EXHIBIT 10.20

                         SECURITIES PURCHASE AGREEMENT

      THIS  SECURITIES  PURCHASE  AGREEMENT  (the  "AGREEMENT"),  dated  as  of
April 1,  2008  (the "AMENDMENT DATE"), by and among South Texas Oil Company, a
Nevada corporation  with  its  principal  offices located at 769 Highway 95 N.,
Bastrop, Texas 78602 (the "COMPANY"), The Longview  Fund,  L.P.,  a  California
limited  partnership  ("LONGVIEW"),  and  Longview  Marquis  Master Fund, L.P.,
British  Virgin  Islands  limited  partnership  ("MARQUIS"  and, together  with
Longview, the "BUYERS"), with each of Longview's and Marquis' principal offices
located at 600 Montgomery Street, 44th Floor, San Francisco, CA 94111 and other
offices  in  Connecticut  and New York, amends and restates that  certain  Loan
Agreement, dated as of January  31,  2007,  by  and  between  the  Company  and
Longview (as amended by the First Amendment (as defined below) and as otherwise
amended  or modified prior to the date hereof, the "LOAN AGREEMENT") and amends
and restates the First Amendment.

      WHEREAS:

         A. Pursuant  to the terms of the Loan Agreement, the Company initially
            had the right  to  borrow  from Longview an aggregate amount not to
            exceed $15,000,000 during the  Initial  Term  (as  defined  below),
            which  obligation  was represented by that certain Revolving Credit
            Note  (as  amended or  modified  prior  to  the  date  hereof,  the
            "REVOLVING NOTE"), dated January 31, 2007, issued by the Company in
            favor of Longview.

         B. The  Company  and  Longview  entered  into  that  certain  Security
            Agreement  (the  "COMPANY SECURITY AGREEMENT"), dated as of January
            31, 2007, pursuant  to  which  the  Company  granted  to Longview a
            security interest in the Collateral (as defined in the  Amended and
            Restated  Security  Agreement),  on  the terms and conditions  more
            specifically set forth therein.

         C. The Company's right to borrow amounts  from Longview under the Loan
            Agreement commenced on the date of the Loan  Agreement and, but for
            this Agreement, would have ended on January 31,  2008 (such period,
            the  "INITIAL  TERM";  provided,  however,  that  the  Company  was
            permitted  to  borrow  an  aggregate  of $2,000,000 under the  Loan
            Agreement on February 6, 2008).

         D. The  Company  and Longview entered into that  certain  Subscription
            Agreement, dated as of January 31, 2007, pursuant to which Longview
            subscribed   for   1,000,000   Common   Stock   Purchase   Warrants
            representing  the   right  to  purchase  1,000,000  shares  of  the
            Company's common stock, $.001 par value per share ("COMMON STOCK"),
            restricted as to transfer  under the applicable securities laws and
            containing  legends  to  that  effect   and  subject  to  piggyback
            registration  rights  as  described  therein   (such  Common  Stock
            Purchase Warrants, together with any securities  issued in exchange
            or substitution therefor or replacement thereof, and  as any of the
            same  may be amended, supplemented, restated or otherwise  modified
            and in  effect  from  time  to  time, the "WARRANTS"; the shares of
            Common Stock issuable upon exercise  of the Warrants being referred
            to as the "WARRANT SHARES").

         E. The Company and Longview entered into  that certain First Amendment
            to   Loan   Agreement  and  Revolving  Credit  Note   (the   "FIRST
            AMENDMENT"),  dated  as of September 25, 2007 (the "FIRST AMENDMENT
            DATE"), pursuant to which  (i)  the  Company and Longview agreed to
            amend  and  restate the Revolving Note to  increase  the  aggregate
            amount that the  Company  was  entitled  to  borrow  from  Longview
            (subject  to  the terms and conditions of the Loan Agreement),  and
            the principal amount  of  the  Revolving  Note, to $30,000,000 (the
            "MAXIMUM  BORROWING  AMOUNT"), (ii) the Company  agreed  to,  among
            other things, grant to,  and  cause  each  of  the Subsidiaries (as
            defined  below) to grant to, Longview perpetual overriding  royalty
            interests in the hydrocarbon production of all of the Company's and
            the Subsidiaries' current and future interest in their then current
            Real Property  (as  defined  in Section 5(s)), except for the South
            Texas Properties (as defined in  the  First  Amendment)  (such Real
            Property,  the  "ORIGINAL  OVERRIDE PROPERTIES" and such overriding
            perpetual royalty interests  therein  as set forth in Schedule I to
            the First Amendment, the "ORIGINAL OVERRIDE INTERESTS"), the rights
            to such Override Interests to be set forth  in  certain Conveyances
            of   Overriding   Royalty   Interests   (the   "ORIGINAL   OVERRIDE
            CONVEYANCES"),  and (iii) the Company agreed to enter into, and  to
            cause each of the  Subsidiaries  to  enter into, (a) a guaranty for
            the Obligations (as defined in the Amended  and  Restated  Security
            Agreement) (the "SUBSIDIARY GUARANTY" and the guarantees under  the
            Subsidiary  Guaranty,  including any such guarantee added after the
            Amendment Date, the "GUARANTEES"),  and  (b)  security  and  pledge
            agreements   and  such  other  documents  and  instruments  as  are
            necessary  to provide  Longview  with  a  valid,  perfected,  first
            priority security  interest  in  substantially all of the assets of
            the Company and each of the Subsidiaries.

         F. Longview and Marquis entered into  that  certain  Purchase and Sale
            Agreement (the "PURCHASE AGREEMENT"), dated as of February 4, 2008,
            pursuant to which Marquis acquired from Longview (i)  a twenty-five
            percent (25%) interest in each of the following: (a) the  Revolving
            Note, (b) the aggregate then outstanding principal balance  of  the
            advances  made by Longview to the Company pursuant to the Revolving
            Note (the "ADVANCES") as of the date of the Purchase Agreement (the
            "OUTSTANDING  NOTE  PRINCIPAL  AMOUNT"),  (c)  accrued  and  unpaid
            interest  payable  on  the Revolving Note through and including the
            date  of the Purchase Agreement  (the  "OUTSTANDING  NOTE  INTEREST
            AMOUNT"), and (d) Longview's right to receive the Original Override
            Conveyances,  (ii)  250,000 of the Warrants, representing the right
            to purchase 250,000 shares of Common Stock and (iii) related rights
            and  obligations  under  the  Loan  Agreement,  including,  without
            limitation, twenty-five  percent  (25%) of Longview's obligation to
            make  future  Advances pursuant to the  Loan  Agreement,  with  the
            remaining (i) seventy-five  percent  (75%)  interest in each of the
            Revolving  Note,  the  Outstanding  Note  Principal   Amount,   the
            Outstanding  Note  Interest  Amount and Longview's right to receive
            the   Override  Conveyances,  (ii)   750,000   of   the   Warrants,
            representing  the right to purchase 750,000 shares of Common Stock,
            and  (iii)  rights   and  obligations  under  the  Loan  Agreement,
            including the obligation  to make seventy-five percent (75%) of any
            future Advances pursuant to  the  Loan  Agreement, continuing to be
            held by Longview.

         G. As required by the First Amendment, prior  to  the date hereof, the
            Subsidiaries  and  Longview  executed  and  delivered   a  Security
            Agreement  (as  amended  or modified prior to the date hereof,  the
            "SUBSIDIARY   SECURITY   AGREEMENT"),   pursuant   to   which   the
            Subsidiaries  have  provided  to  Longview  security  interests  in
            substantially all of the assets of the Subsidiaries.

         H. As  of  the Amendment Date,  the  aggregate  outstanding  principal
            balance of the Advances represented by the Revolving Note, together
            with all accrued and unpaid interest payable on the Revolving Note,
            was $23,877,350.82 (the "CURRENT OUTSTANDING AMOUNT").

         I. The Company  and  each  of  the  Buyers  desire  to enter into this
            Agreement to, among other things, amend and restate in its entirety
            all terms, conditions and provisions of the Loan Agreement,  as set
            forth  in  this  Agreement.   The  Loan  Agreement  and  the  First
            Amendment are hereby amended and restated to read in their entirety
            to read in full as set forth in this Agreement, effective as of the
            Amendment Date.

         J. The  Company  and  each  of the Buyers are executing and delivering
            this Agreement and the securities described herein in reliance upon
            the exemption from securities  registration afforded by Rule 506 of
            Regulation D ("REGULATION D") as  promulgated  by the United States
            Securities and Exchange Commission (the "SEC") under the Securities
            Act of 1933, as amended (the "1933 ACT").

         K. Subject to the terms and conditions hereof, each  of the Buyers and
            the  Company  will  amend and restate the Revolving Note,  and  the
            Company  will  deliver   to   the   Buyers  senior  secured  notes,
            substantially in the form attached as  Exhibit  A,  in  an original
            aggregate principal amount equal to the Current Outstanding  Amount
            (such notes, together with any promissory notes or other securities
            issued in exchange or substitution therefor or replacement thereof,
            and  as  any of the same may be amended, supplemented, restated  or
            otherwise  modified  and  in effect from time to time, the "INITIAL
            NOTES").

         L. Subject to the terms and conditions  set  forth  in this Agreement,
            during the Additional Note Issuance Period (as defined  below), the
            Company will have the option to sell, and if the Company  exercises
            such  option  the Buyers shall be obligated to purchase, additional
            senior secured  notes  (including  any  promissory  notes  or other
            securities  issued  in  exchange  or  substitution  for such senior
            secured notes or replacement thereof, and as any of the same may be
            amended, restated, modified or supplemented and in effect from time
            to time, the "ADDITIONAL NOTES," and, collectively with the Initial
            Notes, the "NOTES"), each with a maturity date of December 31, 2009
            and  otherwise  in  the form attached as Exhibit B, in an  original
            aggregate principal amount of up to $6,122,649.18 (which represents
            the result of the Maximum  Borrowing  Amount  minus  the  aggregate
            principal  amount  on the Initial Notes) (the "AGGREGATE ADDITIONAL
            NOTE ISSUANCE AMOUNT").

         M. Contemporaneously  with   the   execution   and  delivery  of  this
            Agreement,  the  Buyers  and the Company and the  Subsidiaries  are
            executing  and  delivering  an   Amended   and   Restated  Security
            Agreement, substantially in the form attached as Exhibit C  (as the
            same  may  be amended, supplemented, restated or otherwise modified
            and in effect from time to time, the "AMENDED AND RESTATED SECURITY
            AGREEMENT"),  pursuant  to which the Company Security Agreement and
            the  Subsidiary  Security  Agreement   are  consolidated  into  one
            agreement and amended and restated in full,  the  Buyers  designate
            Viking  Asset  Management,  LLC,  as  agent  for  the  Buyers  (the
            "COLLATERAL  AGENT"),  and the Company and the Subsidiaries provide
            the Collateral Agent with  a security interest in substantially all
            of their assets.

         N. Contemporaneously  with  the  execution   and   delivery   of  this
            Agreement,  the  Buyers  and  the  Company and the Subsidiaries are
            executing  and  delivering  to the Collateral  Agent  one  or  more
            Mortgages,  each  in the form attached  as  Exhibit  D  (with  such
            modifications  as  the   Collateral   Agent   deems   necessary  or
            appropriate  for  states  other than Texas), pursuant to which  the
            Company and the Subsidiaries  grant  to the Buyers interests in all
            of  the  Real  Property  (as  any  of  the  same  may  be  amended,
            supplemented, restated or otherwise modified  and  in  effect  from
            time to time, collectively, the "MORTGAGES").

         O. Contemporaneously   with   the   execution  and  delivery  of  this
            Agreement,  the Buyers and the Company  and  the  Subsidiaries  are
            executing and  delivering  one  or  more  Deposit  Account  Control
            Agreements, each in the form attached as Exhibit E (as the same may
            be  amended,  supplemented,  restated or otherwise modified and  in
            effect  from  time  to  time, the  "ACCOUNT  CONTROL  AGREEMENTS"),
            pursuant to which the Company  and  each  of  the Subsidiaries that
            maintain bank, brokerage or other similar accounts  with any banks,
            brokerage  firms and/or other financial institutions (collectively,
            the "BANKS")  agree  to  enable the Collateral Agent to perfect its
            security interest in all of  the  Company's  and  the Subsidiaries'
            right, title and interest in certain accounts and in all collateral
            from time to time credited to such accounts.

         P. Contemporaneously   with   the  execution  and  delivery  of   this
            Agreement,  the Subsidiaries  and  the  Buyers  are  executing  and
            delivering the Subsidiary Guaranty, in the form attached as Exhibit
            F.

         Q. Contemporaneously   with   the   execution  and  delivery  of  this
            Agreement,  Collateral  Agent and the  Company  are  executing  and
            delivering a Pledge Agreement,  in  the  form attached as Exhibit G
            (as the same may be amended, supplemented, restated or modified and
            in effect from time to time, together, the  "PLEDGE AGREEMENT" and,
            collectively with the Subsidiary Guaranty, the Amended and Restated
            Security Agreement, the Account Control Agreements,  the  Mortgages
            and the Additional Security Documents (as defined in Section 2(d)),
            the "SECURITY DOCUMENTS"), pursuant to which the Company agrees  to
            pledge  all  of  the  Capital  Stock of the Subsidiaries, and other
            equity in the Subsidiaries to the  Collateral  Agent  as collateral
            for the Notes.

         R. Contemporaneously   with   the   execution  and  delivery  of  this
            Agreement,  the Buyers and the Company  and  the  Subsidiaries  are
            executing and  delivering  to  the  Collateral  Agent,  in  lieu of
            delivering the Original Override Conveyances pursuant to the  First
            Amendment, Conveyances of Overriding Royalty Interests, each in the
            form  attached as Exhibit H, pursuant to which the Company and each
            of the  Subsidiaries  grant  to  the  Buyers  perpetual  overriding
            royalty interests, effective from the First Amendment Date,  in the
            hydrocarbon   production   of   all   of   the  Company's  and  the
            Subsidiaries'  current and future interest in  all  of  their  Real
            Property  as of the  Amendment  Date,  including  the  South  Texas
            Properties,  equal to an aggregate of three percent (3%) (such Real
            Property, the  "CURRENT  OVERRIDE  PROPERTIES"  and such overriding
            perpetual   royalty   interests  therein,  the  "CURRENT   OVERRIDE
            INTERESTS"), the rights to the Current Override Interests to be set
            forth in certain Conveyances  of  Overriding  Royalty Interests (as
            any of the same may be amended, supplemented, restated or otherwise
            modified and in effect from time to time, the "REPLACEMENT OVERRIDE
            CONVEYANCES").

         S. Contemporaneously   with  the  execution  and  delivery   of   this
            Agreement, the Buyers  are receiving the opinion of Gary Lancaster,
            Esq., dated as of the Amendment  Date,  in  the  form  attached  as
            Exhibit I, which opinion addresses, among other things, laws of the
            State  of  Texas  applicable to the Mortgages for the Real Property
            located in the State of Texas.

         T. The Company and each  of the Buyers desire to amend the Warrants as
            set forth in this Agreement.

      NOW THEREFORE, in consideration  of  the  premises  and  the  agreements,
provisions  and  covenants herein contained, the Buyers and the Company  hereby
amend and restate  the  Loan  Agreement  in  its  entirety, without effecting a
novation of the Obligations, and otherwise agree as follows:

1.    AMENDMENT AND RESTATEMENT OF REVOLVING NOTE; ADDITIONAL NOTES.

      a.    Delivery of Notes

      .  The Company and each of the Buyers, severally  and not jointly, hereby
amend  and restate the Revolving Note with respect to the  Current  Outstanding
Amount to  read  in  its entirety as set forth in the Longview Initial Note and
the Marquis Initial Note (each as defined below).  To effectuate the foregoing,
(A) on the Amendment Date, the Company (I) shall deliver to Longview an Initial
Note in an original aggregate principal amount of $17,908,013.11 (the "LONGVIEW
INITIAL NOTE"), duly executed  on  the  Company's  behalf and registered in the
name of Longview or its designee, and (II) shall deliver  to Marquis an Initial
Note in an original aggregate principal amount of $5,969,337.71  (the  "MARQUIS
INITIAL  NOTE"),  duly  executed on the Company's behalf and registered in  the
name of Marquis or its designee,  and  (B) Longview shall deliver the Revolving
Note to the Company for cancellation (the  "AMENDMENT  AND  RESTATEMENT  OF THE
NOTE").  The completion of the foregoing, as provided for in this Section  1(a)
shall  effect  the  cancellation  of  the Revolving Note, and the Company shall
stamp "Cancelled" on the Revolving Note  and  send a copy of the Revolving Note
(as so stamped) to Longview.

      b.    Purchase and Sale of Additional Notes

      .  Subject to the satisfaction (or waiver) of the conditions set forth in
Sections 1(c), 8 and 9 below, during the period  commencing  on  the  Amendment
Date  and continuing until the earliest to occur of (a) December 31, 2008,  and
(b) a date  not  less than thirty (30) days after all of the Buyers give notice
of such date to the Company of termination of such period (the "ADDITIONAL NOTE
ISSUANCE PERIOD"),  the  Company  may  elect  to  sell  Additional Notes to the
Buyers.  Subject to the limitations set forth in this Section  1(b) and Section
1(c), at any time during the Additional Note Issuance Period, the  Company may,
in  its sole discretion, deliver (by facsimile) a written notice to the  Buyers
electing  to  sell Additional Notes to the Buyers (an "ADDITIONAL SALE ELECTION
NOTICE").  The  Company  may not deliver more than one Additional Sale Election
Notice during any 30-day period,  unless  all  of the Buyers otherwise agree in
writing.  The Additional Sale Election Notice shall  set  forth  the  aggregate
principal  amount of Additional Notes to be sold to the Buyers (the "ADDITIONAL
NOTE ISSUANCE  AMOUNT")  on  an  Additional Closing Date (as defined in Section
1(c)); provided, however, that (A)  the  sum  of  the  Additional Note Issuance
Amount and the aggregate principal amount of all other Additional  Notes issued
to  the  Buyers does not exceed the Aggregate Additional Note Issuance  Amount,
and (B) the  sum  of  the  Additional  Note  Issuance  Amount and the aggregate
principal amount of all other Notes issued in the same calendar  month  as  the
Additional  Closing  Date  for  the  Additional  Note Issuance Amount shall not
exceed $2,000,000, subject to increase upon unanimous  written  approval by the
Buyers (the limitations on the Additional Note Issuance Amount set forth in the
immediately  preceding clauses (A) and (B) being together referred  to  as  the
"ADDITIONAL NOTE  ISSUANCE  AMOUNT LIMITATIONS").  The Additional Sale Election
Notice shall also set forth (i)  the  Company's  principal amount of Additional
Notes  to  be  purchased  (subject  to the limitations  provided  in  the  next
sentence), and (ii) the Additional Closing  Date  for  the purchase and sale of
Additional Notes pursuant to such Additional Sale Election  Notice  (determined
as provided in Section 1(c) below).  In the event that the Company delivers  an
Additional  Sale  Election  Notice in accordance with the foregoing, subject to
the conditions set forth in this Section 1(b) and Sections 1(c), 8 and 9 below,
then with respect to each Additional  Sale  Election  Notice, the Company shall
issue  and  sell  to  each Buyer, and each Buyer agrees to  purchase  from  the
Company, on the applicable  Additional  Closing Date (an "ADDITIONAL CLOSING"),
an Additional Note in a principal amount equal to the product of the Additional
Note Issuance Amount, multiplied by such  Buyer's allocation percentage (as set
forth opposite such Buyer's name in the fourth column on the Schedule of Buyers
(such  Buyer's "ALLOCATION PERCENTAGE").  The  aggregate  purchase  price  (the
"ADDITIONAL  PURCHASE  PRICE")  of  the  Additional  Notes  at  the  applicable
Additional  Closing shall be equal to $1.00 for each $1.00 of principal  amount
of the Additional  Notes  purchased.  As used in this Agreement, "BUSINESS DAY"
means any day other than Saturday,  Sunday  or  other  day  on which commercial
banks in New York City are authorized or required by law to remain closed.

      c.    Additional Closing Dates

      .   The  date and time of any Additional Closing (an "ADDITIONAL  CLOSING
DATE") shall be  10:00  a.m.,  New  York City time, on the fifteenth (15th) day
following receipt by each Buyer of an  Additional  Sale Election Notice (or, if
such  fifteenth (15th) day is not a Business Day, on  the  first  Business  Day
after such  fifteenth  (15th)  day), subject to the satisfaction (or waiver) of
the conditions to the Additional  Closing  set  forth in Sections 1(b), 8 and 9
and the conditions set forth in this Section 1(c)  or  the  waiver  thereof  in
writing  by  such  Buyer (or such earlier or later date and time as is mutually
agreed to by the Company  and  the Buyers).  Notwithstanding the foregoing, the
Company shall not be entitled to  deliver  an  Additional  Sale Election Notice
unless each of the following conditions is satisfied (or waived  in  writing by
the applicable Buyer) as of and through the date on which the Company  delivers
to  each  Buyer the applicable Additional Sale Election Notice (the "ADDITIONAL
SALE ELECTION  NOTICE  DATE"),  and  no Buyer shall be required to purchase the
Additional Notes unless each of the following conditions and the conditions set
forth in this Section 1(c) and Section 9 are satisfied (or waived in writing by
the applicable Buyer) as of and through  the applicable Additional Closing Date
(the  "ADDITIONAL  SALE ELECTION NOTICE CONDITIONS"):  (i)  during  the  period
beginning on the Amendment  Date  and  ending  on  and including the applicable
Additional  Closing  Date,  there  shall not have occurred  either  the  public
announcement of a pending, proposed  or  intended Change in Control (as defined
in the Notes) which has not been abandoned or terminated and publicly announced
as such, or an Event of Default (as defined  in  the  Notes);  (ii)  during the
ninety  (90)  day period ending on and including such Additional Closing  Date,
there shall not  have  occurred  an  event that with the passage of time or the
giving of notice (or both) and without being cured would constitute an Event of
Default; or (iii) as of the Additional Sale Election Notice Date and as of such
Additional  Closing Date, Notes remain  outstanding.   Any  Additional  Closing
shall occur on  the applicable Additional Closing Date at the offices of Katten
Muchin Rosenman LLP,  525  West  Monroe  Street,  Suite 1900, Chicago, Illinois
60661-3693, or at such other place as the Company and  the  Buyers  may jointly
designate  in writing.  The delivery of an Additional Sale Election Notice  and
the issuance  of  any  Additional Notes shall constitute a certification by the
Company that all the representations and warranties of the Company are true and
correct as of the date of  such  notice or issuance (except for representations
and warranties that speak as of a  specific  date,  which  shall  be  true  and
correct  as  of  such  date)  and  that  the  Company and the Subsidiaries have
performed, satisfied and complied with the covenants, agreements and conditions
required  by  this Agreement and the other Transaction  Documents  (as  defined
below) to be performed,  satisfied  or  complied  with  by  the  Company or the
Subsidiaries at or prior to such date.  For purposes hereof, (i) "SUBSIDIARIES"
means STO Operating Company, STO Drilling Company, STO Properties LLC, Southern
Texas  Oil  Company and all other entities in which the Company, STO  Operating
Company or Southern  Texas  Oil  Company,  directly or indirectly, owns Capital
Stock or holds equity or similar interests at  the time of this Agreement or at
any time hereafter, and (ii) "PERIODIC REPORT" shall mean a quarterly report on
Form 10-QSB or 10-Q or annual report on Form 10-KSB or 10-K.

      d.    Additional Closing Date Form of Payment

      .  On each Additional Closing Date, if any,  (i) each Buyer shall pay the
applicable Additional Purchase Price for the Additional  Notes to be issued and
sold  to  such  Buyer  on  such  Additional Closing Date, by wire  transfer  of
immediately  available funds in accordance  with  the  Company's  written  wire
instructions (less  any  amount  deducted  and  paid in accordance with Section
5(h), and (ii) the Company shall deliver to each  Buyer  the  Additional  Notes
that such Buyer is purchasing hereunder on the Additional Closing Date, in each
case  duly executed on behalf of the Company and registered in the name of such
Buyer or its designee.

1A.   AMENDMENT OF WARRANTS.

      e.    Acknowledgement of Exercise Price

      .  Each of the Buyers, severally and not jointly, hereby acknowledges and
agrees  with the Company that, as of the Amendment Date, the Purchase Price (as
defined in  the  Warrants) under the Warrants held by such Buyer is Ten Dollars
($10.00) (regardless  of  whether  any  issuances  of Common Stock prior to the
Amendment Date could have resulted in an adjustment  to  such  Purchase Price).
The  foregoing  (i) is  not,  and  shall  not  be  deemed  to  be, a waiver  or
modification  of  rights  under  each of the Warrants to an adjustment  of  the
Purchase Price thereunder as a result  of  issuances  of Common Stock, or other
events, on or after the Amendment Date (subject to Section  1A(b)  below),  and
(ii) does  not,  and  shall  not  be deemed to, establish a custom or course of
dealing.

      f.    Warrant Amendment

      .  The Company and each of the  Buyers, severally and not jointly, hereby
amend Section 3.4 of each of the Warrants  held  by such Buyer by replacing the
parenthetical  "(as  defined  in  the  Subscription Agreement)"  in  the  first
sentence of such Section 3.4 with the parenthetical "(as defined below)" and by
adding the following sentence at the end of such Section 3.4:

      "For purposes hereof, "EXCEPTED ISSUANCES"  means (i) any issuances
      of  shares  of Common Stock (A) as consideration  in  a  merger  or
      consolidation  (the  primary purpose or material result of which is
      not to raise or obtain  equity  capital or cash), (B) in connection
      with  any  strategic  partnership or  joint  venture  (the  primary
      purpose or material result  of  which  is  not  to  raise or obtain
      equity   capital  or  cash),  or  (C)  as  consideration  for   the
      acquisition  of  a business, a product, a license, Real Property or
      other assets (the  primary  purpose  or material result of which is
      not to raise or obtain equity capital  or cash), (ii) any issuances
      of  shares  of  Common Stock upon exercise  or  conversion  of  any
      options,  warrants,   convertible   notes   or   other  convertible
      securities  outstanding  as of April 1, 2008 and described  in  the
      Periodic  Reports filed prior  to  April  1,  2008,  provided  such
      securities  are  not  amended or modified on or after April 1, 2008
      and provided that the conversion  price,  exchange  price, exercise
      price or other purchase price is not reduced, adjusted or otherwise
      modified  and  the  number  of  shares  issued or issuable  is  not
      increased (whether by operation of law or  in  accordance  with the
      relevant  governing  documents  or otherwise) on or after April  1,
      2008,  and  (iii) any grants of options  or  warrants  to  purchase
      shares of Common  Stock  and  issuances  of  shares of Common Stock
      (upon exercise of outstanding options or warrants  or otherwise) to
      officers, employees and directors of, and consultants  and advisors
      to, the Company or any of the Subsidiaries as compensation  for the
      performance  of  bona  fide  services for the Company or any of the
      Subsidiaries.

2.    DELIVERY  OF  CONVEYANCES  OF OVERRIDING  ROYALTY  INTERESTS,  MORTGAGES,
ACCOUNT CONTROL AGREEMENTS, AND SECURITY DOCUMENTS AND WARRANTS.

      a.    Conveyances of Overriding Royalty Interests

      .  On the Amendment Date, the  Company shall, and shall cause each of the
Subsidiaries  to,  deliver  to  each  of  the   Buyers   Replacement   Override
Conveyances,  each  duly  and  validly  executed by the Company and each of the
Subsidiaries  (as applicable), providing such  Buyer  with  overriding  royalty
interests,  effective  from  the  First  Amendment  Date,  in  the  hydrocarbon
production of  all  of  the  Company's and the Subsidiaries' current and future
interest  in the Current Override  Properties  equal  to  three  percent  (3%),
multiplied by such Buyer's Allocation Percentage.

      b.    Mortgages

      .  On  the Amendment Date, the Company shall, and shall cause each of the
Subsidiaries to,  deliver  to the Collateral Agent the Mortgages, each duly and
validly executed by the Company and each of the Subsidiaries (as applicable).

      c.    Account Control Agreements

      .  On the Amendment Date,  the Company shall, and shall cause each of its
subsidiaries to, deliver to the Collateral  Agent  the Mortgages, each duly and
validly executed by the Company, each of the Subsidiaries  (as  applicable) and
the Banks.

      d.    Other Security Documents

      .  On the Amendment Date, the Company shall, and shall cause  each of the
Subsidiaries   to,  deliver  to  the  Collateral  Agent  such  other  financing
statements,  documents   and  instruments  as  are  necessary  to  provide  the
Collateral  Agent with a valid,  perfected,  first-priority  security  interest
(subject to Permitted  Liens  (as defined in Section 5(t)) in substantially all
of the assets of the Company and  each  of  the Subsidiaries (collectively, the
"ADDITIONAL SECURITY DOCUMENTS"), each duly and validly executed by Company and
the Subsidiaries (as applicable).

      e.    Warrants

      .  On the Amendment Date, the Company shall issue and deliver to Longview
Warrants, dated January 31, 2007, to purchase  750,000  shares of Common Stock,
duly  and  validly  executed  by the Company, and shall issue  and  deliver  to
Marquis Warrants, dated February 4,  2008, to purchase 250,000 shares of Common
Stock, duly and validly executed by the Company, each such Warrant to be in the
form  of  the  Warrants  originally  issued  by  the  Company  to  Longview  on
January 31, 2007, except as amended by Section 1A(b) above (and, in the case of
the Warrants issued to Marquis, dated as set forth in this sentence).  Upon the
receipt by each of the Buyers of such  Warrants, the Warrants originally issued
by the Company to Longview on January 31,  2007  shall  terminate  and be of no
further  force  or  effect, and Longview shall promptly thereafter return  such
originally issued Warrants to the Company for cancellation.

3.    BUYERS' REPRESENTATIONS AND WARRANTIES.

      Each Buyer represents  and  warrants,  as  of the Amendment Date and each
Additional Closing Date, to the Company, with respect to only such Buyer, that:

      a.    Investment Purpose

      .   Such  Buyer  (i) is acquiring (or has acquired)  the  Notes  and  the
related Guarantees and the  Warrants,  and will acquire any Warrant Shares upon
exercise  of the Warrants (the Notes, the  Guarantees,  the  Warrants  and  the
Warrant Shares,  collectively,  the  "SECURITIES"), for its own account and not
with a view towards, or for resale in  connection  with,  the  public  sale  or
distribution  thereof,  except  pursuant to sales registered under, or exempted
from the registration requirements of, the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities  for any minimum period  or  other  specific  term  and  such  Buyer
reserves the  right to dispose of the Securities at any time in accordance with
or pursuant to  an  effective  registration  statement  or  an  exemption  from
registration under the 1933 Act.

      b.    Accredited Investor Status

      .  Such Buyer is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D.

      c.    Reliance on Exemptions

      .   Such Buyer understands that the Securities are being offered and sold
to it in reliance  on specific exemptions from the registration requirements of
the securities laws  and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments  and  understandings of such Buyer set forth herein
in order to determine the availability  of  such exemptions and the eligibility
of  such Buyer to acquire the Securities.  For  purposes  hereof,   "SECURITIES
LAWS"  means  the  securities  laws,  legislation  and  regulations of, and the
instruments, policies, rules, orders, codes, notices and  interpretation  notes
of,  the  securities  regulatory  authorities (including the SEC) of the United
States and any applicable states and other jurisdictions.

      d.    Information

      .  Such Buyer and its advisors,  if  any,  have  been  furnished with all
materials relating to the business, finances and operations of  the Company and
the Subsidiaries and materials relating to the offer and sale of the Securities
that have been requested by such Buyer.  Such Buyer and its advisors,  if  any,
have  been  afforded  the opportunity to ask questions of the Company.  Neither
such inquiries nor any  other  due  diligence  investigations conducted by such
Buyer or its advisors, if any, or its representatives  shall  modify,  amend or
affect  such  Buyer's  right  to  rely  on  the  Company's  representations and
warranties  contained  in  Section  4  below or contained in any of  the  other
Transaction  Documents.  Such Buyer understands  that  its  investment  in  the
Securities involves  a  high  degree  of  risk.   Such  Buyer  has  sought such
accounting,  legal  and  tax  advice as it has considered necessary to make  an
informed investment decision with respect to its acquisition of the Securities.

      e.    No Governmental Review

      .  Such Buyer understands  that  no  Governmental Entity has passed on or
made any recommendation or endorsement of the  Securities  or  the  fairness or
suitability of an investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.  As used in this
Agreement,  "GOVERNMENTAL ENTITY" means the government of the United States  or
any  other  nation,  or  any  political  subdivision  thereof,  whether  state,
provincial or  local,  or  any  agency (including any self-regulatory agency or
organization), authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administration powers or functions  of  or pertaining to government over the
Company  or  any of the Subsidiaries, or any of  their  respective  properties,
assets or undertakings.

      f.    Transfer or Resale

      .  Such  Buyer understands that, (i) the Securities have not been and are
not being registered  under  the 1933 Act or any other securities laws, and may
not be offered for sale, sold,  assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer  shall  have  delivered to the Company an
opinion of counsel, in a generally acceptable form, to  the  effect  that  such
Securities  to  be  sold,  assigned  or  transferred  may  be sold, assigned or
transferred pursuant to an exemption from such registration,  or (C) such Buyer
provides  the  Company with reasonable assurance that such Securities  can  be,
have been or are  being  sold,  assigned  or  transferred  pursuant to Rule 144
promulgated under the 1933 Act, as amended (or a successor rule thereto) ("RULE
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144, and further,  if Rule 144 is not
applicable,  any  resale  of  the Securities under circumstances in  which  the
seller (or the Person through whom  the  sale  is  made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act)  may  require  compliance
with  some  other  exemption  under  the 1933 Act or any other securities laws;
(iii) neither the Company nor any other  Person  is  under  any  obligation  to
register  the  Securities  under  the  1933  Act  or any other securities laws.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan or financing  arrangement  secured  by
the  Securities.   As  used  in this Agreement, "PERSON" means an individual, a
limited liability company, a partnership,  a  joint  venture,  a corporation, a
trust,  an  unincorporated  organization  or a government or any department  or
agency thereof or any other legal entity.

      g.    Legends

      .   Such  Buyer understands that the certificates  or  other  instruments
representing  the   Securities,  except  as  set  forth  below,  shall  bear  a
restrictive legend in  the  following form (the "1933 ACT LEGEND") (and a stop-
transfer order may be placed against transfer of such certificates):

      THE SECURITIES REPRESENTED  BY  THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  OR  APPLICABLE  STATE
      SECURITIES LAWS.  THE SECURITIES  MAY  NOT  BE  OFFERED  FOR  SALE, SOLD,
      TRANSFERRED   OR   ASSIGNED   (I) IN  THE  ABSENCE  OF  (A) AN  EFFECTIVE
      REGISTRATION STATEMENT FOR THE  SECURITIES  UNDER  THE  SECURITIES ACT OF
      1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR  (B) AN  OPINION
      OF  COUNSEL,  IN  A  GENERALLY  ACCEPTABLE FORM, THAT REGISTRATION IS NOT
      REQUIRED  UNDER  SAID  ACT  OR  APPLICABLE   STATE   SECURITIES  LAWS  OR
      (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
      FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION  WITH  A BONA FIDE
      MARGIN  ACCOUNT  OR  OTHER  LOAN OR FINANCING ARRANGEMENT SECURED BY  THE
      SECURITIES.

Upon the written request to the Company  of  a holder of a certificate or other
instrument representing Notes, Warrants or Warrant  Shares, the 1933 Act Legend
shall be removed and the Company shall issue a certificate without the 1933 Act
Legend to the holder of the Securities upon which it  is  stamped  (or,  in the
case  of  any  Warrant  Shares  being  acquired upon exercise of a Warrant, the
Company shall issue the certificate representing  such  Warrant  Shares without
the  1933  Act Legend), if (i) such Securities are registered for resale  under
the 1933 Act,  (ii) in connection with a sale transaction, such holder provides
the Company with  an opinion of counsel, in a generally acceptable form, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, (iii) such holder provides the Company
with reasonable assurances that the Securities can be sold pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) without compliance
with Rule 144(e) or  Rule  144(f)  (or successors thereto), or (iv) such holder
provides the Company reasonable assurances that the Securities have been or are
being sold pursuant to Rule 144.

      h.    Authorization; Enforcement; Validity

      .  Such Buyer is a validly existing  partnership  and  has  the requisite
partnership  power  and authority to purchase the Securities pursuant  to  this
Agreement.  Each of this  Agreement  and  the  Amended  and  Restated  Security
Agreement  has  been  duly  and  validly  authorized, executed and delivered on
behalf of such Buyer, and each is a valid and  binding agreement of such Buyer,
enforceable against such Buyer in accordance with its terms.  Each of the other
agreements  and other documents entered into and  executed  by  such  Buyer  in
connection with  the  transactions contemplated hereby as of the Amendment Date
and  as of each Additional  Closing  Date  will  have  been  duly  and  validly
authorized,  executed and delivered on behalf of such Buyer as of the Amendment
Date or such Additional  Closing Date, as applicable, and will constitute valid
and  binding agreements of  such  Buyer,  enforceable  against  such  Buyer  in
accordance with their respective terms.

      i.    Residency and Offices

      .   Such  Buyer  is  a  resident  of the jurisdiction specified below its
address on the Schedule of Buyers.

4.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company represents and warrants,  as  of  the Amendment Date and each
Additional Closing Date, to each of the Buyers, that:

      a.    Due Incorporation

      .  The Company is a corporation duly incorporated  or  organized, validly
existing  and  in  good  standing  under  the laws of the jurisdiction  of  its
incorporation and has the requisite corporate  power  to own its properties and
to carry on its business as presently conducted.  Schedule  4(a)  sets  forth a
true and correct list of the Subsidiaries and the jurisdiction in which each is
organized  or  incorporated  and  sets  forth the percentage of the outstanding
Capital Stock or other equity interests of  each  entity  that  is  held by the
Company.  Other than with respect to the entities listed on Schedule  4(a), the
Company  does  not  directly  or  indirectly  own  any  security  or beneficial
interest,  in  any other Person (including through joint venture or partnership
agreements) or have  any  interest  in  any other Person.  The Company and each
Subsidiary is duly qualified as a foreign  corporation,  or  other  entity,  as
applicable,  to  do business and is in good standing in each jurisdiction where
the nature of the  business  conducted  or  property  owned  by  it  makes such
qualification necessary, other than those jurisdictions in which the failure to
so  qualify  would  not  have  a Material Adverse Effect.  For purposes hereof,
"MATERIAL  ADVERSE  EFFECT" means  any  material  adverse  effect  on  (a)  the
condition, operations,  assets,  business  or prospects of the Company, (b) the
Company's ability to pay the Obligations in accordance with the terms hereof or
any of the Security Documents, (c) the Buyers'  lien on the accounts subject to
the Account Control Agreements or the priority of  any  such  lien,  or (d) the
practical realization of the benefits of the Buyers' rights and remedies  under
this Agreement and the Transaction Documents.

      b.    Outstanding Stock

      .  All issued and outstanding shares of Capital Stock of the Company  and
each  Subsidiary has been duly authorized and validly issued and are fully paid
and nonassessable.

      c.    Authorization; Enforcement; Validity

      .   Each of the Company and the applicable Subsidiaries has the requisite
corporate power  and  authority to enter into and perform its obligations under
each of this Agreement, the Notes, the Amended and Restated Security Agreement,
the  Account Control Agreements,  the  Pledge  Agreement,  the  Mortgages,  the
Replacement  Override  Conveyances,  the  Subsidiary  Guaranty,  the Additional
Security Documents, the Warrants and each of the other agreements  to  which it
is  a  party  or  by which it is bound and which is entered into by the parties
hereto in connection  with  the  transactions  contemplated  hereby and thereby
(collectively,  the  "TRANSACTION DOCUMENTS"), and to issue the  Securities  in
accordance with the terms  hereof  and  thereof.  The execution and delivery of
the Transaction Documents by the Company  and,  to  the  extent applicable, the
Subsidiaries  and the consummation by the Company and the Subsidiaries  of  the
transactions contemplated  hereby  and thereby have been duly authorized by the
Company's  board  of  directors and no  further  consent  or  authorization  is
required by the Company,  its  board  of  directors  or its shareholders.  This
Agreement, the Notes, the Amended and Restated Security  Agreement,  the Pledge
Agreement,  the  Subsidiary  Guaranty,  the  Warrants and the other Transaction
Documents dated prior to the date hereof or of  even  date  herewith  have been
duly  executed  and delivered by the Company and, to the extent applicable,  by
the Subsidiaries,  constitute  the valid and binding obligations of each of the
Company and the Subsidiaries that  is  a  party  thereto,  and  are enforceable
against  such  parties  in  accordance  with  their terms.  The Mortgages,  the
Account  Control  Agreements,  the  Additional  Security   Documents   and  the
Replacement Override Conveyances, when delivered in accordance with Section  2,
and  any  other  Transaction  Documents  dated  after  the  date  hereof,  when
delivered,  shall  have been duly executed and delivered by the Company and, to
the extent applicable,  by  the  Subsidiaries,  shall  constitute the valid and
binding obligations of each of the Company and the Subsidiaries that is a party
thereto, and shall be enforceable against such parties in accordance with their
terms.  As of each Additional Closing Date, the Transaction  Documents dated on
or prior to such date shall have been duly executed and delivered  by  each  of
the  Company  and,  to  the  extent  applicable,  by  the  Subsidiaries,  shall
constitute  the  valid  and  binding obligations of each of the Company and the
Subsidiaries that is a party thereto,  and  shall  be  enforceable against such
parties in accordance with their terms.

      d.    Additional Issuances

      .  There are no outstanding agreements or preemptive  or  similar  rights
affecting  the  Common  Stock  or equity and no outstanding rights, warrants or
options to acquire, or instruments  convertible  into  or  exchangeable for, or
agreements  or  understandings  with  respect to the sale or issuance  of,  any
shares of common stock or equity of the  Company,  except  as  described in the
Periodic Reports.

      e.    Consents

      .    No   consent,   approval,  authorization  or  order  of  any  court,
governmental agency or body  or arbitrator having jurisdiction over the Company
or  any  of  the Subsidiaries, or  any  of  their  respective  Affiliates,  the
Principal Market  (as defined herein), the Company's shareholders or any of the
Subsidiaries' shareholders, is required for the execution by the Company or any
Subsidiary of the Transaction  Documents  or  for compliance and performance by
the Company or any of the Subsidiaries of its obligations under the Transaction
Documents.

      f.    No Violation or Conflict

      .  The performance of the obligations of  the  Company  and  any  of  the
Subsidiaries under the Transaction Documents do not and will not:

            (i)   violate,  conflict with, result in a breach of, or constitute
a default (or an event which, with the giving of notice or the lapse of time or
both,  would be reasonably likely  to  constitute  a  default)  under  (i)  the
Articles of Incorporation of the Company (the "ARTICLES OF INCORPORATION"), the
bylaws of  the  Company  (the "BYLAWS"), or the organizational documents of any
Subsidiary, (ii) to the Company's  knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination  applicable  to the Company or any of
the  Subsidiaries  of  any  court, governmental agency or body,  or  arbitrator
having jurisdiction over the  Company  or  any  of the Subsidiaries or over the
properties or assets of the Company, any of the Subsidiaries  or  any  of their
respective Affiliates, including environmental and safety laws, (iii) the terms
of  any  bond,  debenture,  note  or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which  the  Company, any of the Subsidiaries or
any of their respective Affiliates is a party, by which the Company, any of the
Subsidiaries or any of their respective Affiliates is bound, or to which any of
the  properties  of  the  Company,  any of the Subsidiaries  or  any  of  their
respective Affiliates is subject, or (iv) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company, any of
the Subsidiaries or any of their respective Affiliates is a party; or

            (ii)  except as contemplated  hereby,  result  in  the  creation or
imposition  of  any lien, charge or encumbrance upon any of the assets  of  the
Company, any of the Subsidiaries or any of their respective Affiliates; or

            (iii) result  in  the  activation  of any anti-dilution rights or a
reset or repricing of any debt or security instrument of any creditor or equity
holder of the Company or any of the Subsidiaries; or

            (iv)      result  in  the acceleration  of  the  due  date  of  any
obligation of the Company or any of the Subsidiaries.

      g.    The Securities

      .  The Securities, upon issuance:

            (i)   are and will be,  free  and  clear of any security interests,
liens, claims or other encumbrances;

            (ii)  have been, or will be, duly and validly authorized;

            (iii) will  not  have  been  issued or sold  in  violation  of  any
preemptive or other similar rights of the  holders of any securities or debt of
the Company; and

            (iv)  will not subject the holders thereof to personal liability by
reason of being such holders.

      h.    Litigation

      .   There  is  no  pending  or, to the best  knowledge  of  the  Company,
threatened  action,  suit,  proceeding   or  investigation  before  any  court,
governmental  agency  or  body,  or arbitrator  having  jurisdiction  over  the
Company, or any of its Affiliates  that  would  affect  the  execution  by  the
Company  or  any  of the Subsidiaries of, or the performance by the Company, or
any of the Subsidiaries  of their respective obligations under, the Transaction
Documents. Except as disclosed in the Periodic Reports, there is no pending or,
to the best knowledge of the  Company,  basis  for  or threatened action, suit,
proceeding or investigation before any court, governmental  agency  or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would have a Material Adverse Effect.

      i.    Reporting Company

      .   The  Company  is  a  publicly-held  company, subject to the reporting
obligation pursuant to Section 13 and/or 15(d)  of  the Securities Exchange Act
of 1934 (the "1934 ACT"), and has a class of common shares reported pursuant to
Section 12(b) of the 1934 Act.  Pursuant to the provisions of the 1934 Act, the
Company has timely filed all reports and other materials  required  to be filed
thereunder with the SEC during the preceding twelve (12) months.

      j.    Information Concerning Company

      .   As  of  their  respective  dates,  the Periodic Reports filed by  the
Company prior to the date this representation  is  made  contained all material
information relating to the Company and its operations and  financial condition
that  was required to be disclosed therein. As of their respective  dates,  the
Periodic  Reports  and other reports, schedules, forms, registration statements
and other documents  filed  by  the Company with the SEC prior to the date this
representation is made, including  the  financial statements contained therein,
did not contain any untrue statement of a  material  fact  or  omit  to state a
material fact required to be stated therein or necessary to make the statements
therein  not  misleading in light of the circumstances when made.  As of  their
respective dates,  the consolidated financial statements of the Company and the
Subsidiaries included in the Periodic Reports filed by the Company prior to the
date this representation  is  made complied as to form in all material respects
with applicable accounting requirements  and  the  securities laws with respect
thereto,  such  consolidated  financial  statements  have   been   prepared  in
accordance with generally accepted accounting principles ("GAAP"), consistently
applied, during the periods involved (except (i) as may be otherwise  indicated
in  such  financial  statements  or  the notes thereto, or (ii) in the case  of
unaudited interim statements, to the extent they may have excluded footnotes or
may have been condensed or summary statements)  and  fairly  presented  in  all
material respects the financial position of the Company and the Subsidiaries as
of the dates thereof and the results of their operations and cash flows for the
periods  then  ended  (subject,  in the case of unaudited statements, to normal
year-end  audit adjustments that were  not  material  individually  or  in  the
aggregate).   Since  the  date of the most recent balance sheet included in the
Periodic Reports (the "LATEST  FINANCIAL  DATE"),  there  has  been no Material
Adverse  Effect  relating  to  the  Company's business, financial condition  or
affairs not disclosed in the Periodic Reports.

      k.    Defaults

      .  The Company is not in violation  of  the  Articles of Incorporation or
Bylaws  and  no Subsidiary is in violation of the organizational  documents  of
such Subsidiary.  The Company, and each Subsidiary, is (a) not in default under
or in violation  of any other material agreement or instrument to which it is a
party or by which  it  or  any  of  its properties are bound or affected, which
default or violation would have a Material  Adverse  Effect, (b) not in default
with  respect  to any order of any court, arbitrator or  governmental  body  or
subject to or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters,
and (c) to the Company's  knowledge,  not  in violation of any statute, rule or
regulation of any governmental authority, which violation would have a Material
Adverse Effect.

      l.    Listing

      .  The Common Stock is currently listed  on the NASDAQ Global Market (the
"PRINCIPAL  MARKET"; however, if the Common Stock  becomes  listed  on  another
national securities  exchange  after the Amendment Date, the "PRINCIPAL MARKET"
shall  mean such exchange) under  the  symbol  "STXX."   The  Company  has  not
received  any oral or written notice that the Common Stock is not eligible, nor
that it will become ineligible for listing on the Principal Market nor that the
Common Stock  does  not  meet  all  requirements  for  the continuation of such
listing.  The Company satisfies all the requirements for  the continued listing
of the Common Stock on the Principal Market.

      m.    No Undisclosed Liabilities

      .   The  Company  has no liabilities or obligations which  are  material,
individually or in the aggregate,  that  are  not  disclosed  in  the  Periodic
Reports,  other  than  those  incurred  in the ordinary course of the Company's
businesses since the Latest Financial Date  or  that,  individually  or  in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

      n.    No Undisclosed Events or Circumstances

      .  Since the Latest Financial Date, no event or circumstance has occurred
or exists with respect to the Company or its businesses, properties, operations
or  financial  condition,  that,  under  applicable  law,  rule  or regulation,
requires   public   disclosure   or   announcement   prior  to  the  date  this
representation  is  made  by the Company, but which has not  been  so  publicly
announced or disclosed in the Public Reports.

      o.    Capitalization

      .  The authorized and  outstanding Capital Stock of the Company as of the
date this representation is made is set forth in the Periodic Reports.   Except
as set forth in the Periodic Reports, there are no options, warrants, or rights
to  subscribe  to,  securities,  rights  or  obligations  convertible  into  or
exchangeable for or giving any right  to  subscribe  for  any shares of Capital
Stock of the Company or any of the Subsidiaries. All of the  outstanding shares
of Common Stock have been duly and validly authorized and issued  and are fully
paid and nonassessable.

      p.    No Disagreements with Accountants and Lawyers

      .   There  are  no  disagreements  of  any  kind  presently existing,  or
reasonably  anticipated by the Company to arise, between the  Company  and  the
accountants  and  lawyers  formerly  or  presently  employed  by  the  Company,
including but  not  limited  to disputes or conflicts over payment owed to such
accountants and lawyers, nor have there been any such agreements during the two
years prior to the date this representation is made.

      q.    DTC Status

      .  The Company's transfer agent is a participant in, and the Common Stock
is eligible for transfer pursuant  to, the Depository Trust Company's Automated
Securities Transfer Program.

      r.    Investment Company

      .   Neither the Company nor any  Affiliate  is  an  "investment  company"
within the meaning of the Investment Company Act of 1940, as amended.

      s.    No General Solicitation

      .  Neither  the Company, nor any of its Affiliates, nor any Person acting
on the behalf of any  of  the foregoing, has engaged or will engage in any form
of  general  solicitation  or   general  advertising  (within  the  meaning  of
Regulation D under the 1933 Act),  including advertisements, articles, notices,
or other communications published in  any  newspaper, magazine or similar media
or broadcast over radio, television or internet  or  any  seminar meeting whose
attendees have been invited by general solicitation or general  advertising, in
connection  with  the  offer  or  sale  of  the  Securities.   As used in  this
Agreement, "AFFILIATE" means, with respect to any Person, a second  Person  (A)
in  which  the first Person owns a 5% equity interest, or (B) that, directly or
indirectly,  (i) has  a  5%  equity  interest  in such first Person, (ii) has a
common ownership with such first Person, (iii) controls such first Person, (iv)
is controlled by such first Person or (v) shares  or  is  under  common control
with such first Person; and "Control" or "controls" means that a Person has the
power, direct or indirect, to conduct or govern the policies of another Person.

      t.    No Integrated Offering

      .   Neither  the  Company  nor  any  Subsidiary,  any  Affiliates of  the
foregoing  or  any  Person  acting on the behalf of any of the foregoing,  has,
directly or indirectly, made  any offers or sales of any security, or solicited
any offers to purchase any security,  under  circumstances  that  would require
registration of any of the Securities under the 1933 Act or cause this offering
of  the  Securities  to  be integrated with prior offerings by the Company  for
purposes of the 1933 Act or any applicable stockholder approval requirements of
the Principal Market or of  any  other  authority,  nor  will  the Company, any
Subsidiary  or  any Person acting on behalf of any of the foregoing,  take  any
action or steps that  would  require registration of the issuance of any of the
Securities under the 1933 Act  or  cause  the  offering of the Securities to be
integrated with other offerings for purposes of  the 1933 Act or any applicable
stockholder  approval requirements of the Principal  Market  or  of  any  other
authority.  The  issuance  by  the  Company  of  the  Securities is exempt from
registration under the 1933 Act and applicable state securities laws.

      u.    Tax Status

      .  Neither the Company nor any of the Subsidiaries  is,  or  after giving
effect  to  the  purchases  and  the  other  transactions  contemplated by this
Agreement  and the other Transaction Documents will be, a "United  States  real
property holding  corporation"  ("USRPHC")  as  that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as  amended,  and  the Treasury
Regulations promulgated thereunder.

      v.    Replacement Override Conveyances

      .   The Replacement Override Conveyances, upon execution and delivery  by
the  parties  thereto,  (i)  will  legally  and  effectively  convey  perpetual
overriding  royalty  interests  in  the  Hydrocarbon  production  in all of the
Current  Override Properties, in the percentages and as otherwise described  in
such conveyances, in each of the respective jurisdictions in which such Current
Override Property  is  located, and (ii) will provide legal descriptions of the
Subject Lands (as defined  in  each  of  the  Replacement Override Conveyances)
sufficient to satisfy all requirements relating to such descriptions in each of
such jurisdictions.

      w.    Outstanding Indebtedness; Liens

      .  Payments of principal and other payments  due  under  the  outstanding
Notes  will  rank  senior  to  all Indebtedness of the Company (other than  the
obligations evidenced by the Diversity  Note)  and,  by virtue of their secured
position and to the extent of the Collateral, to all trade  account payables of
the Company, and the obligations of the Subsidiaries under the  Guarantees will
at all times rank senior to all other Indebtedness of the Subsidiaries  and, by
virtue  of  the  secured  position  of  the Guarantees and to the extent of the
Collateral, to all trade account payables  of any of the Subsidiaries.  Neither
the Company nor any of the Subsidiaries has  any,  and upon consummation of the
transactions  contemplated hereby and by the other Transaction  Documents  will
not have any, outstanding Indebtedness, except for the obligations evidenced by
the Notes, and  by  the Diversity Note, for the Leexus Additional Consideration
Obligation, and for any  other  Permitted  Indebtedness  (as defined in Section
6(f)  hereof).   There  are  no,  and  upon  consummation  of the  transactions
contemplated hereby and by the other Transaction Documents there  will  not  be
any,  Liens on any of the assets of the Company or the Subsidiaries, except for
Permitted  Liens.   There  are  no,  and  upon consummation of the transactions
contemplated hereby and by the other Transaction  Documents  there  will not be
any, financing statements securing obligations of any amounts filed against the
Company  or  any  of the Subsidiaries or any of their respective assets,  other
than pursuant to the  Amended  and  Restated  Security Agreement.  For purposes
hereof,  "INDEBTEDNESS"  of  any  Person means, without  duplication:  (i)  all
indebtedness for borrowed money; (ii)  all  obligations  issued,  undertaken or
assumed  as  the  deferred  purchase price of property or services (other  than
unsecured account trade payables  that  are (A) entered into or incurred in the
ordinary  course  of the Company's and the  Subsidiaries'  business,  including
those that arise under  standard  industry  joint  operating agreements, (B) on
terms that require full payment within ninety (90) days  from  the date entered
into or incurred and (C) not unpaid in excess of ninety (90) days from the date
entered into or incurred, or are being contested in good faith and  as to which
such reserve as is required by GAAP has been made); (iii) all reimbursement  or
payment  obligations  with respect to letters of credit, surety bonds and other
similar  instruments;  (iv)   all   obligations   evidenced  by  notes,  bonds,
debentures,   redeemable  capital  stock  or  similar  instruments,   including
obligations so  evidenced  incurred  in  connection  with  the  acquisition  of
property,  assets  or businesses; (v) all indebtedness created or arising under
any conditional sale  or  other  title  retention  agreement,  or  incurred  as
financing,  in either case with respect to any property or assets acquired with
the proceeds  of  such indebtedness (even though the rights and remedies of the
seller, bank or other  financing  source  under  such agreement in the event of
default are limited to repossession or sale of such property); (vi) all Capital
Lease Obligations; (vii) all indebtedness referred  to  in  clauses (i) through
(vi)  above  secured  by (or for which the holder of such indebtedness  has  an
existing right, contingent  or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest  or other encumbrance upon or in any property
or assets (including accounts and contract  rights)  owned  by any Person, even
though the Person that owns such assets or property has not assumed  or  become
liable  for  the  payment  of  such  indebtedness;  and  (viii)  all Contingent
Obligations  in respect of indebtedness or obligations of others of  the  kinds
referred to in  clauses  (i)  through  (vii)  above, "CAPITAL LEASE OBLIGATION"
means, as to any Person, any obligation that is  required  to be classified and
accounted for as a capital lease on a balance sheet of such  Person prepared in
accordance  with  GAAP;  "CONTINGENT OBLIGATION" means, as to any  Person,  any
direct or indirect liability,  contingent  or  otherwise,  of  such Person with
respect  to  any indebtedness, lease, dividend or other obligation  of  another
Person if a primary  purpose  or intent of the Person incurring such liability,
or a primary effect thereof, is  to  provide  assurance  to the obligee of such
liability  that  such  liability  will  be  paid  or discharged,  or  that  any
agreements relating thereto will be complied with,  or that the holders of such
liability  will be protected (in whole or in part) against  loss  with  respect
thereto; "DIVERSITY  NOTE"  means that certain Promissory Note, dated September
24, 2007, in the principal amount  of  $1,500,000  (as in effect on the date of
its original issuance, without any waiver, amendment,  supplement,  restatement
or  other  modification  thereof  after  such  date), issued by the Company  to
Diversity Petroleum, L.P. ("DIVERSITY"), pursuant  to that certain Purchase and
Sale  Agreement,  dated  as  of September 25, 2007, among  STO  Properties  LLC
("STO"), a Texas limited liability  company  and wholly-owned subsidiary of the
Company, Diversity and the other parties thereto  (collectively with Diversity,
the "SELLERS"), whereby STO purchased certain assets of the Sellers; "DIVERSITY
SECURITY INTEREST" means the first priority security interest granted by STO in
favor of Sellers, pursuant to that certain Deed of  Trust,  Security  Agreement
and  UCC  Financing  Statement  for  Fixture  Filing, dated September 25, 2007,
between STO and Charles D. Perez, as Trustee for the benefit of the Sellers, in
STO's  right  title,  interest, privileges and options  in  the  real  property
subject to the leases set  forth on Exhibit B to the Deed of Trust, as security
for the performance by STO of its obligations under the Diversity Note (as such
security interest was in effect  on  the date of its grant, without any waiver,
amendment, supplement, restatement or  other  modification  thereof  after such
date);  and  "LEEXUS  ADDITIONAL  CONSIDERATION OBLIGATION" means the Company's
obligation under that certain Agreement  and  Plan of Merger, dated as of March
7,  2007  (the "LEEXUS MERGER AGREEMENT"), by and  among  the  Company,  Leexus
Operating Company,  Leexus  Properties Corp. ("LEEXUS") and the shareholders of
Leexus (the "LEEXUS SHAREHOLDERS")  (as  such  agreement  was  in effect on the
original  date thereof, without any waiver, amendment, supplement,  restatement
or other modification  after  such  date),  to pay Additional Consideration (as
defined in the Leexus Merger Agreement) to the Leexus Shareholders pursuant to,
and subject to the terms and conditions set forth  in, Section IV of the Leexus
Merger Agreement.

5.    AFFIRMATIVE COVENANTS.

      a.    Reasonable Best Efforts

      .   Each party shall use its reasonable best efforts  to  timely  satisfy
each of the conditions to be satisfied by it as provided in Sections 8 and 9 of
this Agreement.

      b.    Form D and Blue Sky

      .  The  Company  agrees  to  timely  file  a  Form D  with respect to the
Securities as required under Regulation D and to provide a copy  thereof to the
Buyers  promptly  after  such  filing.   The  Company shall, on or before  each
Additional  Closing  Dates, take such action as the  Company  shall  reasonably
determine is necessary  in  order  to  timely  obtain  an  exemption for, or to
qualify  the  Securities  for,  issuance  to the Buyers on any such  Additional
Closing Date pursuant to this Agreement under  applicable  securities  or "Blue
Sky"  laws  of the states of the United States, and shall provide to the Buyers
evidence of any such action so taken on or prior to any such Additional Closing
Date.  The Company shall make all filings and reports relating to the offer and
sale of the Securities  required under applicable securities or "Blue Sky" laws
of the states of the United States following such Additional Closing Date.

      c.    Reporting Status

      .  Until the latest  of  (i)  the  first  date  on  which no Notes remain
outstanding, (ii) the date on which the Amended and Restated Security Agreement
has  terminated,  (iii) the first date that is the last day of  the  Additional
Note Issuance Period,  and  (iv) the date on which the Buyers no longer own any
Securities (the period ending on such latest date, the "REPORTING PERIOD"), the
Company shall timely file all  reports  required  to  be  filed  with  the  SEC
pursuant  to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act, even if the securities laws
would otherwise permit such termination.

      d.    Use of Proceeds

      .  The  Company  will  use  the  proceeds from the sale of any Additional
Notes:  for general working capital needs.

      e.    Financial Information of the Company

      .  The Company agrees to send the  following  to  each  Buyer  during the
Reporting Period (i) unless the following are filed with the SEC through  EDGAR
and  are  immediately  available to the public through the EDGAR system, within
one (1) Business Day after  the  filing thereof with the SEC, a copy of each of
its Periodic Reports, Current Reports  on  Form  8-K,  registration  statements
(other  than  on  Form  S-8)  and  amendments  and  supplements  to each of the
foregoing,  (ii)  unless  immediately  available  through  Bloomberg  Financial
Markets  (or  any  successor  thereto),  facsimile copies of all press releases
issued by the Company or any of the Subsidiaries,  contemporaneously  with  the
issuance  thereof,  and  (iii) copies of any notices and other information made
available   or  given  to  the   shareholders   of   the   Company   generally,
contemporaneously with making available or giving same to the shareholders.

      f.    Internal Accounting Controls

      .  During  the  Reporting Period, the Company shall, and shall cause each
of the Subsidiaries to  (i)  at all times keep books, records and accounts with
respect to all of such Person's  business  activities, in accordance with sound
accounting practices and GAAP consistently applied,  (ii)  maintain a system of
internal  accounting controls sufficient to provide reasonable  assurance  that
(A) transactions  are  executed  in  accordance  with  management's  general or
specific  authorizations, (B) transactions are recorded as necessary to  permit
preparation  of  financial  statements  in conformity with GAAP and to maintain
asset  and liability accountability, (C) access  to  assets  or  incurrence  of
liability is permitted only in accordance with management's general or specific
authorization and (D) the recorded accountability for assets and liabilities is
compared  with  the existing assets and liabilities at reasonable intervals and
appropriate action  is taken with respect to any differences, (iii) timely file
and make publicly available  on  the SEC's EDGAR system, all certifications and
statements required by (M) Rule 13a-14  or  Rule  15d-14 under the 1934 Act and
(N)  Section  906  of  Sarbanes  Oxley, (iv) maintain disclosure  controls  and
procedures, as required by Rule 13a-15  or  Rule  15d-15  under  the  1934 Act,
designed  to provide reasonable assurance that the information required  to  be
disclosed by  the  Company  in the reports that it files with or submits to the
SEC (X) is recorded, processed,  summarized  and reported accurately within the
time periods specified in the SEC's rules and  forms and (Y) is accumulated and
communicated  to the Company's management, including  its  principal  executive
officer and its  principal  financial  officer,  as appropriate to allow timely
decisions regarding required disclosure, and (v) maintain internal control over
financial reporting, as required by Rule 13a-14 or  Rule  15d-14 under the 1934
Act.

      g.    Listing

      .  The Company shall take all actions necessary to cause the Common Stock
to remain listed on the Principal Market at all times hereafter.   The  Company
shall  not,  and  shall  cause each of the Subsidiaries not to, take any action
that would be reasonably expected  to  result in the delisting or suspension or
termination  of  trading of the Common Stock  on  the  Principal  Market.   The
Company shall pay  all  fees  and  expenses  in  connection with satisfying its
obligations under this Section 5(g).

      h.    Expenses

      .   Subject to Section 12(k) below, on the Amendment  Date  and  on  each
Additional  Closing  Date,  the  Company  shall  pay each Buyer a reimbursement
amount  equal to all of such Buyer's legal, due diligence  and  other  expenses
incurred  in  connection  with  this  Agreement and any such Additional Closing
Date,  including,  without  limitation,  fees   and   expenses   of  attorneys,
investigative  and  other  consultants and travel costs and all other  expenses
relating  to  negotiating  and   preparing   the   Transaction   Documents  and
consummating  the transactions contemplated hereby and thereby.  The  aggregate
amount payable  to the Buyers pursuant to the preceding sentence, to the extent
such costs and expenses  remain  outstanding as of any Additional Closing Date,
shall be withheld as an off-set by  the  Buyers  from  its  Additional Purchase
Price  to  be  paid  by  it  at  such  closing.  Additionally, at each  closing
occurring on any such Additional Closing Date, the Company shall pay all of its
own legal, due diligence and other expenses,  including  fees  and  expenses of
attorneys,  investigative and other consultants and travel costs and all  other
expenses, relating  to  negotiating and preparing the Transaction Documents and
consummating the transactions contemplated thereby.  In addition to the fee and
reimbursement obligations  of  the  Company  set forth in above in this Section
5(h), and not in limitation thereof, following  the Amendment Date, the Company
shall promptly reimburse each Buyer, each holder  of  Notes, and the Collateral
Agent for all of the respective out-of-pocket fees, costs and expenses incurred
thereby  in  connection  with  any amendment, modification,  administration  or
waiver of any of the terms of this  Agreement or the Transaction Documents, the
enforcement of such Person's rights and remedies under this Agreement or any of
the Transaction Documents, including all efforts made to enforce payment of any
of  the  Obligations,  and/or  any  institution,   maintenance,   preservation,
enforcement,  foreclosure,  release, termination, amendment or modification  of
any mortgage, lien or other security  interest  of  such Buyer or holder or the
Collateral  Agent  in  any of the Collateral (as defined  in  the  Amended  and
Restated  Security  Agreement),   whether   through   judicial  proceedings  or
otherwise.

      i.    Disclosure of Transactions and Other Material Information.

            (i)   Not later than 5:30 p.m. (New York City  time)  on the fourth
(4th) Business Day following the execution and delivery of this Agreement,  the
Company  shall file the Announcing Form 8-K with the SEC.  The "ANNOUNCING FORM
8-K" (A) shall  describe  the terms of this Agreement and the other Transaction
Documents and the transactions  contemplated  hereby  and  thereby,  (B)  shall
include,  as exhibits to such Form 8-K, this Agreement (including the schedules
hereto), the  Initial  Notes,  the  form  of  Additional  Note, the Amended and
Restated Security Agreement, the Subsidiary Guaranty, the Pledge Agreement, the
form  of Mortgage, the form of Account Control Agreement, and  the  Replacement
Override  Conveyances,  and (C) shall include any other information required to
be disclosed therein pursuant to any securities laws or other Laws.  As used in
this Agreement, "LAWS" means  all  present  or  future  federal, state local or
foreign laws, statutes, common law duties, rules, regulations,  ordinances  and
codes, together with all administrative or judicial orders, consent agreements,
directed  duties,  requests,  licenses,  authorizations  and  permits  of,  and
agreements with, any Governmental Entity.

            (ii)  No  later  than  8:00  a.m. (New York City time) on the first
(1st) Business Day following each Additional  Closing  Date,  the Company shall
file a Form 8-K with the SEC describing the terms of the transactions  proposed
or  consummated (as the case may be) in connection with such Additional Closing
Date, and the representations and schedules required by Section 9(c) (each such
Form 8-K, an "ADDITIONAL CLOSING FORM 8-K").

            (iii) Subject  to  the  agreements  and covenants set forth in this
Section  5(i),  the Company shall not issue any press  releases  or  any  other
public statements  with  respect  to  the  transactions  contemplated hereby or
disclosing the name of any Buyer; provided, however, that  the Company shall be
entitled,  without  the  prior  approval of any such Buyer, to make  any  press
release or other public disclosure  with  respect  to  such transactions (A) in
substantial  conformity with the Announcing Form 8-K or an  Additional  Closing
Form 8-K and contemporaneously  therewith  and (B) as is required by applicable
Law,  including  as  is  required by Form 8-K or  any  successor  form  thereto
(provided that any such Buyer  shall  be consulted by the Company in connection
with any such press release or other public disclosure prior to its release and
shall be provided with a copy thereof upon request).

            (iv)  The Company represents,  warrants and covenants to the Buyers
that,  from  and  after the filing of the Announcing  Form  8-K  with  the  SEC
(subject to Section  5(m)),  no  Buyer  shall  be in possession of any material
nonpublic information received from the Company, any of the Subsidiaries or any
of their respective officers, directors, employees  or agents.  Notwithstanding
any provision herein to the contrary, the Company shall  not,  and  shall cause
each  of  the  Subsidiaries  and  its  and  each  of their respective officers,
directors, employees and agents not to, provide any  Buyer  with  any  material
nonpublic information regarding the Company or any of the Subsidiaries from and
after  the  filing of the Announcing Form 8-K with the SEC, without the express
prior written consent of the Buyers.  In the event of a breach of the foregoing
covenant by the  Company,  any  of  the  Subsidiaries,  or  any of its or their
respective officers, directors, employees and agents, in addition  to any other
remedy  provided herein or in the Transaction Documents, the Buyers shall  have
the right  to  make  a public disclosure in the form of a press release, public
advertisement or otherwise,  of such material nonpublic information without the
prior approval by the Company,  the  Subsidiaries,  or  any  of  its  or  their
respective officers, directors, employees or agents.  The Buyers shall not have
any  liability  to  the Company, any of the Subsidiaries or any of its or their
respective officers,  directors, employees, shareholders or agents for any such
disclosure.  Notwithstanding anything to the contrary herein, in the event that
the Company believes that  a  notice  or  communication  to  any Buyer contains
material,  nonpublic  information  relating  to  the  Company  or  any  of  the
Subsidiaries,  the  Company  shall  so indicate to the Buyers contemporaneously
with  delivery  of  such notice or communication,  and  such  indication  shall
provide the Buyers the means to refuse to receive such notice or communication;
and in the absence of  any such indication, the holders of the Securities shall
be allowed to presume that all matters relating to such notice or communication
do not constitute material,  nonpublic  information  relating to the Company or
any of the Subsidiaries.  Upon receipt or delivery by the Company or any of the
Subsidiaries  of  any notice in accordance with the terms  of  the  Transaction
Documents, unless the  Company  has  in  good faith determined that the matters
relating  to  such  notice do not constitute  material,  nonpublic  information
relating to the Company  or  the  Subsidiaries,  the  Company  shall within one
Business  Day  after  any  such  receipt  or  delivery  publicly disclose  such
material, nonpublic information.

      j.    Pledge of Securities

      .  The Company acknowledges and agrees that the Securities  of the Buyers
may  be  pledged by any Buyer or its transferees (each, including each  of  the
Buyers, an "INVESTOR") in connection with a bona fide margin agreement or other
loan secured  by  the Securities.  The pledge of Securities shall not be deemed
to be a transfer, sale  or  assignment  of  the  Securities  hereunder,  and no
Investor  effecting  any such pledge of Securities shall be required to provide
the Company with any notice  thereof  or  otherwise  make  any  delivery to the
Company pursuant to this Agreement or any other Transaction Document, including
Section  3(f)  of  this  Agreement.   The Company hereby agrees to execute  and
deliver  such  documentation as a pledgee  of  the  Securities  may  reasonably
request in connection  with  a  pledge  of the Securities to such pledgee by an
Investor.

      k.    Notices

      .  From the date of this Agreement  until the latest of (X) the date that
is the last day of the Additional Note Issuance  Period,  (Y) the first date on
which no Notes remain outstanding, and (Z) the date on which  the  Amended  and
Restated  Security  Agreement  has terminated (the period ending on such latest
date, the "SECURITY PERIOD").

            (i)   Locations.  Promptly (but in no event less than ten (10) days
prior to the occurrence thereof)  notify  the Buyers of the proposed opening of
any new place of business or new location of  Collateral  (as  defined  in  the
Amended  and Restated Security Agreement), the closing of any existing place of
business or location of Collateral, any change in the location of such Person's
books, records  and accounts (or copies thereof), the opening or closing of any
post office box,  the  opening or closing of any bank account or, if any of the
Collateral consists of Goods  (as  defined in the Amended and Restated Security
Agreement) of a type normally used in  more than one state, the use of any such
Goods  in any state other than a state in  which  such  Person  has  previously
advised the Buyers that such Goods will be used.

            (ii)  Names  and  Trade Names.  Notify the Buyers in writing (i) at
least thirty (30) days in advance of any change in such Person's legal name and
(ii) within ten (10) days of the  change  of the use of any trade name, assumed
name, fictitious name or division name not  previously  disclosed to the Buyers
in writing.

            (iii) ERISA  Matters.   Promptly  notify  the  Buyers  of  (x)  the
occurrence  of  any  "reportable event" (as defined in the Employee  Retirement
Income Security Act of  1974,  as amended ("ERISA")), which might result in the
termination by the Pension Benefit  Guaranty  Corporation  (the  "PBGC") of any
employee  benefit  plan  ("PLAN")  covering any officers or employees  of  such
Person, any benefits of which are, or  are  required  to  be, guaranteed by the
PBGC,  (y)  receipt  of  any  notice  from  the PBGC of its intention  to  seek
termination  of  any  Plan  or appointment of a trustee  therefor  or  (z)  its
intention to terminate or withdraw from any Plan.

            (iv)  Environmental  Matters.   Immediately  notify the Buyers upon
becoming aware of any investigation, proceeding, complaint,  order,  directive,
claim,  citation or notice with respect to any non-compliance with or violation
of the requirements  of any Environmental Law by such Person or the generation,
use, storage, treatment,  transportation,  manufacture, handling, production or
disposal of any Hazardous Materials in violation  of  the  requirements  of any
Environmental  Law  or  any  other environmental, health or safety matter which
affects such Person or its business  operations  or assets or any properties at
which  such  Person  has  transported,  stored  or disposed  of  any  Hazardous
Materials, unless the foregoing could not reasonably  be  expected  to  have  a
Material Adverse Effect.

            (v)   Default; Material Adverse Effect.  Promptly advise the Buyers
of any material adverse change in the business, property, assets, operations or
financial  condition  of such Person, any other Material Adverse Effect, or the
occurrence of any Event  of Default (as defined in the Notes) or the occurrence
of any event which, if uncured, will become an Event of Default after notice or
lapse of time (or both).

All of the foregoing notices shall be provided by the Company or the applicable
Subsidiary to the Buyers in writing.

      l.    Compliance with Laws and Maintenance of Permits

      .  During the Reporting  Period,  the Company shall, and shall cause each
of  the  Subsidiaries  to,  maintain  all  governmental  consents,  franchises,
certificates, licenses, authorizations, approvals  and  permits,  the  lack  of
which  would  reasonably  be  expected to have a Material Adverse Effect and to
remain  in compliance with all Laws  (including  Environmental  Laws  and  Laws
relating  to  taxes,  employer  and  employee  contributions and similar items,
securities, ERISA or employee health and safety)  the  failure  with  which  to
comply would have a Material Adverse Effect on such Person.

      m.    Inspection and Audits

      .  During the Reporting Period and subject to each Buyer's execution of a
confidentiality  agreement reasonably acceptable to the Company with respect to
the information provided  pursuant  to  Sections  5(m)(i)  and 5(m)(ii) hereto,
which  execution shall constitute a waiver, with respect to any  material  non-
public information  regarding the Company and the Subsidiaries provided to such
Buyer  directly  in  response   to  such  Buyer's  request  hereunder,  of  the
restriction  herein on the Company's  disclosure  to  such  Buyer  of  material
nonpublic information:

            (i)         The   Company  shall,  and  shall  cause  each  of  the
Subsidiaries  to, permit each Buyer  (and  each  Buyer's  designees),  at  such
Buyer's own expense,  to  call at the  places of business of the Company and of
each of the Subsidiaries at  any reasonable times, and, upon reasonable advance
notice, to inspect, examine and  audit  the  Collateral  and to inspect, audit,
check  and make extracts from such Person's books, records,  journals,  orders,
receipts  and  any  correspondence and other data relating to the Collateral or
any transactions between  the  parties hereto, and each Buyer (and each Buyer's
designees)  shall have the right  to  make  such  verification  concerning  the
Pledged Collateral  or  the  Account  Collateral  as  such  Buyer  may consider
reasonable under the circumstances; and

            (ii)        Notwithstanding  anything to the contrary herein,  upon
written request to the Company by any Buyer, the Company shall promptly provide
such Buyer (or its designee) with any financial,  operating  or  other  type of
information  requested  by  such  Buyer  to  the  extent  that it is reasonably
available  or  can be developed without significant effort or  expense  to  the
Company

      n.    Insurance

      .  During  the  Security Period, the Company shall, and the Company shall
cause each of the Subsidiaries to:

            (i)   Keep  the Collateral properly housed (to the extent possible)
and insured for the full  insurable  value  thereof  against  loss or damage by
fire,  theft, explosion, sprinklers, collision (in the case of motor  vehicles)
and such  other  risks  with companies that regularly insure Persons engaged in
businesses similar to that  of  such  Person,  such  coverage  and the premiums
payable  in  respect  thereof  to  be  acceptable  in scope and amount  to  the
Collateral Agent.  Original (or certified) copies of such policies of insurance
have  been or shall be, no later than ten (10) days prior  to  each  Additional
Closing Date, delivered to the Buyers, together with evidence of payment of all
premiums  therefor,  and  shall  contain  an endorsement, in form and substance
reasonably acceptable to Collateral Agent,  showing  loss  under such insurance
policies  payable  to  Collateral Agent.  Such endorsement, or  an  independent
instrument furnished to  the Collateral Agent, shall provide that the insurance
company shall give the Collateral  Agent  at  least  thirty  (30)  days'  prior
written  notice  before any such policy of insurance is altered or canceled and
that no act, whether  willful  or  negligent,  or default of the Company or the
applicable  Subsidiary  or  any other Person shall  affect  the  right  of  the
Collateral Agent to recover under  such  policy of insurance in case of loss or
damage.  In addition, the Company or the applicable  Subsidiary  shall cause to
be executed and delivered to the Collateral Agent an assignment of  proceeds of
its business interruption insurance policies (if any).

            (ii)  Maintain,  at  its  expense, such public liability and  third
party property damage insurance with companies  that  regularly  insure Persons
engaged  in  businesses similar to that of such Person, such coverage  and  the
premiums payable in respect thereof to be acceptable in scope and amount to the
Collateral Agent.  Original (or certified) copies of such policies have been or
shall be, no later  than  ten  (10) days after the Amendment Date, delivered to
the Buyers, together with evidence  of  payment  of all premiums therefor; each
such policy shall contain an endorsement showing the  Collateral  Agent  as  an
additional  insured  thereunder  and providing that the insurance company shall
give Collateral Agent at least thirty  (30) days written notice before any such
policy shall be altered or canceled.

            (iii) If the Company or any  of  the  Subsidiaries  at  any time or
times  hereafter  shall  fail  to  obtain  or  maintain any of the policies  of
insurance required above or to pay any premium relating  thereto,  the  Buyers,
without  waiving  or  releasing  any  obligation  or  default  by  the  Company
hereunder,  may (but shall be under no obligation to) obtain and maintain  such
policies of insurance  and  pay  such premiums and take such other actions with
respect thereto as the Buyers deems  advisable.  Such insurance, if obtained by
the Buyers, may, but need not, protect  the  interests  of  the Company and the
Subsidiaries  or  pay  any  claim  made  by  or  against  the Company  and  the
Subsidiaries  with  respect  to  the Collateral.  Such insurance  may  be  more
expensive than the cost of insurance  the  Company  and the Subsidiaries may be
able to obtain on their own and may be cancelled only  upon the Company and the
Subsidiaries'  providing  evidence  that they have obtained  the  insurance  as
required above.  All sums disbursed by  the  Buyers in connection with any such
actions, including court costs, expenses, other  charges  relating  thereto and
reasonable  attorneys'  fees,  shall  constitute  Indebtedness under the Notes,
shall be payable on demand by the Company to the Buyers  and, until paid, shall
bear interest at the highest rate then applicable to principal under the Notes.

      o.    Collateral

      .   During the Security Period, the Company shall, and  shall  cause  the
Subsidiaries  to,  maintain  the Collateral in good condition, repair and order
and shall make all necessary repairs  to  the  Equipment  (as  defined  in  the
Amended  and  Restated Security Agreement) and replacements thereof so that the
operating efficiency  and the value thereof shall at all times be preserved and
maintained, subject to normal wear and tear after the Amendment Date.

      p.    Taxes

      .  During the Security  Period,  the Company shall, and the Company shall
cause each of the Subsidiaries to, file all required tax returns and pay all of
its taxes (including taxes imposed by federal,  state  or  municipal  agencies)
when due, subject to any extensions granted by the applicable taxing authority,
and shall cause any Liens for taxes to be promptly released; provided, however,
that a Person shall have the right to contest the payment of such taxes in good
faith  by  appropriate  proceedings  so long as (i) the amount so contested  is
shown on such Person's financial statements;  (ii) the  contesting  of any such
payment  does  not  give  rise to a Lien for taxes; (iii) such Person keeps  on
deposit with the Collateral Agent (such deposit to be held without interest) an
amount  of money which, in the  sole  judgment  of  the  Collateral  Agent,  is
sufficient  to  pay  such  taxes  and any interest or penalties that may accrue
thereon;  and  (iv) if  such  Person  fails  to  prosecute  such  contest  with
reasonable diligence, the Collateral Agent  may apply the money so deposited in
payment of such taxes.  If the Company or a Subsidiary  fails  to  pay any such
taxes  (other than taxes not yet due, subject to an extension or subject  to  a
contest)  and in the absence of any such contest by such Person, the Buyers may
(but shall  be under no obligation to) advance and pay any sums required to pay
any such taxes  and/or to secure the release of any Lien therefor, and any sums
so advanced by the  Buyers shall constitute Indebtedness under the Notes, shall
be payable by the Company  to the Buyers on demand, and, until paid, shall bear
interest at the highest rate then applicable to principal under the Notes.  For
purposes hereof, "LIEN" means,  with  respect  to  any  asset  or property, any
mortgage,    lien,    pledge,   hypothecation,   charge,   security   interest,
encumbrance or  adverse  claim  of  any  kind  and  any  restrictive  covenant,
condition, restriction  or  exception of any kind that has the practical effect
of creating a mortgage, lien, pledge, hypothecation, charge, security interest,
encumbrance or adverse claim of  any  kind  (including (i) any of the foregoing
created by, arising under or evidenced by any  conditional  sale or other title
retention agreement, the interest of a lessor with respect to  a  Capital Lease
Obligation,  or  any  financing  lease  having  substantially the same economic
effect as any of the foregoing, and (ii) any restriction  on  the  use, voting,
transfer,  receipt  of  income or other exercise of any attributes of free  and
clear ownership by a current holder).

      q.    Intellectual Property

      .  During the Reporting  Period,  the Company shall, and shall cause each
of   the  Subsidiaries  to,  maintain  adequate   licenses,   patents,   patent
applications, copyrights, service marks and trademarks to continue its business
as presently  proposed  to  be  conducted  by it (including as described to the
Buyers prior to the Amendment Date) or as hereafter conducted by it, unless the
failure to maintain any of the foregoing would  not  reasonably  be expected to
have a Material Adverse Effect.

      r.    Patriot  Act,  Investor  Secrecy  Act and Office of Foreign  Assets
Control.

        As required by federal law and the Buyers'  policies and practices, the
Buyers  may need to obtain, verify and record certain  customer  identification
information  and  documentation  in  connection  with  opening  or  maintaining
accounts, or establishing or continuing to provide services, and, from the date
of this Agreement until the end of the Reporting Period, the Company agrees to,
and shall cause each of the Subsidiaries to, provide such information.

      s.    Drilling Title Opinions

      .   During the Security Period, prior to the commencement by the  Company
or  any  of  the   Subsidiaries  of  any  drilling  operations,  or  deepening,
sidetracking or other  Subsequent  Operations (as such term is commonly used in
the industry in joint operating agreements)  conducted  by  such  entity as the
Operator  (as  such  term  is  commonly used in the industry in joint operating
agreements), on any of the oil and  gas leasehold interests (or pursuant to any
other  exploration and development rights,  concessions,  working interests and
participation interests acquired under a farmout agreement,  option  agreement,
participation  agreement,  or other acquisition or drilling agreements granting
such rights and interests),  including  all Hydrocarbon Property (as defined in
the Mortgages), that (i) are leased or otherwise  owned  or  possessed  by  the
Company  or  any of the Subsidiaries, (ii) in connection with which the Company
or any of the  Subsidiaries  has  entered  into  a  farmout  agreement,  option
agreement,  participation  agreement or other acquisition or drilling agreement
or (iii) the Company or any  of  the Subsidiaries has agreed (or has an option)
to lease or otherwise acquire or may be obligated to lease or otherwise acquire
in  connection  with  the conduct of  its  business  (collectively,  the  "REAL
PROPERTY"), the Company  or  such  Subsidiary  will obtain a customary drilling
title opinion with respect to such Real Property.   Upon written request to the
Company by the Buyers, the Company shall promptly provide  the  Buyers  with  a
copy  of  such  drilling  title  opinion, subject to the Buyers' execution of a
confidentiality agreement reasonably  acceptable  to  the  Company with respect
thereto;  provided, however, that any such request shall constitute  a  waiver,
with respect  to  any material non-public information regarding the Company and
the Subsidiaries contained  in  such drilling title opinion, of the restriction
herein  on  the Company's disclosure  to  the  Buyers  of  material  non-public
information.

      t.    Security Covenants.

        During  the  Security  Period, the Company shall, and the Company shall
cause each of the Subsidiaries to,  at  its  own  respective  cost and expense,
cause to be promptly and duly taken, executed, acknowledged and  delivered  all
such  further  acts,  documents  and  assurances  as  may  from time to time be
necessary or as any Buyer or the Collateral Agent may from time to time request
in order to carry out the intent and purposes of this Agreement,  the  Security
Documents and the other Transaction Documents and the transactions contemplated
hereby  and thereby, including all such actions to establish, create, preserve,
protect and  perfect a first priority Lien (subject only to Permitted Liens) in
favor of the Collateral  Agent  for the benefit of the Buyers on the Collateral
(as each term is defined in the Amended  and  Restated  Security Agreement, and
including Collateral acquired after the Amendment Date),  including  on any and
all  assets  of the Company and each of the Subsidiaries, whether now owned  or
hereafter acquired.   For  purposes  hereof,  "PERMITTED LIEN" means: (i) Liens
created by the Security Documents; (ii) Liens for  taxes  or other governmental
charges not at the time due and payable, or which are being  contested  in good
faith by appropriate proceedings diligently prosecuted, so long as foreclosure,
distraint,  sale  or other similar proceedings have not been initiated, and  in
each case for which the Company and the Subsidiaries maintain adequate reserves
in accordance with  GAAP  in  respect  of  such  taxes and charges; (iii) Liens
arising in the ordinary course of business in favor  of carriers, warehousemen,
mechanics and materialmen, or other similar Liens imposed  by law, which remain
payable  without  penalty  or  which  are  being  contested  in good  faith  by
appropriate  proceedings  diligently  prosecuted,  which proceedings  have  the
effect  of preventing the forfeiture or sale of the property  subject  thereto,
and in each  case for which adequate reserves in accordance with GAAP are being
maintained; (iv) Liens arising in the ordinary course of business in connection
with worker's compensation, unemployment compensation and other types of social
security (excluding  Liens  arising under ERISA); (v) attachments, appeal bonds
(and cash collateral securing  such  bonds), judgments and other similar Liens,
for  sums not exceeding $250,000 in the  aggregate  for  the  Company  and  the
Subsidiaries,  arising  in connection with court proceedings, provided that the
execution or other enforcement  of  such  Liens  is  effectively  stayed;  (vi)
easements,  rights  of  way,  restrictions,  minor defects or irregularities in
title and other similar Liens arising in the ordinary  course  of  business and
not  materially  detracting from the value of the property subject thereto  and
not interfering in  any  material  respect  with  the  ordinary  conduct of the
business of the Company or any of the Subsidiaries; (vii) 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 of Governors of the U.S.
Federal Reserve System and that no such deposit  account  is  intended  by  the
Company  or  any  of  the  Subsidiaries to provide collateral to the depository
institution; (viii) Liens securing  Capital  Lease  Obligations permitted under
Section  6(f)(ii), provided that such Liens attach only  to  the  fixed  assets
financed  by  such  Capital  Lease  Obligations  and  that  such  Liens  attach
concurrently  with,  or within ninety (90) days, after the acquisition thereof;
and (ix) the Diversity Security Interest (but only for so long as the Diversity
Note remains outstanding).

            (i)   Without  limiting  the  generality  of  the foregoing, in the
event that the Company or any of the Subsidiaries shall, at any time during the
Security Period, acquire or form any new Subsidiary after the  Amendment  Date,
the  Company  shall, or shall cause the respective Subsidiary to cause such new
Subsidiary, upon  such  acquisition  or  concurrently  with  such formation, as
applicable, (A) to execute, and thereafter perform its obligations  under,  the
Amended and Restated Security Agreement and the Subsidiary Guaranty and to take
such  other  action  (including  authorizing  the  filing of such UCC financing
statements and delivering certificates in respect of  the  equity securities of
such  Subsidiary),  as shall be necessary or appropriate to establish,  create,
preserve, protect and  perfect a first priority Lien (subject only to Permitted
Liens) in favor of Collateral Agent for the benefit of Collateral Agent and the
Buyers on all assets, both  real and personal, in which such new Subsidiary has
or may thereafter acquire any  interest,  (B)  to  execute  such other Security
Documents,  in  form  and  content acceptable to Collateral Agent,  as  may  be
required  or requested by Collateral  Agent  in  connection  with  the  actions
contemplated  by  the  preceding  clause  (A), and (C) to deliver such proof of
corporate (or comparable) action, incumbency  of  officers, opinions of counsel
and  other  documents  as Collateral Agent shall have  reasonably  required  or
requested.

            (ii)  During  the  Security  Period, (A) the Company shall, and the
Company shall cause each of the Subsidiaries  to, take such action from time to
time as shall be necessary to ensure that each of the Subsidiaries is a wholly-
owned Subsidiary, and that Collateral Agent shall  have,  for  the  benefit  of
Collateral  Agent and the Buyers, a first priority Lien on all Capital Stock or
other  equity   securities  of  each  of  the  Subsidiaries  concurrently  with
acquisition or formation  of  such  Subsidiary;  and  (B) the Company shall, or
shall cause each of the Subsidiaries to deliver promptly  to  Collateral Agent,
to  the extent required by the applicable Security Documents, the  certificates
evidencing such securities, accompanied by undated powers executed in blank and
to take  such  other  action  as  Collateral Agent shall request to perfect the
security interest created therein pursuant to such Security Documents.  As used
in  this  Agreement, "CAPITAL STOCK"  means  any  and  all  shares,  interests,
participations  or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and  any  and all warrants, rights or options to purchase any of
the foregoing.

            (iii) Concurrently  with  the  acquisition by the Company or any of
the Subsidiaries, at any time during the Security Period, of any real estate or
real property leasehold interests, the Company  shall  deliver  or  cause to be
delivered  to  the  Collateral Agent, with respect to such real estate,  (A)  a
mortgage or deed of trust, as applicable, in form and substance satisfactory to
the Collateral Agent,  executed  by  the  title  holder  thereof,  (B) an  ALTA
lender's   title   insurance  policy  issued  by  a  title  insurer  reasonably
satisfactory to the  Collateral  Agent  in  form  and  substance and in amounts
reasonably satisfactory to the Collateral Agent ensuring the Collateral Agent's
first  priority  Lien  on  such  real estate, free and clear  of  all  defects,
encumbrances and Liens except Permitted  Liens;  (C)  a  current  ALTA  survey,
certified to the Collateral Agent by a licensed surveyor, in form and substance
satisfactory  to the Collateral Agent, (D) a certificate, in form and substance
acceptable to the  Collateral  Agent,  to  the Collateral Agent from a national
certification agency acceptable to the Collateral  Agent,  certifying that such
real estate is not located in a special flood hazard area, and  (E) in the case
of  real  estate  that  consists of a leasehold estate, such estoppel  letters,
consents and waivers from the landlords and non-disturbance agreements from any
holders of mortgages or deeds  of trust on such real estate as may be requested
by  the  Collateral  Agent,  all of  which  shall  be  in  form  and  substance
satisfactory to the Collateral  Agent.   Notwithstanding  any interpretation or
construction  of this Section 5(t)(iii) to the contrary, clauses  (B)  and  (C)
hereof shall not  apply  to  the acquisition of any oil and gas leases or other
oil and gas rights and interests associated with the exploration and production
of oil, gas and other minerals  under  oil,  gas  and mineral leases or similar
agreements granting such rights and interests.

            (iv)  During  the  Security Period, the Company  shall,  and  shall
cause each of the Subsidiaries to,  (A)  refrain from engaging to any extent in
any business other than the ownership and  operation  of  oil,  gas  and  other
hydrocarbon  drilling, exploration and development rights, concessions, working
interests and participation interests and hydrocarbon transportation facilities
and businesses  reasonably  related  thereto or in furtherance thereof, and (B)
preserve, renew and keep in full force  and  effect  their  respective material
rights, privileges and franchises necessary or desirable in the  normal conduct
of their business.

      u.    [INTENTIONALLY OMITTED]



      v.    Stop Orders.

         The  Company  will advise each of the Buyers, within one Business  Day
after  it  receives notice  of  issuance  by  the  SEC,  any  state  securities
commission or  any other regulatory authority of any stop order or of any order
preventing or suspending  any  offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose.

      w.    Market Regulations

      .  The Company shall notify  the SEC, the Principal Market and applicable
state authorities, in accordance with  their  requirements, of the transactions
contemplated by this Agreement, and shall take  all  other necessary action and
proceedings  as  may  be  required and permitted by applicable  law,  rule  and
regulation, for the legal and  valid  issuance  of  the Notes to the Buyers and
promptly provide copies thereof to the Buyers.

6.    NEGATIVE COVENANTS.

      a.    [INTENTIONALLY OMITTED]

      b.    Status.

        From the date of this Agreement until the end  of the Reporting Period,
the Company shall not, nor will it permit any of the Subsidiaries  to, become a
USRPHC;  and  upon  any  Buyer's  request,  the Company shall inform the Buyers
whether any of the Securities then held by any  Buyer  constitute  a  U.S. real
property  interest  pursuant  to Treasury Regulation Section 1.897-2(h) without
regard to Treasury Regulation Section 1.897-2(h)(3).

      c.    Stay, Extension and Usury Laws

      .  The Company covenants  (to the extent that it may lawfully do so) that
it shall not at any time insist upon,  plead, or in any manner whatsoever claim
or take the benefit or advantage of, any  stay, extension or usury law or other
law that would prohibit or forgive it from  paying  all  or  any portion of any
principal  of,  or  interest  or  premium  on, any of the Notes as contemplated
herein or therein, wherever enacted, now or  at any time hereafter in force, or
which may affect the covenants or the performance  of  any  of  the Transaction
Documents; and the Company (to the extent it may lawfully do so),  on behalf of
itself  and the Subsidiaries, hereby expressly waives all benefit or  advantage
of any such  law,  and  covenants  that it will not, by resort to any such law,
hinder, delay or impede the execution  of  any  power  herein  granted  to  the
Buyers,  but will suffer and permit the execution of every such power as though
no such law  has  been enacted.  Notwithstanding the foregoing, the obligations
of the Company hereunder  shall  be  subject to the limitation that payments of
Interest (as defined in the Notes) on  any  Note shall not be required, for any
period for which Interest is computed thereon,  to  the extent (but only to the
extent) that contracting for or receiving such payment  by  the  Buyer  holding
such  Note  would  be  contrary to the provisions of any law applicable to such
Buyer, and in such event  the  Company  shall  pay  such  Buyer Interest at the
highest  rate  permitted  by applicable law ("MAXIMUM LAWFUL RATE");  provided,
however, that if at any time thereafter the rate of Interest payable under such
Note is less than the Maximum  Lawful  Rate,  Company  shall  continue  to  pay
Interest  thereon  at  the  Maximum  Lawful  Rate  until such time as the total
Interest received by such Buyer is equal to the total  Interest that would have
been received by such Buyer had the Interest payable on such Note been (but for
the operation of this paragraph) the Interest rate payable  since the Amendment
Date as otherwise provided in such Note.

      d.    Payment Restrictions Affecting Subsidiaries.

         During  the Security Period, (i) the Company shall not,  nor  will  it
permit  any  of the  Subsidiaries  to,  enter  into  or  assume  any  agreement
prohibiting or  otherwise  restricting  the  creation or assumption of any Lien
upon  its properties or assets, whether now owned  or  hereafter  acquired,  or
requiring the grant of any security for an obligation, except to the extent any
such agreement  provides  for  Permitted  Liens;  and  (ii)  except as provided
herein,  the Company shall not, and shall not cause or permit the  Subsidiaries
to, directly  or  indirectly  create  or  otherwise cause or suffer to exist or
become effective any consensual encumbrance  or  consensual  restriction of any
kind on the ability of any such Subsidiary to: (A) pay dividends  or  make  any
other  distribution  on any of such Person's Capital Stock owned by the Company
or any other Subsidiary;  (B)  pay  any Indebtedness owed to the Company or any
other  Subsidiary; (C) make loans or advances  to  the  Company  or  any  other
Subsidiary; or (D) transfer any of its property or assets to the Company or any
other Subsidiary.

      e.    Prepayments.

       Except  for  the  intercompany  indebtedness  among  the Company and the
Subsidiaries permitted by Section 6(f), from the date of this  Agreement  until
the  end  of  the Reporting Period, the Company shall not, nor will the Company
permit any of the  Subsidiaries  to,  prepay any Indebtedness that is in parity
with or subordinate to the Notes by structure or contract.

      f.    Indebtedness.

        From the date of this Agreement  until the end of the Reporting Period,
the Company shall not, and the Company shall cause each of the Subsidiaries not
to, create, incur, assume, extend the term of, become obligated on or suffer to
exist (directly or indirectly), any Indebtedness  other than Indebtedness under
the Notes issued pursuant to this Agreement, except  that  the  Company and the
Subsidiaries  may,  (i) incur non-convertible Indebtedness for borrowed  money,
and only to the extent,  that  (A) a subordination agreement in favor of and in
form  and substance satisfactory  to  the  Buyers  in  its  sole  and  absolute
discretion  is executed and delivered to the Buyers with respect thereto (which
subordination agreement shall prohibit payments in respect of such subordinated
Indebtedness  for  so long as any Notes are outstanding), (B) the terms of such
subordinated Indebtedness  does  not  require  or  permit  payment of principal
thereon  until  at  least  ninety  (90)  days  after the Maturity Date  of  any
outstanding Notes, and (C) such subordinated Indebtedness is not secured by any
of the assets of the Company or any of the Subsidiaries;  (ii)  incur  purchase
money  Indebtedness or Capital Lease Obligations in an aggregate amount not  to
exceed $250,000  outstanding  at  any  time; (iii) incur unsecured intercompany
Indebtedness amongst the Company and one  or  more of its wholly-owned domestic
Subsidiaries  that  is  a party to, and in compliance  with,  the  Amended  and
Restated Security Agreement  and  the  Subsidiary  Guaranty, to the extent such
Indebtedness  is  evidenced  by  a promissory note that  has  been  pledged  to
Collateral Agent; (iv) incur Indebtedness  of  the Company and the Subsidiaries
for  taxes,  assessments,  municipal  or  governmental  charges  not  yet  due;
(v) incur  obligations  of  the  Company and the  Subsidiaries  resulting  from
endorsements for collection or deposit  in the ordinary course of business; and
(vi) suffer to exist the Diversity Note (and  the  obligations  thereunder) and
the  Leexus Additional Consideration Obligation, in each case as in  effect  on
the date  of  its  original  issuance or incurrence, without waiver, amendment,
supplement, restatement or other  modification  thereof  after  such  date (any
Indebtedness that the Company or any of the Subsidiaries is expressly permitted
to incur pursuant to clauses (i) through (vi) above being referred to herein as
"PERMITTED INDEBTEDNESS").

      g.    Liens.

         From  the  date  of  this  Agreement until the later of the end of the
Reporting Period and the date the Amended  and  Restated Security Agreement has
terminated, the Company shall not, and shall cause each of the Subsidiaries not
to, grant or suffer to exist (voluntarily or involuntarily)  any  Lien,  claim,
security  interest  or other encumbrance whatsoever on any of its assets, other
than Permitted Liens.

      h.    Corporate Existence

      .  During the Reporting  Period, the Company shall maintain its corporate
existence and shall not sell all  or  substantially all of the Company's assets
(including, for the avoidance of any doubt,  all  or  substantially  all of the
assets  of the Subsidiaries in the aggregate), except in the event of a  merger
or consolidation  or  sale  or  transfer  of  all  or  substantially all of the
Company's  assets  (including,  for  the  avoidance  of  any  doubt,   all   or
substantially all of the assets of the Subsidiaries in the aggregate) where (i)
the surviving or successor entity in such transaction (A) assumes the Company's
obligations  hereunder and under the agreements and instruments entered into in
connection herewith and (B) is a publicly traded corporation whose common stock
is listed on a  national  securities  exchange,  (ii)  immediately  before  and
immediately  after  giving  effect to such transaction, no Event of Default (as
defined in the Notes) shall have occurred and be continuing.

      i.    Restriction on Loans; Investments; Subsidiary Equity

      .  During the Security  Period,  the  Company  shall  not,  and shall not
permit  any  of  the Subsidiaries to, (i) except for Permitted Investments  (as
defined herein) in which the holders of the Notes have a valid, perfected first
priority security  interest,  make  any  loans to, or investments in, any other
person or entity, including through lending money, deferring the purchase price
of  property or services (other than trade  accounts  receivable  on  terms  of
ninety  (90)  days  or  less),  purchasing any note, bond, debenture or similar
instrument, entering into any letter  of  credit,  guaranteeing  (or taking any
action that has the effect of guaranteeing) any obligations of any other person
or  entity, or acquiring any equity securities of, or other ownership  interest
in, or  making  any  capital  contribution  to  any  other  entity,  other than
unsecured   intercompany  indebtedness  permitted  by  Section  6(f)  (and  not
otherwise prohibited  hereunder)  and  capital  contributions  to  Subsidiaries
incident to the formation and capitalization of such Subsidiaries in accordance
with  this  Agreement  and limited to de minimis amounts necessary to form  and
capitalize such Subsidiaries,  (ii) invest in, participate in, lease, purchase,
obtain or otherwise acquire any real property, facilities, or oil, gas or other
mineral  drilling,  exploration or  development  rights,  concessions,  working
interests or participation  interests  in  which  the  Buyers are not granted a
valid, perfected first priority security interest, or (iii)  issue, transfer or
pledge  any Capital Stock or equity interest in any Subsidiary  to  any  Person
other than  the  Company.   "PERMITTED INVESTMENTS" means any investment in (A)
direct  obligations  of the United States  or  obligations  guaranteed  by  the
United States, in each  case which mature and become payable within ninety (90)
days of the investment by  the  Company or any Subsidiary, (B) commercial paper
rated at least A-1 by Standard &  Poor's  Ratings  Service  and  P-1 by Moody's
Investors  Services,  Inc.,  (C) time deposits with, including certificates  of
deposit issued by, any office located in the United States of any bank or trust
company which is organized under  the  laws  of  the United States or any State
thereof  and has capital, surplus and undivided profits  aggregating  at  least
$250,000,000  and  which issues (or the parent of which issues) certificates of
deposit or commercial  paper  with  a  rating described in clause (B) above, in
each  case which mature and become payable  within  ninety  (90)  days  of  the
investment  by  the  Company  or any Subsidiary, (D) repurchase agreements with
respect to securities described in clause (A) above entered into with an office
of a bank or trust company meeting  the criteria specified in clause (C) above,
provided in each case that such investment  matures  and becomes payable within
ninety (90) days of the investment by the Company or any Subsidiary, or (E) any
money  market  or  mutual  fund which invests only in the  foregoing  types  of
investments and the liquidity of which is satisfactory to the Collateral Agent.

      j.    Equipment

      .  During the Security  Period,  the  Company  shall not, and shall cause
each of the Subsidiaries not to, (i) permit any Equipment  to  become a fixture
to  Real Property unless such Real Property is owned or leased by  such  Person
and is  subject to a mortgage in favor of the Collateral Agent, for the benefit
of the Buyers,  and if such Real Property is leased, is subject to a landlord's
agreement in favor  of  the Buyers on terms acceptable to the Collateral Agent,
or (ii) permit any Equipment  to  become  an  accession  to  any other personal
property unless such personal property is subject to a first priority perfected
Lien in favor of the Collateral Agent, for the benefit of the  Buyers  and  any
other holders of the Notes.

      k.    Affiliate Transactions

      .   During  the  Reporting Period, the Company shall not, and shall cause
each of the Subsidiaries  not  to,  enter into, amend, modify or supplement any
transaction,  contract,  agreement, instrument,  commitment,  understanding  or
other arrangement with any  Related  Party, except for transactions with either
of the Buyers or the Collateral Agent or any of their respective Affiliates and
intercompany transactions between or among  the  Company  and  its wholly-owned
Subsidiaries,  in  each  case  as  permitted  (and  not  otherwise  prohibited)
hereunder,  and  customary  employment  arrangements  and benefit programs,  on
reasonable terms, that are not otherwise prohibited by this Agreement.

      l.    Settling of Accounts

      .  From the date of this Agreement until the end  of the Security Period,
the Company shall not, and shall cause each of the Subsidiaries  not  to, sell,
discount,  settle or adjust any Account (as defined in the Amended and Restated
Security Agreement);  provided  that  after  the  Amendment Date, so long as no
Event of Default shall have occurred and be continuing,  the  Company  and  the
Subsidiaries  may  (i)  discount or settle past due Accounts on an arm's length
basis in the ordinary course  of  business,  and  (ii)  provide  early  payment
discounts in respect of Accounts in the ordinary course of business, consistent
with past practice.

      m.    Limitation on Sale and Leaseback Transactions

      .   During  the  Reporting Period, the Company shall not, and shall cause
each of the Subsidiaries  not  to,  directly  or  indirectly,  enter  into  any
arrangement   with  any  Person  whereby  in  a  substantially  contemporaneous
transaction the  Company  or  any of the Subsidiaries sells or transfers all or
substantially  all of its right,  title  and  interest  in  an  asset  and,  in
connection therewith, acquires or leases back the right to use such asset.

      n.    Investment Company; Public Utility

      .  During  the  Reporting  Period, the Company shall not, and shall cause
each of the Subsidiaries not to, become  an  "investment  company,"  a  company
controlled  by  an  "investment  company,"  or  an  "affiliated  person" of, or
"promoter"  or  "principal underwriter" for, an "investment company,"  as  such
terms are defined  in the Investment Company Act of 1940; nor shall the Company
become, or permit any  of  the Subsidiaries to become, subject to regulation as
(i)  a  "public utility," (ii)  "public  utility  company,"  (iii)  a  "holding
company"  of  a  "public  utility"  or  a  "public  utility  company,"  (iv)  a
"subsidiary  company"  of  a such a "holding company," or (v) an affiliate of a
such a "holding company" or  such  a "subsidiary company," in each case as such
terms or similar terms are used within the meaning of any Law.

      o.    Real Property Leases

      .  During the Security Period,  the  Company  shall  not, and shall cause
each  of  the  Subsidiaries not to, amend, modify, violate, breach  or  default
under in any respect,  or take or fail to take any action that (with or without
notice or lapse of time  or both) would constitute a violation or breach of, or
default under, any term or  provision  of,  or  would  result in a reversion of
rights to a Person under, any leases and other agreements with respect to which
the  Company  or  any  of  the  Subsidiaries is a party or otherwise  bound  or
affected with respect to the Real  Property,  except  easements, rights of way,
access agreements, surface damage agreements, surface use agreements or similar
agreements that pertain to Real Property that is contained  wholly  within  the
boundaries  of any owned or leased Real Property to which the Company or any of
the Subsidiaries is a party, except to the extent such amendment, modification,
violation, breach  or  default,  action  or  inaction  could  not reasonably be
expected,  either individually or in the aggregate, to have a Material  Adverse
Effect.

      p.    Restriction on Purchases or Payments

      .  During  the  Security  Period,  the Company shall not, and the Company
shall cause each of the Subsidiaries not to,  (i) declare, set aside or pay any
dividends on or make any other distributions (whether  in  cash,  stock, equity
securities  or  property) in respect of any Capital Stock or split, combine  or
reclassify any Capital  Stock  or  issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for, any Capital Stock;
provided, however, that any Subsidiary  may  declare,  set  aside  or  pay  any
dividends  on  or  make any other distributions (whether in cash, stock, equity
securities or property)  in  respect  of  any of its Capital Stock that is held
solely by the Company or by a domestic Subsidiary,  provided  that  all  of the
equity  of  such  domestic  Subsidiary  is  directly or indirectly owned by the
Company,  such  domestic  Subsidiary is controlled  by  the  Company  and  such
domestic Subsidiary is a party  to,  and  in  compliance  with,  the Subsidiary
Guaranty  and  the  Amended and Restated Security Agreement, or (ii)  purchase,
redeem or otherwise acquire,  directly  or indirectly, any shares of the Common
Stock or the Capital Stock of any of the Subsidiaries.

      q.    No Avoidance of Obligations

      .  During the Reporting Period, the  Company  shall  not, and shall cause
each of the Subsidiaries not to, enter into any agreement which  would limit or
restrict the Company's or any of the Subsidiaries' ability to perform under, or
take  any  other  voluntary action to avoid or seek to avoid the observance  or
performance of any  of  the terms to be observed or performed by it under, this
Agreement, the Notes or the other Transaction Documents.

      r.    No Integrated Offering

      .  Neither the Company nor any of the Subsidiaries, nor any Affiliates of
the foregoing or any Person  acting  on  the  behalf  of  any of the foregoing,
shall,  directly  or indirectly, make any offers or sales of  any  security  or
solicit any offers to purchase any security, under any circumstances that would
require registration  of  any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the 1933 Act, the rules and regulations of the Principal Market
or any regulatory or self-regulatory authority.

      s.    Regulation M

      .  Neither the Company,  nor  the  Subsidiaries nor any Affiliates of the
foregoing shall take any action prohibited  by Regulation M under the 1934 Act,
in connection with the offer, sale and delivery  of the Securities contemplated
hereby.

      t.    Financial Covenant.

            (i)   The Company shall not allow the  Daily  Barrel  Average to be
less  than  Four Hundred (400) barrels of oil and/or its equivalent in  natural
gas (including  barrels of oil and barrels of oil equivalents from gas produced
into a sales pipeline at a ratio of one (1) barrel of oil for each six thousand
(6,000) cubic feet  ("MCF")  of  gas  (collectively,  "BOES"))  in the calendar
quarter ending September 30, 2008, or be less than Five Hundred (500)  BOEs  in
the  calendar  quarter  ending  December 31, 2008, or be less than One Thousand
(1,000) BOEs in any calendar quarter  of  2009 (the failure of the Daily Barrel
Average to be at least the applicable minimum  (as  set forth in this sentence)
in  any  such  calendar  quarter  being  referred  to as a "FINANCIAL  COVENANT
FAILURE").  For purposes of this Agreement, the "DAILY  BARREL  AVERAGE" means,
for any calendar quarter, the arithmetic average of the aggregate BOEs produced
by  all  of  the  Real  Property of the Company and the Subsidiaries that  are,
directly or indirectly, wholly owned by the Company (the "COVERED PROPERTIES"),
net  to  the  Working  Interests   (as  defined  in  the  Replacement  Override
Conveyances) owned by the Company and  such Subsidiaries in such Real Property,
on each of the days in such calendar quarter;  provided,  however,  that  there
shall  be  excluded,  in  making any such computation, such portion of the BOEs
produced by the Covered Properties  that are not Current Override Properties in
excess of the portion that would result  in such production constituting 50% of
the aggregate BOEs produced by the Covered Properties.

            (ii)  On  the second Business Day  following  each  date  that  the
Company files or is required  to  file  a  Periodic  Report (which in each case
shall  disclose  the Company's Daily Barrel Average for  the  calendar  quarter
covered by such Periodic  Report  (or,  in the case of an Annual Report on Form
10-K,  for the fourth calendar quarter of  the  year  covered  by  such  Annual
Report),  details  of the calculations and components thereof and any Financial
Covenant Failure with  respect to any such month), the Company shall deliver to
each Buyer, by facsimile  or  overnight  courier, a certificate executed by its
principal financial officer (an "OFFICER'S  CERTIFICATE")  certifying as to the
accuracy  of  the  Periodic  Report  and  of each of the Daily Barrel  Averages
disclosed therein.  Notwithstanding anything  contained herein to the contrary,
no Officer's Certificate delivered by the Company  to  any  Buyer shall contain
any  material  non-public  information  regarding  the Company or  any  of  the
Subsidiaries.

            (iii) In the case of a bona fide dispute as to the determination of
the Daily Barrel Average for any calendar quarter, the  Company  shall transmit
an  explanation  of  the  disputed  determinations  to the Buyers via facsimile
within two (2) Business Days of the occurrence of the  dispute.   If the Buyers
and the Company are unable to agree upon the determination of such Daily Barrel
Average for such calendar quarter within two (2) Business Days of such disputed
determination being transmitted to the Buyers, then the Company shall  promptly
(and  in  any  event  within  two  (2)  Business Days) submit via facsimile the
disputed determination of the Daily Barrel  Average to a qualified, independent
petroleum engineer, agreed to by the Company  and  the  holders  of  all of the
Notes  then  outstanding.   The Company shall direct the petroleum engineer  to
perform the determinations or  calculations,  at  the  Company's  expense,  and
notify the Company and the Buyers of the results no later than two (2) Business
Days  from  the  time  it receives the disputed determinations.  Such petroleum
engineer's determination  shall  be  binding  upon  all parties absent manifest
error.

      7.    LIMITED WAIVER.

      a.    Subject to the conditions set forth in Section 7(b) hereof, each of
the  Buyers, severally and not jointly, hereby waives  the  Company's  and  the
Subsidiaries'  failure  to  (i)  promptly  deliver  the  amended  and  restated
Revolving Note, as amended by the First Amendment, pursuant to Section 1(d)  of
the  First  Amendment, and (ii) deliver, on or prior to September 28, 2007, the
Subsidiary Guaranty,  the  Subsidiary  Security  Agreement,  the Mortgages, the
Deposit  Account  Control  Agreements  and  the  other  security documents  and
financing  statements  required  to  be  delivered  by  the  Company   and  the
Subsidiaries pursuant to Section 3(c) of the First Amendment.

      b.    The limited waivers set forth in Section 7(a) are conditioned upon,
and  subject  to,  the  delivery,  validity and enforceability of the Company's
commitments and obligations under this  Agreement,  and  the failure to deliver
any  such  documents,  or  the  voiding,  setting  aside,  or determination  of
invalidity or unenforceability of which shall render such waivers null and void
and  of no force and effect, each Buyer being entitled thereafter  to  exercise
all remedies  at  law  or  in  equity  under this Agreement and the Transaction
Documents as if Section 7(a) had not been  part of this Agreement, as executed.
The limited waivers set forth in Section 7(a)  hereof  (i) are  not,  nor shall
they  be  deemed to be, waivers under any other circumstance or waivers of  any
other condition,  requirement,  provision or breach of, or rights under, any of
the Transaction Documents or any  other  agreement  or  instrument, and (ii) do
not, nor shall they be deemed to, establish a custom or course of dealing.

8.    CONDITIONS  TO  THE  OBLIGATIONS  OF THE COMPANY TO CLOSE  AN  ADDITIONAL
CLOSING.

      The obligation of the Company to take  the  actions  specified in Section
1(b) at any Additional Closing is subject to the satisfaction,  at  or prior to
the  applicable  Additional  Closing Date, of each of the following conditions,
provided that these conditions  are  for  the Company's sole benefit and may be
waived  by the Company at any time in its sole  discretion  by  providing  each
Buyer with prior written notice thereof:

      a.    Such  Buyer  shall  have  delivered  to  the Company the Additional
Purchase  Price  (less the amount withheld pursuant to Section  5(h))  for  the
Additional Notes being  purchased  by  such Buyer at such Additional Closing by
wire transfer of immediately available funds  pursuant to the wire instructions
provided by the Company.

      b.    The representations and warranties  of such Buyer shall be true and
correct  as  of the date when made and as of such Additional  Closing  Date  as
though made at  that time (except for representations and warranties that speak
as of a specific  date,  which  shall be true and correct as of such date), and
such Buyer shall have performed,  satisfied  and  complied  with the covenants,
agreements  and  conditions  required  by  the  Transaction  Documents   to  be
performed,  satisfied  or  complied  with  by  such  Buyer  at or prior to such
Additional Closing Date.

      c.    No injunction or other court or governmental agency  order shall be
in effect that prohibits the transactions contemplated by this Agreement  to be
effected at such Additional Closing.

9.    CONDITIONS TO BUYERS' OBLIGATIONS TO CLOSE AN ADDITIONAL CLOSING.

      The  obligation  of  each  Buyer  to  purchase  Additional Notes from the
Company  or  to take the actions specified in Section 1(b)  at  any  Additional
Closing is subject  to  the satisfaction, at or prior to the Additional Closing
Date, of each of the following  conditions,  provided that these conditions are
for each Buyer's sole benefit and may be waived  only by such Buyer at any time
in  its  sole  discretion by providing the Company with  prior  written  notice
thereof:

      a.    The  Company  shall  have  executed and delivered to such Buyer the
Additional Notes being purchased by such Buyer at such Additional Closing.

      b.    The Company shall have complied  with  the  requirements of Section
1(b) (including the Additional Note Issuance Amount Limitations) and all of the
Additional Sale Notice Election Conditions set forth in Section 1(c) shall have
been satisfied at all times from the Amendment Date until  and  including  such
Additional Closing Date.

      c.    The  representations  and  warranties of the Company (including any
exceptions thereto contained in the schedules hereto) shall be true and correct
as of the date when made and as of such  Additional Closing Date as though made
at that time (except for representations and  warranties  that  speak  as  of a
specific  date,  which  shall  be  true  and  correct as of such date), and the
Company  shall  have  performed,  satisfied and complied  with  the  covenants,
agreements  and  conditions  required   by  the  Transaction  Documents  to  be
performed, satisfied or complied with by  the  Company  at  or  prior  to  such
Additional  Closing  Date.   Such  Buyer  shall  have  received  a certificate,
executed  by  the  Chief  Executive  Officer  of the Company, dated as of  such
Additional Closing Date, to the foregoing effect  and  as to such other matters
as may be reasonably requested by such Buyer.

      d.    The  Company  shall  have  made  all filings under  all  applicable
securities  laws  necessary  to  consummate  the  issuance  of  the  Securities
(including the Additional Notes) pursuant to this Agreement  in compliance with
such laws.

      e.    No injunction or other court or governmental agency  order shall be
in effect that prohibits the transactions contemplated by this Agreement  to be
effected at such Additional Closing.

      f.    The Company shall have delivered to such Buyer such other documents
relating  to  the  transactions contemplated by this Agreement as such Buyer or
its counsel may reasonably request.

10.   INDEMNIFICATION.

      a.    Company Indemnification Obligation

      .  In consideration  of  each  Buyer's  execution  and  delivery  of  the
Transaction  Documents  and acquiring the Securities thereunder and in addition
to  all  of the Company's obligations  under  the  Transaction  Documents,  the
Company (for  purposes  of  this Section 10(a), the "INDEMNIFYING PARTY") shall
defend, protect, indemnify and  hold  harmless each Buyer and each other holder
of  the  Securities  and  all  of  their equity  holders,  partners,  officers,
directors, members, managers, employees  and  direct  or indirect investors and
any of the foregoing Persons' agents or other representatives  (including those
retained  in  connection with the transactions contemplated by this  Agreement)
(for purposes of  this Section 10(a), collectively, the "INDEMNITEES") from and
against any and all  actions,  causes  of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages,  and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including  reasonable attorneys' fees
and  disbursements  (for  purposes  of  this  Section 10(a),  the  "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitees as a  result  of, or arising out of,
or  relating  to (a) any misrepresentation or breach of any  representation  or
warranty made by  the Indemnifying Party in any of the Transaction Documents or
any other certificate,  instrument  or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement  or  obligation  of  the Indemnifying
Party  contained  in  the  Transaction  Documents  or  any  other  certificate,
instrument or document contemplated hereby or thereby, (c) any cause of action,
suit  or claim brought or made against such Indemnitees and arising out  of  or
resulting  from  the  execution,  delivery,  performance  or enforcement of the
Transaction  Documents in accordance with the terms hereof or  thereof  or  any
other certificate,  instrument  or  document  contemplated hereby or thereby in
accordance with the terms thereof (other than a  cause of action, suit or claim
brought or made against an Indemnitee by such Indemnitee's owners, investors or
Affiliates), or (d) any assets or transaction financed  or  to  be  financed in
whole or in part, directly or indirectly, with the proceeds of the issuance  of
any  of  the  Securities.   To the extent that the foregoing undertaking by the
Indemnifying Party may be unenforceable for any reason, such Indemnifying Party
shall make the maximum contribution  to the payment and satisfaction of each of
the Indemnified Liabilities that is permissible under applicable law.

      b.    Indemnification Procedures

      .  Each Indemnitee (as defined under Section 10(a)) shall (i) give prompt
written notice to the Indemnifying Party  of any claim with respect to which it
seeks indemnification or contribution pursuant  to  this  Agreement  (provided,
however,  that  the  failure  of the Indemnitee to promptly deliver such notice
shall not relieve the Indemnifying Party of any liability, except to the extent
that the Indemnifying Party is  prejudiced in its ability to defend such claim)
and (ii) permit such Indemnifying  Party,  as applicable, to assume the defense
of such claim with counsel selected by such  Indemnifying  Party and reasonably
satisfactory to the Indemnitee; provided, however, that any Indemnitee entitled
to  indemnification hereunder shall have the right to employ  separate  counsel
and to  participate  in the defense of such claim, but the fees and expenses of
such  counsel shall be  at  the  expense  of  the  Indemnitee  unless  (A)  the
Indemnifying Party has agreed in writing to pay such fees and expenses, (B) the
Indemnifying Party shall have failed to assume the defense of such claim within
five (5)  days of delivery of the written notice of the Indemnitee with respect
to such claim  or  failed to employ counsel selected by such Indemnifying Party
and reasonably satisfactory  to  the  Indemnitee,  or  (C)  in  the  reasonable
judgment  of  the  Indemnitee, based upon advice of its counsel, a conflict  of
interest may exist between  the  Indemnitee  and  the  Indemnifying  Party with
respect  to  such  claims  (in  which  case,  if  the  Indemnitee  notifies the
Indemnifying Party in writing that it elects to employ separate counsel  at the
expense  of  the  Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such claim on behalf of the Indemnitee).  If the
Indemnifying Party assumes the defense of the claim, it shall not be subject to
any liability for any  settlement  or compromise made by the Indemnitee without
its consent (but such consent shall  not  be unreasonably withheld, conditioned
or delayed). In connection with any settlement  negotiated  by  an Indemnifying
Party, no Indemnifying Party shall, and no Indemnitee shall be required  by  an
Indemnifying  Party to, (I) enter into any settlement which does not include as
an unconditional  term  thereof  the giving by the claimant or plaintiff to the
Indemnitee  of  a  release from all liability  in  respect  to  such  claim  or
litigation, (II) enter  into  any  settlement  that attributes by its terms any
liability to the Indemnitee, or (III) consent to the entry of any judgment that
does  not  include  as a term thereof a full dismissal  of  the  litigation  or
proceeding with prejudice.  In addition, without the consent of the Indemnitee,
no Indemnifying Party shall consent  to entry of any judgment or enter into any
settlement which provides for any action  on  the  part of the Indemnitee other
than  the  payment  of  money  damages  which are to be paid  in  full  by  the
Indemnifying Party. If an Indemnifying Party  fails or elects not to assume the
defense of a claim pursuant to clause (B) above,  or  is not entitled to assume
or  continue  the  defense  of  such claim pursuant to clause  (C)  above,  the
Indemnifying Party shall have the  right  without  prejudice  to  its  right of
indemnification  hereunder  to,  in its discretion exercised in good faith  and
upon advice of counsel, to contest,  defend  and  litigate  such  claim and may
settle such claim, either before or after the initiation of litigation, at such
time and upon such terms as the Indemnitee deems fair and reasonable,  provided
that,  at  least  five (5) days prior to any settlement, written notice of  its
intention to settle  is  given  to  the Indemnifying Party. If requested by the
Indemnifying Party, the Indemnitee agrees  (at no expense to the Indemnitee) to
reasonably cooperate with the Indemnifying Party  and its counsel in contesting
any claim that the Indemnifying Party elects to contest.

11.   AMENDMENT AND RESTATEMENT OF LOAN AGREEMENT.

      Notwithstanding  anything  to the contrary contained  herein  or  in  the
Initial Notes, neither this Agreement  nor  either  of  the  Initial  Notes  is
intended,  or  does  serve,  to  effect  a  novation  of  the  Obligations,  as
contemplated  by  the  Company  Security  Agreement and the Subsidiary Security
Agreement (the "EXISTING OBLIGATIONS").  Instead,  it  is the express intention
of the parties hereto to reaffirm the Existing Obligations  created  under  the
Loan  Agreement  (as amended and restated pursuant to the terms hereof) and the
Revolving Note, and  secured  by the Collateral, as contemplated by the Company
Security Agreement and the Subsidiary  Security  Agreement.  The Company hereby
acknowledges  and  confirms  that the liens granted pursuant  to  the  Security
Documents secure the indebtedness,  liabilities  and obligations of the Company
to  Collateral  Agent  and  Buyers  under the Loan Agreement,  as  amended  and
restated hereby and by the Initial Notes,  and  that  the term "Obligations" as
used in the Security Documents (or any other term used  therein  to describe or
refer  to  the  indebtedness,  liabilities  and  obligations of the Company  to
Collateral  Agent  and  Buyers)  includes,  without  limitation,  the  Existing
Obligations, and the indebtedness, liabilities and obligations  of  the Company
under  the  Initial  Notes  and  the  other  Notes  to  be delivered under this
Agreement,  as  the  same  may  be  further  amended,  restated,   modified  or
supplemented  from  time  to  time.  The Security Documents and all agreements,
instruments and documents executed  or  delivered in connection with any of the
foregoing shall each be deemed to be amended  to  the  extent necessary to give
effect to the provisions of this Agreement.

12.   GOVERNING LAW; MISCELLANEOUS.

      a.    Governing Law; Jurisdiction; Jury Trial

      .  All questions concerning the construction, validity,  enforcement  and
interpretation  of this Agreement shall be governed by the internal laws of the
State of New York,  without  giving  effect to any choice of law or conflict of
law  provision  or  rule  (whether of the  State  of  New  York  or  any  other
jurisdiction) that would cause  the application of the laws of any jurisdiction
other than the State of New York.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state  and federal courts sitting in the New York
City, Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction  contemplated  hereby  or discussed
herein,  and  hereby irrevocably waives, and agrees not to assert in any  suit,
action or proceeding,  any  claim  that  it  is  not  personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit,  action  or proceeding
is improper.  Each party hereby irrevocably waives personal service  of process
and consents to process being served in any such suit, action or proceeding  by
mailing  a  copy  thereof  by  registered  or  certified  mail,  return receipt
requested,  or  by  deposit  with  a  nationally  recognized overnight delivery
service,  to  such  party  at the address for such notices  to  it  under  this
Agreement and agrees that such  service  shall  constitute  good and sufficient
service  of  process  and  notice thereof.  Nothing contained herein  shall  be
deemed to limit in any way any  right  to serve process in any manner permitted
by law.  The parties acknowledge that each  Buyer has an office in the State of
New York, and each Buyer has made Advances under  the  Loan  Agreement and will
make payment of any Additional Purchase Price from its bank account  located in
the State of New York.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT  IT  MAY
HAVE,  AND  AGREES  NOT  TO  REQUEST,  A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

      b.    Counterparts

      .  This Agreement and any amendments hereto may be executed and delivered
in one or more counterparts, and by the  different  parties  hereto in separate
counterparts,  each of which when executed shall be deemed to be  an  original,
but all of which  taken  together  shall constitute one and the same agreement,
and shall become effective when counterparts  have  been  signed  by each party
hereto and delivered to the other parties hereto, it being understood  that all
parties need not sign the same counterpart.  In the event that any signature to
this  Agreement  or any amendment hereto is delivered by facsimile transmission
or by e-mail delivery of a ".pdf" format data file, such signature shall create
a valid and binding  obligation of the party executing (or on whose behalf such
signature is executed)  with  the same force and effect as if such facsimile or
".pdf" signature page were an original  thereof.   At the request of any party,
each other party shall promptly re-execute an original  form  of this Agreement
or  any  amendment  hereto and deliver the same to the other party.   No  party
hereto shall raise the  use  of  a  facsimile  machine  or e-mail delivery of a
".pdf"  format  data  file  to  deliver  a signature to this Agreement  or  any
amendment  hereto  or  the  fact  that  such  signature   was   transmitted  or
communicated  through  the use of a facsimile machine or e-mail delivery  of  a
".pdf" format data file  as  a  defense to the formation or enforceability of a
contract, and each party hereto forever waives any such defense.

      c.    Headings

      .  The headings of this Agreement  are  for  convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

      d.    Severability

      .  If any provision of this Agreement shall be  invalid  or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not  affect  the
validity  or  enforceability  of  the  remainder  of  this  Agreement  in  that
jurisdiction  or  the  validity  or  enforceability  of  any  provision of this
Agreement in any other jurisdiction.

      e.    Entire Agreement; Amendments

      .   This Agreement supersedes all other prior oral or written  agreements
among the Buyers, the Company, and the Subsidiaries and Persons acting on their
behalf with  respect  to  the  matters  discussed  herein  (including  the Loan
Agreement  and  the First Amendment), and this Agreement, the other Transaction
Documents and the  other  instruments referenced herein and therein contain the
entire understanding of the  parties with respect to the matters covered herein
and therein and, except as specifically  set  forth  herein or therein, neither
the  Company  nor  either  of  the  Buyers makes any representation,  warranty,
covenant or undertaking with respect  to  such  matters.   No provision of this
Agreement may be amended, modified or supplemented other than  by an instrument
in  writing  signed by the Company and each of the Buyers.  Any such  amendment
shall bind all  holders  of the Notes.  No such amendment shall be effective to
the extent that it applies  to  less  than all of the holders of the Notes then
outstanding.

      f.    Notices

      .  Any notices, consents, waivers  or  other  communications  required or
permitted to be given under the terms of this Agreement must be in writing  and
will  be  deemed  to  have  been  delivered:   (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated  and  kept  on file by
the  sending  party);  or  (iii)  one  (1)  Business  Day  after deposit with a
nationally  recognized  overnight  delivery  service,  in  each  case  properly
addressed  to  the  party  to  receive  the  same.  The addresses and facsimile
numbers for such communications shall be:

      If to the Company:

            South Texas Oil Company
            769 Highway 95 N.
            Bastrop, Texas  78602
            Facsimile:  512-321-4737
            Attention: Scott Zimmerman,
                       Chief Executive Officer
                       Scott.zimmerman@southtexasoil.com

      With a copy to:

            Corporate Legal Solutions
                 6 Wheeler's Point Road
                 Gloucester, MA  01930-1691
               Faccimile: 978-283-4692
            Attention:Roy D. Toulan, Jr., Esq.
                      rdtoulan@CorpLegalSolutions.net

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers,  with  copies  to such Buyer's representatives  as  set  forth  on  the
Schedule of Buyers, or,  in the case of a Buyer or any other party named above,
at such other address and/or  facsimile  number and/or to the attention of such
other person as the recipient party has specified  by  written  notice given to
each  other  party  five  (5)  days prior to the effectiveness of such  change.
Written confirmation of receipt  (A)  given  by  the  recipient of such notice,
consent,  waiver  or  other communication, (B) mechanically  or  electronically
generated  by  the  sender's  facsimile  machine  containing  the  time,  date,
recipient facsimile number  and an image of the first page of such transmission
or (C) provided by a nationally  recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or deposit with a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.

      g.    Successors and Assigns

      .  This Agreement shall be binding  upon  and inure to the benefit of the
parties and their respective successors and assigns,  including  any purchasers
of the Securities.  The Company shall not assign this Agreement or  any  rights
or  obligations  hereunder without the prior written consent of the holders  of
all of the Notes then  outstanding,  except  pursuant  to  a  merger  permitted
pursuant  to  Section  6(h).   Each  Buyer may assign some or all of its rights
hereunder without the consent of the Company;  provided, however, that any such
assignment shall not release such Buyer from its  obligations  hereunder unless
such obligations are assumed by such assignee (as evidenced in writing) and the
Company  has  consented to such assignment and assumption, which consent  shall
not  be  unreasonably  withheld.   Notwithstanding  anything  to  the  contrary
contained  in the Transaction Documents, each Buyer shall be entitled to pledge
the Securities  in  connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities.

      h.    No Third Party Beneficiaries

      .  This Agreement  is  intended for the benefit of the parties hereto and
their respective permitted successors  and  assigns and, to the extent provided
in Section 10 hereof, each Indemnitee, but is  not  for the benefit of, nor may
any provision hereof be enforced by, any other Person.

      i.    Survival

      .   The  representations  and warranties of the Company  and  each  Buyer
contained in Sections 3 and 4, respectively,  the  agreements and covenants set
forth  in  Sections 5,  6  and  12,  and the indemnification  and  contribution
provisions  set forth in Section 10, shall  survive  the  consummation  of  the
transactions  contemplated  hereby,  including  any  closings on any Additional
Closing  Dates.   The Company acknowledges and agrees that  the  provisions  of
Section 18 of each Note shall survive the redemption, repayment or surrender of
each such Note.

      j.    Further Assurances

      .  Each party  shall  do  and perform, or cause to be done and performed,
all such further acts and things,  and shall execute and deliver all such other
agreements, certificates, instruments  and  documents,  as  the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

      k.    Termination

      .   Notwithstanding  anything  to the contrary contained herein,  in  the
event that an Additional Closing shall  not  have  occurred  on  or  before the
eighth (8th) Business Day following an Additional Sale Election Notice Date due
to the Company's or such Buyer's failure to satisfy the conditions set forth in
Sections  8  and  9  above (and the nonbreaching party's failure to waive  such
unsatisfied condition(s)),  the  nonbreaching  party  shall  have the option to
terminate the obligations with respect to such Additional Closing  at the close
of business on such date without liability of any party to any other party with
respect  thereto  (and without affecting any other rights or obligations  under
this Agreement); provided,  however, that if a party's obligations with respect
to such Additional Closing are  terminated  pursuant to this Section 12(k), the
Company shall be obligated to pay such Buyer  (so  long  as such Buyer is not a
breaching party) its transaction fees and reimbursement amounts as set forth in
Section 5(h) as if such Buyer had purchased the Additional Notes.

      l.    Placement Agent

      .   The Company represents and warrants to each Buyer  that  it  has  not
engaged any placement agent, broker or financial advisor in connection with the
issuance and  sale  of  the  Notes.   The  Company shall be responsible for the
payment of any fees or commissions of any placement agent or broker relating to
or arising out of the transactions contemplated hereby.  The Company shall pay,
and hold each Buyer harmless against, any liability, loss or expense (including
attorneys' fees and out-of-pocket expenses)  arising  in  connection  with  any
claim for any such payment.

      m.    No Strict Construction

      .   The language used in this Agreement will be deemed to be the language
chosen by the  parties  to  express their mutual intent, and no rules of strict
construction will be applied against any party.

      n.    Waiver of Subrogation

      .  The Company expressly  waives  any  and  all  rights  of  subrogation,
reimbursement,  indemnity,  exoneration, contribution of any other claim  which
the  Company  may  now  or  hereafter  have  against  any  Person  directly  or
contingently liable for the Obligations  hereunder,  or against or with respect
to the Company's property (including, without limitation, any property which is
collateral for the Obligations), arising from the existence  or  performance of
this Agreement, until termination of this Agreement and repayment  in  full  of
the Obligations.

      o.    Remedies

      .  Each Buyer and each holder of the Securities shall have all rights and
remedies  set  forth  in  the Transaction Documents and all rights and remedies
that such Buyer and holders  have  been  granted  at  any  time under any other
agreement or contract and all of the rights that such Buyer  and  holders  have
under  any  law.   Any  Person  having  any  rights under any provision of this
Agreement  shall  be  entitled  to  enforce such rights  specifically  (without
posting a bond or other security or proving actual damages), to recover damages
by reason of any breach of any provision  of this Agreement and to exercise all
other rights granted by law; provided, however  that  none  of  the  Collateral
Agent,  the  Buyers  and any other holders of the Notes shall be liable to  the
Company or any of the  Subsidiaries  for consequential damages arising from any
breach  of  contract,  tort  or  other wrong  relating  to  the  establishment,
administration or collection of the Obligations.

      p.    Rescission and Withdrawal Right

      .  Notwithstanding anything  to  the  contrary  contained in (and without
limiting  any similar provisions of) the Transaction Documents,  whenever  such
Buyer exercises  a  right,  election,  demand  or  option  under  a Transaction
Document and the Company or any of the Subsidiaries does not timely perform its
related  obligations  within the periods therein provided, then the Buyers  may
rescind or withdraw, in  its  sole  discretion  from  time to time upon written
notice to the Company, any relevant notice, demand or election  in  whole or in
part without prejudice to its future actions and rights.

      q.    Payment Set Aside

      .   To  the  extent  that the Company or any of the Subsidiaries makes  a
payment or payments to the Buyers  pursuant  to  this Agreement, the Notes, the
Subsidiary Guaranty or any other Transaction Document  or the Buyers enforce or
exercise their rights hereunder or thereunder, and such  payment or payments or
the  proceeds  of  such  enforcement  or  exercise  or  any  part  thereof  are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered  from,  disgorged  by  or  are  required  to  be refunded, repaid  or
otherwise  restored to the Company or any of the Subsidiaries,  by  a  trustee,
receiver or any other Person under any law (including any bankruptcy law, state
or federal law,  common  law or equitable cause of action), then, to the extent
of any such restoration, the  obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

      r.    Independent Nature of the Buyers

      .  Each Buyer shall be entitled  to independently protect and enforce its
rights, including the rights arising out  of  this Agreement, the Notes and the
other Transaction Documents, and it shall not be necessary for any other holder
of any of the Securities to be joined as an additional  party in any proceeding
for such purpose.

      s.    Interpretative Matters

      .  Unless the context otherwise requires, (a) all references to Sections,
Schedules or Exhibits are to Sections, Schedules or Exhibits  contained  in  or
attached  to  this Agreement, (b) each accounting term not otherwise defined in
this Agreement  has  the  meaning  assigned  to  it  in  accordance  with GAAP,
(c) words  in  the  singular  or  plural  include  the  singular and plural and
pronouns stated in either the masculine, the feminine or  neuter  gender  shall
include  the  masculine,  feminine  and  neuter,  and  (d)  the use of the word
"including"  in  this  Agreement  shall  be  by  way  of  example  rather  than
limitation.


                               *  *  *  *  *  *






<PAGE>
      IN  WITNESS  WHEREOF,  the  Company  and  the  Buyers  have  caused  this
Securities  Purchase Agreement to be duly executed as of the date first written
above.


COMPANY:

SOUTH TEXAS OIL COMPANY,
a Nevada corporation


By:   ___________________________
Name: J. Scott Zimmerman
Title:Chief Executive Officer


BUYERS:

THE LONGVIEW FUND, L.P.,
a California limited partnership

By: Viking Asset Management, LLC
Its:  Investment Adviser

By:   ___________________________
Name: S. Michael Rudolph
Title:Chief Financial Officer


LONGVIEW MARQUIS MASTER FUND, L.P.,
a British Virgin Islands limited partnership

By:   Viking Asset Management, LLC
Its:  Investment Advisor

By:
Name: S. Michael Rudolph
Title:Chief Financial Officer


60625550




                Signature Page to Securities Purchase Agreement

<PAGE>
                              SCHEDULE OF BUYERS

<TABLE>
<CAPTION>

    BUYER'S NAME                    BUYER'S ADDRESS                PRINCIPAL AMOUNT OF    ALLOCATION          BUYER'S LEGAL
                                 AND FACSIMILE NUMBER                 INITIAL NOTES       PERCENTAGE         REPRESENTATIVE'S
                                                                                                               ADDRESS AND
                                                                                                            FACSIMILE NUMBER
<S>                   <C>                                           <C>                   <C>                   <C>


The Longview Fund,   {c/o}Viking Asset Management, LLC               $17,908,013.11             75%         Katten Muchin
L.P.                 600 Montgomery Street, 44th Floor, San                                                 Rosenman LLP
                     Francisco, CA 94111                                                                    525 W. Monroe
                     Attention: S. Michael Rudolph                                                          Street
                     Facsimile: (415) 981-5301                                                              Chicago, Illinois
                     Residence:  California                                                                 60661-3693
                                                                                                            Attention: Mark
                     and                                                                                    D. Wood, Esq.
                                                                                                            Facsimile: (312)
                     c/o Viking Asset Management, LLC                                                       902-1061
                     10 Glenville Street, 3rd Floor
                     Greenwich, CT 06831
                     Attention: Robert J. Brantman
                     Facsimile: (646) 840-4958

Longview Marquis     {c/o}Viking Asset Management, LLC                $5,969,337.71             25%         Katten Muchin
Master Fund, L.P.    600 Montgomery Street, 44th Floor, San                                                 Rosenman LLP
                     Francisco, CA 94111                                                                    525 W. Monroe
                     Attention: S. Michael Rudolph                                                          Street
                     Facsimile:  (415) 981-5301                                                             Chicago, Illinois
                     Residence:  British Virgin Islands                                                     60661-3693
                                                                                                            Attention: Mark
                     and                                                                                    D. Wood, Esq.
                                                                                                            Facsimile: (312)
                     c/o Viking Asset Management, LLC                                                       902-1061
                     10 Glenville Street, 3rd Floor
                     Greenwich, CT 06831
                     Attention: Robert J. Brantman
                     Facsimile: (646) 840-4958
</TABLE>





<PAGE>
                                   SCHEDULE


Schedule 4(a)Subsidiaries








<PAGE>
                EXHIBITS


Exhibit A	Form of Initial Note
Exhibit B	Form of Additional Note
Exhibit C	Form of Amended and Restated Security Agreement
Exhibit D	Form of Mortgage
Exhibit E	Form of Deposit Account Control Agreement
Exhibit F	Form of Subsidiary Guaranty
Exhibit G	Form of Pledge Agreement
Exhibit H	Form of Replacement Override Conveyances
Exhibit I	Form of Legal Opinion






<PAGE>




                               TABLE OF CONTENTS


1.    AMENDMENT AND RESTATEMENT OF REVOLVING NOTE; ADDITIONAL NOTES.
      5
      a.    Delivery of Notes.................................................5
      b.    Purchase and Sale of Additional Notes.............................5
      c.    Additional Closing Dates..........................................6
      d.    Additional Closing Date Form of Payment...........................7

1A.   AMENDMENT OF WARRANTS...................................................7
      a.    Acknowledgement of Exercise Price.................................7
      b.    Warrant Amendment.................................................7

2.    DELIVERY OF CONVEYANCES OF OVERRIDING ROYALTY INTERESTS, MORTGAGES,
      ACCOUNT CONTROL AGREEMENTS, AND SECURITY DOCUMENTS AND WARRANTS.
      8
      a.    Conveyances of Overriding Royalty Interests.......................8
      b.    Mortgages.........................................................8
      c.    Account Control Agreements........................................8
      d.    Other Security Documents..........................................9
      e.    Warrants..........................................................9

3.    BUYERS' REPRESENTATIONS AND WARRANTIES..................................9
      a.    Investment Purpose................................................9
      b.    Accredited Investor Status........................................9
      c.    Reliance on Exemptions............................................9
      d.    Information......................................................10
      e.    No Governmental Review...........................................10
      f.    Transfer or Resale...............................................10
      g.    Legends..........................................................11
      h.    Authorization; Enforcement; Validity.............................12
      i.    Residency and Offices............................................12

4.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................12
      a.    Due Incorporation................................................12
      b.    Outstanding Stock................................................12
      c.    Authorization; Enforcement; Validity.............................13
      d.    Additional Issuances.............................................13
      e.    Consents.........................................................13
      f.    No Violation or Conflict.........................................14
      g.    The Securities...................................................14
      h.    Litigation.......................................................15
      i.    Reporting Company................................................15
      j.    Information Concerning Company...................................15
      k.    Defaults.........................................................16
      l.    Listing..........................................................16
      m.    No Undisclosed Liabilities.......................................16
      n.    No Undisclosed Events or Circumstances...........................16
      o.    Capitalization...................................................16
      p.    No Disagreements with Accountants and Lawyers....................17
      q.    DTC Status.......................................................17
      r.    Investment Company...............................................17
      s.    No General Solicitation..........................................17
      t.    No Integrated Offering...........................................17
      u.    Tax Status.......................................................18
      v.    Replacement Override Conveyances.................................18
      w.    Outstanding Indebtedness; Liens..................................18

5.    AFFIRMATIVE COVENANTS..................................................20
      a.    Reasonable Best Efforts..........................................20
      b.    Form D and Blue Sky..............................................20
      c.    Reporting Status.................................................20
      d.    Use of Proceeds..................................................20
      e.    Financial Information of the Company.............................20
      f.    Internal Accounting Controls.....................................21
      g.    Listing..........................................................21
      h.    Expenses.........................................................21
      i.    Disclosure of Transactions and Other Material Information........22
      j.    Pledge of Securities.............................................23
      k.    Notices..........................................................24
      l.    Compliance with Laws and Maintenance of Permits..................25
      m.    Inspection and Audits............................................25
      n.    Insurance........................................................25
      o.    Collateral.......................................................26
      p.    Taxes............................................................27
      q.    Intellectual Property............................................27
      r.    Patriot Act, Investor Secrecy Act and Office of Foreign Assets
            Control..........................................................27
      s.    Drilling Title Opinions..........................................28
      t.    Security Covenants...............................................28
      u.    [INTENTIONALLY OMITTED]..........................................30
      v.    Stop Orders......................................................30
      w.    Market Regulations...............................................31

6.    NEGATIVE COVENANTS.....................................................31
      a.    [INTENTIONALLY OMITTED]..........................................31
      b.    Status...........................................................31
      c.    Stay, Extension and Usury Laws...................................31
      d.    Payment Restrictions Affecting Subsidiaries......................32
      e.    Prepayments......................................................32
      f.    Indebtedness.....................................................32
      g.    Liens............................................................33
      h.    Corporate Existence..............................................33
      i.    Restriction on Loans; Investments; Subsidiary Equity.............33
      j.    Equipment........................................................34
      k.    Affiliate Transactions...........................................34
      l.    Settling of Accounts.............................................34
      m.    Limitation on Sale and Leaseback Transactions....................35
      n.    Investment Company; Public Utility...............................35
      o.    Real Property Leases.............................................35
      p.    Restriction on Purchases or Payments.............................35
      q.    No Avoidance of Obligations......................................36
      r.    No Integrated Offering...........................................36
      s.    Regulation M.....................................................36
      t.    Financial Covenant...............................................36

7.    LIMITED WAIVER.........................................................37

8.    CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO CLOSE AN ADDITIONAL
      CLOSING.
      38

9.    CONDITIONS TO BUYERS' OBLIGATIONS TO CLOSE AN ADDITIONAL CLOSING.
      38

10.   INDEMNIFICATION........................................................39
      a.    Company Indemnification Obligation...............................39
      b.    Indemnification Procedures.......................................40

11.   AMENDMENT AND RESTATEMENT OF LOAN AGREEMENT............................41

12.   GOVERNING LAW; MISCELLANEOUS...........................................41
      a.    Governing Law; Jurisdiction; Jury Trial..........................41
      b.    Counterparts.....................................................42
      c.    Headings.........................................................42
      d.    Severability.....................................................42
      e.    Entire Agreement; Amendments.....................................42
      f.    Notices..........................................................43
      g.    Successors and Assigns...........................................43
      h.    No Third Party Beneficiaries.....................................44
      i.    Survival.........................................................44
      j.    Further Assurances...............................................44
      k.    Termination......................................................44
      l.    Placement Agent..................................................45
      m.    No Strict Construction...........................................45
      n.    Waiver of Subrogation............................................45
      o.    Remedies.........................................................45
      p.    Rescission and Withdrawal Right..................................45
      q.    Payment Set Aside................................................46
      r.    Independent Nature of the Buyers.................................46
      s.    Interpretative Matters...........................................46