written  consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the  Administrative  Agent hereunder or under any
other Loan  Document  without the prior  written  consent of the  Administrative
Agent.   Notwithstanding   the  foregoing,   any  supplement  to  Schedule  7.14
(Subsidiaries)  shall be effective  simply by delivering  to the  Administrative
Agent a  supplemental  schedule  clearly  marked as such and, upon receipt,  the
Administrative Agent will promptly deliver a copy thereof to the Lenders.

     (c)  Notwithstanding  anything to the contrary  contained  herein or in any
other Loan Document,  the authority to enforce rights and remedies hereunder and
under the other Loan Documents  against the Loan Parties or any of them shall be
vested exclusively in, and all actions and proceedings at law in connection with
such  enforcement  shall  be  instituted  and  maintained  exclusively  by,  the
Administrative Agent in accordance with Section 10.02 for the benefit of all the
Secured Parties;  provided,  however,  that the foregoing shall not prohibit (a)
the  Administrative  Agent  from  exercising  on its own  behalf  the rights and
remedies  that inure to its benefit  (solely in its  capacity as  Administrative
Agent)  hereunder  and under the  other  Loan  Documents,  (b) any  Lender  from
exercising  setoff rights in accordance with Section 12.08 (subject to the terms
of Section 4.01), or (c) any Lender from filing proofs of claim or appearing and
filing pleadings on its own behalf during the pendency of a proceeding  relative
to any Loan Party under any Debtor Relief Law; and provided, further, that if at
any time there is no Person acting as  Administrative  Agent hereunder and under

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the other Loan  Documents,  then (i) the Required  Lenders shall have the rights
otherwise  ascribed to the  Administrative  Agent  pursuant to Section 10.02 and
(ii)  in  addition  to the  matters  set  forth  in  clauses  (b) and (c) of the
preceding  proviso and subject to Section 4.01, any Lender may, with the consent
of the Required Lenders,  enforce any rights and remedies available to it and as
authorized by the Required Lenders.

     Section 12.03 Expenses, Indemnity; Damage Waiver.

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

     (b) THE BORROWER AND THE PARENT SHALL JOINTLY AND  SEVERALLY  INDEMNIFY THE
ADMINISTRATIVE  AGENT  AND  EACH  LENDER  AND EACH  RELATED  PARTY OF ANY OF THE
FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE")  AGAINST,  AND
HOLD  EACH  INDEMNITEE  HARMLESS  FROM,  ANY AND ALL  LOSSES,  CLAIMS,  DAMAGES,
LIABILITIES AND RELATED EXPENSES,  INCLUDING THE FEES, CHARGES AND DISBURSEMENTS
OF  ANY  COUNSEL  FOR  ANY  INDEMNITEE,  INCURRED  BY OR  ASSERTED  AGAINST  ANY
INDEMNITEE  ARISING  OUT OF,  IN  CONNECTION  WITH,  OR AS A  RESULT  OF (i) THE
EXECUTION  OR  DELIVERY  OF THIS  AGREEMENT  OR ANY OTHER LOAN  DOCUMENT  OR ANY
AGREEMENT OR INSTRUMENT  CONTEMPLATED  HEREBY OR THEREBY (OTHER THAN EXPENSES IN
CONNECTION  WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS DATED OF EVEN DATE HEREWITH,  WHICH EXPENSES SHALL ONLY BE PAID BY THE
BORROWER AND THE PARENT TO THE EXTENT  PROVIDED IN SECTION  12.03(A)),  (ii) THE
PERFORMANCE  BY THE PARTIES  HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF
THEIR RESPECTIVE  OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS  CONTEMPLATED  HEREBY  OR BY ANY  OTHER  LOAN  DOCUMENT,  (iii) THE

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

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JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

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

     (d) TO THE EXTENT  PERMITTED  BY  REQUIREMENT  OF LAW, THE BORROWER AND THE
PARENT SHALL NOT ASSERT,  AND HEREBY WAIVE ANY CLAIM AGAINST ANY INDEMNITEE,  ON
ANY THEORY OF  LIABILITY,  FOR  SPECIAL,  INDIRECT,  CONSEQUENTIAL  OR  PUNITIVE
DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL  DAMAGES)  ARISING OUT OF, IN CONNECTION
WITH,  OR AS A RESULT  OF,  THIS  AGREEMENT,  ANY  OTHER  LOAN  DOCUMENT  OR ANY
AGREEMENT OR INSTRUMENT  CONTEMPLATED HEREBY OR THEREBY,  THE TRANSACTIONS,  ANY
LOAN OR THE USE OF THE PROCEEDS THEREOF.

     (e) All  amounts  due under this  Section  12.03 shall be payable not later
than three (3) days after written demand therefor.

     Section 12.04 Successors and Assigns.

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

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

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

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

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

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

     (B)  each  partial   assignment  shall  be  made  as  an  assignment  of  a
proportionate  part of all the assigning  Lender's rights and obligations  under
this Agreement;

     (C) the  parties  to each  assignment  shall  execute  and  deliver  to the
Administrative  Agent an Assignment and  Assumption,  together with a processing
and  recordation  fee of $3,500  (which fee may be waived by the  Administrative
Agent at its discretion);

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

     (E)  no  assignment  shall  be  made  to  (i)  the  Borrower  or any of the
Borrower's Subsidiaries or Affiliates,  (ii) any Defaulting Lender or any of its
Subsidiaries,  or any  Person  who,  upon  becoming  a Lender  hereunder,  would
constitute any of the foregoing Persons described in this clause (ii), (iii) any
natural Person, or (iv) any Person that is not a U.S. Person.

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

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     (iv) The Administrative  Agent,  acting solely for this purpose as an agent
of the Borrower,  shall maintain at one of its offices a copy of each Assignment
and Assumption  delivered to it and a register for the  recordation of the names
and addresses of the Lenders, and the Commitment of, and principal amount of the
Loans  to,  each  Lender  pursuant  to the terms  hereof  from time to time (the
"Register").  The entries in the Register shall be conclusive, and the Borrower,
the  Administrative  Agent and the Lenders  may treat each Person  whose name is
recorded in the Register  pursuant to the terms hereof as a Lender hereunder for
all purposes of this  Agreement,  notwithstanding  notice to the  contrary.  The
Register  shall be available for  inspection by the Borrower and any Lender,  at
any  reasonable  time and from time to time upon  reasonable  prior  notice.  In
connection with any changes to the Register,  if necessary,  the  Administrative
Agent will  reflect the  revisions on Annex I and forward a copy of such revised
Annex I to the Borrower and each Lender.

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

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

     (ii) A  Participant  shall not be entitled  to receive any greater  payment
under  Section 5.01 or Section 5.02 than the  applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,

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unless  the  sale of the  participation  to such  Participant  is made  with the
Borrower's prior written consent.  A Participant that is not a U.S. Person shall
not be entitled to the benefits of Section 5.02.

     (iii) Each Lender that sells a participation  shall, acting solely for this
purpose as an agent of the Borrower,  maintain a register on which it enters the
name and  address of each  Participant  and the  principal  amounts  (and stated
interest) of each Participant's interest in the Loans or other obligations under
the Loan Documents (the "Participant  Register");  provided that no Lender shall
have any obligation to disclose all or any portion of the  Participant  Register
(including  the identity of any  Participant  or any  information  relating to a
Participant's interest in any Commitments, Loans, or its other obligations under
any Loan  Document) to any Person  except to the extent that such  disclosure is
necessary to establish  that such  Commitment,  Loan or other  obligation  is in
registered  form  under  Section  5f.103-1(c)  of  the  United  States  Treasury
Regulations.  The entries in the Participant Register shall be conclusive absent
manifest  error,  and such Lender shall treat each Person whose name is recorded
in the Participant  Register as the owner of such participation for all purposes
of this Agreement  notwithstanding any notice to the contrary. For the avoidance
of doubt, the  Administrative  Agent (in its capacity as  Administrative  Agent)
shall have no responsibility for maintaining a Participant Register.

     (d) Any Lender may at any time pledge or assign a security  interest in all
or any portion of its rights under this Agreement to secure  obligations of such
Lender,  including,  without  limitation,  any  pledge or  assignment  to secure
obligations  to a  Federal  Reserve  Bank,  provided  that  no  such  pledge  or
assignment  of a  security  interest  shall  release  a  Lender  from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

     (e) Notwithstanding any other provisions of this Section 12.04, no transfer
or  assignment  of the  interests or  obligations  of any Lender or any grant of
participations therein shall be permitted if such transfer,  assignment or grant
would require the Borrower and the Guarantors to file a  registration  statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any state.

     Section 12.05 Survival; Revival; Reinstatement.

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

     (b) To the extent that any payments on the  Obligations  or proceeds of any
collateral  are   subsequently   invalidated,   declared  to  be  fraudulent  or
preferential,  set  aside or  required  to be  repaid  to a  trustee,  debtor in
possession,  receiver or other Person under any Debtor Relief Law, common law or
equitable  cause,  then to such extent,  the  Obligations so satisfied  shall be
revived and continue as if such  payment or proceeds  had not been  received and
the Administrative  Agent's and the Lenders' Liens, security interests,  rights,
powers and remedies  under this  Agreement and each Loan Document shall continue

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in  full  force  and  effect.  In  such  event,  each  Loan  Document  shall  be
automatically  reinstated  and the  Borrower  shall  take such  action as may be
reasonably  requested by the Administrative Agent and the Lenders to effect such
reinstatement.

     Section 12.06 Counterparts; Integration; Effectiveness; Etc.

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

     (b) This  Agreement  and the other  Loan  Documents  constitute  the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and  understandings,  oral or written,
relating to the subject matter hereof and thereof.  THIS AGREEMENT AND THE OTHER
LOAN  DOCUMENTS  REPRESENT  THE FINAL  AGREEMENT  AMONG THE  PARTIES  HERETO AND
THERETO AND MAY NOT BE  CONTRADICTED  BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS  OR
SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.  THERE  ARE  NO  UNWRITTEN  ORAL
AGREEMENTS BETWEEN THE PARTIES.

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

     (d) Time is of the essence of this Agreement.

     (e) All covenants  hereunder shall be given independent effect so that if a
particular  action or condition is not permitted by any of such  covenants,  the
fact that it would be permitted by an exception  to, or be otherwise  within the
limitations of, another  covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists.

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

     Section  12.08 Right of Setoff.  If an Event of Default shall have occurred
and be continuing,  each Lender and each of its Affiliates is hereby  authorized
at any time and from time to time,  to the fullest  extent  permitted by law, to
set off and apply any and all  deposits  (general  or  special,  time or demand,
provisional or final) at any time held and other obligations (of whatsoever kind
at any time  owing by such  Lender  or  Affiliate  to or for the  credit  or the
account of the Parent, the Borrower or any Subsidiary against any of and all the
obligations of the Parent,  the Borrower or any  Subsidiary  owed to such Lender
now or  hereafter  existing  under this  Agreement  or any other Loan  Document,
irrespective of whether or not such Lender shall have made any demand under this
Agreement  or any other Loan  Document  and  although  such  obligations  may be

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unmatured. The rights of each Lender under this Section 12.08 are in addition to
other rights and remedies  (including  other rights of setoff) which such Lender
or its  Affiliates  may have;  PROVIDED  that in the event  that any  Defaulting
Lender shall exercise any such right of setoff, (x) all amounts so set off shall
be paid over immediately to the Administrative  Agent for further application in
accordance  with the provisions of Section  10.02(c) and,  pending such payment,
shall be  segregated by such  Defaulting  Lender from its other funds and deemed
held in trust for the benefit of the Administrative  Agent and the Lenders,  and
(y) the Defaulting Lender shall provide promptly to the  Administrative  Agent a
statement  describing  in  reasonable  detail  the  Obligations  owing  to  such
Defaulting  Lender as to which it exercised such right of setoff.  The rights of
each Lender and their  respective  Affiliates  under this  Section  12.08 are in
addition to other  rights and remedies  (including  other rights of setoff) that
such Lender or their  respective  Affiliates  may have.  Each  Lender  agrees to
notify the Borrower and the Administrative  Agent promptly after any such setoff
and application; PROVIDED FURTHER that the failure to give such notice shall not
affect the validity of such setoff and application.

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

     (a) THIS  AGREEMENT  AND THE NOTES SHALL BE GOVERNED  BY, AND  CONSTRUED IN
ACCORDANCE  WITH,  THE LAWS OF THE  STATE OF  TEXAS.  CHAPTER  346 OF THE  TEXAS
FINANCE  CODE  (WHICH  REGULATES  CERTAIN  REVOLVING  CREDIT LOAN  ACCOUNTS  AND
REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.

     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL
BE  BROUGHT  IN THE  COURTS  OF THE  STATE OF TEXAS OR OF THE  UNITED  STATES OF
AMERICA FOR THE SOUTHERN  DISTRICT OF TEXAS,  AND, BY EXECUTION  AND DELIVERY OF
THIS  AGREEMENT,  EACH  PARTY  HEREBY  ACCEPTS  FOR  ITSELF  AND (TO THE  EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY  IRREVOCABLY WAIVES ANY
OBJECTION,  INCLUDING,  WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE  BRINGING  OF ANY  SUCH  ACTION  OR  PROCEEDING  IN SUCH  RESPECTIVE
JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION  IS  NON-EXCLUSIVE  AND DOES NOT
PRECLUDE A PARTY FROM  OBTAINING  JURISDICTION  OVER ANOTHER  PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.

     (c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED  COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE PREPAID,  TO IT AT THE ADDRESS
SPECIFIED IN SECTION  12.01 OR SUCH OTHER  ADDRESS AS IS  SPECIFIED  PURSUANT TO
SECTION 12.01 (OR ITS  ASSIGNMENT AND  ASSUMPTION).  NOTHING HEREIN SHALL AFFECT
THE  RIGHT OF A PARTY OR ANY  HOLDER  OF A NOTE TO SERVE  PROCESS  IN ANY  OTHER

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MANNER  PERMITTED BY LAW OR TO COMMENCE LEGAL  PROCEEDINGS OR OTHERWISE  PROCEED
AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

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

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

     Section 12.11  Confidentiality.  Each of the  Administrative  Agent and the
Lenders agrees to maintain the  confidentiality  of the  Information (as defined
below),  except that Information may be disclosed (a) to its and its Affiliates'
directors,  officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be  informed of the  confidential  nature of such  Information  and
instructed to keep such Information  confidential),  (b) to the extent requested
by any  regulatory  authority,  (c) to the extent  required by applicable law or
regulations or by any subpoena or similar legal process,  (d) to any other party
to this  Agreement  or any  other  Loan  Document,  (e) in  connection  with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or  proceeding  relating to this  Agreement or any other Loan Document or
the enforcement of rights  hereunder or thereunder,  (f) subject to an agreement
containing provisions  substantially the same as those of this Section 12.11, to
(i) any  assignee  of or  Participant  in,  or any  prospective  assignee  of or
Participant  in, any of its rights or  obligations  under this Agreement or (ii)
any actual or prospective  counterparty  (or its advisors) to any Swap Agreement
relating  to the  Borrower  and its  obligations,  (g) with the  consent  of the
Borrower or (h) to the extent such  Information (i) becomes  publicly  available
other  than as a  result  of a breach  of this  Section  12.11  or (ii)  becomes
available to the Administrative  Agent or any Lender on a nonconfidential  basis
from a source other than the Borrower.  For the purposes of this Section  12.11,
"Information" means all information received from the Borrower or any Subsidiary
relating to the Borrower or any Subsidiary and their businesses,  other than any
such information that is available to the Administrative  Agent or any Lender on
a  nonconfidential  basis prior to  disclosure  by the Borrower or a Subsidiary;
provided that, in the case of information received from the Parent, the Borrower

                                       91
<PAGE>
or any Subsidiary after the date hereof,  such information is clearly identified
at the time of delivery as  confidential.  Any Person  required to maintain  the
confidentiality  of  Information  as  provided  in this  Section  12.11 shall be
considered  to have  complied  with its  obligation  to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information as such Person would accord to its own confidential information.

     Section 12.12 Interest Rate Limitation.  It is the intention of the parties
hereto that each Lender shall conform  strictly to usury laws  applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws  applicable to it (including  the laws of the United States of
America  and the  State of Texas or any  other  jurisdiction  whose  laws may be
mandatorily  applicable to such Lender  notwithstanding  the other provisions of
this Agreement),  then, in that event,  notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security  for the Notes,  it is agreed as follows:  (i) the  aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan  Documents or agreements  or otherwise in connection  with the Notes
shall  under  no  circumstances  exceed  the  maximum  amount  allowed  by  such
Requirement  of Law,  and any  excess  shall be  canceled  automatically  and if
theretofore paid shall be credited by such Lender on the principal amount of the
Obligations  (or, to the extent  that the  principal  amount of the  Obligations
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower);  and (ii) in the event that the maturity of the Notes is  accelerated
by reason of an  election  of the  holder  thereof  resulting  from any Event of
Default under this  Agreement or  otherwise,  or in the event of any required or
permitted  prepayment,  then such consideration that constitutes  interest under
law  applicable  to any Lender may never  include  more than the maximum  amount
allowed by such Requirement of Law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such  acceleration or prepayment and, if theretofore  paid, shall be
credited by such Lender on the principal  amount of the Obligations  (or, to the
extent that the  principal  amount of the  Obligations  shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder  shall, to the extent  permitted by law applicable to such Lender,
be amortized,  prorated,  allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans  hereunder  does not exceed the maximum  amount
allowed by such Requirement of Law. If at any time and from time to time (i) the
amount of  interest  payable to any Lender on any date shall be  computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.12 and
(ii) in  respect of any  subsequent  interest  computation  period the amount of
interest  otherwise  payable  to such  Lender  would be less than the  amount of
interest  payable to such Lender  computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total  amount of interest  had been  computed
without giving effect to this Section  12.12.  To the extent that Chapter 303 of
the Texas  Finance Code is relevant for the purpose of  determining  the Highest
Lawful  Rate  applicable  to a  Lender,  such  Lender  elects to  determine  the

                                       92
<PAGE>
applicable  rate ceiling  under such Chapter by the weekly  ceiling from time to
time in  effect.  Chapter  346 of the Texas  Finance  Code does not apply to the
Borrower's obligations hereunder.

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

     Section 12.14 No Third Party Beneficiaries.  This Agreement, the other Loan
Documents,  and the agreement of the Lenders to make Loans  hereunder are solely
for the  benefit  of the  Borrower,  and no  other  Person  (including,  without
limitation,   any   Subsidiary  of  the  Borrower,   any  obligor,   contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or  privileges   hereunder  or  under  any  other  Loan  Document   against  the
Administrative Agent or any Lender for any reason whatsoever. There are no third
party beneficiaries.

     Section  12.15 USA Patriot Act Notice.  Each  Lender  hereby  notifies  the
Borrower that pursuant to the  requirements of the USA Patriot Act (Title III of
Pub. L. 107-56  (signed into law October 26, 2001)) (the "Act"),  it is required
to obtain,  verify and record  information  that identifies the Borrower,  which
information  includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

     Section 12.16 Flood Insurance Provisions.  Notwithstanding any provision in
this  Agreement or any other Loan Document to the  contrary,  in no event is any
Building  (as  defined  in  the  applicable   Flood  Insurance   Regulation)  or
Manufactured  (Mobile)  Home  (as  defined  in the  applicable  Flood  Insurance

                                       93
<PAGE>
Regulation)  included in the definition of "Mortgaged  Property" and no Building
or  Manufactured  (Mobile) Home is hereby  encumbered  by this  Agreement or any
other Loan Document. As used herein, "Flood Insurance Regulations" means (a) the
National  Flood  Insurance  Act of 1968 as now or  hereafter  in  effect  or any
successor statute thereto,  (b) the Flood Disaster Protection Act of 1973 as now
or hereafter in effect or any successor  statue thereto,  (c) the National Flood
Insurance Reform Act of 1994 (amending 42 USC 4001, et seq.), as the same may be
amended or recodified from time to time and (d) the Flood  Insurance  Reform Act
of 2004 and any regulations promulgated thereunder.

Section  12.17  Advertising  and  Publicity.   No  Loan  Party  shall  issue  or
disseminate to the public (by  advertisement,  including without  limitation any
"tombstone" advertisement,  press release or otherwise),  submit for publication
or otherwise cause or seek to publish any  information  describing the credit or
other  financial  accommodations  made  available  by Lenders  pursuant  to this
Agreement  and the other Loan  Documents  without the prior  written  consent of
Administrative  Agent  except as required by law or a listing  agreement  with a
national  exchange  and then only after prior good faith  consultation  with the
Administrative  Agent.  Nothing in the foregoing  shall be construed to prohibit
any Loan Party from making any submission or filing which it is required to make
by applicable  law or pursuant to judicial  process;  provided,  that,  (i) such
filing or  submission  shall  contain only such  information  as is necessary to
comply  with  applicable  law or judicial  process and (ii) unless  specifically
prohibited  by  applicable  law or court order,  such Loan Party shall  promptly
notify Administrative Agent of the requirement to make such submission or filing
and provide Administrative Agent with a copy thereof.



      [Remainder of page intentionally left blank; signature pages follow]

                                       94
<PAGE>
     The  parties  hereto have caused this  Agreement  to be duly  executed  and
delivered as of the day and year first above written.

BORROWER:                     BARON PRODUCTION LLC

                              By:
                                    --------------------------------------------
                              Name:
                                    --------------------------------------------
                              Title:
                                    --------------------------------------------

PARENT:                       BARON ENERGY, INC.

                              By:
                                    --------------------------------------------
                              Name:
                                    --------------------------------------------
                              Title:
                                    --------------------------------------------


                                       95
<PAGE>
ADMINISTRATIVE AGENT:         PETRO CAPITAL ENERGY CREDIT, LLC,
                              as Administrative Agent

                              By: PCEC Management, LLC, its Managing Member


                              By:
                                    --------------------------------------------
                                    Rosser C. Newton, Authorized Signatory

                                       96
<PAGE>
LENDERS:                      PETRO CAPITAL ENERGY CREDIT, LLC,
                              as a Lender

                              By:     PCEC Management, LLC, its Managing Member


                              By:
                                    --------------------------------------------
                                    Rosser C. Newton, Authorized Signatory


                                       97
<PAGE>
                                     ANNEX I

                 LIST OF APPLICABLE PERCENTAGES AND COMMITMENTS

       Name of Lender                Applicable Percentage         Commitment
       --------------                ---------------------         ----------

Petro Capital Energy Credit, LLC            100%                  $5,000,000 (1)

TOTAL                                       100%                  $5,000,000



----------
1.   Subject to adjustment pursuant to the definition of "Commitment" in Section
     1.02.


                                       98
<PAGE>
                                    EXHIBIT A

                                  FORM OF NOTE

$_____________                                                     Dallas, Texas
                                                                 July [__], 2014

     FOR VALUE RECEIVED, the undersigned,  Baron Production LLC, a Texas limited
liability company (the "Borrower"),  hereby  unconditionally  promises to pay to
_____________  (the  "Lender")  or its  registered  assigns at the office of the
Administrative Agent (as hereafter defined) specified in the Credit Agreement in
lawful  money of the  United  States and in  immediately  available  funds,  the
principal amount of (a) ________ DOLLARS  ($____________),  or, if less, (b) the
sum of the aggregate  unpaid principal amount of all Loans made by the Lender to
the  Borrower  pursuant to Section  2.01 of the Credit  Agreement.  The Borrower
further  agrees to pay  interest  in like  money at such  payment  office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified the Credit Agreement.

     The holder of this Note is  authorized  to endorse on the schedule  annexed
hereto  and made a part  hereof  or on a  continuation  thereof  which  shall be
attached  hereto  and made a part  hereof  the date and amount of each Loan made
pursuant  to the Credit  Agreement  and the date and  amount of each  payment or
prepayment of principal  thereof.  Each such endorsement  shall constitute prima
facie evidence of the accuracy of the information endorsed.  The failure to make
any such endorsement or any error in any such  endorsement  shall not affect the
obligations of the Borrower in respect of any Loan.

        This Note (a) is one of the Notes  referred  to in the Credit  Agreement
dated as of July 28,  2014 (as  amended,  restated,  supplemented  or  otherwise
modified from time to time, the "Credit Agreement"),  among the Borrower,  Baron
Energy,  Inc.,  a Nevada  corporation,  the  several  lenders  from time to time
parties thereto, and Petro Capital Energy Credit, LLC, as Administrative  Agent,
(b) is subject to the  provisions of the Credit  Agreement and (c) is subject to
optional and mandatory  prepayment in whole or in part as provided in the Credit
Agreement.  This  Note  is  secured  and  guaranteed  as  provided  in the  Loan
Documents.  Reference is hereby made to the Loan  Documents for a description of
the  properties  and assets in which a security  interest has been granted,  the
nature and extent of the security and the  guarantees,  the terms and conditions
upon which the security interests and each guarantee were granted and the rights
of the holder of this Note in respect thereof.

     Upon  the  occurrence  of any one or more of the  Events  of  Default,  all
principal  and all accrued  interest  then  remaining  unpaid on this Note shall
become, or may be declared to be,  immediately due and payable,  all as provided
in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note,  whether
maker,  principal,  surety,  guarantor,  endorser  or  otherwise,  hereby  waive
presentment,  demand,  protest,  notice  of  acceleration,  notice  of intent to
accelerate and all other notices of any kind.

                                       99
<PAGE>
        Unless otherwise  defined herein,  terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

     THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS.

                                     BARON PRODUCTION LLC


                                     By:
                                         --------------------------------------
                                     Name:
                                          -------------------------------------
                                     Title:
                                           ------------------------------------


                                      100
<PAGE>
                                                              Schedule A to Note

                          LOANS AND REPAYMENTS OF LOANS


           Amount      Amount of Principal      Unpaid Principal       Notation
Date      of Loans       of Loans Repaid         Balance of Loans       Made By
----      --------       ---------------         ----------------       -------





                                      101
<PAGE>
                                    EXHIBIT B

                            FORM OF BORROWING REQUEST

                                  _______, 201_


Petro Capital Energy Credit, LLC,
as Administrative Agent
3710 Rawlins, Suite 400
Dallas, Texas  75219

Ladies and Gentlemen:

     The undersigned,  Baron Production, LLC, an Texas limited liability company
(the  "Borrower"),  refers to the Credit Agreement dated as of July 28, 2014 (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Credit  Agreement"),   among  the  Borrower,   Baron  Energy,  Inc.,  a  Nevada
corporation,  the lenders from time to time parties thereto (the "Lenders"), and
Petro Capital Energy Credit,  LLC, as administrative  agent for the Lenders (the
"Administrative Agent"). Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.

     The Borrower gives you  irrevocable  notice pursuant to Section 2.03 of the
Credit  Agreement that it hereby requests a Loan under the Credit  Agreement and
sets forth below the information required therein:

     1. The Borrower requests a Loan in the principal amount of [$_______].

     2. The date of the Borrowing of the Loan requested  herein is _____,  201_,
which is a Business Day.

     The Borrower  represents  and warrants  that,  on and as of the date of the
Loan requested  herein,  all of the conditions  precedent  specified in [Section
6.01 and] (2) Section 6.02 of the Credit Agreement shall be satisfied.


                            [Signature Page Follows]


----------
2. Include for initial Borrowing.
                                      102
<PAGE>
                                     Very truly yours,

                                     BARON PRODUCTION, LLC


                                     By:
                                         --------------------------------------
                                     Name:
                                          -------------------------------------
                                     Title:
                                           ------------------------------------

                                      103
<PAGE>
                                    EXHIBIT C

                         FORM OF COMPLIANCE CERTIFICATE

                                        Financial Statement Date: ________, ____

To:  Petro Capital Energy Credit, LLC, as Administrative Agent, and each Lender

Ladies and Gentlemen:

     Reference is made to that certain  Credit  Agreement,  dated as of July 28,
2014 (as amended,  restated,  extended,  supplemented  or otherwise  modified in
writing from time to time, the "Agreement;" the terms defined therein being used
herein as therein defined),  among Baron Energy, Inc., a Nevada corporation (the
"Parent"),  Baron  Production  LLC,  a  Texas  limited  liability  company  (the
"Borrower"),  the Lenders  from time to time party  thereto,  and Petro  Capital
Energy Credit, LLC, as Administrative Agent for the Lenders.

     The undersigned  Responsible Officer of the Borrower hereby certifies as of
the date hereof that  he/she is the  ___________________________________  of the
Borrower,  and that,  as such,  he/she is authorized to execute and deliver this
Certificate  to the  Administrative  Agent and each  Lender on the behalf of the
Borrower, and that:

     [USE FOLLOWING PARAGRAPH 1 FOR FISCAL YEAR-END FINANCIAL STATEMENTS]

     1. The Borrower has delivered  the year-end  audited  consolidated  balance
sheet and  related  statements  of  operations,  members'  equity and cash flows
required by Section  8.01(a) of the  Agreement  as of and for the fiscal year of
the  Borrower  ended  as of the  above  date,  setting  forth  in  each  case in
comparative  form the figures for the previous  fiscal year,  all reported on by
independent public accountants of recognized national standing (without a "going
concern" or like  qualification  or exception and without any  qualification  or
exception  as to the  scope of such  audit).  Such  balance  sheet  and  related
statements  present fairly in all material respects the financial  condition and
results of operations  of the Borrower and its  Subsidiaries  on a  consolidated
basis in accordance with GAAP consistently applied.

     [USE FOLLOWING PARAGRAPH 1 FOR FISCAL QUARTER-END FINANCIAL STATEMENTS]

     1. The Borrower has  delivered the  consolidated  balance sheet and related
statements of  operations,  members'  equity and cash flows  required by Section
8.01(b) of the Agreement as of and for the fiscal  quarter of the Borrower ended
as of the  above  date  and  the  then-elapsed  portion  of the  fiscal  year in
question.  Such  balance  sheet and  related  statements  present  fairly in all
material respects the financial condition,  results of operations and cash flows
of the Borrower and its Subsidiaries on a consolidated  basis in accordance with
GAAP consistently applied,  subject to normal year-end audit adjustments and the
absence of footnotes.

                                      104
<PAGE>
     [USE THE FOLLOWING PARAGRAPH 1 FOR MONTHLY FINANCIAL STATEMENTS]

     1. The Borrower has  delivered the  consolidated  balance sheet and related
statements of  operations,  members'  equity and cash flows  required by Section
8.01(d) of the  Agreement  as of and for the month  ended as of the above  date.
Such  balance  sheet and  related  statements  present  fairly  in all  material
respects the financial  condition,  results of operations  and cash flows of the
Borrower and its  Subsidiaries  on a consolidated  basis in accordance with GAAP
consistently  applied,  subject to normal  year-end  audit  adjustments  and the
absence of footnotes.

     2. The  undersigned  has  reviewed  and is  familiar  with the terms of the
Agreement and has made, or has caused to be made under  his/her  supervision,  a
detailed review of the  transactions  and condition  (financial or otherwise) of
the Borrower and the other Loan Parties during the accounting  period covered by
such financial statements.

     3. A review of the  activities  of the  Borrower and the other Loan Parties
during such fiscal period has been made under the supervision of the undersigned
with a view to  determining  whether  during such fiscal period the Borrower and
the other Loan Parties  performed and observed all their respective  Obligations
under the Loan Documents, and

                                  [SELECT ONE:]

     [during  such  fiscal  period  the  Borrower  and the  other  Loan  Parties
performed  and  observed  each  covenant  and  condition  of the Loan  Documents
applicable to it, and no Default has occurred and is continuing.

                                     --OR--

     [the following  covenants or conditions have not been performed or observed
and the following is a list of each such Default and its nature and status:]

     4. The  representations  and  warranties  of the  Borrower  and the  Parent
contained in Article VII of the Agreement and all representations and warranties
of any Loan  Party  that  are  contained  in an Loan  Document  or any  document
furnished at any time under or in connection with the Loan  Documents,  are true
and  correct  on and as of the date  hereof,  except  to the  extent  that  such
representations  and warranties  specifically refer to an earlier date, in which
case they are true and correct as of such earlier date.

     6.  Schedule  3  attached  hereto  describes  each  change in GAAP that has
occurred  since the date of the  audited  financial  statements  referred  to in
Section  7.04 of the  Credit  Agreement  and the  effect  of such  change on the
financial statements accompanying this Certificate.

     7. The financial  covenant  analyses and information set forth on Schedules
1, 2 and 3 attached  hereto are true and  accurate on and as of the date of this
Certificate.

                                      105
<PAGE>
          IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of ____________, ______________.


                              BARON PRODUCTION LLC

                              By:
                                   --------------------------------------------
                              Name:
                                   --------------------------------------------
                              Title:
                                   --------------------------------------------

                                      106
<PAGE>
     For the  Quarter/Year/Month  ended  ___________________,  ____  ("Statement
Date")

                                   SCHEDULE 1
                          to the Compliance Certificate
                                  ($ in 000's)

I. Section 9.01(a) - Consolidated Interest Coverage Ratio.

   A. Consolidated EBITDA as of the Statement Date:                      $______

      1. Consolidated Net Income as of such date:                        $______

      2. Consolidated Interest Expense as of such date:                  $______

      3. Income tax expense as of such date:                             $______

      4. Depreciation expenses as of such date:                          $______

      5. Amortization expenses as of such date:                          $______

      6. Consolidated EBITDA (Lines I.A.1 + 2 + 3 + 4 + 5):              $______

   B. Consolidated Interest Expense for Subject Period:                  $______

   C. Consolidated Interest Coverage Ratio
      (Line I.A.6 / Line I.B):                                      ____ to 1.00

      MINIMUM REQUIRED:                                                 ________

      The Borrower is in compliance (circle yes or no)                   Yes/No

II. Section 9.01(b) - Consolidated Debt Ratio

   A. Consolidated Total Indebtedness as of the Statement Date:          $______

   B. Consolidated EBITDA as of the Statement Date (from Line IA.6):     $______

   C. Consolidated Debt Ratio (Line II.A / Line II.B:               ____ to 1.00

      MAXIMUM PERMITTED:                                            ____ to 1.00

      The Borrower is in compliance (circle yes or no)                    Yes/No

                                      107
<PAGE>
III. Section 9.01(c) - Current Ratio

   A. Consolidated Current Assets at the Statement Date for the
      fiscal quarter then ended as of the Statement  Date, less
      non-cash  assets  under FAS 133 as of the such  Statement
      Date:                                                              $______

   B. Consolidated  Current  Liabilities  as of such  Statement
      Date,  less non-cash  obligations  under FAS 133 and less
      current  maturities  under  the  Agreement,  as  of  such
      Statement Date:                                                    $______

   C. Current Ratio (Line I.A.6 / Line I.B):                        1.00 to 1.__

      MINIMUM PERMITTED:                                            1.00 to 1.25

      The Borrower is in compliance (circle yes or no)                    Yes/No

IV. Section 9.01(d) - Minimum Monthly Gross Production.

   A. Average monthly gross production for the 3-calendar month
      period ending on the Statement Date  (calculated as gross
      barrels of oil and BOE of natural gas):                             ______

   B. Minimum permitted monthly gross production (calculated as
      gross barrels of oil and BOE of natural gas):                       ______

   C.  Deficiency for covenant compliance
       (Line IV.B - IV.A):                                                ______

       MINIMUM PERMITTED:                                                 ______

       The Borrower is in compliance (circle yes or no)                   Yes/No

V. Section 9.01(e) - Minimum Cash Balances.

   A. Cash and Cash  Equivalents  of Borrower on the  Statement
      Date,  less funds on deposit in the Debt Service  Reserve
      Account as of such Statement Date:                                 $______

   B. Minimum permitted Cash Balances as of any date                     $35,000

   C.  Deficiency for covenant compliance
       (Line V.B - V.A):                                                 $______

       The Borrower is in compliance (circle yes or no)                   Yes/No

                                      108
<PAGE>
VI. Section 9.01(f) - Maximum Total G&A Expense.

   A. Average  monthly  Total G&A  Expense  for the  3-calendar
      month period ending on the Statement Date (3):                     $______

   B. Maximum  average  monthly  permitted  Total  G&A  Expense
      permitted:                                                         $60,000

   C.  Excess (deficiency) for covenant compliance
       (Line VI.A - VI.B):                                               $______

       The Borrower is in compliance (circle yes or no)                   Yes/No

VII. Section 9.01(g) - Maximum Consolidated Total Indebtedness.

   A. Total Consolidated Indebtedness as of the Statement Date:          $______

   B. Maximum permitted  Consolidated  Total Indebtedness as of
      any date:                                                       $5,450,000

   C.  Excess for covenant compliance
       (Line VII.A - VII.B): $______

       The Borrower is in compliance (circle yes or no)                   Yes/No



----------
3. Commencing with the month ending October 31, 2014.

                                      109
<PAGE>
        For the Quarter/Year ended ___________________("Statement Date")

                                   SCHEDULE 2
                          to the Compliance Certificate
                                  ($ in 000's)

                               Consolidated EBITDA
            (in accordance with the definition of Consolidated EBITDA
                         as set forth in the Agreement)

                                                                         Twelve
                      Quarter      Quarter      Quarter      Quarter     Months
CONSOLIDATED           Ended        Ended        Ended        Ended       Ended
EBITDA                 -----        -----        -----        -----       -----

Consolidated
Net Income

+  Consolidated Interest Expense

+  income taxes

+  depreciation expense

+  amortization expense

=  Consolidated EBITDA


                                      110
<PAGE>
                                   SCHEDULE 3
                          to the Compliance Certificate
                                  ($ in 000's)

Changes in GAAP and the Application Thereof


                                      111
<PAGE>
                                    EXHIBIT D

                               SECURITY DOCUMENTS

1. Deed of Trust,  Assignment of As-Extracted  Collateral,  Security  Agreement,
Fixture Filing and Financing  Statement,  dated as of July 28, 2014, executed by
the Borrower for the benefit of the Administrative Agent.


                                      112
<PAGE>
                                    EXHIBIT E

                        FORM OF ASSIGNMENT AND ASSUMPTION

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

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

     1. Assignor:
                             ---------------------------------------------

     2. Assignee:
                             ---------------------------------------------
                             [and is an Affiliate of [IDENTIFY LENDER] (4)

     3. Borrower:            Baron Production LLC

     4. Administrative
        Agent:               Petro Capital Energy Credit, LLC

     5. Credit Agreement:    Credit  Agreement dated as of July 28, 2014,  among
                             Baron Energy, Inc., Baron Production LLC, and Petro
                             Capital  Energy  Credit,   LLC,  as  Administrative
                             Agent, for the Lenders



----------
4. Select as applicable.

                                      113
<PAGE>
     Assigned Interest:

               Aggregate Amount of          Amount of           Percentage
Commitment    Commitment/Loans for      Commitment/Loans       Assigned of
 Assigned         all Lenders                Assigned       Commitment/Loans (5)
 --------         -----------                --------       --------------------
                  $                          $                   %
                  $                          $                   %
                  $                          $                   %

     Effective Date:  _____________  ___, 201_ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE  DATE OF  RECORDATION  OF TRANSFER IN THE
REGISTER THEREFOR.]

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

                               ASSIGNOR

                               [NAME OF ASSIGNOR]

                               By:
                                    --------------------------------------------
                               Title:

                               ASSIGNEE

                               [NAME OF ASSIGNEE]

                               By:
                                    --------------------------------------------
                               Title:


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


                                      114
<PAGE>
Consented to and Accepted:

PETRO CAPITAL ENERGY CREDIT, LLC, as
Administrative Agent


By
  ------------------------------------------
Name:
Title:

[Consented to and Accepted:

BARON PRODUCTION LLC


By
  ------------------------------------------
Name:
Title:]

                                      115
<PAGE>
                                     ANNEX 1

                        STANDARD TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

     1. Representations and Warranties.

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

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

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

     3. General  Provisions.  This  Assignment and  Assumption  shall be binding
upon,  and inure to the  benefit  of, the  parties  hereto and their  respective
successors  and assigns.  This  Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by  telecopy  or other  electronic  means  shall be  effective  as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption  shall be governed by, and construed in accordance with, the laws
of the State of Texas.

                                      116
<PAGE>
                                 SCHEDULE 1.01A
                         Scheduled Capital Expenditures

                 Month                           Amount
                 -----                           ------

              August 2014                      $   67,500
             September 2014                    $  101,250
              October 2014                     $  101,250
             November 2014                     $  116,250
             December 2014                     $  101,250
              January 2015                     $  636,250
             February 2015                     $  636,250
               March 2015                      $1,600,000
               April 2015                      $1,000,000
                May 2015                       $        0
               June 2015                       $        0
               July 2015                       $1,000,000
              August 2015                      $1,000,000



                                      117
<PAGE>
                                  SCHEDULE 7.05
                                   LITIGATION


                                      None



                                      118
<PAGE>
                                  SCHEDULE 7.12
                                    INSURANCE



[GRAPHICS SHOWING INSURANCE DOCUMENTS FROM NATIONAL AMERICAN INSURANCE COMPANY]




                                      119
<PAGE>
                                  SCHEDULE 7.14
                                  SUBSIDIARIES

                                      None




                                      120
<PAGE>
                                  SCHEDULE 7.18
                                 GAS IMBALANCES

                                      None




                                      121
<PAGE>
                                  SCHEDULE 7.19
                               MARKETING CONTRACTS

                                      None




                                      122
<PAGE>
                                  SCHEDULE 7.20
                                 SWAP AGREEMENTS

                                      None




                                      123
                                  SCHEDULE 7.25
                             AFFILIATE TRANSACTIONS

1.   Executive  Employment  Agreement  dated  March 1,  2014  between  Ronnie L.
     Steinocher and Baron Energy, Inc.

2.   Executive Employment Agreement dated March 1, 2014 between Lisa P. Hamilton
     and Ronnie L. Steinocher

3.   Advance  from Lisa P.  Hamilton  to Baron  Energy,  Inc.  in the  amount of
     $188,548 as of June 30, 2014

4.   Account payable owed by Baron Energy,  Inc. to Esconde Energy LLC,  general
     partner of Esconde Resources LP, in the amount of $45,900




                                      124
<PAGE>
                                  SCHEDULE 7.27
                   MATERIAL CONTRACTS AND OPERATING AGREEMENTS

EAST PEARSALL (STEWART) PROSPECT

Participation  Agreement (East Pearsall  Prospect)  dated effective  January 15,
2010,  between  Ricochet Energy,  Inc., as Operator,  and Sien Energy Company et
al., as  Participants,  together with Joint Operating  Agreement dated effective
January 15, 2010 attached thereto, unrecorded.

Participation  Agreement  (East Pearsall  Prospect) dated effective May 1, 2010,
between Ricochet Energy, Inc., as Operator, and Ricochet Interests, Ltd. et al.,
as Participants, unrecorded.

Letter Agreement dated February 24, 2011,  between  Ricochet  Energy,  Inc., and
Borden  Jenkins,  unrecorded,  setting  forth  certain  agreements  to  purchase
interests in the East Pearsall Prospect Leases from Borden Jenkins.

Letter  Agreements dated June 1, 2012,  between Ricochet Energy,  Inc., and Sien
Energy  Company,  LLC and  Mark  Thompson,  unrecorded,  setting  forth  certain
agreements to purchase  certain  interests in the East Pearsall  Prospect Leases
from Sien Energy Company, LLC and Mark Thompson.

Eastex Crude Company  Contract No. 4900, as amended  (currently  Amendment #18),
dated March 26, 2010, between Eastex Crude Company,  and Ricochet Energy,  Inc.,
setting  forth  the terms for  sales of crude  oil from  wells  located  in Frio
County.

Base  Contract for Sale and Purchase of Natural Gas,  undated,  between  Faraday
Pipeline Co., as purchaser, and Ricochet Energy, Inc., as seller, unrecorded.

BREAZEALE PROSPECT (NEAL TRUST UNIT)

Participation  Agreement  (Breazeale  Prospect) dated effective  August 1, 2012,
between Ricochet Energy, Inc., as Operator, and Ricochet Interests, Ltd. et al.,
as Participants,  together with Joint Operating Agreement dated effective August
1, 2012 attached thereto, unrecorded.

MAXWELL PROSPECT

Letter  Agreements dated January 24, 2012,  between  Ricochet  Energy,  Inc. and
Vaquillas Energy, Ltd., JOB Energy II, Ltd., Lord's Energy, Ltd.,  Hubberd-Smith
Energy Investments,  Ltd., Nettleship Energy Interests,  Ltd. and Laredo Gateway
Energy, Ltd., setting forth elections to participate in drilling and development
activities on the referenced prospect area.

PETTY PROSPECT

Letter  Agreements  dated April 16,  2012,  between  Ricochet  Energy,  Inc. and
Vaquillas Energy, Ltd., JOB Energy II, Ltd., Lord's Energy, Ltd.,  Hubberd-Smith
Energy Investments,  Ltd., Nettleship Energy Interests,  Ltd. and Laredo Gateway
Energy, Ltd., setting forth elections to participate in drilling and development
activities on the referenced prospect area.

                                      125
<PAGE>
FRIO AUSTIN CHALK PROSPECT
(CULPEPPER, 3C, KOTZEBUE AND RIGGAN)

Participation  Agreement  (Frio Austin Chalk  Prospect)  dated effective June 1,
2011, between Ricochet Energy, Inc., as Operator,  and Ricochet Interests,  Ltd.
et al., as Participants, together with Joint Operating Agreement dated effective
June 1, 2011 attached thereto, unrecorded.

Agreement dated April 21, 2010,  between Sien Energy Company,  Ricochet  Energy,
Inc. and Goodrich Petroleum Company,  L.L.C.,  regarding the sale and conveyance
of certain rights below the top of the Eagleford formation to Goodrich Petroleum
in the "Culpepper" Leases listed therein, unrecorded.

EXPRESS RE-ENTRY PROSPECTS
(CANTU-HENDERSON UNIT AND HARRIS LEASE)

Participation  Agreement  (Express Re-entry  Prospects) dated effective July 15,
2009,  between Ricochet Energy,  Inc., as Operator,  and Express Oil & Gas, Mark
Pinson and Rustic Oil & Gas, L.L.C., covering the Cantu/Henderson Leases and the
Harris Lease in Frio County, unrecorded.

Operating  Agreement  dated July 15, 2009,  between  Ricochet  Energy,  Inc., as
Operator,  and Express Oil & Gas, as  non-operator,  recorded by  Memorandum  of
Operating  Agreement and Financing  Statement  dated effective July 15, 2009, in
Volume  63,  page 442,  Official  Records,  Frio  County,  Texas,  covering  the
Cantu/Henderson Lease Prospect.

Operating  Agreement  dated July 15, 2009,  between  Ricochet  Energy,  Inc., as
Operator,  and Express Oil & Gas and Rustic Oil & Gas, L.L.C., as non-operators,
recorded by Memorandum of Operating  Agreement  and  Financing  Statement  dated
effective July 15, 2009, in Volume 63, page 435, Official Records,  Frio County,
Texas, covering the Harris Lease (Re-entry) Prospect.

Participation  Agreement  (Express Re-entry  Prospects) dated effective November
10, 2009, between Ricochet Energy,  Inc., as Operator,  and Ricochet  Interests,
Ltd. et al, as Participants,  covering the Cantu/Henderson Leases and the Harris
Lease in Frio County, unrecorded.

Gas Sales and Purchase  Agreement  dated December 1, 2010,  between Frio LaSalle
Pipeline,  LLC,  and  Ricochet  Energy,  Inc.,  regarding  sales of gas from the
Cantu-Henderson No. 1H well in Frio County.

Salt Water Disposal Agreement dated effective  September 1, 2012, between Manuel
Cantu Family Trust, as Owner, and Ricochet Energy, Inc., as Operator,  regarding
disposal of salt water from the Cantu-Henderson No. 1H Well into the wellbore of
the former Cantu No. 1 Well, unrecorded.

W.S. SHAFFER AND W.S. SHAFFER -B- LEASES

Operating  Agreement  dated  August 1, 2007,  between  Permian  Legend  LLC,  as
Operator, and Permian Legend Petroleum LP, as non-operator.

                                      126
<PAGE>
W.S. SHAFFER -C- LEASE

Operating  Agreement  dated  August 1, 2007,  between  Permian  Legend  LLC,  as
Operator, and Permian Legend Petroleum LP, as non-operator.



                                      127
<PAGE>
                                  SCHEDULE 7.29
                      DEPOSIT AND SECURITIES ACCOUNTS, ETC.

Name on Account:       Baron Production LLC
Bank Routing #:
Bank ABA# (Wiring):
Bank Name:
Account Number:
Purpose:               Checking



                                      128
<PAGE>
                                  SCHEDULE 8.07
                                    INSURANCE

     Required Coverage

     The  Borrower  will at all times  procure  and  maintain  with  responsible
insurance  companies  the following  insurance  and such other  insurance as the
Administrative Agent deems appropriate:

     (a) Worker's  Compensation  Insurance and Employer's Liability Insurance in
compliance with all applicable Laws.

     (b) Comprehensive  General Liability Insurance (including pollution) with a
combined  single limit of not less than $1,000,000 per occurrence and $2,000,000
in the  aggregate.  This  policy  will  be  endorsed  to  provide  coverage  for
explosion,  collapse  and  underground  damage  hazards to  property  of others;
contractual liability; and products and completed operations;

     (c)  Comprehensive   Liability  Insurance  covering  all  owned,  hired  or
non-owned  vehicles with a combined single limit of not less than $1,000,000 per
occurrence;

     (d) Excess Umbrella Liability Insurance with a combined single limit of not
less than $5,000,000 per occurrence, provided that on and after August 15, 2014,
the Borrower shall maintain Excess Umbrella Liability  Insurance with a Combined
single limit of not less than $10,000,000;

     (e) Well Control Operator's Excess Expense Liability  Insurance  (including
cost of well  control,  relief  wells,  redrilling)  in an amount  not less than
$15,000,000 per occurrence; and

     (f) Property  Insurance  (subject to deductibles  that are customary in the
case of  independent  oil and gas  companies  engaged in  operations  of similar
properties)  fully  covering the Oil and Gas  Properties of the Borrower and its
Subsidiaries including the value of all facilities and well surface equipment.

     Additional Requirements

     1.  All   insurance   policies   will  be   endorsed   to  be  primary  and
noncontributory with any other valid and collectible insurance.

     2. The Borrower will provide to the Administrative  Agent from time to time
as  requested  a  Certificate  of  Insurance,   in  form   satisfactory  to  the
Administrative Agent, as evidencing that satisfactory  coverages of the type and
limits set forth  hereinabove are in effect.  Policies  providing such coverages
will contain provisions that no cancellation or material changes in the policies
will become  effective  except on 30 days' advance written notice thereof to the
Administrative  Agent.  Irrespective  of the  requirements as to insurance to be
carried as provided for herein,  the  insolvency,  bankruptcy  or failure of any
insurance company carrying insurance of the Borrower or any of its Subsidiaries,

                                      129
<PAGE>
the failure of any insurance  company to pay claims accruing,  or the inadequacy
of the  limits of the  insurance,  will not  affect,  negate or waive any of the
provisions of any Loan Document applicable to the property,  including,  without
exception,  the indemnity obligations of the Borrower. The Borrower will furnish
to the Administrative  Agent copies of all renewal  applications or applications
for replacement insurance promptly following submission of the same.

     3. The Borrower will promptly notify the Administrative Agent of any one or
more claims made under any insurance policy where the Borrower or any Subsidiary
is a named or additional  insured (whether such claim is made by the Borrower or
any other Person  insured  thereunder)  where such claim(s) are for an aggregate
amount in excess of 50% of any aggregate policy limit.

     4. The Borrower  will require any policies of liability  insurance,  except
workers  compensation  coverage,  that are in any way related to the Oil and Gas
Properties  of the  Borrower  and its  Subsidiaries,  and that are  obtained  or
maintained by the Borrower,  to include the Administrative Agent and the Lenders
and their respective parent and affiliated  companies and mortgagees,  and their
directors,  managers,  officers,  employees and agents, as Additional  Insureds,
without any limitations  based on the fault or negligence,  in whole or in part,
of such Additional Insureds. The Borrower will require any property and casualty
policies  that  are in any way  related  to the Oil  and Gas  Properties  of the
Borrower  and its  Subsidiaries,  to name the  Administrative  Agent as the loss
payee.  If any  insurance  policy is issued with the name of the  insured  being
other than the name of the Borrower,  then the Borrower will be added as a named
insured  and the  Administrative  Agent and the  Lenders  and their  parent  and
affiliated companies and mortgagees,  and their directors,  officers,  employees
and agents will be named as  Additional  Insureds  and loss payee as required in
the preceding sentences of this paragraph.

     5. The Borrower will require all policies of insurance  that are in any way
related  to this  Credit  Agreement  to  include  clauses  providing  that  each
underwriter will waive its rights of recovery,  under  subrogation or otherwise,
against the Administrative Agent and the Lenders and their respective parent and
affiliated companies and mortgagees,  and their directors,  managers,  officers,
employees and agents.

                                      130
<PAGE>
                                  SCHEDULE 9.05
                                   INVESTMENTS

                                      None





                                      131