Unassociated Document


     

    Exhibit
      10.29

    
      
 

    THIS
      AGREEMENT PROVIDES FOR AN UNCOMMITTED FACILITY IN ADDITION TO A COMMITTED
      FACILITY. THE PROVISION OF LOANS UNDER THE UNCOMMITTED FACILITY IS DISCRETIONARY
      ON THE PART OF THE LENDERS IN THEIR SOLE AND ABSOLUTE DISCRETION.

     

      
        

      

    

     

    CREDIT
      AND GUARANTY AGREEMENT


     

    dated
      as
      of May 11, 2007

     

    among


     

    TEKOIL
      AND GAS GULF COAST, LLC,

     

    TEKOIL
      & GAS CORPORATION 

    AND
      

    THE
      OTHER
      GUARANTORS PARTY HERETO FROM TIME TO TIME,

    


    VARIOUS
      LENDERS,

    


    J.
      ARON
& COMPANY,

    as
      Lead
      Arranger and Syndication Agent,

    


    and

    


    J.
      ARON
& COMPANY,

    as
      Administrative Agent

    


    
      
        

      

    

    


    $50,000,000
      Senior Secured Credit Facility

     

    
      

    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      TABLE
        OF CONTENTS

       

      
        	 	 	 	 	
                Page

              
	 	 	 	 	 
	
                SECTION
                  1

              	 	
                DEFINITIONS
                  AND INTERPRETATION

              	 	
                1

              
	 	 	 	 	 	 	 
	 	 	
                1.1

              	 	
                Definitions

              	 	
                1

              
	 	 	
                1.2

              	 	
                Accounting
                  Terms

              	 	
                25

              
	 	 	
                1.3

              	 	
                Interpretation,
                  etc

              	 	
                25

              
	 	 	
                1.4

              	 	
                Joint
                  Preparation; Construction of Indemnities and Releases

              	 	
                26

              
	 	 	 	 	 
	
                SECTION
                  2

              	 	
                LOANS

              	 	
                26

              
	 	 	 	 	 
	 	 	
                2.1

              	 	
                Loans

              	 	
                26

              
	 	 	
                2.2

              	 	
                Borrowing
                  Mechanics

              	 	
                26

              
	 	 	
                2.3

              	 	
                Pro
                  Rata Shares; Availability of Funds

              	 	
                28

              
	 	 	
                2.4

              	 	
                Use
                  of Proceeds

              	 	
                28

              
	 	 	
                2.5

              	 	
                Evidence
                  of Liabilities; Register; Lenders' Books and Records;
                  Notes

              	 	
                29

              
	 	 	
                2.6

              	 	
                Interest
                  on Loans

              	 	
                29

              
	 	 	
                2.7

              	 	
                Reserved

              	 	
                30

              
	 	 	
                2.8

              	 	
                Default
                  Interest

              	 	
                30

              
	 	 	
                2.9

              	 	
                Fees

              	 	
                30

              
	 	 	
                2.10

              	 	
                ANCF
                  Calculation

              	 	
                30

              
	 	 	
                2.11

              	 	
                ANCF
                  Payment of Principal

              	 	
                30

              
	 	 	
                2.12

              	 	
                Voluntary
                  Prepayments

              	 	
                30

              
	 	 	
                2.13

              	 	
                Mandatory
                  Prepayments

              	 	
                31

              
	 	 	
                2.14

              	 	
                General
                  Provisions Regarding Payments

              	 	
                31

              
	 	 	
                2.15

              	 	
                Ratable
                  Sharing

              	 	
                32

              
	 	 	
                2.16

              	 	
                Increased
                  Costs; Capital Adequacy

              	 	
                32

              
	 	 	
                2.17

              	 	
                Taxes;
                  Withholding, etc

              	 	
                34

              
	 	 	
                2.18

              	 	
                Measures
                  to Mitigate

              	 	
                36

              
	 	 	
                2.19

              	 	
                Collateral
                  Accounts

              	 	
                36

              
	 	 	 	 	 
	
                SECTION
                  3

              	 	
                CONDITIONS
                  PRECEDENT

              	 	
                37

              
	 	 	 	 	 
	 	 	
                3.1

              	 	
                Closing
                  Date

              	 	
                37

              
	 	 	
                3.2

              	 	
                Conditions
                  to Each Credit Extension

              	 	
                42

              
	 	 	 	 	 
	
                SECTION
                  4

              	 	
                REPRESENTATIONS
                  AND WARRANTIES

              	 	
                43

              
	 	 	 	 	 
	 	 	
                4.1

              	 	
                No
                  Default

              	 	
                43

              
	 	 	
                4.2

              	 	
                Organization
                  and Good Standing

              	 	
                44

              
	 	 	
                4.3

              	 	
                Authorization

              	 	
                44

              
	 	 	
                4.4

              	 	
                No
                  Conflicts or Consents

              	 	
                44

              
	 	 	
                4.5

              	 	
                Enforceable
                  Obligations

              	 	
                44

              
	 	 	
                4.6

              	 	
                Current
                  Financial Statements

              	 	
                44

              
	 	 	
                4.7

              	 	
                Other
                  Obligations and Restrictions

              	 	
                45

              
	 	 	
                4.8

              	 	
                Full
                  Disclosure

              	 	
                45

              
	 	 	
                4.9

              	 	
                Litigation

              	 	
                45

              
	 	 	
                4.10

              	 	
                Labor
                  Disputes and Acts of God

              	 	
                46

              
	 	 	
                4.11

              	 	
                ERISA
                  Plans and Liabilities

              	 	
                46

              


      

       

       

      
        
          
          

        

        
          -i-

          
            

          

        

        
          
          

        

      

      
         

        TABLE
          OF CONTENTS

        (continued)

      

       

      
        	 	 	 	 	 	 	
                Page

              
	 	 	
                4.12

              	 	
                Environmental
                  and Other Laws

              	 	
                46

              
	 	 	
                4.13

              	 	
                Names
                  and Places of Business

              	 	
                47

              
	 	 	
                4.14

              	 	
                Subsidiaries

              	 	
                47

              
	 	 	
                4.15

              	 	
                Licenses

              	 	
                47

              
	 	 	
                4.16

              	 	
                Government
                  Regulation

              	 	
                47

              
	 	 	
                4.17

              	 	
                Solvency

              	 	
                47

              
	 	 	
                4.18

              	 	
                Taxes

              	 	
                47

              
	 	 	
                4.19

              	 	
                Projections

              	 	
                48

              
	 	 	
                4.20

              	 	
                No
                  Distributions

              	 	
                48

              
	 	 	
                4.21

              	 	
                Title
                  to Properties; Accounts

              	 	
                48

              
	 	 	
                4.22

              	 	
                No
                  Defaults

              	 	
                48

              
	 	 	
                4.23

              	 	
                Margin
                  Stock

              	 	
                48

              
	 	 	
                4.24

              	 	
                Certain
                  Fees

              	 	
                49

              
	 	 	
                4.25

              	 	
                Leases
                  and Contracts; Performance of Obligations

              	 	
                49

              
	 	 	
                4.26

              	 	
                Marketing
                  Arrangements

              	 	
                49

              
	 	 	
                4.27

              	 	
                Right
                  to Receive Payment for Future Production

              	 	
                50

              
	 	 	
                4.28

              	 	
                Operation
                  of Oil and Gas Properties

              	 	
                50

              
	 	 	
                4.29

              	 	
                Ad
                  Valorem and Severance Taxes; Litigation

              	 	
                50

              
	 	 	
                4.30

              	 	
                Working
                  Interest; Net Revenue Interest

              	 	
                51

              
	 	 	 	 	 
	
                SECTION
                  5

              	 	
                AFFIRMATIVE
                  COVENANTS

              	 	
                51

              
	 	 	 	 	 
	 	 	
                5.1

              	 	
                Payment
                  and Performance

              	 	
                51

              
	 	 	
                5.2

              	 	
                Books,
                  Financial Statements and Reports

              	 	
                51

              
	 	 	
                5.3

              	 	
                Other
                  Information and Inspections

              	 	
                55

              
	 	 	
                5.4

              	 	
                Notice
                  of Material Events and Change of Name

              	 	
                55

              
	 	 	
                5.5

              	 	
                Maintenance
                  of Properties and Professional Staff

              	 	
                56

              
	 	 	
                5.6

              	 	
                Maintenance
                  of Existence and Qualifications

              	 	
                57

              
	 	 	
                5.7

              	 	
                Payment
                  of Taxes, etc

              	 	
                57

              
	 	 	
                5.8

              	 	
                Bonding
                  and Insurance

              	 	
                57

              
	 	 	
                5.9

              	 	
                Performance
                  on Company's Behalf

              	 	
                59

              
	 	 	
                5.10

              	 	
                Interest

              	 	
                59

              
	 	 	
                5.11

              	 	
                Compliance
                  with Agreements and Law

              	 	
                59

              
	 	 	
                5.12

              	 	
                Environmental
                  Matters: Environmental Reviews

              	 	
                59

              
	 	 	
                5.13

              	 	
                Evidence
                  of Compliance

              	 	
                60

              
	 	 	
                5.14

              	 	
                Agreement
                  to Deliver Guaranty and Security Documents

              	 	
                60

              
	 	 	
                5.15

              	 	
                Perfection
                  and Protection of Security Interests and Liens

              	 	
                61

              
	 	 	
                5.16

              	 	
                Bank
                  Accounts; Offset

              	 	
                61

              
	 	 	
                5.17

              	 	
                Production
                  Proceeds

              	 	
                62

              
	 	 	
                5.18

              	 	
                Approved
                  Plan of Development

              	 	
                62

              
	 	 	
                5.19

              	 	
                Reviews

              	 	
                62

              
	 	 	
                5.20

              	 	
                Hedging
                  Contracts

              	 	
                63

              
	 	 	
                5.21

              	 	
                Non-Consolidation

              	 	
                63

              
	 	 	
                5.22

              	 	
                ORRI
                  Conveyance

              	 	
                63

              


      

       

      
        
          
          

        

        
          -ii-

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

      (continued)

       

      
        	 	 	 	 	 	 	
                Page

              
	 	 	
                5.23

              	 	
                Leases
                  and Contracts; Performance of Obligations

              	 	
                63

              
	 	 	
                5.24

              	 	
                Representation
                  to Continue to be True

              	 	
                63

              
	 	 	
                5.25

              	 	
                Non-Voting
                  Representative

              	 	
                64

              
	 	 	 	 	 
	
                SECTION
                  6

              	 	
                NEGATIVE
                  COVENANTS

              	 	
                64

              
	 	 	 	 	 
	 	 	
                6.1

              	 	
                Indebtedness

              	 	
                64

              
	 	 	
                6.2

              	 	
                Limitation
                  on Liens and Negative Pledges; Equitable Lien

              	 	
                64

              
	 	 	
                6.3

              	 	
                Hedging
                  Contracts

              	 	
                65

              
	 	 	
                6.4

              	 	
                Subsidiaries;
                  Mergers; Capital Stock Transactions

              	 	
                66

              
	 	 	
                6.5

              	 	
                Limitation
                  on Sales of Property

              	 	
                66

              
	 	 	
                6.6

              	 	
                Dividends
                  and Redemptions

              	 	
                67

              
	 	 	
                6.7

              	 	
                Limitation
                  on Investments, and Deposit Accounts

              	 	
                68

              
	 	 	
                6.8

              	 	
                Transactions
                  with Affiliates

              	 	
                69

              
	 	 	
                6.9

              	 	
                Certain
                  Contracts; Multiemployer ERISA Plans

              	 	
                69

              
	 	 	
                6.10

              	 	
                Current
                  Ratio

              	 	
                69

              
	 	 	
                6.11

              	 	
                Debt
                  to EBITDA Ratio

              	 	
                69

              
	 	 	
                6.12

              	 	
                Collateral
                  Coverage Ratios

              	 	
                70

              
	 	 	
                6.13

              	 	
                Conduct
                  of Business

              	 	
                71

              
	 	 	
                6.14

              	 	
                Fiscal
                  Year

              	 	
                71

              
	 	 	
                6.15

              	 	
                General
                  and Administrative Expenses

              	 	
                71

              
	 	 	
                6.16

              	 	
                Capital
                  Expenditures

              	 	
                71

              
	 	 	
                6.17

              	 	
                Amendments
                  to Organizational Documents

              	 	
                71

              
	 	 	 	 	 
	
                SECTION
                  7

              	 	
                GUARANTY

              	 	
                71

              
	 	 	 	 	 
	 	 	
                7.1

              	 	
                Guaranty
                  of the Obligations

              	 	
                71

              
	 	 	
                7.2

              	 	
                Contribution
                  by Guarantors

              	 	
                72

              
	 	 	
                7.3

              	 	
                Payment
                  by Guarantors

              	 	
                72

              
	 	 	
                7.4

              	 	
                Liability
                  of Guarantors Absolute

              	 	
                73

              
	 	 	
                7.5

              	 	
                Waivers
                  by Guarantors

              	 	
                74

              
	 	 	
                7.6

              	 	
                Guarantors'
                  Rights of Subrogation, Contribution, etc

              	 	
                75

              
	 	 	
                7.7

              	 	
                Subordination
                  of Other Obligations

              	 	
                76

              
	 	 	
                7.8

              	 	
                Continuing
                  Guaranty

              	 	
                76

              
	 	 	
                7.9

              	 	
                Authority
                  of Guarantors or Company

              	 	
                76

              
	 	 	
                7.10

              	 	
                Financial
                  Condition of Company

              	 	
                76

              
	 	 	
                7.11

              	 	
                Bankruptcy,
                  etc

              	 	
                76

              
	 	 	 	 	 
	
                SECTION
                  8

              	 	
                EVENTS
                  OF DEFAULT

              	 	
                77

              
	 	 	 	 	 
	 	 	
                8.1

              	 	
                Events
                  of Default

              	 	
                77

              
	 	 	
                8.2

              	 	
                Application
                  of Funds

              	 	
                81

              
	 	 	 	 	 
	
                SECTION
                  9

              	 	
                AGENTS

              	 	
                82

              
	 	 	 	 	 
	 	 	
                9.1

              	 	
                Appointment
                  of Agents

              	 	
                82

              
	 	 	
                9.2

              	 	
                Powers
                  and Duties

              	 	
                82

              
	 	 	
                9.3

              	 	
                General
                  Immunity

              	 	
                82

              


      

       

      
        
          
          

        

        
          -iii-

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (continued)

         

      

      
        	 	 	 	 	 	 	
                Page

              
	 	 	
                9.4

              	 	
                Agents
                  Entitled to Act as Lender

              	 	
                83

              
	 	 	
                9.5

              	 	
                Lenders'
                  Representations, Warranties and Acknowledgment

              	 	
                83

              
	 	 	
                9.6

              	 	
                Right
                  to Indemnity

              	 	
                84

              
	 	 	
                9.7

              	 	
                Successor
                  Administrative Agent

              	 	
                84

              
	 	 	
                9.8

              	 	
                Security
                  Documents and Guaranty

              	 	
                85

              
	 	 	 	 	 
	
                SECTION
                  10

              	 	
                MISCELLANEOUS

              	 	
                85

              
	 	 	 	 	 
	 	 	
                10.1

              	 	
                Notices

              	 	
                85

              
	 	 	
                10.2

              	 	
                Expenses

              	 	
                86

              
	 	 	
                10.3

              	 	
                Indemnity,
                  WAIVER OF PUNITIVE DAMAGES

              	 	
                86

              
	 	 	
                10.4

              	 	
                Setoffs

              	 	
                88

              
	 	 	
                10.5

              	 	
                Amendments
                  and Waivers

              	 	
                88

              
	 	 	
                10.6

              	 	
                Successors
                  and Assigns; Participations

              	 	
                89

              
	 	 	
                10.7

              	 	
                Independence
                  of Covenants

              	 	
                93

              
	 	 	
                10.8

              	 	
                Survival
                  of Representations, Warranties and Agreements; Termination

              	 	
                93

              
	 	 	
                10.9

              	 	
                No
                  Waiver; Remedies Cumulative

              	 	
                93

              
	 	 	
                10.10

              	 	
                Marshalling;
                  Payments Set Aside

              	 	
                94

              
	 	 	
                10.11

              	 	
                Severability

              	 	
                94

              
	 	 	
                10.12

              	 	
                Obligations
                  Several; Independent Nature of Lenders' Rights

              	 	
                94

              
	 	 	
                10.13

              	 	
                Headings

              	 	
                94

              
	 	 	
                10.14

              	 	
                APPLICABLE
                  LAW

              	 	
                94

              
	 	 	
                10.15

              	 	
                CONSENT
                  TO JURISDICTION

              	 	
                94

              
	 	 	
                10.16

              	 	
                WAIVER
                  OF JURY TRIAL

              	 	
                95

              
	 	 	
                10.17

              	 	
                Confidentiality

              	 	
                95

              
	 	 	
                10.18

              	 	
                Usury
                  Savings Clause

              	 	
                96

              
	 	 	
                10.19

              	 	
                Counterparts

              	 	
                96

              
	 	 	
                10.20

              	 	
                Effectiveness

              	 	
                97

              
	 	 	
                10.21

              	 	
                USA
                  Patriot Act Notice

              	 	
                97

              
	 	 	
                10.22

              	 	
                Third
                  Party Beneficiaries

              	 	
                97

              
	 	 	
                10.23

              	 	
                Royalty
                  Owner Participation in Property Sales

              	 	
                97

              
	 	 	
                10.24

              	 	
                Participation
                  in Future Financings

              	 	
                98

              


      

      


      
        
          
          

        

        
          -iv-

          
            

          

        

        
          
          

        

         

        TABLE
          OF CONTENTS

         

        
          
            	
                    APPENDICES:

                  	
                    A

                  	 	
                    Commitments

                  	 
	 	
                    B

                  	 	
                    Notice
                      Addresses

                  	 
	 	 	 	 	 
	
                    SCHEDULES:

                  	
                    1.1

                  	 	
                    Security
                      Schedule

                  	 
	 	
                    1.2

                  	 	
                    Operating
                      Expense Budget

                  	 
	 	
                    2.2

                  	 	
                    Wire
                      Transfer Instructions

                  	 
	 	
                    4.7

                  	 	
                    Other
                      Obligations and Restrictions

                  	 
	 	
                    4.8

                  	 	
                    Initial
                      Engineering Report Disclosures

                  	 
	 	
                    4.9

                  	 	
                    Litigation

                  	 
	 	
                    4.11

                  	 	
                    ERISA
                      Plans and Liabilities

                  	 
	 	
                    4.12

                  	 	
                    Environmental
                      Matters

                  	 
	 	
                    4.13

                  	 	
                    Names
                      and Places of Business

                  	 
	 	
                    4.14

                  	 	
                    Organizational
                      and Capital Structure

                  	 
	 	
                    4.18

                  	 	
                    Taxes

                  	 
	 	
                    4.22

                  	 	
                    Material
                      Contracts

                  	 
	 	
                    4.24

                  	 	
                    Certain
                      Fees

                  	 
	 	
                    4.26

                  	 	
                    Sale
                      of Production

                  	 
	 	
                    4.27

                  	 	
                    Payments
                      for Future Production

                  	 
	 	
                    6.1

                  	 	
                    Insurance
                      Premium Financing Indebtedness

                  	 
	 	 	 	 	 
	
                    EXHIBITS:

                  	
                    A

                  	 	
                    Funding
                      Notice

                  	 
	 	
                    B

                  	 	
                    Note

                  	 
	 	
                    C-1

                  	 	
                    Compliance
                      Certificate

                  	 
	 	
                    C-2

                  	 	
                    Environmental
                      Compliance Certificate

                  	 
	 	
                    D

                  	 	
                    Opinion
                      of Counsel

                  	 
	 	
                    E

                  	 	
                    Assignment
                      Agreement

                  	 
	 	
                    F

                  	 	
                    Certificate
                      Re Non-bank Status

                  	 
	 	
                    G-1

                  	 	
                    Closing
                      Date Certificate

                  	 
	 	
                    G-2

                  	 	
                    Solvency
                      Certificate

                  	 
	 	
                    H

                  	 	
                    Approval
                      Letter

                  	 
	 	
                    I

                  	 	
                    Counterpart
                      Agreement

                  	 


          

        

      

    

     

     

    
      
        
        

      

      
        -v-

        
          

        

      

      
        
        

      

    

    CREDIT
      AND GUARANTY AGREEMENT

     

    This
      Credit and Guaranty Agreement, dated as of May 11, 2007 is entered into by
      and among Tekoil and Gas Gulf Coast, LLC, a Delaware limited liability company
      ("Company"),
      Tekoil & Gas Corporation, a Delaware corporation ("Parent"),
      and
      the other Guarantors (as defined below) party hereto from time to time, the
      Lenders (as defined below) party hereto from time to time, J. Aron & Company
      ("J.
      Aron"),
      as
      Lead Arranger and as Syndication Agent (in such capacities, "Syndication
      Agent"),
      and
      J. Aron & Company, as Administrative Agent for such Lenders (together with
      its permitted successors in such capacity, "Administrative
      Agent").

     

    RECITALS:

     

    WHEREAS,
      capitalized terms used in these Recitals shall have the respective meanings
      set
      forth for such terms in Section 1.1 hereof;

     

    WHEREAS,
      Lenders have agreed to extend Loans to Company, the proceeds of which will
      be
      used (a) to acquire and develop certain Oil and Gas Properties, and (b) as
      otherwise provided in Section 2.4;

     

    WHEREAS,
      Company has agreed to secure all of its Obligations by granting to
      Administrative Agent, for the benefit of Secured Parties, a First Priority
      Lien
      on its assets, including a pledge of all of the Capital Stock of each of its
      Subsidiaries;

     

    WHEREAS,
      Guarantors have agreed to guarantee the Obligations of Company hereunder and
      to
      secure their respective Obligations by granting to Administrative Agent, for
      the
      benefit of Secured Parties, a First Priority Lien on their applicable respective
      assets;

     

    WHEREAS,
      To further induce Lenders to enter into this Agreement, Company has agreed
      to
      convey the ORRI to Royalty Owner and to issue membership interests to Equity
      Owner, and Parent has agreed to issue the Warrants to Warrant
      Owner;

     

    NOW,
      THEREFORE, in consideration of the premises and the agreements, provisions
      and
      covenants herein contained, the parties hereto agree as follows:

     

    SECTION
      1 

    DEFINITIONS
      AND INTERPRETATION

     

    
      1.1  Definitions.
        The
        following terms used herein, including in the preamble, recitals, exhibits
        and
        schedules hereto, shall have the following meanings:

    

     

    "Acquired
      Assets"
      means
      the properties and assets to be conveyed to Company pursuant to the Acquisition
      Documents.

     

    "Acquisition"
      means
      the purchase by Company of the Acquired Assets.

     

    "Acquisition
      Agreements"
      means
      that certain Purchase and Sale Agreement, dated as of October 1, 2006,
between
      Sellers and Parent,
      as amended prior to the date hereof.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    "Acquisition
      Documents"
      means
      (a) the Acquisition Agreements, (b) the Assignment and Assumption Agreement
      dated as of February 8, 2007, between Parent and Company, and (c) all
      other agreements, assignments, deeds, conveyances, certificates and other
      documents and instruments now or hereafter executed and delivered pursuant
      to
      the Acquisition Agreements or in connection with the Acquisition.

     

    "Act"
      as
      defined in Section 10.21.

     

    "Adjusted
      Eurodollar Rate"
      means,
      for any Interest Period, (a) the rate per annum (rounded to the nearest 1/100
      of
      1%) equal to the rate determined by Administrative Agent to be the offered
      rate
      which appears on the page of the Telerate Screen which displays an average
      British Bankers Association Interest Settlement Rate (such page currently being
      page number 3740 or 3750, as applicable) for deposits in Dollars (for delivery
      on the first day of such Interest Period) with a term equivalent to such
      Interest Period, determined as of approximately 11:00 a.m. (London, England
      time) on the date that is two Business Days prior to the first day of such
      Interest Period, (b) in the event the rate referenced in the preceding clause
      (a) does not appear on such page or service or if such page or service shall
      cease to be available, the rate per annum (rounded to the nearest 1/100 of
      1%)
      equal to the rate determined by Administrative Agent to be the offered rate
      on
      such other page or other service which displays an average British Bankers
      Association Interest Settlement Rate for deposits in Dollars (for delivery
      on
      the first day of such Interest Period) with a term equivalent to such Interest
      Period, determined as of approximately 11:00 a.m. (London, England time) on
      the
      date that is two Business Days prior to the first day of such Interest Period,
      or (c) in the event the rates referenced in the preceding clauses (a) and (b)
      are not available, the rate per annum (rounded to the nearest 1/100 of 1%)
      equal
      to the offered quotation rate to first class banks in the London interbank
      market by J. Aron for deposits in Dollars (for delivery on the first day of
      such
      Interest Period) of amounts in same day funds comparable to the average
      principal amount of the applicable Loan of Administrative Agent (in its capacity
      as a Lender, during such Interest Period) with maturities comparable to such
      Interest Period as of approximately 11:00 a.m. (London, England time) on the
      date that is two Business Days prior to the first day of such Interest
      Period.

     

    "Administrative
      Agent"
      as
      defined in the preamble hereto.

     

    "Affiliate"
      means,
      as applied to any Person, any other Person directly or indirectly controlling,
      controlled by, or under common control with, that Person. For the purposes
      of
      this definition, "control" (including, with correlative meanings, the terms
      "controlling", "controlled by" and "under common control with"), as applied
      to
      any Person, means the possession, directly or indirectly, of the power (through
      the ownership of voting securities or by contract or otherwise) (a) to vote
      10%
      or more of the Securities having ordinary voting power for the election of
      directors of such Person or (b) to direct or cause the direction of the
      management and policies of that Person.

     

    "Agent"
      means
      each of Syndication Agent and Administrative Agent.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    "Agreed
      Pricing"
      means:

     

    (a) for
      anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales
      contract with an investment grade counterparty (or another counterparty approved
      by Administrative Agent), the fixed price or prices provided for in such sales
      contract during the term thereof; and

     

    (b) for
      anticipated sales of Hydrocarbons that are hedged by a fixed price Hedging
      Contract with an investment grade counterparty, the fixed price or prices
      provided for in such Hedging Contract during the term thereof, as modified
      by
      any necessary adjustment specified by Administrative Agent for quality and
      geographical differentials; and

     

    (c) for
      anticipated sales of Hydrocarbons that are hedged by a Hedging Contract with
      an
      investment grade counterparty which Hedging Contract provides for a range of
      prices between a floor and a ceiling, the prices provided for in subsection
      (d)
      below, provided that during the term of such Hedging Contract such prices shall
      in no event be less than such floor or exceed such ceiling, as such floor and
      ceiling are modified by any necessary adjustment specified by Administrative
      Agent for quality and geographical differentials; and

     

    (d) for
      anticipated sales of Hydrocarbons, if such sales are not hedged by a Hedging
      Contract or sales contract that is described in paragraphs (a), (b), or (c)
      above, for the date of calculation (or, if such date is not a Business Day,
      for
      the first Business Day thereafter), and with any necessary adjustment specified
      by Administrative Agent for quality and geographical differentials:


     

    (i) For
      the
      remainder of the current calendar year, ninety percent (90%) of the average
      NYMEX Pricing for the remaining contracts in the current calendar
      year,

     

    (ii) For
      each
      of the succeeding four complete calendar years, ninety percent (90%) of the
      average NYMEX Pricing for the twelve months in each such calendar year,
      and

     

    (iii) For
      the
      succeeding fifth complete calendar year, and for each calendar year thereafter,
      ninety percent (90%) of the average NYMEX Pricing for the twelve months in
      such
      fifth calendar year.

     

    "Agreement"
      means
      this Credit and Guaranty Agreement, as it may be amended, supplemented or
      otherwise modified from time to time.

     

    "ANCF"
      (or
      "Adjusted
      Net Cash Flow")
      means
      the remainder of:

     

    (a) the
      sum,
      without duplication, of all cash revenues and cash receipts of Company and
      its
      Subsidiaries from any source or activity (excluding only (i) funds received
      from Loans hereunder, (ii) funds received from capital contributions made
      to Company, including sales of new Capital Stock and funds received for options
      or warrants to acquire such Capital Stock, and (iii) funds belonging to or
      received for the credit of third parties, such as royalty, working interest
      or
      other interest owners, that are received for transfer or payment to such third
      parties) during any Calculation Quarter, (with the first such Calculation
      Quarter being comprised of the period beginning on the Closing Date and ending
      on August 31, 2007), minus

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (b) the
      sum,
      without duplication, of all cash payments, net to the interests of Company
      and
      its Subsidiaries, made during such Calculation Quarter (excluding any payments
      financed by funds described in clause (i) or (ii) of subparagraph (a) above)
      for:

     

    
      (i)  Direct
        Taxes paid on Properties or production of Hydrocarbons during such Calculation
        Quarter,

    

     

    
      (ii)  delay
        rentals and lease bonuses payable during such Calculation Quarter that are
        included in the Approved Plan of Development,

    

     

    
      (iii)  ANCF
        Capital Expenditures made during such Calculation Quarter,

    

     

    
      (iv)  ANCF
        LOE
        during such Calculation Quarter,

    

     

    
      (v)  ANCF
        Overhead Costs during such Calculation Quarter,

    

     

    
      (vi)  ANCF
        Transportation Costs during such Calculation Quarter,

    

     

    
      (vii)  payments
        owing during such Calculation Quarter under Hedging Contracts permitted
        hereunder;

    

     

    
      (viii)  interest
        payable during such Calculation Quarter on the Loans, together with the amount
        of payments, if any, due to Agents and Lenders under Section 2.9 hereof or
        under
        any similar sections of any other Transaction Documents; and

    

     

    
      (ix)  Permitted
        Tax Distributions and any other Permitted Other Distributions during such
        Calculation Quarter.

    

     

    This
      definition of "ANCF"
      is to
      be used for the purpose of determining the payments that Company is required
      to
      make under Section 2.11 below; neither this definition nor
      Section 2.11 affects or restricts Lenders' rights or ability to apply
      amounts that they receive from the enforcement of their Liens and remedies
      against Collateral or Lenders' right to require a different application of
      funds
      as a condition to any waiver of or amendment to the Transaction Documents by
      Lenders (such as any consent to a sale by Company of all or substantially all
      of
      its assets).

     

    "ANCF
      Capital Expenditures"
      means
      capital expenditures made or to be made by Company on the Eligible Mortgaged
      Properties, to the extent the same either (a) have been approved by Required
      Lenders at the time in question by means of an Approval Letter, or (b) are
      included in the Approved Plan of Development, as then in effect; provided that
      if a Default or Event of Default exists during any Calculation Quarter, then
      "ANCF
      Capital Expenditures"
      for
      such Calculation Quarter shall be zero or such other amount as may be determined
      by the Administrative Agent in its sole discretion.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    "ANCF
      LOE"
      means
      (a) leasehold operating expenses in the ordinary course of business of the
      kind
      chargeable as direct charges under a COPAS Accounting Procedure for Joint
      Operations (2005 form published by the Council of Petroleum Accountants
      Societies), and (b) other field level or lease level charges for operations
      on
      the Eligible Mortgaged Properties (excluding ANCF Capital Expenditures and
      other
      capital expenditures) that have been approved by Required Lenders at the time
      in
      question by means of an Approval Letter, not to exceed, collectively, for any
      Calculation Quarter, the lesser of (i) such actual expenses and charges for
      such Calculation Quarter and (ii) the amount set forth on Schedule 1.2
      for such Calculation Quarter.

     

    "ANCF
      Overhead Costs"
      means
      (a) Permitted G&A Expense Amounts, and (b) other costs of Company to the
      extent such other costs have been approved as ANCF Overhead Costs by Required
      Lenders at the time in question by means of an Approval Letter; provided that
      until the occurrence of the Required Capital Date "ANCF
      Overhead Costs"
      for
      each Calculation Quarter shall be zero or such other amount as may be determined
      by the Administrative Agent in its sole discretion.

     

    "ANCF
      Transportation Costs"
      means
      (a) the actual costs of gathering, processing and transporting production from
      the Eligible Mortgaged Properties from the wellhead to the point of sale,
      provided that all such costs are negotiated with, and paid to, third parties
      in
      arms-length transactions on terms which are reasonable in the area of operations
      for the quality and quantity of such production for the time period negotiated,
      at the time such prices are agreed to, or (b) other transportation or marketing
      costs, to the extent such other transportation and marketing costs have been
      approved by Required Lenders at the time in question by means of an Approval
      Letter.

     

    "Approval
      Letter"
      means a
      letter given by Administrative Agent on behalf of Required Lenders in the form
      of Exhibit H.

     

    "Approved
      Plan of Development"
      or
      "APOD"
      means
      Company's written plan of development with respect to budgeted capital
      expenditures (including maximum annual expenditures) and other development
      activities that is delivered to Lenders pursuant to Section 3.1, as amended
      and supplemented from time to time with the consent of Required Lenders;
      provided that no such consent shall be required for amendments, modifications
      or
      supplements to the extent, but only to the extent, that any such amendments,
      modifications or supplements (a) either (i) are administrative or
      ministerial in nature, or (ii) would make non-material amendments to the
      timing for the completion of any such development, and (b) do not increase
      the aggregate permitted budgeted capital expenditures of Company and its
      Subsidiaries under such written plan.

     

    "Assignment
      Agreement"
      means
      an Assignment and Assumption Agreement substantially in the form of
      Exhibit E, with such amendments or modifications as may be approved by
      Administrative Agent.

     

    "Authorized
      Officer"
      means
      (a) with respect to any Person that is a corporation, any individual holding
      the
      position of chairman of the board (if an officer), chief executive officer
      or
      president, and such Person's chief financial officer or treasurer, (b) with
      respect to any Person that is a limited liability company, if such Person has
      officers, then any individual holding the position of chairman of the board
      (if
      an officer), chief executive officer or president, and if such Person is managed
      by a member, then the Responsible Officer of such Person's managing member,
      and
      (c) with respect to any Person that is a general partnership, limited
      partnership or limited liability partnership, the Responsible Officer of such
      Person's general partner or partners

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    "Availability
      Termination Date"
      means
      the earliest to occur of (a) May 11, 2010, (b) the date on which all
      Commitments shall have been terminated pursuant to Section 8 or otherwise,
      and (c) the date that all Loans shall become due and payable in full hereunder,
      whether by acceleration or otherwise.

     

    "Bankruptcy Code"
      means
      Title 11 of the United States Code entitled "Bankruptcy,"
      as now
      and hereafter in effect, or any successor statute.

     

    "Beneficiary"
      means
      each Agent, each Lender, each Lender Counterparty, Royalty Owner and Warrant
      Owner.

     

    "Business
      Day"
      means
      (a) any day excluding Saturday, Sunday and any day which is a legal holiday
      under the Laws of the State of New York or is a day on which banking
      institutions located in such state are authorized or required by Law or other
      governmental action to close and (b) as used in the definitions of "Adjusted
      Eurodollar Rate"
      and
      "Quarterly
      Payment Date",
      the
      term "Business
      Day"
      shall
      mean any day which is a Business Day described in clause (a) and which is also
      a
      day for trading by and between banks in Dollar deposits in the London interbank
      market.

     

    "Calculation
      Quarter"
      means
      the three calendar month period commencing on the first day of March, June,
      September, and December of each year.

     

    "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), including, without limitation,
      partnership interests and membership interests, and any and all warrants, rights
      or options to purchase or other arrangements or rights to acquire any of the
      foregoing.

     

    "Certificate
      re Non-Bank Status"
      means a
      certificate substantially in the form of Exhibit F.

     

    "Change
      of Control"
      means
      the occurrence of any of the following events:

     

    With
      respect to Company and its Subsidiaries: (a) Parent ceases to own, either
      directly or indirectly, 100% of the equity interests in Company, other than
      the
      equity interests owned by the Equity Owner or its successors or permitted
      assigns, (b) Company shall cease to own, either directly or indirectly, 100%
      of
      the equity interests in any of its Subsidiaries, or (c) any Key Person
      ceases to be an officer of Company actively involved in the day to day
      management of Company at a level consistent with or greater than the office
      that
      he holds on the Closing Date and is
      not
      simultaneously replaced by an officer who is reasonably acceptable to the
Required
      Lenders.

    
       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

    

     

    With
      respect to Parent: (a) any "person" or "group" (as such terms are used in
      Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights
      (whether by means or warrants, options or otherwise) to become, the "beneficial
      owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
      directly or indirectly, of more than 50% of the outstanding common stock of
      Parent, (b) the board of directors of Parent shall cease to consist of a
      majority of Continuing Directors, or (c) any Key Person ceases to be an officer
      of Parent actively involved in the day to day management of Parent at a level
      consistent with or greater than the office that he holds on the Closing Date
      and
      is not simultaneously replaced by an officer who is reasonably acceptable to
      the
      Required Lenders.

     

    "Closing
      Date"
      means
      the date on which the first Loans are made.

     

    "Closing
      Date Certificate"
      means a
      Closing Date Certificate substantially in the form of
      Exhibit G-1.

     

    "Closing
      Date Transactions"
      means
      (i) the consummation of the Acquisition and (ii) acquisition of the
      membership interest in the Company by the Equity Owner on the Closing
      Date.

     

    "Collateral"
      means,
      collectively, all of the real, personal and mixed property (including Capital
      Stock) in which Liens are purported to be granted pursuant to the Security
      Documents as security for the Obligations.

     


"Collateral
  Account"
  means deposit account number XXXXXXX established in the name of Company with
  Amegy Bank National Association or such other deposit account as may be established
  by Company from time to time with the prior written consent of Administrative
  Agent, which consent may be given or withheld in its sole discretion.

     

    "Collateral
      Account Agreement"
      means
      that certain account control agreement dated May 11, 2007 among the
      Company, the Administrative Agent and the depositary bank party thereto pursuant
      to which such institution recognizes Administrative Agent’s Lien in the
      Collateral Account and agrees to take instructions only from the Administrative
      Agent as provided in such agreement.

     

    "Commitment"
      means,
      as to each Lender, its obligation to make Loans to Company pursuant to
      Section 2.1(a) in an aggregate principal amount at any one time outstanding
      not to exceed the amount set forth opposite such Lender's
      name on
      Annex A or in the Assignment Agreement pursuant to which such Lender becomes
      a
      party hereto, as applicable, as such amount may be adjusted from time to time
      in
      accordance with this Agreement. It is expressly understood and agreed that
      Lenders have no obligation to increase the amount of the commitments set forth
      on Annex A or such Assignment Agreement, as applicable, and that Lenders'
      commitments to make Loans hereunder is determined by reference to such
      Annex A or such Assignment Agreement, as applicable.

     

    "Company"
      as
      defined in the preamble hereto.

     

    "Compliance
      Certificate"
      means a
      Compliance Certificate substantially in the form of
      Exhibit C-1.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    "Consolidated"
      refers
      to the consolidation of Company or any other Credit Party, in accordance with
      GAAP, with its properly consolidated subsidiaries. References herein to a
      Person's Consolidated financial statements, financial position, financial
      condition, liabilities, etc. refer to the consolidated financial statements,
      financial position, financial condition, liabilities, etc. of such Person and
      its properly consolidated subsidiaries.

     

    "Consolidated
      Current Assets"
      as
      defined in Section 6.10.

     

    "Consolidated
      Current Liabilities"
      as
      defined in Section 6.10.

     

    "Consolidated
      Net Income"
      means,
      as to any Person or Persons for any period, the gross revenues of such Person
      or
      Persons for such period, plus any cash dividends or distributions actually
      received by such Person or Persons from any other business entity, minus all
      expenses and other proper charges (including taxes on income and franchise
      taxes, to the extent imposed upon such Person or Persons but excluding charges
      for accrued unpaid dividends on preferred stock of such Person or Persons for
      such period), determined on a Consolidated basis after eliminating earnings
      or
      losses attributable to outstanding minority interests, but excluding the net
      earnings of any other business entity in which such Person or Persons has an
      ownership interest.

     

    "Continuing
      Directors" means
      the
      directors of Parent on the Closing Date, and each other director, if, in each
      case, such other director's nomination for election to the board of directors
      of
      Parent is recommended by at least 50% of the then Continuing
      Directors.

     

    "Contractual
      Obligation"
      means,
      as applied to any Person, any provision of any Security issued by that Person
      or
      of any indenture, mortgage, deed of trust, contract, undertaking, agreement
      or
      other instrument to which that Person is a party or by which it or any of its
      properties is bound or to which it or any of its properties is
      subject.

     

    "Contributing
      Guarantors"
      as
      defined in Section 7.2.

     

    "Counterpart
      Agreement"
      means a
      Counterpart Agreement substantially in the form of Exhibit I delivered by a
      Credit Party pursuant to Section 5.14.

     

    "Credit
      Date"
      means
      the date of a Credit Extension.

     

    "Credit
      Extension"
      means
      the making of a Loan.

     

    "Credit
      Party"
      means
      Parent, Company and each Subsidiary of Company.

     

    "Current
      Financial Statements"
      means
      the pro forma consolidated balance sheet of Company and its consolidated
      Subsidiaries as at December 31, 2006, and the related pro forma
      consolidated statement of income of Company and its consolidated Subsidiaries
      for the Fiscal Year then ended, copies of which have been delivered to the
      Administrative Agent and the Lenders.

     

    "Default"
      means a
      condition or event that, after notice or lapse of time or both, would constitute
      an Event of Default.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    "Deposit
      Account"
      means a
      demand, time, savings, passbook or like account with a bank, savings and loan
      association, credit union or like organization, other than an account evidenced
      by a negotiable certificate of deposit, and any other deposit account, as
      defined in the UCC.

     

    "Direct
      Taxes"
      means
      any severance, ad valorem, or other direct taxes on properties owned by any
      Credit Party or the production therefrom or the proceeds of such production;
      provided that federal, state, or local income or franchise taxes shall in no
      event be considered Direct Taxes.

     

    "Distribution"
      means
      (i) any dividend or other distribution made by a Credit Party on or in respect
      of any Capital Stock in such Credit Party, or (ii) any payment made by a Credit
      Party to purchase, redeem, acquire or retire any Capital Stock in such Credit
      Party.

     

    "Dollars"
      and the
      sign "$"
      mean
      the lawful money of the United States of America.

     

    "EBITDA"
      means,
      for each trailing four Fiscal Quarter period, the sum of (i) the Consolidated
      Net Income of Company during such period, plus (ii) all interest paid during
      such period on Indebtedness (including amortization of original issue discount
      and the interest component of any deferred payment obligations and capital
      lease
      obligations) which was deducted in determining such Consolidated Net Income,
      plus (iii) all income or franchise taxes, if any, payable by Company or its
      Subsidiaries which were deducted in determining, such Consolidated Net Income,
      plus (iv) all depreciation, amortization (including amortization of good will
      and debt issuance costs), depletion, and other non-cash charges (including
      any
      provision for the reduction in the carrying value of assets recorded in
      accordance with GAAP and including those resulting from the requirements of
      FASB
      133 or 143) which were deducted in determining such Consolidated Net Income,
      minus (v) all non-cash items of income or gain (including those resulting from
      the requirements of FASB 133 or 143) which were included in determining such
      Consolidated Net Income.

     

    "Effective
      Rate"
      means,
      at any time of determination, the per
      annum
      rate (the "Original
      Effective Rate")
      equal
      to the Adjusted Eurodollar Rate plus eight percent (8.0%);
      provided that such Original Effective Rate shall be automatically increased
      (a) by 50 basis points per annum on July 11, 2007 if the Required
      Capital Date has not occurred prior to such date and (b) by an additional
      50 basis points per annum on each 30-day anniversary of such increase unless
      the
      Required Capital Date shall have occurred prior to such date. On or after
      May 11, 2008, if no Default or Event of Default exists and the PDP
      Collateral Coverage Ratio is greater than 1.5 to 1.0, the Effective Rate shall
      be reduced to a per annum rate (the "Reduced
      Effective Rate")
      equal
      to the Adjusted Eurodollar Rate plus a percentage that is 2.50% less than the
      percentage margin applicable to the Original Effective Rate then in effect;
      e.g., if the Original Effective Rate on the applicable date is equal to the
      Adjusted Eurodollar Rate plus ten percent (10.0%), then the Reduced Effective
      Rate would be equal to the Adjusted Eurodollar Rate plus 7.5%, so long as no
      Default or Event of Default exists; provided
      that if
      a Default or Event of Default occurs after any such reduction of the Effective
      Rate, the Effective Rate will automatically revert to the Original Effective
      Rate. If any such Default or Event of Default ceases to exist, and if no other
      Default or Event of Default exists and the PDP Collateral Coverage Ratio is
      greater than 1.5 to 1.0, the Effective Rate shall be reduced again to the
      Reduced Effective Rate, so long as no Default or Event of Default exists,
      subject to automatic increase to the Original Effective Rate as provided above
      if a Default or Event of Default occurs.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    "Eligible
      Assignee"
      means
      (a) any Lender or any Affiliate of any Lender, and (b) any Related
      Fund (any two or more Related Funds being treated as a single Eligible Assignee
      for all purposes hereof) or any commercial bank, insurance company, investment
      or mutual fund or other entity that is an "accredited investor" (as defined
      in
      Regulation D under the Securities Act) and which extends credit or buys
      loans as one of its businesses; provided,
      no
      Affiliate of Company or Parent shall be an Eligible Assignee.

     

    "Eligible
      Mortgaged Properties"
      means,
      collectively, those oil and gas Properties (a) which are owned by Company
      or any Subsidiary Guarantor and mortgaged to Administrative Agent to secure
      the
      Obligations, (b) for which Administrative Agent has received title opinions
      or
      other title information concerning such interests in form, substance and
      authorship satisfactory to Administrative Agent, (c) are free and clear of
      all
      Liens other than Permitted Liens, and (d) which are subject to an ORRI
      Conveyance. For the avoidance of doubt, in addition to the other requirements
      set forth in this definition, no Oil and Gas Property shall be considered as
      an
      "Eligible
      Mortgaged Property"
      until
      the sight drafts or other consideration payments for such Oil and Gas Property
      have been paid in full and title to such Oil and Gas Property have vested in,
      and is held in the name of, Company or any Subsidiary Guarantor.

     

    "Engineering
      Report"
      means
      the Initial Engineering Report and each engineering report hereafter delivered
      by Company pursuant to Section 5.2(e), provided that each such report
      hereafter delivered must (a) separately report on Proved Producing Reserves,
      Proved Developed Nonproducing Reserves, Proved Undeveloped Reserves and probable
      reserves and separately calculate the NPV of each such category of Proved
      Reserves for Company's interest, (b) use Agreed Pricing and a 10% discount
      factor (or any other pricing assumptions to which Company and Administrative
      Agent may agree), (c) take into account Company's actual experiences with
      leasehold operating expenses and other costs in determining projected leasehold
      operating expenses and other costs, (d) identify and take into account any
      "over-produced" or "under-produced" status under gas balancing arrangements,
      (e)
      contain information and analysis comparable in scope to that contained in the
      Initial Engineering Report, and (f) otherwise be in form and substance
      satisfactory to Administrative Agent.

     

    "Environmental
      Claim"
      means
      any investigation, notice, notice of violation, claim, action, suit, proceeding,
      demand, abatement order or other order or directive (conditional or otherwise),
      by any Governmental Authority or any other Person, arising (a) pursuant to
      or in
      connection with any actual or alleged violation of any Environmental Law; (b)
      in
      connection with any Hazardous Material or any actual or alleged Hazardous
      Materials Activity; or (c) in connection with any actual or alleged damage,
      injury, threat or harm to health, safety, natural resources or the
      environment.

     

    "Environmental
      Laws"
      means
      any and all current or future foreign or domestic, federal or state (or any
      subdivision of either of them), statutes, ordinances, orders, rules,
      regulations, judgments, Governmental Authorizations, or any other requirements
      of Governmental Authorities relating to (a) environmental matters,
      including those relating to any Hazardous Materials Activity; (b) the
      generation, use, storage, transportation or disposal of Hazardous Materials;
      or
      (c) occupational safety and health, industrial hygiene, land use or the
      protection of human, plant or animal health or welfare, in any manner applicable
      to Company or any of its Subsidiaries or any of their respective
      properties.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    "Equity
      Document"
      means
      the First Amended and Restated Operating Agreement of Tekoil and Gas Gulf Coast,
      LLC.

     

    "Equity
      Owner"
      means
      Goldman, Sachs & Co., together with its successors and assigns in its
      capacity as holder of membership interests issued by the Company.

     

    "ERISA"
      means
      the Employee Retirement Income Security Act of 1974, as amended from time to
      time, and any successor thereto, together with all rules and regulations
      promulgated with respect thereto.

     

    "ERISA
      Affiliate"
      means
      Company and all members of a controlled group of corporations and all trades
      or
      businesses (whether or not incorporated) under common control that, together
      with Company, are treated as a single employer under Section 414 of the
      Internal Revenue Code.

     

    "ERISA
      Plan"
      means
      any employee pension benefit plan subject to Title IV of ERISA maintained by
      any
      ERISA Affiliate with respect to which Company or any Subsidiary has a fixed
      or
      contingent liability.

     

    "Event
      of Default"
      as
      defined in Section 8.1.

     

    "Excepted
      Liens"
      means
      (a) Liens for taxes, assessments or other governmental charges or levies
      not yet delinquent or which are being contested as provided in Section 5.7
      by appropriate proceedings; (b) Liens arising in connection with workmen's
      compensation, unemployment insurance or other social security, old age pension
      or public liability obligations not yet due or which are being contested as
      provided in Section 5.7; (c) Liens under operating agreements, pooling
      orders and unitization agreements, and mechanics' and materialmen's Liens,
      with
      respect to obligations which are not yet due or which are being contested as
      provided in Section 5.7; (d) deposits of cash or cash equivalents
      securing the performance of bids, tenders, statutory or regulatory obligations,
      or securing letters of credit which in turn secure such performance, in each
      case made in the ordinary course of business; (e) minor defects and
      irregularities in title to any Property, so long as such defects and
      irregularities neither (i) are Liens which secure Indebtedness or
      obligations nor (ii) materially impair the value of such Property or the
      use thereof for the purposes for which such Property is held; (f) inchoate
      Liens
      that arise by operation of law which have not attached to the Property subject
      of such Lien, (g) rights of collecting banks having rights of setoff,
      revocation, refund or chargeback with respect to money or instruments of Company
      or any Subsidiary Guarantor or on deposit with or in the possession of such
      banks, and (h) judgment and attachment Liens not giving rise to an Event of
      Default or inchoate Liens created by or arising from any litigation or legal
      proceedings that are currently being contested in good faith by appropriate
      proceedings, promptly utilized and diligently conducted, and for which adequate
      reserves have been made to the extent required by GAAP.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended from time to time, and any
      successor statute.

     

    "Facility
      Amount"
      means
      $50,000,000.

     

    "Federal
      Funds Effective Rate"
      means
      for any day, the rate per annum (expressed, as a decimal, rounded upwards,
      if
      necessary, to the next higher 1/100 of 1%) equal to the weighted average of
      the
      rates on overnight Federal funds transactions with members of the Federal
      Reserve System arranged by Federal funds brokers on such day, as published
      by
      the Federal Reserve Bank of New York on the Business Day next succeeding such
      day; provided,
      (i) if
      such day is not a Business Day, the Federal Funds Rate for such day shall be
      such rate on such transactions on the next preceding Business Day as so
      published on the next succeeding Business Day, and (ii) if no such rate is
      so
      published on such next succeeding Business Day, the Federal Funds Rate for
      such
      day shall be the average rate charged to Administrative Agent, in its capacity
      as a Lender, on such day on such transactions as determined by Administrative
      Agent.

     

    "First
      Priority"
      means,
      with respect to any Lien purported to be created in any Collateral pursuant
      to
      any Security Document, that such Lien is the only Lien to which such Collateral
      is subject, other than Permitted Liens; provided that the existence of such
      Permitted Liens shall not be deemed or construed to evidence Administrative
      Agent's, any Lender's or any Lender Counterparty's intention to subordinate
      any
      of the Obligations to such Permitted Liens.

     

    "Fiscal
      Quarter"
      means a
      three-month period ending on the last day of March, June, September, and
      December of any year.

     

    "Fiscal
      Year"
      means
      the fiscal year of Company and its Subsidiaries ending on December 31 of each
      calendar year.

     

    "Funding
      Guarantors"
      as
      defined in Section 7.2.

     

    "Funding
      Notice"
      means a
      notice substantially in the form of Exhibit A.

     

    "GAAP"
      means
      those generally accepted accounting principles and practices which are
      recognized as such by the Financial Accounting Standards Board (or any generally
      recognized successor) and which, in the case of Company and its Consolidated
      Subsidiaries, are applied for all periods after the date hereof in a manner
      consistent with the manner in which such principles and practices were applied
      to Parent's audited Consolidated financial statements as of December 31, 2005.
      If any change in any accounting principle or practice is required by the
      Financial Accounting Standards Board (or any such successor) in order for such
      principle or practice to continue as a generally accepted accounting principle
      or practice, all reports and financial statements required hereunder with
      respect to Company or with respect to Company and its Consolidated Subsidiaries
      may be prepared in accordance with such change, but all calculations and
      determinations to be made hereunder may be made in accordance with such change
      only after notice of such change is given to each Lender and Required Lenders
      agree to such change insofar as it affects the accounting of Company or of
      Company and its Consolidated Subsidiaries.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    "Governmental
      Authority"
      means
      any federal, state, municipal, national, tribal, Indian nation, or other
      government, governmental department, commission, board, bureau, court, agency
      or
      instrumentality or political subdivision thereof or any entity or officer
      exercising executive, legislative, judicial, regulatory or administrative
      functions of or pertaining to any government or any court, in each case whether
      associated with a state of the United States, the United States, an Indian
      nation, or a foreign entity or government.

     

    "Governmental
      Authorization"
      means
      any permit, license, authorization, plan, directive, consent order or consent
      decree of or from any Governmental Authority.

     

    "Guaranteed
      Obligations"
      as
      defined in Section 7.1.

     

    "Guarantor"
      means
      Parent and each existing and each future Subsidiary Guarantor.

     

    "Guaranty"
      means
      the guaranty of each Guarantor set forth in Section 7.

     

    "Hazardous
      Materials"
      means
      any substances regulated under any Environmental Law, whether as pollutants,
      contaminants, or chemicals, or as industrial, toxic or hazardous substances
      or
      wastes, or otherwise.

     

    "Hazardous
      Materials Activity"
      means
      any past, current, proposed or threatened activity, event or occurrence
      involving any Hazardous Materials, including the use, manufacture, possession,
      storage, holding, presence, existence, location, Release, threatened Release,
      discharge, placement, generation, transportation, processing, construction,
      treatment, abatement, removal, remediation, disposal, disposition or handling
      of
      any Hazardous Materials, and any corrective action or response action with
      respect to any of the foregoing.

     

    "Hedging
      Contract"
      means
      (a) any agreement providing for options, swaps, floors, caps, collars, forward
      sales or forward purchases involving interest rates, commodities or commodity
      prices, equities, currencies, bonds, or indexes based on any of the foregoing,
      (b) any option, futures or forward contract traded on an exchange, and (c)
      any
      other derivative agreement or other similar agreement or
      arrangement.

     

    "Highest
      Lawful Rate"
      means
      the maximum lawful interest rate, if any, that at any time or from time to
      time
      may be contracted for, charged, or received under the Laws applicable to any
      Lender which are presently in effect or, to the extent allowed by law, under
      such applicable Laws which may hereafter be in effect and which allow a higher
      maximum nonusurious interest rate than applicable Laws now allow.

     

    "Hydrocarbons"
      means
      crude oil, natural gas or other liquid or gaseous hydrocarbons.

     

    "Indebtedness"
      of any
      Person means Liabilities in any of the following categories:

     

    (a) Liabilities
      for borrowed money,

     

    (b) Liabilities
      constituting an obligation to pay the deferred purchase price of property or
      services,

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (c) Liabilities
      evidenced by a bond, debenture, note or similar instrument,

     

    (d) Liabilities
      arising under Hedging Contracts,

     

    (e) Liabilities
      constituting principal under leases capitalized in accordance with
      GAAP,

     

    (f) Liabilities
      arising under conditional sales or other title retention
      agreements,

     

    (g) Liabilities
      owing under direct or indirect guaranties of Liabilities of any other Person
      (other than a Subsidiary) or otherwise constituting obligations to purchase
      or
      acquire or to otherwise protect or insure a creditor against loss in respect
      of
      Liabilities of any such Person (such as obligations under working capital
      maintenance agreements, agreements to keep well, or agreements to purchase
      Liabilities, assets, goods, securities or services), but excluding endorsements
      in the ordinary course of business of negotiable instruments in the course
      of
      collection,

     

    (h) Liabilities
      (for example, repurchase agreements, mandatorily redeemable preferred stock
      and
      sale/leaseback agreements) consisting of an obligation to purchase or redeem
      securities or other property, if such Liabilities arise out of or in connection
      with the sale or issuance of the same or similar securities or
      property,

     

    (i) Liabilities
      with respect to letters of credit or applications or reimbursement agreements
      therefor,

     

    (j) Liabilities
      with respect to payments received in consideration of oil, gas, or other
      minerals yet to be acquired or produced at the time of payment (including
      obligations under "take-or-pay" contracts to deliver gas in return for payments
      already received and the undischarged balance of any production payment created
      by such Person or for the creation of which such Person directly or indirectly
      received payment), or

     

    (k) Liabilities
      with respect to other obligations to deliver goods or services in consideration
      of advance payments therefor;

     

    provided
      however, that the "Indebtedness"
      of any
      Person shall not include Liabilities that were incurred by such Person on
      ordinary trade terms to vendors, suppliers, or other Persons providing goods
      and
      services for use by such Person in the ordinary course of its business, unless
      and until such Liabilities are outstanding more than 90 days past when due
      in
      accordance with its terms.

     

    "Indemnified
      Liabilities"
      means,
      collectively, any and all liabilities, obligations, losses, damages (including
      natural resource damages), penalties, claims (including Environmental Claims),
      costs (including the costs of any investigation, study, sampling, testing,
      abatement, cleanup, removal, remediation or other response action necessary
      to
      remove, remediate, clean up or abate any Hazardous Materials Activity), expenses
      and disbursements of any kind or nature whatsoever (including the reasonable
      fees and disbursements of counsel for Indemnitees in connection with any
      investigative, administrative or judicial proceeding commenced or threatened
      by
      any Person, whether or not any such Indemnitee shall be designated as a party
      or
      a potential party thereto, and any fees or expenses incurred by Indemnitees
      in
      enforcing this indemnity), whether direct, indirect or consequential and whether
      based on any Law (including securities and commercial Laws and Environmental
      Laws), on common law or equitable cause or on contract or otherwise, that may
      be
      imposed on, incurred by, or asserted against any Indemnitee, in any manner
      relating to or arising out of (i) this Agreement or the other Transaction
      Documents or the transactions contemplated hereby or thereby (including any
      grant of Collateral or Lenders' agreement to make Credit Extensions or the
      use
      or intended use of the proceeds thereof, or any enforcement of any of the
      Transaction Documents (including any sale of, collection from, or other
      realization upon any of the Collateral or the enforcement of the Guaranty)
      or
      any defense against allegations of misconduct by any Indemnitee); (ii) the
      statements contained in any commitment letter delivered by any Indemnitee to
      Company with respect to the transactions contemplated by this Agreement; or
      (iii) any Environmental Claim or any Hazardous Materials Activity relating
      to or
      arising from, directly or indirectly, any past or present activity, operation,
      land ownership, or practice of Parent, Company or any of their
      Subsidiaries.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    "Indemnitee"
      as
      defined in Section 10.3 and as may be supplemented in
      Section 2.5(b).

     

    "Independent
      Engineer"
      means
      Ralph E. Davis and Associates, Inc., or any other third party, independent
      petroleum engineer selected by Company and approved by the Administrative Agent
      in its sole discretion.

     

    "Initial
      Engineering Report"
      means
      the reserve engineering report with respect to Company's Properties prepared
      as
      of May 1, 2007 by the Independent Engineer, a copy of which has been
      delivered to Administrative Agent.

     

    "Initial
      Loan"
      means
      any initial Loan made on the Closing Date by a Lender to Company pursuant to
      Section 2.1(a).

     

    "Interest
      Period"
      means
      (a) the period beginning on and including the Closing Date and ending on but
      not
      including June 26, 2007, and (b) each subsequent three-month period from
      and including one Quarterly Payment Date to but not including the next Quarterly
      Payment Date.

     

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

     

    "Investment"
      means,
      with respect to any Person, (a) any direct or indirect advance, loan, guarantee
      of Liabilities or other extension of credit or capital contribution to (by
      means
      of any transfer of cash or other property to others or any payment for property
      or services for the account or use of others), (b) any purchase or acquisition
      by such Person of any capital stock, bonds, notes, debentures or other
      securities or evidences of Indebtedness issued by, any other Person, (c) any
      purchase or acquisition by such Person of any business, including the purchase
      of associated assets or operations or of stock (or other ownership interests)
      of
      a Person, or (d) any purchase or acquisition by such Person of Oil and Gas
      Properties

     

    "J.
      Aron"
      as
      defined in the preamble hereto.

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    "Key
      Persons"
      means,
      with respect to both Company and Parent, Mark Western, Richard Creitzman, Frank
      Clear, and Gerry Goodman. 

     

    "Law"
      means
      any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree,
      permit, concession, franchise, license, agreement or other governmental
      restriction of the United States or any state or political subdivision thereof
      or of any foreign country or any department, province or other political
      subdivision thereof.

     

    "Lender"
      means
      each financial institution listed on the signature pages hereto as a Lender,
      and
      any other Person that becomes a party hereto pursuant to an Assignment
      Agreement.

     

    "Lender
      Counterparty"
      means
      any Lender or any Affiliate of a Lender that is a counterparty to a Hedging
      Contract with Company or any Guarantor.

     

    "Lender
      Hedging Obligations"
      means
      all obligations of Company or any Guarantor arising from time to time under
      Hedging Contracts entered into from time to time with a Lender Counterparty;
      provided that (a) if such Lender Counterparty ceases to be a Lender hereunder
      or
      an Affiliate of a Lender hereunder, Lender Hedging Obligations shall only
      include such obligations to the extent arising from transactions entered into
      (i) at the time such counterparty was a Lender hereunder or an Affiliate of
      a
      Lender hereunder or (ii) prior to the time such counterparty was a Lender
      hereunder or an Affiliate of a Lender hereunder, and (b) for any of the
      foregoing to be included within "Lender
      Hedging Obligations"
      hereunder, the applicable counterparty must have provided Administrative Agent
      written notice of the existence thereof and such transaction must not otherwise
      be prohibited under this Agreement.

     

    "Liabilities"
      means,
      as to any Person, all indebtedness, liabilities and obligations of such Person,
      whether matured or unmatured, liquidated or unliquidated, primary or secondary,
      direct or indirect, absolute, fixed or contingent, and whether or not required
      to be considered pursuant to GAAP.

     

    "Lien"
      means,
      with respect to any property or assets, any right or interest therein of a
      creditor to secure Liabilities owed to it or any other arrangement with such
      creditor which provides for the payment of such Liabilities out of such property
      or assets or which allows such creditor to have such Liabilities satisfied
      out
      of such property or assets prior to the general creditors of any owner thereof,
      including any lien, mortgage, security interest, pledge, deposit, production
      payment, rights of a vendor under any title retention or conditional sale
      agreement or lease substantially equivalent thereto, tax lien, mechanic's or
      materialman's lien, or any other charge or encumbrance for security purposes,
      whether arising by Law or agreement or otherwise, but excluding any right of
      offset which arises without agreement in the ordinary course of business.
      "Lien"
      also
      means any filed financing statement, any registration of a pledge (such as
      with
      an issuer of uncertificated securities), or any other arrangement or action
      which would serve to perfect a Lien described in the preceding sentence,
      regardless of whether such financing statement is filed, such registration
      is
      made, or such arrangement or action is undertaken before or after such Lien
      exists.

     

    "Loan"
      means
      any
      loan made by a Lender to Company pursuant to Section 2.1,
      including any Uncommitted Loan.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    "Loan
      Exposure"
      means
      (a) with respect to any Lender, as of any date of determination, the sum of
      (i)
      the outstanding principal amount of the Loans of such Lender as of such date
      and
      (ii) the unfunded amount of such Lender's Commitment as of such date and (b)
      with respect to any Lender Counterparty and solely for the purpose of
      determining Loan Exposure in the definition of "Required
      Lenders",
      as of
      any date of determination, (i) if
      all
      Hedging Contracts with any one or more of the Credit Parties have been
      terminated, the
      maximum
      aggregate amount (giving effect to any netting agreements) owed
      under such Hedging Contracts to such Lender Counterparty by the Credit Parties
      on such date or (ii) if all Hedging Contracts with any Credit Party have not
      been terminated, the maximum
      aggregate amount (giving effect to any netting agreements) that
      would be owed to such Lender Counterparty by the Credit Parties under all
      Hedging Contracts with a Credit Party if all such Hedging Contracts were
      terminated on such date.

     

    "Make-Whole
      Amount"
      means,
      with respect to the principal amount of any Loans being prepaid under
      Section 2.12 or 2.13 (but not Section 2.11), an amount (which shall
      not be less than zero) equal to (a) the Effective Rate then in effect as of
      the
      date of prepayment, multiplied by (b) a fraction, the numerator of which is
      the
      number of days (including the date of prepayment in such calculation) remaining
      until the third anniversary of the Closing Date divided by 360, multiplied
      by
      (c) the principal amount of the Loans being prepaid on such prepayment
      date.

     

    "Management
      Services Agreement"
      means
      that certain Management Services Agreement dated May 11, 2007 by and among
      Company and Parent.

     

    "Margin
      Stock"
      as
      defined in Regulation U of the Board of Governors of the Federal Reserve
      System as in effect from time to time.

     

    "Material
      Adverse Effect"
      means a
      material adverse effect on or material adverse development with respect to
      (a)
      the business, operations, properties, assets, condition (financial or otherwise)
      or prospects of (i) Parent or (ii) Company and its Subsidiaries, in
      each case taken as a whole; (b) the ability of any Credit Party to fully and
      timely perform its Obligations; (c) the legality, validity, binding effect
      or
      enforceability against any Credit Party of a Transaction Document to which
      it is
      a party; or (d) the rights, remedies and benefits available to, or conferred
      upon, any Agent, any Lender or any Secured Party under any Transaction
      Document.

     

    "Material
      Contract"
      means
      any contract or other arrangement to which any Credit Party is a party (other
      than the Transaction Documents) for which breach, nonperformance, cancellation
      or failure to renew could reasonably be expected to have a Material Adverse
      Effect.

     

    "Maturity
      Date"
      means
      the earlier of (a) May 11, 2011, and (b) the date that all Loans shall
      become due and payable in full hereunder, whether by acceleration or
      otherwise.

     

    "Modified
      PDNP NPV"
      means,
      at any time in question, a percentage between 50 and 100 selected by
      Administrative Agent in its sole discretion, of the NPV of all Proved Developed
      Nonproducing Reserves attributed to the Eligible Mortgaged Properties in the
      then most recent Engineering Report, provided that (a) the capital expenditures
      necessary to bring such reserves into production (as contemplated in such
      Engineering Report) have actually been scheduled by Company to be made at or
      prior to the time contemplated in such Engineering Report, and (b) Company
      reasonably expects that it will have funds available to make such capital
      expenditures.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    "Modified
      PDP NPV"
      means,
      at any time in question, a percentage between 90 and 100 selected by
      Administrative Agent in its sole discretion, of the NPV of all Proved Developed
      Producing Reserves attributed to the Eligible Mortgaged Properties in the most
      recent Engineering Report.

     

    "Modified
      Proved NPV"
      means,
      at any time in question, the sum of Modified PDP NPV, Modified PDNP NPV, and
      Modified PUD NPV as each has been most recently determined. No category of
      reserves other than Proved Reserves shall be taken into account in determining
      Modified Proved NPV.

     

    "Modified
      PUD NPV"
      means,
      at any time in question, a percentage between 20 and 100 selected by
      Administrative Agent in its sole discretion, of the NPV of all Proved
      Undeveloped Reserves attributed to the Eligible Mortgaged Properties in the
      then
      most recent Engineering Report, provided that (a) the capital expenditures
      necessary to bring such reserves into production (as contemplated in such
      Engineering Report) have actually been scheduled by Company to be made at or
      prior to the time contemplated in such Engineering Report, and (b) Company
      reasonably expects that it will have funds available to make such capital
      expenditures.

     

    "Moody's"
      means
      Moody's Investor Services, Inc., or its successor.

     

    "Mortgage"
      means
      each deed of trust or mortgage from time to time given by Company or any
      Subsidiary Guarantor to secure any of the Obligations, as each may be amended,
      supplemented or otherwise modified from time to time.

     

    "NAIC"
      means
      The National Association of Insurance Commissioners, and any successor
      thereto.

     

    "Non-US
      Lender"
      as
      defined in Section 2.17(c).

     

    "Note"
      means a
      promissory note in the form of Exhibit B evidencing one or more Loans, as
      such note may be amended, supplemented or otherwise modified from time to
      time.

     

    "NPV"
      means,
      with respect to any Proved Reserves expected to be produced from any undivided
      interests in the Oil and Gas Properties of Company and the Subsidiary
      Guarantors, the net present value, discounted at 10% per annum, of the future
      net revenues expected to accrue to any such Credit Party's interests in such
      Proved Reserves (after deducting all existing burdens) during the remaining
      expected economic lives of such Proved Reserves. Each calculation of such
      expected future net revenues shall be made in accordance with the then existing
      standards of the Society of Petroleum Engineers, provided that in any event
      (a) appropriate deductions shall be made for severance and ad valorem
      taxes, and for operating (including purchasing and injecting water), gathering,
      transportation and marketing costs required for the production and sale of
      such
      reserves, (b) the pricing assumptions and escalations used in determining
      the NPV for any particular reserves shall be the Agreed Pricing (or any other
      pricing assumptions to which Company and Required Lenders may agree),
      (c) deductions shall be made for all capital expenditures (including
      plugging and abandonment costs) which are necessary for the completion of the
      development activities, and (d) the Proved Reserves attributable to Oil and
      Gas
      Properties shall not be included in such calculations if the sight drafts or
      other consideration payments for such Oil and Gas Properties have not been
      paid
      in full or title to such Oil and Gas Properties is not held by, or vested in,
      Company or a Subsidiary Guarantor. NPV shall be calculated hereunder in
      connection with each Engineering Report by the engineering firm who prepares
      such Engineering Report; in the event of any conflict, Administrative Agent's
      calculation shall be conclusive and final, absent manifest error.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    "NYMEX
      Pricing"
      means,
      as of any date of determination with respect to any month:

     

    (a) for
      crude
      oil, the closing settlement price for the Light, Sweet Crude Oil futures
      contract, and 

     

    (b) for
      natural gas, the closing settlement price for the Henry Hub Natural Gas futures
      contract,

     

    in
      each
      case as published by New York Mercantile Exchange (NYMEX) on its website
      currently located at www.nymex.com,
      or any
      successor thereto (as such price may be corrected or revised from time to time
      by the NYMEX in accordance with its rules and regulations).

     

    "Obligee
      Guarantor"
      as
      defined in Section 7.7.

     

    "Obligations"
      means
      all obligations of every nature of each Credit Party from time to time owed
      to
      any Agent (including any former Agent), any Lender, any Lender Counterparty,
      Royalty Owner, Warrant Owner, or any Indemnitee under any Transaction Document
      or Hedging Contract (including, with respect to a Hedging Contract, obligations
      owed thereunder to any Person who was a Lender Counterparty at any time such
      Hedging Contract was in effect), whether for principal, interest (including
      interest which, but for the filing of a petition in bankruptcy with respect
      to
      such Credit Party, would have accrued on any Obligation, whether or not a claim
      is allowed against such Credit Party for such interest in the related bankruptcy
      proceeding), payments arising from or in connection with a Hedging Contract
      (including those for early termination of Hedging Contracts), fees, expenses,
      indemnification or otherwise.

     

    "Oil
      and Gas Properties"
      means
      oil, gas and/or mineral leases, oil, gas or mineral properties, mineral
      servitudes and/or mineral rights of any kind (including, without limitation,
      mineral fee interests, lease interests, farmout interests, overriding royalty
      and royalty interests, net profits interests, oil payment interests, production
      payment interests and other types of mineral interests), and all oil and gas
      gathering, treating, storage, processing and handling assets.

     

    "Organizational
      Documents"
      means
      (a) with respect to any corporation, its certificate or articles of
      incorporation or organization, as amended, and its by-laws, as amended, (b)
      with
      respect to any limited partnership, its certificate of limited partnership,
      as
      amended, and its partnership agreement, as amended, (c) with respect to any
      general partnership, its partnership agreement, as amended, and (d) with respect
      to any limited liability company, its articles of organization, as amended,
      and
      its operating agreement, as amended. In the event any term or condition of
      this
      Agreement or any other Transaction Document requires any Organizational Document
      to be certified by a secretary of state or similar governmental official, the
      reference to any such "Organizational
      Document"
      shall
      only be to a document of a type customarily certified by such governmental
      official.

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    "ORRI"
      means
      the overriding royalty interest in the Properties conveyed by Company to Royalty
      Owner pursuant to the ORRI Conveyance.

     

    "ORRI
      Conveyance"
      means,
      collectively, the Conveyance of Overriding Royalty Interest executed by Company
      in favor of Royalty Owner on the Closing Date and the additional conveyances,
      if
      any, executed by Company in favor of Royalty Owner pursuant to
      Section 5.22, in each case, as amended or supplemented from time to
      time.

     

    "Other
      Permitted Capital Expenditures"
      means
      capital expenditures (other than ANCF Capital Expenditures) approved by Required
      Lenders at the time in question by means of an Approval Letter.

     

    "PBGC"
      means
      the Pension Benefit Guaranty Corporation or any successor thereto.

     

    "PDP
      Collateral Coverage Ratio"
      means,
      as of any date of determination, the quotient obtained by dividing the Modified
      PDP NPV as determined for such day in an Engineering Report, by all Indebtedness
      of Company and its Subsidiaries outstanding at the end of such day, exclusive
      of
      any Indebtedness resulting from the application of FASB Statement 133 or
      143.

     

    "Permitted
      G&A Expense Amount"
      means
      the amount of $250,000 per calendar month; provided that if a Default or an
      Event of Default exists or existed in such calendar month ("Subject
      Month"),
      then
      such amount shall be reduced to $125,000 for such Subject Month. The parties
      agree and acknowledge that such amount comprises the "Service
      Fee"
      payable
      under the Management Services Agreement.

     

    "Permitted
      Investments"
      means
      Investments:

     

    (a) in
      open
      market commercial paper, maturing within 270 days after acquisition thereof,
      which is rated at least A-1 by S&P or P-1 by Moody's.

     

    (b) in
      marketable obligations, maturing within 12 months after acquisition thereof,
      issued or unconditionally guaranteed by the United States of America or an
      instrumentality or- agency thereof and entitled to the full faith and credit
      of
      the United States of America.

     

    (c) in
      demand
      deposits, and time deposits (including certificates of deposit) maturing within
      12 months from the date of deposit thereof, with any office of any national
      or
      state bank or trust company which is organized under the Laws of the United
      States of America or any state therein, which has capital, surplus and undivided
      profits of at least $500,000,000, and whose certificates of deposit are rated
      at
      least Aa3 by S&P or AA- by Moody's.

     

    (d) in
      repurchase obligations with a term of not more than seven days for underlying
      securities of the types described in clause (b) above entered into with any
      commercial bank meeting the specifications of clause (c)
      above.

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    (e) in
      money
      market or other mutual funds substantially all of whose assets comprise
      securities of the types described in clauses (a) through (d)
      above.

     

    "Permitted
      Liens"
      means
      each of the Liens permitted pursuant to Section 6.2.

     

    "Permitted
      Other Distributions"
      as
      defined in Section 6.6(d).

     

    "Permitted
      Tax Distributions"
      as
      defined in Section 6.6(c).

     

    "Person"
      means
      and includes natural persons, corporations, limited partnerships, general
      partnerships, limited liability companies, limited liability partnerships,
      joint
      stock companies, joint ventures, associations, companies, trusts, banks, trust
      companies, land trusts, business trusts or other organizations, whether or
      not
      legal entities, and Governmental Authorities.

     

    "Post-Default
      Rate"
      as
      defined in Section 2.8.

     

    "Principal
      Office"
      means
      (a) with respect to the Administrative Agent, its "Principal
      Office"
      as set
      forth on Appendix B, or such other office as the Administrative Agent may from
      time to time designate in writing to Company and each Lender, and (b) with
      respect to each Lender, such Lender's lending office as designated and set
      forth
      on Appendix B, or such other office as such Lender may from time to time
      designate in writing to Company and the Administrative Agent.

     

    "Pro
      Rata Share"
      means,
      with respect to each Lender, the percentage obtained by dividing (a) the
      Loan Exposure of that Lender by (b) the aggregate Loan Exposure of all
      Lenders.

     

    "Projected
      Oil and Gas Production"
      means
      the projected production of oil or gas (measured by volume unit or BTU
      equivalent, not sales price) for the term of a Hedging Contract or a particular
      month, as applicable, from properties and interests owned by Company or any
      Subsidiary Guarantor which are located in or offshore of the United States
      and
      which have attributable to them Proved Developed Producing Reserves, as such
      production is projected in the most recent Engineering Report delivered pursuant
      to Section 5.2(e), after deducting projected production from any properties
      or interests sold or under contract for sale that had been included in such
      report and after adding projected production from any properties or interests
      that had not been reflected in such report but that are reflected in a separate
      or supplemental reports meeting the requirements of Section 5.2(e) and
      otherwise are satisfactory to Administrative Agent.

     

    "Projections"
      as
      defined in Section 4.19.

     

    "Properties"
      means,
      collectively, those undivided interests in Oil and Gas Properties and interests
      in other real and personal property which are, at the time in question, owned
      by
      Company or any of its Subsidiaries.

     

    "Proved
      Collateral Coverage Ratio"
      means,
      as of any date of determination, the quotient obtained by dividing the Modified
      Proved NPV as determined for such day in an Engineering Report, by all
      Indebtedness of Company and its Subsidiaries outstanding at the end of such
      day,
      exclusive of any Indebtedness resulting from the application of FASB Statement
      133 and 143.

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    "Proved
      Reserves"
      means
      "Proved
      Reserves"
      as
      defined in the Definitions for Oil and Gas Reserves (in this paragraph, the
      "Definitions")
      promulgated by the Society of Petroleum Engineers (or any generally recognized
      successor) as in effect at the time in question. "Proved
      Developed Producing Reserves"
      means
      Proved Reserves which are categorized as both "Developed"
      and
      "Producing"
      in the
      Definitions, "Proved
      Developed Nonproducing Reserves"
      means
      Proved Reserves which are categorized as both "Developed"
      and
      "Nonproducing"
      in the
      Definitions, and "Proved
      Undeveloped Reserves"
      means
      Proved Reserves which are categorized as "Undeveloped"
      in the
      Definitions, provided that the following criteria shall also apply to Proved
      Developed Producing Reserves: (a) no reserves shall be classified as Proved
      Developed Producing Reserves until a minimum of forty-five (45) days of
      production have occurred in at least one consecutive period of sixty (60) days
      following any operation, workover or capital expenditure, and (b) during such
      forty-five (45) days of production, the well relating to such reserves must
      be
      tested a minimum of three (3) times for at least twenty-four (24) hours of
      continuous duration.

     

    "Quarterly
      Payment Date"
      means
      the 26th
      day of
      each March, June, September and December, commencing with June 26, 2007, in
      the case of payments of interest, and September 26, 2007, in the case of ANCF
      calculations and principal payments.

     

    "Register"
      as
      defined in Section 2.5(b).

     

    "Related
      Fund"
      means,
      with respect to any Lender that is an investment fund, any other investment
      fund
      that invests in commercial loans and that is managed or advised by the same
      investment advisor as such Lender or by an Affiliate of such investment
      advisor.

     

    "Release"
      means
      any release, spill, emission, leaking, pumping, pouring, injection, escaping,
      deposit, disposal, discharge, dispersal, dumping, leaching or migration of
      any
      Hazardous Material into the indoor or outdoor environment (including the
      abandonment or disposal of any barrels, containers or other closed receptacles
      containing any Hazardous Material), including the movement of any Hazardous
      Material through the air, soil, surface water or groundwater.

     

    "Required
      Capital Date"
      means
      the date on which (a) Parent has received net cash proceeds from the issuance
      of
      debt or sale of its Capital Stock made after the Closing Date in an aggregate
      amount of not less than $7,500,000 and any portion thereof which is not
      comprised solely of common equity (which shall not include convertible
      instruments, warrants, or similar instruments) shall be on terms and conditions
      satisfactory to the Administrative Agent in all respects and (b) at least
      $7,500,000 of equity capital has been contributed by Parent to Borrower on
      terms
      and conditions satisfactory to the Administrative Agent in all
      respects.

     

    "Required
      Lenders"
      means
      one or more Lenders having or holding Loan Exposure and representing more than
      fifty percent (50%) of the aggregate Loan Exposure of all Lenders; provided
      that, solely in connection with the exercise of rights and remedies related
      to
      the Collateral granted to the Secured Parties under the Security Documents,
      "Required
      Lenders"
      means
      one or more Lenders and Lender Counterparties having or holding Loan Exposure
      and representing more than fifty percent (50%) of the aggregate Loan Exposure
      of
      all Lenders and Lender Counterparties.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    "Royalty
      Owner"
      means
      MTGLQ Investors, L.P., a Delaware limited partnership, together with its
      successors and assigns.

     

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

     

    "Secured
      Parties"
      means
      the Beneficiaries and any other Person to whom any Obligations are at any time
      owed.

     

    "Securities"
      means
      any stock, shares, partnership interests, voting trust certificates,
      certificates of interest or participation in any profit-sharing agreement or
      arrangement, options, warrants, bonds, debentures, notes, or other evidences
      of
      indebtedness, secured or unsecured, convertible, subordinated or otherwise,
      or
      in general any instruments commonly known as "securities" or any certificates
      of
      interest, shares or participations in temporary or interim certificates for
      the
      purchase or acquisition of, or any right to subscribe to, purchase or acquire,
      any of the foregoing.

     

    "Securities
      Act"
      means
      the Securities Act of 1933, as amended from time to time, and any successor
      statute.

     

    "Security
      Documents"
      means
      the instruments listed in the Security Schedule and all other security
      agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties,
      financing statements, continuation statements, extension agreements and other
      agreements or instruments now, heretofore, or hereafter delivered by any Credit
      Party to Administrative Agent in connection with this Agreement or any
      transaction contemplated hereby to secure or guarantee the payment of any part
      of the Obligations, Lender Hedging Obligations or the performance of any Credit
      Party's other duties and obligations under the Transaction
      Documents.

     

    "Security
      Schedule"
      means
      Schedule 1.1 hereto.

     

    "Sellers"
      means
      Masters Resources, LLC, a Texas limited liability company and Masters Oil &
Gas, LLC, a Texas limited liability company.

     

    "Solvency
      Certificate"
      means
      (a) a Solvency Certificate of the chief financial officer of Company and
      (b) a Solvency Certificate of the chief financial officer of Parent, each
      substantially in the form of Exhibit G-2.

     

    "Solvent"
      means,
      with respect to any Credit Party, that as of the date of determination (a)
      the
      sum of such Credit Party's debt (including contingent liabilities) does not
      exceed the present fair saleable value of such Credit Party's present assets;
      (b) such Credit Party's capital is not unreasonably small in relation to its
      business as contemplated on the Closing Date and reflected in the Projections
      or
      as contemplated with respect to any transaction contemplated or undertaken
      after
      the Closing Date; (c) such Credit Party has not incurred and does not intend
      to
      incur, or believe (nor should it reasonably believe) that it will incur, debts
      beyond its ability to pay such debts as they become due (whether at maturity
      or
      otherwise); and (d) such Credit Party is "solvent" within the meaning given
      that
      term and similar terms under applicable Laws relating to fraudulent transfers
      and conveyances. For purposes of this definition, the amount of any contingent
      liability at any time shall be computed as the amount that, in light of all
      of
      the facts and circumstances existing at such time, represents the amount that
      can reasonably be expected to become an actual or matured liability
      (irrespective of whether such contingent liabilities meet the criteria for
      accrual under Statement of Financial Accounting Standard No. 5).

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    "Subsidiary"
      means,
      with respect to any Person, any corporation, association, partnership, limited
      liability company, joint venture, or other business or corporate entity,
      enterprise or organization which is directly or indirectly (through one or
      more
      intermediaries) controlled by or owned fifty percent (50%) or more by such
      Person.

     

    "Subsidiary
      Guarantor"
      means
      any Subsidiary of Company which has executed and delivered a Counterpart
      Agreement.

     

    "Syndication
      Agent"
      as
      defined in the preamble hereto.

     

    "Tax"
      means
      any present or future tax, levy, impost, duty, assessment, charge, fee,
      deduction or withholding of any nature and whatever called, by whomsoever,
      on
      whomsoever and wherever imposed, levied, collected, withheld or assessed;
provided,
      "Tax on
      the overall net income" or "income Tax" of a Person shall be construed as a
      reference to a tax imposed by the jurisdiction in which that Person is organized
      or in which that Person's applicable Principal Office is located or in which
      that Person is deemed to be doing business on all or part of the net income,
      profits or gains (whether worldwide, or only insofar as such income, profits
      or
      gains are considered to arise in or to relate to a particular jurisdiction,
      or
      otherwise) of that Person or its applicable Principal Office.

     

    "Termination
      Event"
      means
      (a) the occurrence with respect to any ERISA Plan of (i) a reportable event
      described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable
      event described in Section 4043(c) of ERISA other than a reportable event
      not subject to the provision for 30-day notice to the PBGC pursuant to a waiver
      by such corporation, or (b) the requirements of Section 4043(b) of
      ERISA apply with respect to a contributing sponsor, as defined in
      Section 4001(a)(13) of ERISA, of an ERISA Plan, and an event described in
      paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
      reasonably expected to occur with respect to such ERISA Plan within the
      following 30 days, or (c) the withdrawal of any ERISA Affiliate from an
      ERISA Plan during a plan year in which it was a "substantial employer" as
      defined in Section 4001(a)(2) of ERISA, or (d) the filing of a notice
      of intent to terminate any ERISA Plan or the treatment of any ERISA Plan
      amendment as a termination under Section 4041 of ERISA, or (e) the
      institution of proceedings to terminate any ERISA Plan by the PBGC under
      Section 4042 of ERISA, or (f) any other event or condition which might
      constitute grounds under Section 4042 of ERISA for the termination of, or
      the appointment of a trustee to administer, any ERISA Plan.

     

    "Transaction
      Document"
      means
      any of this Agreement, the Notes (if any), the Guaranty, the Security Documents,
      the Equity Document (so long as the Equity Owner is the holder of any equity
      membership interests issued thereunder), the ORRI Conveyance, the Warrants,
      the
      registration rights agreement relating thereto, the Management Services
      Agreement, and all other certificates, documents, instruments or agreements
      executed and delivered by a Credit Party for the benefit of any Agent, any
      Lender, any Lender Counterparty, Royalty Owner, or Warrant Owner in connection
      herewith.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    "UCC"
      means
      the Uniform Commercial Code (or any similar or equivalent legislation) as in
      effect in any applicable jurisdiction.

     

    "Uncommitted
      Amount"
      means,
      for each Lender, such Lender's Pro Rata Share of (a) the Facility Amount minus
      (b) the aggregate Commitments.

     

    "Uncommitted
      Loan"
      means
      any loan made by a Lender to Company pursuant to
      Section 2.1(b).

     

    "Warrant
      Owner"
      means
      Goldman, Sachs & Co., together with its respective successors and
      assigns.

     

    "Warrants"
      means
      the warrants to purchase shares of Parent's Common Stock, issued by Parent
      to
      Warrant Owner pursuant to that certain Warrant to Purchase Common Stock of
      Tekoil & Gas Corporation of even date herewith, together with all warrants
      issued upon transfer, exchange or in replacement thereof.

    

      1.2 Accounting
        Terms.
        Except
        as otherwise expressly provided herein, all accounting terms not otherwise
        defined herein shall have the meanings assigned to them in conformity with
        GAAP.
        Financial statements and other information required to be delivered by Company
        to Lenders pursuant to Section 5.2(a), 5.2(b), 5.2(c) and 5.2(d) shall be
        prepared in accordance with GAAP as in effect at the time of such preparation
        (and delivered together with the reconciliation statements provided for in
        Section 5.2(d), if applicable). Subject to the foregoing, calculations in
        connection with the definitions, covenants and other provisions hereof shall
        utilize accounting principles and policies in conformity with those used
        to
        prepare Parent's audited Consolidated financial statements as of December
        31,
        2005.

    

    

      1.3 Interpretation,
        etc.
        Any of
        the terms defined herein may, unless the context otherwise requires, be used
        in
        the singular or the plural, depending on the reference. References herein
        to any
        Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix,
        a
        Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically
        provided. The word "or" is not exclusive. The use herein of the word "include"
        or "including", when following any general statement, term or matter, shall
        not
        be construed to limit such statement, term or matter to the specific items
        or
        matters set forth immediately following such word or to similar items or
        matters, whether or not nonlimiting language (such as "without limitation"
        or
        "but not limited to" or words of similar import) is used with reference thereto,
        but rather shall be deemed to refer to all other items or matters that fall
        within the broadest possible scope of such general statement, term or matter.
        Unless the context requires otherwise, (i) any definition of or reference
        to any
        agreement, instrument or other document shall be construed as referring to
        such
        agreement, instrument or other document as from time to time amended,
        supplemented or otherwise modified (subject to any restrictions on such
        amendments, supplements or modifications set forth herein or in any other
        Transaction Document).

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

       

      1.4 Joint
        Preparation; Construction of Indemnities and Releases.
        This
        Agreement and the other Transaction Documents have been reviewed and negotiated
        by sophisticated parties with access to legal counsel and no rule of
        construction shall apply hereto or thereto which would require or allow any
        Transaction Document to be construed against any party because of its role
        in
        drafting such Transaction Document. All indemnification and release provisions
        of this Agreement shall be construed broadly (and not narrowly) in favor
        of the
        Persons receiving indemnification or being released.

       

      SECTION
        2

      LOANS

       

      2.1 Loans.
        

       

      (a) Committed
        Facility.
        Subject
        to the terms and conditions hereof, each Lender severally agrees to make,
        on the
        Closing Date, a Loan to Company in an amount less than or equal to such Lender's
        Commitment. Subject to the terms and conditions hereof, Company may make
        additional borrowings under the Commitments after the Closing Date, pro rata
        from each Lender, until the entire Commitment of each Lender has been borrowed,
        provided that (A) each such borrowing must equal or exceed $1,000,000 for
        all Lenders collectively and (B) no such borrowing may be made after the
        Availability Termination Date. Any amount borrowed under this
        Section 2.1(a) and subsequently repaid or prepaid may not be reborrowed.
        Subject to Sections 2.11 and 2.14, all amounts owed hereunder with respect
        to the Loans shall be paid in full no later than the Maturity Date.

       

      (b) Uncommitted
        Facility.
        A
        Lender may, but is not obligated to, on the terms and conditions set forth
        in
        this Agreement, make Uncommitted Loans to Company from time to time during
        the
        period commencing with the Closing Date and ending on the Availability
        Termination Date in an amount not to exceed such Lender's Uncommitted Amount;
        provided that (i) each such borrowing must equal or exceed $1,000,000 for
        all
        Lenders collectively, (ii) no such borrowing may be requested to be made
        after
        the Availability Termination Date, and (iii) no Uncommitted Loan may be made
        unless each of the Lenders agrees to fund its respective Pro Rata Share of
        the
        aggregate amount of the requested Uncommitted Loans. Any amount borrowed
        under
        this Section 2.1(b) and subsequently repaid or prepaid may not be
        reborrowed. Subject to Sections 2.11 and 2.14, all amounts owed hereunder
        with respect to the Uncommitted Loans shall be paid in full no later than
        the
        Maturity Date. NOTWITHSTANDING
        ANYTHING HEREIN OR IN ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT
        TO
        THE CONTRARY, NO LENDER IS OBLIGATED IN ANY WAY TO MAKE ANY UNCOMMITTED LOANS
        OR
        OTHER EXTENSIONS OF CREDIT OTHER THAN AS EXPRESSLY PROVIDED IN SECTION 2.1(a)
        ABOVE. EACH LENDER'S DECISION TO MAKE OR NOT MAKE ANY UNCOMMITTED LOANS SHALL
        BE
        MADE IN SUCH LENDER'S SOLE AND ABSOLUTE DISCRETION.

       

      2.2 Borrowing
        Mechanics.
        

       

      (a) Committed
        Loans.
        Company
        shall deliver to Administrative Agent a fully executed Funding Notice for
        Committed Loans as of the Closing Date or five (5) Business Days prior to
        any
        subsequent borrowing of Committed Loans. Promptly upon receipt by Administrative
        Agent of such Funding Notice, Administrative Agent shall notify each Lender
        of
        the proposed borrowing. Each Lender shall make its Loan available to
        Administrative Agent not later than 12:00 p.m. (New York City time) on the
        date
        specified in such Funding Notice, by wire transfer of same day funds in Dollars,
        at Administrative Agent's Principal Office. Upon satisfaction or waiver of
        the
        conditions precedent specified herein, Administrative Agent shall make the
        proceeds of the Loans available to Company on such date by causing an amount
        of
        same day funds in Dollars equal to the proceeds of all such Loans received
        by
        Administrative Agent from Lenders to be paid to Company by wire transfer
        of
        immediately available funds in the amounts and to the accounts set out in
        writing to Administrative Agent by Company; provided that the proceeds of
        the
        Loans available to Company on the Closing Date shall be paid to Company by
        wire
        transfer of immediately available funds in the amounts and to the accounts
        set
        out on Schedule 2.2. Such wire transfers shall include the payment to Bracewell
        & Giuliani LLP, Administrative Agent's attorneys, of their estimated
        attorneys' fees, recording costs, and other out-of-pocket transaction costs
        and
        expenses incurred on behalf of Administrative Agent in connection with the
        transactions contemplated hereby (with any unused portion of such funds to
        be
        returned to Company and any fees, costs and expenses remaining unpaid to
        be paid
        by Company as provided in Section 10.2).

       

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

       

      (b) Uncommitted
        Loans.
        Company
        shall deliver to Administrative Agent a fully executed Funding Notice for
        Uncommitted Loans at least 20 Business Days prior to the requested Credit
        Date
        for such Uncommitted Loans. Promptly upon receipt by Administrative Agent
        of
        such Funding Notice, Administrative Agent shall notify each Lender of such
        requested borrowing. On or prior to the fourth (4th)
        Business Day preceding to the requested Credit Date, each Lender shall inform
        the Administrative Agent in writing of its decision to provide or not provide
        its Pro Rata Share of such requested borrowing (which decision is made in
        each
        Lender's sole and absolute discretion); provided that, any Lender not responding
        to the Administrative Agent in writing on or prior to such fourth (4th)
        Business Day shall be deemed to have declined to provide such requested
        Uncommitted Loans. No Uncommitted Loan shall be made hereunder if any Lender
        shall decline, or is deemed to have declined, to provide its Pro Rata Share
        of
        such requested Uncommitted Loans. On or prior to the third (3rd)
        Business Day prior to the requested borrowing, the Administrative Agent shall
        notify Company and the Lenders of the Lenders' decision with respect to such
        requested borrowing. If such decision by the Lenders is to provide such
        requested borrowing, then each Lender shall make its Uncommitted Loan available
        to Administrative Agent not later than 12:00 p.m. (New York City time) on
        the
        date specified in such Funding Notice, by wire transfer of same day funds
        in
        Dollars, at Administrative Agent's Principal Office. Upon satisfaction or
        waiver
        of the conditions precedent specified herein, Administrative Agent shall
        make
        the proceeds of the Loans available to Company on such date by causing an
        amount
        of same day funds in Dollars equal to the proceeds of all such Loans received
        by
        Administrative Agent from Lenders to be credited to the account of Company
        at
        Administrative Agent's Principal Office or to such other account as may be
        designated in writing to Administrative Agent by Company. Such wire transfers
        shall include the payment to Bracewell & Giuliani LLP, Administrative
        Agent's attorneys, of their estimated attorneys' fees, recording costs, and
        other out-of-pocket transaction costs and expenses incurred on behalf of
        Administrative Agent in connection with the transactions contemplated hereby
        (with any unused portion of such funds to be returned to Company and any
        fees,
        costs and expenses remaining unpaid to be paid by Company as provided in
        Section 10.2).

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

       

      2.3 Pro
        Rata Shares; Availability of Funds.
        

       

      (a) Pro
        Rata Shares.
        All
        Loans shall be made, and all participations purchased, by Lenders simultaneously
        and proportionately to their respective Pro Rata Shares, it being understood
        that no Lender shall be responsible for any default by any other Lender in
        such
        other Lender's obligation to make a Loan requested hereunder or purchase
        a
        participation required hereby nor shall any Commitment of any Lender be
        increased or decreased as a result of a default by any other Lender in such
        other Lender's obligation to make a Loan requested hereunder or purchase
        a
        participation required hereby.

       

      (b) Availability
        of Funds.
        With
        respect to Committed Loans, unless Administrative Agent shall have been notified
        by any Lender prior to the applicable Credit Date that such Lender does not
        intend to make available to Administrative Agent the amount of such Lender's
        Loan, Administrative Agent may assume that such Lender has made such amount
        available to Administrative Agent on such Credit Date and Administrative
        Agent
        may, in its sole discretion, but shall not be obligated to, make available
        to
        Company a corresponding amount on such Credit Date. With respect to Uncommitted
        Loans, if, pursuant to Section 2.2(b) hereof, the Administrative Agent has
        given notice to the Lenders and Company that the Lenders have agreed to provide
        such Uncommitted Loans, then the Administrative Agent may assume that each
        Lender has made its Pro Rata Share of such requested borrowing available
        to
        Administrative Agent on such Credit Date unless Administrative Agent shall
        have
        been notified by any Lender prior to the applicable Credit Date that such
        Lender
        does not intend to make such amount available to Administrative Agent.
        Administrative Agent may, in its sole discretion, but shall not be obligated
        to,
        make available to Company a corresponding amount on such Credit Date. In
        any
        event, if the full amount requested by Company is not in fact made available
        to
        Administrative Agent by such Lender, Administrative Agent shall be entitled
        to
        recover such corresponding amount on demand from such Lender together with
        interest thereon, for each day from such Credit Date until the date such
        amount
        is paid to Administrative Agent, at the customary rate set by Administrative
        Agent for the correction of errors among banks for three Business Days and
        thereafter at a rate equal to the sum of the Federal Funds Effective Rate.
        If
        such Lender does not pay such corresponding amount forthwith upon Administrative
        Agent's demand therefor, Administrative Agent shall promptly notify Company
        and
        Company shall immediately pay such corresponding amount to Administrative
        Agent
        together with interest thereon, for each day from such Credit Date until
        the
        date such amount is paid to Administrative Agent, at the Effective Rate.
        With
        respect to Committed Loans only, nothing in this Section 2.3(b) shall be
        deemed to relieve any Lender from its obligation to fulfill its Commitments
        hereunder or to prejudice any rights that Company may have against any Lender
        as
        a result of any default by such Lender hereunder.

       

      2.4 Use
        of Proceeds.
        Company
        will use the proceeds of Initial Loans made on the Closing Date to acquire
        Oil
        and Gas Properties and related assets from the Sellers as part of the Closing
        Date Transactions and to pay related expenses, costs and fees (including
        closing
        expenses, costs and fees with respect to the Transaction Documents). The
        proceeds of the Loans made after the Closing Date shall be applied by Company
        (a) to implement the Approved Plan of Development, (b) to make other
        expenditures from time to time approved by Required Lenders, (c) subject
        to the
        requirements of Section 6.3, to purchase crude oil puts / natural gas
        floors, and (d) for Company's working capital. No portion of the proceeds
        of any Credit Extension shall be used in any manner that causes or might
        cause
        such Credit Extension or the application of such proceeds to violate
        Regulation T, Regulation U or Regulation X of the Board of
        Governors of the Federal Reserve System or any other regulation thereof or
        to
        violate the Exchange Act.

       

      
        
          
          

        

        
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      2.5 Evidence
        of Liabilities; Register; Lenders' Books and Records;
        Notes.
        

       

      (a) Lenders'
        Evidence of Liabilities.
        Each
        Lender shall maintain on its internal records an account or accounts evidencing
        the Liabilities of Company to such Lender, including the amounts of the Loans
        made by it and each repayment and prepayment in respect thereof. Any such
        recordation shall be conclusive and binding on Company, absent manifest error;
        provided,
        failure
        to make any such recordation, or any error in such recordation, shall not
        affect
        any Lender's Commitments or Company's Obligations in respect of any applicable
        Loans; and provided further,
        in the
        event of any inconsistency between the Register and any Lender's records,
        the
        recordations in the Register shall govern.

       

      (b) Register.
        Administrative Agent shall maintain at its Principal Office a register for
        the
        recordation of the names and addresses of Lenders and the Commitments and
        Loans
        of each Lender from time to time (the "Register").
        The
        Register shall be available for inspection by Company or any Lender at any
        reasonable time and from time to time upon reasonable prior notice.
        Administrative Agent shall record in the Register the Commitments and the
        Loans,
        and each repayment or prepayment in respect of the principal amount of the
        Loans
        and any such recordation shall be conclusive and binding on Company and each
        Lender, absent manifest error; provided,
        failure
        to make any such recordation, or any error in such recordation, shall not
        affect
        any Lender's Commitments or any Credit Party's Obligations in respect of
        any
        Loan. Company hereby designates J. Aron to serve as Company's agent solely
        for
        purposes of maintaining the Register as provided in this Section 2.5, and
        Company hereby agrees that, to the extent J. Aron serves in such capacity,
        J.
        Aron and its officers, directors, employees, agents and affiliates shall
        constitute "Indemnitees."

       

      (c) Notes.
        If so
        requested by any Lender by written notice to Company (with a copy to
        Administrative Agent) at least two Business Days prior to the Closing Date,
        or
        at any time thereafter, Company shall execute and deliver to such Lender
        (and/or, if applicable and if so specified in such notice, to any Person
        who is
        an assignee of such Lender pursuant to Section 10.6) on the Closing Date
        (or, if such notice is delivered after the Closing Date, promptly after
        Company's receipt of such notice) a Note or Notes to evidence such Lender's
        Loans. All Notes evidencing Loans shall be in the form of Exhibit B and,
        for a
        Lender, in an amount equal to such Lender's pro rata share of the Facility
        Amount.

       

      2.6 Interest
        on Loans.
        

       

      (a) Except
        as
        otherwise set forth herein, each Loan shall bear interest on the unpaid
        principal amount thereof at the Effective Rate from the date made through
        repayment thereof (whether by acceleration or otherwise).

       

      (b) Interest
        payable on all Loans shall be computed on the basis of a 360-day year, in
        each
        case for the actual number of days elapsed in the period during which it
        accrues. In computing interest on any Loan, the date of the making of such
        Loan
        shall be included, and the date of payment of such Loan shall be excluded;
        provided,
        if a
        Loan is repaid on the same day on which it is made, one day's interest shall
        be
        paid on that Loan.

       

      
        
          
          

        

        
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      (c) Interest
        on each Loan shall be due and payable in arrears, and Company shall pay such
        interest then accrued and owing, (i) on and to each Quarterly Payment Date
        applicable to that Loan; (ii) if an Event of Default exists, then on and
        to the
        26th
        day of
        each calendar month; (iii) on the date of any prepayment of all or any
        portion of such Loan, whether voluntary or mandatory, to the extent accrued
        on
        the amount being prepaid; and (iv) at maturity, including the Maturity
        Date.

       

      2.7 Reserved.
        

       

      2.8 Default
        Interest.
        Upon
        the occurrence and during the continuance of an Event of Default, the principal
        amount of all Loans outstanding and, to the extent permitted by applicable
        Law,
        any interest payments on the Loans or any fees or other amounts owed hereunder,
        shall thereafter bear interest (including post-petition interest in any
        proceeding under the Bankruptcy Code or other applicable bankruptcy Laws)
        payable on demand at a rate that is 3% per annum in excess of the interest
        rate
        otherwise payable hereunder with respect to the applicable Loans (the
        "Post-Default
        Rate").
        Payment of interest at the Post-Default Rate is not, however, a permitted
        alternative to timely payment, and acceptance of interest at the Post-Default
        Rate shall not constitute a waiver of any Event of Default or otherwise
        prejudice or limit any rights or remedies of Administrative Agent or any
        Lender.

       

      2.9 Fees.
        Pursuant to a letter agreement between Company and Administrative Agent,
        Company
        has promised to pay to Agents certain fees in the amounts and at the times
        agreed upon, and Company hereby repeats its promise to pay such
        fees.

       

      2.10 ANCF
        Calculation.
        At
        least five (5) Business Days prior to each Quarterly Payment Date, Company
        shall
        furnish or cause to be furnished to Administrative Agent a schedule (reasonably
        supported, if requested, by supporting documentation) as of the end of the
        immediately preceding Calculation Quarter in which Company:

       

      (a) calculates
        and determines each component of ANCF as described in the definition of
        ANCF;

       

      (b) calculates
        and determines the resulting ANCF; and

       

      (c) calculates
        the interest in respect of the Loans that will be due on such Quarterly Payment
        Date.

       

      2.11 ANCF
        Payment of Principal.
        On each
        Quarterly Payment Date, Company will pay (or prepay) the principal of the
        Loans,
        without premium or penalty, in an amount equal to 100% of ANCF (or such lesser
        percentage of ANCF, not to be less than 50%, as may be selected by Agent
        in its
        sole discretion) for the immediately preceding Calculation Quarter.

       

      2.12 Voluntary
        Prepayments.
        Company
        may prepay the Loans in full on any Quarterly Payment Date upon no less than
        10
        days' and no more than ninety (90) days' prior written notice to Administrative
        Agent of such prepayment, which notice shall include the date on which such
        prepayment shall be made. Upon the giving of any such notice, all outstanding
        principal amount of the Loans, shall become due and payable on the prepayment
        date specified therein together with any interest accrued thereon and, if
        such
        prepayment occurs on or prior to May 11, 2010, a Make-Whole Amount. Company
        shall have no right to prepay any principal amount of any Loan except as
        permitted in this Section 2.12 or as required under Section 2.13, and
        all notices given pursuant to this Section 2.12 shall be irrevocable and
        binding upon Company.

       

      
        
          
          

        

        
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      2.13 Mandatory
        Prepayments.
        In the
        event that a Change of Control occurs, Company shall give prompt written
        notice
        thereof to Lenders. Lenders may at any time, during the period beginning
        on the
        date of such Change of Control and ending ninety (90) days after such notice
        of
        such Change of Control has been given to Lenders, demand that Company prepay
        the
        Loans in full, which prepayment shall be due and payable on demand together
        with
        any interest accrued thereon and, if such prepayment occurs on or prior to
        May 11, 2010, a Make-Whole Amount. In addition, if any of the Obligations
        become due and payable pursuant to the "THEN" clause of Section 8.1 on or
        prior to May 11, 2010, in addition to, and concurrent with, the payment of
        principal and interest accrued thereon, Company shall also pay a Make-Whole
        Amount.

       

      2.14 General
        Provisions Regarding Payments.
        

       

      (a) All
        payments by Company of principal, interest, fees and other Obligations shall
        be
        made in Dollars in same day funds, without defense, setoff or counterclaim,
        free
        of any restriction or condition, and delivered to Administrative Agent not
        later
        than 12:00 p.m. (New York City time) on the date due at Administrative Agent's
        Principal Office for the account of Lenders; funds received by Administrative
        Agent after that time on such due date shall be deemed to have been paid
        by
        Company on the next succeeding Business Day.

       

      (b) All
        payments in respect of the principal amount of any Loan shall include payment
        of
        accrued interest on the principal amount being repaid or prepaid, and all
        such
        payments (and, in any event, any payments in respect of any Loan on a date
        when
        interest is due and payable with respect to such Loan) shall be applied to
        the
        payment of interest before application to principal.

       

      (c) Administrative
        Agent shall promptly distribute to each Lender at such address as such Lender
        shall indicate in writing, such Lender's applicable Pro Rata Share of all
        payments and prepayments of principal and interest due hereunder, together
        with
        all other amounts due thereto, including, without limitation, all fees payable
        with respect thereto, to the extent received by Administrative
        Agent.

       

      (d) Whenever
        any payment to be made hereunder shall be stated to be due on a day that
        is not
        a Business Day, such payment shall be made on the next succeeding Business
        Day
        and such extension of time shall be included in the computation of the payment
        of interest or fees hereunder.

       

      (e) Company
        hereby authorizes Administrative Agent to charge Company's accounts with
        Administrative Agent in order to cause timely payment to be made to
        Administrative Agent of all principal, interest, fees and expenses due hereunder
        (subject to sufficient funds being available in its accounts for that
        purpose).

       

      
        
          
          

        

        
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      (f) Administrative
        Agent shall deem any payment by or on behalf of Company hereunder that is
        not
        made in same day funds prior to 12:00 p.m. (New York City time) to be a
        non-conforming payment. Any such payment shall not be deemed to have been
        received by Administrative Agent until the later of (i) the time such funds
        become available funds, and (ii) the applicable next Business Day.
        Administrative Agent shall give prompt telephonic notice to Company and each
        applicable Lender (confirmed in writing) if any payment is non-conforming.
        Any
        non-conforming payment may constitute or become a Default or Event of Default
        in
        accordance with the terms of Section 8.1(a). Interest shall continue to
        accrue on any principal as to which a non-conforming payment is made until
        such
        funds become available funds (but in no event less than the period from the
        date
        of such payment to the next succeeding applicable Business Day) at the rate
        determined pursuant to Section 2.8 from the date such amount was due and
        payable until the date such amount is paid in full.

       

      2.15 Ratable
        Sharing.
        As used
        in this section, "Obligation
        Category"
        means
        the following groups of Obligations: (a) payments due and owing to Lenders
        under
        Sections 5.9, 10.2 or 10.3 hereof or under any similar sections of any other
        Transaction Documents, (b) interest due and payable in respect of the Loans
        and
        payment of fees due and owing to Lenders under Section 2.9, and (c) the
        outstanding principal amount of the Loans. Lenders hereby agree among themselves
        that if any of them shall, whether by voluntary payment, through the exercise
        of
        any right of set-off or banker's lien, by counterclaim or cross action or
        by the
        enforcement of any right under the Transaction Documents or otherwise, or
        as
        adequate protection of a deposit treated as cash collateral under the Bankruptcy
        Code, receive payment or reduction of a proportion of any Obligations in
        an
        Obligation Category that are then due and owing to such Lender hereunder
        or
        under the other Transaction Documents which is greater than the proportion
        received by any other Lender in respect of the Obligations in such Obligation
        Category that are then due and owing to such other Lender, then the Lender
        receiving such proportionately greater payment shall (a) notify
        Administrative Agent and each other Lender of the receipt of such payment
        and
        (b) apply a portion of such payment to purchase participations (which it
        shall be deemed to have purchased from each seller of a participation
        simultaneously upon the receipt by such seller of its portion of such payment)
        in the Obligations in such Obligation Category then due and owing to the
        other
        Lenders so that all such recoveries of Obligations in any Obligation Category
        shall be shared by all Lenders in proportion to the aggregate Obligations
        in
        such Obligation Category that are then due and owing to all of them;
provided,
        if all
        or part of such proportionately greater payment received by such purchasing
        Lender is thereafter recovered from such Lender upon the bankruptcy or
        reorganization of Company or otherwise, those purchases shall be rescinded
        and
        the purchase prices paid for such participations shall be returned to such
        purchasing Lender ratably to the extent of such recovery, but without interest.
        Company expressly consents to the foregoing arrangement and agrees that any
        holder of a participation so purchased may exercise any and all rights of
        banker's lien, set-off or counterclaim with respect to any and all monies
        owing
        by Company to that holder with respect thereto as fully as if that holder
        were
        owed the amount of the participation held by that holder.

      
         

        2.16 Increased
          Costs; Capital Adequacy.

      

       

      
        
          
          

        

        
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      (a) Compensation
        For Increased Costs and Taxes.
        Subject
        to the provisions of Section 2.18
        (which
        shall be controlling with respect to the matters covered thereby), in the
        event
        that any Lender shall determine (which determination shall, absent manifest
        error, be final and conclusive and binding upon all parties hereto) that
        any Law
        or any change therein or in the interpretation, administration or application
        thereof (including the introduction of any new Law), or any determination
        of any
        Governmental Authority, in each case that becomes effective after the date
        hereof, or compliance by such Lender with any guideline, request or directive
        issued or made after the date hereof by any central bank or other governmental
        or quasi-governmental authority (whether or not having the force of law):
        (i)
        subjects such Lender or its Principal Office to any additional Tax (other
        than
        any Tax on the overall net income of such Lender or any "Specified
        Taxes"
        (as
        defined in the ORRI Conveyance)) with respect to this Agreement or any of
        the
        other Transaction Documents or any of its obligations hereunder or thereunder
        or
        any payments to such Lender or its Principal Office of principal, interest,
        fees
        or any other amount payable hereunder; (ii) imposes, modifies or holds
        applicable any reserve (including any marginal, emergency, supplemental,
        special
        or other reserve), special deposit, compulsory loan, FDIC insurance or similar
        requirement against assets held by, or deposits or other liabilities in or
        for
        the account of, or advances or loans by, or other credit extended by, or
        any
        other acquisition of funds by, any office of such Lender; or (iii) imposes
        any
        other condition (other than with respect to a Tax matter) on or affecting
        such
        Lender or its Principal Office or its obligations hereunder or the London
        interbank market; and the result of any of the foregoing is to increase the
        cost
        to such Lender of agreeing to make, making or maintaining Loans hereunder
        or to
        reduce any amount received or receivable by such Lender or its Principal
        Office
        with respect thereto; then, in any such case, Company shall promptly pay
        to such
        Lender, upon receipt of the statement referred to in the next sentence, such
        additional amount or amounts (in the form of an increased rate of, or a
        different method of calculating, interest or otherwise as such Lender in
        its
        sole discretion shall determine) as may be necessary to compensate such Lender
        for any such increased cost or reduction in amounts received or receivable
        hereunder. Such Lender shall deliver to Company (with a copy to Administrative
        Agent) a written statement, setting forth in reasonable detail the basis
        for
        calculating the additional amounts owed to such Lender under this
        Section 2.16, which statement shall be conclusive and binding upon all
        parties hereto absent manifest error.

       

      (b) Capital
        Adequacy Adjustment.
        In the
        event that any Lender shall have determined that the adoption, effectiveness,
        phase-in or applicability after the Closing Date of any Law (or any provision
        thereof) regarding capital adequacy, or any change therein or in the
        interpretation or administration thereof by any Governmental Authority, central
        bank or comparable agency charged with the interpretation or administration
        thereof, or compliance by any Lender or its Principal Office with any guideline,
        request or directive regarding capital adequacy (whether or not having the
        force
        of law) of any such Governmental Authority, central bank or comparable agency,
        has or would have the effect of reducing the rate of return on the capital
        of
        such Lender or any corporation controlling such Lender as a consequence of,
        or
        with reference to, such Lender's Loans or Commitment, or participations therein
        or other obligations hereunder with respect to the Loans to a level below
        that
        which such Lender or such controlling corporation could have achieved but
        for
        such adoption, effectiveness, phase-in, applicability, change or compliance
        (taking into consideration the policies of such Lender or such controlling
        corporation with regard to capital adequacy), then from time to time, within
        five Business Days after receipt by Company from such Lender of the statement
        referred to in the next sentence, Company shall pay to such Lender such
        additional amount or amounts as will compensate such Lender or such controlling
        corporation on an after-tax basis for such reduction. Such Lender shall deliver
        to Company (with a copy to Administrative Agent) a written statement, setting
        forth in reasonable detail the basis for calculating the additional amounts
        owed
        to Lender under this Section 2.16(b),
        which
        statement shall be conclusive and binding upon all parties hereto absent
        manifest error.

       

      
        
          
          

        

        
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      2.17 Taxes;
        Withholding, etc. 

       

      (a) Payments
        to Be Free and Clear.
        All
        sums payable by any Credit Party hereunder and under the other Transaction
        Documents shall (except to the extent required by Law) be paid free and clear
        of, and without any deduction or withholding on account of, any Tax (other
        than
        a Tax on the overall net income of any Lender or any "Specified
        Taxes"
        (as
        defined in the ORRI Conveyance)) imposed, levied, collected, withheld or
        assessed by or within the United States of America or any political subdivision
        in or of the United States of America or any other jurisdiction from or to
        which
        a payment is made by or on behalf of any Credit Party or by any federation
        or
        organization of which the United States of America or any such jurisdiction
        is a
        member at the time of payment.

       

      (b) Withholding
        of Taxes.
        If any
        Credit Party or any other Person is required by Law to make any deduction
        or
        withholding on account of any such Tax from any sum paid or payable by any
        Credit Party to Administrative Agent or any Lender under any of the Transaction
        Documents: (i) Company shall notify Administrative Agent of any such
        requirement or any change in any such requirement as soon as Company becomes
        aware of it; (ii) Company shall pay any such Tax before the date on which
        penalties attach thereto, such payment to be made (if the liability to pay
        is
        imposed on any Credit Party) for its own account or (if that liability is
        imposed on Administrative Agent or such Lender, as the case may be) on behalf
        of
        and in the name of Administrative Agent or such Lender; (iii) the sum
        payable by such Credit Party in respect of which the relevant deduction,
        withholding or payment is required shall be increased to the extent necessary
        to
        ensure that, after the making of that deduction, withholding or payment,
        Administrative Agent or such Lender, as the case may be, receives on the
        due
        date a net sum equal to what it would have received had no such deduction,
        withholding or payment been required or made; and (iv) within thirty (30)
        days after paying any sum from which it is required by Law to make any deduction
        or withholding, and within thirty (30) days after the due date of payment
        of any
        Tax which it is required by clause (ii) above to pay, Company shall deliver
        to Administrative Agent evidence satisfactory to the other affected parties
        of
        such deduction, withholding or payment and of the remittance thereof to the
        relevant taxing or other authority; provided, no such additional amount shall
        be
        required to be paid to any Lender under clause (iii) above except to the
        extent that any change after the date hereof (in the case of each Lender
        listed
        on the signature pages hereof on the Closing Date) or after the effective
        date
        of the Assignment Agreement pursuant to which such Lender became a Lender
        (in
        the case of each other Lender) in any such requirement for a deduction,
        withholding or payment as is mentioned therein shall result in an increase
        in
        the rate of such deduction, withholding or payment from that in effect at
        the
        date hereof or at the date of such Assignment Agreement, as the case may
        be, in
        respect of payments to such Lender.

       

      
        
          
          

        

        
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      (c) Evidence
        of Exemption From U.S. Withholding Tax.
        Each
        Lender that is not a United States Person (as such term is defined in
        Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income
        tax purposes (a "Non-US
        Lender")
        shall
        deliver to Administrative Agent for transmission to Company, on or prior
        to the
        Closing Date (in the case of each Lender listed on the signature pages hereof
        on
        the Closing Date) or on or prior to the date of the Assignment Agreement
        pursuant to which it becomes a Lender (in the case of each other Lender),
        and at
        such other times as may be necessary in the determination of Company or
        Administrative Agent (each in the reasonable exercise of its discretion),
        (i)
        two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or
        any
        successor forms), properly completed and duly executed by such Lender, and
        such
        other documentation required under the Internal Revenue Code and reasonably
        requested by Company to establish that such Lender is not subject to deduction
        or withholding of United States federal income tax with respect to any payments
        to such Lender of principal, interest, fees or other amounts payable under
        any
        of the Transaction Documents, or (ii) if such Lender is not a "bank" or other
        Person described in Section 881(c)(3) of the Internal Revenue Code and
        cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant
        to
        clause (i) above, a Certificate re Non-Bank Status together with two original
        copies of Internal Revenue Service Form W-8 (or any successor form), properly
        completed and duly executed by such Lender, and such other documentation
        required under the Internal Revenue Code and reasonably requested by Company
        to
        establish that such Lender is not subject to deduction or withholding of
        United
        States federal income tax with respect to any payments to such Lender of
        interest payable under any of the Transaction Documents. Each Lender required
        to
        deliver any forms, certificates or other evidence with respect to United
        States
        federal income tax withholding matters pursuant to this Section 2.17(c)
        hereby agrees, from time to time after the initial delivery by such Lender
        of
        such forms, certificates or other evidence, whenever a lapse in time or change
        in circumstances renders such forms, certificates or other evidence obsolete
        or
        inaccurate in any material respect, that such Lender shall promptly deliver
        to
        Administrative Agent for transmission to Company two new original copies
        of
        Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank
        Status and two original copies of Internal Revenue Service Form W-8, as the
        case
        may be, properly completed and duly executed by such Lender, and such other
        documentation required under the Internal Revenue Code and reasonably requested
        by Company to confirm or establish that such Lender is not subject to deduction
        or withholding of United States federal income tax with respect to payments
        to
        such Lender under the Transaction Documents, or notify Administrative Agent
        and
        Company of its inability to deliver any such forms, certificates or other
        evidence. Company shall not be required to pay any additional amount to any
        Non-US Lender under Section 2.17(b)(iii) if such Lender shall have failed
        (1) to deliver the forms, certificates or other evidence referred to in the
        second sentence of this Section 2.17, or (2) to notify Administrative
        Agent and Company of its inability to deliver any such forms, certificates
        or
        other evidence, as the case may be; provided,
        if such
        Lender shall have satisfied the requirements of the first sentence of this
        Section 2.17(c) on the Closing Date or on the date of the Assignment
        Agreement pursuant to which it became a Lender, as applicable, nothing in
        this
        last sentence of Section 2.17(c) shall relieve Company of its obligation to
        pay any additional amounts pursuant to Section 2.17(b) in the event that,
        as a result of any change in any applicable Law, or any change in the
        interpretation, administration or application thereof, such Lender is no
        longer
        properly entitled to deliver forms, certificates or other evidence at a
        subsequent date establishing the fact that such Lender is not subject to
        withholding as described herein.

       

      
        
          
          

        

        
          -35-

          
            

          

        

        
          
          

        

      

       

      2.18 Measures
        to Mitigate.
        Each
        Lender agrees that, as promptly as practicable after the officer of such
        Lender
        responsible for administering its Loans becomes aware of the occurrence of
        an
        event or the existence of a condition that would cause such Lender to become
        entitled to receive payments under Section 2.16 or 2.17 or it will, to the
        extent not inconsistent with the internal policies of such Lender and any
        applicable legal or regulatory restrictions, use reasonable efforts to
        (a) make, fund or maintain its Credit Extensions through another office of
        such Lender, or (b) take such other measures as such Lender may deem
        reasonable, if as a result thereof the circumstances which would cause the
        additional amounts which would otherwise be required to be paid to such Lender
        pursuant to Section 2.16 or 2.17 or would be materially reduced and if, as
        determined by such Lender in its sole discretion, the making, issuing, funding
        or maintaining of such Commitments or Loans through such other office or
        in
        accordance with such other measures, as the case may be, would not otherwise
        adversely affect such Commitments or Loans or the interests of such Lender;
        provided,
        such
        Lender will not be obligated to utilize such other office pursuant to this
        Section 2.18 unless Company agrees to pay all incremental expenses incurred
        by such Lender as a result of utilizing such other office as described in
        clause (a) above. A certificate as to the amount of any such expenses
        payable by Company pursuant to this Section 2.18 (setting forth in
        reasonable detail the basis for requesting such amount) submitted by such
        Lender
        to Company (with a copy to Administrative Agent) shall be conclusive absent
        manifest error.

       

      2.19 Collateral
        Accounts. Establishment
        of Collateral Accounts; Rules for Application.
        

       

      (i) Company
        shall establish and maintain at its expense the Collateral Account.

       

      (ii) From
        and
        after the Closing Date through the Maturity Date, Company shall deposit or
        cause
        to be deposited into the Collateral Account all gross cash revenues and receipts
        payable to a Credit Party from any source or activity. 

       

      (iii) Except
        as
        provided in clause (v) below or as otherwise approved with respect to Other
        Capital Expenditures, all amounts in the Collateral Account shall be applied in
        the order of priority referenced in clauses (b)(i) through (b)(ix) of the
        definition of ANCF. 

       

      (iv) Company
        may not instruct the administrator of the Collateral Account to transfer
        or
        disburse amounts from the Collateral Account. Administrative Agent shall,
        subject to the provisions of subsection (a)(v) below, transfer or disburse
        amounts from the Collateral Account (or such account of Administrative Agent
        into which such amounts are swept pursuant to the Collateral Account Agreement)
        to Company’s operating account (or, in Administrative Agent’s discretion,
        directly to the Persons entitled to receive payment of such amounts) from
        time
        to time for use in the ordinary course of Company’s business, subject to the
        terms and provisions of this Agreement, including the priority of payment
        provisions specified in subsection (a)(iii) above.

       

      
        
          
          

        

        
          -36-

          
            

          

        

        
          
          

        

      

       

      (v) After
        the
        occurrence of a Default under any Transaction Document or Company’s failure to
        comply with the terms of this Section 2.19, the Administrative Agent may,
        at its option, from time to time apply all sums in the Collateral Account
        (or
        such account of Administrative Agent into which such amounts are swept pursuant
        to the Collateral Account Agreement) to the reduction of outstanding principal,
        interest and other sums owed by Company on, the Loans, the other Obligations,
        or
        the Transaction Documents.

       

      (b) Notice.
        Company
        and each of its Subsidiaries shall send a notice, in form acceptable to
        Administrative Agent, to all existing and/or new purchasers of Hydrocarbons
        produced from their Oil and Gas Properties, directing them to forward all
        amounts payable to such Credit Party directly to the Collateral Account at
        the
        mailing address of the depositary bank for deposit into the Collateral Account.
        The failure of such Persons to comply with any such notice shall not constitute
        a Default hereunder by any Credit Party, provided that (i) such Person’s failure
        to comply with such notice is not done at the request of a Credit Party and
        (ii)
        the applicable Credit Party shall forward all amounts received from such
        Persons
        to the Collateral Account within three (3) Business Days of such Credit Party’s
        receipt thereof.

       

      (c) Acknowledgments.
        Company
        and each of its Subsidiaries hereby acknowledges that:

       

      (i) It
        has
        granted and assigned to Administrative Agent, for the benefit of the
        Beneficiaries, a first priority, perfected security interest in the Collateral
        Account, all funds therein and all proceeds thereof pursuant to the Collateral
        Account Agreement; and

       

      (ii) No
        Credit
        Party shall be permitted to withdraw, transfer or disburse any funds from
        the
        Collateral Account.

       

      (d) Attorney-in-fact.
        Company
        and each of its Subsidiaries hereby appoints Administrative Agent its
        attorney-in-fact, with full power of substitution, to execute and file on
        behalf
        of such Credit Party, any financing statement, continuation statement or
        instrument of further assurance to more effectively perfect, continue or
        confirm
        (i) the provisions of this Section 2.19 and of any agreement entered into
        by Company, Administrative Agent and the depositary bank administering the
        Collateral Account and (ii) the security interest granted in the Collateral
        Account. This power, being coupled with an interest, shall be irrevocable
        until
        all amounts due in connection with the Obligations have been paid in
        full.

       

      SECTION
        3

      CONDITIONS
        PRECEDENT

       

      3.1 Closing
        Date.
        The
        obligation of any Lender to make a Credit Extension on the Closing Date is
        subject to the satisfaction, or waiver in accordance with Section 10.5, of
        the following conditions on or before the Closing Date:

       

      (a) Transaction
        Documents.
        (i) Administrative Agent shall have received counterparts of each
        Transaction Document originally executed and delivered by each applicable
        Credit
        Party and in such numbers as Administrative Agent or its counsel may reasonably
        request and (ii) the Equity Owner shall have received the Equity Document
        originally executed and delivered by the Company and the other parties thereto
        and in such numbers as the Equity Owner or its counsel may reasonably
        request.

       

      
        
          
          

        

        
          -37-

          
            

          

        

        
          
          

        

      

       

      (b) Organizational
        Documents; Incumbency.
        Administrative Agent shall have received (i) copies, certified as of the
        Closing
        Date by an Authorized Officer of each Credit Party or the secretary or an
        assistant secretary of such Credit Party as being in full force and effect
        without modification, supplement or amendment, of (A) each Organizational
        Document executed and delivered by such Credit Party, as applicable, and,
        to the
        extent applicable, certified as of a recent date by the appropriate governmental
        official, each dated the Closing Date or a recent date prior thereto; (B)
        resolutions of the Board of Directors or similar governing body of such Credit
        Party approving and authorizing the execution, delivery and performance of
        this
        Agreement and the other Transaction Documents to which it is a party or by
        which
        it or its assets may be bound as of the Closing Date; (C) a good standing
        certificate from the applicable Governmental Authority of such Credit Party's
        jurisdiction of incorporation, organization or formation and in each
        jurisdiction in which it owns real property Collateral, each dated a recent
        date
        prior to the Closing Date; and (D) such other documents as Administrative
        Agent
        may reasonably request, and (ii) signature and incumbency certificates of
        the
        officers of each Credit Party executing the Transaction Documents.

       

      (c) Organizational
        and Capital Structure.
        The
        organizational structure and capital structure of Company and its Subsidiaries,
        after giving effect to the Closing Date Transactions, shall be as set forth
        on
        Schedule 4.14.

       

      (d) Application
        of Loan Proceeds.
        On the
        Closing Date, Company shall have arranged for appropriate portions of the
        Loans
        then to be funded to be paid directly to the Persons who are to receive the
        Loan
        as described in the first sentence of Section 2.4.

       

      (e) Initial
        Hedging Contracts.
        On or
        prior to the Closing Date, Company shall, on terms satisfactory to
        Administrative Agent and Syndication Agent, have entered into Hedging Contracts
        with a counterparty who is rated at least A by S&P or A2 by Moody's
under
        which Company will receive the following:

       

      (i) for
        notional MMBtus of Houston Ship Channel Natural Gas in at least the number
        of
        MMBtus specified in the following table, a floor price of at least the amount
        specified below:

       

      
        
          	
                  Year

                	 	
                  MMBtus
                    per year

                	 	
                  Minimum
                    Price

                	 
	
                  2007

                	 	 	
                  336,362

                	 	
                  $

                	
                  7.50

                	 
	
                  2008

                	 	 	
                  406,738

                	 	
                  $

                	
                  7.50

                	 
	
                  2009

                	 	 	
                  280,546

                	 	
                  $

                	
                  7.50

                	 
	
                  2010

                	 	 	
                  193,580

                	 	
                  $

                	
                  7.50

                	 
	
                  2011

                	 	 	
                  52,476

                	 	
                  $

                	
                  7.50

                	 


        

      

       

      
        
          
          

        

        
          -38-

          
            

          

        

        
          
          

        

      

       

      (ii) for
        notional barrels of West Texas Intermediate light sweet crude oil in at least
        the number of barrels specified in the following table, a floor price of
        at
        least the amount specified below:

       

      
        
          	
                  Year

                	 	
                  Barrels
                    per year

                	 	
                  Minimum
                    Price

                	 
	
                  2007

                	 	 	
                  41,647

                	 	
                  $

                	
                  65.00

                	 
	
                  2008

                	 	 	
                  49,918

                	 	
                  $

                	
                  65.00

                	 
	
                  2009

                	 	 	
                  38,751

                	 	
                  $

                	
                  65.00

                	 
	
                  2010

                	 	 	
                  30,084

                	 	
                  $

                	
                  65.00

                	 
	
                  2011

                	 	 	
                  7,698

                	 	
                  $

                	
                  65.00

                	 


        

      

       

      (f) Governmental
        Authorizations and Consents.
        Each
        Credit Party shall have obtained all Governmental Authorizations and all
        consents of other Persons, in each case that are necessary or advisable in
        connection with the transactions contemplated by the Transaction Documents
        and
        each of the foregoing shall be in full force and effect and in form and
        substance reasonably satisfactory to Syndication Agent and Administrative
        Agent.
        All applicable waiting periods shall have expired without any action being
        taken
        or threatened by any competent authority which would restrain, prevent or
        otherwise impose adverse conditions on the transactions contemplated by the
        Acquisition Documents or the Transaction Documents or the financing thereof
        and
        no action, request for stay, petition for review or rehearing, reconsideration,
        or appeal with respect to any of the foregoing shall be pending, and the
        time
        for any applicable agency to take action to set aside its consent on its
        own
        motion shall have expired.

       

      (g) First
        Priority Lien on Oil and Gas Properties.
        In
        order to create in favor of Administrative Agent, for the benefit of Secured
        Parties, a valid and (subject to any filing or recording referred to herein)
        perfected First Priority Lien on such Oil and Gas Properties of the Borrower
        and
        its Subsidiaries as Administrative Agent might request, Administrative Agent
        shall have received from Company:

       

      (i) fully
        executed and notarized Mortgages, in proper form for recording in all
        appropriate places in all applicable jurisdictions, encumbering such Oil
        and Gas
        Properties;

       

      (ii) an
        opinion of counsel (which counsel shall be reasonably satisfactory to
        Administrative Agent) in each state in which such a Property is located with
        respect to the enforceability of the form(s) of Mortgages to be recorded
        in such
        state, the perfection of the Liens created thereby, and such other matters
        as
        Administrative Agent may reasonably request, in each case in form and substance
        satisfactory to Administrative Agent; and

       

      (iii) an
        amount
        necessary to cover all recording and stamp taxes (including mortgage recording
        and intangible taxes) payable in connection with recording the Mortgages
        for
        such Properties in the appropriate real estate records.

       

      (h) Personal
        Property Collateral.
        In
        order to create in favor of Administrative Agent, for the benefit of Secured
        Parties, a valid and (subject to any filing or recording referred to herein)
        perfected First Priority security interest in (i) all personal property of
        Company and its Subsidiaries, (ii) all Capital Stock owned by Company in
        any of
        its Subsidiaries or any other Person, and (iii) all Capital Stock of Company
        held by Parent, subject to Article 9 of the UCC, and in order to effect the
        foregoing, the Administrative Agent shall have received from Company evidence
        that Company, its Subsidiaries, and Parent shall have taken or caused to
        be
        taken any action, executed and delivered or caused to be executed and delivered
        any agreement, document and instrument and made or caused to be made any
        other
        filing and recording (other than as set forth herein) reasonably required
        by
        Administrative Agent.

       

      
        
          
          

        

        
          -39-

          
            

          

        

        
          
          

        

      

       

      (i) Environmental
        Reports.
        Syndication Agent and Administrative Agent shall have received reports and
        other
        information, in form, scope and substance reasonably satisfactory to Syndication
        Agent and Administrative Agent, regarding environmental matters relating
        to
        Company's and its Subsidiaries' material real property assets, which reports
        shall include a Phase I environmental assessment of recent date prepared by
        E.Vironment, L.P.

       

      (j) Financial
        Statements; Projections; Approved Plan of Development.
        Lenders
        shall have received from Company (i) the Current Financial Statements, which
        shall be in form and substance reasonably satisfactory to Administrative
        Agent
        and Syndication Agent, (ii) the Projections, and (iii) the Approved Plan of
        Development, which shall be in form and substance reasonably satisfactory
        to
        Administrative Agent and Syndication Agent.

       

      (k) Evidence
        of Insurance; Premium Down Payment.
        Syndication Agent and Administrative Agent shall have received (i) a
        certificate from Company's insurance broker or other evidence reasonably
        satisfactory to them that all insurance required to be maintained pursuant
        to
        Section 5.8 is in full force and effect and that Administrative Agent have
        been named as additional insured and loss payee thereunder as its interests
        may
        appear and to the extent required under Section 5.8 and (ii) evidence
        reasonably satisfactory to them that a down payment of at least $450,000
        has
        been made by or on behalf of Company with respect to the premiums
        therefor.

       

      (l) Opinions
        of Counsel to Credit Parties.
        Syndication Agent and Administrative Agent shall have received originally
        executed copies of the favorable written opinions of Baker & Hostetler, LLP
        as counsel for the Credit Parties, in the form of Exhibit D or such other
        form
        acceptable to the Administrative Agent, and opining as to such other matters
        as
        Administrative Agent or Syndication Agent may reasonably request, dated as
        of
        the Closing Date and otherwise in form and substance reasonably satisfactory
        to
        Administrative Agent and Syndication Agent (and each Credit Party hereby
        instructs such counsel to deliver such opinions to Agents and
        Lenders).

       

      (m) Fees.
        Company
        shall have paid to Syndication Agent and Administrative Agent the fees payable
        on the Closing Date that are referred to in Section 2.9.

       

      (n) Solvency
        Certificates.
        On the
        Closing Date, Syndication Agent and Administrative Agent shall have received
        a
        Solvency Certificate from each of Company and Parent dated the Closing Date
        and
        addressed to Syndication Agent, Administrative Agent and Lenders, and in
        the
        form of Exhibit G-2 appropriately completed, with appropriate attachments
        and demonstrating that after giving effect to the consummation of this Agreement
        and the Closing Date Transactions, each of Company and its Subsidiaries and
        Parent and its Subsidiaries are Solvent.

       

      
        
          
          

        

        
          -40-

          
            

          

        

        
          
          

        

      

    

    Closing
      Date Transactions, each of Company and its Subsidiaries and Parent and its
      Subsidiaries are Solvent.

     

    (o) Closing
      Date Certificate.
      Company
      shall have delivered to Syndication Agent and Administrative Agent an originally
      executed Closing Date Certificate, together with all attachments
      thereto.

     

    (p) No
      Litigation.
      There
      shall not exist any action, suit, investigation, litigation or proceeding or
      other legal or regulatory developments, pending or threatened in any court
      or
      before any arbitrator or Governmental Authority that, in the reasonable opinion
      of Administrative Agent and Syndication Agent, singly or in the aggregate,
      materially impairs the financing hereunder or any of the other transactions
      contemplated by the Acquisition Documents or the Transaction Documents, or
      that
      could have a Material Adverse Effect.

     

    (q) Completion
      of Proceedings.
      All
      partnership, corporate and other proceedings taken or to be taken in connection
      with the transactions contemplated hereby and all documents incidental thereto
      not previously found acceptable by Administrative Agent or Syndication Agent
      and
      its counsel shall be reasonably satisfactory in form and substance to
      Administrative Agent and Syndication Agent and such counsel, and Administrative
      Agent, Syndication Agent and such counsel shall have received all such
      counterpart originals or certified copies of such documents as Administrative
      Agent or Syndication Agent may reasonably request. Each Lender, by delivering
      its signature page to this Agreement and funding a Loan on the Closing Date,
      shall be deemed to have acknowledged receipt of, and consented to and approved,
      each Transaction Document and each other document required to be approved by
      any
      Agent, Required Lenders or Lenders, as applicable on the Closing
      Date.

     

    (r) Termination
      of Existing Liens.
      Administrative Agent shall have received evidence satisfactory to Administrative
      Agent, confirming that the property of Company and its Subsidiaries, as well
      as
      the Capital Stock of Company, is subject to no Liens other than Permitted
      Liens.

     

    (s) Closing
      Date Transactions.
      Administrative Agent shall have received (i) a certificate of an Authorized
      Officer of Company certifying that Company is concurrently consummating the
      Closing Date Transactions (with all of the conditions precedent thereto having
      been satisfied in all respects by the parties thereto) and acquiring all of
      the
      Acquired Assets; (ii) copies of the assignments, deeds and leases for all of
      such Acquired Assets; (iii) such other related documents and information as
      Administrative Agent shall have reasonably requested. Company hereby
      acknowledges and agrees that (y) the consummation of the transactions
      contemplated under this Agreement and the Closing Date Transactions, including
      the making of the Loans, are intended to be simultaneous for all intents and
      purposes, and (z) each Credit Party shall be deemed to have executed and
      delivered each applicable Transaction Document as set forth in this
      Section 3.1, including each Security Document, immediately prior to or
      simultaneously with the making of the Loans hereunder.

     

    (t) Management
      Services Agreement.
      Administrative Agent shall have received a duly executed copy of the Management
      Services Agreement, in form and substance satisfactory to Administrative
      Agent.

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

     

    (u) Due
      Diligence.
      Administrative Agent and Lenders shall have completed satisfactory due diligence
      review of the assets, liabilities, business, operations and condition (financial
      or otherwise) of Company and its Subsidiaries, including, a review of their
      Oil
      and Gas Properties and all legal, financial, accounting, governmental,
      environmental, tax and regulatory matters, and fiduciary aspects of the proposed
      financing. The Lenders shall have received satisfactory title opinions, and/or
      such other evidence that may be reasonably requested by the Administrative
      Agent, as to the status of title to the Oil and Gas Properties of the Borrower
      and its Subsidiaries.

     

    (v) Engineering
      Report.
      Administrative Agent and Lenders shall have received the Initial Engineering
      Report, and the same shall be satisfactory to Administrative Agent and
      Lenders.

     

    (w) Bank
      Account Control Agreements.
      In
      addition to the Collateral Account Agreement, Administrative Agent shall have
      received duly executed control agreements from each institution holding Deposit
      Accounts of Company or any of its Subsidiaries pursuant to which such
      institution recognizes Administrative Agent's Lien in such Deposit Accounts
      and,
      upon the occurrence and during the continuance of an Event of Default, agrees
      to
      transfer collected balances in all such Deposit Accounts to Administrative
      Agent
      pursuant to its instructions from time to time.

     

    (x) Capitalization
      of Company; Current Ratio.
      Administrative Agent and Lenders shall be satisfied with the pro forma capital
      and ownership structure and the shareholder arrangements of Company. Without
      limiting the foregoing, Company shall have at least $300,000 of cash on its
      balance sheet after giving effect to the Closing Date Transactions and the
      making of the Closing Date Credit Extensions. Administrative Agent and Lenders
      shall be satisfied that the ratio of Company's Consolidated Current Assets
      to
      Company's Consolidated Current Liabilities will not be less than 1.0 to 1.0
      as
      of the last day of the Fiscal Quarter most recently ended prior to the Closing
      Date, after giving pro forma effect to the Closing Date Transactions, the
      Initial Loans and the payment of all transaction costs, fees and expenses
      associated therewith and in connection with this Agreement.

     

    (y) Acquisition
      Documents.
      Each of
      the representations and warranties made by any party in the Acquisition
      Documents shall be true and correct in all material respects, and none of such
      parties shall have failed to perform any obligation or covenant required by
      the
      Acquisition Documents to be performed or complied with by it on or before the
      Closing Date. Simultaneously with making of the Loans on the Closing Date,
      all
      transactions under the Acquisition Documents shall have been consummated in
      compliance with the terms and conditions thereof and all conditions precedent
      to
      such consummation shall be fully satisfied.

     

    (z) Other
      Documentation.
      Administrative Agent shall have received all documents and instruments which
      Administrative Agent has then reasonably requested, in addition to those
      described in this Section 3.1. All such additional documents and
      instruments shall be reasonably satisfactory to Administrative Agent in form,
      substance and date.

     

    3.2 Conditions
      to Each Credit Extension.
      

     

    (a) Conditions
      Precedent.
      No Loan
      shall be made on any Credit Date, including the Closing Date, unless each of
      the
      following conditions precedent have been satisfied or waived in accordance
      with
      Section 10.5:

     

    (i) Administrative
      Agent shall have received a fully executed and delivered Funding
      Notice;

     

    
      
        
        

      

      
        -42-

        
          

        

      

      
        
        

      

    

     

    (ii) as
      of
      such Credit Date, the representations and warranties contained herein and in
      the
      other Transaction Documents shall be true and correct in all respects on and
      as
      of that Credit Date to the same extent as though made on and as of that date,
      except to the extent such representations and warranties specifically relate
      to
      an earlier date, in which case such representations and warranties shall have
      been true and correct in all respects on and as of such earlier
      date;

     

    (iii) as
      of
      such Credit Date, no event or circumstance shall have occurred and be continuing
      or could reasonably be expected to result from the consummation of the
      applicable Credit Extension that would constitute an Event of Default or a
      Default; and

     

    (iv) with
      respect to Uncommitted Loans, each Lender shall have decided to make such
      Uncommitted Loans and all procedures, notices and other requirements required
      under Section 2.2(b).

     

    Any
      Agent
      or Required Lenders shall be entitled, but not obligated to, request and
      receive, prior to the making of any Credit Extension, additional information
      reasonably satisfactory to the requesting party confirming the satisfaction
      of
      any of the foregoing if, in the good faith judgment of such Agent or Required
      Lender such request is warranted under the circumstances.

     

    (b) Funding
      Notices.
      Any
      Funding Notice shall be executed by an Authorized Officer of Company in a
      writing delivered to Administrative Agent. With respect to Committed Loans
      only,
      in lieu of delivering a Funding Notice, Company may give Administrative Agent
      telephonic notice by the required time of any proposed borrowing, conversion
      or
      continuation; provided
      each
      such notice shall be promptly confirmed in writing by delivery of the applicable
      Funding Notice to Administrative Agent on or before the applicable date of
      borrowing or conversion or continuation. Neither Administrative Agent nor any
      Lender shall incur any liability to Company in acting upon any telephonic notice
      referred to above that Administrative Agent believes in good faith to have
      been
      given by a duly authorized officer or other person authorized on behalf of
      Company or for otherwise acting in good faith.

     

    SECTION
      4

    REPRESENTATIONS
      AND WARRANTIES

     

    In
      order
      to induce Lenders to enter into this Agreement and to make each Credit Extension
      to be made thereby, each Credit Party represents and warrants to each Agent,
      Royalty Owner, Warrant Owner, and each Lender, on the Closing Date (both
      immediately prior to and immediately after giving effect to the Closing Date
      Transactions) and on each Credit Date, that the following statements are true
      and correct:

     

    4.1 No
      Default.
      No
      event has occurred and is continuing which constitutes a Default.

     

    
      
        
        

      

      
        -43-

        
          

        

      

      
        
        

      

    

     

    4.2 Organization
      and Good Standing.
      Each
      Credit Party is duly organized, validly existing and in good standing under
      the
      Laws of its jurisdiction of organization, having all powers required to carry
      on
      its business and enter into and carry out the transactions contemplated hereby.
      Each Credit Party is duly qualified, in good standing, and authorized to do
      business in all other jurisdictions within the United States wherein the
      character of the properties owned or held by it or the nature of the business
      transacted by it makes such qualification necessary. Each Credit Party has
      taken
      all actions and procedures customarily taken in order to enter, for the purpose
      of conducting business or owning property, each jurisdiction outside the United
      States, if any, wherein the character of the properties owned or held by it
      or
      the nature of the business transacted by it makes such actions and procedures
      desirable.

     

    4.3 Authorization.
      Each
      Credit Party has duly taken all action necessary to authorize the execution
      and
      delivery by it of the Transaction Documents to which it is a party and to
      authorize the consummation of the transactions contemplated thereby and the
      performance of its obligations thereunder. Company is duly authorized to borrow
      funds hereunder.

     

    4.4 No
      Conflicts or Consents.
      The
      execution and delivery by the various Credit Parties of the Transaction
      Documents to which each is a party, the performance by each of its obligations
      under such Transaction Documents, and the consummation of the transactions
      contemplated by the various Transaction Documents, do not and will not (a)
      conflict with any provision of (i) any Law, (ii) the Organizational Documents
      of
      any Credit Party, or (iii) any agreement, judgment, license, order or permit
      applicable to or binding upon any Credit Party, (b) result in the acceleration
      of any Indebtedness owed by any Credit Party, or (c) result in or require the
      creation of any Lien upon any assets or properties of any Credit Party except
      as
      expressly contemplated in the Transaction Documents. Except as expressly
      contemplated in the Transaction Documents no consent, approval, authorization
      or
      order of, and no notice to or filing with, any Governmental Authority or third
      party is required in connection with the execution, delivery or performance
      by
      any Credit Party of any Transaction Document or any Acquisition Document or
      to
      consummate any transactions contemplated hereby or thereby.

     

    4.5 Enforceable
      Obligations.
      This
      Agreement is, and the other Transaction Documents when duly executed and
      delivered will be, legal, valid and binding obligations of each Credit Party
      which is a party hereto or thereto, enforceable in accordance with their terms
      except as such enforcement may be limited by bankruptcy, insolvency or similar
      Laws of general application relating to the enforcement of creditors' rights
      and
      by general principles of equity.

     

    4.6 Current
      Financial Statements.
      Company
      has heretofore delivered to each Lender true, correct and complete copies of
      the
      Current Financial Statements. The Current Financial Statements fairly present
      Company's pro forma Consolidated financial position at the date thereof. Since
      the date of the Current Financial Statements no Material Adverse Effect has
      occurred. The Current Financial Statements were prepared in accordance with
      GAAP, except as noted therein.

     

    
      
        
        

      

      
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    4.7 Other
      Obligations and Restrictions.
      As of
      the date hereof, neither Company nor any of its Subsidiaries has any outstanding
      Liabilities of any kind (including obligations under farm-in agreements, other
      obligations to make capital expenditures, contingent obligations, tax
      assessments, and unusual forward or long-term commitments) which is, in the
      aggregate, material to Company or material with respect to Company's
      Consolidated financial condition and not shown in the Current Financial
      Statements or disclosed in Schedule 4.7. As of the date hereof, neither Parent
      nor any of its Subsidiaries has any outstanding Liabilities of any kind
      (including obligations under farm-in agreements, other obligations to make
      capital expenditures, contingent obligations, tax assessments, and unusual
      forward or long-term commitments) which is, in the aggregate, material to Parent
      or material with respect to Parent's Consolidated financial condition and not
      shown in the financial statements of Parent most recently filed with the SEC
      or
      disclosed in Schedule 4.7. All obligations of Company or any Subsidiary to
      make
      capital expenditures to drill or otherwise develop any oil, gas or mineral
      properties are specified in Schedule 4.7 (by well or project, describing
      the dollar amount of each such obligation) or in the APOD. Except as shown
      in
      the Current Financial Statements or disclosed in Schedule 4.7, no Credit
      Party is subject to or restricted by any franchise, contract, deed, charter
      restriction, or other instrument or restriction which is materially likely
      to
      cause a Material Adverse Effect.

     

    4.8 Full
      Disclosure.
      As of
      the date of delivery, no certificate, statement or other information delivered
      herewith or heretofore by any Credit Party to any Lender in connection with
      the
      negotiation of this Agreement or in connection with any transaction contemplated
      hereby contains any untrue statement of a material fact or omits to state any
      material fact known to any Credit Party (other than industry-wide risks normally
      associated with the types of businesses conducted by the Credit Parties)
      necessary to make the statements contained herein or therein not misleading
      as
      of the date made or deemed made. There is no fact known to any Credit Party
      (other than industry-wide risks normally associated with the types of businesses
      conducted by the Credit Parties) that has not been disclosed to each Lender
      in
      writing which is materially likely to cause a Material Adverse Effect. Except
      as
      disclosed on Schedule 4.8, and consented to by the Administrative Agent, with
      respect to the Initial Engineering Report, there are no statements or
      conclusions in any Engineering Report which are based upon or include misleading
      information or fail to take into account material information regarding the
      matters reported therein, it being understood that each Engineering Report
      is
      necessarily based upon professional opinions, estimates and projections and
      that
      Company does not warrant that such opinions, estimates and projections will
      ultimately prove to have been accurate. Company has heretofore delivered to
      each
      Lender true, correct and complete copies of the Initial Engineering
      Report.

     

    4.9 Litigation.
      Except
      as disclosed in Schedule 4.9: (a) there are no actions, suits or legal,
      equitable, arbitrative or administrative proceedings pending, or to the
      knowledge of any Credit Party threatened, against any Credit Party before any
      Governmental Authority (i) which could cause a Material Adverse Effect or (ii)
      purport to affect or pertain to this Agreement or any other Transaction
      Document, or any of the transactions contemplated hereby or purport to affect
      or
      pertain to the Acquisition or any Acquisition Document, and (b) there are no
      outstanding judgments, injunctions, writs, rulings or orders by any such
      Governmental Authority against any Credit Party or any Credit Party's
      stockholders, partners, directors or officers which could cause a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    4.10 Labor
      Disputes and Acts of God.
      Neither
      the business nor the properties of any Credit Party has been affected by any
      fire, explosion, accident, strike, lockout or other labor dispute, drought;
      storm, hail, earthquake, embargo, act of God or of the public enemy or other
      casualty (whether or not covered by insurance), which could cause a Material
      Adverse Effect.

     

    4.11 ERISA
      Plans and Liabilities.
      All
      currently existing ERISA Plans are listed in Schedule 4.11. Except as disclosed
      in Schedule 4.11, no Termination Event has occurred or is reasonably expected
      to
      occur with respect to any ERISA Plan and all ERISA Affiliates are in compliance
      with ERISA and other applicable Laws in all material respects. No ERISA
      Affiliate is required to contribute to, or has any other absolute or contingent
      liability in respect of, any "multiemployer plan" as defined in
      Section 4001 of ERISA. Except as set forth in Schedule 4.11:
      (a) no "accumulated funding deficiency" (as defined in Section 412(a)
      of the Internal Revenue Code) exists with respect to any ERISA Plan, whether
      or
      not waived by the Secretary of the Treasury or his delegate, and (b) the
      current value of each ERISA Plan's benefits does not exceed the current value
      of
      such ERISA Plan's assets available for the payment of such benefits by more
      than
      $500,000. None of the assets of the Credit Parties are subject to Title I of
      ERISA or Section 4975 of the Internal Revenue Code.

     

    4.12 Environmental
      and Other Laws.
      Except
      as disclosed in Schedule 4.12: (a) Credit Parties are, to their
      knowledge after due inquiry, conducting their businesses in material compliance
      with all applicable Laws, including Environmental Laws, and have been and are
      in
      compliance in all material respects with all licenses and permits required
      under
      any such Laws; (b) none of the operations or properties of any Credit Party
      is the subject of federal, state or local investigation evaluating whether
      any
      material remedial action is needed to respond to a release of any Hazardous
      Materials into the environment or to the improper storage or disposal (including
      storage or disposal at offsite locations) of any Hazardous Materials;
      (c) no Credit Party (and to the best knowledge of Company, no other Person)
      has filed any notice under any Law indicating that any Credit Party is
      responsible for the improper release into the environment, or the improper
      storage or disposal, of any material amount of any Hazardous Materials or that
      any Hazardous Materials have been improperly released, or are improperly stored
      or disposed of, upon any property of any Credit Party; (d) no Credit Party
      has transported or arranged for the transportation of any Hazardous Material
      to
      any location which is (i) listed on the National Priorities List under the
      Comprehensive Environmental Response, Compensation and Liability Act of 1980,
      as
      amended, listed for possible inclusion on such National Priorities List by
      the
      Environmental Protection Agency in its Comprehensive Environmental Response,
      Compensation and Liability Information System List, or listed on any similar
      state list or (ii) the subject of federal, state or local enforcement actions
      or
      other investigations which may lead to claims against any Credit Party for
      clean-up costs, remedial work, damages to natural resources or for personal
      injury claims (whether under Environmental Laws or otherwise); and (e) no Credit
      Party otherwise has any known material contingent liability under any
      Environmental Laws or in connection with the release into the environment,
      or
      the storage or disposal, of any Hazardous Materials. Each Credit Party
      undertook, at the time of its acquisition of each of its material Properties,
      all appropriate inquiry into the previous ownership and uses of each such
      Property and any potential environmental liabilities associated therewith.
      Each
      Credit Party's liability for future plugging and abandonment costs is properly
      reflected in the Current Financial Statements, in the financial statements
      of
      Parent most recently filed with the SEC, in the most recently delivered
      financial statements pursuant to Section 5.2(b), or on Schedule 4.12,
      as applicable.

     

    
      
        
        

      

      
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    4.13 Names
      and Places of Business.
      No
      Credit Party has, during the preceding five years, had, been known by, or used
      any other trade or fictitious name, except as disclosed in Schedule 4.13. Except
      as otherwise indicated in Schedule 4.13, the chief executive office and
      principal place of business of each Credit Party are (and for the preceding
      five
      years have been) located at the address of Company set out in Appendix B.
      Except as indicated in Schedule 4.13, no Credit Party has any other office
      or place of business. Company has obtained from Sellers a complete list of
      all
      prior names and places of organization or residence of Sellers during the
      preceding five years.

     

    4.14 Subsidiaries.
      Schedule 4.14 correctly sets forth the ownership interest of Company and
      each of its Subsidiaries in their respective Subsidiaries as of the Closing
      Date
      both before and after giving effect to the transactions contemplated herein.
      Company owns, directly or indirectly, the Capital Stock in each of its
      Subsidiaries which is indicated in Schedule 4.14 and Company has no other
      Subsidiary or owns no other Capital Stock in any corporation or other Person.
      Except as set forth in Schedule 4.14, there is no existing option, warrant,
      call, right, commitment or other agreement to which Company or any of its
      Subsidiaries is a party requiring, and there is no Capital Stock of Company
      or
      any of its Subsidiaries outstanding which upon conversion or exchange would
      require, the issuance by Company or any of its Subsidiaries of any other Capital
      Stock of Company or any of its Subsidiaries or other Securities convertible
      into, exchangeable for or evidencing the right to subscribe for or purchase,
      any
      Capital Stock of Company or any of its Subsidiaries.

     

    4.15 Licenses.
      Each
      Credit Party possesses all licenses, permits, franchises, patents, copyrights,
      trademarks and trade names, and other intellectual property (or otherwise
      possesses the right to use such intellectual property without violation in
      any
      material respect of the rights of any other Person) which are necessary to
      carry
      out its business as presently conducted and as presently proposed to be
      conducted hereafter, and no Credit Party is in violation in any material respect
      of the terms under which it possesses such intellectual property or the right
      to
      use such intellectual property.

     

    4.16 Government
      Regulation.
      Neither
      Company nor any other Credit Party owing Obligations is subject to regulation
      under the Public Utility Holding Company Act of 1935, the Federal Power Act,
      the
      Investment Company Act of 1940 (as any of the preceding acts have been amended,
      modified or supplemented) or any other Law which regulates the incurring by
      such
      Person of Indebtedness, including Laws relating to common contract carriers
      or
      the sale of electricity, gas, steam, water or other public utility
      services.

     

    4.17 Solvency.
      Upon
      giving effect to the issuance of the Notes and the making of the Loans, the
      execution of the Transaction Documents and the Acquisition Documents by Company
      and each applicable Credit Party and the consummation of the transactions
      contemplated hereby and thereby, Company and each other Credit Party will be
      Solvent.

     

    4.18 Taxes.
      Each
      Credit Party has filed all United States Federal income tax returns and all
      other material tax returns that are required to be filed by it and have paid
      all
      taxes due pursuant to such returns or pursuant to any assessment received by
      any
      Credit Party and all other penalties or charges. The charges, accruals and
      revenues on the books of each Credit Party in respect of taxes and other
      governmental charges are, in the opinion of Company, adequate. No Credit Party
      has given or been requested to give a waiver of the statute of limitations
      relating to the payment of any federal or other taxes, except as listed in
      Schedule 4.18.

     

    
      
        
        

      

      
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    4.19 Projections.
      On and
      as of the Closing Date, the projections of Company and its Subsidiaries for
      the
      period Fiscal Year 2007 through and including Fiscal Year 2011 (the
      "Projections")
      are
      based on good faith estimates and assumptions made by the management of Company;
      provided,
      the
      Projections are not to be viewed as facts and that actual results during the
      period or periods covered by the Projections may differ from such Projections
      and that the differences may be material; provided
      further,
      as of
      the Closing Date, management of Company believed that the Projections were
      reasonable and attainable.

     

    4.20 No
      Distributions.
      Neither
      Company nor any of its Subsidiaries has directly or indirectly declared,
      ordered, paid or made, or set apart any sum or property for, any Distribution
      or
      agreed to do so except as permitted pursuant to Section 6.6.

     

    4.21 Title
      to Properties; Accounts.
      Each of
      Company and its Subsidiaries has (a) good and defensible title to (in the
      case of fee interests in real property and leasehold interests in Oil and Gas
      Properties), (b) valid leasehold interests in (in the case of leasehold
      interests in other real or personal property), and (c) good title to (in
      the case of all other personal property), all of their respective properties
      and
      assets purported to be subject to the Mortgages and in the most recent financial
      statements delivered pursuant to Section 5.2, in each case except for
      assets disposed of since the date of such financial statements in the ordinary
      course of business or as otherwise permitted under Section 6.5. Except as
      permitted by this Agreement, all such properties and assets are free and clear
      of Liens. The ORRI will be conveyed to Royalty Owner by Company, free and clear
      of any Lien other than the Permitted Liens. Neither Company nor any of its
      Subsidiaries has granted control over any Deposit Accounts to any Person, other
      than Administrative Agent and the bank with which any Deposit Account is
      maintained. Neither Company nor any of its Subsidiaries has any "securities
      accounts" as defined and described in the UCC and, as of the Closing Date,
      neither Company nor any of its Subsidiaries has any Deposit Accounts other
      than
      those listed on Schedule 4.3 to the Pledge and Security Agreement of even
      date herewith which are, on the Closing Date, subject to an account control
      agreement reasonably satisfactory to the Administrative Agent.

     

    4.22 No
      Defaults.
      No
      Credit Party is in default in the performance, observance or fulfillment of
      any
      of the obligations, covenants or conditions contained in any of its Contractual
      Obligations, and no condition exists which, with the giving of notice or the
      lapse of time or both, could constitute such a default, except where the
      consequences, direct or indirect, of such default or defaults, if any, could
      not
      reasonably be expected to have a Material Adverse Effect. Schedule 4.22 contains
      a true, correct and complete list of all the Material Contracts (other than
      oil
      and gas leases) in effect on the Closing Date, and except as described thereon,
      all such Material Contracts (other than oil and gas leases) are in full force
      and effect and no defaults currently exist thereunder.

     

    4.23 Margin
      Stock.
      No
      Credit Party is engaged principally, or as one of its important activities,
      in
      the business of extending credit for the purpose of purchasing or carrying
      any
      Margin Stock. No part of the proceeds of the Loans made to Company will be
      used
      to purchase or carry any such margin stock or to extend credit to others for
      the
      purpose of purchasing or carrying any such margin stock or for any purpose
      that
      violates, or is inconsistent with, the provisions of Regulation T, U or X of
      such Board of Governors.

     

    
      
        
        

      

      
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    4.24 Certain
      Fees.
      No
      broker's or finder's fee or commission will be payable with respect hereto
      or
      any of the actions contemplated hereby or with respect to the Closing Date
      Transactions, other than the fees identified in Schedule 4.24 attached
      hereto.

     

    4.25 Leases
      and Contracts; Performance of Obligations.
      The
      leases, deeds, and other agreements forming a part of the Oil and Gas Properties
      of Company and its Subsidiaries to which Proved Reserves are attributed in
      the
      Initial Engineering Report and each subsequent Engineering Report are in full
      force and effect. All rents, royalties and other payments due and payable under
      such leases, deeds, and other agreements have been properly and timely paid
      other than to the extent such could not reasonably be expected to cause the
      loss
      or forfeiture of any such Proved Reserves. Neither Company nor any of its
      Subsidiaries is in default with respect to its obligations (and neither Company
      nor any of its Subsidiaries is aware of any default by any third party with
      respect to such third party's obligations) under any such leases, deeds, and
      other agreements, or under any Permitted Liens, or otherwise attendant to the
      ownership or operation of any part of any such Person's Oil and Gas Properties,
      where such default could adversely affect the ownership or operation of any
      Oil
      and Gas Properties to which any such Proved Reserves are attributed. Neither
      Company nor any of its Subsidiaries is currently accounting for any royalties,
      or overriding royalties or other payments out of production due to any Person,
      on a basis (other than delivery in kind) less favorable to such Person than
      proceeds received by the Company or such Subsidiary (calculated at the well)
      from sale of production, and neither Company nor any of its Subsidiaries has
      any
      liability (or alleged liability) to account for the same on any such less
      favorable basis.

     

    4.26 Marketing
      Arrangements.
      Except
      as set forth in Schedule 4.26, no Oil and Gas Property of Company or any
      Subsidiary is subject to any contractual or other arrangement (i) whereby
      payment for production is or can be deferred for a substantial period after
      the
      month in which such production is delivered (in the case of oil, not in excess
      of 60 days, and in the case of gas, not in excess of 90 days) or
      (ii) whereby payments are made to Company or any Subsidiary other than by
      checks, drafts, wire transfer advises or other similar writings, instruments
      or
      communications for the immediate payment of money. Except for production sales
      contracts, processing agreements, transportation agreements and other agreements
      relating to the marketing of production that are listed in Schedule 4.26 in
      connection with the Oil and Gas Properties to which such contract or agreement
      relates: (i) no Oil and Gas Property of Company or any Subsidiary is
      subject to any contractual or other arrangement for the sale, processing or
      transportation of production (or otherwise related to the marketing of
      production) which cannot be canceled on 120 days' (or less) notice and
      (ii) all contractual or other arrangements for the sale, processing or
      transportation of production (or otherwise related to the marketing of
      production) are bona fide arm's length transactions made on the best terms
      reasonably available with third parties not affiliated with Credit Parties.
      Company and each Subsidiary is presently receiving a price for all production
      from (or attributable to) each of its Oil and Gas Property covered by a
      production sales contract or marketing contract listed in Schedule 4.26 that
      is
      computed in accordance with the terms of such contract, and neither Company
      nor
      any Subsidiary is having deliveries of production from such Oil and Gas Property
      curtailed by any purchaser or transporter of production substantially below
      such
      property's delivery capacity, except for curtailments caused (a) by an act
      or
      event of force majeure not reasonably within the control of and not caused
      by
      the fault or negligence of Company or any Subsidiary and which by the exercise
      of reasonable diligence Company or such Subsidiary is unable to prevent or
      overcome, and (b) by routine maintenance requirements in the ordinary course
      of
      business.

     

    
      
        
        

      

      
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    4.27 Right
      to Receive Payment for Future Production.
      Except
      as set forth in Schedule 4.27, neither Company nor any Subsidiary, nor any
      such Person's predecessors in title, has received prepayments (including
      payments for gas not taken pursuant to "take or pay" or other similar
      arrangements) for any oil, gas or other hydrocarbons produced or to be produced
      from any Oil and Gas Properties of Company or any Subsidiary after the date
      hereof. Except as set forth in Schedule 4.27, no Oil and Gas Property of
      Company or any Subsidiary is subject to any "take or pay", gas imbalances or
      other similar arrangement (i) which can be satisfied in whole or in part by
      the production or transportation of gas from other properties or (ii) as a
      result of which production from any such Oil and Gas Property may be required
      to
      be delivered to one or more third parties without payment (or without full
      payment) therefor as a result of payments made, or other actions taken, with
      respect to other properties. Except as set forth in Schedule 4.27, prior to
      the date hereof the value of the overproduction or underproduction of all gas
      attributable to the Acquired Assets is less than Fifty Thousand Dollars and
      No/100 ($50,000.00), based upon valuation of the gas using Five Dollars and
      No/100 ($5.00) per MCF, less applicable royalties and taxes. Sellers will
      deliver to Company a certificate to this effect on the Closing Date, per the
      Acquisition Agreements. No Oil and Gas Property of Company or any Subsidiary
      is
      subject at the present time to any regulatory refund obligation and, to the
      best
      of Company's and each Subsidiary's knowledge, no facts exist which might cause
      the same to be imposed.

     

    4.28 Operation
      of Oil and Gas Properties.
      The Oil
      and Gas Properties of Company and its Subsidiaries (and all properties unitized
      therewith) are being (and, to the extent the same could adversely affect the
      ownership or operation of such Oil and Gas Properties after the date hereof,
      have in the past been) maintained, operated and developed in a good and
      workmanlike manner, in accordance with prudent industry standards and in
      conformity with all applicable Laws and in conformity in all material respects
      with all oil, gas or other mineral leases and other contracts and agreements
      forming a part of such Oil and Gas Properties and in conformity with the
      Permitted Liens. No Oil and Gas Property of Company or any Subsidiary is subject
      to having allowable production after the date hereof reduced below the full
      and
      regular allowable (including the maximum permissible tolerance) because of
      any
      overproduction (whether or not the same was permissible at the time) prior
      to
      the date hereof and (ii) none of the wells located on such Oil and Gas
      Properties (or properties unitized therewith) are or will be deviated from
      the
      vertical more than the maximum permitted by applicable Laws, and such wells
      are
      bottomed under and producing from, with the well bores wholly within, such
      Oil
      and Gas Properties (or, in the case of wells located on properties unitized
      therewith, such unitized properties). Company and each of its Subsidiaries
      has
      all governmental licenses and permits necessary or appropriate to own and
      operate its Oil and Gas Property, and no Credit Party has received notice of
      any
      violations in respect of any such licenses or permits.

     

    4.29 Ad
      Valorem and Severance Taxes; Litigation.
      Company
      and each of its Subsidiaries has paid and discharged all ad valorem taxes
      assessed against its Oil and Gas Property or any part thereof and all
      production, severance and other taxes assessed against, or measured by, the
      production or the value, or proceeds, of the production therefrom. There are
      no
      suits, actions, claims, investigations, inquiries, proceedings or demands
      pending (or, to any Credit Party's knowledge, threatened) which might adversely
      affect any Oil and Gas Property of Company or any Subsidiary, including any
      which challenge or otherwise pertain to any such Credit Party's title to any
      Oil
      and Gas Property or rights to produce and sell oil and gas
      therefrom.

     

    
      
        
        

      

      
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    4.30 Working
      Interest; Net Revenue Interest.
      Each
      delivery of the monthly report required under 5.2(f) by Company to the
      Administrative Agent shall constitute a representation and warranty by Company
      to the Administrative Agent and the Lenders that Company and its Subsidiaries,
      as applicable, own the Oil and Gas Properties specified therein subject to
      a
      First Priority Lien and free and clear of any Liens (except Permitted Liens).
      On
      and after the delivery of the monthly report as required under
      Section 5.2(f), the ownership by Company or the applicable Subsidiary
      Guarantor of the Eligible Mortgaged Properties does and will, with respect
      to
      each well or unit identified on such monthly reports as required under
      Section 5.2(f)(vi), entitle such Credit Party to receive (subject to the
      terms and provisions of the Mortgage) a decimal or percentage share of the
      Hydrocarbons produced from, or allocated to, such well or unit equal to not
      less
      than the decimal or percentage share set forth, for such well or unit, in the
      column headed "Net
      Revenue Interest"
      on such
      monthly reports, and cause such Credit Party to be obligated to bear a decimal
      or percentage share of the cost of operation of such well or unit equal to
      not
      more than the decimal or percentage share set forth, for such well or unit,
      in
      the column headed "Working
      Interest"
      on such
      monthly reports without a corresponding and proportional increase in such Credit
      Party's "Net
      Revenue Interest"
      attributable thereto. The above-described shares of production which Company
      or
      a Subsidiary is entitled to receive and shares of expenses which each such
      Credit Party is obligated to bear are not and will not be subject to change
      (other than changes which arise pursuant to non-consent provisions of operating
      agreements entered into on or prior to the date hereof or with prior notice
      to
      the Administrative Agent in connection with operations hereafter proposed),
      except, and only to the extent that, such changes are reflected in such monthly
      reports.

     

    SECTION
      5

    AFFIRMATIVE
      COVENANTS

     

    Company
      covenants and agrees that so long as any Commitment is in effect and until
      payment in full of all Obligations and the termination of this Agreement in
      writing by the parties hereto, Company shall perform, and shall cause each
      of
      its Subsidiaries to perform, all covenants in this Section 5.

     

    5.1 Payment
      and Performance.
      Company
      will pay all amounts due under the Transaction Documents in accordance with
      the
      terms thereof and will observe, perform and comply with every covenant, term
      and
      condition expressed or implied in the Transaction Documents. Company will cause
      each of its Subsidiaries to observe, perform and comply with every such term,
      covenant and condition in any Transaction Document.

     

    5.2 Books,
      Financial Statements and Reports.
      Company
      will, and will cause its Subsidiaries to, at all times maintain full and
      accurate books of account and records and a standard system of accounting,
      will
      maintain its Fiscal Year, and will furnish the following statements and reports
      to Administrative Agent at Company's expense:

     

    
      
        
        

      

      
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    (a) As
      soon
      as available, and in any event within ninety (90) days after the end of each
      Fiscal Year (commencing with the fiscal year ending December 31, 2007), complete
      Consolidated financial statements of Company together with all notes thereto,
      prepared in reasonable detail in accordance with GAAP, together with an
      unqualified opinion, based on an audit using generally accepted auditing
      standards, by independent certified public accountants selected by Company
      and
      acceptable to Administrative Agent, stating that such Consolidated financial
      statements have been so prepared. These financial statements shall contain
      a
      Consolidated balance sheet as of the end of such Fiscal Year and Consolidated
      statements of earnings, of cash flows, and of changes in owners' equity for
      such
      Fiscal Year, each setting forth in comparative form the corresponding figures
      for the preceding Fiscal Year. In addition, within ninety (90) days after the
      end of each Fiscal Year (commencing with the fiscal year ending December 31,
      2007), Company will furnish a report signed by such accountants
      (i) containing calculations showing compliance (or non-compliance) at the
      end of such Fiscal Year with the requirements of Sections 6.10 - 6.12,
      inclusive, and (ii) further stating that in making their examination and
      reporting on the Consolidated financial statements described above they did
      not
      conclude that any Default under Sections 6.10, 6.11, 6.12, 6.15, or 6.16
      existed at the end of such Fiscal Year or at the time of their report, or,
      if
      they did conclude that such a Default existed, specifying its nature and period
      of existence.

     

    (b) As
      soon
      as available, and in any event within thirty (30) days after the end of
      each Fiscal Quarter, Company's Consolidated balance sheet as of the end of
      such
      Fiscal Quarter and Consolidated statements of earnings and cash flows for the
      period from the beginning of the then current Fiscal Year to the end of such
      Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP,
      subject to changes resulting from normal year-end adjustments. In addition,
      Company will, together with each such set of financial statements and each
      set
      of financial statements furnished under subsection (a) of this section,
      furnish a Compliance Certificate signed by the chief financial officer of
      Company stating that such financial statements are accurate and complete
      (subject to normal year-end adjustments), stating that he has reviewed the
      Transaction Documents, containing calculations showing compliance (or
      non-compliance) at the end of such Fiscal Quarter with the requirements of
      Sections 6.10 - 6.12, inclusive, and stating that no Default exists at the
      end of such Fiscal Quarter or at the time of such certificate or specifying
      the
      nature and period of existence of any such Default.

     

    (c) Promptly
      upon their becoming available, copies of all financial statements, reports,
      notices and proxy statements sent by any Credit Party to its stockholders and
      all registration statements, periodic reports and other statements and schedules
      filed by any Credit Party with any securities exchange, the Securities and
      Exchange Commission or any similar Governmental Authority.

     

    (d) If,
      as a
      result of any change in accounting principles and policies from those used
      in
      the preparation of Company's audited Consolidated financial statements as of
      the
      immediately preceding fiscal year, the Consolidated financial statements of
      Company and its Subsidiaries delivered pursuant to Section 5.2(a) or 5.2(b)
      will differ in any material respect from the Consolidated financial statements
      that would have been delivered pursuant to such subsections had no such change
      in accounting principles and policies been made, then, together with the first
      delivery of such financial statements after such change, one or more statements
      of reconciliation for such changes in form and substance satisfactory to
      Administrative Agent.

     

    
      
        
        

      

      
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    (e) By
      March
      1 and September 1 of each year, beginning September 1, 2007, an
      Engineering Report prepared as of the preceding January 1 or July 1,
      respectively, concerning the Properties. Each Engineering Report prepared as
      of
      any January 1 must be prepared or audited by the Independent Engineer; each
      Engineering Report prepared as of any July 1 may, at Company's option, be
      prepared by Company's in-house engineering staff or prepared or audited by
      the
      Independent Engineer. In addition, Administrative Agent or Required Lenders
      may
      (at their expense so long as no Default or Event of Default then exists) request
      additional Engineering Reports from time to time prepared by the Independent
      Engineer. Each Engineering Report shall distinguish (or shall be delivered
      together with a certificate from an appropriate officer of Company which
      distinguishes) those Properties treated in the report which are Eligible
      Mortgaged Properties from those properties treated in the report which are
      not
      Eligible Mortgaged Properties.

     

    (f) Within
      thirty (30) days after the end of each calendar month, a report in detail
      acceptable to Administrative Agent with respect to the Properties during such
      month:

     

    (i) describing
      by well and field the net quantities of oil, gas, natural gas liquids, and
      water
      produced (and the quantities of water injected) during such month;

     

    (ii) describing
      by well and field the quantities of oil, gas and natural gas liquids sold during
      such month out of production from the Properties and calculating the average
      sales prices of such oil, natural gas, and natural gas liquids;

     

    (iii) specifying
      any leasehold operating expenses, overhead charges, gathering costs,
      transportation costs, and other costs with respect to the Properties of the
      kind
      chargeable as direct charges or overhead under an Onshore COPAS Accounting
      Procedure for Joint Operations (1984 form published by the Council of Petroleum
      Accountants Societies);

     

    (iv) setting
      forth the amount of Direct Taxes on the Properties during such month and the
      amount of royalties paid with respect to the Properties during such
      month;

     

    (v) describing
      all activities carried out during such month in furtherance of the Approved
      Plan
      of Development, all other capital expenditures during such month, and all
      projections of capital expenditures projected to be made on any of the Eligible
      Mortgaged Properties; and

     

    (vi) describing
      all workover work and drilling during such month including the cost and status
      of each well drilled or worked over during such month, test reports for each
      well tested during such month, reports on prices and volumes received for such
      month, reports for each well completed during such month, and accompanying
      authorizations for expenditures.

     

    
      
        
        

      

      
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    (g) As
      soon
      as available, and in any event within thirty (30) days after the end of each
      Fiscal Quarter, a report (i) describing aggregate volume of production and
      sales attributable to production during such Fiscal Quarter from the Properties
      and describing the related severance taxes, leasehold operating expenses and
      capital costs attributable thereto and incurred during such Fiscal Quarter
      and
      (ii) describing any Properties acquired during such Fiscal Quarter that are
      leased by an Indian tribe, the Bureau of Indian Affairs, or the U.S. Bureau
      of
      Land Management to Company or any Subsidiary.

     

    (h) As
      soon
      as available, and in any event within thirty (30) days after the end of each
      Fiscal Year, Company shall deliver to Administrative Agent an environmental
      compliance certificate signed by the president or chief executive officer of
      Company in the form attached hereto as Exhibit C-2.

     

    (i) Concurrently
      with the annual renewal of Company's insurance policies, Company shall, if
      requested by Administrative Agent in writing, cause a certificate or report
      to
      be issued by Administrative Agent's professional insurance consultants or other
      insurance consultants reasonably satisfactory to Administrative Agent certifying
      that Company's insurance for the next succeeding year after such renewal (or
      for
      such longer period for which such insurance is in effect) complies with the
      provisions of this Agreement and the Security Documents.

     

    (j) By
      November 1 of each year, a proposed business plan for Company and its
      Consolidated Subsidiaries, including proposed budgets and plans of development
      of Oil and Gas Properties of Company and its Subsidiaries, in form and detail
      reasonably satisfactory to Administrative Agent for the next succeeding
      year.

     

    (k) As
      soon
      as practicable and in any event by the last day of each Fiscal Year, a report
      in
      form and substance satisfactory to Administrative Agent outlining all material
      insurance coverage maintained as of the date of such report by Company and
      its
      Subsidiaries and all material insurance coverage planned to be maintained by
      Company and its Subsidiaries in the immediately succeeding Fiscal
      Year.

     

    (l) With
      reasonable promptness, written notice (i) of any change in the board of
      directors (or similar governing body) of Company, or (ii) that any Key Person
      will cease to be actively involved in the day to day management of Company
      or
      Parent, or will cease to be an officer of Company or Parent at a level
      consistent with or greater than the office that such Key Person held on the
      Closing Date.

     

    (m) Promptly,
      and in any event within ten (10) Business Days (i) after any Material Contract
      of Company or any of its Subsidiaries is terminated or amended in a manner
      that
      is materially adverse to Company or such Subsidiary, as the case may be, or
      (ii)
      any new Material Contract is entered into, a written statement describing such
      event, with copies of such material amendments or new contracts, delivered
      to
      Administrative Agent (to the extent such delivery is permitted by the terms
      of
      any such Material Contract, provided, no such prohibition on delivery shall
      be
      effective if it were bargained for by Company or its applicable Subsidiary
      with
      the intent of avoiding compliance with this Section (m)), and an
      explanation of any actions being taken with respect thereto.

     

    
      
        
        

      

      
        -54-

        
          

        

      

      
        
        

      

    

     

    (n) Each
      year, at the time of delivery of annual financial statements with respect to
      the
      preceding Fiscal Year pursuant to Section 5.2(a), Company shall deliver to
      Administrative Agent an Officer's Certificate (i) either confirming that there
      has been no change in the information set forth in the Schedules to the Pledge
      and Security Agreement of even date herewith since the date thereof or the
      date
      of the most recent certificate delivered pursuant to this Section 5.2
      and/or identifying such changes and (ii) certifying that all Uniform
      Commercial Code financing statements (including fixtures filings, as applicable)
      or other appropriate filings, recordings or registrations, have been filed
      of
      record in each governmental, municipal or other appropriate office in each
      jurisdiction identified pursuant to clause (i) above to the extent necessary
      to
      protect and perfect the security interests under the Security Documents for
      a
      period of not less than 18 months after the date of such certificate (except
      as
      noted therein with respect to any continuation statements to be filed within
      such period).

     

    (o) On
      or
      about the first Business Day of each month, or as otherwise reasonably requested
      by Administrative Agent an update regarding the status of (i) Parent's capital
      raising efforts and (ii) the litigation disclosed on Schedule 4.9, in each
      case,
      in detail satisfactory to Administrative Agent.

     

    Additionally,
      Parent covenants and agrees that Parent shall timely file all financial
      statements and other reports required to be filed pursuant to the Securities
      Act
      or otherwise by the Securities and Exchange Commission.

     

    5.3 Other
      Information and Inspections.
      Company
      will, and will cause its Subsidiaries to, furnish to each Lender any information
      which Administrative Agent may from time to time request in writing concerning
      any covenant, provision or condition of the Transaction Documents or any matter
      in connection with the Credit Parties' businesses and operations. Company will,
      and will cause its Subsidiaries to, permit representatives appointed by
      Administrative Agent (including independent accountants, auditors, agents,
      attorneys, appraisers and any other Persons) to visit and inspect during normal
      business hours any of such Credit Party's property, including its books of
      account, other books and records, and any facilities or other business assets,
      and to make extra copies therefrom and photocopies and photographs thereof,
      and
      to write down and record any information such representatives obtain, and each
      Credit Party shall permit Administrative Agent or its representatives to
      investigate and verify the accuracy of the information furnished to
      Administrative Agent or any Lender in connection with the Transaction Documents
      and to discuss all such matters with its officers, employees and
      representatives. Company will, and will cause its Subsidiaries to, also furnish
      to any Lender, promptly following a request by such Lender, all documentation
      and other information that such Lender reasonably requests in order to comply
      with its ongoing obligations under applicable "know your customer" and
      anti-money laundering rules and regulations, including the Act.

     

    5.4 Notice
      of Material Events and Change of Name.
      Company
      will promptly, and in any event within three (3) Business Days after Company
      or
      its Subsidiary acquires knowledge thereof, notify each Lender in writing,
      stating that such notice is being given pursuant to this Agreement,
      of:

     

    (a) the
      occurrence of any Material Adverse Effect,

     

    
      
        
        

      

      
        -55-

        
          

        

      

      
        
        

      

    

     

    (b) the
      occurrence of any Default,

     

    (c) the
      acceleration of the maturity of any Indebtedness owed by any Credit Party or
      of
      any default by any Credit Party under any indenture, mortgage, agreement,
      contract or other instrument to which any of them is a party or by which any
      of
      them or any of their properties is bound, if such acceleration or default could
      cause a Material Adverse Effect,

     

    (d) the
      occurrence of any Termination Event,

     

    (e) any
      claim
      of $125,000 or more, any notice of potential liability under any Environmental
      Laws which might reasonably be expected to exceed such amount, or any other
      material adverse claim asserted against any Credit Party or with respect to
      any
      Credit Party's properties,

     

    (f) the
      filing of any suit or proceeding against any Credit Party in which an adverse
      decision could reasonably be expected to cause a Material Adverse Effect,
      and

     

    (g) the
      damage or destruction of any material part of the Collateral.

     

    Each
      notice pursuant to this Section 5.4 shall be accompanied by a statement of
      an Authorized Officer of Company setting forth details of the occurrence
      referred to therein and stating what action, if any, the applicable Credit
      Party
      has taken or proposes to take with respect thereto. Company will, and will
      cause
      its Subsidiaries to, take all necessary or appropriate steps to remedy promptly
      any such Material Adverse Effect, Default, acceleration, default or Termination
      Event, to protect against any such adverse claim, to defend any such suit or
      proceeding, and to resolve all controversies on account of any of the foregoing.
      Company will also furnish to Administrative Agent prompt written notice of
      any
      change (i) in any Credit Party's name, (ii) in any Credit Party's
      identity or company structure or (iii) in any Credit Party's Federal
      Taxpayer Identification Number. Company agrees not to effect or permit any
      change referred to in the preceding sentence unless all filings have been made
      under the Uniform Commercial Code or otherwise that are required in order for
      Administrative Agent to continue at all times following such change to have
      a
      First Priority Lien in all the Collateral as contemplated in the Security
      Documents.

     

    5.5 Maintenance
      of Properties and Professional Staff.
      Company
      will, and will cause its Subsidiaries to, maintain, preserve, protect, and
      keep
      all Collateral and all other property used or useful in the conduct of its
      business in good condition and in compliance with all applicable Laws, and
      will
      from time to time make all repairs, renewals and replacements needed to enable
      the business and operations carried on in connection therewith to be conducted
      at all times consistent with prudent industry practices. Company will engage
      (and provide appropriate compensation and incentives to retain) all engineering
      and professional staff needed to prudently execute the Approved Plan of
      Development.

     

    
      
        
        

      

      
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    5.6 Maintenance
      of Existence and Qualifications.
      Company
      will, and will cause its Subsidiaries to, maintain and preserve its existence
      and its rights and franchises in full force and effect and will qualify to
      do
      business in all states or jurisdictions (a) where Collateral is located and
      (b)
      where required by applicable Law, except where the failure so to qualify will
      not cause a Material Adverse Effect.

     

    5.7 Payment
      of Taxes, etc.
      Company
      will, and will cause its Subsidiaries to, (a) timely file all required tax
      returns; (b) timely pay all taxes, assessments, and other governmental charges
      or levies imposed upon it or upon its income, profits or property; (c) within
      90
      days past the original invoice or billing date thereof, or, if earlier, when
      due
      in accordance with its terms, pay and discharge all Liabilities owed by it
      on
      ordinary trade terms to vendors, suppliers and other Persons providing goods
      and
      services used by it in the ordinary course of its business; (d) pay and
      discharge when due all other Liabilities now or hereafter owed by it; and (e)
      maintain appropriate accruals and reserves for all of the foregoing in
      accordance with GAAP. Company or any of its Subsidiaries may, however, delay
      paying or discharging any of the foregoing so long as it is in good faith
      contesting the validity thereof by appropriate proceedings and has set aside
      on
      its books adequate reserves therefor. Company will not, nor will it permit
      any
      of its Subsidiaries to, file or consent to the filing of any consolidated income
      tax return with any Person (other than Company or any of its
      Subsidiaries).

     

    5.8 Bonding
      and Insurance.
      Company
      will, and will cause its Subsidiaries to, maintain all bonds and letters of
      credit in lieu of bonds which they are required to maintain (by Law, lease
      terms, or consistent with prudent industry practices) in order to carry out
      development and production operations on, the Properties. Company will keep,
      or
      cause to be kept, its and its Subsidiaries' vehicles and all other property
      adequately insured by financially sound and reputable insurers in accordance
      with the requirements of this Section 5.8. Any insurance policies covering
      Collateral shall be endorsed (i) to provide for payment of losses to
      Administrative Agent on behalf of Lenders pursuant to a mortgage clause (without
      contribution) of standard form made part of the applicable policy, (ii) to
      provide that such policies may not be canceled, reduced or adversely affected
      in
      any manner for any reason without fifteen days prior notice to Administrative
      Agent, (iii) to provide for any other matters specified in any applicable
      Security Document or which Administrative Agent may reasonably require; and
      (iv)
      to provide the coverages required below in this Section 5.8 for fire,
      casualty and any other hazards normally insured against. (To the extent that
      the
      Mortgages or any other Security Document contains other additional requirements
      for such endorsement, Company and each Subsidiary shall also comply with such
      additional requirements.) Company and each Subsidiary shall at all times
      maintain adequate insurance against its liability for injury to persons or
      property, which insurance shall be by financially sound and reputable insurers
      and shall without limitation provide the coverages described in this
      Section 5.8 below. Company agrees to be insured by insurers with a
      financial strength rating of "A-" or better and financial size category of
      "XV"
      or better from AM Best, "A-" or better by Standard & Poor's or an equivalent
      rating from a recognized rating agency; provided
      that
      Company may be insured by Southern County Mutual Insurance Company as
      Administrative Agent deems reasonable. The proceeds of any casualty or other
      insurance policy with respect or relating to or of any condemnation of any
      of
      the Collateral shall be applied to the restoration of the Collateral. All
      insurance carried pursuant to this Section 5.8 shall be with such insurers,
      in such amounts and in such form as shall be reasonably satisfactory to the
      Administrative Agent, provided such insurance shall be available on commercially
      reasonable terms. Notwithstanding the foregoing provisions of this
      Section 5.8, Company will, and will cause its Subsidiaries to, comply with
      each of the following:

     

    (a) Company
      shall maintain or cause to be maintained All Risk Property insurance, covering
      physical loss or damage to the Collateral. Such insurance shall cover all
      property of the Collateral. Coverage shall be written on a replacement cost
      basis and in amount acceptable to Administrative Agent, but in no event less
      than the replacement cost of the Collateral. The policy may be subject to
      deductibles not to exceed $100,000 per occurrence for all oil and gas gathering,
      treating, storage, processing, handing and services assets.

     

    
      
        
        

      

      
        -57-

        
          

        

      

      
        
        

      

    

     

    (b) Company
      shall maintain or cause to be maintained Hull and Machinery insurance, covering
      physical loss or damage to the Collateral. Such insurance shall cover the
      Company’s entire fleet of owned and bare-boat chartering leased marine vessels.
      Coverage shall be written on a replacement cost basis and in amount acceptable
      to Administrative Agent, but in no event less than the replacement cost of
      the
      Collateral. The policy may be subject to deductibles not to exceed $50,000
      in
      the aggregate for the fleet of marine vessels.

     

    (c) Company
      shall maintain or cause to be maintained Operator’s Extra Expense indemnity
      insurance (including coverage for Control Of Well, Redrilling and Restoration
      due to blowout and/or cratering above or below the surface, evacuation expense,
      and accidental Seepage and Pollution Liability coverage including Clean-Up
      and
      Containment) written on an occurrence basis and with a limit of not less than
      $15,000,000 for new drill wells, not less than $5,000,000 for producing wells
      and not less than $3,000,000 for recompletion and workover wells.

     

    (d) As
      an
      extension to (a), (b) and (c) above or as a separate policy, Company shall
      maintain or cause to be maintained business interruption, or loss of production
      income, insurance in an amount equal to six months projected continuing expenses
      and profit of the Collateral. Any such extension or policy shall have a
      deductible not to exceed 60 days business interruption, or in the case of a
      named wind storm a deductible not to exceed 90 days business interruption.
      Any
      such extension or policy shall (i) not be subject to a deductible exceeding
      $500,000 and (ii) have a named windstorm aggregate limit for (a), (b), (c)
      and the first sentence of this clause (d) in the aggregate of not less than
      $7,500,000.

     

    (e) Company
      shall maintain or cause to be maintained comprehensive (or commercial) general
      liability insurance written on an occurrence basis and with a combined limit
      of
      not less than $2,000,000 in the aggregate and $1,000,000 per occurrence.
      Administrative Agent shall be named an additional insured on such
      policy.

     

    (f) [Reserved.]

     

    (g) Company
      shall maintain comprehensive (or business automobile liability insurance for
      owned (if any), non-owned and hired vehicles with combined single limits of
      not
      less than $1,000,000. Administrative Agent shall be named an additional insured
      on such policy.

     

    (h) Company
      shall maintain or cause to be maintained excess (or umbrella) liability
      insurance written on an occurrence basis providing coverage in excess of the
      limits set forth in paragraph (e), (f)(ii), and (g) above. The limits of the
      insurance set forth in the paragraphs above and such excess or umbrella
      coverage(s), when combined, shall not be less than $50,000,000. Administrative
      Agent shall be named an additional insured on such policy.

     

    
      
        
        

      

      
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    (i) Company
      shall not enter into any form of insurer financing of premiums, unless such
      financing is on terms and conditions expressly acceptable to Administrative
      Agent. In particular, any financings of premiums must provide notice of defaults
      to Lender concurrent with any correspondence to the Company and provide not
      less
      than 10 days for Lender to cure any defaults arising from the Company’s failure
      to comply with the financing agreement prior to any action by
      insurer.

     

    (j) Pollution
      Liability having limits no less than (h) above, if not included in above
      coverages.

     

    (k) Any
      issues as respect to OPA, if applicable.

     

    (l) Company
      will supply certificates of insurance evidencing required coverage, as requested
      and within 15 days of any insurance renewal/placement.

     

    5.9 Performance
      on Company's Behalf.
      If
      Company of any of its Subsidiaries fails to pay any taxes, insurance premiums,
      expenses, attorneys' fees or other amounts it is required to pay under any
      Transaction Document, Administrative Agent may pay the same. Company shall
      immediately reimburse Administrative Agent for any such payments and each amount
      paid by Administrative Agent shall constitute an Obligation owed hereunder
      which
      is due and payable on the date such amount is paid by Administrative
      Agent.

     

    5.10 Interest.
      Company
      hereby promises to each Agent and Lender to pay interest at the Post-Default
      Rate on all Obligations (including Obligations to pay fees or to reimburse
      or
      indemnify any Agent or Lender) which Company has in this Agreement promised
      to
      pay to such Agent or Lender and which are not paid when due. Such interest
      shall
      accrue from the date such Obligations become due until they are
      paid.

     

    5.11 Compliance
      with Agreements and Law.
      Company
      will, and will cause its Subsidiaries to, perform all material obligations
      it is
      required to perform under the terms of each indenture, mortgage, deed of trust,
      security agreement, lease, franchise, agreement, contract or other instrument
      or
      obligation to which it is a party or by which it or any of its properties is
      bound. Company will, and will cause its Subsidiaries to, conduct its business
      and affairs in compliance in all material respects with all Laws applicable
      thereto.

     

    5.12 Environmental
      Matters: Environmental Reviews.
      

     

    (a) Company
      will, and will cause each of its Subsidiaries to, comply in all material
      respects with all Environmental Laws now or hereafter applicable to Company
      or
      any of its Subsidiaries and shall obtain, at or prior to, the time required
      by
      applicable Environmental Laws, all environmental, health and safety permits,
      licenses and other authorizations necessary for its operations and will maintain
      such authorizations in full force and effect. Company will, and will cause
      each
      of its Subsidiaries to, promptly take any and all actions necessary to (i)
      cure
      any material violation of applicable Environmental Laws by Company or any of
      its
      Subsidiaries, and (ii) make an appropriate response to any material
      Environmental Claim against Company or any of its Subsidiaries and discharge
      any
      obligations it may have to any Person thereunder. For purposes of this clause
      (a) and clauses (b) and (d) below, "material" shall mean any violation, claim
      or
      circumstance that could reasonably be expected to result in losses or
      liabilities to Company and its Subsidiaries of $100,000 or more.

     

    
      
        
        

      

      
        -59-

        
          

        

      

      
        
        

      

    

     

    (b) Company
      will promptly furnish to Administrative Agent all written notices of violation,
      orders, claims, citations, complaints, penalty assessments, suits or other
      proceedings received by Company or any of its Subsidiaries, or of which it
      has
      notice, pending or threatened against Company, by any Governmental Authority
      with respect to any alleged violation of or non-compliance with any
      Environmental Laws or any permits, licenses or authorizations in connection
      with
      its ownership or use of its properties or the operation of its business that
      are
      material. Company will promptly furnish to Administrative Agent copies of all
      environmental audits and reports with respect to environmental matters at any
      property of Company or any of its Subsidiaries or which relate to any
      environmental liabilities of Company or its Subsidiaries which are
      material.

     

    (c) Company
      will promptly furnish to Administrative Agent all requests for information,
      notices of claim, demand letters, and other notifications, received by Company
      or any of its Subsidiaries in connection with its ownership or use of its
      properties or the conduct of its business, relating to potential responsibility
      with respect to any investigation or clean-up of Hazardous Material at any
      location.

     

    (d) Company
      will promptly furnish to Administrative Agent written notice describing in
      reasonable detail (1) any proposed acquisition of stock, assets, or property
      by
      Company or any of its Subsidiaries that could reasonably be expected to (A)
      expose Company or any of its Subsidiaries to, or result in, Environmental Claims
      that are material or (B) affect the ability of Company or any of its
      Subsidiaries to maintain in full force and effect all material Governmental
      Authorizations required under any Environmental Laws for their respective
      operations and (2) any proposed action to be taken by Company or any of its
      Subsidiaries to modify current operations in a manner that could reasonably
      be
      expected to subject Company or any of its Subsidiaries to any additional
      material obligations or requirements under any Environmental Laws.

     

    5.13 Evidence
      of Compliance.
      Company
      will, and will cause each of its Subsidiaries to, furnish to each Lender at
      such
      Credit Party's or Company's expense all evidence which Administrative Agent
      from
      time to time reasonably requests in writing as to the accuracy and validity
      of
      or compliance with all representations, warranties and covenants made by any
      Credit Party in the Transaction Documents, the satisfaction of all conditions
      contained therein, and all other matters pertaining thereto.

     

    5.14 Agreement
      to Deliver Guaranty and Security Documents.
      Company
      agrees to have any Subsidiary of Company formed or acquired after the date
      hereof become a Guarantor by executing and delivering a Counterpart Agreement.
      In addition, Company agrees to deliver and to cause its Subsidiaries to deliver,
      to further secure the Obligations and the Lender Hedging Obligations whenever
      requested by Administrative Agent in its sole and absolute discretion, deeds
      of
      trust, mortgages, chattel mortgages, security agreements, financing statements
      and other Security Documents in form and substance satisfactory to
      Administrative Agent for the purpose of granting, confirming, and perfecting
      a
      first and prior lien or security interest in any real or personal property
      now
      owned or hereafter acquired by Company or any of its Subsidiaries; provided
      that,
      without
      limiting the Administrative Agent's right to request the execution and delivery
      of additional Security Documents, Company and its Subsidiaries shall, no later
      than 30 days after the acquisition of Oil and Gas Properties, execute and
      deliver Security Documents in form and substance satisfactory to the
      Administrative Agent for the purpose of granting, confirming and perfecting
      a
      first and prior lien or security interest in any such newly-acquired Property
      unless, pursuant to a sale or transfer permitted herein, such Property is sold
      or transferred to a Person other than Company or one of its Subsidiaries prior
      to the end of such 30-day period. Furthermore, Company agrees to deliver and
      to
      cause each other Credit Party to deliver whenever requested by Administrative
      Agent in its sole and absolute discretion, an intercompany subordination
      agreement in form and substance satisfactory to Administrative Agent. Company
      also agrees to deliver, whenever requested by Administrative Agent in its sole
      and absolute discretion, favorable title opinions or updates of title opinions
      from legal counsel acceptable to Administrative Agent with respect to Company's
      or any Subsidiary's properties and interests designated by Administrative Agent,
      based upon abstract or record examinations to dates acceptable to Administrative
      Agent and (a) stating that Company or such Subsidiary has good and
      defensible title to such properties and interests, free and clear of all Liens
      other than Permitted Liens, (b) confirming that such properties and
      interests are subject to Security Documents securing the Obligations that
      constitute and create legal, valid and duly perfected First Priority deed of
      trust or mortgage liens in such properties and interests and assignments of
      and
      security interests in the oil and gas attributable to such properties and
      interests and the proceeds thereof, and (c) covering such other matters as
      Administrative Agent may request. In addition, Company agrees that with respect
      to the vessels and Equipment subject to certificate of title requirements
      acquired by it in the Transactions it shall, promptly after the Closing Date,
      deliver such documentation and other items as Administrative Agent requests
      to
      grant and/or perfect Secured Party's lien on and security interest in each
      such
      asset selected by Administrative Agent, together with all legal opinions
      requested by Administrative Agent in connection therewith.

     

    
      
        
        

      

      
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    5.15 Perfection
      and Protection of Security Interests and Liens.
      Company
      will from time to time deliver, and will cause its Subsidiaries from time to
      time to deliver, to Administrative Agent any financing statements, continuation
      statements, extension agreements and other documents, properly completed and
      executed (and acknowledged when required) by Company and/or its Subsidiaries
      in
      form and substance satisfactory to Administrative Agent, which Administrative
      Agent requests for the purpose of (i) perfecting, confirming, or protecting
      any Liens or other rights in Collateral securing any Obligations and
      (ii) maintaining compliance with all applicable Laws, including those of
      any applicable Indian tribe, the Bureau of Indian Affairs, and the U.S. Bureau
      of Land Management. Company hereby authorizes, and shall cause each of its
      Subsidiaries to authorize, the Administrative Agent to file one or more
      financing or continuation statements, and amendments thereto, relative to all
      or
      any part of the Collateral describing the Collateral as "all assets" without
      the
      signature of Company or any of its Subsidiaries.

     

    5.16 Bank
      Accounts; Offset.
      To
      secure the repayment of the Obligations and the Lender Hedging Obligations,
      Company hereby grants, and shall cause each of its Subsidiaries to grant, to
      each Lender a security interest, a lien, and a right of offset, each of which
      shall be in addition to all other interests, liens, and rights of such Lender
      at
      common Law, under the Transaction Documents, or otherwise, and each of which
      shall be upon and against (a) any and all moneys, securities or other property
      (and the proceeds therefrom) of Company or such Subsidiary now or hereafter
      held
      or received by or in transit to such Lender from or for the account of Company
      or such Subsidiary, whether for safekeeping, custody, pledge, transmission,
      collection or otherwise, (b) any and all deposit accounts and deposits (general
      or special, time or demand, provisional or final) therein of Company or such
      Subsidiary with such Lender, and (c) any other credits and claims of
      Company or such Subsidiary at any time existing against such Lender, including
      claims under certificates of deposit. At any time and from time to time after
      the occurrence of any Default, each Lender is hereby authorized to foreclose
      upon, or to offset against the Obligations and the Lender Hedging Obligations
      owed to a Lender Counterparty then due and payable (in either case without
      notice to Company or any other Credit Party), any and all items hereinabove
      referred to. The remedies of foreclosure and offset are separate and cumulative,
      and either may be exercised independently of the other without regard to
      procedures or restrictions applicable to the other.

     

    
      
        
        

      

      
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    5.17 Production
      Proceeds.
      Notwithstanding that, by the terms of the various Security Documents, Company
      and its Subsidiaries are and will be assigning to the Administrative Agent
      for
      the benefit of the Secured Parties all of the "Production
      Proceeds"
      (as
      defined therein) accruing to the property covered thereby. So long as no Default
      has occurred Company and its Subsidiaries may continue to receive from the
      purchasers of production all such Production Proceeds, subject, however, to
      the
      Liens created under the Security Documents, which Liens are hereby affirmed
      and
      ratified. Upon the occurrence of a Default, Administrative Agent and Lenders
      may
      exercise all rights and remedies granted under the Security Documents, including
      the right to obtain possession of all Production Proceeds then held by Company
      and its Subsidiaries or to receive directly from the purchasers of production
      all other Production Proceeds. In no case shall any failure, whether proposed
      or
      inadvertent, by Administrative Agent or Lenders to collect directly any such
      Production Proceeds constitute in any way a waiver, remission or release of
      any
      of their rights under the Security Documents, nor shall any release of any
      Production Proceeds by Administrative Agent or Lenders to Company and its
      Subsidiaries constitute a waiver, remission, or release of any other Production
      Proceeds or of any rights of Administrative Agent or Lenders to collect other
      Production Proceeds thereafter.

     

    5.18 Approved
      Plan of Development.
      Company
      will (a) timely develop the Properties, and make capital expenditures on the
      Properties, in accordance with the Approved Plan of Development, and (b) except
      to the extent regulatory approval has not yet been obtained, have each producing
      and injection well which is hereafter completed put into normal
      operation.

     

    5.19 Reviews.
      Company
      will meet with Administrative Agent from time to time as reasonably requested
      by
      Administrative Agent or Required Lenders (which, as of the Closing Date, is
      anticipated to be on a quarterly basis), at the offices of Administrative Agent
      or at such other location as Agent and Company may agree, to review all
      operational activities of Company with respect to the Eligible Mortgaged
      Properties and all financial reports of Company and its Subsidiaries since
      the
      date of the prior review. Each review shall be in scope reasonably satisfactory
      to Administrative Agent, but will include at a minimum, an update by Company
      on
      the development activities made pursuant to Company's business plan, any
      requests by Company that changes be made to Company's business plan, any cost
      or
      expense overruns or underruns, any mechanical problems incurred, and any
      differences in reserves or production estimates.

     

    
      
        
        

      

      
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    5.20 Hedging
      Contracts.
      If, as
      of any date of determination occurring from and after June 30, 2007, the PDP
      Collateral Coverage Ratio is less than 1.50 to 1.00 and upon Administrative
      Agent's request, Company shall enter into additional Hedging Contracts in
      compliance with Section 6.3 such that, when combined with Company's then
      existing Hedging Contracts, no less than 80% of Company's aggregate Projected
      Oil and Gas Production through the Maturity Date (converting gas to oil at
      a
      ratio of six MMBtus of gas per barrel of oil) will be subject to Hedging
      Contracts with the purpose and effect of fixing prices or setting floors on
      such
      production at levels no more than 10% below the forward strip at trade
      execution. Company shall maintain in effect for their full term (and will not
      sell, assign, transfer or novate) the Hedging Contracts that are required as
      a
      condition to the initial closing hereunder pursuant to Section 3.1(e) or
      required under this Section 5.20.

     

    5.21 Non-Consolidation.
      Unless
      otherwise consented to by Administrative Agent or Required Lenders, Company
      will
      and will cause each of its Subsidiaries to: (a) maintain entity records and
      books of account separate from those of any other entity which is an Affiliate
      of such entity; (b) not commingle its funds or assets with those of any other
      entity which is an Affiliate of such entity; and (c) provide that its board
      of
      directors or other analogous governing body will hold all appropriate meetings
      to authorize and approve such entity's actions, which meetings will be separate
      from those of other entities.

     

    5.22 ORRI
      Conveyance.
      Until
      the Loans have been paid in full, Company will, as it acquires new Oil and
      Gas
      Properties, amend and supplement the ORRI Conveyance to make such new Oil and
      Gas Properties subject thereto (or, alternatively, if requested by Royalty
      Owner, Company will deliver a new ORRI Conveyance conveying a net profits
      interest in and to such Properties in the form of, and upon the same terms
      as,
      the ORRI Conveyance executed and delivered to Royalty Owner on the Closing
      Date).
      

     

    5.23 Leases
      and Contracts; Performance of Obligations.
      Company
      and its Subsidiaries will maintain in full force and effect all oil, gas or
      mineral leases, contracts, servitudes and other agreements forming a part of
      any
      of its Oil and Gas Property, to the extent the same cover or otherwise relate
      to
      such Oil and Gas Property, and Company and its Subsidiaries will timely perform
      all of their obligations thereunder. Company and its Subsidiaries will properly
      and timely pay all rents, royalties and other payments due and payable under
      any
      such leases, contracts, servitudes and other agreements, or under the Permitted
      Liens, or otherwise attendant to its ownership or operation of any Oil and
      Gas
      Property. Company will promptly notify Administrative Agent of any claim (or
      any
      conclusion by such Company or any of its Subsidiaries) that such Company or
      any
      of its Subsidiaries is obligated to account for any royalties, or overriding
      royalties or other payments out of production due to any Person, on a basis
      (other than delivery in kind) less favorable to such Person than proceeds
      received by Company or any of its Subsidiaries (calculated at the well) from
      sale of production.

     

    5.24 Representation
      to Continue to be True.
      Each of
      Company and its Subsidiaries will carry out its sales of production, will
      operate all of its respective Oil and Gas Properties, and will otherwise deal
      with such Oil and Gas Properties and the production, to cause the
      representations and warranties in Sections 4.25 through 4.28 to remain true
      and
      correct at, and as of, all times that this Agreement is in effect (and not
      just
      at, and as of, the times such representations and warranties are
      made).

     

    
      
        
        

      

      
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    5.25 Non-Voting
      Representative.
      Administrative Agent may in its discretion from time to time designate an
      employee or advisor to act as its non-voting representative to attend meetings
      of the governing body of Company or any of its Subsidiaries, which designation
      shall be made by written notice to Company. After receipt of each such
      designation, Company will, and will cause each of its Subsidiaries to, (a)
      give
      timely advance notice to such representative of all such meetings of such
      Subsidiary and all proposals to such body for action without a meeting, (b)
      allow such representative to attend all such meetings, and (c) provide such
      representative with copies of all written materials distributed to such
      directors (or similar body) in connection with such meetings or proposals for
      action without a meeting, including all minutes of previous actions and
      proceedings.

     

    SECTION
      6

    NEGATIVE
      COVENANTS

     

    Company
      covenants and agrees that, so long as any Commitment is in effect and until
      payment in full of all Obligations, Company shall perform, and shall cause
      each
      of its Subsidiaries to perform, all covenants in this
      Section 6.

     

    6.1 Indebtedness.
      Company
      will not, nor will it permit any of its Subsidiaries to, in any manner incur,
      owe or be liable for Indebtedness except:

     

    (a) the
      Obligations.

     

    (b) Hedging
      Contracts permitted under Section 6.3.

     

    (c) unsecured
      intercompany Indebtedness among Company and any Subsidiary of Company that
      is in
      compliance with Section 5.14.

     

    (d) purchase
      money Indebtedness (including capital leases) for trucks, trailers and other
      motor vehicles in an aggregate amount not in excess of $100,000 at any time
      outstanding.

     

    (e) purchase
      money Indebtedness (including capital leases) for equipment, inventory and
      other
      tangible personal property (including compressors, but excluding fixtures)
      in an
      aggregate amount not in excess of $100,000 at any time outstanding.

     

    (f) miscellaneous
      items of Indebtedness not described in subsections (a) through (e) which do
      not
      in the aggregate (taking into account all such Indebtedness of all Credit
      Parties) exceed $100,000 at any one time outstanding.

     

    (g) insurance
      premium financing Indebtedness described on Schedule 6.1.

     

    6.2 Limitation
      on Liens and Negative Pledges; Equitable Lien.
      

     

    (a) Company
      will not, nor will it permit any of its Subsidiaries to, create, assume or
      permit to exist any Lien upon any of the properties or assets which it now
      owns
      or hereafter acquires, except, to the extent not otherwise forbidden by the
      Security Documents the following ("Permitted
      Liens").

     

    
      
        
        

      

      
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    (i) Liens
      that secure Obligations only.

     

    (ii) Liens
      that secure only Indebtedness allowed under Sections 6.1(d) or (e) (plus
      associated interest, prepayment penalties, fees and reimbursements), provided
      that such Liens encumber only the personal property purchased with the proceeds
      of such Indebtedness (plus accessions and attachments to such purchased assets)
      and that the encumbered assets are not attached to any Eligible Mortgaged
      Properties in such a way that removal of such assets would damage any Eligible
      Mortgaged Property.

     

    (iii) Excepted
      Liens.

     

    (b) Company
      will not, nor will it permit any of its Subsidiaries to, enter into any
      agreement prohibiting the creation or assumption of any Lien in favor of
      Beneficiaries upon any of its properties or assets, whether now owned or
      hereafter acquired.

     

    (c) If
      Company or any of its Subsidiaries shall create or assume any Lien upon any
      of
      its properties or assets, whether now owned or hereafter acquired, other than
      Permitted Liens, it shall make or cause to be made effective provisions whereby
      the Obligations will be secured by such Lien equally and ratably with any and
      all other Indebtedness secured thereby as long as any such Indebtedness shall
      be
      so secured; provided, notwithstanding the foregoing, this covenant shall not
      be
      construed as a consent by Required Lenders to the creation or assumption of
      any
      such Lien not otherwise permitted hereby.

     

    6.3 Hedging
      Contracts.
      Company
      will not, nor will it permit any of its Subsidiaries to, be a party to or in
      any
      manner be liable on any Hedging Contract except:

     

    (a) contracts
      entered into with the purpose and effect of fixing prices on oil or gas expected
      to be produced by Company, provided that at all times: (i) no such contract
      fixes a price for a term that ends later than the Maturity Date; (ii) the
      aggregate monthly production covered by all such contracts (determined, in
      the
      case of contracts that are not settled on a monthly basis, by a monthly
      proration acceptable to Administrative Agent) for any single month does not
      in
      the aggregate exceed ninety percent (90%) at any time of Company's aggregate
      Projected Oil and Gas Production anticipated (at the time such Hedging Contract
      is entered into) to be sold in the ordinary course of Company's and its
      Subsidiaries' businesses for such month, (iii) no such contract requires
      Company or any Subsidiary to put up money, assets or other security (excluding
      unsecured letters of credit and, in the case of Lender Hedging Obligations
      only,
      Collateral under the Security Documents) against the event of its nonperformance
      prior to actual default by Company or such Subsidiary in performing its
      obligations thereunder, and (iv) each such contract is with a counterparty
      or has a guarantor of the obligation of the counterparty who (unless such
      counterparty is a Lender or one of its Affiliates) at the time the contract
      is
      made is rated at least A by S & P or A2 by Moody's; and

     

    
      
        
        

      

      
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    (b) contracts
      entered into by Company or any of its Subsidiaries with the purpose and effect
      of fixing interest rates on a principal amount of indebtedness of such Credit
      Party that is accruing interest at a variable rate, provided that (i) the
      aggregate notional amount of such contracts never exceeds fifty percent (50%)
      of
      the anticipated outstanding principal balance of the indebtedness to be hedged
      by such contracts or an average of such principal balances calculated using
      a
      generally accepted method of matching interest swap contracts to declining
      principal balances, (ii) the floating rate index of each such contract
      generally matches the index used to determine the floating rates of interest
      on
      the corresponding indebtedness to be hedged by such contract, (iii) no such
      contract requires Company or any of its Subsidiaries to put up money, assets
      or
      other security (excluding unsecured letters of credit and, in the case of Lender
      Hedging Obligations only, Collateral under the Security Documents) against
      the
      event of its nonperformance prior to actual default by Company or such
      Subsidiary in performing its obligations thereunder, and (iv) each such contract
      is with a counterparty or has a guarantor of the obligation of the counterparty
      who (unless such counterparty is a Lender or one of its Affiliates) at the
      time
      the contract is made is rated at least A by S & P or A2 by
      Moody's.

     

    6.4 Subsidiaries;
      Mergers; Capital Stock Transactions.
      Neither
      Company nor any of its Subsidiaries shall create or own any Subsidiary unless
      immediately upon acquisition or formation thereof, such Subsidiary becomes
      a
      Credit Party as required herein and otherwise complies with Section 5.14.
      Neither Company nor any of its Subsidiaries will merge or consolidate with
      or
      into any other business entity. Neither Company nor any of its Subsidiaries
      will
      issue any additional Capital Stock except, in the case of any Subsidiary, to
      Company or another wholly-owned Subsidiary of Company and, in the case of
      Company, as permitted pursuant to Section 6.6(a). No Subsidiary of Company
      will allow any diminution of Company's interest (direct or indirect)
      therein.

     

    6.5 Limitation
      on Sales of Property.
      Company
      will not, nor will it permit any of its Subsidiaries to, sell, transfer, lease,
      exchange, alienate or dispose of any of its material assets or properties or
      any
      material interest therein (including any stock or other equity interests in
      any
      of its Subsidiaries) except, to the extent not otherwise forbidden under the
      Security Documents:

     

    (a) equipment
      which is worthless or obsolete or not used or usable which is replaced by
      equipment of equal suitability and value.

     

    (b) personal
      property inventory (including oil and gas sold as produced) which is sold in
      the
      ordinary course of business on ordinary trade terms.

     

    (c) specific
      properties (or specific portions thereof) not subject to the Mortgages, provided
      the same are abandoned or farmed out and not otherwise disposed of and further
      provided that no well situated on the property to be abandoned, or located
      on
      any unit containing all or any part thereof, is, in the reasonable judgment
      of
      Company, capable (or is subject to being made capable through commercially
      feasible operations) of producing oil, gas or other hydrocarbons or minerals
      in
      paying quantities (with such determination of paying quantities being made
      taking into account the prudent operation of any unit in which such property
      is
      located).

     

    
      
        
        

      

      
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    (d) the
      ORRI
      to Royalty Owner pursuant to the ORRI Conveyance.

     

    Neither
      Company nor any of Company's Subsidiaries will sell, transfer or otherwise
      dispose of Capital Stock of any of Company's Subsidiaries except that any
      Subsidiary of Company may sell or issue its own Capital Stock to the extent
      not
      otherwise prohibited hereunder. Neither Company nor any of its Subsidiaries
      will
      discount, sell, pledge or assign any notes payable to it, accounts receivable
      or
      future income except to the extent expressly permitted under the Transaction
      Documents.

     

    6.6 Dividends
      and Redemptions.
      

     

    (a) Company
      will not, nor will it permit any of its Subsidiaries to, declare or make any
      Distribution in respect of any class of its Capital Stock, nor will Company
      or
      any of its Subsidiaries directly or indirectly declare or make any Distribution
      in respect of any Capital Stock of any Subsidiary (in each case, whether such
      Capital Stock is now or hereafter issued, outstanding or created), or cause
      or
      permit any reduction or retirement of the Capital Stock of Company or any of
      its
      Subsidiaries, provided that Company's Subsidiaries may make Distributions to
      Company and Company may make certain Distributions as specifically permitted
      below. Company shall not issue any Capital Stock other than (i) membership
      interests to Parent provided that such membership interests are Collateral
      pursuant to the Security Documents and (ii) membership interests to the
      Equity Owner.

     

    (b) Except
      as
      provided herein, Company shall not, nor shall it permit any of its Subsidiaries
      to, create or otherwise cause or suffer to exist or become effective any
      consensual encumbrance or restriction of any kind on the ability of any
      Subsidiary of Company to (i) pay dividends or make any other Distributions
      on
      any of such Subsidiary's Capital Stock owned by Company or any other Subsidiary
      of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to
      Company or any other Subsidiary of Company, (iii) make loans or advances to
      Company or any other Subsidiary of Company, or (iv) transfer any of its property
      or assets to Company or any other Subsidiary of Company other than restrictions
      on such transfer or property or assets (1) in agreements evidencing (or secured
      by) Permitted Liens described in Section 6.2(a)(iii) that impose
      restrictions on the property encumbered by such Permitted Liens, (2) by reason
      of customary provisions restricting assignments, subletting or other transfers
      contained in leases, licenses, joint operating agreements, farmin/farmout
      agreements, joint venture agreements and similar agreements entered into in
      the
      ordinary course of business, or (3) that are or were created by virtue of any
      transfer of, agreement to transfer or option or right with respect to any
      property, assets or Capital Stock not otherwise prohibited under this
      Agreement.

     

    (c) Notwithstanding
      the preceding provisions of this Section 6.6, if (i) Company is treated as
      a pass through entity for federal income tax purposes, (ii) no Default or Event
      of Default shall have occurred and be continuing on the date thereof or would
      result therefrom, (iii) there has never been an Event of Default under
      Section 8.1(a) or (b), and (iv) no Event of Default shall have occurred
      under Section 8.1(d) within the immediately preceding six (6) months, then
      Company may make quarterly distributions as provided in this Section 6.6(c)
      during the thirty (30) day period following a Quarterly Payment Date
      ("Permitted
      Tax Distributions");
      provided that (1) on the date of such Distribution the PDP Collateral Coverage
      Ratio shall not be less than 1.5 to 1.0 and (2) concurrently with the making
      of
      any such distribution, Company will enter into additional Hedging Contracts
      in
      compliance with Section 6.3 as requested by Required Lenders. Each
      Permitted Tax Distribution shall be calculated with respect to the Calculation
      Quarter most recently ended and shall equal the excess of (A) the product of
      (i)
      the maximum federal income tax rate applicable to individuals as in effect
      for
      the taxable year in question, utilizing the respective rates for ordinary income
      or capital gain, depending on the characterization of income as described below,
      and without giving effect to any phase-out of exemptions or deductions (the
      "Rate"),
      multiplied by (ii) the excess of the amount of Company's estimated taxable
      income for such quarter over Company's cumulative net loss for all prior taxable
      periods (the excess of the net losses for all prior periods over the net income
      for all prior periods) allocated to the direct and indirect holders of Company's
      Capital Stock. Distributions with respect to the December 26 Quarterly
      Payment Date shall be based on the estimated taxable income of Company for
      the
      entire taxable year and shall take into account the prior quarterly
      distributions for such year. To the extent that Company's actual taxable income
      for any Fiscal Year exceeds the sum of the foregoing quarterly estimates, then,
      if all conditions outlined above remain satisfied, Company shall be entitled
      to
      make an additional distribution to the holders of its Capital Stock calculated
      in the manner provided above based on the actual taxable income of Company.
      To
      the extent that Company's actual taxable income for any Fiscal Year is less
      than
      the sum of the foregoing quarterly estimates, then Company shall deduct an
      amount equal to the excess of the Permitted Tax Distributions actually made
      for
      such year over the amount that would have been made if calculated in the manner
      provided above on Company's actual taxable income from the amounts it is
      otherwise entitled to distribute to the holders of its Capital Stock in the
      next
      succeeding quarter or quarters.

     

    
      
        
        

      

      
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    (d) Notwithstanding
      the preceding provisions of this Section 6.6 if (i) no Default or Event of
      Default exists or would exist after giving effect to such Distribution,
      (ii) on the date of such Distribution the PDP Collateral Coverage Ratio is
      greater than 1.5 to 1.0 and (iii) on the date of such Distribution the Debt
      to EBITDA Ratio as determined in accordance with Section 6.11 is less than
      2.0 to 1.0, Company may notify Administrative Agent in writing, no more often
      than one time in any Fiscal Quarter, that it intends to make a Distribution
      from
      its unrestricted cash on-hand. Such notice shall specify the amount (which
      may
      not exceed Company's unrestricted cash on-hand) of the requested Distribution,
      and in connection therewith Company shall provide any other information
      requested by any Lender. Unless Administrative Agent notifies Company prior
      to
      the end of the 5th Business Day following its receipt of such notice that
      Administrative Agent has determined that the intended Distribution would not
      satisfy all requirements of this Section 6.6(d), Company may make the
      Distribution in the amount so requested ("Permitted
      Other Distribution")
      during
      the thirty (30) day period following such 5th
      Business
      Day.

     

    6.7 Limitation
      on Investments, and Deposit Accounts.
      Neither
      Company nor any of its Subsidiaries will make any Investment other than (a)
      Permitted Investments, (b) normal and prudent extensions of credit to customers
      buying goods and services in the ordinary course of business, which extensions
      shall not be for longer periods than those extended by similar businesses
      operated in a normal and prudent manner, (c) obligations under Hedging
      Contracts that are permitted under Section 6.3, (d) endorsements of
      negotiable instruments in the ordinary course of business, and (e) any
      acquisition of Oil and Gas Properties in order to timely comply with the APOD.
      Neither Company nor any of its Subsidiaries shall open any new deposit,
      commodity or security account or otherwise utilize any such account other than
      the accounts existing on the Closing Date unless it shall have given
      Administrative Agent thirty (30) days prior written notice thereof and shall
      have taken all action deemed necessary or desirable by Administrative Agent
      to
      cause its security interest therein to be a First Priority Lien. Neither Company
      nor any of its Subsidiaries will give control over any Deposit Account to any
      Person except Administrative Agent and the applicable bank with whom such
      account is maintained.

     

    
      
        
        

      

      
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    6.8 Transactions
      with Affiliates.
      Neither
      Company nor any of its Subsidiaries will engage in any material transaction
      with
      any of its Affiliates other than (i) for customary director compensation
      paid to any of such Affiliates who serves as a director of Company or such
      Subsidiary, (ii) for issuances of equity to Affiliates for fair value,
      provided that such issuances are permitted by Section 6.6, (iii) the
      Management Services Agreement, (iv) transactions between Company or any
      Subsidiary and any Affiliate, the terms of which are no less favorable than
      those which would have been obtainable at the time in arm's-length dealings
      with
      Persons other than an Affiliate, and (v) transactions among Company and
      Subsidiaries that are Guarantors (and no other Affiliates).

     

    6.9 Certain
      Contracts; Multiemployer ERISA Plans.
      Neither
      Company nor any of its Subsidiaries will enter into any "take-or-pay" contract
      or other contract or arrangement for the purchase of goods or services which
      obligates it to pay for such goods or service regardless of whether they are
      delivered or furnished to it. Neither Company nor any of its Subsidiaries will
      amend or permit any amendment to any material contract or lease which releases,
      qualifies, limits, makes contingent or otherwise materially and detrimentally
      affects the rights and benefits of any Lender under or acquired pursuant to
      any
      Security Documents. No ERISA Affiliate will incur any obligation to contribute
      to any "multiemployer plan" as defined in Section 4001 of
      ERISA.

     

    6.10 Current
      Ratio.
      At the
      end of each Fiscal Quarter, beginning with the Fiscal Quarter ending September
      30, 2007, the ratio of Company's Consolidated Current Assets to Company's
      Consolidated Current Liabilities will not be less than 1.0 to 1.0. For purposes
      of this Agreement, "Consolidated
      Current Assets"
      and
      "Consolidated
      Current Liabilities"
      shall
      be determined in accordance with GAAP, except that (a) Consolidated Current
      Assets and Consolidated Current Liabilities will be calculated without including
      any amounts resulting from the application of FASB Statement 133 or 143, and
      (b)
      Consolidated Current Liabilities will exclude current maturities of long-term
      debt.

     

    6.11 Debt
      to EBITDA Ratio.
      At the
      end of any Fiscal Quarter listed in the following table, the ratio of (i)
      Company's Consolidated Indebtedness at the end of such Fiscal Quarter (plus,
      without duplication, all Consolidated balance sheet liabilities of Company
      for
      plugging, abandonment, remediation, and similar liabilities, but excluding
      any
      Indebtedness resulting from the application of FASB Statement 133 or 143),
      to
      (ii) Company's EBITDA for the four-Fiscal Quarter period ending with such Fiscal
      Quarter, will be equal to or less than the ratio set out in such table opposite
      such Fiscal Quarter:

     

    
      	
              Fiscal
                Quarter

            	 	
              Maximum
                Ratio

            
	
              9/30/2007

            	 	
              3.00x
                to 1.00

            
	
              12/31/2007

            	 	
              2.75x
                to 1.00

            
	
              3/31/2008

            	 	
              2.50x
                to 1.00

            
	
              6/30/2008

            	 	
              2.25x
                to 1.00

            
	
              9/30/2008

            	 	
              2.00x
                to 1.00

            
	
              12/31/2008

            	 	
              2.00x
                to 1.00

            
	
              3/31/2009

            	 	
              2.00x
                to 1.00

            
	
              6/30/2009

            	 	
              1.75x
                to 1.00

            
	
              9/30/2009

            	 	
              1.75x
                to 1.00

            
	
              12/31/2009
                and thereafter

            	 	
              1.75x
                to 1.00

            


    

     

    
      
        
        

      

      
        -69-

        
          

        

      

      
        
        

      

    

    
 

    Such
      ratio with respect to the Fiscal Quarters ending September 30, 2007,
      December 31, 2007, and March 31, 2008 shall be calculated using
      "Annualized
      EBITDA".
      For
      purposes of this Section 6.11, "Annualized
      EBITDA"
      means
      (a) with respect to the Fiscal Quarter ending September 30, 2007, EBITDA
      for such Fiscal Quarter multiplied by 4; (b) with respect to the Fiscal Quarter
      ending December 31, 2007, EBITDA for the period commencing on July 1,
      2007 through December 31, 2007 multiplied by 2; and (c) with respect to the
      Fiscal Quarter ending March 31, 2008 for the period commencing on
      July 1, 2007 through March 31, 2008 multiplied by 4/3.

     

    6.12 Collateral
      Coverage Ratios.
      From
      and after September 30, 2007, Company will not allow the PDP Collateral
      Coverage Ratio as of any date to be less than the ratio set out in the table
      below for the applicable period:

     

    
      	
              Fiscal
                Quarter

            	 	
              Minimum
                Ratio

            
	
              9/30/2007

            	 	
              0.50x
                to 1.00

            
	
              12/31/2007

            	 	
              0.60x
                to 1.00

            
	
              3/31/2008

            	 	
              0.75x
                to 1.00

            
	
              6/30/2008

            	 	
              0.90x
                to 1.00

            
	
              9/30/2008

            	 	
              1.00x
                to 1.00

            
	
              12/31/2008

            	 	
              1.10x
                to 1.00

            
	
              3/31/2009

            	 	
              1.35x
                to 1.00

            
	
              6/30/2009

            	 	
              1.50x
                to 1.00

            
	
              9/30/2009

            	 	
              1.50x
                to 1.00

            
	
              12/31/2009

            	 	
              1.50x
                to 1.00

            


    

     

    Company
      will not allow the Proved Collateral Coverage Ratio as of any date to be less
      than the ratio set out in the table below for the applicable
      period:

     

    
      	
              Fiscal
                Quarter

            	 	
              Minimum
                Ratio

            
	
              9/30/2007

            	 	
              1.50x
                to 1.00

            
	
              12/31/2007

            	 	
              1.60x
                to 1.00

            
	
              3/31/2008

            	 	
              1.75x
                to 1.00

            
	
              6/30/2008

            	 	
              2.00x
                to 1.00

            
	
              9/30/2008

            	 	
              2.25x
                to 1.00

            
	
              12/31/2008

            	 	
              2.50x
                to 1.00

            
	
              3/31/2009

            	 	
              2.50x
                to 1.00

            
	
              6/30/2009

            	 	
              2.50x
                to 1.00

            
	
              9/30/2009

            	 	
              2.50x
                to 1.00

            
	
              12/31/2009

            	 	
              2.50x
                to 1.00

            


    

     

    
      
        
        

      

      
        -70-

        
          

        

      

      
        
        

      

    

     

    6.13 Conduct
      of Business.
      From
      and after the Closing Date, Company shall not, nor shall it permit any of its
      Subsidiaries to, engage in any business other than (a) the businesses engaged
      in
      by such Credit Party on the Closing Date and similar or related businesses
      and
      (b) such other lines of business as may be consented to by Required
      Lenders.

     

    6.14 Fiscal
      Year.
      Company
      shall not, nor shall it permit any of its Subsidiaries to, change its Fiscal
      Year end from December 31.

     

    6.15 General
      and Administrative Expenses.
      Company
      and its Subsidiaries will not permit their aggregate general and administrative
      expenses in a Calculation Quarter to exceed the Permitted G&A Expense
      Amount. Company and its Subsidiaries will not incur or otherwise become liable
      for the payment of management or consulting fees, except pursuant to the
      Management Services Agreement. No Credit Party will agree to amend, modify,
      supplement, or restate the Management Services Agreement or waive compliance
      with any provision thereof.

     

    6.16 Capital
      Expenditures.
      Except
      for ANCF Capital Expenditures and Other Permitted Capital Expenditures, Company
      and its Subsidiaries will not incur or otherwise become liable for any capital
      expenditures.

     

    6.17 Amendments
      to Organizational Documents.
      Company
      will not and will not permit any of its Subsidiaries to, enter into or permit
      any modification of, or waive any material right or obligation of any Person
      under its Organizational Documents.

     

    SECTION
      7

    GUARANTY

     

    7.1 Guaranty
      of the Obligations.
      Subject
      to the provisions of Section 7.2, Guarantors jointly and severally hereby
      irrevocably and unconditionally guarantee to Administrative Agent for the
      ratable benefit of the Beneficiaries the due and punctual payment in full of
      all
      Obligations when the same shall become due, whether at stated maturity, by
      required prepayment, declaration, acceleration, demand or otherwise (including
      amounts that would become due but for the operation of the automatic stay under
      Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a))
      (collectively, the "Guaranteed
      Obligations").

     

    
      
        
        

      

      
        -71-

        
          

        

      

      
        
        

      

    

     

    7.2 Contribution
      by Guarantors.
      All
      Guarantors desire to allocate among themselves (collectively, the "Contributing
      Guarantors"),
      in a
      fair and equitable manner, their obligations arising under this Guaranty.
      Accordingly, in the event any payment or distribution is made on any date by
      a
      Guarantor (a "Funding
      Guarantor")
      under
      this Guaranty that exceeds its Fair Share as of such date, such Funding
      Guarantor shall be entitled to a contribution from each of the other
      Contributing Guarantors in the amount of such other Contributing Guarantor's
      Fair Share Shortfall as of such date, with the result that all such
      contributions will cause each Contributing Guarantor's Aggregate Payments to
      equal its Fair Share as of such date. "Fair
      Share"
      means,
      with respect to a Contributing Guarantor as of any date of determination, an
      amount equal to (a) the ratio of (i) the Fair Share Contribution Amount
      with respect to such Contributing Guarantor to (ii) the aggregate of the Fair
      Share Contribution Amounts with respect to all Contributing Guarantors
      multiplied by (b) the aggregate amount paid or distributed on or before such
      date by all Funding Guarantors under this Guaranty in respect of the obligations
      Guaranteed. "Fair
      Share Shortfall"
      means,
      with respect to a Contributing Guarantor as of any date of determination, the
      excess, if any, of the Fair Share of such Contributing Guarantor over the
      Aggregate Payments of such Contributing Guarantor. "Fair
      Share Contribution Amount"
      means,
      with respect to a Contributing Guarantor as of any date of determination, the
      maximum aggregate amount of the obligations of such Contributing Guarantor
      under
      this Guaranty that would not render its obligations hereunder or thereunder
      subject to avoidance as a fraudulent transfer or conveyance under
      Section 548 of Title 11 of the United States Code or any comparable
      applicable provisions of state law; provided, solely for purposes of calculating
      the "Fair
      Share Contribution Amount"
      with
      respect to any Contributing Guarantor for purposes of this Section 7.2, any
      assets or liabilities of such Contributing Guarantor arising by virtue of any
      rights to subrogation, reimbursement or indemnification or any rights to or
      obligations of contribution hereunder shall not be considered as assets or
      liabilities of such Contributing Guarantor. "Aggregate
      Payments"
      means,
      with respect to a Contributing Guarantor as of any date of determination, an
      amount equal to (1) the aggregate amount of all payments and distributions
      made on or before such date by such Contributing Guarantor in respect of this
      Guaranty (including, without limitation, in respect of this Section 7.2),
      minus (2) the aggregate amount of all payments received on or before such
      date by such Contributing Guarantor from the other Contributing Guarantors
      as
      contributions under this Section 7.2. The amounts payable as contributions
      hereunder shall be determined as of the date on which the related payment or
      distribution is made by the applicable Funding Guarantor. The allocation among
      Contributing Guarantors of their obligations as set forth in this
      Section 7.2 shall not be construed in any way to limit the liability of any
      Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary
      to
      the contribution agreement set forth in this Section 7.2.

     

    7.3 Payment
      by Guarantors.
      Subject
      to Section 7.2, Guarantors hereby jointly and severally agree, in
      furtherance of the foregoing and not in limitation of any other right which
      any
      Beneficiary may have at law or in equity against any Guarantor by virtue hereof,
      that upon the failure of Company to pay any of the Guaranteed Obligations when
      and as the same shall become due, whether at stated maturity, by required
      prepayment, declaration, acceleration, demand or otherwise (including amounts
      that would become due but for the operation of the automatic stay under
      Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)),
      Guarantors will upon demand pay, or cause to be paid, in immediately available
      funds, to Administrative Agent for the ratable benefit of Beneficiaries, an
      amount equal to the sum of the unpaid principal amount of all Guaranteed
      Obligations then due as aforesaid, all accrued and unpaid interest on such
      Guaranteed Obligations (including interest which, but for Company's becoming
      the
      subject of a case under the Bankruptcy Code, would have accrued on such
      Guaranteed Obligations, whether or not a claim is allowed against Company for
      such interest in the related bankruptcy case) and all other Guaranteed
      Obligations then owed to Beneficiaries as aforesaid.

     

    
      
        
        

      

      
        -72-

        
          

        

      

      
        
        

      

    

     

    7.4 Liability
      of Guarantors Absolute.
      Each
      Guarantor agrees that its obligations hereunder are irrevocable, absolute,
      independent and unconditional and shall not be affected by any circumstance
      which constitutes a legal or equitable discharge of a guarantor or surety other
      than payment in full of the Guaranteed Obligations. In furtherance of the
      foregoing and without limiting the generality thereof, each Guarantor agrees
      as
      follows:

     

    (a) this
      Guaranty is a guaranty of payment when due and not of collectibility. This
      Guaranty is a primary obligation of each Guarantor and not merely a contract
      of
      surety;

     

    (b) Administrative
      Agent may enforce this Guaranty upon the occurrence of an Event of Default
      notwithstanding the existence of any dispute between Company and any Beneficiary
      with respect to the existence of such Event of Default;

     

    (c) the
      obligations of each Guarantor hereunder are independent of the obligations
      of
      Company and the obligations of any other guarantor (including any other
      Guarantor) of the obligations of Company, and a separate action or actions
      may
      be brought and prosecuted against such Guarantor whether or not any action
      is
      brought against Company or any of such other guarantors and whether or not
      Company is joined in any such action or actions;

     

    (d) payment
      by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall
      in no way limit, affect, modify or abridge any Guarantor's liability for any
      portion of the Guaranteed Obligations which has not been paid. Without limiting
      the generality of the foregoing, if Administrative Agent is awarded a judgment
      in any suit brought to enforce any Guarantor's covenant to pay a portion of
      the
      Guaranteed Obligations, such judgment shall not be deemed to release such
      Guarantor from its covenant to pay the portion of the Guaranteed Obligations
      that is not the subject of such suit, and such judgment shall not, except to
      the
      extent satisfied by such Guarantor, limit, affect, modify or abridge any other
      Guarantor's liability hereunder in respect of the Guaranteed
      Obligations;

     

    (e) any
      Beneficiary, upon such terms as it deems appropriate, without notice or demand
      and without affecting the validity or enforceability hereof or giving rise
      to
      any reduction, limitation, impairment, discharge or termination of any
      Guarantor's liability hereunder, from time to time may (i) renew, extend,
      accelerate, increase the rate of interest on, or otherwise change the time,
      place, manner or terms of payment of the Guaranteed Obligations;
      (ii) settle, compromise, release or discharge, or accept or refuse any
      offer of performance with respect to, or substitutions for, the Guaranteed
      Obligations or any agreement relating thereto, or subordinate the payment of
      the
      same to the payment of any other obligations; (iii) request and accept
      other guaranties of the Guaranteed Obligations and take and hold security for
      the payment hereof or the Guaranteed Obligations; (iv) release, surrender,
      exchange, substitute, compromise, settle, rescind, waive, alter, subordinate
      or
      modify, with or without consideration, any security for payment of the
      Guaranteed Obligations, any other guaranties of the Guaranteed Obligations,
      or
      any other obligation of any Person (including any other Guarantor) with respect
      to the Guaranteed Obligations; (v) enforce and apply any security now or
      hereafter held by or for the benefit of such Beneficiary in respect hereof
      or
      the Guaranteed Obligations and direct the order or manner of sale thereof,
      or
      exercise any other right or remedy that such Beneficiary may have against any
      such security, in each case as such Beneficiary in its discretion may determine
      consistent herewith or the applicable Hedging Contract and any applicable
      security agreement, including foreclosure on any such security pursuant to
      one
      or more judicial or nonjudicial sales, whether or not every aspect of any such
      sale is commercially reasonable, and even though such action operates to impair
      or extinguish any right of reimbursement or subrogation or other right or remedy
      of any Guarantor against Company or any security for the Guaranteed Obligations;
      and (vi) exercise any other rights available to it under the Credit
      Documents or the Hedging Contracts; and

     

    
      
        
        

      

      
        -73-

        
          

        

      

      
        
        

      

    

     

    (f) this
      Guaranty and the obligations of Guarantors hereunder shall be valid and
      enforceable and shall not be subject to any reduction, limitation, impairment,
      discharge or termination for any reason (other than payment in full of the
      Guaranteed Obligations), including the occurrence of any of the following,
      whether or not any Guarantor shall have had notice or knowledge of any of them:
      (i) any failure or omission to assert or enforce or agreement or election
      not to assert or enforce, or the stay or enjoining, by order of court, by
      operation of law or otherwise, of the exercise or enforcement of, any claim
      or
      demand or any right, power or remedy (whether arising under the Credit Documents
      or the Hedging Contracts, at law, in equity or otherwise) with respect to the
      Guaranteed Obligations or any agreement relating thereto, or with respect to
      any
      other guaranty of or security for the payment of the Guaranteed Obligations;
      (ii) any rescission, waiver, amendment or modification of, or any consent
      to departure from, any of the terms or provisions (including provisions relating
      to events of default) hereof, any of the other Credit Documents, any of the
      Hedging Contracts or any agreement or instrument executed pursuant thereto,
      or
      of any other guaranty or security for the Guaranteed Obligations, in each case
      whether or not in accordance with the terms hereof or such Credit Document,
      such
      Hedging Contract or any agreement relating to such other guaranty or security;
      (iii) the Guaranteed Obligations, or any agreement relating thereto, at any
      time being found to be illegal, invalid or unenforceable in any respect;
      (iv) the application of payments received from any source (other than
      payments received pursuant to the other Credit Documents or any of the Hedging
      Contracts or from the proceeds of any security for the Guaranteed Obligations,
      except to the extent such security also serves as collateral for indebtedness
      other than the Guaranteed Obligations) to the payment of indebtedness other
      than
      the Guaranteed Obligations, even though any Beneficiary might have elected
      to
      apply such payment to any part or all of the Guaranteed Obligations;
      (v) any Beneficiary's consent to the change, reorganization or termination
      of the corporate structure or existence of Company or any of its Subsidiaries
      and to any corresponding restructuring of the Guaranteed Obligations;
      (vi) any failure to perfect or continue perfection of a security interest
      in any collateral which secures any of the Guaranteed Obligations;
      (vii) any defenses, set-offs or counterclaims which Company may allege or
      assert against any Beneficiary in respect of the Guaranteed Obligations,
      including failure of consideration, breach of warranty, payment, statute of
      frauds, statute of limitations, accord and satisfaction and usury; and
      (viii) any other act or thing or omission, or delay to do any other act or
      thing, which may or might in any manner or to any extent vary the risk of any
      Guarantor as an obligor in respect of the Guaranteed Obligations.

     

    7.5 Waivers
      by Guarantors.
      Each
      Guarantor hereby waives, for the benefit of Beneficiaries: (a) any right to
      require any Beneficiary, as a condition of payment or performance by such
      Guarantor, to (i) proceed against Company, any other guarantor (including any
      other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed
      against or exhaust any security held from Company, any such other guarantor
      or
      any other Person, (iii) proceed against or have resort to any balance of any
      Deposit Account or credit on the books of any Beneficiary in favor of Company
      or
      any other Person, or (iv) pursue any other remedy in the power of any
      Beneficiary whatsoever; (b) any defense arising by reason of the incapacity,
      lack of authority or any disability or other defense of Company or any other
      Guarantor including any defense based on or arising out of the lack of validity
      or the unenforceability of the Guaranteed Obligations or any agreement or
      instrument relating thereto or by reason of the cessation of the liability
      of
      Company or any other Guarantor from any cause other than payment in full of
      the
      Guaranteed Obligations; (c) any defense based upon any statute or rule of law
      which provides that the obligation of a surety must be neither larger in amount
      nor in other respects more burdensome than that of the principal; (d) any
      defense based upon any Beneficiary's errors or omissions in the administration
      of the Guaranteed Obligations, except behavior which amounts to bad faith;
      (e)
      (i) any principles or provisions of law, statutory or otherwise, which are
      or
      might be in conflict with the terms hereof and any legal or equitable discharge
      of such Guarantor's obligations hereunder, (ii) the benefit of any statute
      of
      limitations affecting such Guarantor's liability hereunder or the enforcement
      hereof, (iii) any rights to set-offs, recoupments and counterclaims, and
      (iv) promptness, diligence and any requirement that any Beneficiary
      protect, secure, perfect or insure any security interest or lien or any property
      subject thereto; (f) notices, demands, presentments, protests, notices of
      protest, notices of dishonor and notices of any action or inaction, including
      acceptance hereof, notices of default hereunder, the Hedging Contracts or any
      agreement or instrument related thereto, notices of any renewal, extension
      or
      modification of the Guaranteed Obligations or any agreement related thereto,
      notices of any extension of credit to Company and notices of any of the matters
      referred to in Section 7.4 and any right to consent to any thereof; and (g)
      any defenses or benefits that may be derived from or afforded by law which
      limit
      the liability of or exonerate guarantors or sureties, or which may conflict
      with
      the terms hereof.

    
      
        
        

      

      
        -74-

        
          

        

      

      
        
        

      

    

     

    7.6 Guarantors'
      Rights of Subrogation, Contribution, etc.
      Until
      the Guaranteed Obligations shall have been indefeasibly paid in full and the
      Commitments shall have terminated, each Guarantor hereby waives any claim,
      right
      or remedy, direct or indirect, that such Guarantor now has or may hereafter
      have
      against Company or any other Guarantor or any of its assets in connection with
      this Guaranty or the performance by such Guarantor of its obligations hereunder,
      in each case whether such claim, right or remedy arises in equity, under
      contract, by statute, under common law or otherwise and including without
      limitation (a) any right of subrogation, reimbursement or indemnification that
      such Guarantor now has or may hereafter have against Company with respect to
      the
      Guaranteed Obligations, (b) any right to enforce, or to participate in, any
      claim, right or remedy that any Beneficiary now has or may hereafter have
      against Company, and (c) any benefit of, and any right to participate in, any
      collateral or security now or hereafter held by any Beneficiary. In addition,
      until the Guaranteed Obligations shall have been indefeasibly paid in full
      and
      the Commitments shall have terminated, each Guarantor shall withhold exercise
      of
      any right of contribution such Guarantor may have against any other guarantor
      (including any other Guarantor) of the Guaranteed Obligations, including,
      without limitation, any such right of contribution as contemplated by
      Section 7.2. Each Guarantor further agrees that, to the extent the waiver
      or agreement to withhold the exercise of its rights of subrogation,
      reimbursement, indemnification and contribution as set forth herein is found
      by
      a court of competent jurisdiction to be void or voidable for any reason, any
      rights of subrogation, reimbursement or indemnification such Guarantor may
      have
      against Company or against any collateral or security, and any rights of
      contribution such Guarantor may have against any such other guarantor, shall
      be
      junior and subordinate to any rights any Beneficiary may have against Company,
      to all right, title and interest any Beneficiary may have in any such collateral
      or security, and to any right any Beneficiary may have against such other
      guarantor. If any amount shall be paid to any Guarantor on account of any such
      subrogation, reimbursement, indemnification or contribution rights at any time
      when all Guaranteed Obligations shall not have been finally and indefeasibly
      paid in full, such amount shall be held in trust for Administrative Agent on
      behalf of Beneficiaries and shall forthwith be paid over to Administrative
      Agent
      for the benefit of Beneficiaries to be credited and applied against the
      Guaranteed Obligations, whether matured or unmatured, in accordance with the
      terms hereof.

     

    
      
        
        

      

      
        -75-

        
          

        

      

      
        
        

      

    

     

    7.7 Subordination
      of Other Obligations.
      Any
      Indebtedness of Company or any Guarantor now or hereafter held by any Guarantor
      (the "Obligee
      Guarantor")
      is
      hereby subordinated in right of payment to the Guaranteed Obligations, and
      any
      such indebtedness collected or received by the Obligee Guarantor after an Event
      of Default has occurred and is continuing shall be held in trust for
      Administrative Agent on behalf of Beneficiaries and shall forthwith be paid
      over
      to Administrative Agent for the benefit of Beneficiaries to be credited and
      applied against the Guaranteed Obligations but without affecting, impairing
      or
      limiting in any manner the liability of the Obligee Guarantor under any other
      provision hereof.

     

    7.8 Continuing
      Guaranty.
      This
      Guaranty is a continuing guaranty and shall remain in effect until all of the
      Guaranteed Obligations shall have been paid in full and the Commitments shall
      have terminated. Each Guarantor hereby irrevocably waives any right to revoke
      this Guaranty as to future transactions giving rise to any Guaranteed
      Obligations.

     

    7.9 Authority
      of Guarantors or Company.
      It is
      not necessary for any Beneficiary to inquire into the capacity or powers of
      any
      Guarantor or Company or the officers, directors or any agents acting or
      purporting to act on behalf of any of them.

     

    7.10 Financial
      Condition of Company.
      Any
      Credit Extension may be made to Company or continued from time to time, and
      any
      Hedging Contracts may be entered into from time to time, in each case without
      notice to or authorization from any Guarantor regardless of the financial or
      other condition of Company at the time of any such grant or continuation or
      at
      the time such Hedging Contract is entered into, as the case may be. No
      Beneficiary shall have any obligation to disclose or discuss with any Guarantor
      its assessment, or any Guarantor's assessment, of the financial condition of
      Company. Each Guarantor acknowledges that it has adequate means to obtain
      information from Company on a continuing basis concerning the financial
      condition of Company and its ability to perform its obligations under the Credit
      Documents and the Hedging Contracts, and each Guarantor assumes the
      responsibility for being and keeping informed of the financial condition of
      Company and of all circumstances bearing upon the risk of nonpayment of the
      Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty
      on the part of any Beneficiary to disclose any matter, fact or thing relating
      to
      the business, operations or conditions of Company now known or hereafter known
      by any Beneficiary.

     

    7.11 Bankruptcy,
      etc.
      

     

    (a) So
      long
      as any Guaranteed Obligations remain outstanding, no Guarantor shall, without
      the prior written consent of Administrative Agent acting pursuant to the
      instructions of Required Lenders, commence or join with any other Person in
      commencing any bankruptcy, reorganization or insolvency case or proceeding
      of or
      against Company or any other Guarantor. The obligations of Guarantors hereunder
      shall not be reduced, limited, impaired, discharged, deferred, suspended or
      terminated by any case or proceeding, voluntary or involuntary, involving the
      bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement
      of Company or any other Guarantor or by any defense which Company or any other
      Guarantor may have by reason of the order, decree or decision of any court
      or
      administrative body resulting from any such proceeding.

     

    
      
        
        

      

      
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    (b) Each
      Guarantor acknowledges and agrees that any interest on any portion of the
      Guaranteed Obligations which accrues after the commencement of any case or
      proceeding referred to in clause (a) above (or, if interest on any portion
      of the Guaranteed Obligations ceases to accrue by operation of law by reason
      of
      the commencement of such case or proceeding, such interest as would have accrued
      on such portion of the Guaranteed Obligations if such case or proceeding had
      not
      been commenced) shall be included in the Guaranteed Obligations because it
      is
      the intention of Guarantors and Beneficiaries that the Guaranteed Obligations
      which are guaranteed by Guarantors pursuant hereto should be determined without
      regard to any rule of law or order which may relieve Company of any portion
      of
      such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy,
      receiver, debtor in possession, assignee for the benefit of creditors or similar
      person to pay Administrative Agent, or allow the claim of Administrative Agent
      in respect of, any such interest accruing after the date on which such case
      or
      proceeding is commenced.

     

    (c) In
      the
      event that all or any portion of the Guaranteed Obligations are paid by Company,
      the obligations of Guarantors hereunder shall continue and remain in full force
      and effect or be reinstated, as the case may be, in the event that all or any
      part of such payment(s) are rescinded or recovered directly or indirectly from
      any Beneficiary as a preference, fraudulent transfer or otherwise, and any
      such
      payments which are so rescinded or recovered shall constitute Guaranteed
      Obligations for all purposes hereunder.

     

    SECTION
      8

    EVENTS
      OF DEFAULT

     

    8.1 Events
      of Default.
      If any
      one or more of the following conditions or events (each herein called an
      "Event
      of Default")
      shall
      occur:

     

    (a) Any
      Credit Party fails to pay the principal component of any Obligation when due
      and
      payable, whether at a date for the payment of a fixed installment or as a
      contingent or other payment becomes due and payable or as a result of
      acceleration or otherwise;

     

    (b) Any
      Credit Party fails to pay any Obligation (other than the Obligations described
      in subsection (a) above) when due and payable, whether at a date for the payment
      of a fixed installment or as a contingent or other payment becomes due and
      payable or as a result of acceleration or otherwise, within two (2) Business
      Days after the same becomes due in the case of interest or fifteen (15) days
      thereafter in the case of any other Obligation;

     

    
      
        
        

      

      
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    (c) (i) Any
      "default" or "event of default" (or, in the case of any Hedging Contract, any
      "termination event") occurs under any Transaction Document (other than the
      Equity Document) which defines either such term, and the same is not remedied
      within the applicable period of grace (if any) provided in such Transaction
      Document or (ii) the Company, on its own or as a result of any actions
      taken by any holder of equity interest in the Company (other than the Equity
      Owner), or any other party thereto (other than the Equity Owner), shall fail
      to
      perform or observe any covenant or agreement contained in the Equity Document
      and the same is not remedied within the applicable period of grace (if any)
      provided in the Equity Document;

     

    (d) Company
      or any of its Subsidiaries fails to duly observe, perform or comply with any
      covenant, agreement or provision of Section 5.4, Section 5.14, or any
      part of Section 6;

     

    (e) Any
      Credit Party fails (other than as referred to in subsections (a), (b), (c)
      or
      (d) above) to duly observe, perform or comply with any covenant, agreement,
      condition or provision of any Transaction Document, and such failure remains
      unremedied for a period of thirty (30) days after the earlier of (i) notice
      of
      such failure is given by Administrative Agent to Company and (ii) any Credit
      Party otherwise acquires knowledge of such Default.

     

    (f) Any
      certification, representation or warranty previously, presently or hereafter
      made in writing by or on behalf of any Credit Party in connection with any
      Transaction Document shall prove to have been false or incorrect in any material
      respect on any date on or as of which made;

     

    (g) Any
      Credit Party fails to duly observe, perform or comply with any agreement with
      any Person or any term or condition of any instrument, if such agreement or
      instrument is materially significant to Company or to Company and its
      Subsidiaries on a Consolidated basis or materially significant to any Guarantor,
      and such failure is not remedied within the applicable period of grace (if
      any)
      provided in such agreement or instrument;

     

    (h) Any
      Credit Party (i) fails to pay any portion, when such portion is due, of any
      of
      its Indebtedness in excess of $125,000 (other than (i) the Obligations under
      the
      Transaction Documents, and (ii) Liabilities described in Section 5.7 that
      are not required to be paid so long as the Credit Party is in good faith
      contesting the validity thereof by appropriate proceedings), or (ii) breaches
      or
      defaults in the performance of any agreement or instrument by which any such
      Indebtedness is issued, evidenced, governed, or secured, and any such failure,
      breach or default continues beyond any applicable period of grace provided
      therefor;

     

    (i) Either
      (i) any "accumulated funding deficiency" (as defined in Section 412(a) of
      the Internal Revenue Code) in excess of $125,000 exists with respect to any
      ERISA Plan, whether or not waived by the Secretary of the Treasury or his
      delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan
      and the then current value of such ERISA Plan's benefit liabilities exceeds
      the
      then current value of such ERISA Plan's assets available for the payment of
      such
      benefit liabilities by more than $125,000 (or in the case of a Termination
      Event
      involving the withdrawal of a substantial employer, the withdrawing employer's
      proportionate share of such excess exceeds such amount);

     

    
      
        
        

      

      
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    (j) Any
      Credit Party:

     

    (i) suffers
      the entry against it of a judgment, decree or order for relief by a Governmental
      Authority of competent jurisdiction in an involuntary proceeding commenced
      under
      any applicable bankruptcy, insolvency or other similar Law of any jurisdiction
      now or hereafter in effect, including the federal Bankruptcy Code, as from
      time
      to time amended, or has any such proceeding commenced against it which remains
      undismissed for a period of sixty (60) days; or

     

    (ii) commences
      a voluntary case under any applicable bankruptcy, insolvency or similar Law
      now
      or hereafter in effect, including the federal Bankruptcy Code, as from time
      to
      time amended; or applies for or consents to the entry of an order for relief
      in
      an involuntary case under any such Law; or makes a general assignment for the
      benefit of creditors; or fails generally to pay (or admits in writing its
      inability to pay) its debts as such debts become due; or takes corporate or
      other action to authorize any of the foregoing; or

     

    (iii) suffers
      the appointment of or taking possession by a receiver, liquidator, assignee,
      custodian, trustee, sequestrator or similar official of all or a substantial
      part of its assets or of any part of the Collateral in a proceeding brought
      against or initiated by it, and such appointment or taking possession is neither
      made ineffective nor discharged within thirty days after the making thereof,
      or
      such appointment or taking possession is at any time consented to, requested
      by,
      or acquiesced to by it; or

     

    (iv) suffers
      the entry against it of a final judgment for the payment of money in excess
      of
      $125,000 (not covered by insurance satisfactory to Administrative Agent in
      its
      discretion), unless (A) the same is discharged within the period ending on
      the
      earlier of the thirtieth day after the date of entry thereof or the fifth day
      prior to any scheduled execution thereon, or (B) an appeal or appropriate
      proceeding for review thereof is taken within such period and a stay of
      execution pending such appeal is obtained; or

     

    (v) suffers
      a
      writ or warrant of attachment or any similar process to be issued by any
      Governmental Authority for an amount in excess of $125,000 against all or any
      substantial part of its assets or any part of the Collateral, and such writ
      or
      warrant of attachment or any similar process is not stayed or released within
      the fifth day prior to any scheduled execution thereon, or after any stay is
      vacated or set aside or the fifth day prior to any scheduled execution
      thereon;

     

    (k) At
      any
      time after the execution and delivery thereof, (i) the Guaranty for any reason,
      other than the satisfaction in full of all Obligations, shall cease to be in
      full force and effect with respect to any Guarantor (other than in accordance
      with its terms) or shall be declared to be null and void or any Guarantor shall
      repudiate its obligations thereunder, (ii) this Agreement or any Security
      Document ceases to be in full force and effect (other than by reason of a
      release of Collateral in accordance with the terms hereof or thereof or the
      satisfaction in full of the Obligations in accordance with the terms hereof)
      or
      shall be declared null and void, or Administrative Agent shall not have or
      shall
      cease to have a valid and perfected Lien in any Collateral purported to be
      covered by the Security Documents with the priority required by the relevant
      Security Document, in each case for any reason other than the failure of
      Administrative Agent or any Secured Party to take any action within its control,
      or (iii) any Credit Party shall contest the validity or enforceability of any
      Transaction Document in writing or deny in writing that it has any further
      liability, including with respect to future advances by Lenders, under any
      Transaction Document to which it is a party,

     

    
      
        
        

      

      
        -79-

        
          

        

      

      
        
        

      

    

     

    (l) The
      title
      of Company or any of its Subsidiaries to any material portion of the Oil and
      Gas
      Properties subject to the Mortgages shall become the subject matter of
      litigation before any Governmental Authority or arbitrator which could
      reasonably be expected to result in a Material Adverse Effect with respect
      to
      Company's or such Subsidiary's title to such Oil and Gas Properties,


     

    (m) The
      occurrence of any Material Adverse Effect;

     

    (n) Any
      of
      the following shall not have occurred on or before August ___, 2007:
      (i) the occurrence of the Required Capital Date, (ii) the deposit of
      at least $5,000,000 of the $7,500,000 contributed by Parent to Company on the
      Required Capital Date in the Collateral Account to be held under the control
      of
      Administrative Agent as cash collateral and applied to Other Permitted Capital
      Expenditures and (iii) the repayment in full of the insurance premium
      financing Indebtedness described on Schedule 6.1 from the $7,500,000 contributed
      by Parent to Company on the Required Capital Date; 

     

    (o) Borrower
      shall fail to hire an operations engineer, reasonably satisfactory to
      Administrative Agent, on or before August ___, 2007; 

     

    (p) Any
      capital expenditure or other development activity set forth in the APOD shall
      not be completed within the time period and/or the budget specified therefor
      in
      the APOD, or amounts released from the deposit account described in clause
      (n)(ii) above shall not be applied in their entirety to the payment of Other
      Permitted Capital Expenditures; 

     

    (q) Parent
      shall not have received, on or before November ___, 2007, net cash proceeds
      from
      the issuance of debt or sale of its Capital Stock in an aggregate amount of
      not
      less than $5,000,000 (in addition to, and exclusive of, amounts received in
      connection with the Required Capital Date) on terms and conditions satisfactory
      to the Administrative Agent in all respects; 

     

    (r) The
      bonds
      and/or letters of credit in lieu of bonds maintained by Sellers with respect
      to
      the Properties for the Railroad Commission of Texas shall cease to be in full
      force and effect with respect to the Properties prior to the earlier of (i)
      June
      __, 2007 and (ii) the date on which Company provides all such bonds and/or
      letters of credit in lieu of bonds with respect to the Properties;
      or

     

    (s) Borrower
      shall fail to (i) furnish, on or before June 23, 2007, title opinions, in form
      and substance reasonably satisfactory to Administrative Agent, covering Texas
      State Lease MF030085 (State Tract 5-8A), Texas State Lease MF062790 (State
      Tract
      343), and any lease pooled or unitized therewith, specifically addressing,
      without limitation, the interests of Borrower in and to the following wells
      and
      non-producing reserves: (a) State Tract 5-8A #02, (b) State Tract 5-8A #01,
      State Tract 5-8 #01(BP01), State Tract 5-8A #01(BP02), State Tract 343#014,
      State Tract 343 #009, State Tract 343 #018 (BP01), State Tract 343 #014 (BP03),
      or (ii) comply with all reasonable requirements made by Administrative Agent
      pursuant to such title opinions.

     

    
      
        
        

      

      
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    THEN,
      (1)
      upon the occurrence of any Event of Default described in Section 8.1(j)
      (i), (ii) or (iii), automatically, and (2) upon the occurrence of any other
      Event of Default, at the request of (or with the consent of) Required Lenders,
      upon notice to Company by Administrative Agent, (A) the Commitments, if
      any, shall immediately terminate; (B) all Obligations, including the unpaid
      principal amount of and accrued interest on the Loans and any premium provided
      for herein, shall immediately become due and payable, in each case without
      presentment, demand, protest or other requirements of any kind, all of which
      are
      hereby expressly waived by each Credit Party; (C) Administrative Agent may
      enforce any and all Liens and security interests created pursuant to Security
      Documents; and (D) Administrative Agent may enforce its other rights and
      remedies under the Transaction Documents or applicable Law.

     

    8.2 Application
      of Funds.
      After
      the exercise of remedies provided for in Section 8.1 (or after the Loans
      have automatically become immediately due and payable as set forth in
      Section 8.1), any amounts received on account of the Obligations shall be
      applied by Administrative Agent in the following order:

     

    First,
      to
      payment of that portion of the Obligations constituting fees, indemnities,
      expenses and other amounts (including fees, charges and disbursements of counsel
      to Administrative Agent and amounts payable under Section 2.17) payable to
      Administrative Agent in its capacity as such;

     

    Second,
      to
      payment of that portion of the Obligations constituting fees, indemnities and
      other amounts (other than principal and interest) payable to Lenders (including
      fees, charges and disbursements of counsel to the respective Lenders and amounts
      payable under Sections 2.16 and 2.17), ratably among them in proportion to
      the amounts described in this clause Second payable to them;

     

    Third,
      to
      payment of accrued and unpaid interest on the Loans and the other Obligations
      and on the Lender Hedging Obligations, ratably among Lenders and Lender
      Counterparties in proportion to the respective amounts described in this clause
      Third payable to them;

     

    Fourth,
      to
      payment of unpaid principal of the Loans and the other Obligations and of the
      Lender Hedging Obligations, ratably among Lenders and Lender Counterparties
      in
      proportion to the respective amounts described in this clause Fourth held by
      them; and

     

    Last,
      the
      balance, if any, after all of the Obligations have been indefeasibly paid in
      full, to Company or as otherwise required by Law.

     

    
      
        
        

      

      
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    SECTION
      9

    AGENTS

     

    9.1 Appointment
      of Agents.
      J. Aron
      is hereby appointed Syndication Agent hereunder, and each Lender hereby
      authorizes Syndication Agent to act as its agent in accordance with the terms
      hereof and the other Transaction Documents. J. Aron is hereby appointed
      Administrative Agent hereunder and under the other Transaction Documents and
      each Lender hereby authorizes Administrative Agent to act as its agent in
      accordance with the terms hereof and the other Transaction Documents. Each
      Agent
      hereby agrees to act upon the express conditions contained herein and the other
      Transaction Documents, as applicable. The provisions of this Section 9 are
      solely for the benefit of Agents and Lenders and no Credit Party shall have
      any
      rights as a third party beneficiary of any of the provisions thereof. In
      performing its functions and duties hereunder, each Agent shall act solely
      as an
      agent of Lenders and does not assume and shall not be deemed to have assumed
      any
      obligation towards or relationship of agency or trust with or for Company or
      any
      of its Subsidiaries. Syndication Agent, without consent of or notice to any
      party hereto, may assign any and all of its rights or obligations hereunder
      to
      any of its Affiliates. As of the Closing Date, J. Aron, in its capacity as
      Syndication Agent, shall not have any obligations hereunder but shall be
      entitled to all benefits of this Section 9.

     

    9.2 Powers
      and Duties.
      Each
      Lender irrevocably authorizes each Agent to take such action on such Lender's
      behalf and to exercise such powers, rights and remedies hereunder and under
      the
      other Transaction Documents as are specifically delegated or granted to such
      Agent by the terms hereof and thereof, together with such powers, rights and
      remedies as are reasonably incidental thereto. Each Agent shall have only those
      duties and responsibilities that are expressly specified herein and the other
      Transaction Documents. Each Agent may exercise such powers, rights and remedies
      and perform such duties by or through its agents or employees. No Agent shall
      have, by reason hereof or any of the other Transaction Documents, a fiduciary
      relationship in respect of any Lender; and nothing herein or any of the other
      Transaction Documents, expressed or implied, is intended to or shall be so
      construed as to impose upon any Agent any obligations in respect hereof or
      any
      of the other Transaction Documents except as expressly set forth herein or
      therein.

     

    9.3 General
      Immunity.
      

     

    (a) No
      Responsibility for Certain Matters.
      No
      Agent shall be responsible to any Lender for the execution, effectiveness,
      genuineness, validity, enforceability, collectibility or sufficiency hereof
      or
      any other Transaction Document or for any representations, warranties, recitals
      or statements made herein or therein or made in any written or oral statements
      or in any financial or other statements, instruments, reports or certificates
      or
      any other documents furnished or made by any Agent to Lenders or by or on behalf
      of any Credit Party to any Agent or any Lender in connection with the
      Transaction Documents and the transactions contemplated thereby or for the
      financial condition or business affairs of any Credit Party or any other Person
      liable for the payment of any Obligations, nor shall any Agent be required
      to
      ascertain or inquire as to the performance or observance of any of the terms,
      conditions, provisions, covenants or agreements contained in any of the
      Transaction Documents or as to the use of the proceeds of the Loans or as to
      the
      existence or possible existence of any Event of Default or Default or to make
      any disclosures with respect to the foregoing. Anything contained herein to
      the
      contrary notwithstanding, Administrative Agent shall not have any liability
      arising from confirmations of the amount of outstanding Loans or the component
      amounts thereof.

     

    
      
        
        

      

      
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    (b) Exculpatory
      Provisions.
      No
      Agent nor any of its officers, partners, directors, employees or agents shall
      be
      liable to any Lender or any Credit
      Party for
      any action taken or omitted by any Agent under or in connection with any of
      the
      Transaction Documents except to the extent caused by such Agent's gross
      negligence or willful misconduct.
      Each
      Agent shall be entitled to refrain from any act or the taking of any action
      (including the failure to take an action) in connection herewith or any of
      the
      other Transaction Documents or from the exercise of any power, discretion or
      authority vested in it hereunder or thereunder unless and until such Agent
      shall
      have received instructions in respect thereof from Required Lenders (or such
      other Lenders as may be required to give such instructions under
      Section 10.5) and, upon receipt of such instructions from Required Lenders
      (or such other Lenders, as the case may be), such Agent shall be entitled to
      act
      or (where so instructed) refrain from acting, or to exercise such power,
      discretion or authority, in accordance with such instructions. Without prejudice
      to the generality of the foregoing, (i) each Agent shall be entitled to
      rely, and shall be fully protected in relying, upon any communication,
      instrument or document believed by it to be genuine and correct and to have
      been
      signed or sent by the proper Person or Persons, and shall be entitled to rely
      and shall be protected in relying on opinions and judgments of attorneys (who
      may be attorneys for Company and its Subsidiaries), accountants, experts and
      other professional advisors selected by it; and (ii) no Lender shall have
      any right of action whatsoever against any Agent as a result of such Agent
      acting or (where so instructed) refraining from acting hereunder or any of
      the
      other Transaction Documents in accordance with the instructions of Required
      Lenders (or such other Lenders as may be required to give such instructions
      under Section 10.5).

     

    9.4 Agents
      Entitled to Act as Lender.
      The
      agency hereby created shall in no way impair or affect any of the rights and
      powers of, or impose any duties or obligations upon, any Agent in its individual
      capacity as a Lender hereunder. With respect to its participation in the Loans,
      each Agent shall have the same rights and powers hereunder as any other Lender
      and may exercise the same as if it were not performing the duties and functions
      delegated to it hereunder, and the term "Lender"
      shall,
      unless the context clearly otherwise indicates, include each Agent in its
      individual capacity. Any Agent and its Affiliates may accept deposits from,
      lend
      money to, own securities of, and generally engage in any kind of banking, trust,
      financial advisory or other business with Company or any of its Affiliates,
      including making an equity investment in Company or any of its Affiliates,
      in
      any case, as if such Agent were not performing the duties specified herein,
      and
      may accept fees and other consideration from Company for services in connection
      herewith and otherwise without having to account for the same to
      Lenders.

     

    9.5 Lenders'
      Representations, Warranties and Acknowledgment.
      

     

    (a) Each
      Lender represents and warrants that it has made its own independent
      investigation of the financial condition and affairs of Company and its
      Subsidiaries in connection with Credit Extensions hereunder and that it has
      made
      and shall continue to make its own appraisal of the creditworthiness of Company
      and its Subsidiaries. No Agent shall have any duty or responsibility, either
      initially or on a continuing basis, to make any such investigation or any such
      appraisal on behalf of Lenders or to provide any Lender with any credit or
      other
      information with respect thereto, whether coming into its possession before
      the
      making of the Loans or at any time or times thereafter, and no Agent shall
      have
      any responsibility with respect to the accuracy of or the completeness of any
      information provided to Lenders.

     

    
      
        
        

      

      
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    (b) Each
      Lender, by delivering its signature page to this Agreement and funding its
      Loan
      on the Closing Date, shall be deemed to have acknowledged receipt of, and
      consented to and approved, each Transaction Document and each other document
      required to be approved by any Agent, Required Lenders or Lenders, as applicable
      on the Closing Date.

     

    9.6 Right
      to Indemnity.
      Each
      Lender, in proportion to its Pro Rata Share, severally agrees to indemnify
      each
      Agent, to the extent that such Agent shall not have been reimbursed by any
      Credit Party, for and against any and all liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses (including
      counsel fees and disbursements) or disbursements of any kind or nature
      whatsoever which may be imposed on, incurred by or asserted against such Agent
      in exercising its powers, rights and remedies or performing its duties hereunder
      or under the other Transaction Documents or otherwise in its capacity as such
      Agent in any way relating to or arising out of this Agreement or the other
      Transaction Documents, INCLUDING
      WITHOUT LIMITATION ANY OF THE FOREGOING CAUSED, IN WHOLE OR IN PART, BY THE
      NEGLIGENCE OF SUCH AGENT,
      provided,
      no
      Lender shall be liable for any portion of such liabilities, obligations, losses,
      damages, penalties, actions, judgments, suits, costs, expenses or disbursements
      resulting from such Agent's gross negligence or willful misconduct. If any
      indemnity furnished to any Agent for any purpose shall, in the opinion of such
      Agent, be insufficient or become impaired, such Agent may call for additional
      indemnity and cease, or not commence, to do the acts indemnified against until
      such additional indemnity is furnished; provided,
      in no
      event shall this sentence require any Lender to indemnify any Agent against
      any
      liability, obligation, loss, damage, penalty, action, judgment, suit, cost,
      expense or disbursement in excess of such Lender's Pro Rata Share thereof;
      and
provided further,
      this
      sentence shall not be deemed to require any Lender to indemnify any Agent
      against any liability, obligation, loss, damage, penalty, action, judgment,
      suit, cost, expense or disbursement described in the proviso in the immediately
      preceding sentence.

     

    9.7 Successor
      Administrative Agent.
      Administrative Agent may resign at any time by giving thirty (30) days' prior
      written notice thereof to Lenders and Company, and Administrative Agent may
      be
      removed at any time with or without cause by an instrument or concurrent
      instruments in writing delivered to Company and Administrative Agent and signed
      by Required Lenders. Upon any such notice of resignation or any such removal,
      Required Lenders shall have the right, upon five Business Days' notice to
      Company, to appoint a successor Administrative Agent. Upon the acceptance of
      any
      appointment as Administrative Agent hereunder by a successor Administrative
      Agent, that successor Administrative Agent shall thereupon succeed to and become
      vested with all the rights, powers, privileges and duties of the retiring or
      removed Administrative Agent and the retiring or removed Administrative Agent
      shall promptly (i) transfer to such successor Administrative Agent all
      sums, Securities and other items of Collateral held under the Security
      Documents, together with all records and other documents necessary or
      appropriate in connection with the performance of the duties of the successor
      Administrative Agent under the Transaction Documents, and (ii) execute and
      deliver to such successor Administrative Agent such amendments to financing
      statements, and take such other actions, as may be necessary or appropriate
      in
      connection with the assignment to such successor Administrative Agent of the
      security interests created under the Security Documents, whereupon such retiring
      or removed Administrative Agent shall be discharged from its duties and
      obligations hereunder.

     

    
      
        
        

      

      
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    9.8 Security
      Documents and Guaranty.
      

     

    (a) Agents
      under Security Documents and Guaranty.
      Each
      Lender hereby further authorizes Administrative Agent on behalf of and for
      the
      benefit of Lenders, to be the agent for and representative of Lenders with
      respect to the Guaranty, the Collateral and the Security Documents. Subject
      to
      Section 10.5, without further written consent or authorization from
      Lenders, Administrative Agent may execute any documents or instruments necessary
      to (i) release any Lien encumbering any item of Collateral that is the
      subject of a sale or other disposition of assets permitted hereby or to which
      Required Lenders (or such other Lenders as may be required to give such consent
      under Section 10.5) have otherwise consented or (ii) release any
      Guarantor from the Guaranty if Required Lenders (or such other Lenders as may
      be
      required to give such consent under Section 10.5) have otherwise
      consented.

     

    (b) Right
      to Realize on Collateral and Enforce Guaranty.
      Anything contained in any of the Transaction Documents to the contrary
      notwithstanding, Company, Administrative Agent and each Lender hereby agree
      that
      (i) no Lender shall have any right individually to realize upon any of the
      Collateral or to enforce the Guaranty, it being understood and agreed that
      all
      powers, rights and remedies hereunder may be exercised solely by Administrative
      Agent, on behalf of Lenders in accordance with the terms hereof and all powers,
      rights and remedies under the Security Documents may be exercised solely by
      Administrative Agent, and (ii) in the event of a foreclosure by Administrative
      Agent on any of the Collateral pursuant to a public or private sale,
      Administrative Agent or any Lender may be the purchaser of any or all of such
      Collateral at any such sale and Administrative Agent, as agent for and
      representative of Secured Parties (but not any Lender or Lenders in its or
      their
      respective individual capacities unless Required Lenders shall otherwise agree
      in writing) shall be entitled, for the purpose of bidding and making settlement
      or payment of the purchase price for all or any portion of the Collateral sold
      at any such public sale, to use and apply any of the Obligations as a credit
      on
      account of the purchase price for any collateral payable by Administrative
      Agent
      at such sale.

     

    SECTION
      10

    MISCELLANEOUS

     

    10.1 Notices.
      Unless
      otherwise specifically provided herein, any notice or other communication herein
      required or permitted to be given to a Credit Party, Syndication Agent or
      Administrative Agent shall be sent to such Person's address as set forth on
      Appendix B or in the other relevant Transaction Document, and in the case of
      any
      Lender, the address as indicated on Appendix B or otherwise indicated to
      Administrative Agent in writing. Each notice hereunder shall be in writing
      and
      may be personally served, telexed or sent by facsimile or United States mail
      or
      courier service and shall be deemed to have been given when delivered in person
      or by courier service and signed for against receipt thereof, upon receipt
      of
      facsimile or telex, or three Business Days after depositing it in the United
      States mail with postage prepaid and properly addressed; provided,
      no
      notice to any Agent shall be effective until received by such
      Agent.

     

    
      
        
        

      

      
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    10.2 Expenses.
      Whether
      or not the transactions contemplated hereby shall be consummated, Company agrees
      to pay promptly (and in any event within 30 days after receipt of invoice or
      other demand therefor): (a) all the actual and reasonable costs and
      expenses of preparation of the Transaction Documents and any proposed or
      completed consents, amendments, waivers or other modifications thereto;
      (b) all the costs of furnishing all opinions by counsel for Company and the
      other Credit Parties; (c) the reasonable fees, expenses and disbursements
      of counsel to Agents, Warrant Owner, Royalty Owner, and Equity Owner (in each
      case including allocated costs of internal counsel and travel costs and
      expenses) in connection with the negotiation, preparation, execution and
      administration of the Transaction Documents and any proposed or completed
      consents, amendments, waivers or other modifications thereto and any other
      documents or matters requested by Company; (d) all the actual costs and
      reasonable expenses of creating and perfecting Liens in favor of Administrative
      Agent, for the benefit of Lenders pursuant hereto, including filing and
      recording fees, expenses and taxes, stamp or documentary taxes, search fees,
      and
      reasonable fees, expenses and disbursements of counsel to each Agent and of
      counsel providing any opinions that any Agent or Required Lenders may request
      in
      respect of the Collateral or the Liens created pursuant to the Security
      Documents; (e) all the actual costs and reasonable fees, expenses and
      disbursements of any auditors, accountants, consultants or appraisers;
      (f) all the actual costs and reasonable expenses (including the reasonable
      fees, expenses and disbursements of any appraisers, consultants, advisors and
      agents employed or retained by Administrative Agent, Warrant Owner, Royalty
      Owner, and their counsels) in connection with the custody or preservation of
      the
      ORRI or any of the Collateral; (g) all the actual costs and reasonable
      expenses (including the reasonable fees, expenses and disbursements of any
      appraisers, consultants, advisors and agents employed or retained by Equity
      Owner or its counsel) in connection with the Equity Owner's rights under the
      Equity Document; (h) all other actual and reasonable costs and expenses
      incurred by Warrant Owner, Royalty Owner, Equity Owner, or each Agent in
      connection with the syndication of the Loans and Commitments and the
      negotiation, preparation and execution of the Transaction Documents and any
      consents, amendments, waivers or other modifications thereto and the
      transactions contemplated thereby; and (i) after the occurrence of a Default
      or
      an Event of Default, all costs and expenses, including reasonable attorneys'
      fees (including allocated costs of internal counsel) and costs of settlement,
      incurred by Warrant Owner, Royalty Owner, Equity Owner, or any Agent or Lender
      in enforcing any Obligations of or in collecting any payments due from any
      Credit Party hereunder or under the other Transaction Documents by reason of
      such Default or Event of Default (including in connection with the sale of,
      collection from, or other realization upon any of the Collateral or the
      enforcement of the Guaranty) or in connection with any refinancing or
      restructuring of the credit arrangements provided hereunder in the nature of
      a
      "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings.
      For
      the avoidance of doubt, the parties agree and acknowledge that amounts payable
      under this Section 10.2 or under Section 10.3 below do not constitute
      ANCF Overhead Costs and are not deducted in the calculation of
      ANCF.

     

    10.3 Indemnity,
      WAIVER OF PUNITIVE DAMAGES.
      

     

    (a) In
      addition to the payment of expenses pursuant to Section 10.2, whether or
      not the transactions contemplated hereby shall be consummated, each Credit
      Party
      agrees to defend (subject to Indemnitees' selection of counsel), indemnify,
      pay
      and hold harmless, Warrant Owner, Royalty Owner, Equity Owner, and each Agent
      and Lender and the officers, partners, directors, trustees, employees, agents
      and Affiliates of Warrant Owner, Royalty Owner, Equity Owner, each Agent and
      each Lender (each, an "Indemnitee"),
      from
      and against any and all Indemnified Liabilities, INCLUDING
      WITHOUT LIMITATION ANY INDEMNIFIED LIABILITIES CAUSED, IN WHOLE OR IN PART,
      BY
      THE NEGLIGENCE OF SUCH INDEMNIFIED PARTY (IN EACH CASE WHETHER ALLEGED, ARISING
      OR IMPOSED IN A LEGAL PROCEEDING BROUGHT BY OR AGAINST ANY Credit Party, ANY
      INDEMNITEE, OR ANY OTHER PERSON),
      provided,
      no
      Credit Party shall have any obligation to any Indemnitee hereunder with respect
      to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
      from the gross negligence or willful misconduct of that Indemnitee. To the
      extent that the undertakings to defend, indemnify, pay and hold harmless set
      forth in this Section 10.3 may be unenforceable in whole or in part because
      they are in violation of any Law or public policy, the applicable Credit Party
      shall contribute the maximum portion that it is permitted to pay and satisfy
      under applicable Law to the payment and satisfaction of all Indemnified
      Liabilities incurred by Indemnitees or any of them.

     

    
      
        
        

      

      
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    (b) TO
      THE
      EXTENT PERMITTED BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH
      HEREBY WAIVES, ANY CLAIM AGAINST ANY AGENT, ANY LENDER OR ANY OF THEIR
      AFFILIATES, DIRECTORS, EMPLOYEES, ATTORNEYS OR AGENTS, ON ANY THEORY OF
      LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED
      TO DIRECT OR ACTUAL DAMAGES) (WHETHER OR NOT THE CLAIM THEREFOR IS BASED ON
      CONTRACT, TORT OR DUTY IMPOSED BY ANY APPLICABLE LEGAL REQUIREMENT) ARISING
      OUT
      OF, IN CONNECTION WITH, ARISING OUT OF, AS A RESULT OF, OR IN ANY WAY RELATED
      TO, THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY AGREEMENT OR INSTRUMENT
      CONTEMPLATED HEREBY OR THEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
      ANY LOAN OR THE USE OF THE PROCEEDS THEREOF OR ANY ACT OR OMISSION OR EVENT
      FROM
      TIME TO TIME OCCURRING IN CONNECTION THEREWITH, AND EACH CREDIT PARTY HEREBY
      WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM OR ANY SUCH DAMAGES,
      WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS
      FAVOR. EACH CREDIT PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
      REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
      VOLUNTARILY GIVES THIS WAIVER FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS
      WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
      IN
      WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
      SECTION 10.3 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL
      APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
      HERETO OR TO ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS
      OR
      AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.

     

    
      
        
        

      

      
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    10.4 Setoffs.
      Upon
      the occurrence and during the continuance of any Event of Default, the
      Administrative Agent and each Lender is hereby authorized at any time and from
      time to time, to the fullest extent permitted by Law, to set off and apply
      any
      and all deposits (general or special, time or demand, provisional or final)
      at
      any time held and other indebtedness at any time owing by the Administrative
      Agent or such Lender to or for the credit or the account of any Credit Party
      against any and all of the obligations of any Credit Party now or hereafter
      existing under this Agreement, the Notes held by such Lender, and the other
      Transaction Documents, irrespective of whether or not the Administrative Agent
      or such Lender shall have made any demand under this Agreement, such Notes,
      or
      such other Transaction Documents, and although such obligations may be
      unmatured. The Administrative Agent and each Lender agrees to promptly notify
      such Credit Party after any such set-off and application made by the
      Administrative Agent or such Lender, provided,
      that,
      the failure to give such notice shall not affect the validity of such set-off
      and application. The rights of the Administrative Agent and each Lender under
      this Section 10.4 are in addition to any other rights and remedies
      (including other rights of set-off) that the Administrative Agent or such Lender
      may have.

     

    10.5 Amendments
      and Waivers.

     

    (a) Required
      Lenders' Consent.
      Subject
      to Section 10.5(b) and 10.5(c), no amendment, modification, termination or
      waiver of any provision of the Transaction Documents (other than the Equity
      Document, the ORRI Conveyance or the Warrants), or consent to any departure
      by
      any Credit Party therefrom, shall in any event be effective without the written
      concurrence of the Required Lenders.

     

    (b) Affected
      Lenders' Consent.
      Without
      the written consent of each Lender that would be affected thereby, no amendment,
      modification, termination, or consent shall be effective if the effect thereof
      would:

     

    (i) extend
      the scheduled final maturity of any Loan or Note;

     

    (ii) waive,
      reduce or postpone any scheduled repayment (but not prepayment) of
      principal;

     

    (iii) reduce
      the rate of interest on any Loan (other than any waiver of any increase in
      the
      interest rate applicable to any Loan pursuant to Section 2.10 other than
      any changes from the Original Effective Rate to the Reduced Effective Rate
      as
      provided in the definition of Effective Rate) or any fee payable
      hereunder;

     

    (iv) extend
      the time for payment of any such interest or fees;

     

    (v) reduce
      the principal amount of any Loan;

     

    (vi) amend,
      modify, terminate or waive any provision of this Section 10.5(b) or
      Section 10.5(c);

     

    (vii) amend
      the
      definition of "Required
      Lenders"
      or
      "Pro
      Rata Share";

     

    
      
        
        

      

      
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    (viii) release
      all or substantially all of the Collateral or all or substantially all of the
      Guarantors from the Guaranty except as expressly provided in the Transaction
      Documents; or

     

    (ix) consent
      to the assignment or transfer by any Credit Party of any of its rights and
      obligations under any Transaction Document (other than the Equity Document,
      ORRI
      Conveyance or the Warrants).

     

    Notwithstanding
      the foregoing or anything to the contrary herein, Administrative Agent shall
      not, without the prior consent of each individual Lender Counterparty affected
      thereby, execute and deliver any waiver or amendment to any Transaction Document
      which would (i) cause an obligation under any outstanding Hedging Contract
      owing to such Lender Counterparty that, prior to such waiver or amendment,
      constituted a "Lender
      Hedging Obligation"
      to
      cease to be a "Lender
      Hedging Obligation"
      or (ii)
      cause the priority of the Lien securing such obligation or the priority of
      payment with respect to such obligation in connection with the exercise of
      remedies under such Transaction Document to be subordinate in any manner to
      the
      Obligations (other than expense reimbursements, expenses of enforcement,
      indemnities, and other similar obligations owing under the Transaction
      Documents).

     

    (c) Other
      Consents.
      No
      amendment, modification, termination or waiver of any provision of the
      Transaction Documents, or consent to any departure by any Credit Party
      therefrom, shall:

     

    (i) increase
      any Commitment of any Lender over the amount thereof then in effect without
      the
      consent of such Lender; provided,
      no
      amendment, modification or waiver of any condition precedent, covenant, Default
      or Event of Default shall be deemed to constitute an increase in any Commitment
      of any Lender; or

     

    (ii) amend,
      modify, terminate or waive any provision of Section 9 as the same applies
      to any Agent, or any other provision hereof as the same applies to the rights
      or
      obligations of any Agent, in each case without the consent of such
      Agent.

     

    (d) Execution
      of Amendments, etc.
      Administrative Agent may, but shall have no obligation to, with the concurrence
      of any Lender, execute amendments, modifications, waivers or consents on behalf
      of such Lender. Any waiver or consent shall be effective only in the specific
      instance and for the specific purpose for which it was given. No notice to
      or
      demand on any Credit Party in any case shall entitle any Credit Party to any
      other or further notice or demand in similar or other circumstances. Any
      amendment, modification, termination, waiver or consent effected in accordance
      with this Section 10.5 shall be binding upon each Lender at the time
      outstanding, each future Lender and, if signed by a Credit Party, on such Credit
      Party.

     

    10.6 Successors
      and Assigns; Participations.
      

     

    (a) Generally.
      This
      Agreement shall be binding upon the parties hereto and their respective
      successors and assigns and shall inure to the benefit of the parties hereto
      and
      the successors and assigns of Agents and Lenders. Other than as a result of
      an
      action permitted under the terms of a Transaction Document, no Credit Party's
      rights or obligations hereunder or under any other Transaction Document nor
      any
      interest herein or therein may be assigned or delegated by any Credit Party
      without the prior written consent of all Lenders. Nothing in this Agreement,
      expressed or implied, shall be construed to confer upon any Person (other than
      the parties hereto, their respective successors and assigns permitted hereby
      and, to the extent expressly contemplated hereby, Affiliates and Indemnitees
      of
      each of the Agents and Lenders) any legal or equitable right, remedy or claim
      under or by reason of this Agreement.

     

    
      
        
        

      

      
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    (b) Register.
      Company, Administrative Agent and Lenders shall deem and treat the Persons
      listed as Lenders in the Register as the holders and owners of the corresponding
      Commitments and Loans listed therein for all purposes hereof, and no assignment
      or transfer of any such Commitment or Loan shall be effective, in each case,
      unless and until an Assignment Agreement effecting the assignment or transfer
      thereof shall have been delivered to and accepted by Administrative Agent and
      recorded in the Register as provided in Section 10.6(e). Prior to such
      recordation, all amounts owed with respect to the applicable Commitment or
      Loan
      shall be owed to the Lender listed in the Register as the owner thereof, and
      any
      request, authority or consent of any Person who, at the time of making such
      request or giving such authority or consent, is listed in the Register as a
      Lender shall be conclusive and binding on any subsequent holder, assignee or
      transferee of the corresponding Commitments or Loans.

     

    (c) Right
      to Assign.
      Each
      Lender shall have the right at any time to sell, assign or transfer all or
      a
      portion of its rights and obligations under this Agreement, including, without
      limitation, all or a portion of its Commitment or Loans owing to it or other
      Obligation (provided,
      however,
      that
      each such assignment shall be of a uniform, and not varying, percentage of
      all
      rights and obligations under and in respect of any Loan and any related
      Commitments and each such assignment shall include a pro rata assignment of
      the
      Uncommitted Amount):

     

    (i) to
      any
      Person meeting the criteria of clause (a) of the definition of the term of
      "Eligible
      Assignee"
      upon
      the giving of notice to Company and Administrative Agent; and

     

    (ii) to
      any
      Person meeting the criteria of clause (b) of the definition of the term of
      "Eligible
      Assignee"
      and, in
      the case of assignments of Loans or Commitments to any such Person (except
      in
      the case of assignments made by or to J. Aron), consented to by each of Company
      and Administrative Agent (such consent not to be (x) unreasonably withheld
      or
      delayed or, (y) in the case of Company, required at any time an Event of Default
      shall have occurred and then be continuing); provided,
      further
      each such assignment pursuant to this Section 10.6(c)(ii) shall be in an
      aggregate amount of not less than (A) $5,000,000 (or such lesser amount as
      may
      be agreed to by Company and Administrative Agent or as shall constitute the
      aggregate amount of the Commitments and Loans of the assigning Lender) with
      respect to the assignment of the Commitments and Loans and (B) $1,000,000 (or
      such lesser amount as may be agreed to by Company and Administrative Agent
      or as
      shall constitute the aggregate amount of the Loans of the assigning Lender)
      with
      respect to the assignment of Loans.

     

    
      
        
        

      

      
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    (d) Mechanics.
      The
      assigning Lender and the assignee thereof shall execute and deliver to
      Administrative Agent an Assignment Agreement, together with (i) a processing
      and
      recordation fee of $500 in the case of assignments pursuant to
      Section 10.6(c)(i) or made by or to J. Aron, and $2,000, in the case of all
      other assignments (except that only one fee shall be payable in the case of
      contemporaneous assignments to Related Funds), and (ii) such forms, certificates
      or other evidence, if any, with respect to United States federal income tax
      withholding matters as the assignee under such Assignment Agreement may be
      required to deliver to Administrative Agent pursuant to
      Section 2.17(c).

     

    (e) Notice
      of Assignment.
      Upon
      its receipt of a duly executed and completed Assignment Agreement, together
      with
      the processing and recordation fee referred to in Section 10.6(d) (and any
      forms, certificates or other evidence required by this Agreement in connection
      therewith), Administrative Agent shall record the information contained in
      such
      Assignment Agreement in the Register, shall give prompt notice thereof to
      Company and the other Lenders affected thereby and shall maintain a copy of
      such
      Assignment Agreement.

     

    (f) Representations
      and Warranties of Assignee.
      Each
      Lender, upon execution and delivery hereof or upon executing and delivering
      an
      Assignment Agreement, as the case may be, represents and warrants as of the
      Closing Date or as of the applicable Effective Date (as defined in the
      applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii)
      it
      has experience and expertise in the making of or investing in commitments or
      loans such as the applicable Commitments or Loans, as the case may be; and
      (iii)
      it will make or invest in, as the case may be, its Commitments or Loans for
      its
      own account in the ordinary course of its business and without a view to
      distribution of such Commitments or Loans within the meaning of the Securities
      Act or the Exchange Act or other federal securities Laws (it being understood
      that, subject to the provisions of this Section 10.6, the disposition of
      such Commitments or Loans or any interests therein shall at all times remain
      within its exclusive control).

     

    (g) Effect
      of Assignment.
      Subject
      to the terms and conditions of this Section 10.6, as of the "Effective
      Date"
      specified in the applicable Assignment Agreement: (i) the assignee thereunder
      shall have the rights and obligations of a "Lender"
      hereunder to the extent such rights and obligations hereunder have been assigned
      to it pursuant to such Assignment Agreement and shall thereafter be a party
      hereto and a "Lender"
      for all
      purposes hereof; (ii) the assigning Lender thereunder shall, to the extent
      that
      rights and obligations hereunder have been assigned thereby pursuant to such
      Assignment Agreement, relinquish its rights (other than any rights which survive
      the termination hereof under Section 10.8) and be released from its
      obligations hereunder (and, in the case of an Assignment Agreement covering
      all
      or the remaining portion of an assigning Lender's rights and obligations
      hereunder, such Lender shall cease to be a party hereto; provided,
      anything contained in any of the Transaction Documents to the contrary
      notwithstanding, such assigning Lender shall continue to be entitled to the
      benefit of all indemnities hereunder as specified herein with respect to matters
      arising out of the prior involvement of such assigning Lender as a Lender
      hereunder); (iii) the Commitments shall be modified to reflect the Commitment
      of
      such assignee and any Commitment of such assigning Lender, if any; and (iv)
      if
      any such assignment occurs after the issuance of any Note hereunder, the
      assigning Lender shall, upon the effectiveness of such assignment or as promptly
      thereafter as practicable, surrender its applicable Notes to Administrative
      Agent for cancellation, and thereupon Company shall issue and deliver new Notes,
      if so requested by the assignee and/or assigning Lender, to such assignee and/or
      to such assigning Lender, with appropriate insertions, to reflect the new
      Commitments and/or outstanding Loans of the assignee and/or the assigning
      Lender.

     

    
      
        
        

      

      
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    (h) Participations.
      Each
      Lender shall have the right at any time to sell one or more participations
      to
      any Person (other than Company, any of its Subsidiaries or any of its
      Affiliates) in all or any part of its Commitments, Loans or in any other
      Obligation. The holder of any such participation, other than an Affiliate of
      the
      Lender granting such participation, shall not be entitled to require such Lender
      to take or omit to take any action hereunder except with respect to any
      amendment, modification or waiver that would (i) extend the final scheduled
      maturity of any Loan or Note or reduce the rate or extend the time of payment
      of
      interest or fees thereon (except in connection with a waiver of applicability
      of
      any post-default increase in interest rates, and other than any changes from
      the
      Original Effective Rate to the Reduced Effective Rate as provided in the
      definition of Effective Rate) or reduce the principal amount thereof, or
      increase the amount of the participant's participation over the amount thereof
      then in effect (it being understood that a waiver of any Default or Event of
      Default or of a mandatory reduction in the Commitment shall not be deemed to
      constitute a change in the terms of such participation, and that an increase
      in
      any Commitment or Loan shall be permitted without the consent of any participant
      if the participant's participation is not increased as a result thereof),
      (ii) consent to the assignment or transfer by any Credit Party of any of
      its rights and obligations under this Agreement or (iii) release all or
      substantially all of the Collateral under the Security Documents (except as
      expressly provided in the Transaction Documents) supporting the Loans hereunder
      in which such participant is participating. Company agrees that each participant
      shall be entitled to the benefits of Sections 2.16 and 2.17 to the same
      extent as if it were a Lender and had acquired its interest by assignment
      pursuant to paragraph (c) of this Section; provided,
      (i) a
      participant shall not be entitled to receive any greater payment under
      Section  2.16 and 2.17 than the applicable Lender would have been entitled
      to receive with respect to the participation sold to such participant, unless
      the sale of the participation to such participant is made with Company's prior
      written consent and (ii) a participant that would be a Non-US Lender if it
      were
      a Lender shall not be entitled to the benefits of Section 2.17 unless
      Company is notified of the participation sold to such participant and such
      participant agrees, for the benefit of Company, to comply with Section 2.17
      as though it were a Lender. To the extent permitted by Law, each participant
      also shall be entitled to the benefits of Section 10.4 as though it were a
      Lender, provided such Participant agrees to be subject to Section 2.15 as
      though it were a Lender.

     

    (i) Certain
      Other Assignments.
      In
      addition to any other assignment permitted pursuant to this Section 10.6,
      (i) any Lender may assign and/or pledge all or any portion of its Loans, the
      other Obligations owed by or to such Lender, and its Notes, if any, to secure
      obligations of such Lender including, without limitation, any Federal Reserve
      Bank as collateral security pursuant to Regulation A of the Board of
      Governors of the Federal Reserve System and any operating circular issued by
      such Federal Reserve Bank; provided,
      no
      Lender, as between Company and such Lender, shall be relieved of any of its
      obligations hereunder as a result of any such assignment and pledge, and
provided further,
      in no
      event shall the applicable Federal Reserve Bank or trustee be considered to
      be a
      "Lender"
      or be
      entitled to require the assigning Lender to take or omit to take any action
      hereunder.

     

    
      
        
        

      

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

     

    10.8 Survival
      of Representations, Warranties and Agreements;
      Termination.
      

     

    (a) All
      representations, warranties and agreements made herein shall survive the
      execution and delivery hereof and the making of any Credit Extension.
      Notwithstanding anything herein or implied by Law to the contrary, the
      agreements of each Credit Party set forth in Sections 2.16, 2.17, 10.2,
      10.3, 10.4, 10.23 and 10.24 and the agreements of Lenders set forth in
      Sections 2.15, 9.3 and 9.6 shall survive the payment of the Loans and the
      termination hereof.

     

    (b) If
      the
      Closing Date does not occur within ten days after the date of execution hereof
      by Company, or at any time after the Closing Date when no Obligations are owing
      (other than Obligations under the Equity Document, the ORRI Conveyance or the
      Warrants that arise after the Loans have been paid in full), Company may elect
      in a written notice delivered to Administrative Agent to terminate this
      Agreement. Upon the proper receipt by Administrative Agent of such a notice
      at
      such a time, then this Agreement and all Security Documents shall thereupon
      be
      terminated, except to the extent provided otherwise in Section 10.8(a) of
      this Agreement or in any similar provision of any Security Document that
      expressly provides for the survival of specified provisions thereof. At the
      request and expense of Company, Administrative Agent shall prepare and execute
      all necessary instruments to reflect and effect such termination and the release
      of the Collateral. Administrative Agent is hereby authorized to execute all
      such
      instruments on behalf of all Lenders and Lender Counterparties, without the
      joinder of or further action by any Lender or Lender Counterparty. The
      obligations of the Credit Parties under the Equity Document, the ORRI
      Conveyance, the Warrants, and under the last sentence of Section 5.22 and
      Section 10.23 of this Agreement shall survive the termination of this
      Agreement and the release of the Collateral and, notwithstanding any of the
      foregoing provisions of this subsection, Administrative Agent shall not release
      any Collateral until Company has amended the ORRI Conveyance to the extent
      required under Section 5.22.

     

    10.9 No
      Waiver; Remedies Cumulative.
      No
      failure or delay on the part of any Agent or any Lender in the exercise of
      any
      power, right or privilege hereunder or under any other Transaction Document
      shall impair such power, right or privilege or be construed to be a waiver
      of
      any default or acquiescence therein, nor shall any single or partial exercise
      of
      any such power, right or privilege preclude other or further exercise thereof
      or
      of any other power, right or privilege. The rights, powers and remedies given
      to
      each Agent and each Lender hereby are cumulative and shall be in addition to
      and
      independent of all rights, powers and remedies existing by virtue of any statute
      or rule of law or in any of the other Transaction Documents or any of the
      Hedging Contracts. Any forbearance or failure to exercise, and any delay in
      exercising, any right, power or remedy hereunder shall not impair any such
      right, power or remedy or be construed to be a waiver thereof, nor shall it
      preclude the further exercise of any such right, power or remedy.

     

    
      
        
        

      

      
        -93-

        
          

        

      

      
        
        

      

    

     

    10.10 Marshalling;
      Payments Set Aside.
      Neither
      any Agent nor any Lender shall be under any obligation to marshal any assets
      in
      favor of any Credit Party or any other Person or against or in payment of any
      or
      all of the Obligations. To the extent that any Credit Party makes a payment
      or
      payments to Administrative Agent or Lenders (or to Administrative Agent, on
      behalf of Lenders), or Administrative Agent or Lenders enforce any security
      interests or exercise their rights of setoff, and such payment or payments
      or
      the proceeds of such enforcement or setoff or any part thereof are subsequently
      invalidated, declared to be fraudulent or preferential, set aside and/or
      required to be repaid to a trustee, receiver or any other party under any
      bankruptcy Law, any other state or federal Law, common law or any equitable
      cause, then, to the extent of such recovery, the obligation or part thereof
      originally intended to be satisfied, and all Liens, rights and remedies therefor
      or related thereto, shall be revived and continued in full force and effect
      as
      if such payment or payments had not been made or such enforcement or setoff
      had
      not occurred.

     

    10.11 Severability.
      In case
      any provision in or obligation hereunder or any Note shall be invalid, illegal
      or unenforceable in any jurisdiction, the validity, legality and enforceability
      of the remaining provisions or obligations, or of such provision or obligation
      in any other jurisdiction, shall not in any way be affected or impaired
      thereby.

     

    10.12 Obligations
      Several; Independent Nature of Lenders' Rights.
      The
      obligations of Lenders hereunder are several and no Lender shall be responsible
      for the obligations or Commitment of any other Lender hereunder. Nothing
      contained herein or in any other Transaction Document, and no action taken
      by
      Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as
      a
      partnership, an association, a joint venture or any other kind of entity. The
      amounts payable at any time hereunder to each Lender shall be a separate and
      independent debt, and each Lender shall be entitled to protect and enforce
      its
      rights arising out hereof and it shall not be necessary for any other Lender
      to
      be joined as an additional party in any proceeding for such
      purpose.

     

    10.13 Headings.
      Section
      headings herein are included herein for convenience of reference only and shall
      not constitute a part hereof for any other purpose or be given any substantive
      effect.

     

    10.14 APPLICABLE
      LAW.
      THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
      GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
      THEREOF.

     

    10.15 CONSENT
      TO JURISDICTION. ALL
      JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT
      PARTY ARISING
      OUT OF OR RELATING HERETO OR ANY OTHER TRANSACTION DOCUMENT, OR ANY OF THE
      OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
      JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
      DELIVERING THIS AGREEMENT, EACH CREDIT
      PARTY,
      FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS
      GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH
      COURTS; (B) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (C) AGREES THAT SERVICE
      OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY
      REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE
CREDIT
      PARTY AT
      ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (D) AGREES THAT SERVICE
      AS
      PROVIDED IN CLAUSE (C) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
      OVER
      THE APPLICABLE CREDIT
      PARTY IN
      ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE
      AND
      BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT AGENTS AND LENDERS RETAIN
      THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
      PROCEEDINGS AGAINST ANY CREDIT
      PARTY IN
      THE COURTS OF ANY OTHER JURISDICTION.

     

    
      
        
        

      

      
        -94-

        
          

        

      

      
        
        

      

    

     

    10.16 WAIVER
      OF JURY TRIAL.
      EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS
      TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER
      OR UNDER ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM
      RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY
      RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED
      TO
      BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
      AND
      THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT
      CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
      STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
      INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED
      ON
      THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO
      RELY
      ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
      WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
      AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
      CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
      MAY
      NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
      WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF
      THE
      PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
      RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER TRANSACTION
      DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE
      HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
      CONSENT TO A TRIAL BY THE COURT.

     

    10.17 Confidentiality.
      Each
      Lender and each Agent agrees that it will take all reasonable steps to keep
      confidential any proprietary information regarding Company and its business
      identified as confidential by Company and obtained by Agent or such Lender
      pursuant to the requirements hereof, it being understood and agreed by Company
      that, in any event, a Lender or any Agent may make (i) disclosures of such
      information to Affiliates of such Lender or such Agent and to their agents
      and
      advisors (and to other Persons authorized by a Lender or Agent to organize,
      present or disseminate such information in connection with disclosures otherwise
      made in accordance with this Section 10.17), (ii) disclosures of such
      information reasonably required by any bona fide or potential assignee,
      transferee or participant in connection with the contemplated assignment,
      transfer or participation by such Lender of any Loans or any participations
      therein or by any direct or indirect contractual counterparties (or the
      professional advisors thereto) in Hedging Contracts (provided, such
      counterparties and advisors are advised of and agree to be bound by the
      provisions of this Section 10.17), (iii) disclosure to any rating agency
      when required by it, provided that, prior to any disclosure, such rating agency
      shall undertake in writing to preserve the confidentiality of any confidential
      information relating to the Credit Parties received by it from any of the Agents
      or any Lender, and (iv) disclosures required or requested by any Governmental
      Authority or representative thereof or by the NAIC or pursuant to legal or
      judicial process; provided,
      unless
      specifically prohibited by applicable Law or court order, each Lender shall
      make
      reasonable efforts to notify Company of any request by any Governmental
      Authority or representative thereof (other than any such request in connection
      with any examination of the financial condition or other routine examination
      of
      such Lender by such governmental agency) for disclosure of any such non-public
      information prior to disclosure of such information.

     

    
      
        
        

      

      
        -95-

        
          

        

      

      
        
        

      

    

     

    10.18 Usury
      Savings Clause.
      Notwithstanding any other provision herein, the aggregate interest rate charged
      with respect to any of the Obligations, including all charges or fees in
      connection therewith deemed in the nature of interest under applicable Law,
      shall not exceed the Highest Lawful Rate. If the rate of interest (determined
      without regard to the preceding sentence) under this Agreement at any time
      exceeds the Highest Lawful Rate, the outstanding amount of the Loans made
      hereunder shall bear interest at the Highest Lawful Rate until the total amount
      of interest due hereunder equals the amount of interest which would have been
      due hereunder if the stated rates of interest set forth in this Agreement had
      at
      all times been in effect. In addition, if when the Loans made hereunder are
      repaid in full the total interest due hereunder (taking into account the
      increase provided for above) is less than the total amount of interest which
      would have been due hereunder if the stated rates of interest set forth in
      this
      Agreement had at all times been in effect, then to the extent permitted by
      Law,
      Company shall pay to Administrative Agent an amount equal to the difference
      between the amount of interest paid and the amount of interest which would
      have
      been paid if the Highest Lawful Rate had at all times been in effect.
      Notwithstanding the foregoing, it is the intention of Lenders and Company to
      conform strictly to any applicable usury Laws. Accordingly, if any Lender
      contracts for, charges, or receives any consideration which constitutes interest
      in excess of the Highest Lawful Rate, then any such excess shall be cancelled
      automatically and, if previously paid, shall at such Lender's option be applied
      to the outstanding amount of the Loans made hereunder or be refunded to
      Company.

     

    10.19 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed an original, but all such counterparts
      together shall constitute but one and the same instrument.

     

    
      
        
        

      

      
        -96-

        
          

        

      

      
        
        

      

    

     

    10.20 Effectiveness.
      This
      Agreement shall become effective upon the execution of a counterpart hereof
      by
      each of the parties hereto and receipt by Company and Administrative Agent
      of
      written or telephonic notification of such execution and authorization of
      delivery thereof.

     

    10.21 USA
      Patriot Act Notice.
      Each
      Lender that is subject to the Act (as hereinafter defined) and Administrative
      Agent (for itself and not on behalf of any Lender) hereby notifies Company
      and
      each other Credit Party that pursuant to the requirements of the USA Patriot
      Act
      (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
      (the "Act"),
      it is
      required to obtain, verify and record information that identifies Company and
      the other Credit Parties, which information includes the name and address of
      such Persons and other information that will allow such Lender or Administrative
      Agent, as applicable, to identify such Persons in accordance with the
      Act.

     

    10.22 Third
      Party Beneficiaries.
      The
      Credit Parties agree that Royalty Owner (the "Third
      Party Beneficiary")
      (a) is
      an express and intended third party beneficiary of the representations,
      agreements and promises made in this Agreement, which are made for the benefit
      of Lenders, Administrative Agent and the Third Party Beneficiary (which benefits
      are immediate and not incidental), (b) shall have and be vested with the right
      to enforce the provisions hereof on its own behalf and to sue for non-compliance
      with the provisions hereof, and (c) has acted in reliance upon its status as
      a
      third party beneficiary as set forth above (including entering into the
      Transaction Documents to which it is a party). Without limiting the foregoing,
      the Credit Parties agree that they intend to give the Third Party Beneficiary
      the benefits of the representations, agreements, and promises set forth in
      this
      Agreement, and that such intent is sufficient to make reliance by such Third
      Party Beneficiary both reasonable and probable.

     

    10.23 Royalty
      Owner Participation in Property Sales.
      Whenever
      Company has, and intends to take, the opportunity to sell any part of its
      interest (in this section called a “Sold
      Working Interest”)
      in any
      properties and interests subject to any ORRI Conveyance, then with respect
      to
      that portion of Royalty Owner’s ORRI under an ORRI Conveyance which burdens the
      properties and interests to be sold (in this section called the “Related
      Royalty”):
      (a)
      Company shall take all necessary action to insure that Royalty Owner has the
      opportunity to sell the Related Royalty as a part of such transaction and at
      a
      price which is as favorable as that available to Company (taking into
      consideration that such Related Royalty is a cost free interest) and (b) at
      Company’s election, Royalty Owner shall be obligated to sell the Related Royalty
      in the circumstances and pursuant to the terms set forth in the preceding clause
      (a). In either case, Royalty Owner may elect to resell the Related Royalty
      to
      Company (for further sale on to the purchaser) or to sell the Related Royalty
      directly to the purchaser. Any such resale to Company shall be without
      representation or warranty other than Royalty Owner’s special warranty of title
      to the Related Royalty. Company shall give Royalty Owner at least thirty (30)
      days notice of any such potential sale (or of any material modification in
      the
      terms of any sale of which such a notice was previously given) and, if
      applicable, its election to require Royalty Owner to sell the Related Royalty
      as
      provided above. If the Related Royalty is sold as part of any such transaction,
      then regardless of any purchase price allocations made by the purchaser in
      such
      sale to the Sold Working Interest and the Related Royalty, Company and Royalty
      Owner shall divide between themselves the aggregate purchase price received
      by
      both, net of costs of sale and any taxes (other than income taxes, which shall
      be the separate obligations of Company and Royalty Owner), with Company
      receiving A/C and Royalty Owner receiving B/C, where:

     

    (a) A
      equals
      the net present value attributable to the Sold Working Interest, as reasonably
      derived by Royalty Owner from the then most recent independent Engineering
      Report furnished under Section 5.2(e) (or, after the termination of this
      Agreement, from any other independent engineering reports available to Royalty
      Owner),

     

    
      
        
        

      

      
        -97-

        
          

        

      

      
        
        

      

    

     

    (b) B
      equals
      the net present value attributable to the Related Royalty, as reasonably derived
      by Royalty Owner from the then most recent independent engineering report
      furnished under Section 5.2(e) (or, after the termination of this Agreement,
      from any other independent engineering reports available to Royalty Owner),
      taking into account that the Related Royalty may not be reduced by certain
      costs
      and expenses burdening the Sold Working Interest, and

     

    (c) C
      equals
      the sum of A plus B.

     

    10.24 Participation
      in Future Financings. 

     

    (a) Until
      the
      last to occur of the Maturity Date or the date the Loans are repaid in full,
      in
      the event that either Company or Parent proposes to engage in any transaction
      or
      series of related transactions pursuant to which debt financing will be provided
      to Company (a "Company Financing Transaction") or to Parent (a "Parent Financing
      Transaction"), then J. Aron or one or more of its Affiliates shall be entitled
      to participate in such Company Financing Transaction or Parent Financing
      Transaction in accordance with the following provisions of this Section
      10.24.

     

    (b) At
      least
      30 days prior to the consummation of a Company Financing Transaction or a Parent
      Financing Transaction, Company or Parent, as applicable, shall provide written
      notice (the "Financing Notice") to J. Aron of the proposed Company or Parent
      Financing Transaction, which notice shall specify all material terms of such
      proposed Company or Parent Financing Transaction that are then available and
      shall include copies of any and all documents, whether in draft or final form,
      relating to such Company or Parent Financing Transaction that are then
      available. During the period between the giving of the Financing Notice and
      (i)
      the expiration of the 15-day period during which a Participation Notice (as
      defined in paragraph (c) below) may be given, if J. Aron or one or more of
      its
      Affiliates does not give a Participation Notice during such period, or (ii)
      the
      consummation of the Company or Parent Financing Transaction if J. Aron or one
      or
      more of its Affiliates does give a Participation Notice during such 15-day
      period, Company or Parent shall provide to J. Aron or its applicable Affiliate,
      as soon as practicable after it becomes available, any and all additional or
      changed information regarding the terms of the Company or Parent Financing
      Transaction and any additional or changed draft or final documentation relating
      to the Company or Parent Financing Transaction.

     

    (c) J.
      Aron
      or one or more of its Affiliates shall, to the extent J. Aron or such Affiliate
      determines that it may participate in such financing in accordance with
      applicable Laws and internal policies, have the right, exercisable by written
      notice (the "Participation Notice") to Company or Parent, as applicable, given
      within 15 days after the giving of the Financing Notice, to participate in
      the
      Company Financing Transaction or Parent Financing Transaction described in
      the
      Financing Notice on the same terms as the other Persons providing financing
      to
      Company or Parent (whether as a lender or purchaser of debt securities or
      obligations) in an amount up to 49% of the total amount of such Company
      Financing Transaction or Parent Financing Transaction. Such Participation Notice
      shall specify the portion of such financing, subject to the immediately
      preceding sentence, that J. Aron or such Affiliate desires to provide. In the
      event that none of J. Aron and its Affiliates gives a Participation Notice
      prior
      to the expiration of such 15-day period, no such Person shall have any right
      to
      participate in the Company Financing Transaction or Parent Financing Transaction
      described in the Financing Notice.

     

    
      
        
        

      

      
        -98-

        
          

        

      

      
        
        

      

    

     

    (d) Following
      the giving of a Participation Notice, Company or Parent, as applicable, shall
      promptly provide to J. Aron or its applicable Affiliate any and all information
      and documents reasonably requested by J. Aron or such Affiliate in connection
      with its participation in such Company or Parent Financing Transaction and
      its
      due diligence review of Company or Parent in connection therewith.

     

    (e) Notwithstanding
      the giving by J. Aron or any of its Affiliates of a Participation Notice, the
      obligation of J. Aron or any such Affiliate to participate in any Company or
      Parent Financing Transaction shall be subject to the satisfactory completion
      of
      due diligence by J. Aron or such Affiliate and to the execution and delivery
      of
      final documentation with respect to such Company or Parent Financing Transaction
      in such forms and containing such terms as are satisfactory to J. Aron or such
      Affiliate in its sole discretion.

     

    (f) Any
      failure of J. Aron or its Affiliates to give a Participation Notice with respect
      to or otherwise participate in any Company or Parent Financing Transaction
      shall
      not affect the right of J. Aron and its Affiliates to participate in any other
      Company or Parent Financing Transaction in accordance with this Section 10.24.
      Nothing in this Section 10.24 shall be deemed to obligate J. Aron or any of
      its
      Affiliates to provide or arrange any financing for Company or Parent or to
      participate in any Company or Parent Financing Transaction.

     

    [Remainder
      of page intentionally left blank]

     

    
      
        
        

      

      
        99

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed and delivered by their respective officers thereunto duly authorized
      as
      of the date first written above.

    
      	 	 	 
	 	
              COMPANY

            
	 	 
	 	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 	 
	 	
              By:
                Tekoil & Gas Corporation, its Managing

              Member

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Mark
              Western   
	 	
              

              Name:
                Mark Western

              Title:
                CEO and Chairman of the Board of Directors

            


    

    
      	 	 	 
	 	 	 
	 	
              GUARANTOR

            
	 	 
	 	
              TEKOIL
                & GAS CORPORATION

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Mark
              Western   
	 	
              

              Name:
                Mark Western

              Title:
                CEO and Chairman of the Board of Directors

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	 	 
	 	
              
                J.
                  ARON & COMPANY,

                
                  as
                    Lead Arranger, Syndication Agent,

                  Administrative
                    Agent and a Lender

                

              

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Colleen Foster   
	 	
              

              Authorized
                Signatory Colleen
                Foster, 

              Managing
                Director

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      APPENDIX
        A

      TO
        CREDIT AGREEMENT

       

      Commitments

       

      
        	
                Lender

              	 	
                Commitment

              	 	
                Pro

                Rata
                  Share

              	 
	
                J.
                  Aron & Company

              	 	
                $

              	
                30,000,000

              	 	 	
                100

              	
                %

              
	
                Total

              	 	
                $

              	
                30,000,000

              	 	 	
                100

              	
                %

              


      

      


      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      


      APPENDIX
        B

      TO
        CREDIT AGREEMENT

       

      Notice
        Addresses

       

      TEKOIL
        AND GAS GULF COAST, LLC

      25050
        I-45 North, Suite 525

      The
        Woodlands, Texas 77380

      Attention:
        Mark Western

      Telecopier:
        281-364-8007

      


      with
        a
        copy to:

      


      Baker
        & Hostetler LLP

      SunTrust
        Center

      200
        South
        Orange Avenue, Suite 2300 

      Orlando,
        Florida 32802

      Attention:
        Ken Wright

      Telecopier:
        407-841-0168

      


      J.
        ARON
& COMPANY,

      as
        Lead
        Arranger, Syndication Agent,

      Administrative
        Agent and a Lender

      


      J.
        Aron
& Company

      85
        Broad
        Street

      New
        York,
        New York 10004

      Attention:
        Steve Bunkin

      Telecopier:
        212-428-3675

      


      with
        a
        copy to:

      


      Goldman
        Sachs E&P Capital

      1000
        Louisiana, Suite 550

      Houston,
        Texas 77002

      Attention:
        John Howie

      Telecopier:
        713-658-2603

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

    

     

    SCHEDULE
      1.1

    


    SECURITY
      SCHEDULE

    


    
      	
              1.

            	
              Credit
                and Guaranty Agreement dated as of May 11, 2007 among Tekoil and
                Gas Gulf
                Coast, LLC, as borrower, Tekoil & Gas Corporation and the other
                guarantors party thereto from time to time, various lenders, and
                J. Aron
                & Company, as lead arranger, syndication agent, and administration
                agent.

            


    

    


    
      	
              2.

            	
              Pledge
                and Security Agreement dated as of May 11, 2007 among Tekoil and
                Gas Gulf
                Coast, LLC, each of its subsidiaries from time to time party thereto,
                and
                J. Aron & Company,
                as
                administrative agent for the Beneficiaries (as therein
                defined).

            


    

    


    
      	
              3.

            	
              Pledge
                Agreement dated as of May 11, 2007 between Tekoil & Gas Corporation
                and J. Aron & Company, as administrative agent for the Beneficiaries
                (as therein defined).

            


    

    


    
      	
              4.

            	
              Deed
                of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                and
                Financing Statement dated as of May 11, 2007 from Tekoil
                and Gas Gulf Coast, LLC to John Howie, as trustee, and J. Aron &
                Company, as agent.

            


    

    


    
      	
              5.

            	
              Deposit
                Account Default Control Agreement dated as of May 11, 2007 among
                Tekoil
                and Gas Gulf Coast, LLC, J. Aron & Company, as administrative agent
                for the Beneficiaries (as therein defined), and Amegy Bank National
                Association.

            


    

    


    
      	
              6.

            	
              Deposit
                Account Control Agreement dated as of May 11, 2007 among Tekoil and
                Gas
                Gulf Coast, LLC, J. Aron & Company, as administrative agent for the
                Beneficiaries (as therein defined), and Amegy Bank National
                Association.

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      1.2

    


    OPERATING
      EXPENSE BUDGET

    

      
        	
                Calculation

                Quarter

              	 	
                Operating

                Expense

              
	
                8/31/2007

              	 	
                $987,491

              
	
                11/30/2007

              	 	
                $756,988

              
	
                2/29/2008

              	 	
                $682,435

              
	
                5/31/2008

              	 	
                $687,930

              
	
                8/31/2008

              	 	
                $716,815

              
	
                11/30/2008

              	 	
                $726,541

              
	
                2/28/2009

              	 	
                $702,005

              
	
                5/31/2009

              	 	
                $674,878

              
	
                8/31/2009

              	 	
                $650,360

              
	
                11/30/2009

              	 	
                $638,130

              
	
                2/28/2010

              	 	
                $614,566

              
	
                5/31/2010

              	 	
                $588,523

              
	
                8/31/2010

              	 	
                $554,442

              
	
                11/30/2010

              	 	
                $525,212

              
	
                2/28/2011

              	 	
                $553,803

              
	
                5/31/2011

              	 	
                $551,122

              


      

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      2.2

    


    WIRE
      TRANSFER INSTRUCTIONS

    


    [To
      come]

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.7

    


    OTHER
      OBLIGATIONS AND RESTRICTIONS


    


    None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.8

    


    INITIAL
      ENGINEERING REPORT DISCLOSURES


    


    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.9

    


    LITIGATION


    


    Tekoil
      & Gas Corporation (“Parent”)

    


    None.


    


    Tekoil
      and Gas Gulf Coast, LLC (“Borrower”)

    


    None.


    


    The
      following is a schedule of pending litigation and disputes in which Masters
      Resources, LLC and/or Masters Oil & Gas, LLC (“Sellers”) is a named
      party:


    


    Jiva
      International, Inc. v. Ashi Energy Services LLC,
      Cause
      No 221687, pending in the 151st
      Judicial
      District Court of Harris County, Texas;

    


    Erskine
      Energy Partners II, L.P. v. Masters Resources L.L.C.,
      Case
      No. 2007-15466, pending in the 55th
      Judicial
      District Court of Harris County, Texas.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.11

    


    ERISA
      PLANS AND LIABILITIES


    


    None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.12

    


    ENVIRONMENTAL
      AND OTHER LAWS

    


    (a) Nothing
      to report.

    


    (b) Nothing
      to report.

    


    (c) Nothing
      to report.

    


    (d) Nothing
      to report.

    


    (e) Nothing
      to report.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.13

    


    NAMES
      AND PLACES OF BUSINESS


    


    (A) Current
      Address for all Credit Parties:
      See
      Appendix B of the Credit Agreement.


    


    (B) Former
      Names of Tekoil & Gas Corporation (“Parent”):

    


    Trailridge
      Holdings, Inc., a Delaware corporation

    


    Glow
      Bench Systems International, Inc., a Delaware corporation

    


    Pexcon,
      Inc., a Delaware corporation


    


    Former
      Names of Tekoil and Gas Gulf Coast, LLC (“Company”):

    


    Masters
      Acquisition Co., LLC, a Delaware limited liability company


    


    (C) Former
      Addresses of Parent:

    


    1580
      Sawgrass Corporate Parkway

    Suite
      130

    Sunrise,
      Florida 33323

    


    9101
      W
      Sample Road

    Suite
      606

    Coral
      Springs, FL  33065

    


    5036
      Dr.
      Phillips Boulevard

    Suite
      232

    Orlando,
      Florida 32819


    


    Former
      Addresses of Company:

    


    None.


    


    (D) Other
      Office or Place of Business of Parent:

    


    5036
      Dr.
      Phillips Boulevard

    Suite
      232

    Orlando,
      Florida 32819

    


    Other
      Office or Place of Business of Company:

     

    None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.14

    


    ORGANIZATIONAL
      AND CAPITAL STRUCTURE OF COMPANY


    


    Tekoil
      and Gas Gulf Coast, LLC (“Company”):

    


    
      	Ownership:	
              Tekoil
                & Gas Corporation, (3/4 equity interest); and Goldman, Sachs & Co.
                (1/4 equity interest).

            


    

     

    
      	Subsidiaries:	
              None.

            


    

    


    Agreements
      requiring issuance of Capital Stock: None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.18

    


    TAXES


    


    None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.22

    


    MATERIAL
      CONTRACTS


    


    Tekoil
      & Gas Corporation 

    


    Tekoil
      & Gas Corporation executed a Farmout Agreement with Newfoundland &
Labrador based Ptarmigan Resources Limited in their offshore exploration license
      EL-1069, just North of the Port au Port peninsula in western
      Newfoundland.

    


    The
      Agreement requires Tekoil, as the Farmee, to pay $250,000 to Ptarmigan, which
      is
      to be used as a drilling deposit to secure a one year extension granted by
      the
      Canada, Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB). The
      Agreement also requires Tekoil to drill an onshore-to-offshore exploration
      test-well in 2007, which will test an offshore structure, and as the validation
      well, will extend the lease until January 2011. Tekoil will earn a one-third
      interest (33.3%) in the License for the completion of Phase 1. Tekoil will
      then
      conduct an offshore 3D seismic program by late 2008, to map in more detail
      four
      offshore features already identified by Ptarmigan using 2D seismic data, which
      will earn Tekoil a further 26.7% of the License, for a total ownership of 60%.
      

    


    Tekoil
      and Ptarmigan then plan to drill an offshore exploration well and will share
      the
      drilling costs; 60% Tekoil and 40% Ptarmigan. Should Tekoil carry 100% of the
      cost of drilling, they will earn an additional 20% interest in the License,
      for
      a total of up to 80%, subject to government royalties. Tekoil estimates the
      total cost of Phases 1, 2 and 3 to be approximately $6,000,000 in 2007,
      $10,000,000 in 2008, and $25,000,000 in 2009. The License covers approximately
      140,000 hectares, or 346,500 acres of offshore surface area, in the shallow
      waters of the Gulf of St Lawrence, and strategically located within easy reach
      of the markets in eastern Canada and the northeast United States.

    


    Tekoil
      and Gas Gulf Coast, LLC

    


    
      	
              N
                Point Bolivar 

            	 
	 	 
	
              LC-103-0005

            	
              Exploration
                Agrmt & JOA dtd 2/1/06 btwn Masters Resources LLC & Erskine Energy
                LLC

            
	 	 
	
              LC-103-0014
                

            	
              Barge
                Dock & Surface Use Agrmt dtd eff 9/22/06 btwn Masters Resources LLC,
                St. Mary Land & Expl Co. & Erskine Energy Partners II LP LLC
                covering barge dock facility at Goat Island, ST 342 (Expires
                9/22/2011)

            
	 	 
	
              GC-103-0008

            	
              Production
                Handling Agrmt dtd October 11, 2006 btwn St. Mary Land & Expl Co &
                Masters Resources LLC (ST 342)

            
	 	 
	
              Dorado

            	 
	 	 
	
              LC-110-0001

            	
              E/A
                & JOA dtd 4/21/05 btwn Davis Petroleum Corp. & Masters Resources
                LLC covering ST 113/132/133/203

            
	 	 
	
              LC-110-0004

            	
              JOA
                dtd 6/1/06 btwn Davis Petroleum Corp & Masters Resources LLC covering
                ST 204 Unit

            


    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
              Fishers
                Reef

            	 
	 	 
	
              LC-101-0016

            	
              Exploration
                Agreement & JOA dtd 1/31/05 btwn Masters Resources LLC & Erskine
                Energy Partners LP & Erskine Energy LLC covering State Tract 2-3A Unit
                (M-96828 & M-96829)

            
	 	 
	
              LC-101-0023

            	
              Exploration
                Agreement dtd 2/23/05 btwn Masters Resources LLC & Erskine Energy
                Partners, LP & Erskine Energy LLC Covering State Tract
                6-7A

            
	 	 
	
              LC-101-0024

            	
              Exploration
                Agreement & O/A dtd 2/27/06 btwn Masters Resources LLC & Masters
                Oil & Gas LLC & Erskine Energy Partners LP, Erskine Energy LLC
                covering State Tract 5-8A

            
	 	
              Letter
                Agreement dtd 6/20/05 btwn Masters Resources LLC & Palace Exploration
                Co. et
                al

            
	 	
              Letter
                Agreement dtd 7/11/05 btwn Masters Resources LLC, Erskine Energy
                Partners
                et
                al &
                Palace Exploration Co.

            
	 	 
	
              GC-101-0003

            	
              Gas
                Transportation Contract dated 5/22/06 between Masters Resources LLC
                and
                Erskine Energy Partners II LP (ST 5-8A #1, #2, ST 6-7A #1
                wells)

            
	 	 
	
              GC-101-0004

            	
              Crude
                Oil Gathering Contract dated 5/22/06 between Masters Resources LLC
                and
                Erskine Energy Partners II LP (ST 5-8A #1, #2, ST 6-7A #1
                wells)

            
	 	 
	
              Red
                Fish Reef

            	 
	 	 
	
              LC-102-0002

            	
              Term
                Acreage Agreement dtd 4/19/01 btwn Masters Resources LLC &
                Alcorn-Texana Resources et
                al

            


    

     

    Subject
      to one or more Amendments to Lease of varying dates providing for the addition
      to the lease of rework and/or shut-in gas well clauses.

    


    Subject
      to Pooling Agreement dated 10/6/98 covering 320 acres of State Tract 2-3A -
      3A
      (State Tract 2-3A Unit #1) recorded under File No. 98 395 730, Chambers Co.,
      TX

    


    Subject
      to Pooling Agreement dated 9/15/98 covering 320 acres being 110 acres of State
      Tract 2-3A -3A, 75 acres of State Tract 46 and 135 acres of State Tract 47
      (State Tract 46 No. 1) recorded under File No. 00 453 686.

    


    Subject
      to Pooling Agreement dated 12/11/01 covering 320 acres being 76 acres out of
      State Tract 1-4A, 152 acres out of State Tract 5-8A, 80 acres out of State
      Tract
      2-3A, 90 acres out of State Tract 2-3A, 40 acres out of State Tract 6-7A (State
      Tract 1-4A Unit).

    


    Subject
      to Participation and Farmout Agreement dated 3/6/00 between Vintage Petroleum
      Inc. and Davis Petroleum Corp.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Subject
      to JOA dated 6/20/00 between Vintage Petroleum Inc., Palace Exploration Co.,
      Davis Petroleum Corp., Andex Resources LLC covering land within Pooled Unit
      for
      State Tract 1-4A No. 1 well (State Tract 1-4A No. 1 well).

    


    Subject
      to JOA dated 3/6/00 between Vintage Petroleum Inc., Palace Exploration Co.,
      Davis Petroleum Corp., and Andex Resources LLC covering lands within the Pooled
      Unit for State Tract 46 No. 1 (State Tract 46 No. 1 well).

    


    Subject
      to JOA dated 9/1/00 between Vintage Petroleum Inc., Davis Petroleum Corp.,
      Andex
      Resources LLC covering 250 acres within that portion of State Tract 9-12B,
      limited from the surface of the ground down to the stratigraphic equivalent
      of
      the total depth drilled in the Initial Test, except the Unitized formations
      established by Unit Agreement for the Fishers Reef Field Unit No. 1 but
      including any wellbore interest earned therein, as more specifically identified
      and defined in those certain Participation Farmout Agreements, as amended,
      between Vintage and each of the other parties (State Tract 9-12B #1
      well).

    


    Subject
      to call on oil and gas production in Assignment and Bill of Sale dated 5/1/91
      and recorded under File No. 91 146 152 from Exxon Corporation to Vintage
      Petroleum Inc. whereby Exxon Corporation reserves a preferential right to
      purchase oil and gas for a term of 21 years from assignment date.

    


    Possibly
      subject to two final judgments which are as follows: 1) Final Judgment dated
      7/24/74 in the case of State of Texas et al, Plaintiff vs. Exxon Corporation,
      Defendant in the District Court of Travis County, Texas, the 53rd
      Judicial
      District, Case No. 207789 and 2) Final Judgment dated 2/23/76 in the case of
      the
      State of Texas et al, Plaintiff vs. Exxon Corporation and Sun Oil Company
      (Delaware), Defendants, in the District Court of Travis County, Texas,
      53rd
      Judicial
      District, Case No. 238904.

    


    CEDAR
      POINT/HEMATITE FIELD

    


    Subject
      to the certain Operating Agreement dated 2/15/99 by and between Vintage
      Petroleum Inc. and MCNIC O & G Properties, Inc., Carrizo O&G Inc.,
      Century Offshore Management Corp. and Yuma Exploration and Production Company,
      Inc.

    


    Subject
      to that certain Participation Agreement by and between Yuma Exploration and
      Production Company, Inc., Vintage Petroleum Inc., Carrizo Oil & Gas Inc. and
      MCNIC

    Oil
&
      Gas Properties, Inc. dated 4/6/98.

    


    POINT
      BARROW FACILITY

    


    Subject
      to Saltwater Disposal Agreement dated 10/01/01 between Vintage Petroleum Inc.
      and Masters Resources LLC whereby Vintage will accept Masters’ water produced
      from Masters’ wells located in the Trinity Bay Field, Chambers Co., TX for
      disposal in its Point Barrow saltwater disposal facility located on the Point
      Barrow Facility so long as excess capacity in the Facility exists over and
      above
      that required by Vintage’s operations. The term of this Agreement has expired,
      but both parties continue to perform.

    


    Subject
      to Surface Lease and Easement dated 12/19/02 between Vintage Petroleum Inc.,
      Lessor, and Masters Resources LLC., Lessee wherein Lessor grants to Lessee
      a
      non-exclusive easement on and overt the Point Barrow Facility to Lessee for
      the
      purpose of operating and maintaining and constructing pipelines, facilities,
      power line or roads to and from the leased premises. Lessee owns equipment
      currently located on the leased premises, including 1) TB #1 - 1500 BBL -
      Bottled Gun Barrel; 2) TB #2 - 500 BBL - Settling Tank; 3)TB #3 - 1000 BBL
      -
      Sales Tank; 4) TB Heater; 5) Associated Flow lines. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Subject
      to all easements, rights of way, surface leases and all similar grants of
      surface use affecting this land whether recorded or unrecorded in addition
      to
      those specifically described in Deed and Bill of Sale dated 5/31/91 between
      Exxon Corporation, Grantor and Vintage Petroleum Inc., Grantee recorded under
      File No. 91 146 205, Chambers Co., TX.

    


    Subject
      to reservation of a 1/16th
      of
      8/8ths Non-participating Royalty Interest in favor of Estelle Ervine and J.
      E.
      Bishop, Individually and as Independent Executors of the Estate of J. E. Ervine,
      and their predecessors in interest.


    


    GAS
      CONTRACTS

    


    Crude
      Oil
      Purchase Contract Nos. 05-10247, 05-10248 and 06-55239 dated 08/08/05, 08/09/05
      and 12/29/06 by and between Masters Resources LLC, as Seller, and Pacific
      Marketing and Transportation LLC, as Buyer and as assigned to Plains Marketing
      LP due to merger on 11/15/06.

    


    Base
      Contract for Sale and Purchase of Natural Gas, as amended, dated 02/27/07 by
      and
      between Masters Resources, LLC, Seller and Petrocom Ventures Ltd., as
      Buyer.

    


    Gas
      Purchase Agreement, as amended, dated 03/01/07 by and between Masters Resources
      LLC, as Seller, and Kinder Morgan Tejas Pipeline L.P., as Buyer.

    


    Gas
      Gathering Agreement dated 07/01/98, as amended, between Masters Resources LLC
      and Gateway Offshore Pipeline Company for Galveston Bay State Tract 343
      Lease.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.24

    


    CERTAIN
      FEES


    


    None.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.26

    


    SALE
      OF PRODUCTION


    


    The
      following contracts have a two (2) year term from their effective date, after
      which the contracts may be terminated by giving one hundred eigthy (180) days
      notice.

    


    
      	
              GC-101-0003

            	
              Gas
                Transportation Contract dated effective 5/22/06 between Masters Resources
                LLC and Erskine Energy Partners II LP (ST 5-8A #1, #2, ST 6-7A #1
                wells).

            
	 	 
	
              GC-101-0004

            	
              Crude
                Oil Gathering Contract dated effective 5/22/06 between Masters Resources
                LLC and Erskine Energy Partners II LP (ST 5-8A #1, #2, ST 6-7A #1
                wells).

            
	 	 
	
              The
                following contract has a five (5) year term from their effective
                date,
                after which the contracts may be terminated by giving one hundred
                eigthy
                (180) days notice.

            
	 	 
	
              GC-103-0008

            	
              Production
                Handling Agreement dated effective October 11, 2006 between St. Mary
                Land
                & Exploration Co. & Masters Resources LLC (ST
                342).

            


    

     

    
    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      4.27

    


    PAYMENT
      FOR FUTURE PRODUCTION


    


    Potentially
      subject to the allegations made by Erskine Energy Partners II, L.P.
      in:

    


    Erskine
      Energy Partners II, L.P. v. Masters Resources L.L.C.,
      Case
      No. 2007-15466, pending in the 55th
      Judicial
      District Court of Harris County, Texas.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      6.1

    


    INSURANCE
      PREMIUM FINANCING INDEBTEDNESS


    


    (Attached)

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        


          



          

        

         

         

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

         

        EXHIBIT
          A TO

        CREDIT
          AND GUARANTY AGREEMENT

         

        FORM
          OF FUNDING NOTICE

         

        Reference
          is made to the Credit and Guaranty Agreement, dated as of May 11, 2007 (as
          it may be amended, supplemented or otherwise modified, the "Credit
          Agreement"),
          by
          and among
          TEKOIL AND GAS GULF COAST, LLC, a
          Delaware limited liability company ("Company"),
          TEKOIL
          & GAS CORPORATION,
          a
          Delaware corporation, and
          the
          other guarantors party thereto, J.
          ARON & COMPANY,
          individually and in its capacity as Administrative Agent for the benefit
          the
          lenders from time to time parties thereto (the "Lenders"),
          and
          such Lenders. Capitalized terms not otherwise defined in this Funding Notice
          shall have the meanings assigned to them in the Credit Agreement.

         

        Pursuant
          to Section 2.2 of the Credit Agreement, Company desires that Lenders make
          [Committed Loans][Uncommitted Loans] to Company in accordance with the
          applicable terms and conditions of the Credit Agreement on ________________
          (the
          "Credit
          Date")
          in the
          aggregate principal amount of [$_______________]. Company hereby directs
          and
          requests Administrative Agent to deduct from such Loans, and to pay on
          Company's
          behalf, any fees owed by Company pursuant to that certain fee letter dated
          as of
          May 11, 2007, from Administrative Agent to Company and any other fees and
          expenses amounts owing under the Credit Agreement in accordance with Section
          2.2.

         

        Company
          hereby certifies that:

         

        
          	 	
                  (a)

                	
                  after
                    making the Loans requested hereunder on the Credit Date, the
                    aggregate
                    amount of all Loans made pursuant to the Credit Agreement shall
                    not exceed
                    the Facility Amount then in effect;

                


        

         

        
          	 	
                  (b)

                	
                  the
                    representations and warranties contained in each of the Transaction
                    Documents are true, correct and complete in all material respects
                    on and
                    as of the date hereof and on and as of such Credit Date to the
                    same extent
                    as though made on and as of such dates, except to the extent
                    such
                    representations and warranties specifically relate to an earlier
                    date, in
                    which case such representations and warranties were true, correct
                    and
                    complete in all material respects on and as of such earlier
                    date;

                


        

         

        
          	 	
                  (c)

                	
                  no
                    event has occurred and is continuing as of the date hereof and
                    as of the
                    Credit Date or would result from the consummation of the borrowing
                    contemplated hereby that could reasonably be expected to constitute
                    an
                    Event of Default or a Default.

                


        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        This
          Funding Notice is delivered as of ________________, pursuant to Section
          3.2 of
          the Credit Agreement.

         

        
          	 	 	 
	 	
                  TEKOIL AND GAS GULF COAST, LLC, a
                    

                  Delaware
                    limited liability company

                
	 
 	 
 	 
 
	
                	By:  	 
	 	Name:	  
	 	Title:	 
	 	
                


        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        EXHIBIT
          B TO

        CREDIT
          AND GUARANTY AGREEMENT

         

        FORM
          OF NOTE

         

        $50,000,000

        

          
            	
                    May
                      11, 2007

                  	
                    New
                      York

                  


          

        

         

        FOR
          VALUE RECEIVED,
          Tekoil and Gas Gulf Coast, LLC, a
          Delaware limited liability company ("Company"),
          promises to pay to the order of J.
          Aron & Company
          or its
          registered assigns ("Payee"),
          on or
          before the Maturity Date (as defined in the Credit Agreement referred to
          below)  FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00) or, if less, the
          aggregate outstanding principal amount of the Loans (as defined in the
          Credit
          Agreement referred to below) made by the Payee to Company.

         

        Company
          also promises to pay interest on the unpaid principal amount hereof, from
          the
          date hereof until paid in full, at the rates and at the times which shall
          be
          determined in accordance with the provisions of that certain Credit and
          Guaranty
          Agreement, dated as of May 11, 2007 (as it may be amended, supplemented or
          otherwise modified, the "Credit
          Agreement";
          the
          terms used and not defined herein shall have the meanings given them in
          the
          Credit Agreement), by and among Company,
          TEKOIL
          & GAS CORPORATION,
          a
          Delaware corporation, and
          the
          other guarantors party thereto, J.
          ARON & COMPANY,
          individually and in its capacity as Administrative Agent for the benefit
          of the
          lenders from time to time parties thereto (the "Lenders"),
          and
          such Lenders.

         

        This
          Note
          is a "Note"
          under
          the Credit Agreement and is issued pursuant to and entitled to the benefits
          of
          the Credit Agreement, to which reference is hereby made for a more complete
          statement of the terms and conditions under which the Loans evidenced hereby
          are
          made and are to be repaid.

         

        All
          payments of principal and interest in respect of this Note shall be made
          in
          lawful money of the United States of America in same day funds at the Principal
          Office of Administrative Agent or at such other place as shall be designated
          in
          writing for such purpose in accordance with the terms of the Credit Agreement.
          Unless and until an Assignment Agreement effecting the assignment or transfer
          of
          the obligations evidenced hereby shall have been accepted by Administrative
          Agent and recorded in the Register, Company, each Agent and Lenders shall
          be
          entitled to deem and treat Payee as the owner and holder of this Note and
          the
          obligations evidenced hereby. Payee hereby agrees, by its acceptance hereof,
          that before disposing of this Note or any part hereof it will make a notation
          hereon of all principal payments previously made hereunder and of the date
          to
          which interest hereon has been paid; provided, the failure to make a notation
          of
          any payment made on this Note shall not limit or otherwise affect the
          obligations of Company hereunder with respect to payments of principal
          of or
          interest on this Note.

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        This
          Note
          is subject to mandatory prepayment and to prepayment at the option of Company,
          each as provided in the Credit Agreement.

         

        THIS
          NOTE
          AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER SHALL BE
          GOVERNED
          BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
          LAWS OF
          THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
          THEREOF.

         

        Upon
          the
          occurrence of an Event of Default, the unpaid balance of the principal
          amount of
          this Note, together with all accrued and unpaid interest thereon, may become,
          or
          may be declared to be, due and payable in the manner, upon the conditions
          and
          with the effect provided in the Credit Agreement.

         

        The
          terms
          of this Note are subject to amendment only in the manner provided in the
          Credit
          Agreement.

         

        No
          reference herein to the Credit Agreement and no provision of this Note
          or the
          Credit Agreement shall alter or impair the obligations of Company, which
          are
          absolute and unconditional, to pay the principal of and interest on this
          Note at
          the place, at the respective times, and in the currency herein
          prescribed.

         

        Company
          promises to pay all costs and expenses, including reasonable attorneys'
          fees,
          all as provided in the Credit Agreement, incurred in the collection and
          enforcement of this Note. Company and any endorsers of this Note hereby
          consent
          to renewals and extensions of time at or after the maturity hereof, without
          notice, and hereby waive diligence, presentment, protest, demand notice
          of every
          kind and, to the full extent permitted by law, the right to plead any statute
          of
          limitations as a defense to any demand hereunder.

         

        [The
          remainder of this page is intentionally left blank.]

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        IN
          WITNESS WHEREOF,
          Company
          has caused this Note to be duly executed and delivered by its officer thereunto
          duly authorized as of the date and at the place first written
          above.

        
          	 	 	 
	 	
                  TEKOIL
                    AND GAS GULF COAST, LLC,
                    a
                    

                  Delaware
                    limited liability company

                
	 
 	 
 	 
 
	
                	By:  	      
                  
	 	
                  Name: 
                    

                	 
	 	
                  Title:

                	 


        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        EXHIBIT
          C-1 TO

        CREDIT
          AND GUARANTY AGREEMENT

         

        FORM
          OF COMPLIANCE CERTIFICATE

         

        THE
          UNDERSIGNED, IN HIS CAPACITY AS THE [CHIEF FINANCIAL OFFICER] OF TEKOIL
          AND GAS
          GULF COAST, LLC ("COMPANY"),
          A DELAWARE LIMITED LIABILITY COMPANY, HEREBY CERTIFIES AS
          FOLLOWS:

         

        1. I
          am the
          [chief financial officer] of Company.

         

        2. I
          have
          reviewed the terms of that certain Credit and Guaranty Agreement, dated
          as of
          May 11, 2007 (as it may be amended, supplemented or otherwise modified,
          the
          "Credit
          Agreement";
          the
          terms defined therein and not otherwise defined herein being used herein
          as
          therein defined), by and among Company, TEKOIL
          & GAS CORPORATION,
          a
          Delaware corporation, and
          the
          other guarantors party thereto, J.
          ARON & COMPANY,
          individually and in its capacity as Administrative Agent for the benefit
          of the
          lenders from time to time parties thereto (the "Lenders"),
          and
          such Lenders, and each of the other Transaction Documents (as defined in
          the
          Credit Agreement), and I have made, or have caused to be made under my
          supervision, a review in reasonable detail of the transactions and condition
          of
          Company and its Subsidiaries during the accounting period covered by the
          attached financial statements.

         

        3. The
          examination described in paragraph 2 above did not disclose, and I have
          no
          knowledge of, the existence of any condition or event which constitutes
          an Event
          of Default or Default during or at the end of the accounting period covered
          by
          the attached financial statements or as of the date of this Certificate,
          except
          as set forth in a separate attachment, if any, to this Certificate, describing
          in detail, the nature of the condition or event, the period during which
          it has
          existed and the action which Company has taken, is taking, or proposes
          to take
          with respect to each such condition or event.

         

        4. The
          financial statements attached hereto are accurate and complete (subject
          to
          normal year-end adjustments) and satisfy the requirements of the Credit
          Agreement.

         

        The
          foregoing certifications, together with the computations set forth in the
          Annex
          A hereto and the financial statements delivered with this Certificate in
          support
          hereof, are made and delivered as of [mm/dd/yy]
          pursuant
          to Section 5.2(b) of the Credit Agreement.

        
          	 	 	 
	 	
                  TEKOIL
                    AND GAS GULF COAST, LLC

                
	 
 	 
 	 
 
	
                	By:  	 
	 	
                  Name: 
                    

                	  
	 	
                  
                    Title:

                  

                	 



        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        ANNEX
          A TO

        COMPLIANCE
          CERTIFICATE

         

        FOR
          THE FISCAL [QUARTER] [YEAR] ENDED [MM/DD/YY]

        
          AS
            TO ITEMS 1, 2, 3, AND 4

        

         

        FOR
          THE CALCULATION QUARTER ENDED [MM/DD/YY]

        
          AS
            TO ITEM 5

        

         

        
          	
                  1.

                	
                  Current
                    Ratio1 :
                    (i)
                    / (ii) =

                


        

        

          
            	
                    (i)

                  	
                    Consolidated
                      Current Assets:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (ii)

                  	
                    Consolidated
                      Current Liabilities:

                  	
                    $[___,___,___]

                  
	 	 	 
	 	
                    Actual
                      (i)
                      / (ii):

                  	
                    _.__:1.00

                  
	 	
                    Minimum
                      Required:

                  	
                    1.00:1.00

                  


          

        

         

        
          	
                  2.

                	
                  Debt
                    to EBITDA Ratio2 .
                    (iii)
                    / (iv) =

                


        

        

          
            	
                    (i)

                  	
                    Consolidated
                      Indebtedness:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (ii)
                      

                  	
                    Consolidated
                      balance sheet liabilities of Company for plugging, abandonment,
                      remediation, and similar liabilities, but excluding any Indebtedness
                      resulting from the application of FASB Statement 133 or
                      143:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (iii)

                  	
                    sum
                      of (i) and (ii):

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (iv)

                  	
                    EBITDA
                      = the sum of (A) + (B) + (C) + (D) - (E):

                  	
                    $[___,___,___]

                  


          

           

          
            	
                  	
                    (A)

                  	
                    Consolidated
                      Net Income:

                  	
                    $[___,___,___]

                  
	 	 	 	 
	
                  	
                    (B)

                  	
                    interest
                      expense deducted in determining such Consolidated Net Income:
                      

                  	
                    $[___,___,___]

                  


          

        

        
           

          
            
              

            

            1
              Current
              Ratio to be calculated at the end of each Fiscal Quarter, beginning
              with the
              Fiscal Quarter ending September 30, 2007. Consolidated Current Assets
              and
              Consolidated Current Liabilities shall be determined in accordance
              with GAAP,
              except that (a) Consolidated Current Assets and Consolidated Current
              Liabilities will be calculated without including any amounts resulting
              from the
              application of FASB Statement 133 or 143, and (b)  Consolidated Current
              Liabilities will exclude current maturities of long-term
              debt.

          

          
             

            2 
              Such
              ratio with respect to the Fiscal Quarters ending, September 30, 2007,
              and
              December 31, 2007 shall be calculated using "Annualized EBITDA".
              "Annualized EBITDA" means (a) with respect to the Fiscal Quarter ending
              June 30, 2007, EBITDA for such Fiscal Quarter multiplied by 4; (b) with
              respect to the Fiscal Quarter ending September 30, 2007, EBITDA for the
              period commencing on April 1, 2007 through September 30, 2007
              multiplied by 2; and (c) with respect to the Fiscal Quarter ending
              December 31, 2007 for the period commencing on April 1, 2007 through
              December 31, 2007 multiplied by 4/3.

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

          

        

        

          
            	
                    (C)

                  	
                    all
                      income or franchise taxes, if any, payable by Company or its
                      Subsidiaries
                      which were deducted in determining such Consolidated Net
                      Income:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (D)

                  	
                    all
                      depreciation, amortization and other non-cash charges which
                      were deducted
                      in determining such Consolidated Net Income:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (E)

                  	
                    all
                      non-cash items of income or gain which were Included in determining
                      such
                      Consolidated Net Income:

                  	
                    $[___,___,___]

                  
	 	 	 
	 	
                    Actual
                      (iii)
                      / (iv):

                  	
                    __.__:1.00

                  
	 	
                    Maximum
                      Ratio as of September 30, 2007:

                  	
                    3.00
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of December 31, 2007:

                  	
                    2.75
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of March 31, 2008:

                  	
                    2.50
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of June 30, 2008:

                  	
                    2.25
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of September 30, 2008:

                  	
                    2.00
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of December 31, 2008:

                  	
                    2.00
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of March 31, 2009:

                  	
                    2.00
                      to 1.00

                  
	 	
                    Maximum
                      Ratio as of June 30, 2009,

                  	 
	 	
                    each
                      Fiscal Quarter thereafter:

                  	
                    1.75
                      to 1.00

                  


          

        

         

        
          	
                  3.

                	
                  PDP
                    Collateral Coverage Ratio:
                    (i)
                    / (ii) =

                


        

        

          
            	
                    (i)

                  	
                    Modified
                      PDP NPV: ___%3 
                      of
                      the NPV of all Proved Developed Producing Reserves attributed
                      to the
                      Eligible Mortgaged Properties in the most recent Engineering
                      Report:

                  	
                    $[___,___,___]

                  
	 	 	 
	
                    (ii)

                  	
                    All
                      Indebtedness outstanding as of the measurement date, exclusive
                      of
                      Indebtedness resulting from the application of FASB Statement
                      133 or
                      143:

                  	
                    $[___,___,___]

                  
	 	 	 
	 	
                    Actual
                      (i)
                      / (ii):

                  	
                    __.__:1.00

                  
	 	
                    Minimum
                      Ratio as of September 30, 2007:

                  	
                    0.50
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of December 31, 2007:

                  	
                    0.60
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of March 31, 2008:

                  	
                    0.75
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of June 30, 2008:

                  	
                    0.90
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of September 30, 2008:

                  	
                    1.00
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of December 31, 2008:

                  	
                    1.10
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of March 31, 2009:

                  	
                    1.35
                      to 1.00

                  
	 	
                    Minimum
                      Ratio as of June 30, 2009,

                  	 
	 	
                    each
                      Fiscal Quarter thereafter:

                  	
                    1.50
                      to 1.00

                  


          

           

          
            
              

            

            3 Range
              from ninety percent (90%) to one hundred percent (100%), as selected
              by
              Administrative Agent in its sole discretion. 

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

          

           

          
            	
                    4.

                  	
                    
                       Proved
                        Collateral Coverage Ratio:
                        (i)
                        / (ii) =

                    

                  


          

           

          
            
              	
                      (i)

                    	
                      Modified
                        Proved NPV: (A) + (B) + (C):

                    	
                      $[___,___,___]

                    


            

             

            
              	
                    	
                      (A)

                    	
                      Modified
                        PDP NPV: ___%4 
                        of
                        the NPV of all Proved Developed Producing Reserves attributed
                        to the
                        Eligible Mortgaged Properties in the most recent Engineering
                        Report:

                    	
                      $[___,___,___]

                    
	 	 	 	 
	
                    	
                      (B)

                    	
                      Modified
                        PDNP NPV: __%5 
                        of
                        the NPV of all Proved Developed Nonproducing Reserves attributed
                        to the
                        Eligible Mortgaged Properties in the most recent Engineering
                        Report6 :

                    	
                      $[___,___,___]

                    
	 	 	 	 
	
                    	
                      (C)

                    	
                      Modified
                        PUD NPV: __%7 
                        of
                        the NPV of all Proved Undeveloped Reserves attributed to
                        the the Eligible
                        Mortgaged Properties in the most recent Engineering Report8:

                    	
                      $[___,___,___]

                    


            

             

            
              	
                      (ii)

                    	
                      All
                        Indebtedness outstanding as of the measurement date, exclusive
                        of
                        Indebtedness resulting from the application of FASB Statement
                        133 and
                        143:

                    	
                      $[___,___,___]

                    
	 	 	 
	 	
                      Actual
                        (i)
                        / (ii):

                    	
                      __.__:1.00

                    
	 	
                      Minimum
                        Ratio as of September 30, 2007:

                    	
                      1.50
                        to 1.00

                    
	 	
                      Minimum
                        Ratio as of December 31, 2007:

                    	
                      1.60
                        to 1.00

                    
	 	
                      Minimum
                        Ratio as of March 31, 2008:

                    	
                      1.75
                        to 1.00

                    
	 	
                      Minimum
                        Ratio as of June 30, 2008:

                    	
                      2.00
                        to 1.00

                    
	 	
                      Minimum
                        Ratio as of September 30, 2008:

                    	
                      2.25
                        to 1.00

                    
	 	
                      Minimum
                        Ratio as of December 31, 2008,

                    	 
	 	
                      each
                        Fiscal Quarter thereafter:

                    	
                      2.50
                        to 1.00

                    


            

            
              
                 

                
                  
                    

                  

                

                4 
                  Range
                  from ninety percent (90%) to one hundred percent (100%), as selected
                  by
                  Administrative Agent in its sole discretion.

              

              
                 

                5 
                  Range
                  from sixty percent (50%) to eighty percent (100%), as selected
                  by Administrative
                  Agent in its sole discretion.

              

              
                 

                6 In
                  calculating Modified PDNP NPV and Modified PUD NPV, only such reserves
                  are
                  included to the extent the percentage is attributed to the Eligible
                  Mortgaged
                  Properties, provided that (i) the capital expenditures necessary
                  to bring such
                  reserves into production (as contemplated in such Engineering Report)
                  have
                  actually been scheduled by Company to be made at or prior to the
                  time
                  contemplated in such Engineering Report, and (ii) Company reasonably
                  expects
                  that it will have funds available to make such capital expenditures.
                  

              

              
                 

                7 
                  Range
                  from fifty percent (20%) to seventy percent (100%), as selected
                  by
                  Administrative Agent in its sole discretion.

                 

                
                  
                    
                    

                  

                  
                    
                    

                    
                      

                    

                  

                  
                    
                    

                  

                

              

            

          

          

            
              	
                      5.

                    	
                      General
                        and Administrative Expense Limit (Permitted G&A Expense
                        Amount):
                        (i)
                        ≤ (ii)

                    


            

            

              
                	
                        (i)

                      	
                        Aggregate
                          general and administrative expenses for Calculation Quarter
                          = the sum of
                          (A) + (B) + (C):

                      	
                        $[___,___.__]

                      


              

               

              
                	
                      	
                        (A)

                      	
                        General
                          and administrative expenses for 1st
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]

                      
	 	 	 	 
	
                      	
                        (B)

                      	
                        General
                          and administrative expenses for 2nd
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]

                      
	 	 	 	 
	
                      	
                        (C)

                      	
                        General
                          and administrative expenses for 3rd
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]

                      


              

               

              
                	
                        (ii)

                      	
                        Permitted
                          G&A Expense Amount for such Calculation Quarter = the sum
                          of (A) + (B)
                          + (C):

                      	
                        $[___,___.__]

                      


              

               

              
                	
                      	
                        (A)

                      	
                        Permitted
                          G&A Expense Amount for 1st
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]8 

                      
	 	 	 	 
	
                      	
                        (B)

                      	
                        Permitted
                          G&A Expense Amount for 2nd
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]

                      
	 	 	 	 
	
                      	
                        (C)

                      	
                        Permitted
                          G&A Expense Amount for 3rd
                          Subject Month during said Calculation Quarter:

                      	
                        $[___,___.__]

                      


              

              
                
                   

                  
                    

                  

                

                8
                  Permitted G&A Expense Amount means the amount of $250,000 per calendar
                  month; provided that if a Default or an Event of Default exists
                  or existed in
                  such calendar month ("Subject Month"), then such amount shall be
                  reduced to
                  $125,000 for such Subject Month.

                 

                
                  
                    
                    

                  

                  
                    
                    

                    
                      

                    

                  

                  
                    
                    

                  

                  EXHIBIT
                    C-2 TO

                  CREDIT
                    AND GUARANTY AGREEMENT

                   

                  FORM
                    OF ENVIRONMENTAL COMPLIANCE CERTIFICATE

                   

                  Reference
                    is made to the Credit and Guaranty Agreement, dated as of May 11, 2007 (as
                    it may be amended, supplemented or otherwise modified, the "Credit
                    Agreement";
                    the
                    terms defined therein and not otherwise defined herein being
                    used herein as
                    therein defined), by and among TEKOIL
                    AND GAS GULF COAST, LLC,
                    a
                    Delaware limited liability company ("Company"),
                    TEKOIL
                    & GAS CORPORATION,
                    a
                    Delaware corporation ("Parent"), and
                    the
                    other guarantors party thereto, J.
                    ARON & COMPANY,
                    individually and in its capacity as Administrative Agent for
                    the benefit of the
                    lenders from time to time parties thereto (the "Lenders"),
                    and
                    such Lenders. The undersigned, in his capacity as the [insert
                    title] of the
                    Company, hereby certifies to Administrative Agent and Lenders
                    as
                    follows:

                   

                  1. For
                    the
                    Fiscal Year ending immediately prior to the date hereof, Company
                    and the
                    Subsidiaries of Company have complied and are complying with
                    Section 5.12 of the
                    Agreement [except as set forth in Schedule I attached hereto];

                   

                  2. To
                    the
                    best knowledge of the undersigned after due inquiry, Company
                    and the
                    Subsidiaries of Company are on the date hereof in compliance
                    in all material
                    respects with all applicable Environmental Laws, the noncompliance
                    with which
                    could reasonably be expected to cause a Material Adverse Effect;

                   

                  3. Company
                    and Subsidiaries of Company have taken (and continue to take)
                    steps to minimize
                    the generation of potentially harmful effluents;

                   

                  4. Company
                    and Subsidiaries of Company have established an ongoing program
                    of conducting an
                    internal audit of each operating facility to identify actual
                    or potential
                    environmental liabilities which could reasonably be expected
                    to cause a Material
                    Adverse Effect; and

                   

                  5. Company
                    and Subsidiaries of Company have established an ongoing program
                    of training its
                    employees in issues of environmental, health and safety compliance,
                    and Company
                    and Subsidiaries of Company presently have one or more individuals
                    in charge of
                    implementing such training program.

                   

                  The
                    officer signing this instrument hereby certifies that, to the
                    best of his
                    knowledge after due inquiry and consultation with the operating
                    officers of
                    Company, Parent, and Subsidiaries of Company, the above representations,
                    warranties, acknowledgments, and agreements of Company are true,
                    correct and
                    complete.

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  IN
                    WITNESS WHEREOF, this instrument is executed as of [____________],
                    20__.

                  
                    	 	 	 
	 	
                            TEKOIL
                              AND GAS GULF COAST, LLC

                          
	 
 	 
 	 
 
	
                          	By:  	        
                            
	 	
                            Name: 
                              

                          	   
	 	
                            Title:

                          	  



                  

                  


                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXHIBIT
                    D TO

                  CREDIT
                    AND GUARANTY AGREEMENT

                  


                  FORM
                    OF OPINION OF COUNSEL

                  


                  May
                    11,
                    2007

                  


                  To
                    each
                    of the Lenders party to the

                  Agreement
                    (as defined below)

                  


                  To
                    J.
                    Aron & Company

                  as
                    Agent
                    for the Lenders

                  85
                    Broad
                    Street

                  New
                    York,
                    New York 10004

                  Attention:
                    Steve Bunkin

                  Telecopier:
                    (212) 428-3675

                  


                  Ladies
                    and Gentlemen:

                  


                  We
                    have
                    acted as special Texas, Delaware and New York counsel to (1)
                    Tekoil and Gas Gulf
                    Coast, LLC, a Delaware limited liability company (the "Borrower"),
                    and (2)
                    Tekoil & Gas Corporation, a Delaware corporation (the “Guarantor") in
                    connection with (a) the Credit and Guaranty Agreement, dated
                    as of May 11, 2007
                    (the "Agreement"), by and among the
                    Borrower, the Guarantor and the other guarantors thereto, J.
                    Aron & Company,
                    individually and in its capacity as administrative agent (“Administrative
                    Agent”) for the benefit of the lenders party thereto (the "Lenders"),
                    and such
                    Lenders, and (b) each of the other Documents (as defined below)
                    to which either
                    the Borrower or Guarantor is a party. We have been requested
                    to render this
                    opinion pursuant to Section 3.1(l) of the Agreement. Capitalized
                    terms not
                    otherwise defined herein shall have the meanings assigned to
                    them in the
                    Agreement.

                  


                  In
                    connection with the rendering of this opinion, we have examined
                    photocopies of
                    the following documents each of which, unless otherwise noted,
                    is dated as of
                    May 11, 2007 (each a “Document”
and
                    collectively, “Documents”):

                  


                  1.1. the
                    Agreement among the Borrower, the Guarantor, the Administrative
                    Agent and the
                    Lenders;

                  


                  1.2. Deed
                    of
                    Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                    and Financing
                    Statement executed by the Borrower in favor of John Howie, as
                    Trustee, and the
                    Administrative Agent covering properties located in Texas and
                    other properties
                    related thereto (the "Mortgage");

                  


                  1.3. Pledge
                    and Security Agreement between the Borrower and the Administrative
                    Agent (the
                    "Security Agreement");

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  1.4. Pledge
                    Agreement executed between the Guarantor and the Administrative
                    Agent (the
                    "Pledge Agreement");

                  


                  1.5. Default
                    Deposit
                    Account Control Agreement among Amegy Bank, NA (“Amegy”) the Borrower and the
                    Administrative Agent;

                  


                  1.6. Blocked
                    Deposit Account Control Agreement among Amegy, the Borrower and
                    the
                    Administrative Agent (together with the Default Deposit
                    Account Control Agreement
                    described above, collectively, the "Account Control Agreements");

                  


                  1.7. Two
                    (2)
                    UCC-1 Financing Statements, one for each of the Borrower and
                    Guarantor as
                    debtors, and J. Aron & Company, as Administrative Agent, as secured party,
                    to be filed with the Delaware Secretary of State (collectively
                    the “Financing
                    Statements”); and

                   

                  1.8. Conveyance
                    of Overriding Royalty Interest between the Borrower and Goldman,
                    Sachs & Co
                    (the "ORRI Conveyance");

                  


                  1.9. Management
                    Services Agreement between the Borrower and Guarantor;

                  


                  1.10 Warrant
                    to Purchase Common Stock of Parent, issued by the Parent to Goldman,
                    Sachs &
Co.;

                  


                  1.11 Registration
                    Rights Agreement between the Guarantor and Goldman, Sachs & Co.;
                    and

                  


                  1.12 Amended
                    and Restated Operating Agreement of Borrower between the Guarantor
                    and Goldman,
                    Sachs & Co.

                   

                  We
                    also
                    have examined the certificates and documents from or relating
                    to the Borrower
                    and the Guarantor described on Exhibit A attached hereto and
                    made part hereof
                    (the certificates and documents described on Exhibit A being
                    herein collectively
                    referred to as the “Organizational
                    Documents”).

                  


                  Based
                    on
                    our review of the Documents and the Organizational Documents
                    and Applicable Laws
                    (as defined herein), and subject to the assumptions, limitations,
                    exclusions and
                    qualifications herein set forth, we are of the opinion that:

                  


                  A. Each
                    of
                    the Documents to which Borrower is a party constitutes the legal,
                    valid and
                    binding obligation of the Borrower enforceable against the Borrower
                    in
                    accordance with each of its terms.

                  


                  B. Each
                    of
                    the Documents to which the Guarantor is a party, constitutes
                    the legal, valid
                    and binding obligation of the Guarantor enforceable against the
                    Guarantor in
                    accordance with each of its terms.

                   

                  
                    
                      
                      

                    

                    
                      2

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  C. Under
                    the
                    laws of the State of Texas, the provisions of the Mortgage are
                    effective to
                    create in favor of the Administrative Agent for the benefit of
                    the secured
                    parties named in each thereof, a valid lien on and security interest
                    in all of
                    Borrower’s right, title and interest in and to the Deed of Trust Mortgaged
                    Properties and Other Mortgaged Properties (as defined in the
                    Mortgage and
                    collectively the “Mortgaged Properties”).

                  


                  D. The
                    provisions of each of the Pledge Agreement and the Security Agreement
                    are
                    effective to create in favor of the Administrative Agent for
                    the benefit of the
                    secured parties named in each thereof, a lien on and valid security
                    interest in
                    all of each of the Borrower and Guarantor’s respective right, title and interest
                    in and to the collateral described therein, in which collateral
                    a lien and
                    security interest can be created.

                  


                  E. The
                    Account Control Agreements are effective to perfect a security
                    interest of the
                    Administrative Agent in the accounts described therein by “control” (within the
                    meaning of Section 9-104 of the Uniform Commercial Code as adopted
                    in the State
                    of New York, the “New York Code”).

                  


                  F. The
                    Borrower is duly organized, validly existing, and in good standing
                    under the
                    laws of the State of Delaware. The Borrower has all requisite
                    power and
                    authority to execute and deliver to the Administrative Agent,
                    and to perform its
                    obligations under each of the Documents to which it is a party.
                    The Borrower is
                    in good standing as a foreign limited liability company under
                    the laws of the
                    State of Texas. 

                  


                  G. The
                    Guarantor is duly organized, validly existing, and in good standing
                    under the
                    laws of the State of Delaware. The Guarantor has all requisite
                    power and
                    authority to execute and deliver to the Administrative Agent,
                    and to perform its
                    obligations under, each of the Documents to which it is a party.
                    The Borrower is
                    in good standing as a foreign corporation under the laws of the
                    State of Texas.


                  


                  H. All
                    action on the part of Borrower necessary for the due execution
                    and delivery of,
                    and performance of its obligations under the Documents to which
                    it is a party,
                    and the granting of liens thereby, has been taken. Each Document
                    to which the
                    Borrower is a party has been duly executed and delivered by the
                    Borrower.

                  


                  I. All
                    action on the part of Guarantor necessary for the due execution
                    and delivery of,
                    and performance by it of its obligations under the Documents
                    to which it is a
                    party, and the granting of any liens thereby, has been taken.
                    Each Document to
                    which the Guarantor is a party has been duly executed and delivered
                    by the
                    Guarantor.

                  


                  J. The
                    Borrower’s execution and delivery of, and performance of its obligations
                    under
                    the Documents to which it is a party does not require under Applicable
                    Law (as
                    defined below) the Borrower to obtain the consent or approval
                    of any
                    Governmental Authority of the States of Texas, Delaware, New
                    York or the United
                    States of America. To our knowledge, except as disclosed to the
                    Administrative
                    Agent in the Documents or otherwise (the “Disclosure Schedule”), Borrower’s
                    performance of its obligations of the Documents to which it is
                    a party does not
                    require the consent or approval of any other Person under any
                    contract or
                    agreement to which Borrower is bound. As used in this opinion,
“Applicable
                    Law”
means
                    the laws, rules and regulations of the States of Texas, Delaware,
                    New York, and
                    of the United States of America which, in our experience, exercising
                    customary
                    professional diligence, are normally applicable to transactions
                    of the type
                    provided for in the Documents.

                   

                  
                    
                      
                      

                    

                    
                      3

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  K. Guarantor’s
                    execution and delivery of, and performance of its obligations
                    under the
                    Documents to which it is a party does not require under Applicable
                    Law Guarantor
                    to obtain the consent or approval of any Governmental Authority
                    of the States of
                    Texas, Delaware and New York, or the United States of America.
                    To our knowledge,
                    except as set out in the Disclosure Schedule, Guarantor’s performance of its
                    obligations under the Documents to which it is a party does not
                    require the
                    consent or approval of any other Person under any contract or
                    agreement to which
                    Guarantor is bound.

                  


                  L. Neither
                    the execution and delivery of the Documents to which Borrower
                    is party nor the
                    consummation of the transactions contemplated therein nor the
                    compliance with
                    the provisions thereof by Borrower will conflict with or result
                    in a breach of,
                    or cause default under, the Organizational Documents of Borrower.

                  


                  M. Neither
                    the execution and delivery of the Documents to which Guarantor
                    is a party nor
                    the consummation of the transactions contemplated therein nor
                    the compliance
                    with the provisions thereof by Guarantor will conflict with or
                    result in a
                    breach of, or cause default under, the Organizational Documents
                    of
                    Guarantor.

                  


                  N. Neither
                    the execution and delivery by Borrower of the Documents to which
                    it is a party
                    nor the consummation by Borrower of the transactions contemplated
                    therein nor
                    the compliance by Borrower with the provisions thereof, will
                    result in breach of
                    or constitute a default under any of the terms, conditions or
                    provisions of (i)
                    any Applicable Law or, to our knowledge, except as set out in
                    the Disclosure
                    Schedule, any order, writ, injunction or decree of Texas, Delaware,
                    New York or
                    United States court or Governmental Authority to which Borrower
                    is subject, or
                    (ii) to our knowledge, except as set out in the Disclosure Schedule,
                    any
                    indenture, mortgage, deed of trust, promissory note, loan agreement
                    or note
                    agreement, or any other agreement or undertaking under any contract
                    or agreement
                    to which Borrower is a party or by which any of its properties
                    may be bound or
                    subject.

                  


                  O. Neither
                    the execution and delivery by Guarantor of the Documents to which
                    it is a party,
                    nor the consummation by Guarantor of the transactions contemplated
                    therein nor
                    the compliance by Guarantor with the provisions thereof will
                    result in breach of
                    or constitute a default under any of the terms, conditions or
                    provisions of (i)
                    any Applicable Law or, to our knowledge, except as set out in
                    the Disclosure
                    Schedule, any order, writ, injunction or decree of any Texas,
                    Delaware, New York
                    or United States court or Governmental Authority to which Guarantor
                    is subject,
                    or (ii) to our knowledge, except as set out in the Disclosure
                    Schedule, any
                    indenture, mortgage, deed of trust, promissory note, loan agreement
                    or note
                    agreement, or any other agreement or undertaking under any contract
                    or agreement
                    to which Guarantor is a party or by which any of its properties
                    may be bound or
                    subject.

                   

                  
                    
                      
                      

                    

                    
                      4

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  P. To
                    our
                    knowledge, other than as set forth in the Disclosure Schedule,
                    there are no
                    actions, suits or proceedings pending or threatened by or against
                    Borrower by or
                    before any Governmental Authority of the States of Texas, Delaware
                    or New York,
                    or the United States of America which, if adversely determined,
                    would have a
                    material adverse effect on the financial condition or business
                    of
                    Borrower.

                  


                  Q. To
                    our
                    knowledge, other than as set forth in the Disclosure Schedule,
                    there are no
                    actions, suits or proceedings pending or threatened by or against
                    Guarantor by
                    or before any Governmental Authority of the States of Texas,
                    Delaware or New
                    York or the United States of America which, if adversely determined,
                    would have
                    a material adverse effect on the financial condition or business
                    of
                    Guarantor.

                  


                  R. The
                    Mortgage is in appropriate form for recording with the Office
                    of the County
                    Clerk in Chambers County, Texas and Galveston County, Texas,
                    and complies
                    with the laws of the State of Texas, including all applicable
                    recording, filing
                    and registration laws and regulations, and are adequate and legally
                    sufficient
                    for the purposes intended to be accomplished thereby. The descriptions
                    of those
                    portions of the Mortgaged Property (as defined in the Mortgage)
                    located within
                    the State of Texas which are described in the Mortgage, including
                    without
                    limitation, those shown on Exhibit “A” attached to the Mortgage are legally
                    sufficient descriptions for the purpose of creating and maintaining
                    the Liens
                    purported to be created by the Mortgage and for the purposes
                    of all applicable
                    recording, filing and registration laws in the State of Texas.
                    When the
                    Mortgage is properly recorded in the records of Chambers County,
                    Texas and
                    Galveston County, Texas, the Mortgage, under Texas law, creates
                    a perfected lien
                    and security interest covering the Mortgaged Properties and the
                    collateral
                    described in the Mortgage. Other than recording charges or filing
                    fees, no taxes
                    or other charges, including without limitation, intangible or
                    documentary stamp
                    taxes, mortgage or recording taxes, transfer taxes or similar
                    charges are
                    payable to the State of Texas or to any jurisdiction therein
                    solely on account
                    of the execution or delivery of the Mortgage or other Documents,
                    the creation of
                    the indebtedness evidenced or secured thereby, the creation of
                    the liens and
                    security interest thereunder, or the filing, recording or registration
                    of the
                    Mortgage in the office of the clerk of court in Chambers County,
                    Texas and
                    Galveston County, Texas.

                  


                  S. After
                    the
                    recordings and filings specified in paragraph R above have occurred,
                    the Liens
                    created by the Mortgage will be perfected. After the recordings
                    and filings
                    specified in paragraph R above have occurred, no instruments
                    need be recorded,
                    registered or filed or re-recorded, re-registered or re-filed
                    in any public
                    office in the State of Texas in connection with the execution
                    and delivery of
                    the Mortgage in order to maintain the perfection and priority
                    of the Liens
                    created thereby after the date of recordation, and continuation
                    statements as
                    required by the Uniform Commercial Code as in effect in the State
                    of
                    Texas.

                  


                  T. The
                    Financing Statements are in appropriate form for filing with
                    the Office of the
                    Secretary of State of the State of Texas under the applicable
                    provisions of the
                    Uniform Commercial Code as adopted in the State of Texas (the
“Texas Code”).
                    When the Financing Statements are properly filed with the Secretary
                    of State of
                    the State of Texas, the Financing Statements will, under Texas
                    law, create a
                    perfected lien and security interest covering the collateral
                    described in the
                    Security Agreement, the Mortgage and the Pledge Agreement for
                    which a security
                    interest may be perfected by the filing of a financing statement
                    with such
                    office.

                   

                  
                    
                      
                      

                    

                    
                      5

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  U. The
                    ORRI
                    Conveyance constitutes the legal, valid and binding conveyance
                    of the Borrower
                    to the extent that it relates to properties located in the State
                    of Texas. The
                    ORRI (as defined in the ORRI Conveyance) constitutes a real property
                    interest
                    under the laws of the state of Texas of the Subject Interests
                    (as defined in the
                    ORRI Conveyance).

                  


                  V. The
                    membership interests of the Borrower issued to Goldman, Sachs
& Co have been
                    duly authorized and validly issued. The shares of the Guarantor
                    issuable on
                    exercise of the Warrant have been duly authorized and reserved
                    for issuance and,
                    upon the issuance of such shares pursuant to the terms of the
                    Warrant, will be
                    validly issued, fully paid and non-assessable. The issuance of
                    such shares will
                    not be subject to preemptive or similar rights of any person.

                  


                  W. Neither
                    the Borrower nor the Guarantor is an "investment company" or
                    a company
                    "controlled by" an "investment company" within the meaning of
                    the Investment
                    Company Act of 1940, as amended.

                  


                  We
                    express no opinion as to any of the following:

                  


                  2.1. Any:
                    (a)
                    laws other than the Applicable Laws, or (b) documents other than
                    the Documents,
                    even if such other documents are referenced or described in the
                    Documents.

                  


                  2.2. Whether
                    a
                    court would limit the exercise or enforcement of rights or remedies
                    under the
                    Documents (a) in the event of any default by any Person under
                    the Documents or
                    any related agreement or instrument if it is determined that
                    such default is not
                    material or if such exercise or enforcement is not reasonably
                    necessary for a
                    creditor’s protection, or (b) if the exercise or enforcement thereof under
                    the
                    circumstances would violate an implied covenant of good faith
                    and fair
                    dealing.

                   

                  2.3. With
                    respect to (a) the power or authority of the Lenders to enter
                    into or perform
                    their obligations pursuant to the Documents or of any party (other
                    than the
                    Borrower or Guarantor) to otherwise act in accordance with the
                    terms of any
                    agreement to which it is a party; (b) whether multiple remedies
                    may be pursued
                    concurrently; (c) compliance by the Lenders with any federal
                    or state banking
                    law, rule, regulation or restriction; (d) any provision in the
                    Documents with
                    respect to the relationship between any Lenders or among Lenders
inter
                    se;
                    (e) the
                    enforceability of any guaranty or any obligation in respect of
                    any letter of
                    credit if the underlying obligations or the documentation evidencing
                    or
                    governing such obligations are invalid, unenforceable or otherwise
                    have been
                    released or discharged; (f) the enforceability of provisions
                    that purport to
                    establish evidentiary standards; (g) the enforceability of provisions
                    resulting
                    in a waiver of notices, a waiver of the application of certain
                    laws, a waiver of
                    certain rights (including without limitation, rights of set-off
                    and counterclaim
                    and rights to trial by jury), defenses (including without limitation,
                    suretyship
                    or similar defenses) or exemptions, the reinstatement of certain
                    obligations or
                    waivers of applicable statutes of limitations, to the extent
                    each may be limited
                    or rendered unenforceable by legal and equitable principles or
                    by public policy
                    considerations; (h) the adequacy or sufficiency of consideration
                    of any party
                    delivering a guaranty; and (i) the enforceability of provisions
                    that deny the
                    effectiveness of waivers, amendments and modifications that are
                    not in
                    writing.

                   

                  
                    
                      
                      

                    

                    
                      6

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  2.4. With
                    respect to: (a) the right, title or interest of Borrower in or
                    to any property,
                    real or personal, or the freedom from any security interest,
                    lien, charge or
                    encumbrance thereon; (b) except as specifically set forth in
                    the opinions, the
                    creation, existence, attachment, enforceability or perfection
                    of any lien on or
                    security interest in any real or personal property; (c) the priority
                    of any lien
                    on or security interest in any real or personal property or the
                    accuracy or
                    sufficiency of the description thereof in any of the Documents
                    or in any
                    Financing Statement; (d) whether any financing statement or other
                    instrument or
                    document has been duly filed or recorded; (e) the enforceability
                    or perfection
                    of any lien or security interest purported to be created (other
                    than in after
                    acquired property) or revived after the date hereof; or (f) the
                    enforceability
                    of any provisions of the Documents that purports to (1) prospectively
                    release a
                    party with respect to a liability or (2) require the parties
                    to negotiate in
                    good faith or to mutually agree on any terms and conditions.

                  


                  2.5. The
                    effect of any provision of the Documents that is intended to
                    establish any
                    standard other than the standard set forth in Applicable Law
                    as the measure of
                    the performance of any party thereto of such party’s obligations of good faith,
                    diligence, reasonableness or care or of any fulfillment of the
                    duties imposed on
                    any secured party with respect to the maintenance of collateral,
                    accounting for
                    surplus proceeds of collateral or accepting collateral in discharge
                    of
                    liabilities.

                   

                  2.6. The
                    effect of Section 9-315 of the Texas Code (or the corresponding
                    provisions of
                    any Applicable Law) with respect to any proceeds of the collateral
                    that are not
                    identifiable or to the extent that a duly filed Financing Statement
                    does not
                    cover the related collateral.

                   

                  2.7. The
                    enforceability of any provision of the Documents imposing penalties,
                    forfeitures, increased interest rates and/or late payment charges
                    upon
                    delinquency in payment or the occurrence of a default, or any
                    provisions which
                    may grant Lender the right to obtain attorneys’ fees and other costs incurred
                    which a court determines to be unreasonable or excessive.

                  


                  2.8. The
                    enforceability of any provision in the Documents that purports
                    to exonerate any
                    Lender from, or provides any Lender with indemnification with
                    respect to, losses
                    or damages resulting from the negligence or malfeasance of any
                    Lender.

                  


                  2.9. Any
                    right
                    of the Lenders under the Documents to take possession of the
                    collateral prior to
                    having a receiver appointed or foreclosure in accordance with
                    applicable
                    law.

                  


                  2.10. The
                    ability of the Lenders to foreclose the lien of the Mortgage
                    by executory
                    process.

                  


                  2.11. Except
                    as
                    specifically set forth in our opinions, whether or to what extent
                    jurisdictions
                    other than Texas or Delaware would respect, apply or enforce
                    the laws of the
                    State of New York or a judgment obtained from a New York state
                    or federal court
                    applying New York law.

                   

                  
                    
                      
                      

                    

                    
                      7

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  In
                    addition to the foregoing exclusions, our opinion is subject
                    to the following
                    qualifications and limitations:

                   

                  3.1. In
                    basing
                    portions of this opinion on “our knowledge”, the words “our knowledge” or words
                    of similar effect, mean that in the course of preparing this
                    opinion, no facts
                    have come to the actual knowledge of the attorneys within our
                    firm who have been
                    directly involved in reviewing the Documents and preparing this
                    opinion that our
                    opinion is not accurate.

                   

                  3.2. Enforceability
                    of any provision in the Documents may be limited by: (a) bankruptcy,
                    insolvency,
                    reorganization, fraudulent transfer, moratorium or similar federal
                    or state laws
                    or judicial decisions of general application relating to the
                    rights of
                    creditors; (b) general principles of equity, including, without
                    limitation, the
                    defenses of unconscionability, ambiguity and economic duress,
                    whether asserted
                    in equitable or in legal actions; (c) the discretion of the court
                    before which
                    any proceeding for the enforcement of any Document may be brought,
                    including
                    determinations by any court or other tribunal in which any proceeding
                    may be
                    brought (i) that any Lender failed to act reasonably, in good
                    faith or in
                    compliance with applicable law and (ii) that, to the extent that
                    remedies are
                    sought, a breach is not material or does not adversely affect
                    the Lenders; and
                    (d) general principles of interpretation and rules of construction
                    of contracts.


                   

                  3.3. Certain
                    of the remedial provisions of the Documents may be limited or
                    rendered
                    unenforceable by laws governing them or by public policy considerations.
                    For
                    example: (a) certain indemnification provisions and provisions
                    for the recovery
                    of expenses in connection with the enforcement of remedies, including,
                    among
                    others, legal fees and expenses, may not be enforceable; (b)
                    provisions
                    resulting in a waiver of notices, a waiver of the application
                    of certain laws, a
                    waiver of certain rights (including, without limitation, rights
                    of set-off and
                    counterclaim and rights to trial by jury), defenses or exemptions,
                    the
                    reinstatement of certain obligations or waivers of applicable
                    statutes of
                    limitations may in each case be limited by legal and equitable
                    principles or by
                    public policy considerations; (c) the availability of specific
                    performance,
                    injunctive relief or other equitable remedies and the appointment
                    of a receiver
                    are subject to the discretion of the court before which any proceeding
                    therefor
                    may be brought; (d) provisions permitting any party to act as
                    another party’s
                    attorney-in-fact or purporting to create or permit a right of
                    set off with
                    respect to obligations that may be contingent or not yet matured,
                    or with
                    respect to obligations not owed to or by the party exercising
                    set-off rights,
                    may not be enforceable; (e) provisions requiring that proceeds
                    of collateral be
                    used to pay obligations in excess of sums properly secured by
                    the Documents may
                    be unenforceable; (f) provisions requiring a party to vote, to
                    refrain from
                    voting or to otherwise act or refrain from acting, in cases where
                    such voting or
                    failure to vote, action or failure to act, may violate that party’s fiduciary
                    duty or applicable law or public policy, may not be enforceable;
                    (g) provisions
                    requiring the payment of indeterminate amounts or amounts determined
                    solely in
                    any Lender’s discretion may be unenforceable; and (h) every aspect of the
                    disposition of any collateral subject to the Documents including,
                    without
                    limitation, the method, manner, time, place and terms, must be
                    commercially
                    reasonable as provided in Section 9-610 of the Texas Code. However,
                    the inclusion of such provisions does not affect the validity
                    of the Documents
                    as against the Borrower and the Guarantor as a whole and the
                    Mortgage contains
                    adequate provision for the practical realization of the principal
                    benefits
                    provided by the Documents, in each case subject to the other
                    qualifications
                    contained in this letter.

                   

                  
                    
                      
                      

                    

                    
                      8

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  3.4. We
                    note
                    that certain of the Collateral consists or may consist of assets
                    or property as
                    to which a security interest may not be created or otherwise
                    does not attach
                    under Article 9 of the Texas Code. Accordingly, we express no
                    opinion with
                    respect to the creation, attachment, enforceability or perfection
                    of any lien on
                    or security interest in any such assets or property, including
                    but not limited
                    to commercial tort claims that currently exist or that arise
                    after the date
                    hereof.

                   

                  3.5. Our
                    opinion is subject to the qualification that a court sitting
                    in the State of New
                    York or New York City may look to the law of the issuer’s jurisdiction of
                    incorporation to determine the validity and enforceability of
                    any provisions of
                    the Documents granting proxy rights or other rights to vote equity
                    securities of
                    Borrower or any other Person that is incorporated in a jurisdiction
                    other than
                    New York.

                  


                  3.6. Any
                    security interest created under the Documents with respect to
                    any property will
                    not be effective until the applicable Borrower has acquired rights
                    therein, and
                    with respect to personal property that is acquired by a Borrower
                    after the date
                    hereof, Section 552 of the United States Bankruptcy Code will
                    limit the extent
                    to which property acquired by a debtor after the commencement
                    of a case under
                    the United States Bankruptcy Code may be subject to a security
                    interest arising
                    from a security agreement entered into by the debtor before the
                    commencement of
                    such case. In addition, under Section 364(d) of the United States
                    Bankruptcy
                    Code, a bankruptcy court may authorize a debtor in a bankruptcy
                    proceeding to
                    obtain post-petition credit secured by liens on property of the
                    debtor
                    including, in certain circumstances, liens that are senior or
                    equal to
                    pre-petition liens.

                   

                  3.7. The
                    perfection of any security interest arising from the filing of
                    any Financing
                    Statement will expire or be ineffective: (a) as to any property
                    acquired by the
                    debtor named therein, more than four months after it changes
                    its name, identity
                    or structure so as to make such Financing Statement seriously
                    misleading under
                    Section 9-506 of Uniform Commercial Code in effect as of the
                    date hereof in the
                    jurisdiction in which such Financing Statement has been filed
                    (the “UCC”),
                    unless new appropriate financing statements indicating the new
                    name, identity or
                    structure of such debtor are properly filed before the expiration
                    of such
                    four-month period; (b) as to any property with respect to which
                    a continuation
                    statement is not filed within the period of six months prior
                    to the expiration
                    of five years from the date of the original filing of such Financing
                    Statement;
                    (c) in accordance with the provisions of Section 9-315 of the
                    UCC relating to
                    proceeds of collateral subject to a perfected security interest;
                    (d) as to any
                    items of property consisting of goods acquired from a debtor,
                    to the extent
                    provided in Sections 9-320 and 9-323(D) and (E) of the UCC as
                    to the rights of
                    certain buyers of goods; (e) as to any Collateral subject to
                    the rights of a
                    purchase money security interest or any Collateral subject to
                    the rights of a
                    buyer in the ordinary course of business as defined in the UCC;
                    or (f) four
                    months after the debtor identified therein changes its location
                    to a
                    jurisdiction other than the jurisdiction in which it is located
                    on the date
                    hereof, unless new appropriate financing statements are properly
                    filed in the
                    appropriate jurisdiction before the expiration of such four-month
                    period.

                   

                  3.8. We
                    note
                    that the selection of U.S. federal courts and state courts sitting
                    in the State
                    of New York or New York City, as the case may be, as the venue
                    for actions or
                    proceedings relating to the Documents is subject to the power
                    of such courts to
                    transfer actions or proceedings pursuant to 28 U.S.C. Section
                    1404(a) or dismiss
                    such actions or proceedings pursuant to the doctrine of forum
                    non conveniens.

                   

                  
                    
                      
                      

                    

                    
                      9

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  In
                    rendering our opinions we have assumed without any independent
                    investigation
                    each of the following:

                   

                  4.1. The
                    Loan
                    is made to the Borrower by the Lenders in accordance with the
                    Agreement.

                  


                  4.2. All
                    parties to the Documents, other than Borrower and Guarantor,
                    are duly authorized
                    to execute and deliver the Documents and the Documents have been
                    executed and
                    delivered by such other parties.

                   

                  4.3. Each
                    of
                    the parties to the Documents, other than the Borrower and Guarantor,
                    have duly
                    and validly executed and delivered each Document to which such
                    party is a
                    signatory. The obligations of each of the parties to the Documents,
                    other than
                    Borrower and Guarantor, set forth in the Documents will constitute
                    its legal,
                    valid and binding obligations, enforceable in accordance with
                    their respective
                    terms.

                   

                  4.4. Each
                    natural person executing the Documents is legally competent to
                    do so.


                   

                  4.5. The
                    absence of fraud, misrepresentation, duress and mistake. 

                   

                  4.6. All
                    signatures on the Documents, other than the signatures of Borrower
                    and Guarantor
                    are genuine.

                   

                  4.7. The
                    conformity to originals of all documents submitted to us as facsimile
                    or
                    electronic versions or copies, and 

                   

                  4.8. The
                    authenticity of all documents.

                   

                  4.9. The
                    terms
                    and conditions of the Loan, as reflected in the Documents, have
                    not been
                    amended, modified or supplemented by any other agreement or understanding
                    of the
                    parties or waiver of any of the material provisions of the Documents,
                    and that
                    each document submitted to us is accurate and complete and that
                    each such
                    document accurately reflects the complete understanding of the
                    parties thereto
                    with respect to the transactions contemplated thereby and the
                    rights and
                    obligations of the parties thereunder. 

                   

                  4.10. Borrower
                    has sufficient title to, or other interest in, each item of the
                    Collateral in
                    order to grant a security interest or lien and for such security
                    interest to
“attach” within the meaning of the Texas Code.

                   

                  4.11. As
                    to
                    matters of fact, the warranties and representations set forth
                    in the Documents
                    and in the Affidavit are true and correct.

                   

                  4.12. The
                    Borrower does not intend to use all or any portion of the proceeds
                    of the Loan
                    to acquire margin stock;

                   

                  
                    
                      
                      

                    

                    
                      10

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  4.13. If
                    any
                    party to any Document seeks to maintain any action, suit or proceeding
                    in the
                    courts of New York to enforce any provision of any of the Documents,
                    such
                    Person, if required at such time to hold a certificate of authority
                    to transact
                    business as a foreign entity in such jurisdiction, will have
                    obtained such a
                    certificate prior to commencing such action, suit or proceeding.

                   

                  4.14. Except
                    as
                    expressly stated herein, each party (other than the Borrower
                    and Guarantor) to a
                    Document will be in compliance with all the terms of the applicable
                    Document and
                    all applicable laws, and shall have obtained any licenses or
                    registrations
                    required by applicable law.

                  


                  4.15. The
                    Financing Statements will have been properly filed and indexed
                    in the
                    appropriate filing offices in the States of Delaware and Texas,
                    as the case may
                    be, and all related fees and charges will have been paid.

                  


                  4.16. The
                    Administrative Agent, in its capacity as a secured party on behalf
                    of each
                    Lender, and each Lender has taken its interest in the Collateral
                    without
                    knowledge of any adverse claim or security interest of any other
                    Person.

                  


                  4.17. As
                    of the
                    date hereof, fair value has been exchanged by the Borrower and
                    the Lenders in
                    accordance with Section 548 of the United States Bankruptcy Code
                    and applicable
                    state laws.

                  


                  4.18. The
                    deposit accounts (as described in the Account Control Agreements)
                    are
                    established and maintained as deposit accounts (as defined in
                    Section
                    9-102(a)(29) of the New York Code) and do not constitute financial
                    assets (as
                    defined in Section 8-102(a)(9) of the New York Code) forming
                    the basis of a
                    security entitlement (as defined in Section 8-102(a)(17) of the
                    New York Code),
                    and the jurisdiction of Amegy
                    Bank, NA is
                    the
                    State of New York for purposes of Section 9-304 of the New York
                    Code.

                  


                  4.19. Borrower
                    has only one principal place of business and that place of business
                    is at 25050
                    I-45 North, Suite 525, The Woodlands, Texas 77380.

                  


                  4.20. That
                    because the Administrative Agent is a resident of the State of
                    New York, and
                    because the Borrower and Guarantor are required to perform substantial
                    parts of
                    the transaction contemplated by the Documents, such as delivering
                    payments and
                    reports, in New York, a court applying Texas law will find that
                    the transaction
                    consummated pursuant to the Documents bears a reasonable relation
                    to the State
                    of New York pursuant to Section 35.51 of the Texas Business and
                    Commerce
                    Code.

                  


                  With
                    reference to the foregoing qualifications, limitations, exclusions
                    and
                    assumptions: (a) to our knowledge, there are no facts inconsistent
                    with any of
                    the foregoing; and (b) nothing has come to the attention of those
                    attorneys who
                    have provided substantial attention to this Opinion that leads
                    us to believe
                    that we are not justified in relying on the foregoing assumptions.
                    Note,
                    however, that we have not made any inquiries or investigations
                    or other efforts
                    (unless specifically described as such herein) to determine the
                    accuracy of any
                    fact set forth in any Document or whether any facts assumed or
                    inferred in our
                    qualifications, limitations, exclusions and assumptions are
                    correct.

                   

                  
                    
                      
                      

                    

                    
                      11

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  This
                    opinion is issued as of the date hereof (and we are under no
                    obligation to
                    advise you of any change in law or fact occurring after the date
                    hereof), solely
                    for the benefit of the Administrative Agent (including
                    its respective assignees and participants under the Documents)
                    and the Lenders
                    (including their respective assignees and participants under
                    the
                    Documents),
                    and
may
                    be
                    relied upon solely by the Administrative Agent and the Lenders
                    in connection
                    with the transactions described herein and is not to be made
                    available to, or
                    relied upon by, any other person, firm or entity without our
                    prior written
                    consent.

                  
                    	 	 	 
	
                          	
                          	Sincerely,
	 	
                          
	 	 
	 	Baker & Hostetler
                            LLP




                   

                  
                    
                      
                      

                    

                    
                      12

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  ATTACHMENTS

                  


                  
                    	
                            Exhibit
                              A

                          	
                            Organizational
                              Documents

                          
	
                            Exhibit
                              B.1-B.3

                          	
                            Affidavits
                              of Certain Officers of Guarantor and Manager of
                              Borrower

                          


                  

                  


                   

                  
                    
                      
                      

                    

                    
                      13

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXHIBIT
                    A

                  (Attached
                    to and made part of opinion dated May 11, 2007, of Baker & Hostetler LLP to
                    J. 

                  Aron
                    & Company, as Administrative Agent, and others.)

                  


                  ORGANIZATIONAL
                    DOCUMENTS

                  


                  1. Certificate
                    of Incumbency dated May 11, 2007, and related Exhibits of each
                    of the following
                    limited liability companies or corporations: Tekoil and Gas Gulf
                    Coast, LLC, a
                    Delaware limited liability company (“Borrower”), and Tekoil & Gas
                    Corporation, a Delaware corporation (“Guarantor”), and related
                    Exhibits.

                  


                  2. Certificate
                    of Fact for Borrower issued by the Secretary of State for the
                    State of Texas on
                    May 11, 2007.

                   

                  3. Certificate
                    of Account Status for Borrower issued by the Texas Comptroller
                    of Public
                    Accounts on May 11, 2007.

                   

                  4. Certificate
                    of Fact for Guarantor issued by the Secretary of State for the
                    State of Texas on
                    May 11, 2007.

                  


                  5. Certificate
                    of Account Status for Borrower issued by the Texas Comptroller
                    of Public
                    Accounts on May 11, 2007.

                   

                  6. Certificate
                    of Good Standing for Borrower issued by the Secretary of State
                    for the State of
                    Florida on May 11, 2007.

                  


                  7. Certificate
                    of Status for Borrower issued by the Secretary of State for the
                    State of
                    Delaware on May 11, 2007.

                  


                  8. Certificate
                    of Status for Guarantor issued by the Secretary of State for
                    the State of
                    Delaware on May 11, 2007.

                  


                  9. Certified
                    copy dated March 28, 2007 of the Application for Registration
                    of a Foreign
                    Limited Liability Company for Borrower, as filed with the Secretary
                    of the State
                    of Texas on January 23, 2007.

                  


                  10. Certified
                    copy dated March
                    28,
                    2007 of
                    the
                    Application for Registration of a Foreign For-Profit corporation
for
                    Guarantor, as filed with the Secretary of the State of Texas
                    on December 7,
                    2006.

                  


                  11. Certified
                    copy dated March 28, 2007 of the Application by Foreign Limited
                    Liability
                    Company for Authorization to Transact Business in the State of
                    Florida for
                    Borrower as filed with the Secretary of the State of Florida
                    on March 8,
                    2007.

                  


                  12. Certified
                    copy dated March 28, 2007 of the Certificate of Formation for
                    Borrower as filed
                    with the Secretary of State for the State of Delaware on January
                    17,
                    2007.

                   

                  
                    
                      
                      

                    

                    
                      14

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  13. Certified
                    copy dated March 28, 2007 of the Certificate of Incorporation
                    for Guarantor as
                    filed with the Secretary of State for the State of Delaware on
                    January 2,
                    2002.

                  


                  14. Authorization
                    Resolutions of Borrower and Guarantor.

                  


                  15.
                     First
                    Amended and Restated Operating Agreement of Borrower between
                    the Guarantor and
                    Goldman, Sachs & Co.

                  


                  16. Certified
                    copy dated January 29, 2007 of the Certificate of Amended
                    Registration for Borrower, as filed with the Secretary of the State of
                    Texas on January 29, 2007.

                   

                  
                    
                      
                      

                    

                    
                      15

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  EXHIBIT
                    B.1

                  (Attached
                    to and made part of opinion dated May 11, 2007, of Baker & Hostetler LLP to
                    J. 

                  Aron
                    & Company, as Administrative Agent, and others.)

                   

                  AFFIDAVIT

                   

                  THE
                    STATE
                    OF TEXAS

                   

                  COUNTY
                    OF
                    HARRIS

                   

                  BEFORE
                    ME, the undersigned authority, on this day personally appeared
                    MARK S. WESTERN,
                    known to me to be a credible person, who, after being by me duly
                    sworn, stated
                    on oath as follows:

                   

                  “My
                    name
                    is Mark S. Western. I am a person of the lawful age of majority.
                    I am the
                    President and Chief Executive Officer of Tekoil & Gas Corporation, a
                    Delaware corporation which is the manager of Tekoil & Gas Gulf Coast, LLC, a
                    Delaware limited liability (collectively “Tekoil”). I am well-acquainted with
                    the operations and fiscal management of Tekoil, both from personal
                    knowledge and
                    from records of Tekoil.

                   

                  “On
                    behalf of Tekoil and myself, I have participated in negotiations
                    in connection
                    with and have reviewed the Credit and Guaranty Agreement (the
“Agreement”)
                    among: Tekoil and J. Aron & Company, individually and in its capacity as
                    administrative agent (“Administrative Agent”) for all Lenders dated May 11,
                    2007. Capitalized terms used in this Affidavit but not otherwise
                    defined herein,
                    shall have the meaning set out in the Agreement.

                   

                  “On
                    behalf of Tekoil and myself, I have also reviewed originals or
                    copies of the
                    following documents each of which (unless otherwise noted) will
                    be dated May 11,
                    2007 (which documents, together with the Agreement, are collectively
                    called the
“Credit Documents” in this Affidavit):

                   

                  1.1. the
                    Agreement among the Borrower, the Guarantor, the Administrative
                    Agent and the
                    Lenders;

                  


                  1.2. Deed
                    of
                    Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                    and Financing
                    Statement executed by the Borrower in favor of J.
                    Aron
& Company,
                    as
                    Trustee, and the Administrative Agent covering properties located
                    in Texas and
                    other properties related thereto (the "Mortgage");

                  


                  1.3. Pledge
                    and Security Agreement among the Borrower and the Administrative
                    Agent (the
                    "Security Agreement");

                  


                  1.4. Pledge
                    Agreement executed between the Guarantor and the Administrative
                    Agent (the
                    "Pledge Agreement");

                  


                  1.5. Default
                    Deposit
                    Account Control Agreement among Amegy Bank, NA (“Amegy”) the Borrower and the
                    Administrative Agent;

                   

                  
                    
                      
                      

                    

                    
                      16

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  1.6. Blocked
                    Deposit Account Control Agreement among Amegy, the Borrower and
                    the
                    Administrative Agent (together with the Deposit
                    Account Control Agreement
                    described above, collectively, the "Account Control Agreements");

                  


                  1.7. Two
                    (2)
                    UCC-1 Financing Statements, one for each of the Borrower and
                    Guarantor as
                    debtor, and J. Aron & Company, as Administrative Agent, as secured party, to
                    be filed with the Delaware Secretary of State (collectively the
“Financing
                    Statements”);

                   

                  1.8. Transfer
                    Letter executed by Borrower;

                   

                  1.9. Conveyance
                    of Overriding Royalty Interest between the Borrower and Goldman,
                    Sachs & Co
                    (the "ORRI Conveyance"); and

                  


                  1.10. Management
                    Services Agreement by and between Borrower and Guarantor.

                  


                  “The
                    performance by Tekoil or me of the Credit Documents to which
                    either of us is a
                    party does not require the consent of any other Person under
                    any contract or
                    agreement to which either Tekoil or I am bound.

                  


                  “Neither
                    the execution and delivery by Tekoil or me of the Credit Documents
                    nor the
                    consummation by Tekoil or me of the transactions contemplated
                    therein nor the
                    compliance by Tekoil or me with the provisions thereof will result
                    in a breach
                    of or constitute a default under any of the terms, conditions,
                    or provisions of
                    (i) any order, writ, injunction or decree of any Texas, Delaware,
                    New York, or
                    United States court or Governmental Authority to which Tekoil
                    or I are subject,
                    or (ii) any indenture, mortgage, deed of trust, promissory note,
                    loan agreement
                    or note agreement, or any other agreement or undertaking under
                    any contract or
                    agreement to which Tekoil or I are a party or by which any of
                    Tekoil’s or my
                    properties may be bound or subject.

                  


                  “There
                    are no actions, suits or proceedings pending or threatened by
                    or against Tekoil
                    or me by or before any Governmental Authority of the States of
                    Texas, Delaware,
                    New York, or the United States of America which, if adversely
                    determined, would
                    have a material adverse effect on the financial condition or
                    business of Tekoil
                    or me.

                   

                  “The
                    minute books and company records of Tekoil that were furnished
                    to Baker &
Hostetler LLP for review in March 2007 were current at such time
                    and no action
                    of the Members or Managers of Tekoil has been taken to alter
                    such records to the
                    date hereof.

                   

                  “This
                    Affidavit is made with the intention that the representations
                    herein set out
                    shall be relied upon by Baker & Hostetler LLP as a condition of its delivery
                    of its opinion to the Administrative Agent and Lenders on behalf
                    of Tekoil, and
                    in acknowledgment that each of such representations is material
                    and that Baker
& Hostetler LLP would not deliver its opinion but for these
                    representations.”

                   

                  [SIGNATURE
                    PAGE TO FOLLOW]

                   

                  
                    
                      
                      

                    

                    
                      17

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXECUTED
                    this 11th
                    day of
                    May, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
                              

                            

                            Mark
                              S. Western

                          


                  

                   

                  SUBSCRIBED
                    AND SWORN TO BEFORE ME on this 11th
                    day of
                    May, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
                              

                            

                            Notary Public in and for the State
                              of
                              Texas

                          


                  

                  


                  
                    	 	 	 
	
                            
                            

                          	
                            
                            

                          	
                            [Seal]

                          




                  


                  
                    
                      
                      

                    

                    
                      18

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  EXHIBIT
                    B.2

                  (Attached
                    to and made part of opinion dated May 11, 2007, of Baker & Hostetler LLP to
                    J. 

                  Aron
                    & Company, as Administrative Agent, and others.)

                   

                  AFFIDAVIT

                   

                  THE
                    STATE
                    OF TEXAS

                   

                  COUNTY
                    OF
                    HARRIS

                   

                  BEFORE
                    ME, the undersigned authority, on this day personally appeared
                    MARK S. WESTERN,
                    known to me to be a credible person, who, after being by me duly
                    sworn, stated
                    on oath as follows:

                   

                  “My
                    name
                    is Gerald Goodman. I am a person of the lawful age of majority.
                    I am the Chief
                    Financial Officer of Tekoil & Gas Corporation, a Delaware corporation which
                    is the manager of Tekoil & Gas Gulf Coast, LLC, a Delaware limited liability
                    (collectively “Tekoil”). I am well-acquainted with the operations and fiscal
                    management of Tekoil, both from personal knowledge and from records
                    of
                    Tekoil.

                   

                  “On
                    behalf of Tekoil and myself, I have participated in negotiations
                    in connection
                    with and have reviewed the Credit and Guaranty Agreement (the
“Agreement”)
                    among: Tekoil and J. Aron & Company, individually and in its capacity as
                    administrative agent (“Administrative Agent”) for all Lenders dated May 11,
                    2007. Capitalized terms used in this Affidavit but not otherwise
                    defined herein,
                    shall have the meaning set out in the Agreement.

                   

                  “On
                    behalf of Tekoil and myself, I have also reviewed originals or
                    copies of the
                    following documents each of which (unless otherwise noted) will
                    be dated May 11,
                    2007 (which documents, together with the Agreement, are collectively
                    called the
“Credit Documents” in this Affidavit):

                   

                  1.1. The
                    Agreement among the Borrower, the Guarantor, the Administrative
                    Agent and the
                    Lenders;

                  


                  1.2. Deed
                    of
                    Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                    and Financing
                    Statement executed by the Borrower in favor of J.
                    Aron
& Company,
                    as
                    Trustee, and the Administrative Agent covering properties located
                    in Texas and
                    other properties related thereto (the "Mortgage");

                  


                  1.3. Pledge
                    and Security Agreement among the Borrower and the Administrative
                    Agent (the
                    "Security Agreement");

                  


                  1.4. Pledge
                    Agreement executed between the Guarantor and the Administrative
                    Agent (the
                    "Pledge Agreement");

                  


                  1.5. Default
                    Deposit
                    Account Control Agreement among Amegy Bank, NA (“Amegy”) the Borrower and the
                    Administrative Agent;

                   

                  
                    
                      
                      

                    

                    
                      19

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  1.6. Blocked
                    Deposit Account Control Agreement among Amegy, the Borrower and
                    the
                    Administrative Agent (together with the Deposit
                    Account Control Agreement
                    described above, collectively, the "Account Control Agreements");

                  


                  1.7. Two
                    (2)
                    UCC-1 Financing Statements, one for each of the Borrower and
                    Guarantor as
                    debtor, and J. Aron & Company, as Administrative Agent, as secured party, to
                    be filed with the Delaware Secretary of State (collectively the
“Financing
                    Statements”);

                   

                  1.8. Transfer
                    Letter executed by Borrower;

                   

                  1.9. Conveyance
                    of Overriding Royalty Interest between the Borrower and Goldman,
                    Sachs & Co
                    (the "ORRI Conveyance"); and

                  


                  1.10. Management
                    Services Agreement by and between Borrower and Guarantor.

                  


                  “The
                    performance by Tekoil or me of the Credit Documents to which
                    either of us is a
                    party does not require the consent of any other Person under
                    any contract or
                    agreement to which either Tekoil or I am bound.

                  


                  “Neither
                    the execution and delivery by Tekoil or me of the Credit Documents
                    nor the
                    consummation by Tekoil or me (as applicable) of the transactions
                    contemplated
                    therein nor the compliance by Tekoil or me with the provisions
                    thereof will
                    result in a breach of or constitute a default under any of the
                    terms,
                    conditions, or provisions of (i) any order, writ, injunction
                    or decree of any
                    Texas, Delaware, New York, or United States court or Governmental
                    Authority to
                    which Tekoil or I are subject, or (ii) any indenture, mortgage,
                    deed of trust,
                    promissory note, loan agreement or note agreement, or any other
                    agreement or
                    undertaking under any contract or agreement to which Tekoil or
                    I are a party or
                    by which any of Tekoil’s or my properties may be bound or subject.

                  


                  “There
                    are no actions, suits or proceedings pending or threatened by
                    or against Tekoil
                    or me by or before any Governmental Authority of the States of
                    Texas, Delaware,
                    New York, or the United States of America which, if adversely
                    determined, would
                    have a material adverse effect on the financial condition or
                    business of Tekoil
                    or me.

                   

                  “The
                    minute books and company records of Tekoil that were furnished
                    to Baker &
Hostetler LLP for review in March 2007 were current at such time
                    and no action
                    of the Members or Managers of Tekoil has been taken to alter
                    such records to the
                    date hereof.

                   

                  “This
                    Affidavit is made with the intention that the representations
                    herein set out
                    shall be relied upon by Baker & Hostetler LLP as a condition of its delivery
                    of its opinion to the Administrative Agent and Lenders on behalf
                    of Tekoil, and
                    in acknowledgment that each of such representations is material
                    and that Baker
& Hostetler LLP would not deliver its opinion but for these
                    representations.”

                   

                  [SIGNATURE
                    PAGE TO FOLLOW]

                   

                  
                    
                      
                      

                    

                    
                      20

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXECUTED
                    this 11th
                    day of
                    May, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
                              

                            

                            Gerald
                              Goodman

                          


                  

                   

                  SUBSCRIBED
                    AND SWORN TO BEFORE ME on this 11th
                    day of
                    May, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
Notary
                            Public in and for the State of
                            Texas




                  
                    	 	 	 
	
                          	
                          	
                            [Seal]

                          


                  

                   

                   

                  
                    
                      
                      

                    

                    
                      21

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  EXHIBIT
                    B.3

                  (Attached
                    to and made part of opinion dated May 11, 2007, of Baker & Hostetler LLP to
                    J. 

                  Aron
                    & Company, LLC, as Administrative Agent, and others.)

                   

                  AFFIDAVIT

                   

                  THE
                    STATE
                    OF TEXAS

                   

                  COUNTY
                    OF
                    HARRIS

                   

                  BEFORE
                    ME, the undersigned authority, on this day personally appeared
                    RICHARD KOSELUK,
                    known to me to be a credible person, who, after being by me duly
                    sworn, stated
                    on oath as follows:

                   

                  “My
                    name
                    is Richard Koseluk. I am a person of the lawful age of majority.
                    I am the
Vice
                    President of Gulf Coast Regional Operations of
                    Tekoil
& Gas Corporation, a Delaware corporation which is the manager
                    of Tekoil
& Gas Gulf Coast, LLC, a Delaware limited liability (collectively
“Tekoil”).
                    I am well-acquainted with the operations and fiscal management
                    of Tekoil, both
                    from personal knowledge and from records of Tekoil.

                   

                  “On
                    behalf of Tekoil and myself, I have participated in negotiations
                    in connection
                    with and have reviewed the Credit and Guaranty Agreement (the
“Agreement”)
                    among: Tekoil and J. Aron & Company, individually and in its capacity as
                    administrative agent (“Administrative Agent”) for all Lenders dated May 11,
                    2007. Capitalized terms used in this Affidavit but not otherwise
                    defined herein,
                    shall have the meaning set out in the Agreement.

                   

                  “On
                    behalf of Tekoil and myself, I have also reviewed originals or
                    copies of the
                    following documents each of which (unless otherwise noted) will
                    be dated May 11,
                    2007 (which documents, together with the Agreement, are collectively
                    called the
“Credit Documents” in this Affidavit):

                   

                  1.1. the
                    Agreement among the Borrower, the Guarantor, the Administrative
                    Agent and the
                    Lenders;

                  


                  1.2. Deed
                    of
                    Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                    and Financing
                    Statement executed by the Borrower in favor of J.
                    Aron
& Company,
                    as
                    Trustee, and the Administrative Agent covering properties located
                    in Texas and
                    other properties related thereto (the "Mortgage");

                  


                  1.3. Pledge
                    and Security Agreement among the Borrower and the Administrative
                    Agent (the
                    "Security Agreement");

                  


                  1.4. Pledge
                    Agreement executed between the Guarantor and the Administrative
                    Agent (the
                    "Pledge Agreement");

                  


                  1.5. Default
                    Deposit
                    Account Control Agreement among Amegy Bank, NA (“Amegy”) the Borrower and the
                    Administrative Agent;

                   

                  
                    
                      
                      

                    

                    
                      22

                      
                        

                      

                    

                    
                      
                      

                    

                  

                  


                  1.6. Blocked
                    Deposit Account Control Agreement among Amegy, the Borrower and
                    the
                    Administrative Agent (together with the Deposit
                    Account Control Agreement
                    described above, collectively, the "Account Control Agreements");

                  


                  1.7. Two
                    (2)
                    UCC-1 Financing Statements, one for each of the Borrower and
                    Guarantor as
                    debtor, and J. Aron & Company, as Administrative Agent, as secured party, to
                    be filed with the Delaware Secretary of State (collectively the
“Financing
                    Statements”);

                   

                  1.8. Transfer
                    Letter executed by Borrower;

                   

                  1.9. Conveyance
                    of Overriding Royalty Interest between the Borrower and Goldman,
                    Sachs & Co
                    (the "ORRI Conveyance"); and

                  


                  1.10. Management
                    Services Agreement by and between Borrower and Guarantor.

                  


                  “The
                    performance by Tekoil or me of the Credit Documents to which
                    either of us is a
                    party does not require the consent of any other Person under
                    any contract or
                    agreement to which either Tekoil or I am bound.

                  


                  “Neither
                    the execution and delivery by Tekoil or me of the Credit Documents
                    nor the
                    consummation by Tekoil or me of the transactions contemplated
                    therein nor the
                    compliance by Tekoil or me with the provisions thereof will result
                    in a breach
                    of or constitute a default under any of the terms, conditions,
                    or provisions of
                    (i) any order, writ, injunction or decree of any Texas, Delaware,
                    New York, or
                    United States court or Governmental Authority to which Tekoil
                    or I are subject,
                    or (ii) any indenture, mortgage, deed of trust, promissory note,
                    loan agreement
                    or note agreement, or any other agreement or undertaking under
                    any contract or
                    agreement to which Tekoil or I are a party or by which any of
                    Tekoil’s or my
                    properties may be bound or subject.

                  


                  “There
                    are no actions, suits or proceedings pending or threatened by
                    or against Tekoil
                    or me by or before any Governmental Authority of the States of
                    Texas, Delaware,
                    New York, or the United States of America which, if adversely
                    determined, would
                    have a material adverse effect on the financial condition or
                    business of Tekoil
                    or me.

                   

                  “The
                    minute books and company records of Tekoil that were furnished
                    to Baker &
Hostetler LLP for review in March 2007 were current at such time
                    and no action
                    of the Members or Managers of Tekoil has been taken to alter
                    such records to the
                    date hereof.

                   

                  “This
                    Affidavit is made with the intention that the representations
                    herein set out
                    shall be relied upon by Baker & Hostetler LLP as a condition of its delivery
                    of its opinion to the Administrative Agent and Lenders on behalf
                    of Tekoil, and
                    in acknowledgment that each of such representations is material
                    and that Baker
& Hostetler LLP would not deliver its opinion but for these
                    representations.”

                   

                  [SIGNATURE
                    PAGE TO FOLLOW]

                   

                  
                    
                      
                      

                    

                    
                      23

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXECUTED
                    this 11th
                    day of
                    April, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
                              

                            

                            Richard
                              Koseluk

                          


                  

                   

                  SUBSCRIBED
                    AND SWORN TO BEFORE ME on this 11th
                    day of
                    May, 2007.

                   

                  
                    	 	 	 
	
                          	
                          	
                          
	 	
                            
Notary
                            Public in and for the State of
                            Texas




                  
                    	 	 	 
	
                          	
                          	
                            [Seal]

                          




                  


                  
                    
                      
                      

                    

                    
                      24

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  EXHIBIT
                    E TO

                  CREDIT
                    AND GUARANTY AGREEMENT

                  


                  FORM
                    OF ASSIGNMENT AGREEMENT

                   

                  Reference
                    is made to that certain Credit and Guaranty Agreement dated as
                    of May 11,
                    2007 (as it may be amended, supplemented or otherwise modified
                    from time to
                    time, the "Credit
                    Agreement"),
                    by
                    and among TEKOIL
                    AND GAS GULF COAST, LLC,
                    a
                    Delaware limited liability company ("Borrower"),
                    TEKOIL
                    & GAS CORPORATION,
                    a
                    Delaware corporation, and
                    the
                    other guarantors party thereto, J.
                    ARON & COMPANY,
                    individually and in its capacity as Administrative Agent for
                    the benefit of the
                    lenders from time to time parties thereto (the "Lenders"),
                    and
                    such Lenders.

                   

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

                   

                  For
                    an
                    agreed consideration, the Assignor hereby irrevocably sells and
                    assigns to the
                    Assignee, and the Assignee hereby irrevocably purchases and assumes
                    from the
                    Assignor, subject to and in accordance with the Standard Terms
                    and Conditions
                    and the Credit Agreement, as of the Effective Date inserted by
                    the
                    Administrative Agent as contemplated below, the interest in and
                    to all of the
                    Assignor's rights and obligations under the Credit Agreement
                    and any other
                    documents or instruments delivered pursuant thereto that represents
                    the amount
                    and percentage interest identified below of all of the Assignor's
                    outstanding
                    rights and obligations under the respective facilities identified
                    below
                    (including, to the extent included in any such facilities, letters
                    or credit and
                    swingline loans) (the "Assigned
                    Interest").
                    Such
                    sale and assignment is without recourse to the Assignor and,
                    except as expressly
                    provided in this Assignment and the Credit Agreement, without
                    representation or
                    warranty by the Assignor.

                   

                  1. Assignor:  ______________________

                   

                  2. Assignee:  ______________________
                    [and is an Affiliate/Related Fund]

                   

                  3. Borrower:  Tekoil
                    and Gas Gulf Coast, LLC

                   

                  4. Administrative
                    Agent: J.
                    Aron
& Company, as Administrative Agent under the Credit Agreement

                   

                  
                    	5.	
                            Credit
                              Agreement: The
                              $50,000,000 Credit and Guaranty Agreement dated as
                              of May 11,
                              2007,
                              by and among Borrower, Tekoil & Gas Corporation,
                              a
                              Delaware corporation, and
                              the other guarantors party thereto, J. Aron & Company, individually
                              and in its capacity as Administrative Agent for the
                              benefit of the lenders
                              from time to time parties thereto (the "Lenders"),
                              and such Lenders.

                          


                  

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                     

                  

                  
                    
                      
                        	
                                6.

                              	
                                Assigned
                                  Interest:

                              


                      

                    

                  

                   

                  
                    
                      	
                              Aggregate
                                Amount of

                              Commitment/Loans

                              for
                                all Lenders

                            	 	
                              Amount
                                of

                              Commitment/Loans

                              Assigned

                            	 	
                              Percentage
                                Assigned of Commitment/Loans

                            	 	
                              Pro
                                Rata Share of Facility
                                Amount

                            	 
	
                              $_______

                            	 	
                              $

                            	
                              __________

                            	 	 	
                              _____

                            	
                              %

                            	
                              $

                            	
                              _______

                            	 
	
                              $_______

                            	 	
                              $

                            	
                              __________

                            	 	 	
                              _____

                            	
                              %

                            	
                              $

                            	
                              _______

                            	 
	
                              $_______

                            	 	
                              $

                            	
                              __________

                            	 	 	
                              _____

                            	
                              %

                            	
                              $

                            	
                              _______

                            	 


                    

                  

                   

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

                   

                  
                    
                      
                        	7.	
                                Notice
                                  and Wire Instructions:

                              


                      

                    

                  

                   

                  
                    	
                            [NAME
                              OF ASSIGNOR]

                             

                            Notices:

                            _________________________

                            _________________________

                            _________________________

                            Attention:

                            Telecopier:

                             

                            with
                              a copy to:

                            _________________________

                            _________________________

                            _________________________

                            Attention:

                            Telecopier:

                             

                            Wire
                              Instructions:

                          	 	
                            [NAME
                              OF ASSIGNEE]

                             

                            Notices:

                            _________________________

                            _________________________

                            _________________________

                            Attention:

                            Telecopier:

                             

                            with
                              a copy to:

                            _________________________

                            _________________________

                            _________________________

                            Attention:

                            Telecopier:

                             

                            Wire
                              Instructions:

                          


                  

                  


                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  This
                    Assignment may be separately executed in any number of counterparts
                    and by the
                    different parties hereto in separate counterparts, each of which
                    when so
                    executed shall be deemed to constitute one and the same Assignment.

                   

                  [Remainder
                    of this page intentionally left blank.]

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  WHEREAS,
                    the
                    terms
                    set forth in this Assignment are hereby agreed to as of the Effective
                    Date first
                    written above:

                   

                  
                    	 	ASSIGNOR:
	 	 	 
	 	[NAME
                            OF ASSIGNOR]
	 	 	 
	 	 	 
	
                          	 By:	 
	
                          	 Name:	 
	
                          	 Title:	 


                  

                   

                  
                    	 	ASSIGNEE:
	 	 	 
	 	[NAME
                            OF
                            ASSIGNEE]
	 	 	 
	 	 	 
	
                          	 By:	 
	
                          	 Name:	 
	
                          	 Title:	 


                  

                  


                  Accepted
                    and agreed to as of the date first written above.

                  


                  J.
                    ARON & COMPANY,
                    as
Administrative
                    Agent

                   

                  
                    	 	 	 
	 By:	 	
                          
	 Name:	 	
                          
	 Title:	 	
                          


                  

                   

                  TEKOIL
                    AND GAS GULF COAST, LLC

                   

                  
                    	 	 	 
	 By:	 	
                          
	 Name:	 	
                          
	 Title:	 	
                          


                  

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  


                  ANNEX
                    1

                  


                  STANDARD
                    TERMS AND CONDITIONS FOR ASSIGNMENT

                  AGREEMENT

                   

                  
                    	
                            1.

                          	
                            Representations
                              and Warranties.

                          


                  

                   

                  
                    	 	
                            1.1

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

                          


                  

                   

                  
                    	 	
                            1.2

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

                          


                  

                   

                  
                    	
                            2.

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

                          


                  

                   

                  
                    	
                            3.

                          	
                            General
                              Provisions.
                              This Assignment shall be binding upon, and inure to
                              the benefit of, the
                              parties hereto and their respective successors and
                              assigns. Delivery of an
                              executed counterpart of a signature page of this Assignment
                              by telecopy
                              shall be effective as delivery of a manually executed
                              counterpart of this
                              Assignment. This Assignment shall be governed by, and
                              construed in
                              accordance with, the internal laws of the State of
                              New York without regard
                              to conflict of laws principles
                              thereof.

                          


                  

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                      EXHIBIT
                        F TO

                      CREDIT
                        AND GUARANTY AGREEMENT

                       

                      FORM
                        OF CERTIFICATE REGARDING NON-BANK STATUS

                       

                      Reference
                        is made to the Credit and Guaranty Agreement, dated as of
                        May 11, 2007 (as
                        it may be amended, supplemented or otherwise modified, the
                        "Credit
                        Agreement";
                        the
                        terms defined therein and not otherwise defined herein being
                        used herein as
                        therein defined), by and among TEKOIL
                        AND GAS GULF COAST, LLC,
                        a
                        Delaware limited liability company ("Company"),
                        TEKOIL
                        & GAS CORPORATION,
                        a
                        Delaware corporation, and
                        the
                        other guarantors party thereto, J.
                        ARON & COMPANY,
                        individually and in its capacity as Administrative Agent
                        for the benefit of the
                        lenders from time to time parties thereto (the "Lenders"),
                        and
                        such Lenders. Pursuant to Section 2.14 of the Credit Agreement,
                        the undersigned
                        hereby certifies that it is not a "bank" or other Person
                        described in Section
                        881(c)(3) of the Internal Revenue Code of 1986, as amended.

                       

                      
                        	 	 	 
	 	[NAME
                                OF
                                LENDER]
	 
 	 
 	 
 
	 	By:       
                                	
                              
	
                                 Name:  


                              	
                              
	
                                 Title:    
                                  

                              	
                              


                      

                       

                      [TO
                        BE
                        GIVEN BY NON-US LENDERS THAT ARE NOT BANKS]

                      


                      
                        
                          
                          

                        

                        
                          
                          

                          
                            

                          

                        

                        
                          
                          

                        

                        EXHIBIT
                          G-1 TO

                        CREDIT
                          AND GUARANTY AGREEMENT

                         

                        FORM
                          OF CLOSING DATE CERTIFICATE

                         

                        THE
                          UNDERSIGNED HEREBY CERTIFY AS FOLLOWS:

                         

                        1.  We
                          are,
                          respectively, the President and the Chief Financial Officer
                          of TEKOIL
                          AND GAS GULF COAST, LLC, a
                          Delaware limited liability company ("Company").

                         

                        2.  Pursuant
                          to Section 2.1 of the Credit and Guaranty Agreement, dated
                          as of May 11,
                          2007 (as it may be amended, supplemented or otherwise modified,
                          the
                          "Credit
                          Agreement";
                          the
                          terms defined therein and not otherwise defined herein
                          being used herein as
                          therein defined), by and among Company, TEKOIL
                          & GAS CORPORATION,
                          a
                          Delaware corporation, and
                          the
                          other guarantors party thereto, J.
                          ARON & COMPANY,
                          individually and in its capacity as Administrative Agent
                          for the benefit of the
                          lenders from time to time parties thereto (the "Lenders"),
                          and
                          such Lenders, Company requests that Lenders make a $30,000,000
                          Loan to Company
                          on May 11, 2007 (the "Closing
                          Date").

                         

                        3.  We
                          have
                          reviewed the terms of Section 3 of the Credit Agreement
                          and the definitions and
                          provisions contained in such Credit Agreement relating
                          thereto, and in our
                          opinion we have made, or have caused to be made under our
                          supervision, such
                          examination or investigation as is necessary to enable
                          us to express an informed
                          opinion as to the matters referred to herein.

                         

                        4.  Based
                          upon our review and examination described in paragraph
                          3 above, we certify, on
                          behalf of Company, that:

                         

                        (i)  as
                          of the
                          Closing Date, the representations and warranties contained
                          in each of the
                          Transaction Documents are true and correct in all respects
                          on and as of the
                          Closing Date to the same extent as though made on and as
                          of such date, except to
                          the extent such representations and warranties specifically
                          relate to an earlier
                          date, in which case such representations and warranties
                          are true, correct and
                          complete in all respects on and as of such earlier date;

                         

                        (ii)  as
                          of the
                          Closing Date, no event has occurred and is continuing or
                          would result from the
                          consummation of the applicable Credit Extension that could
                          reasonably be
                          expected to constitute an Event of Default or a Default;

                         

                        (iii)  Company
                          is concurrently consummating the Closing Date Transactions
                          (with all of the
                          conditions precedent thereto having been satisfied in all
                          respects by the
                          parties thereto) and acquiring all of the Acquired Assets.
                          Each of the
                          representations and warranties made by any party in the
                          Acquisition Documents
                          shall be true and correct in all material respects, and
                          none of such parties
                          shall have failed to perform any obligation or covenant
                          required by the
                          Acquisition Documents to be performed or complied with
                          by it on or before the
                          Closing Date; and

                         

                        
                          
                            
                            

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                         

                        (iv)  as
                          of
                          December 31, 2006, after giving pro forma effect to the
                          Closing Date
                          Transactions, the Initial Loans, and the payment of all
                          transaction costs, fees,
                          and expenses associated therewith and in connection with
                          the Credit Agreement,
                          the Ratio of Company's Consolidated Current Assets to Company's
                          Consolidated
                          Current Liabilities is as follows:

                         

                        (A)  Consolidated
                          Current Assets:       
$_________________

                         

                        (B)  Consolidated
                          Current Liabilities:    $_________________

                         

                                           
                           (A)/(B) =                        
_.__
                          to
                          1.00

                         

                        5.  Attached
                          as Annex A hereto are true, correct, and complete copies
                          of (a) the Current
                          Financial Statements, (b) the Projections, (c) the Approved
                          Plan of Development,
                          and (d) the Acquisition Documents.

                         

                        6.  Each
                          Credit Party has requested Baker & Hostetler LLP to
                          deliver to the Administrative Agent and Lenders on the
                          Closing Date favorable
                          written opinions setting forth substantially the matters
                          in the opinions
                          designated in Exhibit D annexed to the Credit Agreement, and as to such
                          other matters as Administrative Agent may reasonably request.

                         

                        The
                          foregoing certifications are made and delivered as of May ___, 2007 and are
                          made by the undersigned, in their capacities as President
                          and Chief Financial
                          Officer of Company.

                        
                          	 	 	 
	 	TEKOIL
                                  AND
                                  GAS GULF COAST, LLC
	 
 	 
 	 
 
	 	By:       
                                  	 

	
                                   Name:  


                                	  

	 	President


                        

                        
                          
                            	 	 	 
	 	 
	 
 	 
 	 
 
	 	By:       
                                    	 

	
                                     Name:  


                                  	  

	 	Chief Financial Officer


                          

                           

                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          
 

                        

                        EXHIBIT
                          G-2 TO

                        CREDIT
                          AND GUARANTY AGREEMENT

                         

                        FORM
                          OF SOLVENCY CERTIFICATE

                         

                        THE
                          UNDERSIGNED HEREBY CERTIFIES AS FOLLOWS:

                         

                        1.  I
                          am the
                          chief financial officer of [Tekoil
                          and Gas Gulf Coast, LLC, a Delaware limited liability company
                          ("Company")]
                          [Tekoil & Gas Corporation, a Delaware corporation ("Parent")].

                         

                        2.  Reference
                          is made to that certain Credit and Guaranty Agreement,
                          dated as of May 11,
                          2007 (as it may be amended, supplemented or otherwise modified,
                          the
                          "Credit
                          Agreement";
                          the
                          terms defined therein and not otherwise defined herein
                          being used herein as
                          therein defined), by and among TEKOIL
                          AND GAS GULF COAST, LLC,
                          a
                          Delaware limited liability company ("Company"),
                          TEKOIL
                          & GAS CORPORATION,
                          a
                          Delaware corporation, and
                          the
                          other guarantors party thereto, J.
                          ARON & COMPANY,
                          individually and in its capacity as Administrative Agent
                          for the benefit of the
                          lenders from time to time parties thereto (the "Lenders"),
                          and
                          such Lenders.

                         

                        3.  I
                          have
                          reviewed the terms of Sections 3 and 4 of the Credit Agreement
                          and the
                          definitions and provisions contained in the Credit Agreement
                          relating thereto,
                          together with each of the Transaction Documents, and, in
                          my opinion, have made,
                          or have caused to be made under my supervision, such examination
                          or
                          investigation as is necessary to enable me to express an
                          informed opinion as to
                          the matters referred to herein.

                         

                        4.  Based
                          upon my review and examination described in paragraph 3
                          above, I certify that as
                          of the date hereof, after giving effect to the consummation
                          of the transactions
                          contemplated by the Credit Agreement and the other Transaction
                          Documents, the
                          related financings and the other transactions contemplated
                          by the Credit
                          Agreement and the other Transaction Documents, [Company
                          and each of its
                          Subsidiaries (if any) are] [each Credit Party is] Solvent.

                         

                        The
                          foregoing certifications are made and delivered as of May ___, 2007 and are
                          made by the undersigned, in his capacity as the chief financial
                          officer of
                          [Company] [Parent].

                        

                          
                            	 	
                                     

                                  	
                                     

                                  
	
                                     

                                  	[Company]
                                    [Parent]
	
                                     

                                     

                                  	
                                     

                                     

                                  	
                                     

                                     

                                  
	
                                     

                                  	
                                               
                                      By:

                                  	
                                     
                                      

                                  
	
                                     Name:  
                                      

                                  	
                                      
                                      

                                  
	
                                     

                                  	
                                    Chief
                                      Financial Officer

                                  


                          

                        

                         

                         

                        
                          
                            
                            

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                          EXHIBIT
                            H TO

                          CREDIT
                            AND GUARANTY AGREEMENT

                           

                          FORM
                            OF APPROVAL LETTER

                           

                          Reference
                            is made to the Credit and Guaranty Agreement, dated as
                            of May 11, 2007 (as
                            it may be amended, supplemented or otherwise modified,
                            the "Credit
                            Agreement";
                            the
                            terms defined therein and not otherwise defined herein
                            being used herein as
                            therein defined), by and among TEKOIL
                            AND GAS GULF COAST, LLC,
                            a
                            Delaware limited liability company ("Company"),
                            TEKOIL
                            & GAS CORPORATION,
                            a
                            Delaware corporation, and
                            the
                            other guarantors party thereto, J.
                            ARON & COMPANY,
                            individually and in its capacity as Administrative Agent
                            for the benefit of the
                            lenders from time to time parties thereto (the "Lenders"),
                            and
                            such Lenders. Reference is hereby made to the Credit
                            Agreement for all purposes,
                            and terms defined therein shall have the same meanings
                            when used
                            herein.

                           

                          The
                            Agreement contemplates that certain Approval Letters
                            may be given from time to
                            time in connection therewith in order to permit certain
                            capital expenditures
                            made or to be made by Company on the Eligible Mortgaged
                            Properties to the extent
                            the same either (a) have been approved by Required Lenders
                            at the time in
                            question by means of an Approval Letter, or (b) are included
                            in the Approved
                            Plan of Development, as then in effect. This letter is
                            such an Approval Letter
                            and is given by the undersigned in order so to approve
                            the capital expenditures
                            which are specified in the schedule attached hereto.
                            This letter [is in addition
                            to/supersedes] all previous Approval Letters dealing
                            with such capital
                            expenditures.

                           

                          This
                            letter is a Transaction Document, and all provisions
                            of the Credit Agreement
                            which apply to Transaction Documents shall apply hereto.

                           

                          This
                            letter may be separately executed in any number of counterparts
                            and by the
                            different parties hereto in separate counterparts, each
                            of which when so
                            executed shall be deemed to constitute one and the same
                            Approval
                            Letter.

                           

                          Please
                            execute a counterpart of this letter in the place provided
                            below to evidence
                            your agreement to the foregoing and your continuing ratification
                            of the Credit
                            Agreement and the other Transaction Documents in consideration
                            of the approval
                            herein contained.

                          
                            	 	 	 
	 	Yours
                                    truly,
	 	 	 
	 	J.
                                    ARON & COMPANY,
                                    as Administrative Agent
	 
 	 	 
	
                                  	By:  	 
	 	Name:	 

	 	Title:	 


                          

                           

                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                           

                          
                            	 	 *[OTHER
                                    LENDERS CONSTITUTING REQUISITE
                                    LENDERS]


                          

                           

                          Accepted
                            and agreed to as of the date first written above

                          


                          TEKOIL
                            AND GAS GULF COAST, LLC

                          
                            	 	 	 	 	 
	 By:  	 	 	 	 
	 Name:	 	 	 	
                                  
	 Title:	 	 	 	
                                  


                          

                           

                           

                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                           

                          EXHIBIT
                            I TO

                          CREDIT
                            AND GUARANTY AGREEMENT

                           

                          FORM
                            OF COUNTERPART AGREEMENT

                           

                          This
                            COUNTERPART AGREEMENT dated as of [______________] ("Agreement")
                            is
                            made by [______________], a [State of Formation] [corporation/limited
                            liability
                            company/limited partnership]] ("Company"),
                            in
                            favor of J. Aron & Company, as Administrative Agent. Reference is made to
                            the Credit and Guaranty Agreement, dated as of May 11, 2007 (as it may have
                            been and may be amended, restated, supplemented or otherwise
                            modified, the
                            "Credit
                            Agreement"),
                            by
                            and among TEKOIL
                            AND GAS GULF COAST, LLC,
                            a
                            Delaware limited liability company ("Borrower"),
                            TEKOIL
                            & GAS CORPORATION,
                            a
                            Delaware corporation, and
                            the
                            other guarantors party thereto, J.
                            ARON & COMPANY,
                            individually and in its capacity as Administrative Agent
                            for the benefit of the
                            lenders from time to time parties thereto (the "Lenders"),
                            and
                            such Lenders. Capitalized terms used herein but not otherwise
                            defined herein
                            have the meanings assigned such terms in the Credit Agreement.

                           

                          Company
                            is a Subsidiary of Borrower, and pursuant to Section
                            5.14 of the Credit
                            Agreement, Company is required, and Borrower is required
                            to cause Company, to
                            execute this Agreement.

                           

                          Accordingly,
                            Company hereby agrees as follows:

                           

                          1.  Assumption
                            and Joinder.
                            In
                            accordance with Section 5.14 of the Credit Agreement,
                            Company hereby confirms
                            that it has assumed, and hereby agrees to perform and
                            observe, each and every
                            one of the covenants, rights, promises, agreements, terms,
                            conditions,
                            obligations, appointments, duties and liabilities of
                            (a) a Guarantor under the
                            Credit Agreement, (b) a Credit Party under the Credit
                            Agreement, and (c) a
                            Grantor under, and as defined in, that certain Pledge
                            and Security Agreement
                            dated as of May 11, 2007 among Borrower, the other grantors named therein,
                            and the Administrative Agent (as it may have been and
                            may be amended, restated,
                            supplemented otherwise modified from time to time, the
                            "Security
                            Agreement")
                            as
                            provided in the Pledge Supplement dated the date hereof
                            and provided by Company
                            as required under the Security Agreement. Company agrees
                            to be bound by the
                            provisions of the Credit Agreement and the Security Agreement
                            as if Company had
                            been an original party to the Credit Agreement and the
                            Security Agreement.
                            Without limiting the foregoing, Company confirms its
                            joint and several liability
                            under Section 7.1 of the Credit Agreement, and its liability
                            shall be primary as
                            provided under Section 7.4 of the Credit Agreement. All
                            references to the term
                            "Credit Party" or "Guarantor" in the Credit Agreement
                            or in any other
                            Transaction Document, or in any document or instrument
                            executed and delivered or
                            furnished, or to be executed and delivered or furnished,
                            in connection therewith
                            shall be deemed to be a reference to, and shall include,
                            Company. All references
                            to the term "Grantor" in the Security Agreement or in
                            any document or instrument
                            executed and delivered or furnished, or to be executed
                            and delivered or
                            furnished, in connection therewith shall be deemed to
                            be a reference to, and
                            shall include, Company.

                           

                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                           

                          2.  Representations
                            and Warranties.
                            Company
                            hereby represent and warrants as follows:

                           

                          (a)  Company
                            has the requisite [corporate/limited liability company/limited
                            partnership]
                            power and authority to enter into this Agreement and
                            to perform its obligations
                            hereunder and under the Credit Agreement and any other
                            Transaction Document to
                            which it is a party after giving effect to this Agreement.

                           

                          (b)  The
                            execution, delivery and performance of this Agreement
                            by Company and the
                            performance of its obligations under the Credit Agreement,
                            the Security
                            Agreement and all other Transaction Documents have been
                            duly authorized by the
                            [sole member][general partner][board of directors] of
                            Company and no other
                            action or proceedings on the part of Company are necessary
                            to authorize the
                            execution, delivery and performance of this Agreement,
                            the Credit Agreement, the
                            Security Agreement and all other Transaction Documents
                            and the performance of
                            Company's obligations hereunder and thereunder.

                           

                          (c)  This
                            Agreement has been duly authorized, executed and delivered
                            by it and constitutes
                            its legal, valid and binding obligation, enforceable
                            against it in accordance
                            with its terms, except as such enforceability may be
                            limited by any applicable
                            bankruptcy, insolvency, reorganization, fraudulent conveyance,
                            moratorium or
                            similar law affecting creditors' rights generally or
                            general principles of
                            equity.

                           

                          (d)  After
                            giving effect to this Agreement, the representations
                            and warranties set forth in
                            the Credit Agreement with respect to Company are true
                            and correct in all
                            material respects on and as of the date of this Agreement
                            (except to the extent
                            that such representations and warranties expressly relate
                            to an earlier date)
                            with the same effect as if made on and as of the date
                            hereof.

                           

                          3.  Further
                            Assurances.
                            At any
                            time and from time to time, upon the Administrative Agent's
                            request and at the
                            sole expense of Company, Company will promptly and duly
                            execute and deliver any
                            and all further instruments and documents and take such
                            further action as the
                            Administrative Agent reasonably deems necessary to effect
                            the purposes of this
                            Agreement.

                           

                          4.  Miscellaneous.
                            This
                            Agreement shall be binding on Company and shall inure
                            to the benefit of the
                            Secured Parties and their respective successors and assigns.
                            This Agreement may
                            be executed in counterparts, each of which shall constitute
                            an original, but all
                            of which when taken together shall constitute one and
                            the same agreement. This
                            Agreement is a Transaction Document pursuant to the Credit
                            Agreement. Delivery
                            of an executed signature page to this Agreement by facsimile
                            transmission or
                            electronic transmission shall be as effective as delivery
                            of a manually signed
                            counterpart of this Agreement.

                           

                          5.  Governing
                            Law.
                            This
                            Agreement shall be governed by and construed in accordance
                            with the laws of the
                            State of New York and the applicable laws of the United
                            States of
                            America.

                           

                          [Remainder
                            of Page Intentionally Left Blank.]


                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          


                          IN
                            WITNESS WHEREOF, Company has duly executed this Agreement
                            as of the day and year
                            first above written.

                          

                            
                              	
                                       

                                    	
                                       

                                    	
                                       

                                    
	
                                       

                                    	
                                      [Company]
                                        

                                    
	
                                       

                                       

                                    	
                                       

                                       

                                    	
                                       

                                       

                                    
	
                                       

                                    	
                                      By:

                                    	
                                          
                                        

                                    
	 	
                                      Name:  

                                    	 
	 	
                                      Title:    

                                    	 


                            

                             

                          

                          
                            	
                                    ACCEPTED
                                      AND AGREED:

                                    
J.
                                      ARON & COMPANY,
                                      

                                    as
                                      Administrative Agent

                                     

                                     

                                  	 	 	 
	By:	  
	 	 	 
	Name:	  
	 	 	
                                  
	
                                    Title: