AMENDED
AND RESTATED CREDIT AGREEMENT

    


    BETWEEN

    


    CROSS
BORDER RESOURCES, INC.

    


    AND

    


    TEXAS
CAPITAL BANK, N.A.

    


    January
31, 2011

     

    
      
        

      



    REVOLVING
LINE OF CREDIT AND LETTER

    OF CREDIT
FACILITY OF UP TO $25,000,000 

       

      
        

      

    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    TABLE
OF CONTENTS

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	 
      	 
      	 
      	 
      	 
      	
                                        Page

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      I	
                                        DEFINITIONS
      AND INTERPRETATION

                                      	 
      	
                                        2

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                        1.1

                                      	 
      	
                                        Terms
      Defined Above

                                      	 
      	
                                        2

                                      
	 
      	
                                        1.2

                                      	 
      	
                                        Additional
      Defined Terms

                                      	 
      	
                                        2

                                      
	 
      	
                                        1.3

                                      	 
      	
                                        Undefined
      Financial Accounting Terms

                                      	 
      	
                                        14

                                      
	 
      	
                                        1.4

                                      	 
      	
                                        References

                                      	 
      	
                                        14

                                      
	 
      	
                                        1.5

                                      	 
      	
                                        Articles
      and Sections

                                      	 
      	
                                        14

                                      
	 
      	
                                        1.6

                                      	 
      	
                                        Number
      and Gender

                                      	 
      	
                                        14

                                      
	 
      	
                                        1.7

                                      	 
      	
                                        Incorporation
      of Schedules and Exhibits

                                      	 
      	
                                        15

                                      
	 
      	
                                        1.8

                                      	 
      	
                                        Negotiated
      Transaction

                                      	 
      	
                                        15

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      II	
                                        TERMS
      OF FACILITIES

                                      	 
      	
                                        15

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                        2.1

                                      	 
      	
                                        Revolving
      Line of Credit

                                      	 
      	
                                        15

                                      
	 
      	
                                        2.2

                                      	 
      	
                                        Letter
      of Credit Facility

                                      	 
      	
                                        16

                                      
	 
      	
                                        2.3

                                      	 
      	
                                        Additional
      Provisions Applicable to Letters of Credit

                                      	 
      	
                                        16

                                      
	 
      	
                                        2.4

                                      	 
      	
                                        Use
      of Loan Proceeds and Letters of Credit

                                      	 
      	
                                        17

                                      
	 
      	
                                        2.5

                                      	 
      	
                                        Interest

                                      	 
      	
                                        17

                                      
	 
      	
                                        2.6

                                      	 
      	
                                        Repayment
      of Loans and Interest

                                      	 
      	
                                        18

                                      
	 
      	
                                        2.7

                                      	 
      	
                                        Outstanding
      Amounts

                                      	 
      	
                                        18

                                      
	 
      	
                                        2.8

                                      	 
      	
                                        Taxes
      and Time, Place, and Method of Payments

                                      	 
      	
                                        18

                                      
	 
      	
                                        2.9

                                      	 
      	
                                        Borrowing
      Base and Monthly Reduction Amount

                                      	 
      	
                                        20

                                      
	 
      	
                                        2.10

                                      	 
      	
                                        Mandatory
      Prepayments

                                      	 
      	
                                        21

                                      
	 
      	
                                        2.11

                                      	 
      	
                                        Voluntary
      Prepayments

                                      	 
      	
                                        21

                                      
	 
      	
                                        2.12

                                      	 
      	
                                        Engineering
      Fees and Expenses

                                      	 
      	
                                        21

                                      
	 
      	
                                        2.13

                                      	 
      	
                                        Commitment
      Fees

                                      	 
      	
                                        21

                                      
	 
      	
                                        2.14

                                      	 
      	
                                        Additional
      Fees

                                      	 
      	
                                        22

                                      
	 
      	
                                        2.15

                                      	 
      	
                                        Loans
      to Satisfy Obligations

                                      	 
      	
                                        22

                                      
	 
      	
                                        2.16

                                      	 
      	
                                        General
      Provisions Relating to Interest

                                      	 
      	
                                        22

                                      
	 
      	
                                        2.17

                                      	 
      	
                                        Yield
      Protection

                                      	 
      	
                                        23

                                      
	 
      	
                                        2.18

                                      	 
      	
                                        Letters
      in Lieu of Transfer Orders or Division Orders

                                      	 
      	
                                        24

                                      
	 
      	
                                        2.19

                                      	 
      	
                                        Power
      of Attorney

                                      	 
      	
                                        24

                                      
	 
      	
                                        2.20

                                      	 
      	
                                        Security
      Interest in Accounts; Right of Offset

                                      	 
      	
                                        25

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      III	
                                        CONDITIONS

                                      	 
      	
                                        25

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                        3.1

                                      	 
      	
                                        Receipt
      of Loan Documents and Other Items

                                      	 
      	
                                        25

                                      
	 
      	
                                        3.2

                                      	 
      	
                                        Each
      Loan

                                      	 
      	
                                        28

                                      
	 
      	
                                        3.3

                                      	 
      	
                                        Issuance
      of Letters of Credit

                                      	 
      	
                                        29

                                      
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      IV	
                                        REPRESENTATIONS
      AND WARRANTIES

                                      	 
      	
                                        30

                                      
	 
      	
                                        4.1

                                      	 
      	
                                        Due
      Authorization

                                      	 
      	
                                        30

                                      
	 
      	
                                        4.2

                                      	 
      	
                                        Existence

                                      	 
      	
                                        30

                                      


                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        - i
-

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              	 
      	
                      4.3

                    	 
      	
                      Valid
      and Binding Obligations

                    	 
      	
                      30

                    
	 
      	
                      4.4

                    	 
      	
                      Security
      Documents

                    	 
      	
                      30

                    
	 
      	
                      4.5

                    	 
      	
                      Title
      to Oil and Gas Properties

                    	 
      	
                      30

                    
	 
      	
                      4.6

                    	 
      	
                      Scope
      and Accuracy of Financial Statements

                    	 
      	
                      31

                    
	 
      	
                      4.7

                    	 
      	
                      No
      Material Adverse Effect or Default

                    	 
      	
                      31

                    
	 
      	
                      4.8

                    	 
      	
                      No
      Material Misstatements

                    	 
      	
                      31

                    
	 
      	
                      4.9

                    	 
      	
                      Liabilities,
      Litigation and Restrictions

                    	 
      	
                      31

                    
	 
      	
                      4.10

                    	 
      	
                      Authorizations;
      Consents

                    	 
      	
                      31

                    
	 
      	
                      4.11

                    	 
      	
                      Compliance
      with Laws

                    	 
      	
                      31

                    
	 
      	
                      4.12

                    	 
      	
                      ERISA

                    	 
      	
                      31

                    
	 
      	
                      4.13

                    	 
      	
                      Environmental
      Laws

                    	 
      	
                      32

                    
	 
      	
                      4.14

                    	 
      	
                      Compliance
      with Federal Reserve Regulations

                    	 
      	
                      32

                    
	 
      	
                      4.15

                    	 
      	
                      Investment
      Company Act

                    	 
      	
                      32

                    
	 
      	
                      4.16

                    	 
      	
                      Proper
      Filing of Tax Returns; Payment of Taxes Due

                    	 
      	
                      32

                    
	 
      	
                      4.17

                    	 
      	
                      Refunds

                    	 
      	
                      32

                    
	 
      	
                      4.18

                    	 
      	
                      Gas
      Contracts

                    	 
      	
                      32

                    
	 
      	
                      4.19

                    	 
      	
                      Intellectual
      Property

                    	 
      	
                      33

                    
	 
      	
                      4.20

                    	 
      	
                      Casualties
      or Taking of Property

                    	 
      	
                      33

                    
	 
      	
                      4.21

                    	 
      	
                      Principal
      Location

                    	 
      	
                      33

                    
	 
      	
                      4.22

                    	 
      	
                      Subsidiaries

                    	 
      	
                      33

                    
	 
      	
                      4.23

                    	 
      	
                      Compliance
      with Anti-Terrorism Laws

                    	 
      	
                      33

                    
	 
      	
                      4.24

                    	 
      	
                      Identification
      Numbers

                    	 
      	
                      34

                    
	 
      	
                      4.25

                    	 
      	
                      Solvency

                    	 
      	
                      34

                    
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      V	
                      AFFIRMATIVE
      COVENANTS

                    	 
      	
                      35

                    
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                      5.1

                    	 
      	
                      Maintenance
      and Access to Records

                    	 
      	
                      35

                    
	 
      	
                      5.2

                    	 
      	
                      Quarterly
      Financial Statements and Compliance Certificates

                    	 
      	
                      35

                    
	 
      	
                      5.3

                    	 
      	
                      Annual
      Financial Statements and Compliance Certificate

                    	 
      	
                      35

                    
	 
      	
                      5.4

                    	 
      	
                      Oil
      and Gas Reserve Reports and Production Reports

                    	 
      	
                      36

                    
	 
      	
                      5.5

                    	 
      	
                      Title
      Opinions; Title Defects; Mortgaged Properties

                    	 
      	
                      36

                    
	 
      	
                      5.6

                    	 
      	
                      Notices
      of Certain Events

                    	 
      	
                      37

                    
	 
      	
                      5.7

                    	 
      	
                      Letters
      in Lieu of Transfer Orders or Division Orders

                    	 
      	
                      37

                    
	 
      	
                      5.8

                    	 
      	
                      Commodity
      Hedging

                    	 
      	
                      38

                    
	 
      	
                      5.9

                    	 
      	
                      Joinder
      of New Domestic Subsidiaries

                    	 
      	
                      38

                    
	 
      	
                      5.10

                    	 
      	
                      Additional
      Information

                    	 
      	
                      38

                    
	 
      	
                      5.11

                    	 
      	
                      Compliance
      with Laws

                    	 
      	
                      38

                    
	 
      	
                      5.12

                    	 
      	
                      Payment
      of Assessments and Charges

                    	 
      	
                      38

                    
	 
      	
                      5.13

                    	 
      	
                      Maintenance
      of Existence or Qualification and Good Standing

                    	 
      	
                      38

                    
	 
      	
                      5.14

                    	 
      	
                      Payment
      of Note; Performance of Obligations

                    	 
      	
                      39

                    
	 
      	
                      5.15

                    	 
      	
                      Further
      Assurances

                    	 
      	
                      39

                    
	 
      	
                      5.16

                    	 
      	
                      Initial
      Expenses of Lender

                    	 
      	
                      39

                    
	 
      	
                      5.17

                    	 
      	
                      Subsequent
      Expenses of Lender

                    	 
      	
                      39

                    
	 
      	
                      5.18

                    	 
      	
                      Operation
      of Oil and Gas Properties

                    	 
      	
                      39

                    
	 
      	
                      5.19

                    	 
      	
                      Maintenance
      and Inspection of Properties

                    	 
      	
                      40

                    
	 
      	
                      5.20

                    	 
      	
                      Maintenance
      of Insurance

                    	 
      	
                      40

                    
	 
      	
                      5.21

                    	 
      	
                      Environmental
      Indemnification

                    	 
      	
                      41

                    


            

          

        

      

    


    
      
         


      

      
        - ii
-

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	
                                5.22

                              	 
      	
                                General
      Indemnification

                              	 
      	
                                41

                              
	 
      	
                                5.23

                              	 
      	
                                Evidence
      of Compliance with Anti-Terrorism Laws

                              	 
      	
                                42

                              
	 
      	
                                5.24

                              	 
      	
                                Deposit
      Accounts

                              	 
      	
                                42

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      VI	
                                NEGATIVE
      COVENANTS

                              	 
      	
                                42

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                6.1

                              	 
      	
                                Indebtedness

                              	 
      	
                                42

                              
	 
      	
                                6.2

                              	 
      	
                                Contingent
      Obligations

                              	 
      	
                                43

                              
	 
      	
                                6.3

                              	 
      	
                                Liens

                              	 
      	
                                43

                              
	 
      	
                                6.4

                              	 
      	
                                Sales
      of Assets

                              	 
      	
                                43

                              
	 
      	
                                6.5

                              	 
      	
                                Leasebacks

                              	 
      	
                                43

                              
	 
      	
                                6.6

                              	 
      	
                                Sale
      or Discount of Receivables

                              	 
      	
                                43

                              
	 
      	
                                6.7

                              	 
      	
                                Loans
      or Advances

                              	 
      	
                                43

                              
	 
      	
                                6.8

                              	 
      	
                                Investments

                              	 
      	
                                43

                              
	 
      	
                                6.9

                              	 
      	
                                Dividends,
      Distributions and Certain Payments

                              	 
      	
                                44

                              
	 
      	
                                6.10

                              	 
      	
                                Issuance
      of Equity; Changes in Corporate Structure

                              	 
      	
                                44

                              
	 
      	
                                6.11

                              	 
      	
                                Transactions
      with Affiliates

                              	 
      	
                                44

                              
	 
      	
                                6.12

                              	 
      	
                                Lines
      of Business

                              	 
      	
                                44

                              
	 
      	
                                6.13

                              	 
      	
                                Plan
      Obligation

                              	 
      	
                                44

                              
	 
      	
                                6.14

                              	 
      	
                                Current
      Ratio

                              	 
      	
                                45

                              
	 
      	
                                6.15

                              	 
      	
                                Total
      Funded Indebtedness to EBITDA Ratio

                              	 
      	
                                45

                              
	 
      	
                                6.16

                              	 
      	
                                Interest
      Coverage Ratio

                              	 
      	
                                45

                              
	 
      	
                                6.17

                              	 
      	
                                Anti-Terrorism
      Laws

                              	 
      	
                                45

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      VII	
                                EVENTS
      OF DEFAULT

                              	 
      	
                                46

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                7.1

                              	 
      	
                                Enumeration
      of Events of Default

                              	 
      	
                                46

                              
	 
      	
                                7.2

                              	 
      	
                                Remedies

                              	 
      	
                                48

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	ARTICLE
      VIII	
                                MISCELLANEOUS

                              	 
      	
                                49

                              
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                                8.1

                              	 
      	
                                Assignments;
      Participations

                              	 
      	
                                49

                              
	 
      	
                                8.2

                              	 
      	
                                Survival
      of Representations, Warranties, and Covenants

                              	 
      	
                                50

                              
	 
      	
                                8.3

                              	 
      	
                                Notices
      and Other Communications

                              	 
      	
                                50

                              
	 
      	
                                8.4

                              	 
      	
                                Parties
      in Interest

                              	 
      	
                                51

                              
	 
      	
                                8.5

                              	 
      	
                                Renewals;
      Extensions

                              	 
      	
                                51

                              
	 
      	
                                8.6

                              	 
      	
                                Rights
      of Third Parties

                              	 
      	
                                51

                              
	 
      	
                                8.7

                              	 
      	
                                No
      Waiver; Rights Cumulative

                              	 
      	
                                51

                              
	 
      	
                                8.8

                              	 
      	
                                Survival
      Upon Unenforceability

                              	 
      	
                                51

                              
	 
      	
                                8.9

                              	 
      	
                                Amendments;
      Waivers

                              	 
      	
                                52

                              
	 
      	
                                8.10

                              	 
      	
                                Controlling
      Agreement

                              	 
      	
                                52

                              
	 
      	
                                8.11

                              	 
      	
                                Disposition
      of Collateral

                              	 
      	
                                52

                              
	 
      	
                                8.12

                              	 
      	
                                Governing
      Law

                              	 
      	
                                52

                              
	 
      	
                                8.13

                              	 
      	
                                Waiver
      of Rights to Jury Trial

                              	 
      	
                                52

                              
	 
      	
                                8.14

                              	 
      	
                                Jurisdiction
      and Venue

                              	 
      	
                                52

                              
	 
      	
                                8.15

                              	 
      	
                                Integration

                              	 
      	
                                53

                              
	 
      	
                                8.16

                              	 
      	
                                Waiver
      of Punitive and Consequential Damages

                              	 
      	
                                53

                              


                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        - iii
-

        
          

        

      

      
         


      

    

    


    
      
        
          	 
      	
                  8.17

                	 
      	
                  Counterparts

                	 
      	
                  53

                
	 
      	
                  8.18

                	 
      	
                  USA
      Patriot Act Notice

                	 
      	
                  53

                
	 
      	
                  8.19

                	 
      	
                  Tax
      Shelter Regulations

                	 
      	
                  53

                
	 
      	
                  8.20

                	 
      	
                  Contribution
      and Indemnification

                	 
      	
                  54

                


        

      

    

     

    LIST OF
SCHEDULES

     

    
      
        
          
            
              
                	
                        Schedule
      4.9

                      	
                        -

                      	
                        Liabilities
      and Litigation

                      	 
	
                        Schedule
      4.13

                      	
                        -

                      	
                        Environmental
      Matters

                      	 
	
                        Schedule
      4.17

                      	
                        -

                      	
                        Refunds

                      	 
	
                        Schedule
      4.18

                      	
                        -

                      	
                        Gas
      Contracts

                      	 
	
                        Schedule
      4.20

                      	
                        -

                      	
                        Casualties

                      	 
	
                        Schedule
      4.24

                      	
                        -

                      	
                        Taxpayer
      ID and Organizational Numbers

                      	 
	 
      	 
      	 
      	 
	
                        LIST OF EXHIBITS

                      	 
	 
      	 
      	 
      	 
	
                        Exhibit
      I

                      	
                        -

                      	
                        Form
      of Note

                      	 
	
                        Exhibit
      II

                      	
                        -

                      	
                        Form
      of Borrowing Request

                      	 
	
                        Exhibit
      III

                      	
                        -

                      	
                        Form
      of Compliance Certificate

                      	 
	
                        Exhibit
      IV

                      	
                        -

                      	
                        Form
      of Opinion of Counsel

                      	 
	
                        Exhibit
      V

                      	
                        -

                      	
                        Form
      of Opinion of Texas Counsel

                      	 


              

            

          

        

      

    


    
      
         


      

      
        - iv
-

        
          

        

      

      
         


      

    


    AMENDED AND RESTATED CREDIT
AGREEMENT

     

    This
AMENDED AND RESTATED CREDIT AGREEMENT is made and entered into this 31st day of
January, 2011, by and between CROSS BORDER RESOURCES, INC., a Nevada corporation
(the “Borrower”), and TEXAS CAPITAL BANK, N.A., a national banking association
(the “Lender”).

     

    WITNESSETH:

     

    WHEREAS,
Pure Energy Partners II, L.P., a Texas limited liability partnership (“Pure Energy”), and
the Lender entered into that certain Credit Agreement dated August 4, 2006 (as
amended to the date hereof, the “Existing Credit
Agreement”);

     

    WHEREAS,
all obligations of Pure Energy under the Existing Credit Agreement and the other
Loan Documents (as such term is defined in the Existing Credit Agreement) were
assumed and ratified by its General Partner, Pure Gas Group, Inc., a Texas
corporation (“Pure
Gas”), pursuant to the following documents:

     

    Assignment,
Bill of Sale and Assumption Agreement dated December 27, 2010, to be effective
January 1, 2011 by Pure Energy in favor of Pure Gas filed December 29, 2010
under Reception No. 101331 and recorded in Book 838, Pages 945 et. seq.,
Official Public Records of Eddy County, New Mexico; and

     

    Assignment,
Bill of Sale and Assumption Agreement dated December 27, 2010, to be effective
January 1, 2011 by Pure Energy in favor of Pure Gas filed December 29, 2010 as
Document No. 25850 and recorded in Book 1710, Pages 758 et seq., Official Public
Records of Lea County, New Mexico;

     

    WHEREAS,
Pure Gas has been merged with and into Doral Acquisition Corp., a Nevada
corporation (“Doral
Acquisition”);

     

    WHEREAS,
Doral Acquisition has been merged with and into the Borrower, which, prior to
such merger, was known as Doral Energy Corp.; and

     

    WHEREAS,
the Borrower and the Lender desire to amend and restate in its entirety the
Existing Credit Agreement by entering into this Amended and Restated Credit
Agreement;

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows,
restating in its entirety the Existing Credit Agreement:


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    ARTICLE
I

    DEFINITIONS AND
INTERPRETATION

     

    1.1           Terms Defined
Above.  As used in this Amended and Restated Credit Agreement,
each of the terms “Borrower,” “Doral Acquisition,”
“Existing Credit
Agreement,” “Lender,” “Pure Energy” and
“Pure Gas”
shall have the meaning assigned to such term hereinabove.

     

    1.2           Additional Defined
Terms.  As used in this Amended and Restated Credit Agreement,
each of the following terms shall have the meaning assigned thereto in this
Section 1.2 or in Sections referred to in this Section 1.2, unless
the context otherwise requires:

     

    “Additional Amount”
shall have the meaning assigned to such term in Section
2.8.

     

    “Adjusted Base Rate”
shall mean, for any Loan, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Lender to be the
greater of (a) the Base Rate and (b) the Federal Funds Rate.

     

    “Affiliate” shall
mean, as to any Person, any other Person directly or indirectly, controlling, or
under common control with, such Person and includes any “affiliate” of such
Person within the meaning of Rule 12b-2 promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, with
“control,” as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships; provided, however, that in no event shall the Lender be deemed an
Affiliate of the Borrower or any of the Guarantors.

     

    “Agreement” shall mean
this Amended and Restated Credit Agreement, as it may be amended, supplemented,
restated or otherwise modified from time to time.

     

    “Anti-Terrorism Laws”
shall mean any laws relating to terrorism or money laundering, including
Executive Order No. 13224 and the USA Patriot Act.

     

    “Approved Fund” shall
mean any (a) investment company, fund, trust, securitization vehicle or conduit
that is (or will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of its business or (b) any Person (other than a natural person) which
temporarily warehouses loans for the Lender or any entity described in the
preceding clause (a) and that, with respect to each of the preceding clauses (a)
and (b), is administered or managed by (i) the Lender, (ii) an Affiliate of the
Lender or (iii) a Person (other than a natural person) or an Affiliate of a
Person (other than a natural person) that administers or manages the
Lender.

     

    “Approved Hedge
Counterparty” shall mean the Lender or an Affiliate of the
Lender.


    
      
         


      

      
        - 2
-

        
          

        

      

      
         


      

    


    “Available Commitment”
shall mean, at any time, an amount equal to the remainder, if any, of (a) the
sum of the Revolving Commitment Amount in effect at such time minus (b) the sum of
the Loan Balance at such time plus the L/C Exposure at such time.

     

    “Base Rate” shall mean
the interest rate announced by the Lender from time to time as its prime rate or
its general reference rate of interest, which Base Rate shall change upon any
change in such announced or published general reference interest rate and which
Base Rate may not be the lowest interest rate charged by the
Lender.

     

    “Blocked Person” shall
have the meaning assigned to such term in Section
4.23.

     

    “Borrowing Base” shall
mean, at any time, the amount stated in Section 2.9(a) and
each other amount established and in effect from time to time in accordance with
the provisions of Section
2.9.

     

    “Borrowing Request”
shall mean each written request, substantially in the form attached hereto as
Exhibit II, by
the Borrower to the Lender for a borrowing pursuant to Section 2.1, each of
which shall:

     

    (a)           be
signed by a Responsible Officer of the Borrower;

     

    (b)           specify
the amount of the Loan requested and the date of the borrowing (which shall be a
Business Day); and

     

    (c)           be
delivered to the Lender no later than 2:00 p.m., Central Standard or Central
Daylight Savings Time, as the case may be, on the Business Day preceding the
requested date of the borrowing

     

    “Business Day” shall
mean a day other than a Saturday, Sunday, legal holiday for commercial banks
under the laws of the State of Texas, or any other day when banking is suspended
in the State of Texas.

     

    “Business Entity”
shall mean a corporation, partnership, joint venture, limited liability company,
joint stock association, business trust, or other business entity.

     

    “Closing” shall mean
the establishment of the Facilities.

     

    “Closing Date” shall
mean the  date of this Agreement.

     

    “Collateral” shall
mean the Mortgaged Properties and any other Property now or at any time pledged
to the Lender by the Borrower or any of the Guarantors as security for the
payment or performance of all or any portion of the Obligations, including any
Property that was considered in determining or redetermining the Borrowing Base
and expressly including “as extracted collateral” as defined in the UCC or the
Uniform Commercial Code of any other applicable state.


    
      
         


      

      
        - 3
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    “Commitment” shall
mean the obligation of the Lender to make Loans to or for the benefit of the
Borrower and to issue Letters of Credit pursuant to applicable provisions of
this Agreement.

     

    “Commitment Fees”
shall mean the fees payable to the Lender by the Borrower pursuant to the
provisions of Section
2.13.

     

    “Commitment Period”
shall mean the period from and including the Closing Date to, but not including,
the Commitment Termination Date.

     

    “Commitment Termination
Date” shall mean the earlier of (a) January 31, 2014 and (b) the date the
Commitment is terminated pursuant to the provisions of Section
7.2.

     

    “Commodity Hedge
Agreements” shall mean crude oil, natural gas, or other hydrocarbon
floor, collar, cap, price protection or hedge agreements.

     

    “Commonly Controlled
Entity” shall mean any Person which is under common control with the
Borrower or any of the Guarantors within the meaning of Section 4001 of
ERISA.

     

    “Compliance
Certificate” shall mean each certificate, substantially in the form
attached hereto as Exhibit III, executed
by a Responsible Officer of the Borrower and furnished to the Lender from time
to time in accordance with the provisions of Section 5.2 or Section 5.3, as the
case may be.

     

    “Contingent
Obligation” shall mean, as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, or
other obligations of any other Person (for purposes of this definition, a “primary obligation”)
in any manner, whether directly or indirectly, including any obligation of such
Person, regardless of whether such obligation is contingent, (a) to purchase any
primary obligation or any Property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
primary obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain the net
worth or solvency of any other Person, (c) to purchase Property, securities or
services primarily for the purpose of assuring the owner of any primary
obligation of the ability of the Person primarily liable for such primary
obligation to make payment thereof, or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof, with
the amount of any Contingent Obligation being deemed to be equal to the stated
or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof  as determined by
such Person in good faith.

     

    “Contribution
Percentage” shall mean, for each party obligated to make a payment due
pursuant to the provisions of Section 8.20, the
percentage obtained by dividing such party’s Obtained Benefit by the aggregate
Obtained Benefits of all of the Guarantors.


    
      
         


      

      
        - 4
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    “Current Assets” shall
mean all assets which would, in accordance with GAAP, be included as current
assets on a consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as of the date of calculation, after deducting adequate reserves in
each case in which a reserve is proper in accordance with GAAP, plus the then
current Available Commitment and, if not already included, the amount of any
cash on deposit with the Lender in accordance with the provisions of Section 5.24, but
excluding non-cash derivative current assets arising from Commodity Hedge
Agreements.

     

    “Current Liabilities”
shall mean all liabilities which would, in accordance with GAAP, be included as
current liabilities on a consolidated balance sheet of the Borrower and its
consolidated Subsidiaries, but excluding current maturities in respect of the
Obligations, both principal and interest, and non-cash derivative current
liabilities arising from Commodity Hedge Agreements.

     

    “Default” shall mean
any event or occurrence which with the lapse of time or the giving of notice or
both would become an Event of Default.

     

    “Default Rate” shall
mean a daily interest rate equal to the per annum interest rate equal to the
Adjusted Base Rate for each relevant day plus three percent (3%) converted to a
daily rate on the basis of a year of 365 or 366 days, as the case may be, and
the rate so determined for each relevant day being applied on the basis of
actual days elapsed (including the first day, but excluding the last day) during
the period for which interest is payable at the Default Rate, but in no event
shall the Default Rate exceed the Highest Lawful Rate.

     

    “Deficiency” shall
have the meaning assigned to such term in Section
2.10.

     

    “Dollars” and “$” shall mean dollars
in lawful currency of the United States of America.

     

    “Domestic Subsidiary”
shall mean any Subsidiary of the Borrower that is organized under the laws of
the United States of America or any state thereof or the District of
Columbia.

     

    “EBITDA” shall mean,
for any period for which the amount thereof is to be determined and on a
consolidated basis for the Borrower and its consolidated Subsidiaries, Net
Income for such period, but excluding (i) unrealized gains or losses or charges
in respect of Commodity Hedge Agreements (including those under GAAP arising
from the application of FAS 133), (ii) extraordinary or non-recurring income
items and, to the extent acceptable to the Lender, expense items and (iii)
deferred financing costs written off, including equity discounts, and premiums
paid in connection with any early extinguishment of Indebtedness permitted
pursuant to this Agreement, including the refinancing of the senior secured
Indebtedness of the Borrower outstanding prior to the Closing Date), plus, in
each case to the extent deducted in the determination of Net Income for such
period and without duplication of any item in more than one category, each of
the following for such period: (a) Interest Expense, (b) Taxes, (c)
depreciation, depletion and amortization expenses, (d) intangible drilling and
completion costs and (e) other non-cash expenses, including write-downs of
non-current assets and unrealized non-cash losses resulting from foreign
currency balance sheet adjustments required under GAAP, and minus, to the extent
credited in the determination of Net Income for such period, non-cash credits
for such period.


    
      
         


      

      
        - 5
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    “Environmental
Complaint” shall mean any written or oral complaint, order, directive,
claim, citation, notice of environmental report or investigation, or other
notice by any Governmental Authority or any other Person with respect to (a) air
emissions, (b) spills, releases, or discharges to soils, any improvements
located thereon, surface water, groundwater, or the sewer, septic, waste
treatment, storage, or disposal systems servicing any Property of the Borrower
or any of the Guarantors, (c) solid or liquid waste disposal, (d) the use,
generation, storage, transportation, or disposal of any Hazardous Substance, or
(e) other environmental, health, or safety matters affecting any Property of the
Borrower or any of the Guarantors or the business conducted
thereon.

     

    “Environmental Laws”
shall mean (a) the following federal laws as they may be cited, referenced, and
amended from time to time:  the Clean Air Act, the Clean Water Act,
the Safe Drinking Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Occupational Safety and Health Act, the Oil Pollution Act, the Resource
Conservation and Recovery Act, the Superfund Amendments and Reauthorization Act,
and the Toxic Substances Control Act; (b) any and all equivalent environmental
statutes of any state in which Property of the Borrower or any of the Guarantors
is situated, as they may be cited, referenced and amended from time to time; (c)
any rules or regulations promulgated under or adopted pursuant to the above
federal and state laws; and (d) any other equivalent federal, state, or local
statute or any requirement, rule, regulation, code, ordinance, or order adopted
pursuant thereto, including those relating to the generation, transportation,
treatment, storage, recycling, disposal, handling, or release of Hazardous
Substances.

     

    “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, and the regulations thereunder
and interpretations thereof.

     

    “Event of Default”
shall mean any of the events specified in Section
7.1.

     

    “Excess Payments”
shall have the meaning assigned to such term in Section
8.20.

     

    “Excluded Taxes” shall
mean, with respect to any and all payments to the Lender or any other recipient
of any payment to be made by or on account of any Obligation, net income taxes,
branch profits taxes, franchise and excise taxes (to the extent imposed in lieu
of net income taxes), and all interest, penalties and liabilities with respect
thereto, imposed on the Lender.

     

    “Executive Order No.
13224” shall mean Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, as the same has been, or shall hereafter be,
renewed, extended, amended or replaced.

     

    “Facility Amount”
shall mean $10,000,000, as modified from time to time pursuant to the terms
hereof; provided, however, upon
delivery by the Borrower to the Lender of a written consent of the Trustee under
the Trust Indenture, pursuant to the provisions of the Trust Indenture, to such
increase, such term shall mean $25,000,000, as modified from time to time
pursuant to the terms hereof.


    
      
         


      

      
        - 6
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    “Federal Funds Rate”
shall mean, for any day, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published by the Federal Reserve Bank
of Dallas, Texas, on the Business Day next succeeding such day; provided that
(a) if the day for which such rate is to be determined is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Lender on such day on
such transactions as determined by the Lender.

     

    “Financial Statements”
shall mean consolidated and consolidating financial statements of the Borrower
and its consolidated Subsidiaries as at the point in time and for the period
indicated, including all notes thereto, and consisting of at least a balance
sheet and related statements of operations, members’, shareholders’ or partners’
equity, and cash flows and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification of a
nationally-recognized or regionally-recognized firm of independent certified
public accountants or other independent certified public accountants acceptable
to the Lender and footnotes to any of the foregoing, all of which, unless
otherwise indicated, shall be prepared in accordance with GAAP consistently
applied and in comparative form with respect to the corresponding period of the
preceding fiscal year.

     

    “GAAP” shall mean
generally accepted accounting principles established by the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants and in
effect in the United States from time to time.

     

    “Governmental
Authority” shall mean any nation, country, commonwealth, territory,
government, state, county, parish, municipality, or other political subdivision
and any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.

     

    “Guaranties” shall
mean, collectively, guarantees of payment and performance of the Obligations, in
form and substance acceptable to the Lender, provided from time to time by the
Guarantors in compliance with the provisions of Section
5.9.

     

    “Guarantors” shall
mean, collectively, any and all Domestic Subsidiaries of the Borrower formed or
acquired subsequent to the Closing Date.

     

    “Hazardous Substances”
shall mean flammables, explosives, radioactive materials, hazardous wastes,
asbestos, or any material containing asbestos, polychlorinated biphenyls (PCBs),
toxic substances or related materials, petroleum, petroleum products, associated
oil or natural gas exploration, production, and development wastes, or any
substances defined as “hazardous substances,” “hazardous materials,” “hazardous
wastes,” or “toxic substances” under the Comprehensive Environmental Response,
Compensation and Liability Act, the Superfund Amendments and Reauthorization
Act, the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, or any other Requirement of
Law.

     

    “Highest Lawful Rate”
shall mean the maximum non-usurious interest rate, if any (or, if the context so
requires, an amount calculated at such rate), that at any time or from time to
time may be contracted for, taken, reserved, charged or received under laws
applicable to the Lender, as such laws are presently in effect or, to the extent
allowed by applicable law, as such laws may hereafter be in effect and which
allow a higher maximum non-usurious interest rate than such laws now
allow.


    
      
         


      

      
        - 7
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    “Indebtedness” shall
mean, as to any Person, without duplication, (a) all liabilities (excluding
capital, surplus, reserves for deferred income taxes, deferred compensation
liabilities, other deferred liabilities and credits and asset retirement
obligations) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet, (b) all
obligations of such Person evidenced by bonds, debentures, promissory notes, or
similar evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money, (d) all obligations of others, to the extent any such obligation
is secured by a Lien on the assets of such Person (whether or not such Person
has assumed or become liable for the obligation secured by such
Lien),  (e) all direct or contingent obligations of such Person under
letters of credit, banker’s acceptances, surety bonds, and similar instruments
and (f) net obligations of such Person under any Commodity Hedge Agreements or
Interest Rate Hedge Agreements.

     

    “Indemnified Taxes”
shall mean Taxes other than Excluded Taxes.

     

    “Indemnitee” shall
have the meaning assigned to such term in Section
5.21.

     

    “Insolvency
Proceeding” shall mean application (whether voluntary or instituted by
another Person) for or the consent to the appointment of a receiver, trustee,
conservator, custodian, or liquidator of any Person or of all or a substantial
part of the Property of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a case under Title 11 of
the United States Code, seeking liquidation, reorganization, or rearrangement or
taking advantage of any bankruptcy, insolvency, debtor’s relief, or other
similar law of the United States, the State of Texas, or any other
jurisdiction.

     

    “Intellectual
Property” shall mean patents, patent applications, trademarks,
tradenames, copyrights, technology, know how, and processes.

     

    “Interest Expense”
shall mean, for any period for which the amount thereof is to be determined, any
and all expenses relating to the accrual of interest on Indebtedness of the
Borrower, on a consolidated basis with its consolidated Subsidiaries, including
interest expense attributable to capitalized leases.

     

    “Interest Rate Hedge
Agreements” shall mean interest rate floor, collar, cap, rate protection
or hedge agreements.

     

    “Investment” in any
Person shall mean any stock, bond, note, or other evidence of Indebtedness, or
any other security (other than current trade and customer accounts) of,
investment or partnership interest in or loan to, such Person.

     

    “Joinder Agreement”
shall mean each agreement, in form and substance acceptable to the Lender,
pursuant to which a Domestic Subsidiary of the Borrower formed or acquired
subsequent to the Closing Date agrees to become a party to and bound by this
Agreement.


    
      
         


      

      
        - 8
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    “L/C Exposure” shall
mean, at any time, the sum of (a) the then aggregate maximum amount available to
be drawn under outstanding Letters of Credit plus (b) prior to the making of any
related Letter of Credit Payments in respect of such Letters of Credit, the
aggregate of all unpaid reimbursement obligations in respect of such Letters of
Credit.

     

    “L/C Sublimit” shall
mean $500,000.

     

    “Letter of Credit”
shall mean any standby letter of credit issued for the account of the Borrower
pursuant to Section
2.2.

     

    “Letter of Credit
Application” shall mean the standard letter of credit application
employed by the Lender, as the issuer of the Letters of Credit, from time to
time in connection with its issuance of letters of credit.

     

    “Letter of Credit
Payment” shall mean any payment made by the Lender under a Letter of
Credit, to the extent that such payment has not been repaid by the
Borrower.

     

    “Lien” shall mean any
interest in Property securing an obligation owed to, or a claim by, a Person
other than the owner of such Property, whether such interest is based on common
law, statute, or contract, and including, but not limited to, the lien or
security interest arising from a mortgage, ship mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt, or a lease, consignment,
or bailment for security purposes (other than true leases or true consignments),
liens of mechanics, materialmen, and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other than
the owner of such Property (for the purpose of this Agreement, the Borrower and
each of the Guarantors shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes).

     

    “Limitation Period”
shall mean any period while any amount remains owing on the Note and interest on
such amount, calculated at the applicable interest rate, plus any fees or other
sums payable to the Lender under any Loan Document and deemed to be interest
under applicable law, would exceed the amount of interest which would accrue at
the Highest Lawful Rate.

     

    “Loan” shall mean any
loan made by the Lender to or for the benefit of the Borrower pursuant to this
Agreement and any payment made by the Lender under a Letter of
Credit.

     

    “Loan Balance” shall
mean, at any point in time, the aggregate outstanding principal balance of the
Note at such time.

     

    “Loan Documents” shall
mean this Agreement, the Note, all of the documents in effect under the terms of
the Existing Credit Agreement, the Letter of Credit Applications, the Letters of
Credit, the Security Documents, any Joinder Agreements and all other documents
and instruments now or hereafter delivered pursuant to the terms of or in
connection with this Agreement, the Note, any of the documents in effect under
the terms of the Existing Credit Agreement, the Letter of Credit Applications,
the Letters of Credit, the Security Documents or any Joinder Agreement, and all
renewals and extensions of, amendments and supplements to, and restatements of,
any or all of the foregoing from time to time in effect.


    
      
         


      

      
        - 9
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    “Material Adverse
Effect” shall mean (a) any material and adverse effect on the business,
operations, assets, properties, liabilities (actual or contingent) or financial
condition of the Borrower, on a consolidated basis with its consolidated
Subsidiaries, (b) any material and adverse effect upon the Collateral, including
any material and adverse effect upon the value or impairment of the Borrower or
its Subsidiary’s ownership of the Collateral, (c) any material adverse effect on
the validity or enforceability of any Loan Document or (d) any material adverse
effect on the rights or remedies of the Lender or any Approved Hedge
Counterparty under any Loan Document.

     

    “Monthly Reduction
Amount” shall mean, at any time, the amount determined as such by the
Lender and then in effect in accordance with the provisions of Section
2.9.

     

    “Mortgaged Properties”
shall mean all Oil and Gas Properties of the Borrower and its Domestic
Subsidiaries subject to a perfected first priority Lien (subject only to
Permitted Liens) in favor of the Lender, as security for the
Obligations.

     

    “Net Income” shall
mean, for any relevant period, the net income of the Borrower, on a consolidated
basis with its consolidated Subsidiaries, during such period, determined in
accordance with GAAP.

     

    “Note” shall mean the
promissory note of the Borrower payable to the Lender in the face amount of up
to the Aggregate Facility Amount in the form attached hereto as Exhibit I with all
blanks in such form completed appropriately, together with all renewals,
extensions for any period, increases and rearrangements thereof.

     

    “Obligations” shall
mean, without duplication of the same amount in more than one category, (a) all
Indebtedness of the Borrower evidenced by the Note, (b) the obligation of the
Borrower to provide to or reimburse the Lender, as the issuer of the Letters of
Credit, as the case may be, for amounts payable, paid or incurred with respect
to Letters of Credit, (c) the undrawn, unexpired amount of all outstanding
Letters of Credit, (d) Indebtedness of the Borrower in respect of Commodity
Hedge Agreements or Interest Rate Hedge Agreements with Approved Hedge
Counterparties, so long as in compliance with the provisions of Section 6.1 (which it
is agreed shall rank pari passu with all other items listed in this definition),
(e) the obligation of the Borrower for the payment of Commitment Fees and other
fees pursuant to the provisions of this Agreement and (f) all other obligations
and liabilities of the Borrower to the Lender, now existing or hereafter
incurred, under, arising out of or in connection with any Loan Document or any
Commodity Hedge Agreement or Interest Rate Hedge Agreement with an Approved
Hedge Counterparty and in compliance with the provisions of Section 6.1, and to
the extent that any of the foregoing includes or refers to the payment of
amounts deemed or constituting interest, only so much thereof as shall have
accrued, been earned and which remains unpaid at each relevant time of
determination.

     

    
      
        
           


        

        
          - 10
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    “Obtained Benefit”
shall mean the aggregate amount of benefits, both direct and indirect, obtained
by any of the Borrower and the Guarantors from the extension of credit to the
Borrower under this Agreement and not repaid by the Borrower or one of the
Guarantors.

     

    “OFAC” shall mean the
Office of Foreign Assets Control of the United States Department of the
Treasury, or any successor Governmental Authority.

     

    “Oil and Gas
Properties” shall mean fee, leasehold, or other interests in or under
mineral estates or oil, gas, and other liquid or gaseous hydrocarbon leases,
including undivided interests in any such property rights owned jointly with
others, with respect to Properties situated in the United States or offshore
from any State of the United States, including overriding royalty and royalty
interests, leasehold estate interests, net profits interests, production payment
interests, and mineral fee interests, together with contracts executed in
connection therewith and all tenements, hereditaments, appurtenances, and
Properties appertaining, belonging, affixed, or incidental thereto.

     

    “Other Taxes” shall
mean 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 under any Loan Document or from the execution, delivery or enforcement of,
or otherwise with respect to, any Loan Document.

     

    “Permitted Liens”
shall mean (a) Liens for taxes, assessments, or other governmental charges or
levies not yet due or which (if foreclosure, distraint, sale, or other similar
proceedings shall not have been initiated) are being contested in good faith by
appropriate proceedings, and such reserve as may be required by GAAP shall have
been made therefor, (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security (other than Liens created by
Section 4068 of ERISA), old age pension, employee benefits, or public liability
obligations which are not yet due or which are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall have
been made therefor, (c) Liens in favor of vendors, carriers, warehousemen,
repairmen, mechanics, workmen, materialmen, constructors, laborers, landlords or
similar Liens arising by operation of law in the ordinary course of business in
respect of obligations that are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (d) Liens in favor of operators and non-operators
under joint operating agreements or similar contractual arrangements arising in
the ordinary course of the business of the Borrower to secure amounts owing,
which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP shall have
been made therefor, (e) Liens under production sales agreements, division
orders, operating agreements, and other agreements customary in the oil and gas
business for processing, producing, and selling hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do not
secure obligations to deliver hydrocarbons at some future date without receiving
full payment therefor within 90 days of delivery, (f) covenants, liens, rights,
easements, rights of way, restrictions and other similar encumbrances , and
minor defects in the chain of title which are customarily accepted in the oil
and gas financing industry, none of which interfere with the ordinary conduct of
the business of the Borrower or materially detract from the value or use of the
Property to which they apply, (g) Liens securing the purchase price of Property,
including vehicles and equipment, acquired by the Borrower in the ordinary
course of business (including Liens existing under conditional sale or title
retention contracts), provided that such Liens cover only the acquired Property
and the aggregate unpaid purchase price secured by such Liens does not exceed
$250,000, (h) Liens securing leases of equipment, provided that, as to any
particular lease, the Lien covers only the relevant leased equipment and secures
only amounts which are not yet due and payable under the relevant lease or are
being contested in good faith by appropriate proceedings and such reserve as may
be required by GAAP shall have been made therefor , (i) Liens in favor or for
the benefit of Secured Third Party Hedge Counterparties securing Indebtedness of
the Borrower in respect of Commodity Hedge Agreements and Interest Rate Hedge
Agreements (other than such as constitute a portion of the Obligations)
permitted pursuant to the provisions of Section 6.1, (j)
Liens in favor or for the benefit of the Lender, (k) Liens securing the
Subordinated Debt pursuant to the Trust Indenture, so long as subordinated to
the Liens in favor or for the benefit of the Lender securing the Obligations and
(l) other Liens expressly permitted hereunder or in the Security
Documents.


    
      
         


      

      
        - 11
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    “Person” shall mean an
individual, Business Entity, trust, unincorporated organization, Governmental
Authority or any other form of entity.

     

    “Plan” shall mean, at
any time, any employee benefit plan which is covered by Title IV of ERISA and in
respect of which the Borrower, any of the Guarantors or any Commonly Controlled
Entity of any is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5)
of ERISA.

     

    “Principal Office”
shall mean the office of the Lender in Houston, Texas  located at One
Riverway, Suite 2100, Houston, Texas 77056 or such other office as the Lender
may designate in writing to the Borrower from time to time.

     

    “Property” shall mean
any interest in any kind of property or asset, whether real, personal or mixed,
tangible or intangible.

     

    “Regulation D” shall
mean Regulation D of the Board of Governors of the Federal Reserve System (or
any successor).

     

    “Regulatory Change”
shall mean, with respect to the Lender, the passage, adoption, institution or
amendment of any federal, state, local, or foreign Requirement of Law (including
Regulation D), or any interpretation, directive, or request (whether or not
having the force of law) of any Governmental Authority or monetary authority
charged with the enforcement, interpretation, or administration thereof,
occurring after the Closing Date and applying to a class of lenders including
the Lender or its lending office.

     

    “Release of Hazardous
Substances” shall mean any emission, spill, release, disposal, or
discharge, except in accordance with a valid permit, license, certificate, or
approval of the relevant Governmental Authority, of any Hazardous Substance into
or upon (a) the air, (b) soils or any improvements located thereon, (c) surface
water or groundwater, or (d) the sewer or septic system, or the waste treatment,
storage, or disposal system servicing any Property of the Borrower or any of the
Guarantors.


    
      
         


      

      
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    “Requirement of Law”
shall mean, as to any Person, the certificate or articles of incorporation and
by-laws, the certificate or articles of organization and regulations, operating
agreement or limited liability company agreement, the agreement of limited
partnership, the partnership agreement, or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator, court, or
other Governmental Authority, including rules, regulations, orders, and
requirements for permits, licenses, registrations, approvals, or authorizations,
in each case as such now exist or may be hereafter amended and are applicable to
or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.

     

    “Reserve Report” shall
mean each report delivered to the Lender pursuant to the provisions of Section
5.4.

     

    “Responsible Officer”
shall mean, as to any Business Entity, its President, any Vice President or any
other Person duly authorized in accordance with the applicable organizational
documents, bylaws, regulations or resolutions to act on behalf of such Business
Entity.

     

    “Revolving Commitment
Amount” shall mean, subject to the applicable provisions of this
Agreement and the right of the Borrower to reduce such amount on an irrevocable
basis by written notice to the Lender, at any time (provided, however, the Borrower
shall not be entitled to any reduction to an amount less than the sum of the
then existing Loan Balance and L/C Exposure), the lesser of (a) the Facility
Amount and (b) the Borrowing Base in effect at such time.

     

    “Revolving Facility”
shall mean the credit facility provided to the Borrower pursuant to the
provisions of Section
2.1.

     

    “Secured Third Party Hedge
Counterparty” shall mean any counterparty of the Borrower to a Commodity
Hedge Agreement or Interest Rate Hedge Agreement that is party to an
intercreditor agreement with the Lender, in form and substance reasonably
satisfactory to the Lender and such counterparty.

     

    “Security Documents”
shall mean the security documents executed and delivered in satisfaction of the
condition set forth in Section 3.1(f), any
existing security documents assigned or amended by any of such documents set
forth in Section
3.1(f) and all other documents and instruments at any time executed as
security for all or any portion of the Obligations, as such instruments may be
amended, supplemented, restated, or otherwise modified from time to
time.

     

    “Subordinated Debt”
shall mean the debt described in the Trust Indenture.

     

    “Subsidiary” shall
mean, as to any Person, any Business Entity of which shares of stock or other
equity interests having ordinary voting power (other than stock or other equity
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other governing body or other
managers of such Business Entity are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.

     

    “Superfund Site” shall
mean those sites listed on the Environmental Protection Agency National Priority
List and eligible for remedial action or any comparable state registry or list
in any state of the United States.


    
      
         


      

      
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    “Taxes” shall mean any
and all present or future taxes, levies, imposts, duties, fees, deductions,
charges or withholdings imposed by any Governmental Authority.

     

    “Trust Indenture”
shall mean the Trust Indenture dated as of March 1, 2005, from Pure Energy and
Pure Gas, as Issuer, to First Security Bank, as Trustee and Paying
Agent.

     

    “UCC” shall mean the
Uniform Commercial Code as from time to time in effect in the State of
Texas.

     

    “USA Patriot Act”
shall mean the Uniting and Strengthening America by Providing Appropriate Tools
required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56,
115 Stat. 272 (2001), as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

     

    1.3           Undefined Financial
Accounting Terms.  Financial accounting terms used in this
Agreement without definition are used herein with the respective meanings
assigned thereto in accordance with GAAP at the time in effect.

     

    1.4           References.  References
in this Agreement to Schedule, Exhibit, Article or Section numbers shall be to
Schedules, Exhibits, Articles or Sections of this Agreement, unless expressly
stated to the contrary.  References in this Agreement to “hereby,”
“herein,” “hereinafter,” “hereinabove,” “hereinbelow,” “hereof,” “hereunder” and
words of similar import shall be to this Agreement in its entirety and not only
to the particular Schedule, Exhibit, Article, or Section in which such reference
appears.  Specific enumeration herein shall not exclude the general
and, in such regard, the terms “includes” and “including” used herein shall mean
“includes, without limitation,” or “including, without limitation,” as the case
may be, where appropriate.  Except as otherwise indicated, references
in this Agreement to statutes, sections, or regulations are to be construed as
including all statutory or regulatory provisions consolidating, amending,
replacing, succeeding, or supplementing the statute, section, or regulation
referred to.  References in this Agreement to “writing” include
printing, typing, lithography, facsimile reproduction, and other means of
reproducing words in a tangible visible form.  References in this
Agreement to agreements and other contractual instruments shall be deemed to
include all exhibits and appendices attached thereto and all subsequent
amendments and other modifications to such instruments, but only to the extent
such amendments and other modifications are not prohibited by the terms of this
Agreement.  References in this Agreement to Persons include their
respective successors and permitted assigns.

     

    1.5           Articles and
Sections.  This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.

     

    1.6           Number and
Gender.  Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular.  Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise
indicated.  Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as
cumulative.


    
      
         


      

      
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    1.7           Incorporation of Schedules
and Exhibits.  The Schedules and Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.

     

    1.8           Negotiated
Transaction.  Each party to this Agreement affirms to the
others that it has had the opportunity to consult, and discuss the provisions of
this Agreement with, independent counsel and fully understands the legal effect
of each provision.

     

    ARTICLE
II


     

    TERMS OF
FACILITIES

     

    2.1           Revolving Line of
Credit.

     

    (a)           Upon
the terms and conditions (including the right of the Lender to decline to make
any Loan, other than a Letter of Credit Payment, so long as any condition to the
making of such Loan set forth in Section 3.2 has not been satisfied) and relying
on the representations and warranties contained in this Agreement, the Lender
agrees to make Loans during the Commitment Period to or for the benefit of the
Borrower in an aggregate outstanding principal amount not to exceed at any time
the Revolving Commitment Amount minus the then existing L/C
Exposure.  Loans shall be made from time to time on any Business Day
designated in a Borrowing Request.

     

    (b)           Subject
to the provisions of this Agreement, during the Commitment Period, the Borrower
may borrow, repay and reborrow Loans.  Each borrowing of principal of
Loans shall be in an amount at least equal to $50,000 and a whole multiple of
$10,000.  Except for prepayments made pursuant to the provisions of
Section 2.10,
each prepayment of principal shall be in an amount at least equal to $50,000 and
a whole multiple of $10,000.  Each borrowing or prepayment of a Loan
shall be deemed a separate borrowing and prepayment for purposes of the
foregoing.

     

    (c)           Proceeds
of borrowings requested by the Borrower shall, subject to the terms and
conditions hereof, be made available to the Borrower in immediately available
funds at the Principal Office.  All Loans shall be evidenced by the
Note.

     

    
      
        
        

      

      
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    2.2         Letter of Credit
Facility.  Upon the terms and conditions (including the right
of the Lender to decline to issue, renew or extend any such Letter of Credit so
long as any condition to the issuance, renewal or extension of such Letter of
Credit set forth in Section 3.3 has not
been satisfied) and relying on the representations and warranties contained in
this Agreement, the Lender agrees, from the date of this Agreement until the
date which is 30 days prior to the Commitment Termination Date, to issue Letters
of Credit under the Facility for the account of the Borrower and to renew and
extend such Letters of Credit.  Such Letters of Credit shall be
issued, renewed or extended from time to time on any Business Day designated by
the Borrower following the receipt in accordance with the terms hereof by the
Lender of the written (or oral, confirmed promptly in writing) request by a
Responsible Officer of the Borrower therefor and a Letter of Credit
Application.  Such Letters of Credit shall be issued in such amounts
as the Borrower may request; provided, however, that (i) no
such Letter of Credit shall have an expiration date which is less than 30 days
prior to the Commitment Termination Date, (ii) the Loan Balance plus the L/C
Exposure, including that under any then requested Letter of Credit to be issued
under the Facility, shall not exceed at any time the Revolving Commitment
Amount, (iii) the L/C Exposure, including that under any then requested Letter
of Credit to be issued under the Facility, shall not exceed at any time the L/C
Sublimit and (iii) no such Letter of Credit shall be issued in an amount less
than $10,000.

     

    2.3         Additional Provisions
Applicable to Letters of Credit.

     

    (a)           In
connection with the issuance, renewal or extension by the Lender of any Letter
of Credit pursuant to Section 2.2, the
Borrower shall pay to the Lender a letter of credit fee in an amount equal to
the greater of (i) the face amount of such Letter of Credit multiplied by two
and one half percent (2.50%) per annum, calculated on the basis of a year of 360
days and actual days elapsed (including the first day but excluding the last
day), on the amount of the L/C Exposure under such Letter of Credit and for the
period for which such Letter of Credit is issued or renewed or extended and
remains outstanding or (ii) $750.  Such fee with respect to each
Letter of Credit shall be payable in advance commencing on the date of issuance,
renewal or extension of the relevant Letter of Credit.  The Lender
shall not have any obligation to refund any portion of any such fee upon early
cancellation of the relevant Letter of Credit.  The Borrower also
agrees to pay on demand to the Lender its customary letter of credit transaction
fees and expenses, including amendment fees, payable with respect to each Letter
of Credit.

     

    (b)           The
Borrower agrees that the Lender shall not be responsible for, nor shall the
Obligations be affected by, among other things, (i) the validity or genuineness
of documents or any endorsements thereon presented in connection with any Letter
of Credit, even if such documents shall in fact prove to be in any and all
respects invalid, fraudulent or forged, so long as the Lender has no actual
knowledge of any such invalidity, lack of genuineness, fraud or forgery prior to
the presentment for payment of a corresponding Letter of Credit or any draft
thereunder or (ii) any dispute between or among the Borrower and any beneficiary
of any Letter of Credit or any other Person to which any Letter of Credit may be
transferred, or any claims whatsoever of the Borrower against any beneficiary of
any Letter of Credit or any such transferee.  The Borrower further
acknowledges and agrees that the Lender shall be liable to the Borrower to the
extent, but only to the extent, of any direct, as opposed to consequential or
punitive, damages suffered by the Borrower as a result of the willful misconduct
or gross negligence of the Lender in determining whether documents presented
under a Letter of Credit complied with the terms of such Letter of Credit that
resulted in either a wrongful payment under such Letter of Credit or a wrongful
dishonor of a claim or draft properly presented under such Letter of
Credit.  In the absence of gross negligence or willful misconduct by
the Lender, the Lender shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit.  The Lender and
the Borrower agree that any action taken or omitted by the Lender under or in
connection with any Letter of Credit or the related drafts or documents, if done
in the absence of gross negligence or willful misconduct, shall be binding as
among the Lender and the Borrower and shall not put the Lender under any
liability to the Borrower.


    
      
         


      

      
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    (c)           Unless
the Borrower provides to the Lender  funds sufficient to allow the
Lender to pay any drawing by a beneficiary under a Letter of Credit prior to the
Lender being obligated to pay the relevant drawing under a Letter of Credit, the
Lender shall make a Letter of Credit Payment in payment of such
drawing.

     

    (d)           Each
Letter of Credit Payment shall be deemed to be a Loan by the Lender under and
shall be evidenced by the Note and shall be payable by the Borrower upon demand
by the Lender.

     

    2.4         Use of Loan Proceeds and
Letters of Credit.

     

    (a)           Proceeds
of all Loans shall be used solely by the Borrower (i) to refinance the
Indebtedness of the Borrower under the Existing Credit Agreement, (ii) to
acquire and develop Oil and Gas Properties, (iii) for the Borrower’s working
capital and general business purposes and capital expenditures not otherwise
prohibited under applicable provisions of this Agreement, (iv) to advance funds
to the Guarantors for working capital and general business purposes and capital
expenditures not prohibited under the provisions of this Agreement or to acquire
and develop Oil and Gas Properties and (v) to pay fees and expenses incurred in
connection with this Agreement and for other general business purposes of the
Borrower.

     

    (b)           Letters
of Credit shall be issued solely for the account of the Borrower for general
business purposes of the Borrower and the Guarantors not otherwise prohibited
under applicable provisions of this Agreement; provided, however, no Letter of
Credit may be used in lieu or in support of stay or appeal bonds or Obligations
in respect of Commodity Hedge Agreements or Interest Rate Hedge
Agreements.

     

    2.5         Interest.  Subject
to applicable provisions of this Agreement (including those of Section 2.16),
interest on the Loan Balance shall accrue and be payable at a daily interest
rate based on the per annum rate equal to the lesser of (a) the Adjusted Base
Rate for each relevant day plus one half of one percent (0.50%), but in no event
based on a per annum rate less than four percent (4.00%), and (b) the Highest
Lawful Rate for each relevant day, converted to a daily rate on the basis of a
year of 365 or 366 days, as the case may be, with such rates being applied on
the basis of actual days elapsed (including the first day, but excluding the
last day) during the period for which interest is payable at the relevant
rate.  Notwithstanding the foregoing, interest on past due principal
and, to the extent permitted by applicable law, past due interest and fees,
shall accrue at the Default Rate and shall be payable upon demand by the Lender
at any time as to all or any portion of such interest.  Interest
provided for herein shall be calculated on unpaid sums actually advanced and
outstanding pursuant to the terms of this Agreement and only for the period from
the date or dates of such advances to, but not including, the date or dates of
repayment.


    
      
         


      

      
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    2.6         Repayment of Loans and
Interest.  Accrued and unpaid interest on the Loan Balance
shall be due and payable monthly commencing on the first day of March, 2011 and
continuing on the first day of each calendar month thereafter while any Loan
remains outstanding, the payment in each instance to be the amount of interest
which has accrued and remains unpaid in respect of the relevant
Loan.  The Loan Balance, together with all accrued and unpaid interest
thereon as of such date, shall be due and payable on the Commitment Termination
Date.  At the time of making each payment hereunder or under the Note,
the Borrower shall specify to the Lender the Loans or other amounts payable by
the Borrower hereunder to which such payment is to be applied.  In the
event the Borrower fails to so specify, or if an Event of Default has occurred,
the Lender may apply such payment as it may elect in its discretion and in
accordance with the terms hereof.  Subject to the provisions of Section 2.16, if any
payment due under the terms of this Agreement remains unpaid for a period of 15
days or more from the date such payment is due, the Lender may charge a
delinquency charge equal to five percent (5.00%) of the amount of such
payment.

     

    2.7         Outstanding
Amounts.  The outstanding principal balance of the Note
reflected by the notations of the Lender on its records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the
Note.  The liability for payment of principal and interest evidenced
by the Note shall be limited to principal amounts actually advanced and
outstanding pursuant to this Agreement and interest on such amounts calculated
in accordance with this Agreement.

     

    2.8         Taxes and Time, Place, and
Method of Payments.

     

    (a)           All
payments required pursuant to this Agreement or the Note shall be made without
set-off or counterclaim in Dollars and in immediately available funds free and
clear of, and without deduction for, any Indemnified Taxes or Other Taxes; provided, however that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased by the amount (the
“Additional
Amount”) necessary so that after making all required deductions
(including deductions applicable to additional sums described in this paragraph)
the Lender receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.  In
addition, to the extent not paid in accordance with the preceding sentence, the
Borrower shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.

     

    (b)           The
Borrower shall indemnify the Lender for Indemnified Taxes and Other Taxes paid
by the Lender, including any Indemnified Taxes or Other Taxes arising from the
negligence, whether sole or concurrent, of the Lender; provided,
however, that the
Borrower shall not in any event be obligated to make payment to the Lender in
respect of penalties, interest and other similar liabilities attributable to
such Indemnified Taxes or Other Taxes if such penalties, interest or other
similar liabilities are attributable to the gross negligence or willful
misconduct of, or breach of this Agreement by, the Lender.


    
      
         


      

      
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    (c)           If
the Lender shall become aware that it is entitled to claim a refund from a
Governmental Authority in respect of Indemnified Taxes or Other Taxes paid by
the Borrower pursuant to this Section 2.8,
including Indemnified Taxes or Other Taxes as to which it has been indemnified
by the Borrower, or with respect to which the Borrower has paid Additional
Amounts pursuant to the Loan Documents, it shall promptly notify the Borrower of
the availability of such refund claim and, if the Lender determines in good
faith that making a claim for refund will not have an adverse effect to its
taxes or business operations, shall, within 10 days after receipt of a request
by the Borrower, make a claim to such Governmental Authority for such refund at
the expense of the Borrower.  If the Lender receives a refund in
respect of any Indemnified Taxes or Other Taxes paid by the Borrower pursuant to
the Loan Documents, it shall within 30 days from the date of such receipt pay
over such refund to the Borrower (but only to the extent of Indemnified Taxes or
Other Taxes paid pursuant to the Loan Documents, including indemnity payments
made or Additional Amounts paid, by the Borrower under this Section 2.8 with
respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net
of all reasonable out of pocket expenses of the Lender and without interest
(other than interest paid by the relevant Governmental Authority with respect to
such refund).

     

    (d)           If
the Lender is or becomes eligible under any applicable law, regulation, treaty
or other rule to a reduced rate of taxation, or a complete exemption from
withholding, with respect to Indemnified Taxes or Other Taxes on payments made
to it or for its benefit by the Borrower, the Lender shall, upon the request,
and at the cost and expense, of the Borrower, complete and deliver from time to
time any certificate, form or other document requested by the Borrower, the
completion and delivery of which are a precondition to obtaining the benefit of
such reduced rate or exemption, provided that the taking of such action by the
Lender would not, in the reasonable judgment of the Lender be disadvantageous or
prejudicial to the Lender or inconsistent with its internal policies or legal or
regulatory restrictions.  For any period with respect to which the
Lender has failed to provide any such certificate, form or other document
requested by the Borrower, the Lender shall not be entitled to any payment under
this Section
2.8 in respect of any Indemnified Taxes or Other Taxes that would not
have been imposed but for such failure.

     

    (e)           The
Lender, shall (i) deliver to the Borrower, upon the written request of the
Borrower, two original copies of United States Internal Revenue Service Form W-9
or any successor form, properly completed and duly executed by the Lender,
certifying that the Lender is exempt from United States backup withholding Tax
on payments of interest made under the Loan Documents and (ii) thereafter, at
each time it is so reasonably requested in writing by the Borrower, deliver
within a reasonable time two original copies of an updated United States
Internal Revenue Service Form W-9 or any successor form thereto.

     

    (f)           All
payments by the Borrower  shall be deemed received on (i) receipt or
(ii) the next Business Day following receipt if such receipt is after 2:00 p.m.,
Central Standard or Central Daylight Savings Time, as the case may be, on any
Business Day, and shall be made to the Lender at the Principal
Office.  Except as provided to the contrary herein, if the due date of
any payment hereunder or under the Note would otherwise fall on a day which is
not a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension.


    
      
         


      

      
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    2.9         Borrowing Base and Monthly
Reduction Amount.

     

    (a)           The
Borrowing Base as of the Closing Date is acknowledged by the Borrower and the
Lender to be $4,000,000.  Commencing on March 1, 2011 and continuing
thereafter on the first day of each calendar month through the Commitment
Termination Date, the amount of the Borrowing Base then in effect shall be
reduced by the Monthly Reduction Amount, which Monthly Reduction Amount as of
the Closing Date is acknowledged to be $0.

     

    (b)           The
Borrowing Base and the Monthly Reduction Amount shall be redetermined
semi-annually as soon as practicable following each receipt of Reserve Reports
pursuant to the provisions of Section 5.4, and all
other information available to the Lender.  In addition, the Lender
shall, in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base and the Monthly Reduction Amount; provided, however, the Lender
shall not be obligated to respond to more than one such request during the
period between the scheduled semi-annual redeterminations provided for
above.  Notwithstanding the foregoing, the Borrowing Base in effect at
any time shall be subject to reduction at such other time or times as may be
permitted by the terms of this Agreement and the Lender may redetermine the
Borrowing Base and the Monthly Reduction Amount at any time.

     

    (c)           Upon
each determination of the Borrowing Base and the Monthly Reduction Amount, the
Lender shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and, subject to the operation of the Monthly
Reduction Amount, the Borrowing Base and the Monthly Reduction Amount so
communicated to the Borrower shall become effective upon such oral notification
and shall remain in effect until the next subsequent determination of the
Borrowing Base and the Monthly Reduction Amount.

     

    (d)           The
Borrowing Base shall represent the determination by the Lender, in accordance
with the applicable definitions and provisions herein contained and the
customary lending practices of the Lender for loans of this nature (but taking
into account floor and cap prices or other price protection under Commodity
Hedge Agreements), of the value, for loan purposes, of the Mortgaged Properties
and any other Oil and Gas Properties of the Borrower and its Domestic
Subsidiaries acceptable to the Lender, subject, in the case of any increase in
the Borrowing Base, to the credit approval processes of the
Lender.  Furthermore, the Borrower acknowledges that the determination
of the Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lender.


    
      
         


      

      
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    2.10        Mandatory
Prepayments.  If at any time the sum of the Loan Balance and
the L/C Exposure exceeds the Borrowing Base then in effect (such excess, a
“Deficiency”),
the Borrower shall, within 30 days of notice from the Lender of such occurrence,
(i) prepay the amount of the Deficiency for application on the portion of the
Loan Balance applicable to the Revolving Facility and then to provide cash as
Collateral for the Revolving Facility L/C Exposure in the manner provided below
in this Section
2.10, (ii) provide additional Collateral, of character and value
satisfactory to the Lender in its sole discretion, and/or cash as Collateral to
secure the Obligations, by way of the execution and delivery to the Lender of
Security Documents in form and substance satisfactory to the Lender, or (iii)
affect any combination of the alternatives described in clauses (i) and (ii) of
this sentence and acceptable to the Lender in its reasonable
discretion.  Any prepayment pursuant to the provisions of this Section 2.10 shall be
without premium or penalty, except as provided in Section 2.17, and the
amount of any such prepayment may be reborrowed if otherwise available to the
Borrower pursuant to the terms of this Agreement.  In the event that a
mandatory prepayment is to be made under this Section 2.10 or any
other applicable provision of this Agreement and the Loan Balance is less than
the amount required to be prepaid, the Borrower shall repay the entire Loan
Balance and, in accordance with the provisions of the relevant Letter of Credit
Applications executed by the Borrower or otherwise to the satisfaction of the
Lender, deposit with the Lender, as additional Collateral securing the
Obligations, an amount of cash, in immediately available funds, equal to the
Revolving Facility L/C Exposure minus the Revolving Commitment
Amount.  The cash deposited with the Lender in satisfaction of the
requirement provided in this Section 2.10 shall be
invested, at the express direction of the Borrower as to investment vehicle and
maturity (which shall be no later than the latest expiry date of any then
outstanding Letter of Credit), for the account of the Borrower in cash or cash
equivalent investments offered by or through the Lender.

     

    2.11        Voluntary
Prepayments.  Subject to applicable provisions of this
Agreement, the Borrower shall have the right at any time or from time to time to
prepay all or any portion of the Loan Balance without prepayment penalty;
provided, however, that (a) the Borrower shall give the Lender notice of each
such prepayment of all or any portion of the Loan Balance no less than one
Business Day prior to prepayment, (b) any prepayment of any portion of the Loan
Balance shall be in an amount of at least equal to $50,000 and a whole multiple
of $10,000, (c) the Borrower shall pay all accrued and unpaid interest on the
amounts prepaid, (d) no such prepayment shall serve to postpone the repayment
when due of any Obligation or any installments thereof, and (e) the Borrower
shall reimburse the Lender for any losses, expenses or costs reasonably incurred
by the Lender as a result of the failure of the Borrower to make such
prepayment.  Except as provided in the immediately preceding sentence,
any prepayment pursuant to the provisions of this Section 2.11 shall be
without premium or penalty and the amount of any such prepayment  may
be reborrowed if otherwise available to the Borrower pursuant to the terms of
this Agreement.

     

    2.12        Engineering Fees and
Expenses.  The Borrower shall pay the Lender a fee in the
amount of $2,500 on the Closing Date and in connection with each regularly
scheduled or Borrower-requested redetermination of the Borrowing Base subsequent
to the Closing Date by the independent petroleum engineer or firm of independent
petroleum engineers engaged by the Lender, payable within ten days of receipt by
the Borrower of an invoice therefor or statement thereof.

     

    2.13         Commitment
Fees.  In addition to interest on the Note as provided herein
and other fees payable hereunder, and to compensate the Lender for maintaining
funds available under the Facilities, the Borrower shall pay to the Lender, in
immediately available funds, on the first day of each calendar quarter during
the Commitment Period, commencing on the first day of April, 2011, and on the
Commitment Termination Date, a fee equal to a per annum rate of one half of one
percent (0.50%), calculated on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day, but excluding the
last day), multiplied by the average daily amount of the Available Commitment
during the preceding quarterly or shorter period, as the case may
be.  Commitment Fees shall be payable by the Borrower within ten days
of receipt of an invoice therefor or statement thereof delivered by the
Lender.


    
      
         


      

      
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    2.14       Additional
Fees.  In addition to interest on the Note as provided herein
and other fees payable hereunder, and to compensate the Lenders for the costs of
the extension of credit hereunder, the Borrower shall pay to the Lender, on the
Closing Date, in immediately available funds, a fee in the amount of
$30,000.  Additionally, the Borrower shall pay a fee to the Lender at
any time the Borrowing Base is increased, with the agreement of the Borrower,
above the highest Borrowing Base previously in effect, equal to three quarters
of one percent (0.75%) of such increased Borrowing Base.

     

    2.15       Loans to Satisfy
Obligations.  Upon a Default, the Lender may, but shall not be
obligated to, make Loans for the benefit of the Borrower and apply proceeds
thereof to the satisfaction of any condition, warranty, representation or
covenant of the Borrower or any of the Guarantors contained in this Agreement or
any other Loan Document .  Such Loans shall be evidenced by the Note
and shall bear interest at the Adjusted Base Rate in the manner provided in
Section 2.5,
subject, however, to the
provisions of Section
2.5 regarding the accrual of interest at the Default Rate in certain
circumstances.

     

    2.16       General Provisions Relating
to Interest.

     

    (a)           It
is the intention of the parties hereto to comply strictly with the usury laws of
the State of Texas and the United States of America.  In this
connection, there shall never be collected, charged, or received on the sums
advanced hereunder interest in excess of that which would accrue at the Highest
Lawful Rate.  The Borrower agrees that, to the extent the Highest
Lawful Rate is determined with reference to the laws of the State to Texas, the
Highest Lawful Rate shall be the “weekly” rate as defined in Chapter 303 of the
Texas Finance Code, provided, however, that the
Lender may, at its election, substitute for the “weekly” rate the “annualized”
or “quarterly” rate, as such terms are defined in the aforesaid statute, upon
the giving of notices provided for in such statute and effective upon the giving
of such notices.  The Lender may also rely, to the extent permitted by
applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
the United States of America applicable to the Lender, if greater.

     

    (b)           Notwithstanding
anything herein or in the Note to the contrary, during any Limitation Period,
the interest rate to be charged on amounts evidenced by the Note shall be the
Highest Lawful Rate, and the obligation, if any, of the Borrower for the payment
of fees or other charges deemed to be interest under applicable law shall be
suspended.  During any period or periods of time following a
Limitation Period, to the extent permitted by applicable laws of the State of
Texas or the United States of America, the interest rate to be charged hereunder
on amounts evidenced by the Note shall remain at the Highest Lawful Rate until
such time as there has been paid to the Lender (i) the amount of interest in
excess of that accruing at the Highest Lawful Rate that the Lender would have
received during the Limitation Period had the interest rate remained at the
otherwise applicable rate, and (ii) all interest and fees otherwise payable to
the Lender but for the effect of such Limitation Period.


    
      
         


      

      
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    (c)           If,
under any circumstances, the aggregate amounts paid on the Note or under this
Agreement or any other Loan Document include amounts which by law are deemed
interest and which would exceed the amount permitted if the Highest Lawful Rate
were in effect, the Borrower stipulates that such payment and collection will
have been and will be deemed to have been, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the result of
mathematical error on the part of the Borrower and the Lender; and the Lender
shall promptly refund the amount of such excess (to the extent only of such
interest payments in excess of that which would have accrued and been payable on
the basis of the Highest Lawful Rate) upon discovery of such error by the Lender
or notice thereof from the Borrower.  In the event that the maturity
of any Obligation is accelerated, by reason of an election by the Lender or
otherwise, or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never exceed that
payable on the basis of the Highest Lawful Rate, and excess amounts paid which
by law are deemed interest, if any, shall be credited by the Lender on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded to the Borrower.

     

    (d)           All
sums paid, or agreed to be paid, to the Lender for the use, forbearance and
detention of the proceeds of any advance hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term hereof until paid in full so that the actual rate of
interest is uniform but does not exceed the Highest Lawful Rate throughout the
full term hereof.

     

    2.17       Yield
Protection.

     

    (a)           Without
limiting the effect of the other provisions of this Section 2.17 (but
without duplication), the Borrower shall pay to the Lender from time to time on
request such amounts as the Lender may reasonably determine are necessary to
compensate the Lender or the Lender’s holding company for any costs attributable
to the maintenance by the Lender, pursuant to any Regulatory Change, of capital
in respect of its Commitment, such compensation to include an amount equal to
any reduction of the rate of return on assets or equity of the Lender or the
Lender’s holding company to a level below that which the Lender or the Lender’s
holding company could have achieved but for such Regulatory Change.

     

    (b)           Without
limiting the effect of the other provisions of this Section 2.17 (but
without duplication), in the event that any Requirement of Law or Regulatory
Change or the compliance by the Lender therewith shall (i) impose, modify or
hold applicable any reserve, special deposit or similar requirement against any
Letter of Credit or obligation to issue Letters of Credit or (ii) impose upon
the Lender any other condition regarding any Letter of Credit or obligation to
issue Letters of Credit, and the result of any such event shall be to increase
the cost to the Lender of issuing or maintaining any Letter of Credit or
obligation to issue Letters of Credit or any liability with respect to Letter of
Credit Payments, or to reduce any amount receivable in connection therewith,
then upon demand by the Lender, the Borrower shall pay to the Lender, from time
to time as specified by the Lender in the exercise of its reasonable judgment,
additional amounts which shall be sufficient to compensate the Lender for such
increased cost or reduced amount receivable.


    
      
         


      

      
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    (c)           Determinations
by the Lender for purposes of this Section 2.17 of the
effect of any Regulatory Change on capital maintained, its costs or rate of
return, its obligation to make and maintain Loans, issuing or participating in
Letters of Credit, or on amounts receivable by it in respect of Loans, Letters
of Credit or such other obligations, and the additional amounts required to
compensate the Lender under this Section 2.17 shall be
conclusive, absent manifest error.  The Lender shall furnish the
Borrower with a certificate setting forth in reasonable detail the basis and
amount of any loss, cost or expense incurred as a result of any such event, and
the statements set forth therein shall be conclusive, absent manifest
error.  The Lender shall notify the Borrower, as promptly as
practicable after the Lender obtains knowledge of any sums payable pursuant to
this Section
2.17 and determines to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Lender to compensation
pursuant to this Section
2.17.  Any compensation requested by the Lender pursuant to
this Section
2.17 shall be due and payable within 30 days of receipt by the Borrower
of any such notice.

     

    (d)           The
Lender agrees not to request, and the Borrower shall not be obligated to pay,
any sums payable pursuant to this Section 2.17 unless
similar sums are also generally assessed by the Lender against other customers
similarly situated where such customers are subject to documents providing for
such assessment.

     

    2.18       Letters in Lieu of Transfer
Orders or Division Orders.  The Lender agrees that none of the
letters in lieu of transfer or division orders provided pursuant to the
provisions of Section
3.1(f) or Section 5.7 will be
sent to the addressees thereof unless an Event of Default has occurred, at which
time the Lender may, at its option, and in addition to the exercise of any of
its other rights and remedies, send any or all of such letters.

     

    2.19       Power of
Attorney.  The Borrower hereby designates the Lender as its
agent and attorney-in-fact, to act in its name, place and stead solely for the
purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer or division orders
delivered by the Borrower pursuant to the provisions of Section 3.1(f) or
Section 5.7,
including completing any blanks contained in such letters and attaching exhibits
thereto describing the relevant Collateral.  The Borrower hereby
ratifies and confirms all that the Lender shall lawfully do or cause to be done
by virtue of this power of attorney and the rights granted with respect to such
power of attorney.  This power of attorney is coupled with the
interests of the Lender in the Collateral, shall commence and be in full force
and effect as of the Closing Date and shall remain in full force and effect and
shall be irrevocable so long as any Obligation remains outstanding or unpaid or
any Commitment exists.  The powers conferred on the Lender by this
appointment are solely to protect the interests of the Lender and any other
Approved Hedge Counterparties under the Loan Documents with respect to the
assignment of production proceeds under certain of the Security Documents and
shall not impose any duty upon the Lender to exercise any such
powers.  The power of attorney under this Section 2.19 is
expressly limited to the rights and powers set forth herein and no additional
rights or powers are herein created or implied.  The Lender shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.


    
      
         


      

      
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    2.20       Security Interest in
Accounts; Right of Offset.  As security for the payment and
performance of the Obligations, the Borrower hereby transfers, assigns, and
pledges to the Lender and grants to the Lender (for the pro rata benefit of the
Lender and any other Approved Hedge Counterparties) a security interest in all
of its funds now or hereafter or from time to time on deposit with the Lender or
any other Approved Hedge Counterparty, with such interest of the Lender to be
retransferred, reassigned and/or released at the expense of the Borrower upon
payment in full and complete performance  of all
Obligations.  All remedies as secured party or assignee of such funds
shall be exercisable  upon the occurrence of any Event of Default,
regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity
thereof.  Furthermore, the Borrower hereby grants to the Lender (for
the pro rata benefit of the Lender and any other Approved Hedge Counterparties)
the right, exercisable at such time as any Obligation shall mature, whether by
acceleration of maturity or otherwise, of offset or banker’s lien against all of
its funds now or hereafter or from time to time on deposit with the Lender or
any other Approved Hedge Counterparty, regardless of whether the exercise of any
such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof.  The Lender shall notify the Borrower promptly
of the exercise of any such right of offset or banker’s lien.

     

    ARTICLE
III

     

    CONDITIONS

     

    The
obligations of the Lender to enter into this Agreement and to make Loans or
issue Letters of Credit are subject to the satisfaction of the following
conditions precedent:

     

    3.1         Receipt of Loan Documents
and Other Items.  The Lender shall have no obligation under
this Agreement unless and until all matters incident to the consummation of the
transactions contemplated herein shall be satisfactory to the Lender and the
Lender shall have received, reviewed and approved the following documents and
other items, appropriately executed when necessary and, where applicable,
acknowledged by one or more Responsible Officers of the Borrower or other
Persons, as the case may be, all in form and substance satisfactory to the
Lender and dated, where applicable, of even date herewith or a date prior
thereto or thereafter and acceptable to the Lender:

     

    (a)           multiple
counterparts of this Agreement as requested by the Lender;

     

    (b)           the
Note;

     

    (c)           copies
of the organizational documents of the Borrower and all amendments to any of
such documents, accompanied by a certificate dated the Closing Date issued by
the secretary or an assistant secretary or another authorized representative of
the Borrower to the effect that each such copy is correct and
complete;

     

    (d)           a
certificate of incumbency dated the Closing Date, including specimen signatures
of all officers or other representatives of the Borrower who are authorized to
execute Loan Documents on behalf of the Borrower, each such certificate being
executed by the secretary or an assistant secretary or another authorized
representative of the Borrower;


    
      
         


      

      
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    (e)           copies
of resolutions adopted by the governing body of the Borrower approving the Loan
Documents to which the Borrower is a party and authorizing the transactions
contemplated herein and therein, accompanied by a certificate dated the Closing
Date issued by the secretary or an assistant secretary or another authorized
representative of the Borrower to the effect that such copies are true and
correct copies of resolutions duly adopted and that such resolutions constitute
all the resolutions adopted with respect to such transactions, have not been
amended, modified or rescinded in any respect, and are in full force and effect
as of the date of such certificate;

     

    (f)           the
following documents continuing in effect or establishing Liens in favor or for
the benefit of the Lender in and to the Collateral, including Mortgaged
Properties constituting at least ninety percent (90%) of the discounted present
value, as determined by the Lender in its reasonable discretion, of the proved
reserves attributable to the Oil and Gas Properties of the
Borrower:

     

    
      	
               
      

            	
              (i)

            	
              amendments
      to and ratifications of the security documents in effect under the terms
      of the Existing Credit Agreement;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              if
      requested by the Lender, additional security documents from the Borrower
      in favor of the Lender covering certain Property of the Borrower,
      including additional Oil and Gas Properties of the Borrower sufficient for
      the Borrower to be in compliance with the provisions of Section
      5.5;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              financing
      statement amendments and, if requested by the Lender, new financing
      statements, in each case constituent to the documents described in clauses
      (i) and (ii) above; and

            


    

     

    
      	
               
      

            	
              (iv)

            	
              undated
      letters, in form and substance satisfactory to the Lender, from the
      Borrower to each purchaser of production and disburser of the proceeds of
      production from or attributable to the Mortgaged Properties, with the
      addressees left blank, authorizing and directing the addressees to make
      future payments attributable to production from the Mortgaged Properties
      directly to the Lender for the account of the
  Borrower;

            


    

     

    (g)           unaudited
pro forma Financial Statements as of January 4, 2011, certified by a Responsible
Officer of the Borrower as having been prepared in accordance with GAAP
consistently applied and as a fair presentation of the condition of the
Borrower, subject to changes resulting from normal year-end audit
adjustments;

     

    (h)           certificates
dated as of a recent date from the Secretary of State or other appropriate
Governmental Authority evidencing the existence or qualification and, if
applicable, good standing of the Borrower in its jurisdiction of organization
and in any other jurisdictions where it owns property or does
business;


    
      
         


      

      
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    (i)           results
of a search of the uniform commercial code records of the Secretary of State of
the State of Nevada in the name of the Borrower, such search report to be from a
source or sources acceptable to the Lender and reflecting no Liens, other than
Permitted Liens, against any of the Collateral as to which perfection of a Lien
is accomplished by the filing of a financing statement;

     

    (j)          confirmation,
acceptable to the Lender, of the title of the Borrower, free and clear of Liens
other than Permitted Liens, to Mortgaged Properties constituting at least ninety
percent (90%) of the discounted present value, as determined by the Lender in
its discretion, of the proved reserves attributable to such Mortgaged
Properties;

     

    (k)         confirmation
acceptable to the Lender that the Oil and Gas Properties of the Borrower are in
compliance, in all material respects, with applicable Environmental
Laws;

     

    (l)          copies
of executed counterparts of all operating, lease, sublease, royalty, sales,
exchange, processing, farmout, bidding, pooling, unitization, communitization
and other agreements relating to the Mortgaged Properties as of the Closing
Date, as  requested by the Lender;

     

    (m)        engineering
information regarding the Oil and Gas Properties of the Borrower, as requested
by the Lender;

     

    (n)         the
opinion of O’Neill Law Group PLLC, as Nevada counsel to the Borrower in
connection with this Agreement and the other Loan Documents to which the
Borrower is a party, substantially in the form attached hereto as Exhibit IV, with such
changes thereto as may be approved by the Lender;

     

    (o)         the
opinion of Friday Eldredge & Clark LLP, as Texas counsel to the Borrower in
connection with this Agreement and the other Loan Documents to which the
Borrower is a party, substantially in the form attached hereto as Exhibit V, with such
changes thereto as may be approved by the Lender;

     

    (p)         certificates
evidencing the insurance coverage required by the provisions of Section
5.20;

     

    (q)         payment
of any fees due as of the Closing Date pursuant to this Agreement;

     

    (r)      
   payment from the Borrower for estimated fees charged by filing
officers and other public officials incurred or to be incurred in connection
with the filing and recordation of any Security Documents and for which invoices
have been presented as of the Closing Date;

     

    (s)         copies
of all Commodity Hedge Agreements to which the Borrower is a party as of the
Closing Date;

     

    (t)          a
certificate of a Responsible Officer of the Borrower to the effect that all
representations and warranties made by the Borrower in this Agreement or any
other Loan Document in place on the Closing Date are true and correct in all
material respects as of the Closing Date and that no Default or Event of Default
exists as of the Closing Date;


    
      
         


      

      
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    (u)         confirmation
acceptable to the Lender that no event or circumstance, including any action,
suit, investigation or proceeding pending, or, to the knowledge of the Borrower,
threatened in any court or before any arbitrator or Governmental Authority,
shall have occurred which could reasonably be expected to have a Material
Adverse Effect; and

     

    (v)         such
other agreements, documents, instruments, opinions, certificates, waivers,
consents and evidence as the Lender may reasonably request.

     

    3.2          Each
Loan.  In addition to the conditions precedent stated elsewhere
herein, the Lender shall not be obligated to make any Loan, other than in
connection with a Letter of Credit Payment, unless:

     

    (a)           at
least the requisite time prior to the requested date for the relevant Loan, the
Borrower shall have delivered to the Lender a Borrowing Request and a funding
direction advising the Lender whether the requested Loan should be funded to an
account of the Borrower at the Lender or should be funded by wire transfer to an
account of another Person (in which case wire transfer instructions shall be
included) and each statement or certification made in such Borrowing Request
shall be true and correct in all material respects on the requested date for
such Loan;

     

    (b)           no
Event of Default or Default shall exist or will occur as a result of the making
of the requested Loan;

     

    (c)           if
requested by the Lender, the Borrower shall have delivered evidence satisfactory
to the Lender substantiating any of the matters contained in this Agreement
which are necessary to enable the Borrower to qualify for such
Loan;

     

    (d)          the
Lender shall have received a copy of any notice to the Trustee under the Trust
Indenture required, pursuant to the provisions of the Trust Indenture, with
respect to such Loan;

     

    (e)          the
Lender shall have received, reviewed and approved such additional documents and
items as described in Section 3.1 as may be
requested by the Lender with respect to such Loan;

     

    (f)           no
event shall have occurred which, in the opinion of the Lender, could reasonably
be expected to have a Material Adverse Effect;

     

    (g)           each
of the representations and warranties of the Borrower or any of the Guarantors
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects and shall be deemed to be repeated by the
relevant entity as if made on the requested date for such Loan;

     

    (h)          all
of the Security Documents shall be in full force and effect;


    
      
         


      

      
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    (i)           neither
the consummation of the transactions contemplated hereby nor the making of such
Loan shall contravene, violate or conflict with any Requirement of Law
applicable to the Lender, the Borrower or any of the Guarantors;
and

     

    (j)           the
Borrower or any relevant Guarantor, as applicable, shall hold full legal title
to the Collateral pledged by it under the Security Documents and be the sole
beneficial owner thereof.

     

    3.3         Issuance of Letters of
Credit.  The obligation of the Lender to issue, renew, or
extend any Letter of Credit is subject to the satisfaction of the following
additional conditions precedent:

     

    (a)           the
Borrower shall have delivered to the Lender a written (or oral, confirmed
promptly in writing) request for the issuance, renewal or extension of a Letter
of Credit at least three Business Days prior to the requested issuance, renewal
or extension date and a Letter of Credit Application at least one Business Day
prior to the requested issuance date, and each statement or certification made
in such Letter of Credit Application shall be true and correct in all material
respects on the requested date for the issuance of such Letter of
Credit;

     

    (b)           no
Event of Default or Default shall exist or will occur as a result of the
issuance, renewal, or extension of such Letter of Credit;

     

    (c)           if
requested by the Lender, the Borrower shall have delivered evidence satisfactory
to the Lender substantiating any of the matters contained in this Agreement
which are necessary to enable the Borrower to qualify for the issuance, renewal
or extension of such Letter of Credit;

     

    (d)           the
Lender shall have received a copy of any notice to the Trustee under the Trust
Indenture required, pursuant to the provisions of the Trust Indenture, with
respect to such Letter of Credit;

     

    (e)           no
event shall have occurred which, in the opinion of the Lender, could reasonably
be expected to have a Material Adverse Effect;

     

    (f)           each
of the representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects and shall be deemed to be repeated by the Borrower as if made on the
requested date for the issuance, renewal or extension of such Letter of
Credit;

     

    (g)           all
of the Security Documents shall be in full force and effect;

     

    (h)           neither
the consummation of the transactions contemplated hereby nor the issuance,
renewal or extension of such Letter of Credit shall contravene, violate or
conflict with any Requirement of Law applicable to the Lender, the Borrower or
any of the Guarantors;

     

    (i)           the
Borrower or any relevant Guarantor, as applicable, shall hold full legal title
to the Collateral pledged by it under the Security Documents and be the sole
beneficial owner thereof; and


    
      
         


      

      
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    (j)           the
terms, provisions and beneficiary of the Letter of Credit or such renewal or
extension shall be satisfactory to the Lender in its reasonable
discretion.

     

    ARTICLE
IV

     

    REPRESENTATIONS AND
WARRANTIES

     

    To induce
the Lender to enter into this Agreement and to make the Loans and issue and
renew Letters of Credit, the Borrower and each of the Guarantors represents and
warrants to the Lender (which representations and warranties shall survive the
delivery of the Note) that:

     

    4.1           Due
Authorization.  The execution and delivery by it of this
Agreement and the borrowings by the Borrower hereunder, the execution and
delivery by the Borrower of the Note, the repayment by the Borrower of the Note
and interest and fees provided for in the Note and this Agreement, the execution
and delivery of the Security Documents to which it is a party and the
performance by it of its obligations under the Loan Documents to which it is a
party are within the power of the Borrower or such Person as the case may be,
have been duly authorized by all necessary action by the Borrower or such
Person, as the case may be, and do not and will not (a) require the consent of
any Governmental Authority, (b) contravene or conflict with any applicable
Requirement of Law, (c) contravene or conflict in any material respect with any
material indenture, instrument or other agreement to which it is a party or by
which any of its Property may be presently bound or encumbered or (d) result in
or require the creation or imposition of any Lien in, upon or on any of its
Property under any such indenture, instrument, or other agreement, other than
under any of the Loan Documents.

     

    4.2           Existence.  It
is a corporation, a limited partnership, a limited liability company or other
entity, as the case may be, duly organized, legally existing and, if applicable,
in good standing under the laws of the state of its organization or formation
and is duly qualified as a foreign limited partnership or limited liability
company and, if applicable, in good standing in all jurisdictions wherein the
ownership of its Property or the operation of its business necessitates same and
where the failure to so qualify would have a Material Adverse
Effect.

     

    4.3           Valid and Binding
Obligations.  Each Loan Document to which it is a party, when
duly executed and delivered by it, constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms.

     

    4.4           Security
Documents.  The provisions of each Security Document executed
by it are effective to create, in favor or for the benefit of the Lender, a
legal, valid and enforceable Lien in all of its right, title and interest in the
Collateral described therein, which Lien, assuming the accomplishment of
recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, constitutes a fully perfected
first-priority Lien (except as to Permitted Liens) on all of its right, title
and interest in the Collateral described therein.

     

    4.5           Title to Oil and Gas
Properties.  It has good and indefeasible title to all of its
Oil and Gas Properties, free and clear of all Liens except Permitted
Liens.  No Person other than it has any ownership interest, whether
legal or beneficial, in its interest in any of its Oil and Gas
Properties.


    
      
         


      

      
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    4.6           Scope and Accuracy of
Financial Statements.  The Financial Statements provided to the
Lender in satisfaction of the condition set forth in Section 3.1(g) present
fairly (subject to normal year-end audit adjustments) the financial position and
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries in accordance with GAAP as at the relevant point in time or for the
period indicated, as applicable.

     

    4.7           No Material Adverse Effect
or Default.  No event or circumstance has occurred since
January 4, 2011 which could reasonably be expected to have a Material Adverse
Effect, and, to its best knowledge, no Default has occurred and is
continuing.

     

    4.8           No Material
Misstatements.  No information, exhibit, statement or report
furnished to the Lender by it or at its direction in connection with this
Agreement or any other Loan Document contains any material misstatement of fact
or omits to state a material fact or  any fact necessary to make the
statements contained therein not misleading as of the date made or deemed
made.

     

    4.9           Liabilities, Litigation and
Restrictions.  Other than as reflected in the Financial
Statements provided to the Lender in satisfaction of the condition set forth in
Section 3.1(i)
or listed on Schedule
4.9 under the heading “Liabilities”, it has no liabilities, direct or
contingent, which may materially and adversely affect its business or operations
or its ownership of any Collateral.  Except as set forth under the
heading “Litigation” on Schedule 4.9, no
litigation or other action of any nature affecting it is pending before any
Governmental Authority or, to the best of its knowledge, threatened against or
affecting it or any of its Subsidiaries which could, if adversely determined,
reasonably be expected to have a Material Adverse Effect.  No unusual
or unduly burdensome restriction, restraint or hazard exists by contract,
Requirement of Law or otherwise relative to its business or operations or its
ownership and operation of any Collateral other than such as relate generally to
Persons engaged in business activities similar to those conducted by it or as
could not reasonably be expected to have a Material Adverse Effect.

     

    4.10           Authorizations;
Consents.  Except as expressly contemplated by this Agreement,
no authorization, consent, approval, exemption, franchise, permit or license of,
or filing with, any Governmental Authority or any other Person is required to
authorize, or is otherwise required in connection with, the valid execution and
delivery by it of the Loan Documents to which it is a party or any instrument
contemplated hereby, the repayment of the Note and interest and fees provided in
the Note and this Agreement or the performance of the Obligations.

     

    4.11           Compliance with
Laws.  It and its Properties, including any Mortgaged
Properties and Oil and Gas Properties owned by it, are in compliance with all
applicable Requirements of Law, except to the extent any such failure to comply
could not reasonably be expected to have a Material Adverse Effect.

     

    4.12           ERISA.  It
does not maintain, nor has it maintained, any Plan.  It does not
currently contribute to or have any obligation to contribute to or otherwise
have any liability with respect to any Plan.

     


    
      
         


      

      
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    4.13        Environmental
Laws.  Except as  described on Schedule
4.13:

     

    (a)           no
Property owned by it, or, to its knowledge, Property of others adjacent to
Property owned by it, is currently on or has, to its knowledge, ever been on any
federal or state list of Superfund Sites;

     

    (b)           no
Hazardous Substances have been generated, transported and/or disposed of by it
at a site which was, at the time of such generation, transportation and/or
disposal, or has since become, a Superfund Site;

     

    (c)           except
in accordance with applicable Requirements of Law or the terms of a valid
permit, license, certificate or approval of the relevant Governmental Authority,
no Release of Hazardous Substances by it or from, affecting or related to any
Property owned by it has occurred which could reasonably be expected to have a
Material Adverse Effect; and

     

    (d)           no
Environmental Complaint has been received by it that has not been resolved in
full.

     

    4.14        Compliance with Federal
Reserve Regulations.  No transaction contemplated by the Loan
Documents is in violation of, and it has not taken any action that would result
in any transaction contemplated by the Loan Documents being in violation of, in
any material respect, any regulations promulgated by the Board of Governors of
the Federal Reserve System, including Regulations T, U or X.

     

    4.15        Investment Company
Act.  It is not, nor is it directly or indirectly controlled by
or acting on behalf of any Person which is an “investment company” or an
“affiliated person” subject to regulation as an “investment company” within the
meaning of the Investment Company Act of 1940.

     

    4.16        Proper Filing of Tax
Returns; Payment of Taxes Due.  It has filed its United States
income tax returns and all other tax returns which are required to be filed and
has paid all taxes shown as due from it thereon, except such as are being
contested in good faith and as to which adequate provisions and disclosures have
been made.  The respective charges and reserves on its books with
respect to taxes and other governmental charges are adequate.

     

    4.17        Refunds.  Except
as described on Schedule 4.17, no
orders of, proceedings pending before, or other requirements of any Governmental
Authority exist which could result in it being required to refund any portion of
the proceeds received or to be received by it from the sale of hydrocarbons
constituting part of the Mortgaged Property or other Oil and Gas Properties
owned by it.

     

    4.18        Gas
Contracts.  Except as described on Schedule 4.18, (a) it
is not obligated in any material respect by virtue of any prepayment made under
any contract containing a “take-or-pay” or “prepayment” provision or under any
similar agreement to deliver hydrocarbons produced from or allocated to any of
the Mortgaged Property or other Oil and Gas Properties owned by it at some
future date without receiving full payment therefor within 90 days of delivery,
and (b) it has not produced gas, in any material amount, subject to, and neither
it nor any of the Mortgaged Properties  or other Oil and Gas
Properties owned by it is subject to, balancing rights of third parties or
subject to balancing duties under Requirements of Law, except as to such matters
for which it has established monetary reserves adequate in amount to satisfy
such obligations and has segregated such reserves from other
accounts.


    
      
         


      

      
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    4.19        Intellectual
Property.  It owns or is licensed to use all Intellectual
Property necessary to conduct its business as currently conducted, except where
the failure to own or license such property could not reasonably be expected to
have a Material Adverse Effect.  No claim is pending, or to its
knowledge has been asserted, by any Person with respect to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any such Intellectual Property; and it knows of no valid basis
for any such claim.  The use of such Intellectual Property by it does
not infringe on the rights of any Person, except for such claims and
infringements as do not, in the aggregate, give rise to any material liability
on its part.

     

    4.20        Casualties or Taking of
Property.  Except as disclosed on Schedule 4.20, since
the later of (a) January 4, 2011, or (b) the date of the most recent Financial
Statements furnished to the Lender pursuant to either Section 5.2 or Section 5.3, neither
its business nor any of its Property has been affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property, or cancellation
of contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God, except as could not reasonably be
expected to have a Material Adverse Effect.

     

    4.21        Principal
Location.  Its principal place of business and chief executive
office is located at its address set forth in Section 8.3 or at
such other location as it may have, by proper written notice hereunder, advised
the Lender.

     

    4.22        Subsidiaries.  It
has no Subsidiaries other than Doral West Corp., a Nevada corporation, which
owns no assets of material value, as disclosed to the Lender in writing from
time to time.

     

    4.23        Compliance with
Anti-Terrorism Laws.

     

    (a)           Neither
it nor any of its Affiliates is in violation in any material respect of any
applicable Anti-Terrorism Law or knowingly engages in or conspires to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
applicable Anti-Terrorism Law.

     

    (b)           Neither
it nor any of its Affiliates is any of the following (each a “Blocked
Person”):

     

    
      	
               
      

            	
              (i)

            	
              a
      Person that is listed in the annex, to, or is otherwise subject to the
      provisions of, Executive Order No.
13224;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              a
      Person owned or controlled by, or acting for or on behalf of, any Person
      that is listed in the annex to, or is otherwise subject to the provisions
      of, Executive Order No. 13224;

            


    

     

    
      
         


      

      
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              (iii)

            	
              a
      Person with which any bank or other financial institution is prohibited
      from dealing or otherwise engaging in any transaction by any
      Anti-Terrorism Law;

            


    

     

    
      	
               
      

            	
              (iv)

            	
              a
      Person that commits, threatens or conspires to commit or supports
      “terrorism” as defined in Executive Order No.
  13224;

            


    

     

    
      	
               
      

            	
              (v)

            	
              a
      Person that is named as a “specially designated national” on the most
      current list published by OFAC at its official website or any replacement
      website or other replacement official publication of such list;
      or

            


    

     

    
      	
               
      

            	
              (vi)

            	
              an
      Affiliate of a Person or entity listed
above.

            


    

     

    (c)           Neither
it nor any of its Affiliates (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224.

     

    (d)           Neither
it nor any of its Affiliates is in violation in any material respect of any
rules or regulations promulgated by OFAC or of any economic or trade sanctions
administered and enforced by OFAC or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any rules or
regulations promulgated by OFAC.

     

    4.24        Identification
Numbers.  Its federal taxpayer identification number and
organizational number with the Secretary of State of the state of its
organization or formation are as set out on Schedule 4.24 or as
otherwise provided to the Lender in writing.

     

    4.25        Solvency.  Immediately
after the Closing and immediately following the making of each Loan made on the
Closing Date and following the making of any Loan made after the Closing Date,
after giving effect to the application of the proceeds of each such Loan, (a)
the fair value of its assets, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise, at a fair valuation; (b) the
present fair saleable value of its assets, at a fair valuation, will be greater
than the amount that will be required to pay the probable liability of its debts
and other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to it; (c) it will
be able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) it will not
have unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and are proposed to be conducted
following the Closing Date.


    
      
         


      

      
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    ARTICLE
V

     

    AFFIRMATIVE
COVENANTS

     

    So long
as any Obligation remains outstanding or unpaid or any Commitment exists, each
of the Borrower and the Guarantors shall (provided, however, that Section 5.14 shall
apply only to the Borrower):

     

    5.1         Maintenance and Access to
Records.  Keep adequate records, in accordance with GAAP, of
all its transactions so that at any time, and from time to time, its true and
complete financial condition (subject to normal year-end audit adjustments) may
be readily determined, and promptly following the request of the Lender, make
such records available for inspection by the Lender and, at the expense of the
Borrower allow Lender to make and take away copies thereof.

     

    5.2         Quarterly Financial
Statements and Compliance Certificates.  Deliver to the Lender,
on or before the 60th day after the close of each of the first three quarterly
periods of each fiscal year of the Borrower, commencing with that ending March
31, 2011, (a) a copy of the Financial Statements  as at the close of
such quarterly period and from the beginning of such fiscal year to the end of
such period, such Financial Statements to be certified by a Responsible Officer
of the Borrower as having been prepared in accordance with GAAP consistently
applied and as a fair presentation of the financial condition, as of the date
and for the period indicated therein, of the Borrower, on a consolidated basis
with its consolidated Subsidiaries, subject to changes resulting from normal
year end audit adjustments, and (b) a Compliance Certificate prepared as of the
close of such quarterly period.

     

    5.3         Annual Financial Statements
and Compliance Certificate.  Deliver to the Lender, on or
before the 120th day after the close of each fiscal year of the Borrower,
commencing with that ending on December 31, 2011, (a) a copy of the annual
audited Financial Statements, such Financial Statements to be certified by a
Responsible Officer of the Borrower as having been prepared in accordance with
GAAP consistently applied and as a fair presentation of the financial condition,
as of the date and for the period indicated therein, of the Borrower on a
consolidated basis with its consolidated Subsidiaries, with such audited
Financial Statements accompanied by an unqualified opinion from a nationally
recognized or regionally-recognized firm of independent certified public
accountants or other independent certified public accountants acceptable to the
Lender, and (b) a Compliance Certificate prepared as of the close of the
relevant fiscal year.


    
      
         


      

      
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    5.4          Oil and Gas Reserve Reports
and Production Reports.

     

    (a)           Deliver
to the Lender, no later than each March 31 during the term of this Agreement,
commencing with March 31, 2012, an engineering report in form satisfactory to
the Lender, prepared as of the preceding December 31 and certified by a
nationally or regionally-recognized firm of independent consulting petroleum
engineers or other firm of independent consulting petroleum engineers acceptable
to the Lender as fairly and accurately setting forth (i) the proved and
producing, non-producing, shut-in, behind-pipe and undeveloped oil and gas
reserves (separately classified as such) attributable to the Mortgaged
Properties and other Oil and Gas Properties of the Borrower and its Subsidiaries
as of the most recent practicable date, (ii) the aggregate present value of the
future net income with respect to proved and producing reserves attributable to
the Mortgaged Properties and other Oil and Gas Properties of the Borrower and
its Subsidiaries, discounted at a stated per annum discount rate, (iii)
projections of the annual rate of production, gross income and net income with
respect to such proved and producing reserves, (iv) information with respect to
the “take-or-pay,” “prepayment” and gas-balancing liabilities of the Borrower
and its Subsidiaries with respect to such reserves, and (v) general economic
assumptions.


    (b)          Deliver
to the Lender, no later than each September 30 during the term of this
Agreement, commencing with September 30, 2011, an engineering report, in
substantially the format of and providing the information provided in the
engineering reports provided pursuant to Section 5.4(a),
prepared as of the preceding June 30 and certified, at the election of the
Borrower, by either the chief operating officer or senior reserve engineer of
the Borrower or a nationally or regionally-recognized firm of independent
consulting petroleum engineers acceptable to the Lender or other firm of
independent consulting petroleum engineers acceptable to the Lender as fairly
and accurately setting forth the information provided therein.

     

    (c)           Deliver
to the Lender, no later than the 60th day following the end of each calendar
quarter, a report, in form satisfactory to the Lender, setting forth information
as to quantities of production from the Mortgaged Properties, volumes of
production sold, volumes of production committed to Commodity Hedge Agreements,
pricing, purchasers of production, gross revenues, lease operating expenses, and
such other information as the Lender may reasonably request with respect to the
relevant quarterly period.

     

    5.5          Title Opinions; Title
Defects; Mortgaged Properties.

     

    (a)          Promptly
upon the request of the Lender, furnish to the Lender title opinions, in form
and substance and by counsel satisfactory to the Lender, or other confirmation
of title reasonably acceptable to the Lender, covering Oil and Gas Properties of
the Borrower and its Subsidiaries the discounted present value of the proved
reserves attributable to which, in the aggregate, equals no less than ninety
percent (90%) of the aggregate discounted present value of the proved reserves
attributable to the combined Oil and Gas Properties of the Borrower and its
Domestic Subsidiaries.

     

    (b)          Promptly,
but in any event within 30 days after notice by the Lender of any defect having
a Material Adverse Effect, clear such title defect.

     

    (c)           Promptly
upon request of the Lender, execute and deliver to the Lender additional
Security Documents as necessary to maintain, as Mortgaged Properties, Oil and
Gas Properties of the Borrower and its Domestic Subsidiaries constituting no
less than ninety percent (90%) of the aggregate discounted present value of the
proved reserves attributable to the combined Oil and Gas Properties of the
Borrower and its Domestic Subsidiaries.

     

    
      
         


      

      
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    5.6         Notices of Certain
Events.  Deliver to the Lender, promptly, but in no event later
than the fifth Business Day after having knowledge of the occurrence of any of
the following events or circumstances, a written statement with respect thereto,
signed by a Responsible Officer of the relevant Business Entity or its general
partner and setting forth the relevant event or circumstance and the steps being
taken by the relevant Business Entity with respect to such event or
circumstance:

     

    (a)           any
Default or Event of Default;

     

    (b)          any
default by it under any contractual obligation or any litigation, investigation
or proceeding between it and any Governmental Authority which, in either case,
if not cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;

     

    (c)          any
litigation or proceeding involving it as a defendant or in which any of its
Property is subject to a claim and in which the amount involved is $100,000 or
more and which is not covered by insurance or in which injunctive or similar
relief is sought;

     

    (d)          the
receipt by it of any Environmental Complaint, which if adversely determined
could reasonably be expected to have a Material Adverse Effect;

     

    (e)          any
actual, proposed, or threatened testing or other investigation by any
Governmental Authority or other Person concerning the environmental condition
of, or relating to, any of its Property following any allegation of a material
violation of any Requirement of Law;

     

    (f)           any
Release of Hazardous Substances by it or from, affecting, or related to any of
its Property or Property of others adjacent to any of its Property which could
reasonably be expected to have a Material Adverse Effect, except in accordance
with applicable Requirements of Law or the terms of a valid permit, license,
certificate, or approval of the relevant Governmental Authority, or the
violation of any Environmental Law in any material respect, or the revocation,
suspension, or forfeiture of or failure to renew, any permit, license,
registration, approval, or authorization which could reasonably be expected to
have a Material Adverse Effect;

     

    (g)          any
change in its senior management;

     

    (h)          any
material change in its accounting or financial reporting practices;
and

     

    (i)           any
other event or condition which could reasonably be expected to have a Material
Adverse Effect.

     

    5.7         Letters in Lieu of Transfer
Orders or Division Orders.  Promptly upon request by the Lender
at any time and from time to time, and without limitation on the rights of the
Lender pursuant to the provisions of Section 2.18 and
Section 2.19,
execute such letters in lieu of transfer or division orders, in addition to the
letters delivered to the Lender in satisfaction of the condition set forth in
Section 3.1(f),
as are necessary or appropriate to transfer and deliver to the Lender proceeds
from or attributable to any Mortgaged Property.

     

    
      
        
        

      

      
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    5.8          Commodity
Hedging.  Comply in all material respects with any Commodity
Hedge Agreements entered into by the Borrower or any Domestic Subsidiary of the
Borrower subsequent to the Closing Date and not in violation of the provisions
of Section
6.1.

     

    5.9          Joinder of New Domestic
Subsidiaries.  Execute and deliver Security Documents covering
all of its equity ownership in each Domestic Subsidiary of the Borrower formed
or acquired after the Closing Date or sixty five percent (65%) of the equity
ownership in any Subsidiary of the Borrower formed or acquired after the Closing
Date which is not a Domestic Subsidiary of the Borrower and take all other
action requested by the Lender to perfect the Lien of all such Security
Documents and cause each Domestic Subsidiary of the Borrower or any of the
Guarantors formed or acquired after the Closing Date to execute and deliver
Joinder Agreements and Guaranties, as requested by the Lender, and take all such
other action reasonably requested by the Lender in connection with such
Guaranties and Joinder Agreements.

     

    5.10       Additional
Information.  Furnish to the Lender, promptly upon the request
of the Lender, such additional financial or other information concerning its
assets, liabilities, operations and transactions as the Lender may from time to
time reasonably request; and notify the Lender not less than ten Business Days
prior to the occurrence of any condition or event that may change the proper
location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a Lien in any Collateral, including any
change in its name or jurisdiction of  organization; and upon the
request of the Lender, execute such additional Security Documents as may be
necessary or appropriate in connection therewith.

     

    5.11      
Compliance with
Laws.  Except to the extent the failure to comply or cause
compliance could not reasonably be expected to have a Material Adverse Effect,
comply in all material respects with all applicable Requirements of Law,
including (a) ERISA, (b) Environmental Laws and (c) all permits, licenses,
registrations, approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, related to or
affected by any of its Property, (ii) required for the performance of its
operations, or (iii) applicable to the use, generation, handling, storage,
treatment, transport or disposal of any Hazardous Substances; and use its best
efforts to cause all of its employees, crew members, agents, contractors,
subcontractors and future lessees (pursuant to appropriate lease provisions),
while such Persons are acting within the scope of their relationship with it, to
comply with all such Requirements of Law as may be necessary or appropriate to
enable it to so comply.

     

    5.12       Payment of Assessments and
Charges.  Pay all taxes, assessments, governmental charges,
rent and other Indebtedness which, if unpaid, might become a Lien against any of
its Property, except any of the foregoing that are being contested in good faith
and as to which an adequate reserve in accordance with GAAP has been established
or unless failure to pay would not have a Material Adverse Effect.

     

    5.13       Maintenance of Existence or
Qualification and Good Standing.  Maintain its separate
corporate, limited partnership or limited liability company existence and
identity, as the case may be, and, if applicable, good standing and
qualification in its jurisdiction of organization and in all jurisdictions
wherein the Property now owned or hereafter acquired or business now or
hereafter conducted by it necessitates same, except where the failure to so
qualify would not reasonably be expected to have a Material Adverse
Effect.

     

    
      
         


      

      
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    5.14           Payment of Note; Performance
of Obligations.  Pay the Note according to the reading, tenor
and effect thereof, as modified hereby, and do and perform every act and
discharge all of the other Obligations in all material respects.

     

    5.15           Further
Assurances.  Promptly cure any defects in the execution and
delivery of any of the Loan Documents to which it is a party and all agreements
contemplated thereby, and execute, acknowledge and deliver to the Lender such
other assurances and instruments as shall, in the reasonable opinion of the
Lender, be necessary to fulfill the terms of the Loan Documents to which it is a
party.

     

    5.16           Initial Expenses of
Lender.  Upon request by the Lender, promptly reimburse the
Lender for, or pay directly to such special counsel, all reasonable fees and
expenses of Jackson Walker  L.L.P., special counsel to the Lender, in
connection with the preparation of this Agreement and all documentation
contemplated hereby, the satisfaction of the conditions precedent set forth
herein, the filing and recordation of Security Documents and the consummation of
the transactions contemplated in this Agreement.

     

    5.17           Subsequent Expenses of
Lender.  Upon request by the Lender, promptly reimburse the
Lender (to the fullest extent permitted by law) for all amounts reasonably
expended, advanced or incurred by or on behalf of the Lender to evaluate the
Mortgaged Properties or to satisfy any of the Borrower’s or any Guarantor’s
obligations under any of the Loan Documents; to collect the Obligations; to
ratify, amend, restate or prepare additional Loan Documents, as the case may be;
for the filing and recordation of Security Documents; to enforce the rights of
the Lender under any of the Loan Documents; and to protect the relevant Person’s
Properties or business, including the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the relevant
Person by the Lender and which amounts shall include (a) all court costs, (b)
reasonable attorneys’ fees, (c) reasonable fees and expenses of auditors,
accountants and independent petroleum engineers incurred to protect the
interests of the Lender and any other Approved Hedge Counterparties, (d) fees
and expenses incurred in connection with the participation by the Lender as
members of the creditors’ committee in any Insolvency Proceeding, (e) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
§362 Title 11 of the United States Code, and (f) fees and expenses reasonably
incurred in connection with any action pursuant to §1129 Title 11 of the United
States Code all incurred by the Lender in connection with the collection of any
sums due under the Loan Documents, together with interest at the per annum
interest rate equal to the Adjusted Base Rate on each such amount from the date
of notification that the same was expended, advanced, or incurred by the Lender
until the date it is repaid to the Lender, with the obligations under this
Section 5.17 surviving the non-assumption of this Agreement in any Insolvency
Proceeding and being binding upon it and/or a trustee, receiver, custodian, or
liquidator of it  appointed in any such case.

     

    5.18           Operation of Oil and Gas
Properties.  Develop, maintain and operate or, to the extent
that the right or obligation to do so rests with another Person, exercise its
best efforts to cause such other Person to develop, maintain and operate its Oil
and Gas Properties in a prudent and workmanlike manner and in accordance with
customary industry standards.

     

    
      
         


      

      
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    5.19           Maintenance and Inspection
of Properties.  Maintain or, to the extent that the right or
obligation to do so rests with another Person, exercise its best efforts to
cause such other Person to maintain all of its material tangible Properties
necessary to operate its business as currently conducted in good repair and
condition, ordinary wear and tear excepted; make or, to the extent that the
right or obligation to do so rests with another Person, exercise its best
efforts to cause such other Person to make all necessary replacements thereof
and operate such Properties in a good and workmanlike manner; and permit any
authorized representative of the Lender, upon prior notice to visit and inspect,
at reasonable times, any of its tangible Property.

     

    5.20           Maintenance of
Insurance.  Maintain insurance with respect to its Properties
and businesses against such liabilities, casualties, risks and contingencies as
is customary in the relevant industry and sufficient to prevent a Material
Adverse Effect, all such insurance to be in amounts and from insurers reasonably
acceptable to the Lender,  name the Lender as an additional insured
(in the case of liability insurance) and co-loss payee (in the case of physical
damage insurance), and, upon any renewal of any such insurance and at other
times upon request by the Lender, furnish to the Lender evidence, satisfactory
to the Lender, of the maintenance of such insurance.  The Lender shall
have the right to collect, and each of the Borrower and the Guarantors hereby
assigns to the Lender, any and all monies that may become payable under any
policies of insurance relating to business interruption or by reason of damage,
loss or destruction of any of the Collateral.  In the event of any
damage, loss or destruction for which insurance proceeds relating to (a)
business interruption exceed $250,000 or (b) Collateral exceed ten percent
(10%) of the book
value of such Collateral, the Lender may, at its option, apply all such sums or
any part thereof received by it toward the payment of the Obligations, whether
matured or unmatured, application to be made first to fees, then to interest and
then to principal, and shall deliver to the Borrower or the relevant Guarantor,
as the case may be, the balance, if any, after such application has been
made.  In the event of any other damage, loss or destruction for which
insurance proceeds are received, and provided that no Default or Event of
Default has occurred and is continuing, the Lender shall deliver any such
proceeds received by it to the Borrower or the relevant Guarantor, as the case
may be, for use to repair or replace the damaged, destroyed or lost
property.  In the event the Lender receives insurance proceeds not
attributable to Collateral or business interruption, the Lender shall deliver
any such proceeds to the Borrower or the relevant Guarantor, as the case may
be.

     

    
      
         


      

      
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    5.21           Environmental
Indemnification.  Indemnify
and hold the Lender and its shareholders, officers, directors, employees,
agents, attorneys-in-fact and Affiliates and each trustee for the benefit of the
Lender under any Security Document (each of the foregoing an “Indemnitee”) harmless
from and against any and all claims, losses, damages, liabilities, fines,
penalties, charges, administrative and judicial proceedings and orders,
judgments, remedial actions, requirements and enforcement actions of any kind,
and all costs and expenses incurred in connection therewith (including
reasonable attorneys’ fees and expenses), arising directly or indirectly, in
whole or in part, from (a) the presence of any Hazardous Substances on, under,
or from any of its Property, whether prior to or during the term hereof, (b) any
activity carried on or undertaken on any of its Property, whether prior to or
during the term hereof, and whether by it or any of its predecessors in title,
employees, agents, contractors or subcontractors or any other Person at any time
occupying or present on such Property, in connection with the handling,
treatment, removal, storage, decontamination, cleanup, transportation, or
disposal of any hazardous substances at any time located or present on or under
such Property, (c) any residual contamination on or under any of its Property,
(d) any contamination of any Property or natural resources arising in connection
with the generation, use, handling, storage, transportation or disposal of any
Hazardous Substances by it or any of its employees, agents, contractors, or
subcontractors while such Persons are acting within the scope of their
relationship with it, irrespective of whether any of such activities were or
will be undertaken in accordance with applicable Requirements of Law, or (e) the
performance and enforcement of any Loan Document or any other act or omission in
connection with or related to any Loan Document or the transactions contemplated
thereby, including any such claim, loss, damage, liability, fine, penalty,
charge, administrative or judicial proceeding, order, judgment, remedial action,
requirement, enforcement action, cost or expense, arising from the negligence
(but not the gross negligence or willful misconduct), whether sole or
concurrent, of any Indemnitee; with the foregoing indemnity surviving
satisfaction of all Obligations and the termination of this Agreement, unless
all such Obligations have been satisfied wholly in cash and not by way of
realization against any Collateral or the conveyance of any Property in lieu
thereof, provided,
however, that such
Indemnity shall not extend to any act or omission by the Lender with respect to
any Property subsequent to the Lender becoming the owner of such Property and
with respect to which Property such claim, loss, damage, liability, fine,
penalty, charge, proceeding, order, judgment, action or requirement arises
subsequent to the acquisition of title thereto by the Lender.  All
amounts due under this Section
5.21 shall be
payable on written demand therefor.

     

    5.22           General
Indemnification.  Indemnify
and hold each Indemnitee harmless from and against any and all losses, claims,
damages, liabilities and related expenses, including reasonable attorneys’ fees
and expenses (including the allocated cost of internal counsel), incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (a) the execution and delivery of this Agreement and the other Loan
Documents, the performance by the parties hereto and thereto of their respective
Obligations hereunder and thereunder and consummation of the transactions
contemplated hereby and thereby, (b) the use of proceeds of the Loans or Letters
of Credit, or (c) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto,
including any such loss, claim, damage, liability or expense arising from the
negligence (but not the gross negligence or willful misconduct), whether sole or
concurrent, of any Indemnitee; with the foregoing Indemnity surviving
satisfaction of all Obligations and the termination of this
Agreement.  All amounts due under this Section
5.22 shall be
payable on written demand therefor.

     

    
      
         


      

      
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    5.23           Evidence of Compliance with
Anti-Terrorism Laws.  Deliver to the Lender any certification
or other evidence requested from time to time by the Lender confirming its
compliance with the provisions of Section 6.17.

     

    5.24           Deposit
Accounts.  Open and maintain with the Lender its primary
operating accounts.

     

    ARTICLE
VI

     

    NEGATIVE
COVENANTS

     

    So long
as any Obligation remains outstanding or unpaid or any Commitment exists,
neither the Borrower nor any of the Guarantors will:


    6.1         
  Indebtedness.  Create,
incur, assume or suffer to exist any Indebtedness, whether by way of loan or
otherwise; provided, however, the foregoing restriction shall not apply to (a)
the Obligations, (b) unsecured accounts payable, taxes and other assessments, in
each case incurred in the ordinary course of business and which are not unpaid
in excess of 90 days beyond invoice date or are being contested in good faith
and as to which such reserve as is required by GAAP has been made, (c)
Indebtedness under Commodity Hedge Agreements, including reimbursement
obligations under letters of credit securing or supporting such Indebtedness,
with any Approved Hedge Counterparty, any Secured Third Party Hedge Counterparty
or, so long as each such Person is acceptable to the Lender, other
counterparties, provided that (i) such agreements shall not be for a term in
excess of three years and shall not, except as to floors, be entered into with
respect to more than seventy five percent (75%) of the projected production of
proved developed producing volumes of each commodity category, as determined by
the Lender in connection with each determination of the Borrowing Base provided
pursuant to the provisions of Section 5.4 during the term of the relevant
agreement, and (ii) the floor prices in such agreements are not less than the
prices used by the Lender in its most recent Borrowing Base determination as of
the time the relevant agreement is entered into, (d) Indebtedness under Interest
Rate Hedge Agreements with any Approved Hedge Counterparty, any Secured Third
Party Hedge Counterparty or, so long as each such Person is acceptable to the
Lender, other counterparties, provided that such agreements shall not be entered
into with respect to notional principal amounts in excess of seventy five
percent (75%) of the Loan Balance, (e) Indebtedness incurred with respect to all
or a portion of the purchase price of Property acquired in the ordinary course
of business not exceeding $250,000 in the aggregate for the Borrower on a
consolidated basis with its Subsidiaries, (f) Indebtedness from time to time
owing by any Guarantor to the Borrower or any other Guarantor with respect to
loans or advances not prohibited by the provisions of Section 6.7, (g) the
Subordinated Debt provided that such Indebtedness is paid as and when due and is
not renewed or extended in any respect and the material terms thereof are not
amended in any material respect, (h) Indebtedness secured by Permitted Liens and
(i) other unsecured Indebtedness not exceeding, in the aggregate at any time,
$100,000 for the Borrower on a consolidated basis with its consolidated
Subsidiaries.

     

    
      
        
        

      

      
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    6.2        
   Contingent
Obligations.  Create, incur, assume or suffer to exist any
Contingent Obligation; provided, however, the foregoing restriction shall not
apply to (a) performance guarantees, performance surety or other bonds or
endorsements of items deposited for collection, in each case provided in the
ordinary course of business, (b) trade credit incurred or operating leases
entered into in the ordinary course of business, (c) the Guaranties or (d)
Indebtedness permitted by Section
6.1.

     

    6.3       
    Liens.  Create,
incur, assume or suffer to exist any Lien on any of its Oil and Gas Properties
or any other Property, whether now owned or hereafter acquired; provided, however, the
foregoing restriction shall not apply to Permitted Liens.

     

    6.4    
       Sales of
Assets.  Sell, transfer or otherwise dispose of, in one or any
series of transactions, any of its Property, whether now owned or hereafter
acquired, or enter into any agreement to do so; provided, however, the
foregoing restriction shall not apply to (a) the sale of hydrocarbons or
inventory in the ordinary course of business, provided, however, that no
contract for the sale of hydrocarbons shall obligate the relevant Person to
deliver hydrocarbons produced from any of its Oil and Gas Properties at some
future date without receiving full payment therefor within 90 days of delivery,
or (b) the sale or other disposition of Property destroyed, lost, worn out,
damaged or having only salvage value or no longer used or useful in the business
in which it is used, (c) the sale, transfer or other disposition of Property
from the Borrower to its Domestic Subsidiaries or from the Subsidiaries of the
Borrower to the Borrower, or (d) if no Default exists or would result therefrom,
sales of assets having an aggregate book value of less than $250,000 in the
aggregate in any fiscal year of the Borrower.

     

    6.5     
      Leasebacks.  Enter
into any agreement to sell or transfer any Property and thereafter rent or lease
as lessee such Property or other Property intended for the same use or purpose
as the Property sold or transferred.

     

    6.6      
     Sale or Discount of
Receivables.  Except to minimize losses on bona fide debts
previously contracted, discount or sell with recourse, or sell for less than the
greater of the face or market value thereof, any of its notes receivable or
accounts receivable.

     

    6.7        
   Loans or
Advances.  Make or agree to make or allow to remain outstanding
any loans or advances to any Person; provided, however, the foregoing
restriction shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, (b) advances to
employees for the payment of expenses in the ordinary course of business not
exceeding $50,000 in the aggregate for the Borrower on a consolidated basis with
its consolidated Subsidiaries, (c) loans or advances by the Borrower or any
Domestic Subsidiary of the Borrower to a Guarantor or the Borrower or (d) other
loans or advances so long as not exceeding, in the aggregate outstanding
principal balance at any time, $50,000.

     

    6.8          
 Investments.  Make
or acquire Investments in, or purchase or otherwise acquire all or substantially
all of the assets of, any Person; provided, however, the
foregoing restriction shall not apply to the purchase or acquisition of (a) Oil
and Gas Properties, (b) Investments in the form of (i) debt securities issued or
directly and fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof, with maturities of no more than one year,
(ii) commercial paper of a domestic issuer rated at the date of acquisition at
least P-2 by Moody’s Investors Service, Inc. or A-2 by Standard & Poor’s
Corporation and with maturities of no more than one year from the date of
acquisition, or (iii) repurchase agreements covering debt securities or
commercial paper of the type permitted in this Section 6.8,
certificates of deposit, demand deposits, eurodollar time deposits, overnight
bank deposits and bankers’ acceptances, with maturities of no more than 180 days
from the date of acquisition, issued by or acquired from or through the Lender
or any bank or trust company organized under the laws of the United States of
America or any state thereof and having capital surplus and undivided profits
aggregating at least $100,000,000, (c) other short-term Investments similar in
nature and degree of risk to those described in clause (b) of this Section 6.8, (d)
Investments in money-market funds sponsored or administered by Persons
acceptable to the Lender and which funds invest in short-term Investments
similar in nature and degree of risk to those described in clause (b) of this
Section 6.8, (e) evidences of loans or advances not prohibited by the provisions
of Section 6.7
or (f) Investments by the Borrower or any Domestic Subsidiary of the Borrower in
a Guarantor.

     

    
      
        
        

      

      
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    6.9           
Dividends,
Distributions and Certain Payments.  Declare, pay or make,
whether in cash or Property of the Borrower, any dividend or distribution on, or
purchase, redeem or otherwise acquire for value, any of its equity interests at
any time when there exists a Default or an Event of Default or if a Default or
an Event of Default would exist after giving effect to such dividend,
distribution, purchase, redemption or other acquisition or make any payment on
the Subordinated Debt other than scheduled payments of principal and interest
pursuant to the provisions of the Trust Indenture or any payment on the
Subordinated Debt when there exists a Default or an Event of Default or if a
Default or an Event of Default would exist after giving effect to such
payment.

     

    6.10           Issuance of Equity; Changes
in Corporate Structure.  Issue or agree to issue any additional
equity interests; enter into any transaction of consolidation, merger or
amalgamation; or liquidate, wind up or dissolve (or suffer any liquidation or
dissolution); provided, however, the
foregoing shall not restrict (a) the issuance of shares of the common stock of
the Borrower, (b) transactions of merger, consolidation or amalgamation among
any of the Domestic Subsidiaries of the Borrower or, if the Borrower is the
surviving entity, between the Borrower and any Domestic Subsidiary of the
Borrower or (c) any liquidation, winding up or dissolution of a Domestic
Subsidiary of the Borrower.

     

    6.11           Transactions with
Affiliates.  Directly or indirectly, enter into any transaction
(including the sale, lease or exchange of Property or the rendering of service)
with any of its Affiliates (other than transactions entered into in the normal
course of business between the Borrower or a Domestic Subsidiary of the Borrower
with another Domestic Subsidiary of the Borrower not otherwise prohibited
hereunder), other than upon fair and reasonable terms no less favorable than
could be obtained in an arm’s length transaction with a Person which was not an
Affiliate.

     

    6.12           Lines of
Business.  Change its principal line of business from that in
which it is engaged as of the date hereof.

     

    6.13           Plan
Obligation.  Assume or otherwise become subject to an
obligation to contribute to or maintain any Plan or acquire any Person which has
at any time had an obligation to contribute to or maintain any
Plan.

     

    
      
        
        

      

      
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    6.14           Current
Ratio.  Permit, as of the close of any quarterly period of any
fiscal year of the Borrower, commencing with the quarterly period ending March
31, 2011, the ratio of Current Assets to Current Liabilities to be less than
1.00 to 1.00.

     

    6.15           Total Funded Indebtedness to
EBITDA Ratio.  Permit the ratio, determined as of the close of
any quarterly period of any quarterly period of any fiscal year of the Borrower,
commencing with the quarterly period ending March 31, 2011, of (a) Indebtedness
of the Borrower in respect of funded borrowed money, including the Loan Balance
(exclusive, for the avoidance of doubt, of trade accounts payable and accrued
liabilities, net unrealized losses or charges in respect of Commodity Hedge
Agreements or Interest Rate Hedge Agreements and the undrawn, unexpired amount
of all outstanding Letters of Credit, if such would otherwise be included),
which is not subordinated to payment in full of all Obligations on terms
approved by the Lender (which shall include the Subordinated Debt) to (b) EBITDA determined as follows (provided that for any
calendar quarter in which any acquisitions or divestitures occur, EBITDA shall
be determined on a pro forma basis as if the relevant acquisitions or
divestitures were consummated on the first day of the relevant calendar
quarter):

     

    
      
        
          
            
              
                	
                        Quarterly Period

                      	 
      	
                        EBITDAX

                      
	 
      	 
      	 
      
	
                        Ending
      March 31, 2011

                      	 
      	
                        EBITDA
      for the period January 4, 2011 2011 through March 31, 2011 multiplied by
      four

                      
	 
      	 
      	 
      
	
                        Ending
      June 30, 2011

                      	 
      	
                        EBITDA
      for the period January 4, 2011 through June 30, 2011 multiplied by
      two

                      
	 
      	 
      	 
      
	
                        Ending
      September 30, 2011

                      	 
      	
                        EBITDA
      for the period January 4, 2011 through September 30, 2011 multiplied by
      one and one third

                      
	 
      	 
      	 
      
	
                        Ending
      December 31, 2012

                        and
      thereafter

                      	 
      	
                        EBITDA
      for such calendar quarter and the three immediately preceding calendar
      quarters

                      


              

            

          

        

      

    

     

    to be
greater than 4.00 to 1.00.

     

    6.16           Interest Coverage
Ratio.  Permit, as of the close of any quarterly period of any
fiscal year of the Borrower, commencing with the quarterly period ending March
31, 2011, the ratio of (a) EBITDA for the quarterly period then ended to (b)
Interest Expense for the quarterly period then ended to be less than 3.00 to
1.00.

     

    6.17           Anti-Terrorism
Laws.  Conduct any business or engage in any transaction or
dealing with any Blocked Person, including the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person; deal in, or otherwise engage in any transaction relating to, any
Property or interests in Property blocked pursuant to Executive Order No. 13224;
or engage in or conspire to engage in any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, (i) any of the
prohibitions set forth in Executive Order No. 13224 or the USA Patriot Act, or
(ii) any prohibitions set forth in the rules or regulations issued by OFAC or
any sanctions against targeted foreign countries, terrorism sponsoring
organizations, and international narcotics traffickers based on United States
foreign policy.

     

    
      
        
        

      

      
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    ARTICLE
VII

     

    EVENTS OF
DEFAULT

     

    7.1         Enumeration of Events of
Default.  Any of the following events shall constitute an Event
of Default:

     

    (a)          default
shall be made in the payment when due of (i) any installment of principal or
interest under this Agreement or the Note and such default shall remain
unremedied in excess of three days, (ii) in the payment when due of any fee or
other sum payable under any Loan Document and such default shall remain
unremedied in excess of three days or (iii) any Indebtedness of the Borrower
under any Commodity Hedge Agreement or Interest Rate Hedge Agreement permitted
or required under applicable provisions of this Agreement and such default shall
remain unremedied for in excess of the period of grace, if any, with respect
thereto;


    (b)          default
shall be made by the Borrower or any of the Guarantors in the due observance or
performance of any of its obligations, covenants or agreements under (i) the
Note, (ii) Section
4.6, Section
5.14 or Article
VI or (iii) any material provision of any Loan Documents, other than this
Agreement, and such default shall continue beyond any applicable grace or cure
period or default shall be made by the Borrower or any of the Guarantors in the
due observance or performance of any of its obligations, covenants or agreements
under any other provision of any Loan Document and such default shall continue
for 30 days after the earlier of notice thereof  by the Lender or
knowledge thereof by the Borrower or the relevant Guarantor, as the case may
be;

     

    (c)          any
representation or warranty made by or on behalf of the Borrower or any of the
Guarantors in any of the Loan Documents proves to have been untrue in any
material respect or any representation, statement (including Financial
Statements), certificate or data furnished or made to the Lender in connection
herewith proves to have been untrue in any material respect as of the date the
facts therein set forth were stated or certified;

     

    (d)          default
shall be made by the Borrower or any of the Guarantors (as principal or
guarantor or other surety) in the payment or performance of any bond, debenture,
note or other Indebtedness in excess of $250,000 in the aggregate or under any
credit agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing, and
such default shall remain unremedied for in excess of the period of grace, if
any, with respect thereto or there shall occur any event or condition in respect
of any such Indebtedness which would allow the holders thereof to require such
Indebtedness to be repaid, repurchased or redeemed;

     

    
      
        
        

      

      
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      (e)           the
Borrower or any of the Guarantors shall be unable to satisfy any condition or
cure any circumstance specified in Article III, the
satisfaction or curing of which is precedent to the right of the Borrower to
obtain a Loan or the issuance, renewal or extension of a Letter of Credit, and
such inability shall continue for a period in excess of 60
days;

    

     

    (f)           the
levy against any significant portion of the Property of the Borrower or any of
the Guarantors of any execution, garnishment, attachment, sequestration or other
writ or similar proceeding in an amount in excess of $250,000 which is not
permanently dismissed or discharged within 60 days after the levy;

     

    (g)          the
Borrower or any of the Guarantors shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or all or a substantial
part of its assets, (ii) file a voluntary petition commencing an Insolvency
Proceeding, (iii) make a general assignment for the benefit of creditors of all
or substantially all of its assets, (iv) be unable, or admit in writing its
inability, to pay its debts generally as they become due, or (v) file an answer
admitting the material allegations of a petition filed against it in any
Insolvency Proceeding;

     

    (h)          an
order, judgment or decree shall be entered against the Borrower or any of the
Guarantors by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver, trustee,
conservator, custodian, or liquidator of it or all or any substantial part of
its assets, and such order, judgment, or decree shall not be dismissed or stayed
within 60 days;

     

    (i)           a
final and non-appealable order, judgment, or decree shall be entered against the
Borrower or any of the Guarantors for money damages and/or Indebtedness due in
an amount in excess of $250,000, and such order, judgment, or decree shall not
be dismissed or stayed within 60 days or is not fully covered by insurance
(excluding any deductible);

     

    (j)           any
charges are filed or any other action or proceeding is instituted by any
Governmental Authority against the Borrower or any of the Guarantors under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. §1961 et seq.), the result of
which could be the forfeiture or transfer of any material Property of the
Borrower or any of the Guarantors subject to a Lien in favor of the Lender
without (i) satisfaction or provision for satisfaction of such Lien, or (ii)
such forfeiture or transfer of such Property being expressly made subject to
such Lien;

     

    (k)           the
Borrower or any of the Guarantors shall have (i) concealed, removed or diverted,
or permitted to be concealed, removed or diverted, any part of its Property,
with intent to hinder, delay or defraud its creditors or any of them, (ii) made
or suffered a transfer of any of its Property which is fraudulent under any
bankruptcy, fraudulent conveyance, or similar law with intent to hinder, delay
or defraud its creditors, (iii) made any transfer of its Property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid with intent to hinder, delay or defraud its creditors, or (iv) shall
have suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any of its Property through legal proceedings or distraint which is not vacated
within 60 days from the date thereof;

     

    
      
        
        

      

      
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    (l)           any
Security Document shall for any reason not, or cease to, create valid and
perfected first priority Liens (subject only to Permitted Liens) against the
Collateral purportedly covered thereby, except to the extent permitted by this
Agreement or resulting from the negligence of the Lender;

     

    (m)         the
Borrower or one of the Guarantors shall cease to be the sole shareholder or
member or the sole general partner of any Guarantor;

     

    (n)          any
Loan Document, at any time after its execution and delivery and for any reason
other than as expressly permitted hereunder or thereunder or satisfaction in
full of all Obligations and termination of the Commitments and this Agreement,
ceases to be in full force and effect;

     

    (o)          the
Borrower or any Guarantor purports to revoke, terminate or rescind any Loan
Document or any provision of any Loan Document; or

     

    (p)          the
occurrence of a Material Adverse Effect which is not remedied within 30 days
following written notice thereof from the Lender or knowledge thereof by the
Borrower.

     

    7.2         Remedies.

     

    (a)           Upon
the occurrence of an Event of Default specified in Section 7.1(f) or
Section 7.1(g),
immediately and without notice, (i) all Obligations under the Loan Documents
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of protest, default, or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, or other notice of any
kind, except as may be provided to the contrary elsewhere herein, all of which
are hereby expressly waived by the Borrower and the Guarantors and (ii) the
Commitment shall immediately cease and terminate unless and until reinstated by
the Lender in writing.

     

    (b)          Upon
the occurrence of any Event of Default other than those specified in Section 7.1(f) or
Section 7.1(g),
(i) the Lender may, by notice in writing to the Borrower, declare all
Obligations under the Loan Documents immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower and the Guarantors and
(ii) the Lender may declare the Commitment terminated, whereupon the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing.

     

    (c)          Upon
the occurrence of any Event of Default,  the Lender may, in addition
to the foregoing in this Section 7.2, exercise
any or all of the rights and remedies provided by law or pursuant to the Loan
Documents.

     

    
      
        
        

      

      
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    (d)           Should
the Obligations under the Loan Documents become immediately due and payable in
accordance with any of the preceding subsections of this Section 7.2, the
obligation of the Borrower with respect to the L/C Exposure shall be to provide
cash as Collateral therefor, to be held and administered by the Lender as
provided in Section
2.10 with respect to mandatory prepayments and, failing receipt by the
Lender of immediate payment in full of the Loan Balance, any additional
Obligations then due and payable, and all accrued and unpaid interest and fees
and such cash to serve as Collateral for the L/C Exposure, the Lender shall be
entitled to proceed against the Collateral, and proceeds from any realization
against any such Collateral, other than cash, in excess of the sum of the costs
of such realization, the Loan Balance, any additional Obligations then due and
payable, and accrued and unpaid interest and fees shall constitute cash
Collateral for the remaining L/C Exposure, if any, to be held and administered
by the Lender as provided in Section
2.10.

     

    (e)           Proceeds
from realization against the Collateral and any other funds received by the
Lender from the Borrower or any of the Guarantors when an Event of Default has
occurred shall be applied (i) first, to fees and expenses due pursuant to the
terms of this Agreement, any other Loan Document or any Commodity Hedge
Agreement or Interest Rate Hedge Agreement with an Approved Hedge Counterparty,
(ii) second, to accrued interest on the Obligations under the Loan Documents or
any Commodity Hedge Agreement or Interest Rate Hedge Agreement with an Approved
Hedge Counterparty, (iii) third, to the Loan Balance, in any manner elected by
the Lender, and any other Obligations then due and payable, pro rata in
accordance with the ratio of the Loan Balance or such other Obligations, as the
case may be, to the sum of the Loan Balance and such other Obligations and (iv)
as provided in subsection (d) immediately above, if applicable.

     

    ARTICLE
VIII

     

    MISCELLANEOUS

     

    8.1         Assignments;
Participations.

     

    (a)           Neither
the Borrower nor any of the Guarantors may assign any of its rights or delegate
any of its obligations under any Loan Document without the prior consent of the
Lender.

     

    (b)           With
the consent of the Lender and, except when a Default or an Event of Default
shall have occurred, the Borrower (which shall not be unreasonably withheld or
delayed in either case), the Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement; provided, however, (i) such
consent  shall not be required with respect to an assignment from the
Lender to one or more Affiliates of the Lender and (ii) such consent shall not
be required with respect to an assignment from the Lender to one or more
Approved Funds or Affiliates of Approved Funds.  Upon the
effectiveness of any assignment pursuant to this Section 8.1(b), the
assignee will become a “Lender,” if not already a “Lender,” for all purposes of
the Loan Documents, and the assignor shall be relieved of its obligations
hereunder to the extent of such assignment.  If the assignor no longer
holds any rights or obligations under this Agreement, such assignor shall cease
to be a “Lender” hereunder, except that its rights under Section 5.17, Section 5.21 and
Section 5.22,
shall not be affected.

     

    
      
        
        

      

      
        - 49
-

        
          

        

      

      
        
        

      

    

     

    (c)           Lender
may transfer, grant, or assign participations in all or any portion of its
interests hereunder to any Person pursuant to this Section 8.1(c), provided, however, that the
Lender shall remain the “Lender” for all purposes of this Agreement and the
transferee of such participation shall not constitute a “Lender”
hereunder.  In the case of any such participation, the participant
shall not have any rights under any Loan Document, the rights of the participant
in respect of such participation to be against the granting Lender as set forth
in the agreement with such Lender creating such participation, and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation.

     

    (d)          The
Lender may furnish any information concerning the Borrower or any of the
Guarantors in the possession of the Lender from time to time to its permitted
assignees and participants and prospective assignees and
participants.  The Lender shall require any Person receiving any such
information to agree, in writing, to keep all such information
confidential.

     

    (e)           Notwithstanding
anything in this Section 8.1 to the
contrary, the Lender may assign and pledge the Note or any interest therein to
any Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank.  No such assignment or pledge shall release the
Lender from its obligations hereunder.

     

    (f)           Notwithstanding
any other provisions of this Section 8.1, no
transfer or assignment of the interests or obligations of the Lender or grant of
participations therein shall be permitted if such transfer, assignment, or grant
would require the Borrower to file a registration statement with the Securities
and Exchange Commission or any successor Governmental Authority or qualify the
Loans under the “Blue Sky” laws of any state.

     

    8.2        Survival of Representations,
Warranties, and Covenants.  All representations and warranties
of the Borrower and the Guarantors and all covenants and agreements of the
Borrower and the Guarantors herein made shall survive the execution and delivery
of the Note and the Security Documents and shall remain in force and effect so
long as any Obligation is outstanding or any Commitment exists.

     

    8.3        Notices and Other
Communications.  Except as to oral notices expressly authorized
herein, which oral notices shall be confirmed in writing, all notices, requests,
and communications hereunder shall be in writing (including by facsimile,
electronic mail or other electronic form).  Unless otherwise expressly
provided herein, any such notice, request, demand, or other communication shall
be deemed to have been duly given or made when delivered by hand or by a
nationally-recognized overnight courier service, or, in the case of delivery by
mail, five days after being deposited in the mail, certified mail, return
receipt requested, postage prepaid, or, in the case of facsimile notice, when
receipt thereof is acknowledged orally or by written confirmation report,
addressed as follows:

     

    (a)           if
to the Lender, to:

     

    Texas
Capital Bank, N.A.

    One
Riverway, Suite 2100

    Houston,
Texas  77056

    Attention:  Energy
Banking

    Facsimile:  (832)
308-7042

     

    
      
        
        

      

      
        - 50
-

        
          

        

      

      
        
        

      

    

     

    (b)           if
to the Borrower or any of the Guarantors, to:

     

    22610
U.S. Hwy. 281 North

    Suite
218

    San
Antonio, Texas  78258

    Attention:  Chief
Financial Officer

    Facsimile:  (210)
930-3967

     

    Any party
may, by proper written notice hereunder to the others, change the individuals or
addresses to which such notices to it shall thereafter be sent.

     

    8.4         Parties in
Interest.  Subject to the restrictions on changes in structure
set forth in Section
6.10 and other applicable restrictions contained herein, all covenants
and agreements herein contained by or on behalf of the Borrower, any of the
other Guarantors, or the Lender shall be binding upon and inure to the benefit
of the Borrower, any of the other Guarantors, or the Lender, as the case may be,
and their respective legal representatives, successors, and permitted
assigns.

     

    8.5         Renewals;
Extensions.  All provisions of this Agreement relating to the
Note shall apply with equal force and effect to each promissory note hereafter
executed which in whole or in part represents a renewal or extension of any part
of the Indebtedness of the Borrower under this Agreement, the Note or any other
Loan Document.

     

    8.6         Rights of Third
Parties.  All provisions herein are imposed solely and
exclusively for the benefit of the Lender, any other Approved Hedge
Counterparties, the Borrower and the Guarantors.  No other Person
shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in
accordance with their terms.

     

    8.7         No Waiver; Rights
Cumulative.  No course of dealing on the part of the Lender or
its officers or employees, nor any failure or delay by the Lender with respect
to exercising any of its rights under any Loan Document shall operate as a
waiver thereof.  The rights of the Lender under the Loan Documents
shall be cumulative and the exercise or partial exercise of any such right shall
not preclude the exercise of any other right.  Neither the making of
any Loan nor the issuance of any Letter of Credit shall constitute a waiver of
any of the covenants, warranties or conditions of the Borrower contained
herein.  In the event the Borrower is unable to satisfy any such
covenant, warranty or condition, neither the making of any Loan nor the issuance
of any Letter of Credit shall have the effect of precluding the Lender from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.

     

    8.8         Survival Upon
Unenforceability.  In the event any one or more of the
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.

     

    
      
        
        

      

      
        - 51
-

        
          

        

      

      
        
        

      

    

     

    8.9           Amendments;
Waivers.  Neither this Agreement nor any provision hereof may
be amended, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the amendment,
waiver, discharge or termination is sought.  Subject to the preceding
sentence, any provision of this Agreement or any other Loan Document may be
amended, modified or waived by the Borrower, the Guarantors and the
Lender.

     

    8.10         Controlling
Agreement.  In the event of a conflict between the provisions
of this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control.

     

    8.11         Disposition of
Collateral.  Notwithstanding any term or provision, express or
implied, in any of the Security Documents, but subject to applicable provisions
of this Agreement, the realization, liquidation, foreclosure or any other
disposition on or of any or all of the Collateral shall be in the order and
manner and determined in the sole discretion of the Lender; provided, however,
that in no event shall the Lender violate applicable law or exercise rights and
remedies other than those provided in such Security Documents or otherwise
existing at law or in equity.

     

    8.12         Governing
Law.  This
Agreement and the Note shall be deemed to be contracts made under and shall be
construed in accordance with and governed by the laws of the State of Texas,
without giving effect to principles thereof relating to conflicts of
law.

     

    8.13        Waiver
of Rights to Jury Trial.  The
Borrower, the Guarantors and the Lender hereby knowingly, voluntarily,
intentionally, irrevocably and unconditionally waive all rights to trial by jury
in any action, suit, proceeding, counterclaim or other litigation that relates
to or arises out of this Agreement or any other Loan Document or the acts or
omissions of the Lender in the enforcement of any of the terms or provisions of
this Agreement or any other Loan Document or otherwise with respect
thereto.  The provisions of this Section
8.13 are a
material inducement for the Lender to enter into this
Agreement.

     

    8.14    
    Jurisdiction
and Venue.  Subject to
the provisions of Section
8.13, all
actions or proceedings with respect to, arising directly or indirectly in
connection with, out of, related to or from this Agreement or any other Loan
Document may be litigated, at the sole discretion and election of the Lender, in
courts having situs in Houston, Harris County, Texas.  In such regard,
the Borrower and each of the Guarantors hereby submits to the jurisdiction of
any local, state or federal court located in Houston, Harris County, Texas, and
hereby waives any rights it may have to transfer or change the jurisdiction or
venue of any litigation brought against it by the Lender in accordance with this
Section
8.14.

     

    
      
        
        

      

      
        - 52
-

        
          

        

      

      
        
        

      

    

     

    8.15         Integration.  This
Agreement and the other Loan Documents constitute the entire Agreement between
the parties hereto and thereto with respect to the subject hereof and thereof
and shall supersede any prior agreement between the parties hereto and thereto,
whether written or oral, relating to the subject hereof and thereof, including
any term sheet provided to the Borrower by the Lender.  Furthermore,
in this regard, this Agreement and the other written Loan Documents represent,
collectively, the final agreement between the parties thereto and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of such parties.  There are no unwritten oral agreements
between such parties.

     

    8.16        Waiver
of Punitive and Consequential Damages.  Each of the
Borrower, the Guarantors and the Lender hereby knowingly, voluntarily,
intentionally and irrevocably (a) waives, to the maximum extent it may lawfully
and effectively do so, any right it may have to claim or recover, in any dispute
based hereon, or directly or indirectly at any time arising out of, under or in
connection with the Loan Documents or any transaction contemplated thereby or
associated therewith, before or after maturity, any special, exemplary, punitive
or consequential damages, or damages other than, or in addition to, actual
damages and (b) acknowledges that it has been induced to enter into this
Agreement, the other Loan Documents and the transactions contemplated hereby and
thereby by, among other things, the mutual waivers and certifications contained
in this Section
8.16.

     

    8.17         Counterparts.  For
the convenience of the parties, this Agreement may be executed in multiple
counterparts and by different parties hereto in separate counterparts, each of
which for all purposes shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same Agreement and shall
be enforceable as of the date hereof upon the execution of one or more
counterparts hereof by each of the parties hereto.  In this regard,
each of the parties hereto acknowledges that a counterpart of this Agreement
containing a set of counterpart execution pages reflecting the execution of each
party hereto shall be sufficient to reflect the execution of this Agreement by
each party hereto and shall constitute one instrument.

     

    8.18        
USA Patriot Act
Notice.  The Lender hereby notifies the Borrower that, pursuant
to the requirements of the USA Patriot Act, it is required to obtain, verify and
record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow the
Lender to identify the Borrower in accordance with the USA Patriot
Act.

     

    8.19        
Tax Shelter
Regulations.  The Borrower does not intend to treat the Loans
and related transactions hereunder and under the other Loan Documents as a
“reportable transaction” (within the meanings under current Treasury Regulation
Section 1.6011-4 and Proposed Treasury Regulation Section 1.6011-4, promulgated
on November 1, 2006).  In the event the Borrower determines to take
any action inconsistent with the foregoing statement, it will promptly notify
the Lender thereof.  If the Borrower so notifies the Lender, the
Borrower acknowledges that the Lender may treat the Loans and related
transactions hereunder and under the other Loan Documents as part of a
transaction that is subject to current Treasury Regulation Section 301.6112-1 or
Proposed Treasury Regulation Section 301.6112-1, promulgated on November 1,
2006, and, in such case, the Lender will maintain the lists and other records
required, if any, by such Treasury Regulations.

     

    
      
        
        

      

      
        - 53
-

        
          

        

      

      
        
        

      

    

     

    8.20        Contribution and
Indemnification.  In the event that any  Guarantor
pays (whether through direct payments or as a result of providing Collateral for
the Obligations) any amounts on the Obligations in excess of such Guarantor’s
Obtained Benefit (the “Excess Payments”),
such Guarantor shall be entitled to make demand on the Borrower for such Excess
Payments, and, to the extent not recovered from the Borrower, to receive from
each other Guarantor that received an Obtained Benefit, such Guarantor’s
Contribution Percentage of the Excess Payment.  If any party obligated
to make such a payment is unable to pay the Contribution Percentage of the
Excess Payment, each Guarantor agrees to make a contribution to the party
entitled to such payment to the extent necessary so that each Guarantor shares
equally the liability for such Excess Payment in relation to the relative
Obtained Benefit received by such Guarantor.  In
such regard, to the maximum extent permitted by law, each Guarantor shall
indemnify, defend and hold harmless the other Guarantors from and against any
and all liability, claims, costs and expenses (including reasonable attorneys’
fees and expenses) arising with respect to the Obligations and exceeding such
other Guarantor’s obtained benefit or contribution percentage thereof as
provided herein.  Any amount due under this Section 8.20 shall be
due and payable within ten days of demand therefor by the party entitled to
payment and shall be made to the party entitled thereto at the Borrower’s
address for notices under this Agreement, in immediately available funds, not
later than 2:00 p.m., Central Standard or Daylight Time, on the date on which
such payment shall come due.  The remedies available to any Guarantor
pursuant to the provisions of this Section 8.20 are not
exclusive.  All rights and claims of contribution, indemnification and
reimbursement under this Section 8.20 shall be
subordinate in right of payment to the prior payment in full of the
Obligations.  The provisions of this Section 8.20 shall,
to the extent expressly inconsistent with any provision in any Loan Document,
supersede such inconsistent provision.

     

    (Signatures
appear on following pages)


    
      
         


      

      
        - 54
-

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

     

    
      
        	
                BORROWER:

              
	 
      
	
                CROSS
      BORDER RESOURCES, INC.

              
	 
      
	
                By:

              	
                /s/ P. Mark Stark

              	 
      
	 
      	
                P.
      Mark Stark

              	 
      
	 
      	
                Chief
      Financial Officer

              	 
      


      

    

    


    (Signatures
continue on following page)


    
      
         


      

      
        - 55
-

        
          

        

      

      
         


      

    

    
      
        	
                LENDER:

              
	 
      
	
                TEXAS
      CAPITAL BANK, N.A.

              
	 
      
	
                By:

              	
                /s/ Jeff Treadway

              
	 
      	
                Jeff
      Treadway

              
	 
      	
                Vice
      President

              


      

    

     

    
      
         


      

      
        - 56
-

        
          

        

      

      
         


      

    

    


    Schedule
4.9

     

    LIABILITIES
AND LITIGATION

     

    Liabilities:

    


    None.

    


    Litigation:

    


    None.


    
      
         


      

      
        Schedule
4.9

        
          

        

      

      
         


      

    

    


    Schedule
4.13

     

    ENVIRONMENTAL
MATTERS

     

    None.


    
      
         


      

      
        Schedule
4.13

        
          

        

      

      
         


      

    

    


    Schedule
4.17

     

    REFUNDS

     

    None.


    
      
         


      

      
        Schedule
4.17

        
          

        

      

      
         


      

    

    


    Schedule
4.18

     

    GAS
CONTRACTS

     

    None.


    
      
         


      

      
        Schedule
4.18

        
          

        

      

      
         


      

    

     

    Schedule
4.20

     

    CASUALTIES

     

    None.


    
      
         


      

      
        Schedule
4.20

        
          

        

      

      
         


      

    

    


    Schedule
4.24

     

    TAXPAYER
I.D. AND ORGANIZATIONAL NUMBERS

     

    
      
        
          	
                  Entity

                	 
      	
                  Taxpayer I.D. No.

                	 
      	
                  Organizational No.

                
	 
      	 
      	 
      	 
      	 
      
	
                  Borrower

                	 
      	
                  98-0555508

                	 
      	
                  NV20051667323

                


        

      

    

     

    
      
         


      

      
        Schedule
4.24

        
          

        

      

      
         


      

    

    


    EXHIBIT
I

    


    [FORM OF
NOTE]

    


    PROMISSORY
NOTE

    (this
“Note”)

     

    
      
        	
                $25,000,000.00

              	
                Houston,
      Texas

              	
                January 31,
      2011

              


      

    

     

    FOR VALUE
RECEIVED and WITHOUT GRACE (except to the extent, if any, provided in the
Amended and Restated Credit Agreement referred to hereinafter), the undersigned
(“Maker”) promises to pay to the order of Texas Capital Bank, N.A. (“Payee”), at
the Principal Office (as such term is defined in the Credit Agreement referred
to hereinafter) of Payee, TWENTY FIVE MILLION AND NO/100 DOLLARS
($25,000,000.00) or so much thereof as may be advanced against this Note and
remains unpaid pursuant to the Amended and Restated Credit Agreement dated
January 31, 2011 by and between Maker and Payee (as
amended,  supplemented, restated or otherwise modified from time to
time, the “Credit Agreement”), together with interest at the rates and
calculated as provided in the Credit Agreement.

     

    Reference
is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to
accelerate the maturity of all amounts due hereunder.  Capitalized
terms used but not defined in this Note shall have the respective meanings
assigned to such terms in the Credit Agreement.

     

    This Note
is issued pursuant to, is the “Note” under, and is payable as provided in the
Credit Agreement.  Subject to compliance with applicable provisions of
the Credit Agreement, Maker may at any time pay the full amount or any part of
this Note without the payment of any premium or fee, but such payment shall not,
until this Note is fully paid and satisfied, excuse the payment as it becomes
due of any payment on this Note provided for in the Credit
Agreement.

     

    This Note
represents, in part, a renewal, but not a novation or discharge, of all or a
portion of the Indebtedness of Maker previously evidenced by the Promissory Note
or Promissory Notes issued by Maker pursuant to the Existing Credit
Agreement.

     

    Without
being limited thereto or thereby, this Note is secured by the Security
Documents.

     

    This Note shall be governed and
controlled by the laws of the State of Texas, without giving effect to
principles thereof relating to conflicts of law.

     

    
      
        
          
            
              
                
                  
                    
                      	
                              CROSS
      BORDER RESOURCES, INC.

                            
	 
      
	
                              By:

                            	
                                 

                            
	 	
                              P.
      Mark Stark

                            
	 	
                              Chief
      Financial
Officer

                            


                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        Exhibit
I-i

        
          

        

      

      
         


      

    

    


    EXHIBIT
II

     

    [FORM OF
BORROWING REQUEST]

     

    [Date]

     

    Texas
Capital Bank, N.A.

    One
Riverway, Suite 2100

    Houston,
Texas 77056

    Attention:  Energy
Banking

     

    
      	
               
      

            	
              Re:

            	
              Amended
      and Restated Credit Agreement dated January 31, 2011, by and between
      Cross Border Resources, Inc., a Nevada corporation, and Texas Capital
      Bank, N.A., a national banking association (as amended, supplemented,
      restated or otherwise modified from time to time, the “Credit
      Agreement”)

            


    

     

    Ladies
and Gentlemen:

     

    Pursuant
to the Credit Agreement, the undersigned hereby makes the requests indicated
below:

     

    
      	
               
      

            	
              1.

            	
              Loans

            


    

     

    
      	
               
      

            	
              (a)

            	
              Amount
      of new Loan:  $__________

            


    

     

    
      	
               
      

            	
              (b)

            	
              Requested
      funding date:  ______________,
20__

            


    

     

    
      	
               
      

            	
              2.

            	
              Certification

            


    

     

    The
undersigned individual certifies that [s]he is the ___________ of the Borrower,
has obtained all consents necessary, and as such [s]he is authorized to execute
this request on behalf of the Borrower.  The undersigned individual
further certifies, represents, and warrants on behalf of the Borrower, that the
Borrower is entitled to receive the requested borrowing under the terms and
conditions of the Credit Agreement and that, to the best knowledge of such
undersigned individual, there exists as of the date hereof neither a Default nor
an Event of Default under the Credit Agreement.

     

    Each
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Credit Agreement.

     

    
      
        
          	
                  Very
      truly yours,

                
	 
      
	
                       
    

                
	
                  ________________ of

                	 
      
	
                  Cross
      Border Resources, Inc.

                


        

      

    

     

    
      
         


      

      
        Exhibit
II-i

        
          

        

      

      
         


      

    

    


    EXHIBIT
III

     

    [FORM OF
COMPLIANCE CERTIFICATE]

     

    [Date]

     

    Texas
Capital Bank, N.A.

    One
Riverway, Suite 2100

    Houston,
Texas 77056

    Attention:  Energy
Banking

     

    
      	
               
      

            	
              Re:

            	
              Amended
      and Restated Credit Agreement dated January 31, 2011, by and between
      Cross Border Resources, Inc., a Nevada corporation, and Texas Capital
      Bank, N.A., a national banking association (as amended, supplemented,
      restated or otherwise modified from time to time, the “Credit
      Agreement”)

            


    

     

    Ladies
and Gentlemen:

     

    Pursuant
to applicable requirements of the Credit Agreement, the undersigned, as a
Responsible Officer of the Borrower, hereby certifies to you the following
information as true and correct as of the date hereof or for the period
indicated, as the case may be:

     

    1.           [To
the best of the knowledge of the undersigned, no Default or Event of Default
(including, but not limited to, any arising from any violation or alleged
violation of any Environmental Law) exists as of the date hereof or has occurred
since the date of our previous certification to you, if any.]

     

    [To the
best of the knowledge of the undersigned, the following Defaults or Events of
Default (including, but not limited to, any arising from any violation or
alleged violation of any Environmental Law) exist as of the date hereof or have
occurred since the date of our previous certification to you, if any, and the
actions set forth below are being taken to remedy such
circumstances:]

     

    2.           The
compliance of the Borrower, on a consolidated basis with its consolidated
Subsidiaries, with the financial covenants of the Credit Agreement, as of the
close of business on _________________________, is evidenced by the
following:

     

    
      	
               
      

            	
              (a)

            	
              Section
      6.14:

            	
              Current
      Ratio

            


    

     

    
      
        
          
            	
                    Required

                  	
                    Actual

                  
	
                    Not
      less than 1.00 to 1.00

                  	
                    ___
      to 1.00

                  


          

        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Section
      6.15:

            	
              Total
      Funded Indebtedness to EBITDA Ratio

            


    

     

    
      
        
          	
                  Required

                	
                  Actual

                
	
                  Not
      greater than 4.00 to 1.00

                	
                  ___
      to 1.00

                


        

      

    


    
      
         


      

      
        Exhibit
III-i

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (c)

            	
              Section
      6.16:

            	
              Interest
      Coverage Ratio

            


    

     

    
      
        
          
            	
                    Required

                  	
                    Actual

                  
	
                    Not
      less than 4.00 to 1.00

                  	
                    ___
      to 1.00

                  


          

        

      

    

     

    (See
attached detailed calculation of EBITDA)

     

    3.           The
Borrower and the Guarantors [are] [are not] in compliance with the provisions of
Section 6.1 of the Credit Agreement relating to Commodity Hedge
Agreements.

     

    4.           No
Material Adverse Effect has occurred since the date of the combined consolidated
Financial Statements of the Borrower as of [_____________] and for the period
then ended.

     

    Each
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Credit Agreement.

     

    
      
        	
                Very
      truly yours,

              
	 
      
	
                    

              
	
                ________________
      of

              	 
      
	
                Cross
      Border Resources, Inc.

              


      

    


    
      
         


      

      
        Exhibit
III-ii

        
          

        

      

      
         


      

    

    


    EXHIBIT
IV

     

    [FORM OF
OPINION OF NEVADA COUNSEL]

     

    January
31, 2011

     

    Texas
Capital Bank, N.A.

    One
Riverway, Suite 2100

    Houston,
Texas  77056

    Attention:  Energy
Banking

     

    
      	
               
      

            	
              Re:

            	
              Amended
      and Restated Credit Agreement dated effective January 31, 2011 (as
      amended, supplemented, restated or otherwise modified from time to time,
      the “Credit
      Agreement”) by and between Cross Border Resources, Inc., a Nevada
      corporation and Texas Capital Bank, N.A., a national banking association
      (the “Lender”)

            


    

     

    Ladies
and Gentlemen:

     

    [We][I]
have acted as counsel to the Borrower and Texas Capital Bank, N.A., a national
banking association (the “Lender”) in
connection with the transactions contemplated in the Credit
Agreement.  This opinion is delivered pursuant to Section 3.1(n) of
the Credit Agreement, and the Lender is hereby authorized to rely upon this
opinion in connection with the transactions contemplated in the Credit
Agreement.  For convenience, each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement, unless expressly provided to the contrary herein.

     

    In
[our][my] representation of the Borrower, [we][I] have examined an executed
counterpart or a copy of an executed counterpart of each of the following
(collectively, the “Loan Documents”),
each of which is dated of even date herewith:

     

    (i)           the
Credit Agreement;

     

    (ii)          the
Note;

     

    (iii)         Amendment
to and Ratification of Mortgage, Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production by and between the Borrower and the
Lender;

     

    (iv)      
  Deed of Trust, Security Agreement, Financing Statement and
Assignment of Production from the Borrower to Stephen Scholl, Trustee for the
benefit of the Lender; and

     

    (v)        
 Amendment to and Ratification of Security Agreement by and between the
Borrower and the Lender.


    
      
         


      

      
        Exhibit
IV-i

        
          

        

      

      
         


      

    


    In making
such examinations, [we][I] have, with your permission, assumed:

     

    (i)           the
genuineness of all signatures to the Loan Documents other than those of officers
of the Borrower;

     

    (ii)          the
authenticity of all documents submitted to [us][me] as originals and the
conformity with the originals of all documents submitted to [us] [me] as
copies;

     

    (iii)         that
the Lender is duly organized, legally existing and in good standing under the
laws of its jurisdiction of organization;

     

    (iv)         that
the Lender is authorized and has the power to enter into and perform its
obligations under those of the Loan Documents to which it is a party;
and

     

    (v)       
  the due authorization, execution and delivery by the Lender of all
Loan Documents to which it is a party.

     

    Based
upon the foregoing and subject to the qualifications set forth herein, [we
are][I am] of the opinion that:

     

    1.           The
Borrower is a corporation duly incorporated legally existing and in good
standing under the laws of the State of Nevada and is duly qualified and in good
standing as a foreign corporation in each of the State of New Mexico and the
State of Texas.

     

    2.           The
execution and delivery by the Borrower of the Credit Agreement and the
borrowings and obtaining of Letters of Credit by the Borrower thereunder, the
execution and delivery by the Borrower of the other Loan Documents to which it
is a party, the payment and performance by the Borrower of all Obligations and
the performance of all obligations of the Borrower under the Credit Agreement
and the other Loan Documents to which it is a party are within the power of the
Borrower, have been duly authorized by all necessary action by the Borrower, and
do not (a) require the consent of any Governmental Authority, (b) contravene or
conflict with any Requirement of Law, (c) to [our][my] knowledge, contravene or
conflict with any indenture, instrument or other agreement to which the Borrower
is a party or by which any Property of the Borrower may be presently bound or
encumbered or (d) result in or require the creation or imposition of any Lien
upon any Property of the Borrower other than as contemplated by the Loan
Documents.

     

    3.           The
Borrower is not, nor is the Borrower directly or indirectly controlled by or
acting on behalf of any Person which is, an “investment company” or an
“affiliate person” of an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

     

    The
opinions expressed herein are subject to the qualification and limitation that
[we are] [I am] licensed
to practice law only in the State of Nevada [and other jurisdictions the laws of
which are not applicable to the opinions expressed herein]; accordingly,
the foregoing opinions are limited solely to the laws of the State of Nevada and
applicable United States federal law.  Further to the foregoing, [we][I] express no opinion
herein regarding matters governed by the laws of either the State of New Mexico
or the State of Texas.


    
      
         


      

      
        Exhibit
IV-ii

        
          

        

      

      
         


      

    


    This
opinion is furnished for the benefit of the Lender and any transferee or
assignee of any the Lender in connection with the transactions contemplated by
the Credit Agreement and the other Loan Documents and is not to be quoted in
whole or in part or otherwise referred to or disclosed to any other Person or in
any other transaction.

     

    Very
truly yours,


    
      
         


      

      
        Exhibit
IV-iii

        
          

        

      

      
         


      

    

    


    EXHIBIT
V

     

    [FORM OF
OPINION OF TEXAS COUNSEL]

     

    January
31, 2011

     

    Texas
Capital Bank, N.A.

    One
Riverway, Suite 2100

    Houston,
Texas  77056

    Attention:  Energy
Banking

     

    
      	
               
      

            	
              Re:

            	
              Amended
      and Restated Credit Agreement dated effective January 31, 2011 (as
      amended, supplemented, restated or otherwise modified from time to time,
      the “Credit
      Agreement”) by and between Cross Border Resources, Inc., a Nevada
      corporation and Texas Capital Bank, N.A., a national banking association
      (the “Lender”)

            


    

     

    Ladies
and Gentlemen:

     

    [We][I]
have acted as counsel to the Borrower in connection with the transactions
contemplated in the Credit Agreement.  This opinion is delivered
pursuant to Section 3.1(o) of the Credit Agreement, and the Lender are hereby
authorized to rely upon this opinion in connection with the transactions
contemplated in the Credit Agreement.  For convenience, each
capitalized term used but not defined herein shall have the meaning assigned to
such term in the Credit Agreement, unless expressly provided to the contrary
herein.

     

    In
[our][my] representation of the Borrower, [we][I] have examined an executed
counterpart or a copy of an executed counterpart of each of the following
(collectively, the “Loan Documents”),
each of which is dated of even date herewith:

     

    (i)           the
Credit Agreement;

     

    (ii)          the
Note; and

     

    (iii)         Amendment
to and Ratification of Security Agreement by and between the Borrower and the
Lender.

     

    In making
such examinations, [we][I] have, with your permission, assumed:

     

    (iv)         the
genuineness of all signatures to the Loan Documents other than those of officers
of the Borrower;

     

    (v)         the
authenticity of all documents submitted to [us][me] as originals and the
conformity with the originals of all documents submitted to [us] [me] as
copies;

     

    (vi)         that
each of the Borrower and the Lender is duly organized, legally existing and in
good standing under the laws of its jurisdiction of
organization;


    
      
         


      

      
        Exhibit
V-i

        
          

        

      

      
         


      

    


    (vii)        that
each of the Borrower and the Lender, is authorized and has the power to enter
into and perform its obligations under those of the Credit Agreement and the
other Loan Documents to which it is a party; and

     

    (viii)       the
due authorization, execution and delivery of all Loan Documents by each party
thereto.

     

    Based
upon the foregoing and subject to the qualifications set forth herein, [we
are][I am] of the opinion that the Loan Documents to constitute legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.

     

    The
opinions expressed herein are subject to the qualification and limitation that
[we are] [I am] licensed
to practice law only in the State of Texas [and other jurisdictions the laws of
which are not applicable to the opinions expressed herein]; accordingly,
the foregoing opinions are limited solely to the laws of the State of Texas and
applicable United States federal law.  Further to the foregoing, [we][I] express no opinion
herein with respect to any matter governed by the laws of the State of
Nevada.

     

    This
opinion is furnished for the benefit of the Lender and any transferee or
assignee of any the Lender in connection with the transactions contemplated by
the Credit Agreement and the other Loan Documents and is not to be quoted in
whole or in part or otherwise referred to or disclosed to any other person or
entity or in any other transaction.

     

    Very
truly yours,


    
      
         


      

      
        Exhibit
V-ii