ex10-1.htm

Exhibit
    10.1
    


     

    SECURITIES
      PURCHASE AGREEMENT

     

    LV
      ADMINISTRATIVE SERVICES, INC.,

     

    as
      Administrative and Collateral Agent

     

    THE
      PURCHASERS

     

    From
      Time to Time Party Hereto

     

    and

     

    NEW
      CENTURY ENERGY CORP.

     

    Dated:
      November 30, 2007

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
                

        

      

    


    


      SECURITIES
        PURCHASE AGREEMENT

      


      TABLE
        OF
        CONTENTS

       

       


      
        	
                1.

              	
                Agreement
                  to Sell and Purchase

              	
                1

              
	 	 	 
	
                2.

              	
                Fees

              	
                1

              
	 	 	 
	
                3.

              	
                Closing,
                  Delivery and Payment

              	
                2

              
	 	
                3.1
                  Closing

              	
                2

              
	 	
                3.2
                  Delivery

              	
                2

              
	 	 	 
	
                4.

              	
                Representations
                  and Warranties of the Company

              	
                2

              
	 	
                4.1
                  Organization, Good Standing and Qualification

              	
                2

              
	 	
                4.2
                  Subsidiaries

              	
                3

              
	 	
                4.3
                  Capitalization; Voting Rights

              	
                3

              
	 	
                4.4
                  Authorization; Binding Obligations

              	
                4

              
	 	
                4.5
                  Liabilities; Solvency

              	
                4

              
	 	
                4.6
                  Agreements; Action

              	
                5

              
	 	
                4.7
                  Obligations to Related Parties

              	
                6

              
	 	
                4.8
                  Changes

              	
                7

              
	 	
                4.9
                  Title to Properties and Assets; Liens, Etc

              	
                8

              
	 	
                4.10
                  Intellectual Property

              	
                9

              
	 	
                4.11
                  Compliance with Other Instruments

              	
                10

              
	 	
                4.12
                  Litigation

              	
                10

              
	 	
                4.13
                  Tax Returns and Payments

              	
                10

              
	 	
                4.14
                  Employees

              	
                11

              
	 	
                4.15
                  Voting Rights

              	
                11

              
	 	
                4.16
                  Compliance with Laws; Permits

              	
                11

              
	 	
                4.17
                  Environmental and Safety Laws

              	
                12

              
	 	
                4.18
                  Valid Offering

              	
                12

              
	 	
                4.19
                  Full Disclosure

              	
                13

              
	 	
                4.20
                  Insurance

              	
                13

              
	 	
                4.21
                  Patriot Act

              	
                13

              
	 	
                4.22
                  ERISA

              	
                14

              
	 	
                4.23
                  Oil and Gas Properties; Titles, Etc

              	
                14

              
	 	
                4.24
                  Maintenance of Oil and Gas Properties

              	
                14

              
	 	
                4.25
                  Gas Imbalances; Prepayments

              	
                15

              
	 	
                4.26
                  Marketing of Production

              	
                15

              
	 	
                4.27
                  Swap Agreements

              	
                15

              
	 	 	 
	
                5.

              	
                Representations
                  and Warranties of each Purchaser

              	
                15

              
	 	
                5.1
                  Requisite Power and Authority

              	
                15

              
	 	
                5.2
                  Investment Representations

              	
                16

              
	 	
                5.3
                  The Purchaser Bears Economic Risk

              	
                16

              
	 	
                5.4
                  Acquisition for Own Account

              	
                16

              
	 	
                5.5
                  The Purchaser Can Protect Its Interest

              	
                16

              
	 	
                5.6
                  Accredited Investor

              	
                16

              
	 	
                5.7
                  Legend

              	
                16

              


      

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	 	 	 
	
                6.

              	
                Covenants
                  of the Company

              	
                17

              
	 	
                6.1
                  Reporting Requirements

              	
                17

              
	 	
                6.2
                  Use of Funds

              	
                18

              
	 	
                6.3
                  Access to Facilities

              	
                18

              
	 	
                6.4
                  Taxes

              	
                18

              
	 	
                6.5
                  Insurance

              	
                20

              
	 	
                6.6
                  Intellectual Property.

              	
                21

              
	 	
                6.7
                  Properties

              	
                21

              
	 	
                6.8
                  Confidentiality

              	
                22

              
	 	
                6.9
                  Required Approvals

              	
                22

              
	 	
                6.10
                  Opinion

              	
                23

              
	 	
                6.11
                  Margin Stock

              	
                23

              
	 	
                6.12
                  FIRPTA

              	
                24

              
	 	
                6.13
                  Financing Right of First Refusal

              	
                24

              
	 	
                6.14
                  Board Observation Rights

              	
                24

              
	 	
                6.15
                  Summaries; Reports

              	
                25

              
	 	
                6.16
                  Financial Statements; Other Information

              	
                25

              
	 	
                6.17
                  Operation and Maintenance of Oil and Gas Properties

              	
                26

              
	 	
                6.18
                  Reserve Reports

              	
                26

              
	 	
                6.19
                  Marketing Activities

              	
                27

              
	 	
                6.20
                  Sale of Oil and Gas Properties

              	
                27

              
	 	
                6.21
                  Gas  Imbalances, Take-or-Pay or Other
                  Prepayments

              	
                27

              
	 	 	 
	
                7.

              	
                Covenants
                  of the Purchasers

              	
                27

              
	 	
                7.1
                  Confidentiality

              	
                27

              
	 	
                7.2
                  Limitation on Acquisition of Common Stock of the Company

              	
                28

              
	 	 	 
	
                8.

              	
                Covenants
                  of the Company and the Purchasers Regarding
                  Indemnification

              	
                28

              
	 	
                8.1
                  Company Indemnification

              	
                28

              
	 	
                8.2
                  Purchaser Indemnification

              	
                28

              
	 	 	 
	
                9.

              	
                Miscellaneous

              	
                29

              
	 	
                9.1
                  Governing Law, Jurisdiction and Waiver of Jury Trial

              	
                29

              
	 	
                9.2
                  Severability

              	
                30

              
	 	
                9.3
                  Survival

              	
                30

              
	 	
                9.4
                  Successors.

              	
                30

              
	 	
                9.5
                  Entire Agreement; Maximum Interest

              	
                31

              
	 	
                9.6
                  Amendment and Waiver

              	
                32

              
	 	
                9.7
                  Delays or Omissions

              	
                32

              
	 	
                9.8
                  Notices

              	
                32

              
	 	
                9.9
                  Attorneys’ Fees

              	
                33

              
	 	
                9.10
                  Titles and Subtitles

              	
                33

              
	 	
                9.11
                  Signatures; Counterparts

              	
                33

              
	 	
                9.12
                  Broker’s Fees

              	
                33

              
	 	
                9.13
                  Construction

              	
                34

              
	 	
                9.14
                  Agency

              	
                34

              


      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

     

    LIST
      OF EXHIBITS

     

    
      	
              Form
                of Term Note

            	
              Exhibit
                A

            
	
              Form
                of Opinion

            	
              Exhibit
                B

            
	
              Form
                of Escrow Agreement

            	
              Exhibit
                C

            


    

     

    LIST
      OF SCHEDULES

     

    
      	
              Schedule
                1

            	
              Purchaser
                Commitments

            
	
              Schedule
                4.2

            	
              Subsidiaries

            
	
              Schedule
                      4.3

            	
              Capitalization

            
	
              Schedule
                4.6

            	
              Extraordinary
                Agreements

            
	
              Schedule
                4.7

            	
              Obligations
                to Related Parties

            
	
              Schedule
                4.9

            	
              Title
                to Properties; Liens

            
	
              Schedule
                4.10

            	
              IP
                Registration

            
	
              Schedule
                4.12

            	
              Litigation

            
	
              Schedule
                4.13

            	
              Taxes

            
	
              Schedule
                4.14

            	
              Employees

            
	
              Schedule
                4.15

            	
              Voting
                Rights

            
	
              Schedule
                6.9(e)

            	
              Indebtedness

            
	
              Schedule
                9.12

            	
              Brokers

            


    

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
      as of November 30, 2007, among New Century Energy Corp., a Colorado corporation
      (the “Company”), the purchasers from time to time a party hereto (each a
“Purchaser” and collectively, the “Purchasers”), LV Administrative
      Services, Inc., a Delaware corporation, as administrative and collateral agent
      for each Purchaser, (the “Agent” and together with the Purchasers, the
“Creditor Parties”).

     

    RECITALS

     

    WHEREAS,
      the Company has authorized the sale to each Purchaser of a Secured Term Note
      in
      the form of Exhibit A hereto in the principal amount set forth opposite
      such Purchaser’s name on Schedule 1 hereto (each as amended, restated,
      modified and/or supplemented from time to time, a “Note” and,
      collectively, the “Notes”);

     

    WHEREAS,
      each Purchaser desires to purchase the applicable Note on the terms and
      conditions set forth herein; and

     

    WHEREAS,
      the Company desires to issue and sell the applicable Note to each Purchaser
      on
      the terms and conditions set forth herein.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the foregoing recitals and the mutual promises,
      representations, warranties and covenants hereinafter set forth and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree as follows:

     

    1.           Agreement
      to Sell and Purchase Pursuant to the terms and conditions set forth in this
      Agreement, on the Closing Date (as defined in Section 3), the Company shall
      sell
      to each Purchaser, and each Purchaser shall purchase from the Company, the
      applicable Note.  The sale of the Notes on the Closing Date shall be
      known as the “Offering.”  The Notes will mature on the Maturity
      Date (as defined in the Note).

     

    2.           Fees.  On
      the Closing Date:

     

    (a)           Subject
      to the terms of Section 2(b) below, the Company shall pay (i) to Valens Capital
      Management, LLC, the investment manager of the Purchasers (“VCM”), a
      non-refundable payment in an amount equal to one and one-half percent (1.50%)
      of
      the aggregate principal amount of the Notes,
      plus reasonable expenses (including legal fees and
      expenses) incurred in connection with the entering into of this Agreement and
      the Related Agreements, plus expenses incurred in connection with each of VCM
      and/or Purchasers’ due diligence review of the Company and its Subsidiaries and
      all other related matters; (ii) to the Purchasers, a non-refundable payment
      in
      an amount equal to one percent (1.00%) of the aggregate principal amount of
      the
      Notes; and (iii) to the Purchasers, an advance prepayment discount deposit
      equal to one percent (1.00%)
      of the aggregate principal amount of the Notes.  Each of the foregoing
      payments in clauses (i) and (ii) shall be deemed fully earned on the Closing
      Date and shall not be subject to rebate or proration for any
      reason.


    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    


     

     

    (b)           The
      payments and the expenses referred to in the preceding clause (b) (net of
      deposits previously paid by the Company) shall be paid at closing out of funds
      held pursuant to the Escrow Agreement (as defined below) and a disbursement
      letter (the “Disbursement Letter”).

     

    3.           Closing,
      Delivery and Payment

     

    3.1           Closing  Subject
      to the terms and conditions herein, the closing of the transactions contemplated
      hereby (the “Closing”), shall take place on the date hereof, at such time
      or place as the Company and the Agent may mutually agree (such date is
      hereinafter referred to as the “Closing Date”).

     

    3.2           Delivery.  Pursuant
      to the Escrow Agreement, at the Closing on the Closing Date, the Company will
      deliver to each Purchaser, among other things, the applicable Note and such
      Purchaser will deliver to the Company, among other things, the amounts set
      forth
      opposite its name in the Disbursement Letter by certified funds or wire
      transfer. The Company hereby acknowledges and agrees that each Purchaser’s
      obligation to purchase the applicable Note from the Company on the Closing
      Date
      shall be contingent upon the satisfaction (or waiver by the Agent in its sole
      discretion) of the items and matters set forth in the closing checklist provided
      by the Agent to the Company on or prior to the Closing Date.

     

    4.           Representations
      and Warranties of the Company  The Company hereby represents and
      warrants to each Creditor Party as follows:

     

    4.1           Organization,
      Good Standing and Qualification.  Each of the Company and its
      Subsidiaries is a corporation, partnership or limited liability company, as
      the
      case may be, duly organized, validly existing and in good standing under the
      laws of its jurisdiction of organization.  The Company, and each of
      its Subsidiaries has the corporate, limited liability company or partnership,
      as
      the case may be, power and authority to own and operate its properties and
      assets and, insofar as it is or shall be a party thereto, to (1) execute and
      deliver (i) this Agreement; (ii) the Notes to be issued in connection
      with this Agreement; (iii) the Master Security Agreement dated as of the
      date hereof among the Company, Gulf Coast Oil Corporation (“Gulf Coast”)
      and Century Resources, Inc. (“CRI”) (as amended, restated, modified
      and/or supplemented from time to time, the “Master Security Agreement”);
      (iv) the Guaranty dated as of the date hereof made by Gulf Coast (as
      amended, restated, modified and/or supplemented from time to time, the
“Subsidiary Guaranty”); (v) the Stock Pledge Agreement dated as of
      the date hereof between the Company and the Agent (as amended, restated,
      modified and/or supplemented from time to time, the “Stock Pledge
      Agreement”); (vi) the Net Profits Interest Agreement and the Conveyance
      of Net Profits Overriding Royalty Interest related thereto, each dated as of
      the
      date hereof and each made by the Company and CRI in favor of the Purchasers
      (as
      each is amended, restated, modified and/or supplemented from time to time,
      collectively, the “Net Profits Interest Agreements”); (vii) the
      Restricted Account Agreement with North Fork Bank
      and
      the Letter Agreement regarding Restricted Account Agreement Mechanics dated
      as
      of the date hereof between the Company and the Agent (as each is amended,
      restated, modified and/or supplemented from time to time, collectively, the
      “Restricted Account Agreement”); (viii) the Ratification and
      Amendment of Mortgage, Deed of Trust, Security Agreement, Financing Statement
      and Assignment of Production dated as of the date hereof made by the Company
      and
      CRI in favor of the Agent for the benefit of the Purchasers (as amended,
      restated, modified and/or supplemented from time to time, the “Mortgage
      Amendment”); (ix) the Ratification and Amendment of Mortgage, Deed of
      Trust, Security Agreement, Financing Statement and Assignment of Production
      dated as of the date hereof made by Gulf Coast in favor of the Agent for the
      benefit of the Purchasers (as amended, restated, modified and/or supplemented
      from time to time, the “Subsidiary Mortgage Amendment”); (x) the
      Funds Escrow Agreement dated as of the date hereof among the Company, the
      Purchasers and the escrow agent referred to therein, substantially in the form
      of Exhibit C hereto (as amended, restated, modified and/or supplemented
      from time to time, the “Escrow Agreement”); and (xi) all other
      documents, instruments and agreements entered into in connection with the
      transactions contemplated hereby and thereby (the preceding clauses (ii) through
      (xi), collectively, the “Related Agreements”); (2) issue and sell
      the Notes; and (3) carry out the provisions of this Agreement and the
      Related Agreements and to carry on its business as presently
      conducted.  Each of the Company and its Subsidiaries is duly qualified
      and is authorized to do business and is in good standing as a foreign
      corporation, partnership or limited liability company, as the case may be,
      in
      all jurisdictions in which the nature or location of its activities and of
      its
      properties (both owned and leased) makes such qualification necessary, except
      for those jurisdictions in which failure to do so has not, or could not
      reasonably be expected to have, individually or in the aggregate, a material
      adverse effect on the business, assets, liabilities, condition (financial or
      otherwise), properties, operations or prospects of the Company and its
      Subsidiaries, taken individually and as a whole (a “Material Adverse
      Effect”).


    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    


     

     

    4.2           Subsidiaries  Each
      direct and indirect Subsidiary of the Company, the direct owner of such
      Subsidiary and its percentage ownership thereof, is set forth on Schedule
      4.2.  For the purpose of this Agreement, a “Subsidiary” of
      any person or entity means (i) a corporation or other entity whose shares of
      stock or other ownership interests having ordinary voting power (other than
      stock or other ownership interests having such power only by reason of the
      happening of a contingency) to elect a majority of the directors of such
      corporation, or other persons or entities performing similar functions for
      such
      person or entity, are owned, directly or indirectly, by such person or entity
      or
      (ii) a corporation or other entity in which such person or entity owns, directly
      or indirectly, more than 50% of the equity interests at such time.

     

    4.3           Capitalization;
      Voting Rights

     

    (a)           The
      authorized capital stock of the Company, as of the date hereof consists of
      220,000,000 shares, of which 200,000,000 are shares of Common Stock, par value
      $0.001 per share, 56,010,612 shares of which are issued and outstanding as
      of
      the date hereof, and 20,000,000 are shares of preferred stock, par value $0.001
      per share.  The Company has 5,000 shares of Series A convertible
      preferred stock designated and 0 shares of Series A convertible preferred stock
      issued and outstanding as of the date hereof, which can vote in the aggregate
      an
      amount equal to 1,500,000 shares of the Company’s
      Common Stock, and 2,000,000 shares of Series B convertible preferred stock
      designated and 0 shares of Series B convertible preferred stock issued and
      outstanding.  The authorized, issued and outstanding capital stock of
      each Subsidiary of the Company is set forth on Schedule
      4.3.


    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    


     

     

    (b)           Except
      as disclosed on Schedule 4.3, other than:  (i) the shares
      reserved for issuance under the Company’s stock option plans; and (ii) the
      warrants issued in favor of Laurus Master Fund, Ltd. (“Laurus”), there
      are no outstanding options, warrants, rights (including conversion or preemptive
      rights and rights of first refusal), proxy or stockholder agreements, or
      arrangements or agreements of any kind for the purchase or acquisition from
      the
      Company of any of its securities.

     

    (c)           All
      issued and outstanding shares of the Company’s common stock:  (i) have
      been duly authorized and validly issued and are fully paid and non-assessable;
      and (ii) were issued in compliance with all applicable state and federal laws
      concerning the issuance of securities.

     

    (d)           The
      rights, preferences, privileges and restrictions of the shares of the Company’s
      common stock are as stated in the Company’s Articles of Incorporation (the
“Charter”).

     

    4.4           Authorization;
      Binding Obligations  All corporate, partnership or limited
      liability company, as the case may be, action on the part of the Company and
      each of its Subsidiaries (including their respective officers and directors)
      necessary for the authorization of this Agreement and the Related Agreements,
      the performance of all obligations of the Company and its Subsidiaries hereunder
      and under the other Related Agreements at the Closing and the authorization,
      sale, issuance and delivery of the Notes has been taken or will be taken prior
      to the Closing.  This Agreement and the Related Agreements, when
      executed and delivered by the Company and each of its Subsidiaries party
      thereto, will be valid and binding obligations of each such person or entity,
      enforceable against each such person or entity in accordance with their terms,
      except:

     

    (a)           as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      other laws of general application affecting enforcement of creditors’ rights;
      and

     

    (b)           general
      principles of equity that restrict the availability of equitable or legal
      remedies.

     

    The
      sale
      of the Notes are not and will not be subject to any preemptive rights or rights
      of first refusal that have not been properly waived or complied
      with.

     

    4.5           Liabilities;
      Solvency.

     

    (a)           Neither
      the Company nor any of its Subsidiaries has any liabilities, except current
      liabilities incurred in the ordinary course of business.


    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    


     

    (b)           Both
      before and after giving effect to (a) the transactions contemplated hereby
      that
      are to be consummated on the Closing Date, (b) the disbursement of the proceeds
      of, or the assumption of the liability in respect of, the Notes pursuant to
      the
      instructions or agreement of the Company and (c) the payment and accrual of
      all
      transaction costs in connection with the foregoing, the Company is and will
      be
      Solvent.  For purposes of this Section 4.5(b), “Solvent” means,
      with respect to any Person (as hereinafter defined) on a particular date, that
      on such date (a) the fair value of the property of such Person is greater than
      the total amount of liabilities, including contingent liabilities, of such
      Person; (b) the present fair salable value of the assets of such Person is
      not
      less than the amount that will be required to pay the probable liability of
      such
      Person on its debts as they become absolute and matured; (c) such Person does
      not intend to, and does not believe that it will, incur debts or liabilities
      beyond such Person’s ability to pay as such debts and liabilities mature; and
      (d) such Person is not engaged in a business or transaction, and is not about
      to
      engage in a business or transaction, for which such Person’s property would
      constitute an unreasonably small capital.  The amount of contingent
      liabilities (such as litigation, guaranties and pension plan liabilities) at
      any
      time shall be computed as the amount that, in light of all the facts and
      circumstances existing at the time, represents the amount that can reasonably
      be
      expected to become an actual or matured liability.

     

    4.6           Agreements;
      Action.  Except as set forth on Schedule 4.6:

     

    (a)           there
      are no agreements, understandings, instruments, contracts, proposed
      transactions, judgments, orders, writs or decrees to which the Company or any
      of
      its Subsidiaries is a party or by which it is bound which may involve: (i)
      obligations (contingent or otherwise) of, or payments to, the Company or any
      of
      its Subsidiaries in excess of $50,000 (other than obligations of, or payments
      to, the Company or any of its Subsidiaries arising from purchase or sale
      agreements entered into in the ordinary course of business); or (ii) the
      transfer or license of any patent, copyright, trade secret or other proprietary
      right to or from the Company or any of its Subsidiaries (other than licenses
      arising from the purchase of “off the shelf” or other standard products); or
      (iii) provisions restricting the development, manufacture or distribution
      of the Company’s or any of its Subsidiaries products or services; or
      (iv) indemnification by the Company or any of its Subsidiaries with respect
      to infringements of proprietary rights.

     

    (b)           since
      December 31, 2006 (the “Balance Sheet Date”), neither the Company nor any
      of its Subsidiaries has:  (i) declared or paid any dividends, or
      authorized or made any distribution upon or with respect to any class or series
      of its capital stock; (ii) incurred any indebtedness for money borrowed or
      any other liabilities (other than ordinary course obligations) individually
      in
      excess of $50,000 or, in the case of indebtedness and/or liabilities
      individually less than $50,000, in excess of $100,000 in the aggregate;
      (iii) made any loans or advances to any person or entity not in excess,
      individually or in the aggregate, of $100,000, other than ordinary course
      advances for travel expenses; or (iv) sold, exchanged or otherwise disposed
      of any of its assets or rights, other than the sale of its inventory in the
      ordinary course of business.

     

    (c)           for
      the purposes of subsections (a) and (b) above, all indebtedness, liabilities,
      agreements, understandings, instruments, contracts and proposed transactions
      involving the same person or entity (including persons or entities the Company
      or any Subsidiary of the Company has reason to believe are affiliated therewith)
      shall be aggregated for the purpose of meeting the individual minimum dollar
      amounts of such subsections.


    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    


     

     

    (d)           the
      Company makes and keeps books, records, and accounts, that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions of
      the
      Company’s assets.  The Company maintains internal control over
      financial reporting (“Financial Reporting Controls”) designed by, or
      under the supervision of, the Company’s principal executive and principal
      financial officers, and effected by the Company’s board of directors,
      management, and other personnel, to provide reasonable assurance regarding
      the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles (“GAAP”), including that:

     

    (i)           transactions
      are executed in accordance with management’s general or specific
      authorization;

     

    (ii)           unauthorized
      acquisition, use, or disposition of the Company’s assets that could have a
      material effect on the financial statements are prevented or timely
      detected;

     

    (iii)           transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with GAAP, and that the Company’s receipts and expenditures are being
      made only in accordance with authorizations of the Company’s management and
      board of directors;

     

    (iv)           transactions
      are recorded as necessary to maintain accountability for assets;
      and

     

    (v)           the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals, and appropriate action is taken with respect to any
      differences.

     

    4.7           Obligations
      to Related Parties.  Except as set forth on
Schedule 4.7, there are no obligations of the Company or any of its
      Subsidiaries to officers, directors, stockholders or employees of the Company
      or
      any of its Subsidiaries other than:

     

    (a)           for
      payment of salary for services rendered and for bonus payments;

     

    (b)           reimbursement
      for reasonable expenses incurred on behalf of the Company and its
      Subsidiaries;


    
      
        
        

      

      
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    (c)           for
      other standard employee benefits made generally available to all employees
      (including stock option agreements outstanding under any stock option plan
      approved by the Board of Directors of the Company and each Subsidiary of the
      Company, as applicable); and

     

    (d)           obligations
      listed in the Company’s and each of its Subsidiary’s financial
      statements.

     

    Except
      as
      described above or set forth on Schedule 4.7, none of the officers,
      directors or, to the best of the Company’s knowledge, key employees or
      stockholders of the Company or any of its Subsidiaries or any members of their
      immediate families, are indebted to the Company or any of its Subsidiaries,
      individually or in the aggregate, in excess of $50,000 or have any direct or
      indirect ownership interest in any firm or corporation with which the Company
      or
      any of its Subsidiaries is affiliated or with which the Company or any of its
      Subsidiaries has a business relationship, or any firm or corporation which
      competes with the Company or any of its Subsidiaries, other than passive
      investments in publicly traded companies (representing less than one percent
      (1%) of such company) which may compete with the Company or any of its
      Subsidiaries.  Except as described above, no officer, director,
      stockholder or employee of the Company or any of its Subsidiaries, or any member
      of their immediate families, is, directly or indirectly, interested in any
      material contract with the Company or any of its Subsidiaries and no agreements,
      understandings or proposed transactions are contemplated between the Company
      or
      any of its Subsidiaries and any such person.  Except as set forth on
Schedule 4.7, neither the Company nor any of its Subsidiaries is a
      guarantor or indemnitor of any indebtedness of any other person or
      entity.

     

    4.8           Changes  Since
      the Balance Sheet Date, except as disclosed in any Schedule to this Agreement
      or
      to any of the Related Agreements, there has not been:

     

    (a)           any
      change in the business, assets, liabilities, condition (financial or otherwise),
      properties, operations or prospects of the Company or any of its Subsidiaries,
      which individually or in the aggregate has had, or could reasonably be expected
      to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (b)           any
      resignation or termination of any officer, key employee or group of employees
      of
      the Company or any of its Subsidiaries;

     

    (c)           any
      material change, except in the ordinary course of business, in the contingent
      obligations of the Company or any of its Subsidiaries by way of guaranty,
      endorsement, indemnity, warranty or otherwise;

     

    (d)           any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect;

     

    (e)           any
      waiver by the Company or any of its Subsidiaries of a valuable right or of
      a
      material debt owed to it;


    
      
        
        

      

      
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    (f)           any
      direct or indirect loans made by the Company or any of its Subsidiaries to
      any
      stockholder, employee, officer or director of the Company or any of its
      Subsidiaries, other than advances made in the ordinary course of
      business;

     

    (g)           any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder of the Company or any of its
      Subsidiaries;

     

    (h)           any
      declaration or payment of any dividend or other distribution of the assets
      of
      the Company or any of its Subsidiaries;

     

    (i)           any
      labor organization activity related to the Company or any of its
      Subsidiaries;

     

    (j)           any
      debt, obligation or liability incurred, assumed or guaranteed by the Company
      or
      any of its Subsidiaries, except those for immaterial amounts and for current
      liabilities incurred in the ordinary course of business;

     

    (k)           any
      sale, assignment, transfer, abandonment or other disposition of any patents,
      trademarks, copyrights, trade secrets or other intangible assets owned by the
      Company or any of its Subsidiaries;

     

    (l)           any
      change in any material agreement to which the Company or any of its Subsidiaries
      is a party or by which either the Company or any of its Subsidiaries is bound
      which either individually or in the aggregate has had, or could reasonably
      be
      expected to have, individually or in the aggregate, a Material Adverse
      Effect;

     

    (m)           any
      other event or condition of any character that, either individually or in the
      aggregate, has had, or could reasonably be expected to have, individually or
      in
      the aggregate, a Material Adverse Effect; or

     

    (n)           any
      arrangement or commitment by the Company or any of its Subsidiaries to do any
      of
      the acts described in subsection (a) through (m) above.

     

    4.9           Title
      to Properties and Assets; Liens, Etc  Except as set forth on
Schedule 4.9, the Company and each of its Subsidiaries has good and
      marketable title to its properties and assets, and good title to its leasehold
      interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
      or charge (each for the foregoing, a “Lien”) , other than the following
      (each a “Permitted Encumbrance”):

     

    (a)           those
      in favor of the Agent, for the ratable benefit of the Creditor
      Parties;

     

    (b)           those
      in favor of Laurus, its assignees and/or any of its or their collateral
      agents;


    
      
        
        

      

      
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    (c)           those
      resulting from taxes which have not yet become delinquent;

     

    (d)           minor
      Liens which do not materially detract from the value of the property subject
      thereto or materially impair the operations of the Company or any of its
      Subsidiaries, so long as in each such case, such Liens have no effect on the
      Lien priority of the Agent, for the ratable benefit of the Creditor Parties,
      in
      such property; and

     

    (e)           those
      that have otherwise arisen in the ordinary course of business, so long as they
      have no effect on the Lien priority of the Purchaser therein.

     

    All
      facilities, machinery, equipment, fixtures, vehicles and other properties owned,
      leased or used by the Company and its Subsidiaries are in good operating
      condition and repair and are reasonably fit and usable for the purposes for
      which they are being used.  Except as set forth on
Schedule 4.9, the Company and its Subsidiaries are in compliance
      with all material terms of each lease to which it is a party or is otherwise
      bound.

     

    4.10           Intellectual
      Property

     

    (a)           The
      Company and each of its Subsidiaries owns or possesses sufficient legal rights
      to use all patents, trademarks, service marks, trade names, copyrights, trade
      secrets, licenses, information and other proprietary rights and processes
      necessary for its business as now conducted and, to the Company’s knowledge, as
      presently proposed to be conducted (the “Intellectual
      Property”).  There are no settlements or consents, covenants not
      to sue, non-assertion assurances, or releases to which the Company or any of
      its
      Subsidiaries is bound which adversely affects its rights to own or use any
      Intellectual Property.

     

    (b)           To
      the Company’s knowledge, the conduct of the Company’s and each of its
      Subsidiaries’ business as now conducted, and as presently proposed to be
      conducted, does not (and will not) result in any infringement or other violation
      of the rights of others.

     

    (c)           Schedule 4.10
      (as such schedule may be amended or supplemented from time to time) sets forth
      a
      true and complete list of (i) all registrations and applications for
      Intellectual Property owned by the Company and each of its Subsidiaries filed
      or
      issued by any Intellectual Property registry and (ii) all Intellectual
      Property licenses which are either material to the business of the Company
      or
      relate to any material portion of the Company’s or any of its Subsidiaries’
inventory, including licenses for standard software having a replacement value
      of more than $50,000.  None of such Intellectual Property licenses are
      reasonably likely to be construed as an assignment of the licensed Intellectual
      Property to the Company or any of its Subsidiaries.

     

    (d)           There
      are no claims pending or, to the best of the Company’s knowledge, threatened and
      neither the Company nor any of its Subsidiaries has received any other
      communications, alleging that, the Company or any of its Subsidiaries has
      infringed, diluted, misappropriated, or otherwise violated any Intellectual
      Property of any other
      person or entity, nor is the Company or any of its Subsidiaries aware of any
      basis therefor.


    
      
        
        

      

      
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    (e)           The
      Company is not aware of any infringement diluted, misappropriated, or other
      violation of its Intellectual Property by any other person or
      entity.

     

    (f)           Neither
      the Company nor any of its Subsidiaries utilizes any inventions, trade secrets
      or other Intellectual Property of any of its employees, officers, or
      contractors) except for inventions, trade secrets or other Intellectual Property
      that is owned by the Company or any Subsidiary as a matter of law or have been
      rightfully assigned to the Company or any of its Subsidiaries.

     

    4.11           Compliance
      with Other Instruments  Neither the Company nor any of its
      Subsidiaries is in violation or default of (x) any term of its Charter or
      bylaws or (y) any provision of any indebtedness, mortgage, indenture,
      contract, agreement or instrument to which it is party or by which it is bound
      or of any judgment, decree, order or writ, which violation or default, in the
      case of this clause (y), has had, or could reasonably be expected to have,
      either individually or in the aggregate, a Material Adverse
      Effect.  The execution, delivery and performance of and compliance
      with this Agreement and the Related Agreements to which it is a party, and
      the
      issuance and sale of the Notes by the Company pursuant hereto and thereto,
      will
      not, with or without the passage of time or giving of notice, result in any
      such
      material violation, or be in conflict with or constitute a default under any
      such term or provision, or result in the creation of any Lien upon any of the
      properties or assets of the Company or any of its Subsidiaries or the
      suspension, revocation, impairment, forfeiture or non-renewal of any permit,
      license, authorization or approval applicable to the Company, its business
      or
      operations or any of its assets or properties.

     

    4.12           Litigation  Except
      as set forth on Schedule 4.12 hereto, there is no action, suit,
      proceeding or investigation pending or, to the Company’s knowledge, currently
      threatened against the Company or any of its Subsidiaries that prevents the
      Company or any of its Subsidiaries from entering into this Agreement or the
      other Related Agreements, or from consummating the transactions contemplated
      hereby or thereby, or which has had, or could reasonably be expected to have,
      either individually or in the aggregate, a Material Adverse Effect or any change
      in the current equity ownership of the Company or any of its Subsidiaries,
      nor
      is the Company aware that there is any basis to assert any of the
      foregoing.  Neither the Company nor any of its Subsidiaries is a party
      to or subject to the provisions of any order, writ, injunction, judgment or
      decree of any court or government agency or instrumentality.  There is
      no action, suit, proceeding or investigation by the Company or any of its
      Subsidiaries currently pending or which the Company or any of its Subsidiaries
      intends to initiate.

     

    4.13           Tax
      Returns and Payments  The Company and each of its Subsidiaries has
      timely filed all tax returns (federal, state and local) required to be filed
      by
      it.  All taxes shown to be due and payable on such returns, any
      assessments imposed, and all other taxes due and payable by the Company or
      any
      of its Subsidiaries on or before the Closing, have been paid or will
      be
      paid prior to the time they become delinquent.  Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been
      advised:
       

      (a)           that
        any of its returns, federal, state or other, have been or are being audited
        as
        of the date hereof; or

       

      (b)           of
        any adjustment, deficiency, assessment or court decision in respect of its
        federal, state or other taxes.

    


    
      
        
        

      

      
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    The
      Company has no knowledge of any liability for any tax to be imposed upon its
      properties or assets as of the date of this Agreement that is not adequately
      provided for.

     

    4.14           Employees.  Except
      as set forth on Schedule 4.14, neither the Company nor any of its
      Subsidiaries has any collective bargaining agreements with any of its
      employees.  There is no labor union organizing activity pending or, to
      the Company’s knowledge, threatened with respect to the Company or any of its
      Subsidiaries.  Except as disclosed on Schedule 4.14, neither
      the Company nor any of its Subsidiaries is a party to or bound by any currently
      effective employment contract, deferred compensation arrangement, bonus plan,
      incentive plan, profit sharing plan, retirement agreement or other employee
      compensation plan or agreement.  To the Company’s knowledge, no
      employee of the Company or any of its Subsidiaries, nor any consultant with
      whom
      the Company or any of its Subsidiaries has contracted, is in violation of any
      term of any employment contract, proprietary information agreement or any other
      agreement relating to the right of any such individual to be employed by, or
      to
      contract with, the Company or any of its Subsidiaries because of the nature
      of
      the business to be conducted by the Company or any of its Subsidiaries; and
      to
      the Company’s knowledge the continued employment by the Company and its
      Subsidiaries of their present employees, and the performance of the Company’s
      and its Subsidiaries’ contracts with its independent contractors, will not
      result in any such violation.  Neither the Company nor any of its
      Subsidiaries is aware that any of its employees is obligated under any contract
      (including licenses, covenants or commitments of any nature) or other agreement,
      or subject to any judgment, decree or order of any court or administrative
      agency that would interfere with their duties to the Company or any of its
      Subsidiaries.  Neither the Company nor any of its Subsidiaries has
      received any notice alleging that any such violation has
      occurred.  Except for employees who have a current effective
      employment agreement with the Company or any of its Subsidiaries, no employee
      of
      the Company or any of its Subsidiaries has been granted the right to continued
      employment by the Company or any of its Subsidiaries or to any material
      compensation following termination of employment with the Company or any of
      its
      Subsidiaries.  Except as set forth on Schedule 4.14, the
      Company is not aware that any officer, key employee or group of employees
      intends to terminate his, her or their employment with the Company or any of
      its
      Subsidiaries, nor does the Company or any of its Subsidiaries have a present
      intention to terminate the employment of any officer, key employee or group
      of
      employees.

     

    4.15           Voting
      Rights.  Except as set forth on Schedule 4.15, to the
      Company’s knowledge, no stockholder of the Company or any of its Subsidiaries
      has entered into any agreement with respect to the voting of equity securities
      of the Company or any of its Subsidiaries.

     

    4.16           Compliance
      with Laws; Permits.  Neither the Company nor any of its
      Subsidiaries is in violation of any provision of the Sarbanes-Oxley Act of
      2002,
      as amended, or any other applicable statute, rule, regulation, order or
      restriction of any domestic or foreign government or any instrumentality or
      agency thereof in respect of the conduct of its business or the ownership of
      its
      properties which has had, or could reasonably be expected to have, either
      individually or in the aggregate, a Material Adverse Effect.  No
      governmental orders, permissions, consents, approvals or authorizations are
      required to be obtained and no registrations or declarations are required to
      be
      filed in connection with the execution and delivery of this Agreement or any
      other Related Agreement and the issuance of any of the Notes, except such as
      have been duly and validly obtained or filed, or with respect to any filings
      that must be made after the Closing, as will be filed in a timely
      manner.  The Company and its Subsidiaries, or to the extent
      applicable, the operator(s), have all material franchises, permits, licenses
      and
      any similar authority necessary for the conduct of its business as now being
      conducted by it, the lack of which could, either individually or in the
      aggregate, reasonably be expected to have a Material Adverse
      Effect.


    
      
        
          
          

        

        
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    4.17           Environmental
      and Safety Laws.  There are no pending actions, suits or
      proceedings by or before any arbitrator or Governmental Authority pending,
      or to
      the knowledge of Company threatened against the Company or any of its
      Subsidiaries under Environmental Law.  The Company and its
      Subsidiaries (i) are and have been in full compliance with Environmental Law
      and
      have no knowledge or any material expenditure that will be required to maintain
      such compliance in the future; (ii) have not received any notice or claim
      alleging that they are not in full compliance with or otherwise have liability
      under Environmental Law; and (iii) have no knowledge of any facts or
      circumstances that could reasonably be expected to form the basis of any such
      claim.  No Hazardous Materials are present or are used or have been
      used, stored, or released by the Company or its Subsidiaries, or to their
      knowledge by any other Person, at any property currently or formerly owned,
      leased or operated by the Company or its Subsidiaries or disposed of at any
      other location by the Company or its Subsidiaries except (i) in compliance
      with
      Environmental Law; and (2) in quantities and under circumstances that would
      not
      require investigation or remediation by the Company or their its
      Subsidiaries.  The Company and its Subsidiaries have not assumed by
      contract or by operation of law the liabilities arising under Environmental
      Law
      of any other Person.  The Company and its Subsidiaries have provided
      to the Agent all material reports, audits and assessments in their possession
      or
      control regarding the environmental condition of any property currently or
      formerly owned or operated by the Company or any of its
      Subsidiaries.  “Environmental Law” means all laws, rules,
      regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices
      or binding agreements issued, promulgated or entered into by any Governmental
      Authority, relating in any way to pollution or the environment , preservation
      or
      reclamation of natural resources, the management, generation, use, handling,
      treatment, transportation, storage, disposal or release or threatened release
      of
      or exposure to Hazardous Materials, or occupational health and
      safety.  “Governmental Authority” means any nation or
      government, any state or other political subdivision thereof, and any agency,
      department or other entity exercising executive, legislative, judicial,
      regulatory or administrative functions of or pertaining to
      government.  “Hazardous Materials” means materials, wastes or
      pollutants listed or defined as “hazardous substances”, “hazardous wastes”
,”toxic substances” or by words of similar import or any other substance or
      waste otherwise regulated by applicable Environmental Law, including nuclear
      materials and radioactive substances or wastes, petroleum or
      petroleum distillates, asbestos or asbestos containing materials,
      polychlorinated biphenyls, radon gas, infectious or medical wastes, and toxic
      mold.  “Person” means any individual, sole proprietorship,
      partnership, limited liability partnership, joint venture, trust, unincorporated
      organization, association, corporation, limited liability company, institution,
      public benefit corporation, entity or government (whether federal, state,
      county, city, municipal or otherwise, including any instrumentality, division,
      agency, body or department thereof), and shall include such Person’s successors
      and assigns.

     

     

    4.18           Valid
      Offering  Assuming the accuracy of the representations and
      warranties of the Purchasers contained in this Agreement, the offer, sale and
      issuance of the Notes will be exempt from the registration requirements of
      the
      Securities Act of 1933, as amended (the “Securities Act”), and will have
      been registered or qualified (or are exempt from registration and qualification)
      under the registration, permit or qualification requirements of all applicable
      state securities laws.

     

    
      
        
        

      

      
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    4.19           Full
      Disclosure.  The Company and each of its Subsidiaries has provided
      the Purchasers with all information requested by the Purchasers in connection
      with the Purchasers’ decision to purchase the Notes, including all information
      the Company and its Subsidiaries believe is reasonably necessary to make such
      investment decision.  Neither this Agreement, the Related Agreements,
      the exhibits and schedules hereto and thereto nor any other document including,
      without limitation, the responses contained in any questionnaire provided to
      the
      Company by the Agent, delivered by the Company or any of its Subsidiaries to
      Purchasers or their attorneys or agents in connection herewith or therewith
      or
      with the transactions contemplated hereby or thereby, contain any untrue
      statement of a material fact nor omit to state a material fact necessary in
      order to make the statements contained herein or therein, in light of the
      circumstances in which they are made, not misleading.  Any financial
      projections and other estimates provided to the Purchasers by the Company or
      any
      of its Subsidiaries were based on the Company’s and its Subsidiaries’ experience
      in the industry and on assumptions of fact and opinion as to future events
      which
      the Company or any of its Subsidiaries, at the date of the issuance of such
      projections or estimates, believed to be reasonable.

     

    4.20           Insurance.  The
      Company and each of its Subsidiaries has general commercial, product liability,
      fire and casualty insurance policies with coverages which the Company and each
      of its Subsidiaries believe are customary for companies similarly situated
      to
      the Company and its Subsidiaries in the same or similar business.

     

    4.21           Patriot
      Act.  The Company certifies that, to the best of Company’s
      knowledge, neither the Company nor any of its Subsidiaries has been designated,
      nor is or shall be owned or controlled, by a “suspected terrorist” as defined in
      Executive Order 13224.  The Company hereby acknowledges that each of
      the Creditor Parties seeks to comply with all applicable laws concerning money
      laundering and related activities.  In furtherance of those efforts,
      the Company hereby represents, warrants and covenants that:  (i) none
      of the cash or property that the Company or any of its Subsidiaries will pay
      or
      will contribute to any Creditor Party has been or shall be derived from, or
      related to, any activity that is deemed criminal under United States law; and
      (ii) no contribution or payment by the Company or any of its Subsidiaries to
      any
      Creditor Party, to the extent that they are within the Company’s and/or its
      Subsidiaries’ control,
      shall cause any Creditor Party to be in violation of the United States Bank
      Secrecy Act, the United States International Money Laundering Control Act of
      1986, as amended, or the United States International Money Laundering Abatement
      and Anti-Terrorist Financing Act of 2001.  The Company shall promptly
      notify the Agent if any of these representations, warranties or covenants ceases
      to be true and accurate regarding the Company or any of its
      Subsidiaries.  The Company shall provide any Creditor Party all
      additional information regarding the Company or any of its Subsidiaries that
      such Creditor Party deems necessary or convenient to ensure compliance with
      all
      applicable laws concerning money laundering and similar
      activities.  The Company understands and agrees that if at any time it
      is discovered that any of the foregoing representations, warranties or covenants
      are incorrect, or if otherwise required by applicable law or regulation related
      to money laundering or similar activities, the Creditor Parties may undertake
      appropriate actions to ensure compliance with applicable law or regulation,
      including but not limited to segregation and/or redemption of any Purchaser’s
      investment in the Company.  The Company further understands that the
      Creditor Parties may release confidential information about the Company and
      its
      Subsidiaries and, if applicable, any underlying beneficial owners, to proper
      authorities if such Creditor Party, in its sole discretion, determines that
      it
      is in the best interests of such Creditor Party in light of relevant rules
      and
      regulations under the laws set forth in subsection (ii)
      above.


    
      
        
        

      

      
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    4.22           ERISA.  Based
      upon the Employee Retirement Income Security Act of 1974, as amended
      (“ERISA”), and the regulations and published interpretations
      thereunder:  (i) neither the Company nor any of its Subsidiaries has
      engaged in any Prohibited Transactions (as defined in Section 406 of ERISA
      and
      Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”)); (ii) each of the Company and its Subsidiaries has met all
      applicable minimum funding requirements under Section 302 of ERISA in respect
      of
      its plans; (iii) neither the Company nor any of its Subsidiaries has any
      knowledge of any event or occurrence which would cause the Pension Benefit
      Guaranty Corporation to institute proceedings under Title IV of ERISA to
      terminate any employee benefit plan(s); (iv) neither the Company nor any of
      its
      Subsidiaries has any fiduciary responsibility for investments with respect
      to
      any plan existing for the benefit of persons other than the Company’s or such
      Subsidiary’s employees; and (v) neither the Company nor any of its Subsidiaries
      has withdrawn, completely or partially, from any multi-employer pension plan
      so
      as to incur liability under the Multiemployer Pension Plan Amendments Act of
      1980.

     

    4.23           Oil
      and Gas Properties; Titles, Etc  The Company has good and
      defensible title to the working interests and net revenue interests in its
      oil
      and gas leases, oil and gas fee properties, and related properties (the “Oil
      and Gas Properties”) evaluated in the most recent reserve report delivered
      to the Agent free and clear of all liens except liens permitted by Section
      4.9.  The Company owns the net interests in production attributable to
      the Oil and Gas Properties as reflected in such reserve report, and the
      ownership of such Oil and Gas Properties shall not obligate the Company to
      bear
      the costs and expenses relating to the maintenance, development and operations
      of any Oil and Gas Property in an amount in excess of the working interests
      of
      the Oil and Gas Properties set forth in such reserve report that is not offset
      by a corresponding proportionate increase in the Company’s net revenue interest
      in the Oil and Gas Properties.

     

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

    


    
      
        
        

      

      
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    4.25           Gas
      Imbalances; Prepayments.  On a net basis there are no gas
      imbalances, take-or-pay or other prepayments which would require the Company
      to
      deliver hydrocarbons produced from the Oil and Gas Properties at some future
      time without then or thereafter receiving full payment therefor.

     

    4.26           Marketing
      of Production  The Company is receiving a price for all production
      sold thereunder which is computed substantially in accordance with the terms
      of
      the relevant contract and is not having deliveries curtailed substantially
      below
      the subject Oil and Gas Property’s delivery capacity), no material agreements
      exist which are not cancelable on sixty (60) days notice or less without penalty
      or detriment for the sale of production from the Company’s hydrocarbons
      (including, without limitation, calls on, or other rights to purchase,
      production, whether or not the same are currently being exercised) that (a)
      pertain to the sale of production at a fixed price and (b) have a maturity
      or  expiry date of longer than six (6) months from the date
      hereof.

     

    4.27           Swap
      Agreements  The Company is not party to any Swap
      Agreement.  For the purposes hereof, “Swap Agreement” shall
      mean any agreement with respect to any swap, forward, future or derivative
      transaction or option or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or
      more interest rates, currencies, commodities, equity or debt instruments or
      securities, or economic, financial or pricing indices or measures of economic,
      financial or pricing risk or value or any similar transaction or any combination
      of these transactions.

     

    5.           Representations
      and Warranties of each Purchaser.  Each Purchaser hereby
      represents and warrants, severally and not jointly, to the Company as follows
      (such representations and warranties do not lessen or obviate the
      representations and warranties of the Company set forth in this
      Agreement):

     

    
      5.1           Requisite
        Power and Authority  Such Purchaser has all necessary power and
        authority under all applicable provisions of law to execute and deliver this
        Agreement and the Related Agreements and to carry out their
        provisions.  All corporate action on such Purchaser’s part required
        for the lawful execution and delivery of this Agreement and the Related
        Agreements have been or will be effectively taken prior to the
        Closing.  Upon their execution and delivery, this Agreement and the
        Related Agreements will be valid and binding obligations of such Purchaser,
        enforceable in accordance with their terms, except:

       

      (a)           as
        limited by applicable bankruptcy, insolvency, reorganization, moratorium
        or
        other laws of general application affecting enforcement of creditors’ rights;
        and

       

      (b)           as
        limited by general principles of equity that restrict the availability of
        equitable and legal remedies.

    


    
      
        
        

      

      
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    5.2           Investment
      Representations.  Such Purchaser understands that the Notes are
      being offered and sold pursuant to an exemption from registration contained
      in
      the Securities Act based in part upon such Purchaser’s representations contained
      in this Agreement, including, without limitation, that such Purchaser is an
      “accredited investor” within the meaning of Regulation D under the
      Securities Act.  Such Purchaser confirms that it has received or has
      had full access to all the information it considers necessary or appropriate
      to
      make an informed investment decision with respect to the applicable Note to
      be
      purchased by it under this Agreement.  Such Purchaser further confirms
      that it has had an opportunity to ask questions and receive answers from the
      Company regarding the Company’s and its Subsidiaries’ business, management and
      financial affairs and the terms and conditions of the Offering and the Notes
      and
      to obtain additional information (to the extent the Company possessed such
      information or could acquire it without unreasonable effort or expense)
      necessary to verify any information furnished to such Purchaser or to which
      such
      Purchaser had access.

     

    5.3           The
      Purchaser Bears Economic Risk  Such Purchaser has substantial
      experience in evaluating and investing in private placement transactions of
      securities in companies similar to the Company so that it is capable of
      evaluating the merits and risks of its investment in the Company and has the
      capacity to protect its own interests.

     

    5.4           Acquisition
      for Own Account.  Such Purchaser is acquiring the applicable Note
      for such Purchaser’s own account for investment only, and not as a nominee or
      agent and not with a view towards or for resale in connection with their
      distribution.

     

    5.5           The
      Purchaser Can Protect Its Interest.  Such Purchaser represents
      that by reason of its, or of its management’s, business and financial
      experience, such Purchaser has the capacity to evaluate the merits and risks
      of
      its investment in the applicable Note and to protect its own interests in
      connection with the transactions contemplated in this Agreement and the Related
      Agreements.  Further, such Purchaser is aware of no publication of any
      advertisement in connection with the transactions contemplated in the Agreement
      or the Related Agreements.

     

    5.6           Accredited
      Investor.  Such Purchaser represents that it is an accredited
      investor within the meaning of Regulation D under the Securities
      Act.


     

    5.7           Legend.  The
      applicable Note shall bear substantially the following legend:

     

    “THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR
      ANY APPLICABLE STATE SECURITIES LAWS.  THIS NOTE MAY NOT BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE
      REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE
      SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION.”

     

    
      
        
        

      

      
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    6.           Covenants
      of the Company.  The Company covenants and agrees with each
      Creditor Party as follows:

     

    6.1           Reporting
      Requirements.  The Company will deliver, or cause to be delivered,
      to the Agent each of the following, which shall be in form and detail acceptable
      to the Agent:

     

    (a)           As
      soon as available, and in any event within one hundred five (105) days after
      the
      end of each fiscal year of the Company, the Company’s and each of its
      Subsidiaries’ audited financial statements with a report of independent
      certified public accountants of recognized standing selected by the Company
      and
      acceptable to the Agent (the “Accountants”), which annual financial
      statements shall be without qualification and shall include the Company’s and
      each of its Subsidiaries’ balance sheet as at the end of such fiscal year and
      the related statements of the Company’s and each of its Subsidiaries’ income,
      retained earnings and cash flows for the fiscal year then ended, prepared on
      a
      consolidating and consolidated basis to include the Company, each Subsidiary
      of
      the Company, all in reasonable detail and prepared in accordance with GAAP,
      together with (i) if and when available, copies of any management letters
      prepared by the Accountants; and (ii) a certificate of the Company’s President,
      Chief Executive Officer or Chief Financial Officer stating that such financial
      statements have been prepared in accordance with GAAP and whether or not such
      officer has knowledge of the occurrence of any Event of Default  (as
      defined in each Note) and, if so, stating in reasonable detail the facts with
      respect thereto;

     

    (b)           As
      soon as available and in any event within fifty (50) days after the end of
      each
      fiscal quarter of the Company, an unaudited/internal balance sheet and
      statements of income, retained earnings and cash flows of the Company and each
      of its Subsidiaries as at the end of and for such quarter and for the year
      to
      date period then ended, prepared on a consolidating and consolidated basis
      to
      include the Company and each Subsidiary of the Company, in reasonable detail
      and
      stating in comparative form the figures for the corresponding date and periods
      in the previous year, all prepared in accordance with GAAP, subject to year-end
      adjustments and accompanied by a certificate of the Company’s President, Chief
      Executive Officer or Chief Financial Officer, stating (i) that such financial
      statements have been prepared in accordance with GAAP,
      subject to year-end audit adjustments, and (ii) whether or not such officer
      has
      knowledge of the occurrence of any Event of Default (as defined in each Note)
      not theretofore reported and remedied and, if so, stating in reasonable detail
      the facts with respect thereto;
       

      (c)           As
        soon as available and in any event within twenty (20) days after the end
        of each
        calendar month, an unaudited/internal balance sheet of the Company and each
        of
        its Subsidiaries, as at the end of such month, prepared, on a consolidating
        and
        consolidated basis to include the Company and each of its Subsidiaries, in
        reasonable detail and stating in comparative form the figures for the
        corresponding date and periods in the previous year, all prepared in accordance
        with GAAP, subject to year-end adjustments; and

       

      (d)           The
        Company shall deliver, or cause the applicable Subsidiary of the Company
        to
        deliver, such other information as any Creditor Party shall reasonably
        request.

    


    
      
        
        

      

      
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    6.2           Use
      of Funds.  The Company shall use the proceeds of the sale of the
      Notes solely for general working capital purposes.

     

    6.3           Access
      to Facilities.  The Company and each of its Subsidiaries will
      permit any representatives designated by the Agent (or any successor of the
      Agent), upon reasonable notice and during normal business hours, at such
      person’s expense and accompanied by a representative of the Company or any
      Subsidiary (provided that no such prior notice shall be required to be given
      and
      no such representative of the Company or any Subsidiary shall be required to
      accompany the Agent in the event the Agent believes such access is necessary
      to
      preserve or protect the Collateral (as defined in the Master Security Agreement)
      or following the occurrence and during the continuance of an Event of Default
      (as defined in each Note)), to:

     

    (a)           visit
      and inspect any of the properties of the Company or any of its
      Subsidiaries;

     

    (b)           examine
      the corporate and financial records of the Company or any of its Subsidiaries
      (unless such examination is not permitted by federal, state or local law or
      by
      contract) and make copies thereof or extracts therefrom; and

     

    (c)           discuss
      the affairs, finances and accounts of the Company or any of its Subsidiaries
      with the directors, officers and independent accountants of the Company or
      any
      of its Subsidiaries.

     

    Notwithstanding
      the foregoing, neither the Company nor any of its Subsidiaries will provide
      any
      material, non-public information to any Creditor Party unless such Creditor
      Party signs a confidentiality agreement and otherwise complies with Regulation
      FD, under the federal securities laws.

     

    6.4           Taxes.


     

    (a)           The
      Company and each of its Subsidiaries will promptly pay and discharge, or cause
      to be paid and discharged, when due and payable, all taxes, assessments and
      governmental charges or levies imposed upon the income, profits, property or
      business of the Company and its Subsidiaries; provided, however, that any such
      tax, assessment, charge or levy need not be paid currently if (i) the
      validity thereof shall currently and diligently be contested in good faith
      by
      appropriate proceedings, (ii) such tax, assessment, charge or levy shall
      have no effect on the lien priority of the Agent in any property of the Company
      or any of its Subsidiaries and (iii) if the Company and/or such Subsidiary
      shall have set aside on its books adequate reserves with respect thereto in
      accordance with GAAP; and provided, further, that the Company and its
      Subsidiaries will pay all such taxes, assessments, charges or levies forthwith
      upon the commencement of proceedings to foreclose any lien which may have
      attached as security therefor.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    (b)           All
      payments made by the Company under this Agreement or any Note shall be made
      free
      and clear of, and without deduction or withholding for or on account of, any
      present or future Taxes (as defined below) now or hereafter imposed, levied,
      collected, withheld or assessed by any Governmental Authority, other than
      Excluded Taxes (as defined below).  If any Non-Excluded Taxes (as
      defined below) or Other Taxes (as defined below) are required to be withheld
      from any amounts payable to any Creditor Party under this Agreement or any
      Note,
      the amounts so payable to such Creditor Party shall be increased to the extent
      necessary to yield to such Creditor Party (after payment of all Non-Excluded
      Taxes and Other Taxes, including those imposed on payments made pursuant to
      this
      paragraph (b) of this Section 6.4 or any such other amounts payable in this
      Agreement or any Note at the rates or in the amounts specified herein or
      therein), an amount equal to the sum it would have received had no such
      withholding or deductions been made provided, however, that no Company shall
      be
      required to increase any such amounts payable to any Creditor Party with respect
      to any Non-Excluded Taxes that are directly attributable to such Creditor
      Party’s failure to comply with the requirements of paragraph (e) of this
      Section 6.4.

     

    (c)           In
      addition, the Company shall pay any Other Taxes to the relevant Governmental
      Authority in accordance with applicable law.

     

    (d)           Whenever
      any Non-Excluded Taxes or Other Taxes are payable by the Company, as promptly
      as
      possible thereafter the Company shall send to the Agent for its own account
      or
      for the account of the relevant Lender, as the case may be, a certified copy
      of
      an original official receipt received by the Company showing payment thereof
      (or
      such other evidence reasonably satisfactory to the Agent).  If the
      Company fails to pay any Non-Excluded Taxes or Other Taxes when due to the
      appropriate taxing authority or fails to remit to the Agent the required
      receipts or other required documentary evidence, the Company shall indemnify
      the
      Creditor Parties for any incremental taxes, interest or penalties that may
      become payable by any Creditor Party as a result of any such
      failure.

     

    (e)           Each
      Purchaser (or its assignee) that is not a “United States Person” as defined in
      Section 7701(a)(30) of the Code (a “Non-U.S. Purchaser”) shall deliver
      to the Company and the Agent two completed originals of an appropriate U.S.
      Internal Revenue Service Form W-8, as applicable, or any subsequent versions
      thereof or successors thereto, properly completed and duly executed by such
      Non-U.S. Purchaser.  Such forms shall be delivered by each Non-U.S.
      Purchaser on or before the date it becomes a party to this
      Agreement.  In addition, each Non-U.S. Purchaser shall deliver such
      forms promptly upon the obsolescence or invalidity of any form previously
      delivered by such Non-U.S. Purchaser.  Each Non-U.S. Purchaser shall
      promptly notify the Company at any time it determines that it is no longer
      in a
      position to provide any previously delivered certificate to the Company (or
      any
      other form of certification adopted by the U.S. taxing authorities for such
      purpose).  Notwithstanding any other provision of this paragraph (e),
      a Non-U.S. Purchaser shall not be required to deliver any form pursuant to
      this
      paragraph that such Non-U.S. Purchaser is not legally able to
      deliver.


    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    


     

     

    (f)           The
      agreements in the preceding paragraphs (b), (c), (d), (e) and this paragraph
      (f)
      shall survive the termination of this Agreement and the payment of the Notes
      and
      all other amounts payable hereunder or thereunder or under any other Related
      Agreement.

     

    As
      used
      in this Section 6.4, the following terms shall have the following meanings
      (such meanings to be equally applicable to both the singular and plural forms
      of
      the terms defined):

     

    “Excluded
      Taxes” means, with respect to any Creditor Party, taxes imposed on or
      measured by its overall net income and franchise taxes imposed on it in lieu
      of
      net income taxes, by the jurisdiction (or any political subdivision thereof)
      under the laws of which such Creditor Party is incorporated or organized or
      by
      the jurisdiction (or any political subdivision thereof) in which the principal
      place of management or applicable lending office of such Creditor Party is
      located.

     

    “Non-Excluded
      Taxes” means all Taxes other than (i) Excluded Taxes and (ii) Other
      Taxes.

     

    “Other
      Taxes” means any and all present or future stamp or documentary taxes or any
      other excise or property taxes, charges or similar levies arising from any
      payment made hereunder or from the execution, delivery or enforcement of, or
      otherwise with respect to, this Agreement or any other Related
      Agreement.

     

    “Taxes”
      means any and all present or future taxes, duties, levies, imposts, deductions,
      assessments, fees, withholdings or similar charges, and all liabilities with
      respect thereto.

     

    6.5           Insurance.  (i)  The
      Company shall bear the full risk of loss from any loss of any nature whatsoever
      with respect to the Collateral (as defined in each of the Master Security
      Agreement and each other security agreement entered into by the Company and/or
      any of its Subsidiaries for the benefit of the Creditor Parties) and the Company
      and each of its Subsidiaries will, jointly and severally, bear the full risk
      of
      loss from any loss of any nature whatsoever with respect to the assets pledged
      to the Agent, for the ratable benefit of the Creditor Parties, as security
      for
      the Obligations (as defined in the Master Security
      Agreement).  Furthermore, the Company
      will insure or cause the Collateral to be insured in the Agent’s name as an
      additional insured and lender loss payee, with an appropriate loss payable
      endorsement in form and substance satisfactory to the Agent, against loss or
      damage by fire, flood, sprinkler leakage, theft, burglary, pilferage, loss
      in
      transit and other risks customarily insured against by companies in similar
      business similarly situated as the Company and its Subsidiaries including but
      not limited to workers compensation, public and product liability and business
      interruption, and such other hazards as the Agent shall specify in amounts
      and
      under insurance policies and bonds by insurers acceptable to the Agent and
      all
      premiums thereon shall be paid by the Company and the policies delivered to
      the
      Agent.  If the Company or any of its Subsidiaries fails to obtain the
      insurance and in such amounts of coverage as otherwise required pursuant to
      this
      Section 6.5, the Agent may procure such insurance and the cost thereof shall
      be
      promptly reimbursed by the Company and shall constitute
      Obligations.


    
      
        
        

      

      
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    (ii)           The
      Company’s insurance coverage shall not be impaired or invalidated by any act or
      neglect of the Company or any of its Subsidiaries and the insurer will provide
      the Agent with no less than thirty (30) days notice prior of
      cancellation;

     

    (iii)           The
      Agent, in connection with its status as a lender loss payee, will be assigned
      at
      all times to a first lien position until such time as all the Obligations have
      been indefeasibly satisfied in full.

     

    6.6           Intellectual
      Property.

     

    (a)           The
      Company and each of its Subsidiaries shall maintain in full force and effect
      its
      existence, rights and franchises and all licenses and other rights to own or
      use
      Intellectual Property including registrations and applications therefore, that
      are necessary to the conduct of its business, as now conducted or as presently
      proposed to be conducted, and shall not do any act or omit to do any act whereby
      any of such Intellectual Property may lapse, or become abandoned, dedicated
      to
      the public, or unenforceable, or the Lien therein in favor of the Agent, for
      the
      ratable benefit of the Creditor Parties, would be adversely
      affected,

     

    (b)           The
      Company shall report to the Agent (i) the filing by the Company or any of its
      Subsidiaries of any application to register a Copyright no later than ten (10)
      days after such filing occurs (ii) the filing of any application to register
      any
      other Intellectual Property with any other Intellectual Property registry,
      and
      the issuance thereof, no later than thirty (30) days after such filing or
      issuance occurs and, in each case, shall, simultaneously with such report,
      deliver to the Agent fully-executed documents required to acknowledge, confirm,
      register, record or perfect the Lien in such Intellectual
      Property.  In addition, the Company and its Subsidiaries hereby
      authorize the Agent to modify this Agreement by amending Schedule 4.10 to
      include any registrations or applications for Intellectual Property
      inadvertently omitted from such Schedule or filed, registered, acquired by
      the
      Company or any of its Subsidiaries after the date hereof and agree to cooperate
      with the Agent in effecting any such amendment to include any new item of
      Intellectual Property included in the Collateral.


     

    (c)           The
      Company shall, and shall cause each of its Subsidiaries to, promptly upon the
      reasonable request of the Agent, execute and deliver to the Agent any document
      or instrument required to acknowledge, confirm, register, record, or perfect
      the
      Lien of the Agent in any part of the Intellectual Property owned by the Company
      and its Subsidiaries.

     

    (d)           The
      Company shall, and shall cause of each of its Subsidiaries to, not sell, assign,
      transfer, license, grant any option, or create or suffer to exist any Lien
      upon
      or with respect to Intellectual Property, except for the Permitted
      Encumbrances.

     

    6.7           Properties.  The
      Company and each of its Subsidiaries will keep its properties in good repair,
      working order and condition, reasonable wear and tear excepted, and from time
      to
      time make all needful and proper repairs, renewals, replacements, additions
      and
      improvements thereto; and each of the Company and its Subsidiaries will at
      all
      times comply with each provision of all leases to which it is a party or under
      which it occupies property if the breach of such provision could, either
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    6.8           Confidentiality.  The
      Company will not, and will not permit any of its Subsidiaries to, disclose,
      and
      will not include in any public announcement, the name of any Creditor Party,
      unless expressly agreed to by such Creditor Party or unless and until such
      disclosure is required by law or applicable regulation, and then only to the
      extent of such requirement.  Notwithstanding the foregoing, (i) the
      Company may disclose any Creditor Party’s identity and the terms of this
      Agreement and the Related Agreements to its current and prospective debt and
      equity financing sources, and (ii) the Company (and each employee,
      representative, or other agent of the Company) may disclose to any and all
      Persons, without limitation of any kind, the tax treatment and any facts that
      may be relevant to the tax structure of the transactions contemplated by this
      Agreement and the Related Agreements and the agreements referred to therein;
      provided, however, that the Company (and no employee, representative or other
      agent of the Company) disclose pursuant to this clause (ii) any other
      information that is not relevant to understanding the tax treatment or tax
      structure of such transactions (including the identity of any party or any
      information that could lead another to determine the identity of any party);
      and, provided, further, that the Company will not, and will not permit any
      of
      its Subsidiaries to, disclose any information to the extent that such disclosure
      could reasonably be expected to result in a violation of any U.S. federal or
      state securities law or similar law of another jurisdiction.  Each
      Creditor Party shall be permitted to discuss, distribute or otherwise transfer
      any non-public information of the Company and its Subsidiaries in such Creditor
      Party’s possession now or in the future to potential or actual (i) direct or
      indirect investors in such Creditor Party and (ii) third party assignees or
      transferees of all or a portion of the obligations of the Company and/or any
      of
      its Subsidiaries hereunder and under the Related Agreements.

     

    6.9           Required
      Approvals.  (I) Except as set forth on Schedule 6.9,
      the Company, without the prior written consent of the Agent, shall not, and
      shall not permit any of its Subsidiaries to:


     

    (a)           (i)
      directly or indirectly declare or pay any dividends, other than dividends paid
      to the Company or any of its wholly-owned Subsidiaries, (ii) issue any preferred
      stock that is mandatorily redeemable prior to the one year anniversary of the
      Maturity Date (as defined in each Note) or (iii) redeem any of its preferred
      stock or other equity interests;

     

    (b)           liquidate,
      dissolve or effect a material reorganization (it being understood that in no
      event shall the Company or any of its Subsidiaries dissolve, liquidate or merge
      with any other person or entity (unless, in the case of such a merger, the
      Company or, in the case of merger not involving the Company, such Subsidiary,
      as
      applicable, is the surviving entity);

     

    (c)           become
      subject to (including, without limitation, by way of amendment to or
      modification of) any agreement or instrument which by its terms would (under
      any
      circumstances) restrict the Company’s or any of its Subsidiaries, right to
      perform the provisions of this Agreement, any Related Agreement or any of the
      agreements contemplated hereby or thereby;

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    (d)           materially
      alter or change the scope of the business of the Company and its Subsidiaries
      taken as a whole; or

     

    (e)           (i)
      create, incur, assume or suffer to exist any indebtedness (exclusive of trade
      debt and debt incurred to finance the purchase of equipment (not in excess
      of
      five percent (5%) of the fair market value of the Company’s and its
      Subsidiaries’ assets)) whether secured or unsecured other than (x) the Company’s
      obligations owed to each Purchaser, (y) indebtedness set forth on Schedule
      6.9(e) attached hereto and made a part hereof and any refinancings or
      replacements thereof on terms no less favorable to the Purchasers than the
      indebtedness being refinanced or replaced, and (z) any indebtedness incurred
      in
      connection with the purchase of assets (other than equipment) in the ordinary
      course of business, or any refinancings or replacements thereof on terms no
      less
      favorable to the Purchasers than the indebtedness being refinanced or replaced,
      so long as any lien relating thereto shall only encumber the fixed assets so
      purchased and no other assets of the Company or any of its Subsidiaries; (ii)
      cancel any indebtedness owing to it in excess of $50,000 in the aggregate during
      any twelve (12) month period; (iii) assume, guarantee, endorse or otherwise
      become directly or contingently liable in connection with any obligations of
      any
      other person or entity, except the endorsement of negotiable instruments by
      the
      Company or any Subsidiary thereof for deposit or collection or similar
      transactions in the ordinary course of business or guarantees of indebtedness
      otherwise permitted to be outstanding pursuant to this clause (e); (iv) make
      any
      payment or distribution in respect of any subordinated indebtedness of the
      Company or its Subsidiaries in violation of any subordination or other agreement
      made in favor of any Creditor Party; and (v) make any optional payment or
      prepayment on or redemption (including, without limitation, by making payments
      to a sinking fund or analogous fund) or repurchase of any indebtedness for
      borrowed money other than indebtedness pursuant to this Agreement;
      and


     

    (II)  The
      Company, without the prior written consent of the Agent, shall not, and shall
      not permit any of its Subsidiaries to, create or acquire any Subsidiary after
      the date hereof unless (i) such Subsidiary is a wholly-owned Subsidiary of
      the
      Company and (ii) such Subsidiary becomes a party to (A) the Master Security
      Agreement, (either by executing a counterpart thereof or an assumption or
      joinder agreement in respect thereof); (B) a Subsidiary Guaranty in favor of
      the
      Purchasers in form and substance satisfactory to the Agent and (C) to the extent
      required by the Agent, satisfies each condition of this Agreement and the
      Related Agreements as if such Subsidiary were a Subsidiary on the Closing
      Date.

     

    6.10           Opinion.  On
      the Closing Date, the Company will deliver to the Creditor Parties substantially
      in the form of Exhibit B hereto an opinion acceptable to the Agent from
      the Company’s external legal counsel.

     

    6.11           Margin
      Stock  The Company will not permit any of the proceeds of the
      Notes to be used directly or indirectly to “purchase” or “carry” “margin stock”
or to repay indebtedness incurred to “purchase” or “carry” “margin stock” within
      the respective meanings of each of the quoted terms under Regulation U of the
      Board of Governors of the Federal Reserve System as now and from time to time
      hereafter in effect.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    6.12           FIRPTA  Neither
      the Company, nor any of its Subsidiaries, is a “United States real property
      holding corporation” as such term is defined in Section 897(c)(2) of the Code
      and Treasury Regulation Section 1.897-2 promulgated thereunder and neither
      the
      Company nor any of its Subsidiaries shall at any time take any action or
      otherwise acquire any interest in any asset or property to the extent the effect
      of which shall cause the Company and/or such Subsidiary, as the case may be,
      to
      be a “United States real property holding corporation” as such term is defined
      in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
      promulgated thereunder.

     

    6.13           Financing
      Right of First Refusal

     

    (a)           The
      Company hereby grants to the Purchasers a right of first refusal to provide
      any
      Additional Financing (as defined below) to be issued by the Company and/or
      any
      of its Subsidiaries, subject to the following terms and
      conditions.  From and after the date hereof, prior to the incurrence
      of any additional indebtedness and/or the sale or issuance of any equity
      interests of the Company or any of its Subsidiaries (an “Additional
      Financing”), the Company and/or any Subsidiary of the Company, as the case
      may be, shall notify the Agent of its intention to enter into such Additional
      Financing.  In connection therewith, the Company and/or the applicable
      Subsidiary thereof shall submit a fully executed term sheet (a “Proposed Term
      Sheet”) to the Agent setting forth the terms, conditions and pricing of any
      such Additional Financing (such financing to be negotiated on “arm’s length”
terms and the terms thereof to be negotiated in good faith) proposed to be
      entered into by the Company and/or such Subsidiary.  The Agent shall
      have the right, but not the obligation, to deliver its own proposed term sheet
      (the “Purchaser Term Sheet”) setting forth the terms and conditions upon
      which the Purchasers would be willing to provide such Additional Financing
      to
      the Company
      and/or such Subsidiary.  The Purchaser Term Sheet shall contain terms
      no less favorable to the Company and/or such Subsidiary than those outlined
      in
      Proposed Term Sheet as determined in the sole discretion of the Company and/or
      such Subsidiary.  The Agent shall deliver such Purchaser Term Sheet
      within ten (10) business days of receipt of each such Proposed Term
      Sheet.  If the provisions of the Purchaser Term Sheet are at least as
      favorable to the Company and/or such Subsidiary, as the case may be, as the
      provisions of the Proposed Term Sheet, the Company and/or such Subsidiary shall
      enter into and consummate the Additional Financing transaction outlined in
      the
      Purchaser Term Sheet.

     

    (b)           The
      Company will not, and will not permit its Subsidiaries to, agree, directly
      or
      indirectly, to any restriction with any person or entity which limits the
      ability of the Purchaser(s) to consummate an Additional Financing with the
      Company or any of its Subsidiaries.

     

    6.14           Board
      Observation Rights.  Until such time as all Obligations (as
      defined in the Master Security Agreement) have been paid in full, the Purchasers
      will be entitled to the following board observation rights (“Board
      Observation Rights”):  the Company shall permit one representative
      of the Purchasers to attend all meetings of the board of directors of the
      Company (the “Board of Directors”) in a non-voting observer capacity,
      which observation right shall include the ability to observe discussions of
      the
      Board of Directors, and shall provide such representative with copies of all
      notices, minutes, written consents, and other materials that it provides to
      members of the Board of Directors, at the time it provides them to such members.
      The observation right may be exercised in person or via telephone or videophone
      participation. Each Purchaser agrees, on behalf of itself and any representative
      exercising the observation rights set forth herein, that so long as it shall
      exercise its observation right (i) it shall hold in strict confidence
      pursuant to a confidentiality and non-disclosure agreement (in form and
      substance satisfactory to each Purchaser) all information and materials that
      it
      may receive or be given access to in connection with meetings of the Board
      of
      Directors and to act in a fiduciary manner with respect to all information
      so
      provided (provided that this shall not limit its ability to discuss such matters
      with its officers, directors or legal counsel, as necessary), and (ii) the
      Board of Directors may withhold from it certain information or material
      furnished or made available to the Board of Directors or exclude it from certain
      confidential “closed sessions” of the Board of Directors if the
      furnishing or availability of such information or material or its presence
      at
      such “closed sessions” would jeopardize such Company’s attorney-client
      privilege or if the Board of Directors otherwise reasonably so
      requires.  The Board Observation Rights set forth in this Section
      shall automatically terminate and be of no further force or effect upon the
      indefeasibly payment in full of all Obligations (as defined in the Master
      Security Agreement).

     

    
      
        
        

      

      
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    6.15           Summaries;
      Reports.  The Company shall deliver to the Agent, within twenty
      (20) business days following the end of each month, summaries of the Company’s
      lease operating expenses and production relating to the Company’s Oil and Gas
      Properties as and for the immediately preceding month.

     

    6.16           Financial
      Statements; Other Information.  The Company will furnish to the
      Agent:

     

    (a)           in
      the event the Company intends to sell, transfer, assign or otherwise dispose
      of
      any Oil or Gas Property, prior written notice of such sale, transfer, assignment
      or other disposition, the price thereof and the anticipated date of closing
      and
      any other details thereof requested by the Agent; and

     

    (b)           within
      sixty (60) days after the end of each fiscal quarter, a report setting forth,
      for each calendar month during the then current fiscal year to date, the volume
      of sold production and sales attributable to production (and the prices at
      which
      such sales were made and the revenues derived from such sales) for each such
      calendar month from the Oil and Gas Properties, and setting forth the related
      ad
      valorem, severance and production taxes and lease operating expenses
      attributable thereto and incurred for each such calendar month.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    6.17           Operation
      and Maintenance of Oil and Gas Properties.  The Company, at its
      own expense, will:

     

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

     

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

     

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

     

    (d)           operate
      its Oil and Gas Properties or cause or make reasonable and customary efforts
      to
      cause such Oil and Gas Properties to be operated in accordance with the
      practices of the industry and in material compliance with all applicable
      contracts and agreements; and

     

    (e)
      to
      the extent the Company is not the operator of any Oil and Gas Property, the
      Company shall use reasonable efforts to cause the operator to comply with this
      Section 6.17.

     

    6.18           Reserve
      Reports.

     

    (a)           On
      or before April 1st of each year, the Company shall furnish to the Agent a
      reserve report prepared by one or more petroleum engineers approved by Agent
      evaluating the Oil and Gas Properties of the Company as of the immediately
      preceding December 31.  The Company shall furnish to the Agent all
      supplemental reserve reports promptly after their completion.  All
      such supplemental reserve reports shall be prepared by or under the supervision
      of the chief engineer of the Company who shall certify such reserve report
      to be
      true and accurate and to have been prepared in accordance with the procedures
      used in the immediately preceding December 31 reserve report.

     

    (b)           With
      the delivery of each reserve report, the Company shall provide to the Agent
      a
      certificate certifying that in all material respects: (i) the information
      contained in the reserve report and any other information delivered in
      connection therewith is true and correct, (ii) the Company has good and
      defensible title to the working interests and net revenue interests in the
      Oil
      and Gas Properties evaluated in such reserve report and such Oil and Gas
      Properties are free of all liens except for liens permitted by Section 4.9,
      (iii) except as set forth on an exhibit to the certificate, on a net basis
      there
      are no gas imbalances, take-or-pay or other prepayments with respect to its
      Oil
      and Gas Properties evaluated in such reserve report which would require the
      Company to deliver hydrocarbons either generally or produced from such Oil
      and
      Gas Properties at some future time without then or thereafter receiving full
      payment therefor, (iv) none of the Oil and Gas Properties have been sold since
      the date of the last certificate, (v) attached to the certificate is a list
      of
      all marketing agreements entered into subsequent to the later of the date hereof
      or the most recently delivered reserve report, and (vi) attached thereto is
      a
      schedule of the Oil and Gas Properties evaluated by such reserve
      report.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    6.19           Marketing
      Activities.  The Company will not engage in marketing activities
      for any hydrocarbons or enter into any contracts related thereto other than
      (a)
      contracts for the sale of hydrocarbons scheduled or reasonably estimated to
      be
      produced from its proved Oil and Gas Properties during the period of such
      contract, (b) contracts for the sale of hydrocarbons scheduled or reasonably
      estimated to be produced from proved oil and gas properties of third parties
      during the period of such contract associated with the Oil and Gas Properties
      of
      the Company that the Company has the right to market pursuant to joint operating
      agreements, unitization agreements or other similar contracts that are usual
      and
      customary in the oil and gas business and (b) other contracts for the purchase
      and/or sale of hydrocarbons of third parties (i) which have generally offsetting
      provisions (i.e., corresponding pricing mechanics, delivery dates and points
      and
      volumes) such that no “position” is taken and (ii) for which appropriate credit
      support has been taken to alleviate the material credit risks of the
      counterparty thereto.

     

    6.20           Sale
      of Oil and Gas Properties.  The Company will not sell, assign,
      farm-out, convey or otherwise transfer any Oil and Gas Property or related
      equipment except for (a) the sale of hydrocarbons in the ordinary course of
      business; (b) farm-outs in the ordinary course of business of undeveloped
      acreage or undrilled depths and assignments in connection with such farm-outs;
      and (c) the sale or transfer of equipment that is no longer necessary for the
      business of the Company or is replaced by equipment of at least comparable
      value
      and use.


     

    6.21           Gas  Imbalances,
      Take-or-Pay or Other Prepayments.  The Company will not allow gas
      imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
      Properties that would require the Company to deliver hydrocarbons at some future
      time without then or thereafter receiving full payment therefor.

     

    7.           Covenants
      of the Purchasers.  Each Purchaser covenants and agrees with the
      Company as follows:

     

    7.1           Confidentiality.  No
      Purchaser will disclose, nor will it include in any public announcement, the
      name of the Company, unless expressly agreed to by the Company or unless and
      until such disclosure is required by law or applicable regulation, and then
      only
      to the extent of such requirement.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

    7.2           Limitation
      on Acquisition of Common Stock of the Company.  Notwithstanding
      anything to the contrary contained in this Agreement, any Related Agreement
      or
      any document, instrument or agreement entered into in connection with any other
      transactions entered into by a Purchaser and the Company (and/or Subsidiaries
      or
      Affiliates of the Company), such Purchaser (and/or Subsidiaries or Affiliates
      of
      such Purchaser) shall not acquire stock in the Company (including, without
      limitation, pursuant to a contract to purchase, by exercising an option or
      warrant, by converting any other security or instrument, by acquiring or
      exercising any other right to acquire, shares of stock or other security
      convertible into shares of stock in the Company, or otherwise, and such
      contracts, options, warrants, conversion or other rights shall not be
      enforceable or exercisable) to the extent such stock acquisition would cause
      any
      interest (including any original issue discount) payable by the Company to
      a
      Non-U.S. Purchaser not to qualify as “portfolio interest” within the
      meaning of Section 871(h)(2) or Section 881(c)(2) of the Code, by reason of
      Section 871(h)(3) or Section 881(c)(3)(B) of the Code, as applicable, taking
      into account the constructive ownership rules under Section 871(h)(3)(C) of
      the
      Code (the “Stock Acquisition Limitation”).  The Stock
      Acquisition Limitation shall automatically become null and void without any
      notice to the Company upon the existence of an Event of Default (as defined
      in
      the Note).

     

    8.           Covenants
      of the Company and the Purchasers Regarding Indemnification

     

    8.1           Company
      Indemnification.  The Company agrees to indemnify, hold harmless,
      reimburse and defend each Creditor Party, each of such Creditor Party’s
      officers, directors, agents, affiliates, control persons, and principal
      shareholders, against all claims, costs, expenses, liabilities, obligations,
      losses or damages (including reasonable legal fees) of any nature, incurred
      by
      or imposed upon such Creditor Party which result, arise out of or are based
      upon: (i) any misrepresentation by the Company or any of its Subsidiaries or
      breach of any warranty by the Company or any of its Subsidiaries in this
      Agreement, any other Related Agreement or in any exhibits or schedules attached
      hereto or thereto; or (ii) any breach or default in performance by Company
      or
      any of its Subsidiaries of any covenant or undertaking to be performed by
      Company or any of its Subsidiaries hereunder, under any other Related Agreement
      or any other agreement entered into by the Company and/or any of its
      Subsidiaries and such Creditor Party relating hereto or thereto; or (iii) (a)
      the violation of any Environmental Laws and the regulations promulgated pursuant
      to such laws, all as amended and relating to or affecting the Company
      and/or any Subsidiary and the Company’s and/or any Subsidiary’s properties,
      whether or not caused by or within the control of any Creditor Party and/or
      (b)
      the presence, release or threat of release of any Hazardous Materials
      (including, without limitation, asbestos, polychlorinated biphenyls, petroleum
      products, flammable explosives, radioactive materials, infectious substances
      or
      raw materials which include hazardous constituents) on, in, under or affecting
      all or any portion of any property of the Company and/or any Subsidiary or
      any
      surrounding areas, regardless of whether or not caused by or within the control
      of any Creditor Party.

     

    8.2           Purchaser
      Indemnification.  Each Purchaser agrees to indemnify, hold
      harmless, reimburse and defend the Company and each of the Company’s officers,
      directors, agents, affiliates, control persons and principal shareholders,
      at
      all times against any claims, costs, expenses, liabilities, obligations, losses
      or damages (including reasonable legal fees) of any nature, incurred by or
      imposed upon the Company which result, arise out of or are based
      upon:  (i) any misrepresentation by such Purchaser or breach of any
      warranty by such Purchaser in this Agreement or in any exhibits or schedules
      attached hereto or any Related Agreement; or (ii) any breach or default in
      performance by such Purchaser of any covenant or undertaking to be performed
      by
      such Purchaser hereunder, or any other agreement entered into by the Company
      and
      such Purchaser relating hereto.

     

    
      
        
        

      

      
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    9.           Miscellaneous

     

    9.1           Governing
      Law, Jurisdiction and Waiver of Jury Trial

     

    (a)           THIS
      AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
      AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
      TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAWS.

     

    (b)           THE
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
      AND ANY CREDITOR PARTY, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR
      ANY
      OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
      AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT EACH
      CREDITOR PARTY AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
      MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK,
      STATE
      OF NEW YORK; AND FURTHERPROVIDED, THAT, NOTHING IN THIS AGREEMENT
      SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY CREDITOR PARTY FROM BRINGING SUIT
      OR
      TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,
      TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER
      SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN
      THE
      MASTER SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
      FAVOR OF ANY CREDITOR PARTY.  THE COMPANY EXPRESSLY SUBMITS AND
      CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
      ANY
      SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED
      UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
      CONVENIENS.  THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
      IN SECTION 9.8 AND THAT SERVICE SO MADE SHALL BE
      DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR
      THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
      PREPAID.


    
      
        
        

      

      
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    (c)           THE
      PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
      BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE
      ALL
      RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
      ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN ANY
      CREDITOR PARTY AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
      INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
      THIS
      AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
      THERETO.

     

    9.2           Severability  Wherever
      possible each provision of this Agreement and the Related Agreements shall
      be
      interpreted in such manner as to be effective and valid under applicable law,
      but if any provision of this Agreement or any Related Agreement shall be
      prohibited by or invalid or illegal under applicable law such provision shall
      be
      ineffective to the extent of such prohibition or invalidity or illegality,
      without invalidating the remainder of such provision or the remaining provisions
      thereof which shall not in any way be affected or impaired thereby.

     

    9.3           Survival  The
      representations, warranties, covenants and agreements made herein shall survive
      any investigation made by any Creditor Party and the closing of the transactions
      contemplated hereby to the extent provided therein.  All statements as
      to factual matters contained in any certificate or other instrument delivered
      by
      or on behalf of the Company pursuant hereto in connection with the transactions
      contemplated hereby shall be deemed to be representations and warranties by
      the
      Company hereunder solely as of the date of such certificate or
      instrument.  All indemnities set forth herein shall survive the
      execution, delivery and termination
      of this Agreement and the Notes and the making and repayment of the obligations
      arising hereunder, under the Notes and under the other Related
      Agreements.

     

    9.4           Successors.

     

    (a)           Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the successors, heirs, executors and
      administrators of the parties hereto and shall inure to the benefit of and
      be
      enforceable by each person or entity which shall be a holder of the Notes from
      time to time.  Each Purchaser may assign any or all of the Obligations
      to any Person and, subject to acceptance and recordation thereof by the Agent
      pursuant to Section 9.4(b) and receipt by the Agent of a copy of the
      agreement or instrument pursuant to which such assignment is made (each such
      agreement or instrument, an “Assignment Agreement”), any such assignee
      shall succeed to all of such Purchaser’s rights with respect thereto; provided
      that no Purchaser shall be permitted to assign its rights hereunder or under
      any
      Related Agreement to a competitor of the Company unless an Event of Default
      (as
      defined in each Note) has occurred and is continuing.  Upon such
      assignment, such Purchaser shall be released from all responsibility for the
      Collateral (as defined in the Master Security Agreement, the Stock Pledge
      Agreement and each other security agreement, mortgage, cash collateral deposit
      letter, pledge and other agreements which are executed by the Company and/or
      any
      of its Subsidiaries for the benefit of the Creditor Parties) to the extent
      same
      is assigned to any transferee.  Each Purchaser may from time to time
      sell or otherwise grant participations in any of the Obligations (as defined
      in
      the Master Security Agreement) and the holder of any such participation shall,
      subject to the terms of any agreement between such Purchaser and such holder,
      be
      entitled to the same benefits as such Purchaser with respect to any security
      for
      the Obligations (as defined in the Master Security Agreement) in which such
      holder is a participant.  The Company agrees that each such holder may
      exercise any and all rights of banker’s lien, set-off and counterclaim with
      respect to its participation in the Obligations (as defined in the Master
      Security Agreement) as fully as though the Company were directly indebted to
      such holder in the amount of such participation.  The Company may not
      assign any of its rights or obligations hereunder without the prior written
      consent of the Agent.  All of the terms, conditions, promises,
      covenants, provisions and warranties of this Agreement shall inure to the
      benefit of each of the undersigned, and shall bind the representatives,
      successors and permitted assigns of the Company.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    (b)           The
      Agent shall maintain, or cause to be maintained, for this purpose only as agent
      of the Company, (i) a copy of each Assignment Agreement delivered to it and
      (ii)
      a book entry system, within the meaning of U.S. Treasury Regulation Sections
      15f.103-1(c) and 1.871-14(c) (the “Register”), in which it will register
      the name and address of each Purchaser and the name and address of each assignee
      of each Purchaser under this Agreement, and the principal amount of, and stated
      interest on, the Notes owing to each such Purchaser and assignee pursuant to
      the
      terms hereof and each Assignment Agreement.  The right, title and
      interest of the Purchasers and their assignees in and to such Notes shall be
      transferable only upon notation of such transfer in the Register, and no
      assignment thereof shall be effective until recorded therein.  The
      Company and each Creditor Party shall treat each Person whose name is recorded
      in the Register as a Purchaser pursuant to the terms hereof as a Purchaser
      and
      owner of an interest in the Obligations hereunder for all purposes of this
      Agreement, notwithstanding notice to the contrary or any notation of ownership
      or other writing or any Note.  The Register shall be available for
      inspection by the Company or any Purchaser, at any reasonable time and from
      time
      to time, upon reasonable prior notice.

     

    9.5           Entire
      Agreement; Maximum Interest.  This Agreement, the Related
      Agreements, the exhibits and schedules hereto and thereto and the other
      documents delivered pursuant hereto constitute the full and entire understanding
      and agreement between the parties with regard to the subjects hereof and no
      party shall be liable or bound to any other in any manner by any
      representations, warranties, covenants and agreements except as specifically
      set
      forth herein and therein.  Nothing contained in this Agreement, any
      Related Agreement or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum rate permitted by
      applicable law.  In the event that the rate of interest or dividends
      required to be paid or other charges hereunder exceed the maximum rate permitted
      by such law, any payments in excess of such maximum shall be credited against
      amounts owed by the Company to the Purchasers and thus refunded to the
      Company.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    9.6           Amendment
      and Waiver

     

    (a)           This
      Agreement may be amended or modified only upon the written consent of the
      Company and the Agent.

     

    (b)           The
      obligations of the Company and the rights of the Creditor Parties under this
      Agreement may be waived only with the written consent of the Agent.

     

    (c)           The
      obligations of the Creditor Parties and the rights of the Company under this
      Agreement may be waived only with the written consent of the
      Company.

     

    9.7           Delays
      or Omissions.  It is agreed that no delay or omission to exercise
      any right, power or remedy accruing to any party, upon any breach, default
      or
      noncompliance by another party under this Agreement or the Related Agreements,
      shall impair any such right, power or remedy, nor shall it be construed to
      be a
      waiver of any such breach, default or noncompliance, or any acquiescence
      therein, or of or in any similar breach, default or noncompliance thereafter
      occurring.  All remedies, either under this Agreement or the Related
      Agreements, by law or otherwise afforded to any party, shall be cumulative
      and
      not alternative.

     

    9.8           Notices  All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given:

     

    (a)           upon
      personal delivery to the party to be notified;


     

    (b)           when
      sent by confirmed facsimile if sent during normal business hours of the
      recipient, if not, then on the next business day;

     

    (c)           three
      (3) business days after having been sent by registered or certified mail, return
      receipt requested, postage prepaid; or

     

    (d)           one
      (1) day after deposit with a nationally recognized overnight courier, specifying
      next day delivery, with written verification of receipt.

     

    All
      communications shall be sent as follows:

    
      
        	
                If
                  to the Company, to:

              	
                New
                  Century Energy Corp.

                5851
                  San Felipe, Suite 775

                Houston,
                  Texas  77057

                Attention:  Chief
                  Financial Officer

                Facsimile
                  No.:  713-266-4358

                 

              
	
                with
                  a copy to:

              	
                David
                  M. Loev, Esquire

                The
                  Loev Law Firm, PC

                6300
                  West Loop South, Suite 280

                Bellaire,
                  Texas  77401

                Attention:  David
                  Loev, Esq.

                Facsimile
                  No.:  713-524-4122

              


      

       

       

      
 

      
        
          
          

        

        
          -32-

          
            

          

        

        
          
          

        

      

      
        	
                If
                  to the Agent, to:

              	
                LV
                  Administrative Services, Inc.

                c/o
                  Laurus Capital Management, LLC

                335
                  Madison Avenue, 10th Floor

                New
                  York, NY 10017

                Facsimile
                  No.: 212-581-5037

                 

              
	
                with
                  a copy to:

              	
                Loeb
                  & Loeb, LLP

                345
                  Park Avenue

                New
                  York, NY 10154

                Attention: Scott
                  J. Giordano, Esq.

                Facsimile
                  No.:  212-407-4990

                 

              
	 	
                and
                  to

                 

              
	 	
                Jackson
                  Walker L.L.P.

                1401
                  McKinney, Suite 1900

                Houston,
                  Texas 77010

                Attention:  Michael
                  P. Pearson, Esq.

                Facsimile
                  No.: (713) 752-4221

                 

              
	
                If
                  to a Purchaser:

              	
                To
                  the address indicated under its signature on the signature pages
                  hereto

              


      

    

    


     

     

    or
      at
      such other address as the Company or the applicable Creditor Party may designate
      by written notice to the other parties hereto given in accordance
      herewith.

     

    9.9           Attorneys’
      Fees.  In the event that any suit or action is instituted to
      enforce any provision in this Agreement or any Related Agreement, the prevailing
      party in such dispute shall be entitled to recover from the losing party all
      fees, costs and expenses of enforcing any right of such prevailing party under
      or with respect to this Agreement and/or such Related Agreement, including,
      without limitation, such reasonable fees and expenses of attorneys and
      accountants, which shall include, without limitation, all fees, costs and
      expenses of appeals.

     

    9.10           Titles
      and Subtitles.  The titles of the sections and subsections of this
      Agreement are for convenience of reference only and are not to be considered
      in
      construing this Agreement.

     

    9.11           Signatures;
      Counterparts.  This Agreement may be executed by facsimile or
      electronic signatures and in any number of counterparts, each of which shall
      be
      an original, but all of which together shall constitute one
      agreement.

     

    9.12           Broker’s
      Fees.  Except as set forth on Schedule 9.12 hereof,
      each party hereto represents and warrants that no agent, broker, investment
      banker, person or firm acting on behalf of or under the authority of such party
      hereto is or will be entitled to any broker’s or finder’s fee or any other
      commission directly or indirectly in connection with the transactions
      contemplated herein.  Each party hereto further agrees to indemnify
      each other party for any claims, losses or expenses incurred by such other
      party
      as a result of the representation in this Section 11.12 being
      untrue.

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    9.13           Construction.  Each
      party acknowledges that its legal counsel participated in the preparation of
      this Agreement and the Related Agreements and, therefore, stipulates that the
      rule of construction that ambiguities are to be resolved against the drafting
      party shall not be applied in the interpretation of this Agreement or any
      Related Agreement to favor any party against the other.

     

    9.14           Agency.  Each
      Purchaser has pursuant to an Administrative and Collateral Agency Agreement
      designated and appointed the Agent as the administrative and collateral agent
      of
      such Purchaser under this Agreement and the Related Agreements.

     

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
      AGREEMENT as of the date set forth in the first paragraph hereof.

     

     

    
      	
              COMPANY:

               

               

               

            	
              PURCHASERS:

            
	
              NEW
                CENTURY ENERGY CORP.

            	
              VALENS
                U.S. SPV I, LLC

            
	
               

               

              By:
                /s/ Edward R. DeStefano

              Name:
                Edward R. DeStefano

              Title:
                President

            	
               

               

              By:
                Valens Capital Management, LLC, its

              Investment
                Manager

              
                By:  /s/
                  Patrick
                  Regan                                                              

                Name:
                  Patrick Regan

                Title:
                  Authorized Signatory

              

               

            
	
               

              AGENT:

            	
               

              VALENS
                OFFSHORE SPV II, CORP.

               

               

            
	
              LV
                ADMINISTRATIVE SERVICES, INC.,

              as
                Agent

              By:  /s/
                Patrick
                Regan                                                              

              Name:
                Patrick Regan

              Title:
                Authorized Signatory

            	
              By:
                Valens Capital Management, LLC, its

              Investment
                Manager

              
                By:  /s/
                  Patrick
                  Regan                                                              

                Name:
                  Patrick Regan

                Title:
                  Authorized
                  Signatory

              

            


    


    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    


    Schedule
      1

    


    


    
      	
              Purchaser:

            	
              Total
                Notes Purchased:

               

            
	
               

              Valens
                U.S. SPV I, LLC

               

            	
               

              $2,300,000

            
	
               

              Valens
                Offshore SPV II, Corp.

               

               

            	
               

              $3,000,000

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.2

    


    Century
      Resources, Inc., a Delaware corporation, is wholly owned by New
      Century Energy Corp.

    


    Gulf
      Coast Oil Corporation, a Delaware corporation, is wholly owned by
      New Century Energy Corp.

    


    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.3

    


    Gulf
      Coast Oil Corporation Capitalization

    


    1,000,000
      shares $0.001 par value per share authorized,

    1,000
      shares issued and outstanding

    


    Century
      Resources, Inc. Capitalization

    1,000
      shares authorized, no par value per share

    500
      shares issued and outstanding

    


    


    Outstanding
      Warrants:

    


    Energy
      Capital Solutions – 900,000 warrants, exercisable at $0.80 per share, which are
      exercisable until June 30, 2009.

    


    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.6

    


    None.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.7

    


    None.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.9

    


    None.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.10

    


    None.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.12

    


    None.

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     Schedule
      4.13

    


    None.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.14

    


    


    Edward
      DeStefano serves as our Chief Executive Officer and President under a three
      year
      Executive Employment Agreement effective from September 1, 2005 to August 31,
      2008, which was amended, effective June 1, 2006, and which is renewable for
      successive one (1) year terms upon its expiration.

    


    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      4.15

    


    None.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

    Schedule
      6.9

    


    The
      Company’s outstanding indebtedness under its Notes Payable to Laurus Master Fund
      Ltd. are:

    


    


    
      	 	
               

            
	
              Second
                Amended and Restated Secured Convertible (June 30, 2005)

            	
               

            
	
              Second
                Amended And Restated

                  Secured
                Term (September 19, 2005)

            	
               

            
	
              December
                2006 Secured Term

                 (December
                28, 2006)

            	
               

            
	
              Gulf
                Coast Note (April 26, 2006)*

              Gulf
                Coast Notes (November 20, 2007)*

            	
               

            


    

    


    *
      Guaranteed by the Company

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      9.12

    


    None.