ex10-1.htm


    


     

    SECURITIES
      PURCHASE AGREEMENT

     

    LV
      ADMINISTRATIVE SERVICES, INC.,

     

    as
      Administrative and Collateral Agent

     

    THE
      PURCHASERS

     

    From
      Time to Time Party Hereto

     

    and

     

    GULF
      COAST OIL CORPORATION

     

    Dated:
      November 20, 2007

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SECURITIES
      PURCHASE AGREEMENT

     

    TABLE
      OF CONTENTS



    
      	
              1.

            	
              Agreement
                to Sell and Purchase

            	
              5

            
	 	 	
               

            
	
              2.

            	
              Fees

            	
              5

            
	 	 	 
	
              3.

            	
              Closing,
                Delivery and Payment

            	
              6

            
	 	
              3.1    
                Closing

            	
              6

            
	 	
              3.2     Delivery

            	
              6

            
	 	 	 
	
              4.

            	
              Representations
                and Warranties of the Company

            	
              6

            
	 	
              4.1    
                Organization,
                Good Standing and Qualification

            	
              6

            
	 	
              4.2    
                Subsidiaries

            	
              6

            
	 	
              4.3    
                Capitalization;
                Voting Rights

            	
              6

            
	 	
              4.4    
                Authorization;
                Binding Obligations

            	
              7

            
	
               

            	
              4.5    
                Liabilities;
                Solvency

            	
              7

            
	 	
              4.6    
                Agreements;
                Action

            	
              8

            
	 	
              4.7    
                Obligations
                to Related Parties

            	
              9

            
	 	
              4.8    
                Changes

            	
              9

            
	 	
              4.9    
                Title
                to Properties and Assets; Liens, Etc

            	
              10

            
	 	
              4.10   Intellectual
                Property

            	
              11

            
	 	
              4.11  
                Compliance
                with Other Instruments

            	
              12

            
	 	
              4.12  
                Litigation

            	
              12

            
	 	
              4.13  
                Tax
                Returns and Payments

            	
              12

            
	 	
              4.14  
                Employees

            	
              13

            
	 	
              4.15  
                Voting
                Rights

            	
              13

            
	 	4.16  
              Compliance
              with Laws;Permits	13 
	
               

            	
              4.17  
                Environmental
                and Safety Laws   

            	
              13

            
	 	
              4.18  
                Valid
                Offering

            	
              14

            
	 	
              4.19  
                Full
                Disclosure

            	
              14

            
	 	
              4.20  
                Insurance

            	
              14

            
	 	
              4.21  
                Patriot
                Act

            	
              14

            
	 	
              4.22  
                ERISA

            	
              14

            
	 	
              4.23  
                Oil
                and Gas Properties; Titles, Etc

            	
              14

            
	
               

            	
              4.24  
                Maintenance
                of Oil and Gas Properties

            	
              15

            
	 	4.25  
              Gas
              Imbalances; Prepayments 	15 
	 	
              4.26   Marketing
                of Production

            	
              15

            
	 	
              4.27  
                Swap
                Agreements

            	
              15

            
	 	 	 
	
              5.

            	
              Representations
                and Warranties of each Purchaser

            	
              16

            
	 	
              5.1    
                Requisite
                Power and Authority

            	
              16

            
	 	
              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

            	
              17

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              5.7

            	
              Legend

            	
              17

            
	 	  	 
	
              6.

            	
              Covenants
                of the Company

            	
              17

            
	 	
              6.1        Reporting
                Requirements

            	
              17

            
	 	
              6.2       
                Use
                of Funds

            	
              17

            
	 	
              6.3       
                Access
                to Facilities

            	
              17

            
	 	
              6.4       
                Taxes

            	
              18

            
	 	
              6.5        Insurance

            	
              20

            
	 	
              6.6       
                Intellectual
                Property.

            	
              20

            
	 	
              6.7       
                Properties

            	
              21

            
	 	
              6.8       
                Confidentiality

            	
              21

            
	
               

            	
              6.9       
                Required
                Approvals

            	
              21

            
	 	
              6.10     
                Opinion

            	
              22

            
	 	
              6.11     
                Margin
                Stock

            	
              22

            
	 	
              6.12     
                FIRPTA

            	
              22

            
	 	
              6.13     
                Financing
                Right of First Refusal

            	
              22

            
	 	
              6.14     
                Board
                Observation Rights

            	
              22

            
	 	
              6.15     
                Summaries;
                Reports

            	
              23

            
	 	
              6.16     
                Financial
                Statements; Other Information

            	
              23

            
	 	
              6.17     
                Operation
                and Maintenance of Oil and Gas Properties

            	
              23

            
	 	
              6.18     
                Reserve
                Reports

            	
              24

            
	 	
              6.19     
                Marketing
                Activities

            	
              24

            
	 	
              6.20     
                Sale
                of Oil and Gas Properties

            	
              24

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

            	
              24

            
	 	 	 
	7. 	Covenants
              of the Purchasers 	24 
	 	
              7.1       
                Confidentiality

            	
              24

            
	 	
              7.2       
                Limitation
                on Acquisition of Common Stock of the Company

            	
              24

            
	 	 	 
	
              8.

            	
              Covenants
                of the Company and the Purchasers Regarding
                Indemnification

            	
              25

            
	 	
              8.1       
                Company
                Indemnification

            	
              25

            
	 	
              8.2       
                Purchaser
                Indemnification

            	
              25

            
	 	 	 
	
              9.

            	
              Miscellaneous

            	
              25

            
	 	
              9.1       
                Governing
                Law, Jurisdiction and Waiver of Jury Trial

            	
              25

            
	 	
              9.2       
                Severability

            	
              26

            
	 	
              9.3       
                Survival

            	
              26

            
	 	
              9.4        Successors.

            	
              26

            
	 	
              9.5       
                Entire
                Agreement; Maximum Interest

            	
              26

            
	 	9.6       
              Amendment
              and Waiver	
              26

            
	 	9.7       
              Delays
              or Omissions	
              27

            
	 	9.8       
              Notices	
              27

            
	 	9.9       
              Attorneys’
              Fees	
              28

            
	 	9.10     
              Titles
              and Subtitles	
              28

            
	 	9.11     
              Signatures;
              Counterparts	
              28

            
	 	9.12     
              Broker’s
              Fees	
              28

            
	 	9.13     
              Construction	
              28

            
	 	9.14     
              Agency	
              28

            


    

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    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 20, 2007, among Gulf Coast Oil Corporation, a Delaware
      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 $106,500,
      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.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

     

    (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 New Century Energy Corp.
      (the “Parent”), the Company and each of their respective 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 Parent, the Company, and each of
      their respective 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 Parent, the Company and certain of their
      Subsidiaries and the Agent (as amended, restated, modified and/or supplemented
      from time to time, the “Master Security Agreement”); (iv) the
      Restricted Account Agreement dated as of the date hereof (as amended, restated,
      modified and/or supplemented from time to time, the “Restricted Account
      Agreement”); (v) the Guaranty dated as of the date hereof made by the
      Parent and certain Subsidiaries of the Parent (as amended, restated, modified
      and/or supplemented from time to time, the “Parent Guaranty”);
      (vi) the Stock Pledge Agreement dated as of the date hereof between the
      Parent and the Agent (as amended, restated, modified and/or or supplemented
      from
      time to time, the “Stock Pledge Agreement”); (vii) the Mortgage,
      Deed of Trust, Security Agreement, Financing Statement and Assignment of
      Production dated as of the date hereof made by the Parent and Century Resources,
      Inc. in favor of the Agent (as amended, restated,
      modified and/or supplemented from time to time, the “Parent Mortgage”);
      (viii) the Mortgage, Deed of Trust, Security Agreement, Financing Statement
      and Assignment of Production dated as of the date hereof made by the Company
      in
      favor of the Agent (as amended, restated, modified and/or supplemented from
      time
      to time, the “Mortgage”); (ix) 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 in favor of the
      Purchasers (as each are amended, restated, modified and/or supplemented from
      time to time, collectively, the “Net Profits Interest Agreements”); (x)
      the Letter Agreement Amending Existing Notes and Consent to Distribution and
      Granting of Liens dated as of the date hereof among the Company, the Parent,
      Laurus, Valens U.S. SPV I LLC, Valens Offshore SPV I Ltd. and PSource Structured
      Debt Limited (as amended, restated, modified and/or supplemented from time
      to
      time, the “Amendment”); (xi) 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 (xii) all other documents, instruments and agreements
      entered into in connection with the transactions contemplated hereby and thereby
      (the preceding clauses (ii) through (xii), 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 Parent, the Company and
      each of their respective 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”).

     

    4.2           Subsidiaries.  Each
      direct and indirect Subsidiary of the Parent, 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
      1,000,000 shares, of which 1,000,000 are shares of common stock, par value
      $0.001 per share, 1,000 shares of which are issued and
      outstanding.  The authorized, issued and outstanding capital stock of
      each Subsidiary of the Company is set forth on Schedule
      4.3.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (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 Certificate 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 Parent, the
      Company and each of their respective 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 Parent, the
      Company and their respective 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 and to the
      extent it is a party thereto, will be valid and binding obligations of the
      Parent, the Company and each of their respective Subsidiaries, 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.

     

    (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.

     

    (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;

     

    (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;

     

    (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;

     

    (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.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (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 Parent, the Company nor any
      of their respective 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 Parent, the Company or any of their respective
      Subsidiaries or the suspension, revocation, impairment, forfeiture or
      non-renewal of any permit, license, authorization or approval applicable to
      the
      Parent or 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 Parent, the Company or any of their respective
      Subsidiaries that prevents the Parent, the Company or any of their respective
      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 Parent, the Company or any of their respective Subsidiaries,
      nor is the Company aware that there is any basis to assert any of the
      foregoing.  Neither the Parent, the Company nor any of their
      respective 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 Parent, the Company or any of their respective Subsidiaries
      currently pending or which the Parent, the Company or any of their respective
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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 Parent, the Company nor any of
      their respective Subsidiaries is in violation of any provision of the
      Sarbanes-Oxley Act of 2002
      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.

     

    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 Parent, the Company or any
      of
      their respective Subsidiaries under Environmental Law.  The Parent,
      the Company and their respective 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 Parent,
      the Company or their respective Subsidiaries, or to their knowledge by any
      other
      Person, at any property currently or formerly owned, leased or operated by
      the
      Parent, the Company or their respective Subsidiaries or disposed of at any
      other
      location by the Parent, the Company or their respective Subsidiaries except
      (i)
      in compliance with Environmental Law; and (2) in quantities and under
      circumstances that would not require investigation or remediation by the Parent,
      the Company or their respective Subsidiaries.  The Parent, the Company
      and their respective Subsidiaries have not assumed by contract or by operation
      of law the liabilities arising under Environmental Law of any other
      Person.  The Parent, the Company and their respective 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 Parent, the Company or any of
      their respective 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.

     

    4.19           Full
      Disclosure.  The Parent, the Company and each of their respective
      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 Parent, the Company and their respective
      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
      Parent, the Company and each of their respective Subsidiaries has general
      commercial, product liability, fire and casualty insurance policies with
      coverages which the Parent, the Company and each of their respective
      Subsidiaries believe are customary for companies similarly situated to the
      Parent, the Company and their respective Subsidiaries in the same or similar
      business.

     

    4.21           Patriot
      Act.  The Company certifies that, to the best of Company’s
      knowledge, neither the Parent, the Company nor any of their respective
      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 Parent, the Company or any of their respective 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 Parent, the Company or any of their respective
      Subsidiaries to any Creditor Party, to the extent that they are within the
      Parent’s, the Company’s and/or their respective 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 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 Parent, the Company or any of their respective
      Subsidiaries.  The Company shall provide any Creditor Party all
      additional information regarding the Parent, the Company or any of their
      respective 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 Parent, the Company and their respective 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.

     

    4.22           ERISA.  Based
      upon the Employee Retirement Income Security Act of 1974 (“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 each of 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.

     

    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.

     

    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.”

     

    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 Parent and the Company, the Parent’s, and the
      Company’s 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 each of the Parent’s and the
      Company’s balance sheet as at the end of such fiscal year and the related
      statements of each of the Parent’s and the Company’s income, retained earnings
      and cash flows for the fiscal year then ended, prepared on a consolidating
      and
      consolidated basis to include the Parent and 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 Parent’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 Parent, an unaudited/internal balance sheet and statements
      of income, retained earnings and cash flows of the Parent and the Company 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 Parent and 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 Parent’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 Parent and the
      Company as at the end of such month, prepared, on a consolidating and
      consolidated basis to include the Parent and 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

     

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

     

    6.2           Use
      of Funds.  The Company shall use the proceeds of the sale of the
      Notes solely for general working capital purposes and for the reimbursement
      to
      the Parent of certain expenses paid by the Parent in connection with the
      development of certain properties owned by the Company in an aggregate amount
      not to exceed $1,115,761.

     

    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.

     

    (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.

     

    (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.

     

    (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 each of 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.

     

    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 or dividends to the
      Parent provided that at the time of the payment of any such dividend and after
      taking into account the effect thereof, (A) no Event of Default (as defined
      in
      each Note) or event which, with the passage of time, giving of notice or both,
      would become an Event of Default (as defined in each Note) has occurred or
      would
      occur and (B) the Company shall continue to have on hand not less than $300,000
      in cash available for the Company’s general working capital purposes (exclusive
      of any cash required by any Creditor Party to be held in any restricted or
      cash
      collateral account for the benefit of any such Creditor Party), (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;

     

    (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.

     

    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).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

     

    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.

     

    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.

     

    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.

     

    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.

     

    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.

     

    (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 or any of its Subsidiaries
      in
      favor of any Creditor Party) 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.

     

    (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 Purchase 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.

     

    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:

            	
              Gulf
                Coast Oil Corporation

              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

            
	 	 
	
              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.

     

    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.

     

     

     

     

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      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    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:

            
	 	 
	
              GULF
                COAST OIL CORPORATION

            	
              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/
                Eugene
                Grin                                                          

              Name:
                Eugene Grin

              Title:
                Authorized Signatory

            
	 	 
	
              AGENT:

            	
              VALENS
                OFFSHORE SPV II, CORP.

            
	 	 
	
              LV
                ADMINISTRATIVE SERVICES, INC.,

               

              as
                Agent

               

              By: /s/
                Eugene
                Grin                                                               

              Name:
                Eugene Grin

              Title:
                Authorized Signatory

            	
              By:Valens
                Capital Management, LLC, its

              Investment
                Manager

               

              By:  /s/
                Eugene
                Grin                                                           

              Name:
                Eugene Grin

              Title:
                Authorized Signatory