Exhibit 10.13


    Execution
      Version

     

    



    
      
        
          
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    ADVANCING
      TERM CREDIT AGREEMENT

    BETWEEN

    WESTSIDE
      ENERGY PRODUCTION COMPANY, LP,

    a
      Texas
      limited partnership

    and

    WESTSIDE
      ENERGY OPERATING COMPANY, LP,

    a
      Texas
      limited partnership

    As
      Borrowers

    WESTSIDE
      ENERGY CORPORATION,

    a
      Nevada
      corporation

     

    As
      a
      Guarantor

     

    AND

    GASROCK
      CAPITAL LLC,

    a
      Delaware limited liability company

     

    As
      Lender

     

     

    Dated
      Effective as of March 17, 2006

     

     

    ADVANCING
      TERM LOAN OF UP TO $45,000,000

    



    
      
        
          
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    EXHIBITS

     

    Exhibit
      A
      Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G

     

    SCHEDULES

     

    Schedule
      2.1 Schedule 2.1(a) Schedule
      2.1(b)(i) Schedule
      4.1(b) Schedule 4.1(c) Schedule 4.1(g) Schedule 4.1(h) Schedule 4.1(j) Schedule
      4.1(m) Schedule 4.1(o) Schedule 4.1(s) Schedule 4.1(t) Schedule 4.1(u) Schedule
      4.1(v) Schedule
      4. 1 (w) Schedule
      7. 1 (e) Schedule 7.2(k)

     

    Property
      Descriptions

    Form
      of
      Note

    Fomi
      of
      Property Operating Statement

    Form
      of
      Request for Commitment

    Form
      of
      Cost Certificate

    Fowl
      of
      Overriding Royalty Interest Conveyance Form
      of
      Guaranty

     

    List
      of
      CVR Wells and Initial Development Operations Wire
      Transfer Instructions

    Committed
      Development Operations

    Shareholders
      and Partners of Borrowers and Owners of Partners Borrowers
      Equity Interest Obligations

    Borrowers'
      Pro Forma Financial Statements and Cash Flow Statement Other.
      Obligations and Restrictions

    Litigation

    Unpaid
      Bills

    Subsidiaries

    Compliance
      with Environmental and Other Laws Equipment
      Description

    Purchasers
      of Hydrocarbons and Pipeline Parties Existing
      Hydrocarbon Sales Agreement

     

    Existing
      Swap Agreements

    Additional
      Reserve Report Parameters and Guidelines Existing
      Liens

    



    
      
        
          
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    ADVANCING
      TERM CREDIT AGREEMENT

     

    



    
      
        
          
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    THIS
      ADVANCING TERM CREDIT AGREEMENT ("Credit
      Agreement") is
      made
      and entered
      into effective as of the 17th day of March, 2006 by and among WESTSIDE
      ENERGY PRODUCTION
      COMPANY, LP, a
      Texas
      limited pal tnership
      f/k/a EBS Oil and Gas Partners

    Production
      Company, L.P., and WESTSIDE
      ENERGY OPERATING COMPANY, LP, a
      Texas
      limited partnership f/k/a EBS
      Oil
      and
      Gas Partners Operating Company, L.P. (each individually "Borrower"
      and
      collectively "Borrowers"),
      WESTSIDE
      ENERGY CORPORATION,
      a
      Nevada
      corporation ("Parent"), as a Guarantor, and GASROCK
      CAPITAL
      LLC, a
      Delaware limited liability company ("Lender").

     

    WHEREAS,
      Borrowers have requested that Lender make available, and Lender is willing
      to
      make available to Borrowers on the terms and conditions hereinafter set forth,
      a
      loan for the acquisition
      and/or refinancing of the acquisition of oil and gas properties and/or equity
      interests in
      business entities owning oil and gas properties and, where specifically noted,
      the development of certain oil and gas properties and the expansion of their
      pipelines.

     

    NOW,
      THEREFORE, the parties hereto in consideration of the foregoing and the terms,
      covenants, provisions and conditions hereinafter set forth hereby agree as
      follows:

     

    ARTICLE
      I

     

    DEFINITIONS
      AND REFERENCES

     

    Section
      1.1 Defined
      Terms. As
      used
      in this Agreement, each of the following terms has
      the
      meaning given it in this Section
      1.1
      or
      in the
      sections and subsections referred to below:

     

    "AAA"
      is
      defined in Section
      12.1(a).

     

    "Accounting
      Procedure" means
      the
      accounting procedure attached to and incorporated in any
      Operating Agreement.

     

    "Administration
      Fee" is
      defined in Section
      7.1(hh). "AFE"
      means
      Authorization for Expenditures.

    "Affiliate(s)"
      means,
      as
      to any Person (as hereinafter defined), any other Person who directly
      or indirectly controls, is under common control with, or is controlled by such
      Person. As used
      in
      this definition, "control" (including, with its correlative meanings,
      "controlled by" and "under common control with") shall mean possession, directly
      or indirectly, of power to direct or cause the direction of management or
      policies (whether through ownership of securities, partnership,
      membership or other ownership interests, by contract or otherwise), provided
      that,
      in
any
      event
      (i) any Person (other than Wellington Management Company, LLP) who owns directly
      or indirectly 20% or more of the securities having ordinary voting power for
      the
      election of directors
      or other governing body of a corporation or 20% or more of the partnership,
      membership
      or other ownership interests of any other Person will be deemed to control
      such
other
      Person, (ii) any subsidiary of any Borrower shall be deemed to be an Affiliate
      of such Borrower,
      (iii) the partners of any Borrower and any Persons they control will be deemed
      Affiliates of such Borrower, and (iv) any direct or indirect stockholder or
      other equity owner of

    



    
      
        
          
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    the
      Borrowers or the General Partner or any other partners of Borrower shall be
      deemed to be an Affiliate
      of such Borrower.

     

    "Affiliate-Owned
      Barnett Interest" is
      defined in Section
      8.6(a).

     

    "Agreement"
      means
      this Advancing Term Credit Agreement, as the same may be amended
      restated, extended or otherwise modified from time to time.

     

    "Arbitration
      Notice" is
      defined in Section
      12(c).

     

    "Borrower"
      and
      "Borrowers"
      have
      the
      meanings assigned to those terms in the preamble of
      this
      Agreement.

     

    "Borrower
      Operating Account" means
      that certain bank account maintained by Borrowers
      with Plains Capital Bank, a Texas corporation, located at 2911 Turtle Creek
      Boulevard,
      Suite 1300, Dallas, Texas 75219, Account # 32008922.

     

    "Borrower
      Sub-Account" is
      defined in Section
      2.7(a).

     

    "Bridge
      Credit Agreement" means
      that certain Credit Agreement dated May 20, 2005, by and
      among
      EBS Production, as borrower, and EBS Operating and EBS GP, as guarantors, and
      Petro
      Capital II, LP, as agent and a lender, et al., as amended.

     

    "Business
      Day" means
      for
      all purposes, a day other than a Saturday, Sunday or legal holiday
      for commercial banks under the laws of the State of Texas or the laws of the
      United States
      of
      America and, if such day relates to the determination of the LIBOR Rate, means
      any such
      day
      on which dealings in U.S. dollar deposits are conducted by and between banks
      in
      the London
      interbank Eurodollar market.

     

    "Change
      of Control" means,
      with respect to any Person, an event or series of events by which
      the
      holders of the capital ownership of such Person as of the date hereof cease
      to
      own and control,
      directly and indirectly, at least fifty-one percent (51%) of such Person's
      capital ownership.

     

    "Closing"
      is defined in Section
      9.1.

     

    "Closing
      Costs" is
      defined in Section
      2.1(a). "Closing
      Date" is
      defined in Section
      9.1.

    "Collateral"
      means
      all
      property of any kind which, pursuant to any Loan Document, is subject
      to a Lien in favor of Lender or is purported or intended to be subject to such
      a
      Lien, including
      without limitation, the Properties, Borrowers' interests in the Hydrocarbons
      produced therefrom
      or attributable thereto, the Equipment (including Fixtures), gathering systems,
      Borrowers'
      interests in the seismic, geological and geophysical data relating thereto,
      Borrowers' books
      and
      records relating thereto, the pledge equity interests under the Pledge Agreement
      and all
      products and proceeds of any of the foregoing_

     

    "Committed
      Development Loan" is
      defined in Section
      2.1(b).

    



    
      
        
          
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    "Corporate
      Income Taxes" means
      the
      amount of United States federal and state income or
      franchise taxes due and payable by Parent as the limited partner of Borrower,
      with respect to income
      of
      each Borrower attributable to the limited partners of Borrower and derived
      from
      the Properties
      and the other Collateral.

     

    "Cost
      Certificate" is
      defined in Section
      2.1(b). "CVR
      Loans" is
      defined in Section
      2.1(a).

    "CVR
      Wells" has
      the
      meaning given to the term as defined in the EBS Production PSA and
      listed on Schedule
      2.1
      attached
      hereto.

     

    "Debt"
      means
      all
      indebtedness, liabilities and obligations, whether matured or unmatured,
      liquidated or unliquidated, primary or secondary, direct or indirect, absolute,
      fixed or contingent,
      and whether or not required to be considered debt pursuant to GAAP.

     

    "Debt
      Service" means
      the
      principal and interest due pursuant to the Note for any Interest
      Period.

     

    "Deed
      of Trust" is
      defined in Section
      6.1.

     

    "Default
      Rate" means
      the
      lesser of (i) fifteen percent (15%) per annum and (ii) the Maximum
      Rate.

     

    "Defensible
      Title" means
      with respect to the Properties, such title that: (A) with respect to
      each
      well or Unit located on the Leases entitles Borrowers to receive, free and
      clear
      of all royalties,
      overriding royalties and net profits interests (except the ORRI), or other
      burdens on or measured
      by production of Hydrocarbons, not less than the Net Revenue Interests of
      Borrowers reflected
      on Exhibit
      "A" for
      such
      wells or Units for the productive life of such well or Unit (subject
      only to the Permitted Encumbrances); and (B) with respect to each well or Unit
      located on the Leases obligates Borrowers to bear costs and expenses relating
      to
      the maintenance, development
      and operation of such well or Unit in an amount not greater than the Working
      Interests
      reflected on Exhibit
      "A"
      for
      the
      productive life of such well or Unit (subject only to the Permitted
      Encumbrances); free and clear of any Lien, other than the Permitted Encumbrances
      and
      any
      Liens in favor of Lender and its Affiliates.

     

    "Deposit
      Account Control Agreement" means
      that certain agreement dated of even date herewith
      among Borrowers, Lender and Plains Capital Bank covering the Borrower Operating
      Account.

     

    "Development
      Loan" means
      the
      loan or loans made or to be made from Lender to Borrowers,
      as evidenced by the Note, to fund Borrowers' share of the costs and expenses
      of
Development
      Operations.

     

    "Development
      Operations" means
      the
      (i) drilling, sidetracking, deepening, completing, recompleting
      or reworking activities or similar activities proposed by Borrowers from time
      to
time
      prior to the Drawdown Termination Date to be conducted on any of the Properties
      and (ii) the
      acquisition of any one or more additional oil or gas properties, the expansion
      of the Pipeline

    



    
      
        
          
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    and
      other
      oil and gas projects relating to the Properties (including
      after-acquired-properties) proposed by Borrowers from time to time prior to
      the
      Drawdown Termination Date.

     

    "Direct
      Taxes" means,
      without duplication (a) Property Taxes, (b) Severance Taxes, (c) ad
      valorem taxes, (d) conservation taxes, and (e) any other taxes of any kind,
      excluding only income taxes and franchise taxes imposed on Borrowers or any
      producer in connection with or as a result of their ownership of interests
      in
      the Properties.

     

    "Drawdown
      Termination Date" means
      March 1, 2009.

     

    "EBITDA"
      means
      for
      any period (a) net income in accordance with GAAP for such period plus
      (b)
      to
      the
      extent deducted in determining net income for such period, interest expense,
      income taxes and non-cash charges and expenses, including depreciation,
      depletion and amortization
      expense for such period, minus
      (c)
      all
      non-cash income added to net income for such
      period. EBITDA shall be calculated without including non-cash mark-to-market
      adjustments
      arising from the application of FASB Statement 133 or FASB Statement 143 (or
      any
successor
      GAAP which serves to amend, supplement or replace FASB Statement 133 and
      143).

     

    "EBS
      Credit Agreement" means
      that certain Credit Agreement dated February 1, 2005, by
      and
      among EBS Production, as borrower, and EBS Operating and EBS GP, as guarantors,
      and Petro
      Capital II, LP, as agent and a lender, et al., as amended.

     

    "EBS
      GP" means
      EBS
      Oil
      and
      Gas Partners Production GP, LLC, a Texas limited liability
      company and the general partner of EBS Production and EBS Operating, and the
      predecessor to Westside GP.

     

    "EBS
      Loans" means
      the
      loans described in the Bridge Credit Agreement and the EBS Credit
      Agreement.

     

    "EBS
      Operating" means
      EBS
      Oil and Gas Partners Operating Company, LP, a Texas limited
      partnership, and the predecessor to WEO.

     

    "EBS
      Operating PSA" means
      that certain Purchase and Sale Agreement dated effective as
      of
      March 15, 2006, between the partners of EBS Operating, as seller, and Parent,
      as
      purchaser, relating
      to the equity interests in EBS Operating.

     

    "EBS
      Production" means
      EBS
      Oil and Gas Partners Production Company, LP, a Texas limited partnership, and
      the predecessor to WU_

     

    "EBS
      Production PSA" means
      that certain Amended and Restated Purchase and Sale Agreement
      dated November 30, 2005, between the partners of EBS Production, et al., as
      seller, and Parent, as purchaser, relating to the equity interests in EBS
      Production.

     

    "Engineers"
      means,
      unless specifically provided otherwise, an independent petroleum engineering
      firm to be mutually acceptable to Borrowers and Lender; provided
      that
      any
      prior acceptance
      by a party of any independent petroleum engineering firm does not necessarily
      denote
      acceptance by such party of such firm at any future time or date.

    



    
      
        
          
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    "Environmental
      Laws" means
      any
      and all federal, state or local statutes, laws (including common law),
      regulations, ordinances, rules, judgments, orders, decrees, permits, grants,
      franchises, licenses, agreements or other governmental restrictions relating
      to
      the environment or to
      emissions, discharges, releases or threatened releases of pollutants,
      contaminants, chemicals or industrial,
      toxic or hazardous substances or wastes into the environment including ambient
      air, surface water, ground water, or land, or otherwise relating to the
      manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of pollutants,
      contaminants, chemicals or industrial, toxic or hazardous substances or wastes.
      For purposes of this definition, "chemicals" includes all substances referred
      to
      in the second sentence of the definition herein of "Hazardous
      Materials."

     

    "Environmental
      Report" means
      that certain Phase I Environmental Site Assessments prepared by Haiff
      Associates, Inc., and to be delivered to Borrower and Lender, which report
      covers the Wells described on Exhibit
      "A"
      as
      of the
      Closing Date.

     

    "Equipment"
      means
      all
      equipment of Borrowers more particularly described in Schedule
      4.1(t), and
      all
      other equipment of Borrowers, used for or in the operation of the Properties
      which may not be described in Schedule
      4.1(t), of
      every
      kind and nature whether located on the Properties or located elsewhere,
      including but not limited to, pipelines, well and lease equipment and surface
      equipment, casing, tubing, connections, rods, pipe, machines, compressors,
      gathering systems, meters, motors, pumps, tankage, fixtures, storage and
      handling equipment
      and all other equipment or movable property of any kind and nature and wherever
      situated now or hereafter owned by Borrowers or in which Borrowers may now
      or
      hereafter have any
      interest (to the extent of such interest), together with all additions and
      accessions thereto, all replacements
      and all accessories and parts therefor, all logs and records in connection
      therewith, all
      rights against suppliers, warrantors, manufacturers, sellers or others in
      connection therewith, and
      together with all substitutes and replacements for any of the
      foregoing.

     

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

     

    "ERISA
      Plan" means
      any
      employee pension benefit plan which is maintained by any Person
      subject to Title IV of ERISA.

     

    "Event
      of Default" is
      defined in Section
      10.1.

     

    "Expenses"
      means,
      in
      connection with the Properties, Borrowers' share of costs and expenses
      relating to, without duplication, Operating Expenses, Direct Taxes, royalties,
      overriding
      royalty interests and associated Swap Settlement Payables.

     

    "Facility
      Fees" means
      the
      fees owed by Borrowers to Lender as consideration, in part, for Lender's
      assistance to Borrowers in structuring the transactions contemplated under
      this
Agreement
      and the other Loan Documents in an amount equal to 2.0% of the amount of the
      Initial
      Loan funded at Closing, and an additional 2.0% of any Loan (including any
      Development Loan
      and
      CVR Loan, but not Overhead Advances) each time a Loan is funded after
      Closing.

     

    "Financial
      Statements" means
      the
      financial statements of Borrowers, required to be delivered
      pursuant to Section
      7.1(c)
      hereof.

    



    
      
        
          
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    "Fiscal
      Quarter" means
      a
      three-month period ending on March 31, June 30, September 30 or
      December 31 of any year.

     

    "Fiscal
      Year" means
      a
      twelve-month period ending on December 31 of any year.

     

    "GAAP"
      means
      those generally accepted accounting principles and practices which are
recognized
      as such by the Financial Accounting Standards Board (or any generally
      recognized

     

    successor).

     

    "General
      Partner" means
      Westside, GP LLC.

     

     

    "Governmental
      Authority" means
      any
      nation or government, any state or other political subdivision
      thereof, any agency, authority, instrumentality, regulatory body, court,
administrative
      tribunal, central bank or other entity exercising executive, legislative,
      judicial, taxing, regulatory or administrative powers or functions of or
      pertaining to government.

     

    "Gross
      Promotional Proceeds" means,
      with respect to each Promoted Well, the aggregate cash proceeds received by
      Borrowers in connection with the Sale of such Promoted Interest.

     

    "Gross
      Receipts" means,
      in
      relation to and arising from the Properties (including the Pipeline) and
      Permitted Swap Agreements, all sums received by Borrowers, including, but not
      limited
      to, Net Promotional Proceeds (but excluding cash proceeds from the Sale of
      any
Promoted
      Interest in any CVR Well), Swap Settlement Proceeds and proceeds under gas
      sales
agreements,
      oil sales agreements, natural gas liquids sales agreements, gas processing
      agreements, gas gathering agreements, transportation agreements, Operating
      Agreements, including,
      but not limited to receipts pursuant to Accounting Procedures, and any other
      receipts relating
      to or arising from the Collateral (other than the proceeds of Collateral
      governed separately
      by Section
      2.4(b)).

     

    "Guarantee"
      shall
      include any agreement, whether such agreement is on a contingency basis
      or
      otherwise, to purchase, repurchase or otherwise acquire any Debt or liability
      of
      any other Person,
      or to purchase, sell or lease, as lessee or lessor, property or services in
      any
      such case primarily for the purpose of enabling another Person to make payment
      of any such Debt or liability,
      or to make any payment (whether as a capital contribution, purchase of any
      equity interest
      or otherwise) to assure a minimum equity, asset base, working capital or other
      balance sheet
      or
      financial condition, in connection with Debt or liability of another Person,
      or
      to supply funds
      to
      or in any manner invest in another Person in connection with such Person's
      Debt
      or liability.

     

    "Guarantor"
      means
      Parent together with any other Person who agrees to Guarantee the Lender against
      loss with respect to the Obligations.

     

    "Guaranty"
      means
      a
      guaranty agreement substantially in the form of Exhibit
      G to
      this
Agreement.

     

    "Hazardous
      Materials" means
      any
      substances regulated under any Environmental Law, whether as pollutants,
      contaminants or chemicals, or as industrial, toxic or hazardous substances
      or
      wastes, or otherwise. "Hazardous Materials" also includes (a) any petroleum,
      any
      fraction of

    



    
      
        
          
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    petroleum,
      natural gas, natural gas liquids, liquefied natural gas and synthetic gas usable
      for fuel (including
      any mixtures of the foregoing) that has been or may be emitted, discharged
      or
      released into the environment, and (b) any drilling fluids, produced waters
      and
      other wastes associated with
      the
      exploration, development or production of crude oil, natural gas or geothermal
      reserves.

     

    "Hydrocarbon
      Interests" means
      leasehold and other interests in or under oil, gas and other liquid
      or
      gaseous hydrocarbon leases with respect to Hydrocarbons wherever located,
      mineral fee interests,
      overriding royalty and royalty interests, net profit interests, production
      payment interests
      relating to Hydrocarbons wherever located, including any beneficial, reserved
      or
residual
      interest of whatever nature.

     

    "Hydrocarbons"
      means
      crude oil, condensate, natural gas, natural gas liquids and other hydrocarbons.

     

    "Industry
      Agreement" means
      any
      farmout, farmin, joint operating, development, participation
      or similar agreement commonly used in the oil and gas exploration and production
      industry.

     

    "Initial
      Development Operations" is
      defined in Section
      2.1(a). "Initial
      Loan" is
      defined in SectiOn
      2.1(a).

    "Intercreditor
      Agreement" means
      that certain Intercreditor Agreement among Borrowers, Lender
      and the counterp arty under the initial Peimitted Swap Agreement and executed
      and delivered
      pursuant to Section
      9.3(i) below,
      and any other mutually agreeable intercreditor agreement
      among Lender, Borrowers and any other counterparty approved by Lender in
      substantially the same form and content entered into in connection with a
      Permitted Swap Agreement.

     

    "Interest
      Period" means
      each monthly period beginning on (but not including) the Repayment
      Date in one calendar month and ending on (and including) the Repayment Date
      in
the
      next
      following calendar month, provided
      that
      the
      first Interest Period for the Note and Loans shall
      begin on the date a Loan is first funded hereunder and ending on the Repayment
      Date in April,
      2006.

     

    "Interest
      Rate" means
      the
      lesser of (a) the Maximum Rate and (b) the greater of (i) twelve percent
      (12.0%) per annum and (ii) the LIBOR Rate, plus the LIBOR Margin; but in no
      event greater than the Maximum Rate.

     

    "Invest" Pent"
      in
      any
      Person means the amount paid or committed to be paid or the value

     

    of
      property or wages contributed or committed to be contributed by the Person
      making the Investment
      on its account for or in connection with its acquisition of any stock, bonds,
      notes, debentures,
      partnership or other ownership interest or any other security of the Person
      in
      whom such
      Investment is made or any evidence of Debt of such Person in whom the Investment
      is made.

     

    "JIBs"
      is
      defined in Section
      7.1(c)(iii).

    



    
      
        
          
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    "Lease"
      or
      "Leases"
      means,
      whether one or more, (i) those certain oil, gas and/or mineral leases
      set forth in the description of the Property on Exhibit
      "A"
      and
      any
      other interests in such leases,
      whether now owned or hereafter acquired by Borrowers, and any extension,
      renewals, corrections,
      modifications, elections or amendments of any such oil and gas leases, or (ii)
      other oil,
      gas
      and/or mineral leases or other interests pertaining to the Properties which
      may
      now and hereafter
      be made (or intended or purported to be made) subject to the lien of any of
      the
      Security Documents
      and any extension, renewals, corrections, modifications, elections or amendments
      of any
      such
      oil, gas and/or mineral leases.

     

    "Lease
      Bank Agreement" means
      the
      agreement entitled "Barrett Shale Project" (more commonly
      known as the "EBS-Westside Lease Agreement"), dated April 13, 2005, as amended
      by letter agreement dated April 22, 2005 between Parent and EBS
      Production.

     

    "Lender"
      shall
      have the meaning assigned to such term in the preamble of this Agreement,
      and its successors and assigns.

     

    "Lender
      Account" is
      defined in Section
      2.7(a).

     

    "Letters
      in Lieu" means
      those certain letters in lieu of transfer orders, duly executed by Borrowers,
      in
      the form satisfactory to Lender.

     

    "LIBOR
      Margin" means
      six
      and one-half percent (6.50%).

     

    "LIBOR
      Rate" means
      the
      fluctuating rate of interest equal to the one-month London interbank
      offered rate as published in the "Money Rates" section of The
      Wall Street Journal as
      stated
      on the first Business Day of each calendar month. Interest, when calculated
      based on the LIBOR Rate, will accrue on any non-Business Day at the rate in
      effect on the immediately preceding
      Business Day. In the event The
      Wall Street Journal is
      no
      longer published or no longer
      publishes the LIBOR Rate in its "Money Rates" table, Lender shall choose a
      substitute LIBOR Rate that is based upon comparable information subject,
      however, to Section
      3.2
      hereof.

     

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

     

    "Loan
      Documents" means
      this Agreement, the Note, the Overriding Royalty Interest Conveyance,
      ORRI Letters in Lieu, the Deed of Trust, the Security Agreement, the
      Pledge

    



    
      
        
          
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    Agreement,
      the Letters in Lieu, Notices of Assignment of Proceeds, the Deposit Account
      Control Agreement,
      the Subordination Agreement, the Intercreditor Agreement and all other security
      agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties,
      financing statements,
      continuation statements, extension agreements and other agreements or
      instruments, in
      as
      many counterparts as Lender may require, now, heretofore or hereafter delivered
      by Borrowers
      to Lender in connection with this Agreement or any transaction contemplated
      hereby to secure or guarantee the payment of any part of the
      Obligations.

     

    "Loan
      Termination Date" means
      with respect to Loans advanced hereunder, the earlier of (a)
      March
      15, 2010, (b) the date on which all Obligations of Borrowers under the Loan
      Documents
      (other than the Overriding Royalty Interest Conveyance) have been paid and
      performed
      in full and Lender's obligation (if any) to advance any Loans has terminated,
      and (c) the
      date
      on which Lender notifies Borrowers of the acceleration of payment of any portion
      or all of the Obligations because of the occurrence of an Event of
      Default.

     

    "Loan
      to Value Ratio" means,
      when determined, the ratio derived by dividing (a) the aggregate
      principal amount of the Loans outstanding at that time, divided by (b) an amount
      equal to
      the
      sum of (i)
      the
      PW10
      of Borrowers' Proved Developed Producing Reserves in the Properties, net to
      Borrowers' interests, and calculated by Lender in connection with the most
      recent
      Reserve Report delivered hereunder (after being adjusted from time to time
      to
      incorporate Lender's
      then-current assumptions with respect to pricing, Expenses and hedges under
      Permitted Swap
      Agreements), plus
      (ii)
      an
      amount equal to six times the trailing 12-month EBITDA of the Pipeline
      less any Debt burdening the Pipeline or its operation (proportionately reduced
      to Borrowers'
      interest in the Pipeline).

     

    "Loans"
      means,
      collectively, the Initial Loan, the Development Loans, the Overhead Advances
      and
      the Facility Fees advanced hereunder and "Loan" means, individually, the Initial
      Loan, any Development Loan and any Overhead Advance as described in Section
      2.1
      and
      any
      Facility Fee advanced hereunder.

     

    "Lockbox"
      means
      Lender's lockbox established with the lending institution where the Lender
      Account is maintained to which Gross Receipts of Borrowers that are not
      wire-transferred
      into the Lender Account will be directed for subsequent transfer into the Lender
      Account.

     

    "Maximum
      Loan Amount" means,
      subject to the terms and conditions of this Agreement, $45,000,000.

     

    "Maximum
      Rate" means
      the
      maximum non-usurious rate of interest that Lender is permitted
      under applicable law to contract for, take, charge, or receive from
      Borrowers.

     

    "Net
      Promotional Proceeds" means,
      with respect to each Promoted Well, the excess, if any,
      of
(1)
      the
      Gross
      Promotional Proceeds minus
      (ii) the
      Promoted Well Drilling Costs.

     

    "Net
      Revenue" means,
      unless specified otherwise, the aggregate amount calculated as Gross
      Receipts minus
      the
      aggregate amount calculated as Expenses, for any specified period.

    



    
      
        
          
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    "Net
      Revenue Interest" and
      "NRI"
      means (i) with respect to a Unit for which a net revenue
      interest is stated, that interest in the applicable Hydrocarbons produced,
      saved
      and sold from
      such
      unitized area which is afforded to Borrowers by virtue of their ownership of
      the
      Leases included in whole or in part in such area after deducting all burdens
      against the production
      therefrom, and (ii) with respect to a Well for which a net revenue interest
      is
      stated, that interest in the applicable Hydrocarbons produced, saved and sold
      from the Well which is afforded
      to Borrowers by virtue of their ownership of the Lease on which such Well is
      located after
      deducting all burdens against the production therefrom; provided,
      however, that,
      except with
      regard to the representation set forth in the last sentence in Section
      4.1(n), any
      representation,
      warranty or covenant in relation to Borrowers' Net Revenue Interest shall be
      deemed
      to
      refer to such interest net of the ORRI granted to Lender.

     

    "Net
      Revenue Reimbursement Amount" is
      defined in Section
      2.7(b). "Note"
      is
      defined in Section
      2.1(d).

    "Notice
      of Assignment of Proceeds" is
      defined in Section
      6.4.

     

    "Obligations"
      means
      all
      Debt and all obligations from time to time owing from Borrowers
      to Lender or any of Lender's Affiliates under or pursuant to any of the Loan
      Documents
      in connection with this Agreement or any transaction contemplated hereby,
      including without
      limitation, all principal, interest, fees, expenses, costs and
      indemnities.

     

    "Oil
      and Gas Properties" means
      Hydrocarbon Interests now owned or hereafter acquired by
      Borrowers or any of their Subsidiaries and contracts executed in connection
      therewith and all tenements, hereditaments, appurtenances, and properties
      belonging, affixed or incidental to such Hydrocarbon
      Interests, including, without limitation, any and all property, real or
      personal, now owned
      or
      hereafter acquired by Borrowers or any of their Subsidiaries and situated upon
      or to be situated
      upon, and used, built for use, or useful in connection with the operating,
      working or developing of such hydrocarbon interests, including, without
      limitation, any and all petroleum and/or
      natural gas wells, buildings, structures, field separators, processing plants,
      liquid extractors,
      plant compressors, pumps, pumping units, field gathering systems, tank and
      tank
      batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
      liters, apparatus, equipment, appliances, tools, implements, cables, wires,
      towers, taping, tubing and rods, surface leases,
      rights-of-way, easements and servitudes, and all additions, substitutions,
      replacements for,
      fixtures and attachments to any and all of the foregoing owned directly or
      indirectly by any Borrower
      or any of its Subsidiaries.

     

    "Operating
      Agreements" means
      operating agreements to which Borrowers are parties or by
      which
      any Borrower is bound (including any and all operating agreements among WEO
      and
      WEP), now or hereafter relating to the Properties, each of which shall be
      reasonably satisfactory in form and substance to Lender.

     

    "Operating
      Expenses" means
      (a)
      direct lease operating expenses and well maintenance expenses (such well
      maintenance expenses shall be limited to $50,000.00 per event, net to
Borrowers'
      interests, without Lender's prior consent), which arise from Borrowers' Working
      Interests
      in the wells that are subject to the Deed of Trust, that are billed to Borrower
      by the Operator
      or incurred by Borrowers, as Operator, of the Properties, and (b) Borrowers'
      Working

    



    
      
        
          
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    Interest
      share of expenses incurred in the repair, maintenance and replacement of damaged
      or obsolete Equipment (such equipment repair, maintenance and replacement
      expenses shall be limited to $50,000,00 per event, net to Borrowers' interest,
      without Lender's prior consent).

     

    "Operating
      Report" is
      defined in Section
      7.1(v).

     

    "Operator"
      means
      any
      operators, including contract operators, of the Properties (as such terms are
      generally understood in the oil and gas industry) and, includes, in any event,
      WEO.

     

    "ORRI"
      means,
      with respect to the Properties, a cost-free overriding royalty interest from
      Borrowers'
      proportionately reduced Working Interest in Hydrocarbons in, under and to be
      produced
      from or attributable to the Leases constituting the Properties (including
      after-acquired Properties)
      conveyed to Lender pursuant to the Overriding Royalty Interest Conveyance,
      including,
      but not limited to, the ORRI to be conveyed pursuant to Section
      8.4.

     

    "ORRI
      Letters in Lieu" means
      those certain letters in lieu of transfer orders in relation to the ORRI, duly
      executed by Borrowers, in the form satisfactory to Lender.

     

    "Other
      Taxes" is
      defined in Section
      3.1(b).

     

    "Overhead
      Advances" has
      the
      meaning given to such term in Section
      2.1(c)
      hereof.

     

    "Overriding
      Royalty Interest Conveyance" means
      an
      assignment in the form of Exhibit
      "F" pursuant
      to
      which
      Borrower conveys to Lender an ORRI from time to time.

     

    "Parent"
      means
      Westside Energy Corp., a Nevada corporation, the limited partner of each
of
      the
      Borrowers and the sole member of Westside GP.

     

    "Parties"
      is
      defined in Section
      12.1(a). "Permitted
      Encumbrances" means:

    (a) Liens
      pursuant to any Loan Document;

     

    (b) Liens
      existing on the date hereof and listed on Schedule
      7.2(k)
      hereto;

     

    (c) Liens
      for
      taxes, assessments, or other governmental charges or levies not yet
      due
      or which are being contested in good faith and by appropriate proceedings
diligently
      conducted, if adequate reserves with respect thereto are maintained on the
      books
      of
      the applicable Person in accordance with GAAP;

     

    (d) operators,'
      non-operators,' vendors,' carriers,' warehousemen's, mechanics,'
      materialmen's, repairmen's or other like Liens arising in the ordinary course
      of
      business or which are incident to the exploration, development, operation,
      and
maintenance
      of the Properties, not overdue for a period of more than thirty days or which
      are
      being
      contested in good faith and by appropriate proceedings diligently conducted,
      if
adequate
      reserves with respect thereto are maintained on the books of the applicable
      Person
      in
      accordance with GAAP;

    



    
      
        
          
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    (e) pledges
      or deposits in the ordinary course of business or Liens in connection
      with workers' compensation, unemployment insurance and other social security
      legislation, other than any Lien imposed by ERISA;

     

    deposits
      to secure the performance of bids, trade contracts and leases (other
      than Debt), statutory obligations, surety bonds (other than bonds related to
      judgments
      or litigation), performance bonds and other obligations of a like nature
incurred
      in the ordinary course of business; and

     

    (g) easements,
      rights-of-way, restrictions, servitudes, permits, conditions, covenants,
      exceptions, or reservations and other similar encumbrances, defects,
irregularities,
      minor imperfections and deficiencies in title affecting real property which,
      in
      the
      aggregate, are not substantial in amount, and which do not in any case
      materially detract
      from the value of the property subject thereto or materially interfere with
      the
ordinary
      conduct of the business of the applicable Person; and

     

    (h) Liens
      permitted under Section
      6.1 that
      are
      granted by Borrowers to counterparties
      under Permitted Swap Agreements.

     

    "Permitted
      Swap Agreement" means
      a
      Swap Agreement (i) provided in those certain master swap agreements on
      International Swap Dealers Association forms and the schedules thereto
      and any confirmations thereunder which Borrowers enter into with counterparties
      acceptable
      to Lender, as evidenced by Lender's prior written approval (which will not
      be
      unreasonably withheld or delayed) and (ii) on terms reasonably satisfactory
      to
      Lender.

     

    "Person"
      means
      an
      individual, corporation, partnership, association, joint stock company,
trust
      or
      trustee thereof, estate or executor thereof, unincorporated organization or
      joint venture, court
      or
      governmental unit or any agency or subdivision thereof, or any other legally
      recognizable
      entity.

     

    "Petro
      Lien Releases" means
      documents in form and content satisfactory to Lender, whereby Petro Capital
      II,
      LP releases the Petro Liens.

     

    "Petro
      Liens" means
      any
      and all liens and security interest conveyed or granted by EBS Production,
      EBS Operating and EBS GP to Petro Capital II, LP under the EBS Credit Agreement
      or
      the
      Bridge Credit Agreement_

     

    "Pipeline"
      means
      Borrowers' interests in that certain Pipeline and all related assets as
more
      particularly described on Exhibit
      "A"
      attached
      hereto.

     

    "feline
      Parties" means
      the
      Persons listed on Schedule
      4.1(u) and
      all
      other Persons who,
      now
      or in the future, are parties to contracts or agreements with either Borrower
      in
      any way related
      to the Pipeline from which Gross Receipts are derived.

     

    "Pledge
      Agreement" means
      the
      pledge agreement executed by all the owners of the partnership
      interests in the Westside Subsidiaries and the membership interests in Westside
      GP, executed
      in favor of Lender as of the date hereof, in form and substance satisfactory
      to
      Lender, as
      the
      same may be modified, amended or supplemented from time to time.

    



    
      
        
          
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    "Pro
      Forma Financial Statements" is
      defined in Section
      4.1(g).

     

     

    "Project
      Area" includes
      the area within the Fort Worth Basin and located within Bosque, Clay,
      Comanche, Cooke, Coryell, Denton, Ellis, Erath, Hamilton, Hill, Hood, Jack,
      Johnson, Lampasas,
      Mills, Montague, Palo Pinto, Parker, Sommerville, Tarrant or Wise Counties,
      Texas.

     

    "Promoted
      Interest" is
      defined in Section
      11.13.

     

    "Promoted
      Well" means
      a
      Well drilled or to be drilled on a Promoted Interest. "Promoted
      Well Cost Certificate" is
      defined in Section
      11.13(b).

    "Promoted
      Well Drilling Costs" means,
      with respect to each Promoted Well, an amount equal to the aggregate, direct
      costs incurred by Borrowers in connection with the drilling and completion
      (or abandonment) of such Well multiplied
      by the
      percentage of such costs to be borne by
      the
      purchaser(s) of the Promoted Interest. For the avoidance of doubt, the "Promoted
      Well Drilling
      Costs" will not include any amounts attributable to Borrowers' interest in
      such
      Well and to be paid from the proceeds of a Loan advance made by
      Lender.

     

    "Properties"
      means
      (i)
      all
      Oil
      and Gas properties of Borrowers, now owned or hereafter acquired,
      including, without limitation, the interests in those certain Leases, properties
      and the other
      oil
      and gas assets described in Exhibit
      "A," as
      Exhibit
      "A" may
      be
      modified, amended or supplemented
      from time to time and (ii)
      the
      Pipeline.

     

    "Property
      Operating Statement" means
      the
      monthly statement, in the form of Exhibit
      "C,"
      or
      another form mutually acceptable to Borrowers and Lender (but containing at
      a
minimum
      the same requested information) to be prepared and delivered by Borrowers to
      Lender pursuant
      to Section
      2.6.

     

    "Property
      Taxes" means
      taxes imposed annually on Borrowers which are based on or measured
      by the estimated value (at the time such taxes are assessed) of any Hydrocarbons
      or other assets situated within the Properties.

     

    "Proved
      Developed Non-Producing Reserves" means
      Proved Reserves that are estimated to
      be
      recoverable by existing wells that are not yet capable of producing such
      reserves without completions
      or recompletions being conducted within the existing wellbores
      thereof.

     

    "Proved
      Developed Producing Reserves" means
      Proved Reserves that are estimated to be recoverable
      by existing wells that are then capable of producing such reserves.

     

    "Proved
      Reserves" means
      the
      current estimated quantity of Hydrocarbons which analysis of
      geologic and engineering data demonstrate with reasonable certainty to be
      recoverable in the future
      from known oil and gas reservoirs under existing economic and operating
      conditions based
      on
      either actual production or conclusive formation tests, and includes all Proved
      Developed
      Producing Reserves, all Proved Developed Non-Producing Reserves and all Proved
      Undeveloped
      Reserves.

     

    "Proved
      Undeveloped Reserves" means
      Proved Reserves that are estimated to be recoverable
      from wells to be drilled in the future.

    



    
      
        
          
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    "PSAs"
      means
      collectively, EBS Production PSA and the EBS Operating PSA.

     

    "Purchasers
      of Hydrocarbons" means
      the
      Persons listed on Schedule
      4.1(u) and
      all
      other Persons
      who, now or may in the future, purchase Hydrocarbons attributable or allocable
      to Borrowers'
      Net Revenue Interests in the Properties and are reasonably approved by Lender
      and Borrowers
      in writing.

     

    "PW
      10" means
      the
      present worth of future net cash flow calculated based on the then current
      Reserve Report, discounted to present value at the simple interest rate of
      ten
      percent (10%)
      per
      year.

     

    "Reimbursed
      Costs" is
      defined in Section
      2.1(a).

     

    "Repayment
      Date" means,
      prior to the satisfaction of all Obligations, the last Business Day
      of
      each month, commencing with the month of April 2006 and ending on the Loan
      Termination Date.

     

    "Request
      for Commitment" means
      a
      written request, in the form of Exhibit
      "13," to
      Lender
      from Borrowers, signed by an authorized representative of Borrowers as specified
      in the resolutions
      and incumbency certificate to be delivered pursuant to Section
      9.2(b) hereof,
      for an advance of funds under the Development Loan.

     

    "Reserve
      Report" is
      defined in Section
      7.1(e).

     

    "Reserve
      Report Delivery Date" has
      the
      meaning given to such tern in the EBS Production
      PSA.

     

    "Rules"
      is
      defined in Section
      12.1(c).
      "Sale"
      is
      defined in Section
      11.13(a).

     

    "Security
      Agreement" means
      a
      security agreement (covering, without limitation Accounts,
      Equipment, General Intangibles and Inventory of Borrowers as those terms are
      defined
      in the Uniform Commercial Code adopted by the State of Texas) executed by
      Borrowers as
      debtors in favor of Lender as secured party dated as of the date hereof, in
      form
      and substance satisfactory
      to Lender, as the same may be modified, amended or supplemented pursuant to
      the
      terms of this Agreement.

     

    "Security
      Documents" means
      the
      Deed of Trust, the Security Agreement, the Pledge Agreement, the Deposit Account
      Control Agreement and all other security agreements, deeds of trust,
      mortgages, chattel mortgages, pledges, guaranties, financing statements,
      continuation statements, extension agreements and other agreements or
      instruments now, heretofore, or hereafter
      delivered to Lender in connection with this Agreement or any transaction
      contemplated hereby
      to
      secure or guarantee the payment of any part of the Obligations, as the same
      may
      be modified,
      amended or supplemented from time to time pursuant to this
      Agreement.

     

    "Sell"
      is
      defined in Section
      11.13(a).

    



    
      
        
          
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    "Severance
      Taxes" means
      taxes imposed at the time oil or gas is produced from a well which
      are
      based on or measured by the amount or value of such production.

     

    "Subordination
      Agreement" means
      an
      agreement, in form and substance satisfactory to Lender, executed by General
      Partner and Parent subordinating any amounts owed or that may become
      owing to either of them by either of the Borrowers to the Obligations owed
      by
Borrowers
      to Lender under this Agreement and the other Loan Documents.

     

    "Subsidiary"
      means
      for
      any Person any entity of which more than fifty percent (50%) of the
      issued and outstanding securities having ordinary voting power for the election
      of directors or managers
      is owned, directly or indirectly, by such Person and/or one or more of its
      subsidiaries.

     

    "Swap
      Agreement" means
      any
      (a) interest rate or currency swap, rate cap, rate collar, forward
      agreement and other exchange or rate protection agreements or any option with
      respect to
      any
      such transaction and any swap agreement, cap, collar, floor, exchange
      transaction, forward agreement
      or exchange or protection agreement related to Hydrocarbons or any option with
      respect
      to such transaction.

     

    "Swap
      Settlement Payables" means
      any
      settlement amounts payable by Borrowers under the terms of any executed
      Permitted Swap Agreement_

     

    "Swap
      Settlement Proceeds" means
      any
      settlement amounts paid to Borrowers under the terms
      of
      any executed Permitted Swap Agreement.

     

    "Tax
      Claim" means
      any
      claim by a taxing authority that Borrowers owe or that any Borrowers'
      interests in any of the Properties is subject to a Lien securing any amount
      of
      taxes of any
      kind.

     

    "Taxes"
      is
      defined in Section
      3.1(a).

     

    "Title
      Opinions" means
      those certain title opinions to be delivered by Borrowers to Lender
      from time to time, including, but not limited to, following Closing as required
      under this Agreement
      in relation to the Properties; provided
      that,
      in
      all circumstances except the post-Closing
      Title Opinions to be delivered pursuant to Section
      7.l
      (y) below,
      "Title Opinions" may also
      include, with the prior written consent of Lender, other evidence of title
      satisfactory to Lender
      in
      its sole and absolute discretion.

     

    "Unit"
      means,
      in
      respect of each Well or group of related Wells, Borrowers' Oil and Gas
Properties
      covering the lands attributed to each such respective Well or group of related
      Wells for
      pooling, unitization and/or proration purposes, from time to time, whether
      so
      attributed to such
      Well
      or group of related Wells in order to comply with the terms of the applicable
      oil and gas
      leases, pooling or unitization agreements, unit operating agreements or the
      like
      or in order to comply
      with the applicable rules and regulations of applicable governmental authorities
      related to
      pooling, unitization, well spacing or the like and, including without limitation
      any pooled (compulsory
      or voluntary) unit, proration unit, production unit, regulatory unit, field-wide
      unit, or
      other
      similar designation or allocation of lands to such Well or group of related
      Wells; provided,
      however, to
      the
      extent lands have not been attributed to any such Well or group of related
      Wells either by any such contractual or regulatory authority, the applicable
      Unit will

    



    
      
        
          
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    consist
      of all of Borrower's Oil and Gas Properties supporting Borrower's right to
      receive production or proceeds of production from such Well or Wells without
      geographic limitations; and
      provided
      further that,
      for
      purposes of Section
      8.4 below,
      the lands comprising each Unit shall be limited to the larger
      of (i) the
      minimum unit established under the rules and regulations of
      the
      Texas Railroad Commission for the relevant Well, considering the type (i.e.,
      horizontal or non-horizontal),
      geographical location and other relevant characteristics of such Well, or
(ii)
      the
      unit
      established for the relevant Wells pursuant to the applicable Industry
      Agreement.

     

    "Unmatured
      Event of Default" means
      any
      event or condition which would, with the giving
      of
      any requisite notices and/or the passage of any requisite periods of time,
      constitute an Event
      of
      Default.

     

    "WEO"
      means
      Westside Energy Operating Company, LP. "WEP"
      means
      Westside Energy Production Company, LP.

    "Well"
      means
      a
      well producing or capable of producing Hydrocarbons that is described
or
      referred to in Exhibit
      "A," as
      Exhibit
      "A"
      may
      be
      modified, amended or supplemented from time
      to
      time.

     

    "Westside
      GP" means
      Westside Energy GP, L.L.C., a Texas limited liability company and
      the
      general partner of the Westside Subsidiaries.

     

    "Westside
      Subsidiaries" means
      WEO
      and WEP.

     

    "Wire
      Transfer Instructions" means
      the
      instructions described on Schedule
      2.1(a) relating
      to the disbursements by Lender of the amounts constituting the Initial Loan
      (other than the Facility Fee and the initial Administration Fee).

     

    "Working
      Interest" and
      "WI"
      means (i) with respect to a Unit for which a working interest
      is stated, Borrowers' share of the costs of operations conducted thereon, and
      (ii) with respect
      to a Well for which a working interest is stated, Borrowers' share of costs
      of
      the operation
      thereof.

     

    Section
      1.2 Exhibits
      and Schedules. All
      exhibits and schedules attached to this Agreement are incorporated herein by
      reference and made a part hereof for all purposes.

     

    Section
      1.3 Amendment
      of Defined Instruments. Unless
      the context otherwise requires
      or unless otherwise provided herein, the Willis defined in this Agreement which
      refer to a
      particular agreement, instrument or document also refer to and include all
      renewals, extensions, modifications,
      amendments and restatements of such agreement, instrument or document;
provided
      that
      nothing contained in this Section shall be construed to authorize any such
      renewal, extension,
      modification, amendment or restatement.

     

    Section
      1.4 References
      and Titles. All
      references in this Agreement to exhibits, schedules,
      articles, sections, subsections and other subdivisions refer to the exhibits,
      schedules, articles,
      sections, subsections and other subdivisions of this Agreement unless otherwise
      expressly
      provided. Section and subdivision headings are for convenience only, do
      not

    



    
      
        
          
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    constitute
      any part of such sections or subdivisions and shall be disregarded in construing
      the language contained in such sections or subdivisions. The words "this
      Agreement", "this instrument",
      "herein", "hereof', "hereby", "hereunder" and words of similar import refer
      to
      this Agreement
      as a whole and not to any particular sections or subdivisions unless expressly
      so limited. The phrases "this section" and "this subsection" and similar phrases
      refer only to the sections or subsections hereof in which such phrases occur.
      The word "or" is not exclusive, and the
      word
      "including" (in its various forms) means "including without limitation".
      Pronouns in masculine,
      feminine and neuter genders shall be construed to include any other gender,
      and
words
      in
      the singular form shall be construed to include the plural and vice versa,
      unless the context otherwise requires.

     

    Section
      1.5 Calculations
      and Determinations. All
      calculations pursuant to the Loan Documents
      of fees and of interest shall be made on the basis of actual days elapsed
      (including the
      first
      day but excluding the last) and a year of 360 days. Unless otherwise expressly
      provided herein
      or
      Lender otherwise consents in writing, all Financial Statements and reports
      to be
furnished
      to Lender under the Loan Documents shall be prepared and all financial
      computations and
      determinations made pursuant to the Loan Documents, and with respect to the
      Financial Statements, shall be made in accordance with GAAP.

     

    ARTICLE
      II THE LOANS

     

    Section
      2.1 The
      Loans.The
      Initial Loan and CVR Loans. Borrowers
      desire to borrow funds
      to
      (i) fund certain initial drilling operations described on Schedule
      2.1
      (the
      "Initial
      Development
      Operations") and
      (ii)
      to reimburse Parent for certain drilling costs and other capital projects
      related to the Properties described on Schedule
      2.1
      (the
      "Reimbursed
      Costs"). Borrowers
      also desire to borrow funds to be reimbursed for certain expenses incurred
      (including accounting,
      legal and other similar fees) or obtain advances to pay certain (i) expenses
      incurred by
      Borrowers in connection with preparation, execution, due diligence and the
      closing of the PSAs
      and
      relating to land and title work, and environmental assessment and review in
      connection
      with the Properties, (ii) expenses incurred by Borrowers and by Lender under
      Section
      7.1(z)
      and
      (iii)
      relating to filing fees which may be required to properly file any and all
      Security Documents
      (collectively, the "Closing
      Costs"). In
      addition to the Closing Costs, Borrowers have agreed
      to
      pay Lender an initial Facility Fee pursuant to Section
      71(bb). The
      aggregate amount of
      the
      advances under this Section
      2.1(a) shall
      be
      equal to $5,355,000 and shall consist of (1) the advance
      to fund the Initial Development Operations and the Reimbursed Cots in an amount
      of $5,100,000,
      (2) the payment of expenses to Lender in an amount of $85,000 (3) the payment
      for additional
      Closing Costs in an amount of $60,000, (4) the payment .for the Facility Fee
      in
      the aggregate
      amount of $105,000 and (5) the payment of the Administration Fee in the Amount
      of $5,000
      (collectively, the "Initial
      Loan"). Subject
      to the terms and conditions hereunder, Lender agrees to advance the Initial
      Loan
      to Borrowers and agrees to wire transfer the amount of the Initial Loan, less
      the initial Facility Fee, to the designated payees noted in the Wire Transfer
      Instructions on the Closing Date. Borrowers irrevocably authorize Lender to
      transfer the initial Facility Fee to Lender's account and the initial Facility
      Fee shall be deemed advanced by Lender to Borrowers and paid by Borrowers to
      Lender contemporaneously with Closing.

     

    On
      or
      before the 10th
      day
      following the last Reserve Report Delivery Date and so long
      as
      no Unmatured Event of Default or Event of Default shall have occurred and
      be

    



    
      
        
          
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    continuing,
      Borrowers may request additional advances up to an aggregate amount of
$7,500,000
      in connection with the "Additional Consideration," as described in Section
      3.2
      of
      the
EBS
      Production
      PSA (after applying any amounts described in item (a) (i.e.,
      adjustments for title defects) of the definition of "Additional Consideration
      Offsets" in
      the
      EBS Production PSA, but without regard to the application of any other
      Additional Consideration
      Offsets), for the CVR Wells ("CVR
      Loans"). To
      request a CVR Loan, Borrowers
      shall provide Lender a Request for Commitment at least five (5) Business
Days
      prior to the date of the requested CVR Loan specifying therein the CVR Well(s)
      for which
      CVR
      Loan(s) are being requested by Borrowers, and Borrowers shall certify
therein
      that all conditions and terms set forth in the EBS Production PSA in relation
      to
such
      CVR
      Wells have been satisfied. Each Request for Commitment in relation to CVR
Loans
      shall also include the applicable request for an advance of the additional
      Facility Fee
      pursuant to Section
      7.1(bb). Subject
      to the foregoing, Lender shall advance the CVR Loans to Borrowers on the
      requested date.

     

    (a)Development
      Loans.

     

    (i) Prior
      to
      the Drawdown Termination Date, Lender may, but shall not
      be
      obligated to, make additional advances to Borrowers of the Development Loan(s)
      to be used exclusively for certain Development Operations such that the
total
      of
      such additional Development Loan advances under this Section
      2.1(b) plus
      the
      aggregate advances otherwise made pursuant to this Agreement (including
      but limited to Overhead Advances and advances to pay the Facility Fee
and,
      to
      the extent permitted under this Agreement, advances to pay Corporate Income
      Taxes) will not exceed the Maximum Loan Amount. Any Request for Commitment
      for a Development Loan in relation to a Development Operation shall
      be
      for a minimum of $1,000,000 (except in relation to the Committed Development
      Loan described below) and will be subject to Lender's approval in its
      sole
      and absolute discretion. Each Request for Commitment shall also include
(1)
      the
      applicable request for an advance of the additional Facility Fee payable
      pursuant to Section
      7.1(bb) and
      (2) a
      variance allowance not to exceed ten percent (10%)
      of
      the estimated expenses set forth in the Request for Commitment and supporting
      materials for each Development Operation (such allowance will be available
      only to the extent the actual costs of any Development Operation exceeds
      100% of the estimated costs). Notwithstanding the foregoing, Borrowers are
      hereby deemed to have provided the requisite Request for Commitment to
Lender
      for $5,000,000 of the Development Loans (the "Committed
      Development Loan")
      for
      certain Development Operations as more particularly described on Schedule
      2.1(b)(i) plus
      the
      applicable Facility Fee. Lender is hereby deemed to have
      committed to make such Committed Development Loan no later than March
15,
      2007,
      subject, however, to the satisfaction of all of the conditions set forth
herein.
      The Development Operations described on Schedule
      2.1(b)(i) that
      are
ultimately
      conducted with proceeds of the Committed Development Loan shall be subject
      to mutual agreement between Lender and Borrowers.

     

    (ii) Within
      ten (10) days after the receipt from Borrowers prior to the Drawdown
      Tetntination Date of a Request for Commitment listing all
      applicable

    



    
      
        
          
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    expenditures
      that Borrowers desire to make to conduct a Development Operation, Lender
      shall notify Borrowers in writing whether in its sole and absolute discretion
      Lender will make an advance equal to the total estimated expenditures shown
      on
      such Request for Commitment. If Lender does not agree to make an advance as
      requested in any such Request for Commitment covering any Development
      Operation, Borrowers' participation in the proposed Development Operation
      identified in the applicable Request for Commitment cannot, by itself,
be
      urged
      as the basis of an Unmatured Event of Default or Event of Default; provided
      that
      Borrowers' compliance with the terms and conditions of this Agreement
      will at all times be evaluated in the context of its ownership and operation
      of all of the Properties, without regard to whether Lender has made an
advance
      with respect to a Development Operation on a particular Property. If
Lender
      agrees to make any such advance for a Development Operation, then Borrowers
      may participate in the Development Operation proposed in their Request
      for Commitment, and Lender shall advance the funds necessary to pay Borrowers'
      share of the costs and expenses attributable to such proposed operations
      (not to exceed the amount requested in the Request for Commitment). Any
      advances to be made by Lender under this Section
      2.1(b), if
      at
      all, shall be made
      within five (5) Business Days after receipt from Borrowers of a cost certificate
      in the form attached hereto as Exhibit
      "E" (the
      "Cost
      Certificate"), duly
      executed by an authorized officer of Borrowers, certifying the amount of
costs
      and
      expenses incurred and to be incurred by Borrowers in connection with
such
      approved Development Operation, together with the supporting documentation
      referred in the form of Cost Certificate, including, without limitation,
      the applicable AFE(s).

     

    (iii)
      Any
      Request for Commitment shall be made by Borrowers for business
      opportunities, projects, and/or uses that are described as Development
      Operations subject, without limitation, to the following:

     

    (1) All
      statements of costs and estimates provided to Lender shall
      be
      rendered in sufficient detail to give Lender complete and accurate information
      as to the purpose for and amount of all items included therein, and
      Lender shall be entitled to such additional information regarding such
expenditures
      as Lender may reasonably request. All such data shall be subject
      to audit by Lender's representatives at any time mutually agreeable to the
      parties.

     

    (2) Borrowers
      agree that, subject to any other conditions expressly
      set forth in this Agreement, with respect to any Development Operation
      consisting of a new-well drill or any other operation requiring Borrowers
      to expend more than $100,000, Lender's funding of such operation is further
      subject to the requirement that prior to or contemporaneously
      with the submission of a Request for Commitment covering
      each such operation Borrowers shall submit to Lender a then-current
      Title Opinion relating to the Leases covering the lands relating to such
      operations, unless a current Title Opinion covering such lands has

    



    
      
        
          
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    already
      been provided hereunder following Closing, which confirms that Borrowers
      own Defensible Title thereto subject only to a first priority lien under the
      Deed of Trust in favor of Lender and Permitted Encumbrances.

     

    (3)
      Notwithstanding the foregoing or anything herein to the contrary,
      in no event shall Lender be obligated to make any Development Loans, including
      the Committed Development Loan, pursuant to this Section
      2.1(b) such
      that
      the aggregate advances made under this Agreement
      exceed the Maximum Loan Amount (less the aggregate amount
      of
      Facility Fees) for all combined Development Operations approved
      by Lender.

     

    (iv) No
      Unmatured Event of Default or Event of Default shall have occurred
      and be continuing and no Loan shall be advanced following the Drawdown
      Temiination Date.

     

    (v) Notwithstanding
      the thin's
      of this
Section
      2.1(b) and
      the
      definition of
      "Development Loans," to the extent no Event of Default has occurred and is
      continuing
      and the distributions to Parent pursuant to Section
      2.6(c) plus
      available Overhead
      Advances are insufficient to pay the current Corporate Income Taxes, Borrowers
      may, from time to time, submit a Request for Commitment for a Development
      Loan to be used by Parent for payment of the Corporate Income Taxes.
      Such Request for Commitment shall provide Lender all inforniation regarding
      the amount of Corporate Income Taxes due and payable and the date of
the
      requested Development Loan which may not be earlier than 20 days after
receipt
      of Request for Commitment by Lender; provided that Development Loans
for
      payment of Corporate Income Taxes, plus the applicable Facility Fee, shall
      be
the
      lesser of (i) the amount of tax payments generated on any amount paid in
principal
      (to be calculated by multiplying the aggregate amount of principal paid
by
      the
      current tax rate less any prior advances made to pay Corporate Income
Taxes),
      or (ii) an aggregate amount of $2,000,000 during any calendar year, but in
      no
      event
      an amount that would increase the total aggregate amount advanced above
      the
      $45,000,000 facility size.

     

    (b)
      Overhead
      Advances. Prior
      to
      the Drawdown Termination Date and if no Unmatured
      Event of Default or Event of Default exists, Lender will, from time to time,
      make
      certain advances to the Borrowers that constitute Loan proceeds hereunder
("Overhead
      Advances"), which
      may
      not, in the aggregate exceed $1,500,000. Each Overhead
      Advance shall be advanced by Lender contemporaneously with the distribution
      of
      Net
      Revenue pursuant to Section
      2.6(c); provided,
      however, that
      the
      application of the amount
      described in Section
      2.6(b) to
      be
      applied to Debt Service must be sufficient to pay
      all
      interest that is due and payable for all the outstanding Loans for an
      Overhead

    Advance
      to be available. The Overhead Advances will be in amounts required in
addition
      to the amount of Net Revenue paid to Borrowers under Section
      2.6(c), such
      that
the
      Net
      Revenue disbursed to Borrowers under Section
      2.6(c) together
      with such Overhead
      Advance will equal (but will not exceed) $250,000 per month. In lieu of using
      such
      amounts to pay Overhead Expenses, however, Borrowers may request that the
      aggregate amount available for Overhead Advances (and not otherwise advanced
      for

    



    
      
        
          
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    Overhead
      Advances) be used for purposes of funding Development Operations approved
by
      Lender
      in its sole discretion. In each such case, Borrowers shall provide Lender
sufficient
      information, acceptable to Lender, detailing the use of Overhead Advances.
      No
      Facility Fee will be payable in connection with the making of any Overhead
      Advance used to pay Overhead Expenses.

     

    (c)
      Promissory
      Note. The
      Loans
      described in Section
      2.1 and
      all
      other amounts
      due under this Agreement shall be evidenced by a promissory note (the
"Note")
      issued
      by
      Borrowers to Lender in the face amount of $45,000,000, in the form of
Exhibit
      "B," appropriately
      completed. The final maturity date of such Note shall be the Loan Termination
      Date and all amounts evidenced by the Note shall be secured by the Security
      Documents.

     

    Section
      2.2Interest.

     

    (a) Subject
      to the provisions of subsection (b) below, each Loan shall bear interest
      on the outstanding principal amount thereof at a rate per annum equal to the
      Interest
      Rate and shall be payable as set forth in Section
      2.6 hereof.

     

    (b) If
      any
      amount payable by Borrowers (other than interest) under any Loan Document
      is not paid when due (without regard to any applicable grace periods), whether
      at
      stated
      maturity by acceleration or otherwise, such amount shall thereafter bear
      interest at the Default Rate to the fullest extent permitted by applicable
      laws.
      Furthermore, while any
      Event
      of Default exists (either before or after acceleration), Borrowers shall pay
      interest
      on the principal amount of all outstanding Obligations at the Default Rate
      to
      the fullest extent permitted by applicable laws.

     

    (c) Interest
      on each Loan shall be due and payable in arrears on each Repayment
      Date applicable thereto and at such other times as may be specified herein.
      Interest
      hereunder shall be due and payable in accordance with the terms hereof before
      and
      after
      judgment, and before and after the commencement of any proceeding under any
      applicable
      bankruptcy, insolvency or other similar law of any jurisdiction now or
hereafter
      in effect, including the federal Bankruptcy Code, as amended from time to time.
      Interest
      which has accrued and is not paid when due shall be added to and become part
      of
the
      principal under the Note; provided,
      however, the
      capitalization of such accrued and unpaid interest pursuant to this sentence
      will not preclude Lender from declaring or maintaining
      an Event of Default based on Borrowers' failure to pay such amount to the
extent
      Lender has such right under any other provision of this Agreement or under
      any
      of the other Loan Documents.

     

    (d) All
      computations of interest and all fees shall be made on the basis of a
year
      of
      360 days and the actual number of days elapsed. Interest shall accrue on the
      day
on
      which
      the Loan is made, but shall not accrue on the day on which the Loan or such
      portion
      thereof is paid, provided that any Loan that is repaid on the same day on which
      it is
      made
      shall bear interest for one day.

     

    (e) To
      the
      extent the percent of Net Revenue swept and applied by Lender

     

    pursuant
      to Section
      2.6(b) below
      to
      pay Debt Service and other Obligations for a

    



    
      
        
          
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    particular
      Interest Period is insufficient to pay the Debt Service and other Obligations
      due for
      that
      Interest Period (including any such amounts remaining unpaid from any prior
      Interest Period), the percent of Net Revenue swept and applied by Lender shall
      automatically
      be increased to a percentage (up to 100% if necessary) necessary to sweep
a
      sufficient portion of the Net Revenue to pay (i) all Debt Service and other
      Obligations due
      for
      that Interest Period plus
      (ii) all
      Debt
      Service and other Obligations remaining unpaid
      from any prior Interest Period.

     

     Section
      2.3
      Repayment
      of the Loans. Borrowers
      shall repay the outstanding principal
      amount of the Loans evidenced by the Note plus all interest accrued thereon
      by
      the Loan
      Termination Date.

     

     Section
      2.4 Prepayment
      of the Loans.Voluntary
      Prepayments. Borrowers
      may prepay
      the Note, in whole or in part, without premium or penalty at any time after
      the
      Closing Date;
      provided
      that
      Borrowers shall provide Lender at least three (3) Business Days' prior
written
      notice thereof, except in connection with Section
      2.4(b).

     

    (a) Mandatory
      Prepayment. Except
      as
      expressly provided otherwise in Sections
      2.6, 6.5 and
      11.13,
      Borrowers
      shall deliver to Lender for application against the amounts
      outstanding under the Note one hundred percent (100%) of the net proceeds of
      any
      disposition of Collateral, any insurance proceeds or the net proceeds from
      the
issuance
      of any equity of any Borrower on the Business Day following such Borrower's
      receipt of such proceeds, unless such proceeds are used with the prior written
      consent of Lender
      to
      promptly acquire replacement assets which are contemporaneously subjected to
      a
      first
      priority Lien in favor of Lender and otherwise on terms satisfactory to
      Lender.

     

    (b) Prepayments
      Generally. Any
      principal prepaid pursuant to this Section
      2.4 shall
      be
      in addition to, and not in lieu of, all payments otherwise required to
be
      paid
      under the Loan Documents at the time of such prepayment.

     

    .
      [Reserved]

     

     Section
      2.6 Application
      of Receipts.
      Net
      Revenue
      shall be calculated by Lender based
      on
      the Property Operating Statement. Borrowers shall prepare and deliver the
      Property Operating
      Statement to Lender no later than the last Business Day of each month. Such
      Property Operating
      Statement shall detail Borrowers' Gross Receipts and Expenses with respect
      to
      the month
      in
      which such Property Operating Statement is scheduled to be delivered and for
      any
other
      such amounts relating to any preceding months that were not previously accounted
      for in a Property
      Operating Statement. The first Property Operating Statement shall be delivered
      on April
      30,
      2006; provided,
      however, that
      this
      first Property Operating Statement shall cover the period
      from Closing through and including such date. On the Repayment Date at the
      end
      of each Interest
      Period, Gross Receipts for such Interest Period shall be applied as
      follows:

     

    (a) First,
      to
      the amount necessary to pay the Expenses.

     

    (b) Second,
      eighty-five percent (85.0%) of the Net Revenue to Lender for payment
      of amounts which are included within Debt Service and other Obligations to
      Lender for such Interest Period (including but not limited to the Administration
      Fee to the

    



    
      
        
          
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    extent
      the same becomes due during such Interest Period); provided
      that,
      upon the occurrence and continuation of an Event of Default and to the extent
      required by Section
      2.2(e)
      above,
      the percentage of the Net Revenue to be applied for Debt Service and other
      Obligations
      to Lender shall be increased to one hundred percent (100%) or such other amount
      specified in Section
      2.2(e)
      above.
      The amount paid to Lender pursuant to this subpart
      (b) shall be applied first to any interest due on the Note, until all accrued
      interest is
      paid
      in full, and any remaining amounts paid pursuant to this subpart (b) shall
      be
applied
      to remaining outstanding principal under the Note.

     

    (c)
      Third, so long as no Event of Default shall have occurred and be continuing,
      any remaining amounts shall be paid to Borrowers by remitting such sums to
      the
      Borrower Operating Account in accordance with Section
      2.7(b)

     

    Section
      2.7 Borrower
      Sub-Account.Until all
      of
      Borrowers' Obligations have been fully
      satisfied, Borrowers shall direct and cause all Purchasers of Hydrocarbons,
      Pipeline Parties, the
      Operator, all account debtors of Borrowers, and any other customers of Borrowers
      to deposit all
      payments of any nature whatsoever due and owing by such Persons to Borrowers
      directly into an
      account maintained by Lender (the "Lender
      Account"); provided,
      however, that
      Purchasers of Hydrocarbons
      may make distributions to royalty interest owners and third-party working
      interest owners
      and may withhold Severance Taxes. Lender shall establish a sub-account (the
      "Borrower
      Sub-Account")
      on
      its
      internal books and records and shall credit to such Borrower Sub-Account all
      collected funds which constitute payments referred to in the preceding sentence.
      Borrowers authorize
      Lender to debit the Borrower Sub-Account for the payment of all Obligations
      hereunder
      when due and payable.

     

    (a)
      On
      each Repayment Date, provided
      that
      no
      Unmatured Event of Default or
      Event
      of Default has occurred and is continuing, and after satisfying all
      distributions to Lender
      pursuant to Section
      2.6(b), Lender
      will release to Borrowers the funds credited to the
      Borrower Sub-Account, by remitting such amounts to the Borrower Operating
Account,
      in order to pay (i) the Expenses which have been incurred and are due and
payable
      and which are referenced in the most recent Property Operating Statement
delivered
      to Lender and (ii) the amount payable to Borrowers pursuant to Section
      2.6(c), (iii)
      together with any Overhead Advances, if applicable (the "Net
      Revenue Reimbursement Amount"). Borrowers
      will have one hundred eighty (180) days after the receipt of such funds to
      contest the amounts of funds released, after which time the amounts released
      will be deemed conclusively correct absent manifest error, provided Borrowers
      may not contest any such amounts released for any reason after two hundred
      seventy (270) days after the receipt of such funds or after the Loan Termination
      Date. Borrowers
      shall be permitted, with prior reasonable notice and during Lender's normal
      business
      hours, to review at Lender's offices any documents in which specific references
      to
      and
      the calculation of the Net Revenue Reimbursement Amount distributed during
      the
ninety
      (90) day period preceding such review are made.

     

    Any
      amounts deposited into the Lender Account owing to third-party working interest,
      overriding
      royalty interest and royalty interest holders whose interests in the Properties
      were created
      prior to the time such Properties became subject to any of the Security
      Documents or to taxing
      authorities for production taxes shall be released by Lender to Borrowers within
      two (2) Business
      Days after receipt of a certificate from Borrowers detailing such amounts and
      the party

    



    
      
        
          
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    to
      be
      paid so that Borrowers may return such amounts to such third-party working
      interest, overriding royalty interest and royalty interest holders and taxing
      authorities. Lender shall have the right to undertake audit procedures during
      normal business hours and upon reasonable prior notice
      to
      periodically confirm that such payments have been made by Borrowers. Lender
      shall have
      the
      right at its option, but not the obligation, to make such payments directly
      to
      the third-party
      working interest, overriding royalty interest and royalty interest holders
      and
      taxing authorities
      upon the occurrence of and during the continuance of an Event of Default or
      an
Unmatured
      Event of Default hereunder. Except as provided in this paragraph, upon the
      occurrence
      of and during the continuance of an Event of Default, any funds in the Borrower
      Sub-Account
      may be applied, at Lender's option, against all unpaid Obligations. Lender
      agrees to
      maintain accounting records with respect
      to
      the
      Borrower Sub-Account and make such records available
      to Borrowers upon reasonable request.

     

    Section
      2.8 Use
      of Proceeds. Initial
      Loan and CVR Loan proceeds may be used by Borrowers
      for the purposes described in Section
      2.1(a). Development
      Loan proceeds may be used
      by
      Borrowers for the purposes of funding Borrowers' share of costs and expenses
      relating to
      the
      conduct of the Development Operations pursuant to Section
      2.1(b) and
      approved by Lender
      in
      writing. Overhead Advances may be used only for purposes and only for the period
      specified
      in Section
      2.1(c). In
      no
      event shall funds from the Loans be used by Borrowers, directly or indirectly,
      for personal, family, household or agricultural purposes, or any other
purpose
      not specifically described in this Section
      2.8.

     

    Section
      2.9 Initial
      Swap Agreement. At
      or
      following Closing, Borrowers shall enter into
      a
      Permitted Swap Agreement together with one or more transaction confirmations
      thereunder
      that in the aggregate subject not more than ninety percent (90%) of the notional
      volume
      of
      Borrowers' Net Revenue Interest share of Proved Developed Producing Reserves
      scheduled
      to be produced for the period commencing on the date of such initial Permitted
      Swap Agreement
      through and including December 31, 2007 (based on the Reserve Report(s)
      evaluated by
      Lender
      prior to Closing).

     

    ARTICLE
      III

     

    TAXES,
      YIELD PROTECTION AND ILLEGALITY

     

    Section
      3.1Taxes.

     

    (a)
      Any
      and all payments by Borrowers to or for the account of Lender under any
      Loan
      Document shall be made free and clear of and without deduction for any and
      all
taxes,
      duties, levies, imposts, deductions, assessments, fees, withholdings or similar
      charges,
      and all liabilities with respect thereto, but excluding, in the case of Lender,
      taxes imposed
      on or measured by its net income, and franchise taxes imposed on it (in lieu
      of
net
      income taxes), by the jurisdiction (or any political subdivision thereof) under
      the applicable
      laws of which Lender is organized or maintains a lending office (all such
      non-excluded
      taxes, duties, levies, imposts, deductions, assessments, fees, withholdings
      or
similar
      charges, and liabilities being hereinafter referred to as "Taxes").
      If
      Borrowers shall
      be
      required by any applicable laws to deduct any Taxes from or in respect of any
      sum payable under any Loan Document to Lender, (i) the sum payable shall be
      increased as
      necessary so that, after making all required deductions (including deductions
      applicable
      to additional sums payable under this Section), Lender- receives an amount
      of

    



    
      
        
          
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    principal
      and interest it would have received had no such deductions been made, (ii)
      Borrowers shall make such deductions, (iii) Borrowers shall pay the full amount
      deducted to
      the
      relevant taxation authority or other authority in accordance with applicable
      laws, and
      (iv)
      within thirty days after the date of such payment, Borrowers shall furnish
      to
Lender
      the original or a certified copy of a receipt evidencing payment thereof. To
      the
      extent Borrowers pay any such Taxes on behalf of Lender to a taxing authority
      and any such
      taxing authority refunds any such Taxes during the term of this Agreement to
      Lender,
      Lender shall return any such amounts to Borrowers.

     

     (b)
      In
      addition, Borrower agrees to pay any and all present or future stamp,
court
      or
      documentary taxes and any other excise or property taxes or charges or similar
      levies
      which arise from any payment made under any Loan Document or from the execution,
      delivery, performance, enforcement or registration of, or otherwise with
respect
      to, any Loan Document (hereinafter referred to as "Other
      Taxes").

     

     Section
      3.2 Inability
      to Determine LIBOR Rate. If
      Lender
      determines in connection
      with any request for a Loan or continuation thereof for any reason that adequate
      and reasonable means do not exist for determining the LIBOR Rate, Lender will
      promptly so notify Borrowers
      if Lender reasonably determines that such event or events have any impact on
      the
application
      of the Interest Rate. In such event, Lender shall use, as the LIBOR Rate, the
      average LIBOR
      Rate for the two immediately preceding months (for one-month teiins) until
      Lender notifies Borrowers that the circumstances giving rise to such
      determination no longer exist.

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES

     

     Section
      4.1 Representations
      and Warranties of Borrowers. To
      confilln Lender's understanding
      concerning Borrowers and Borrowers' businesses, properties and obligations,
      and
to
      induce
      Lender to enter into this Agreement and to make the Loans, Borrowers represent
      and warrant to Lender that:

     

    (a) No
      Default. No
      event
      has occurred and is continuing which would

     

    constitute
      an Event of Default or an Unmatured Event of Default.

     

    (b) Organization
      and Good Standing. Each
      of
      WEO and WEP is a limited partnership
      duly organized, validly existing and in good standing under the laws of
Texas,
      having all powers necessary to carry on its businesses and to enter into and
      consummate
      the transactions contemplated by the Loan Documents. The General Partner
is
      a
      limited liability company duly organized, validly existing and in good standing
      under the laws of Texas, having all powers necessary to carry on its businesses
      and to enter into and
      consummate the transactions contemplated by the Loan Documents. Parent is a
      corporation
      duly organized, validly existing and in good standing under the laws of
Nevada,
      having all powers necessary to carry on its businesses and to enter into and
      consummate the transactions contemplated by the Loan Documents. Borrowers and
      the General Pal titer
      are
      authorized to do business in all other jurisdictions wherein the

     

    character
      of the properties owned or held by them or the nature of the business transacted
      by them makes such qualification necessary or desirable. The record holders
      of
      the

    



    
      
        
          
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    shareholders
      and the partners of Borrower, as applicable, and the members of the General
      Partner
      consist exclusively of those Persons listed on Schedule
      4.1(b).

     

    (c) Capitalization:
      Compliance with Security Laws. Except
      as
      disclosed on Schedule
      4.1(c), no
      Borrower is subject to any agreement under which there may become outstanding,
      nor are there currently outstanding, any rights to purchase, or securities
      convertible
      into or exchangeable for, any equity interests of any Borrower including, but
      not
      limited to, options, warrants or rights. Except as disclosed on Schedule
      4.1(c), no
      Borrower
      is under obligation (contingent or otherwise) to purchase or otherwise acquire
      or
      retire
      any of its equity interests. Except as contemplated by this Agreement or as
      disclosed
      on Schedule
      4.1(c), there
      are
      no agreements, understandings, plans or arrangements in existence which require
      any Borrower to elect any person as its general partner
      or otherwise pertain to the distribution rights, voting, sale or transfer of
      any
      equity interests
      of any Borrower. Each Borrower has complied with all applicable federal and
      state
      limited partnership and corporate laws. No Person has any federal or state
      securities law
      claims against any Borrower.

     

    (d) Authorization.
      Borrowers
      and General Partner have taken all actions necessary
      to authorize the execution and delivery of the Loan Documents and to authorize
      the consummation of the transactions contemplated thereby and the perfoiiiiance
      of their obligations thereunder. Borrowers are duly authorized to borrow thuds
      hereunder.

     

    (e) No
      Conflicts or Consents. Except
      with regard to Borrowers' obligations that
      will
      be satisfied prior to or contemporaneously with Closing, the execution and
      delivery
      by Borrowers of the Loan Documents, the performance of their obligations
under
      the
      Loan Documents, and the consummation of the transactions contemplated by
the
      various Loan Documents does not and will not (i) conflict with any provision
      of
      (A) any
      domestic or, to Borrowers' knowledge, any foreign law, statute, rule or
      regulation, (B) the Certificate of Incorporation or Bylaws, Certificate of
      Limited Partnership or Limited
      Partnership Agreement of Borrowers, as applicable, or the Articles of
Organization
      or Limited Liability Company Agreement of General Partner, or (C) any
agreement,
      judgment, license, order or permit applicable to or binding upon Borrowers
      or
      General Partner, (ii) result in the acceleration of any Debt owed by Borrowers
      or General Partner,
      or (iii) result in or require the creation of any Lien upon any assets or
      properties of
      Borrowers, except as expressly contemplated in the Loan Documents. Except as
      expressly
      contemplated in the Loan Documents and to Borrowers' knowledge, no consent,
      approval, authorization or order of, and no notice to or filing with, any court
      or governmental
      authority or third party is required in connection with the execution,
delivery
      or performance by Borrowers or General Pai tuer
      of
      any Loan Document or to

     

    consummate
      any transactions contemplated by the Loan Documents.

     

    (f) Enforceable
      Obligations. This
      Agreement is, and the other Loan Documents when executed and delivered by
      Borrowers and General Partner will be, legal,
      valid and binding obligations of Borrowers and General Partner enforceable
      in
      accordance with their terms except as such enforcement may be limited by
      bankruptcy, insolvency or similar laws of general application relating to the
      enforcement of creditors' rights
      or
      by principles of equity applicable to the enforcement of creditors'
      rights

    



    
      
        
          
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    generally_
      The Deed of Trust, the UCC-1 Financing Statements relating to the Security
      Documents and the Overriding Royalty Interest Conveyance to be filed or recorded
      in the various
      jurisdictions are in proper form under the laws of such
      jurisdictions.

     

    (g) Financial
      Statements. Attached
      hereto (at Closing or such later date as may
      be
      permitted by Section
      9.3(k) below)
      as
Schedule
      4.l(g)(i) and
      (ii),
      respectively, are,
      with
      respect to Borrowers, (i) Borrowers' audited financial statements for the year
      ending
      December 31, 2005 and (ii) Borrowers' unaudited, management-prepared pro
forma
      balance sheet as of the Closing Date (the "Pro
      Forma Financial Statements"). The
      Pro
      Forma
      Financial Statements present fairly the pro forma financial condition of
Borrowers
      as of the dates thereof and the results (pro forma or actual, as the case may
      be) of
      operations for the period then ended, and are in accordance with the projected
      or actual (as
      the
      case may be) performance and books and records of Borrowers.

     

    (h) Other
      Obligations and Restrictions. Except
      as
      previously disclosed on Schedule
      4.1(h), Borrowers
      have no outstanding Debt of any kind (including contingent obligations,
      tax assessments, and forward or long-term commitments), other than Debt
under
      the
      Loan Documents, which is material to Borrowers and not disclosed in the Pro
      Forma
      Financial Statements. No Tax Claim or other claim for past due Property Taxes
      or
Severance
      Taxes exists. No Borrower is subject to or restricted by any franchise,
contract,
      deed, charter restriction or other instrument or restriction which could
      materially and adversely affect either Borrower's financial condition, or either
      Borrower's ability to timely
      pay the Note and the other Obligations and to perfonn its obligations under
      the
Loan
      Documents.

     

    (i)
      Full
      Disclosure. No
      certificate, statement or other information delivered herewith
      or heretofore by Borrowers or General Partner to Lender in connection with
      the
negotiation
      of this Agreement or in connection with any transaction contemplated hereby
      contains
      any untrue statement of a material fact or omits to state any material fact
      known to
      Borrowers or General Partner necessary to make the statements contained herein
      or therein not misleading as of the date made or deemed made. No facts are
      known
      to Borrowers or General Partner that have not been disclosed to Lender in
      writing which could
      materially and adversely affect Borrowers' financial condition, or Borrowers'
      ability
      to timely pay or perfollu their obligations.

     

    Litigation.
      Except
      as
      disclosed on Schedule
      4.1(j), there
      are
      no actions, suits
      or
      legal, equitable, arbitrative or administrative proceedings pending, or to
      the
knowledge
      of Borrowers threatened, against Borrowers or General Partner before any
federal,
      state, municipal or other court, department, commission, body, board, bureau,
      agency
      or
      instrumentality, domestic or foreign, and there are no outstanding judgments,
      injunctions,
      writs, rulings or orders by any such governmental entity against Borrowers
      or
any
      of
      the Properties.

     

    (k)
      ERISA
      Liabilities. There
      are
      no ERISA Plans with respect to which Borrower
      has any fixed or contingent liability, and Borrower is in compliance with
ERISA
      in
      all material respects, if applicable.

    



    
      
        
          
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    (1)
      Names
      and Places of Business. To
      the
      best of Borrowers' knowledge, except
      for the names changes of each Borrower that become effective immediately prior
      to Borrowers' execution and delivery of this Agreement and the other Loan
      Documents, no
      Borrower has, during the preceding five (5) years, been known by or used any
      other name.
      The
      principal office and principal places of business of Borrowers is set forth
      in
Section
      11.3. No
      Borrower does now have and has previously had any other office or place
      of
      business. No Borrower is or has engaged in any business or activity other than
      the
      acquisition, ownership, operation and development of the
      Properties.

     

    (m) Unpaid
      Bills. Except
      as
      disclosed on Schedule
      4.1(m) and
      except as incurred
      in the ordinary course of business and which are not yet due, Borrowers have
      no
unpaid
      bills with respect to improvements to any of the Collateral which may give
      rise
      to mechanic's,
      materialman's or other similar liens arising by operation of applicable law
      should
      such bills remain unpaid.

     

    (n) Title.
      Subject
      to Permitted Encumbrances, (i) Borrowers will have all legal
      and
      beneficial rights, title and interest in and to all production from or allocable
      to their Net Revenue Interests in the Properties and have the exclusive right
      to
      sell the same subject
      to the ORRI and any right of the owners of royalty interests to take their
      royalty interest
      in kind, and (ii) Borrowers will have good and Defensible Title to the
      Properties, the Equipment and to their other properties and assets. The
      Collateral will be owned by Borrowers free and clear of any Lien (other than
      Permitted Encumbrances). Borrowers' Working
      Interests are not greater than, and Borrowers' Net Revenue Interests are not
      less than,
      those stated on Exhibit
      "A"
      attached
      hereto.

     

    (o) No
      Subsidiaries or Other Owners. Except
      as
      disclosed on Schedule
      4.1(o), Borrowers
      do not have any Affiliate or own any equity interest in any other Person.
      No Borrower is a member of any joint venture or association of any type
whatsoever
      except pursuant to an Industry Agreement. No Borrower is a party to any
      transaction of any kind with any Affiliate of Borrowers other than on fair
      and
      reasonable terms
      substantially as favorable to such Borrower as would be obtainable .by
      any
Borrower
      at the time in a comparable arm's length transaction with a Person other than
      an
      Affiliate.

     

    (p) Omissions
      and Misstatements. To
      Borrowers' and General Partner's knowledge
      after due inquiry, all written data, reports and information which Borrowers
      and
      General Partner have supplied to Lender or caused to be supplied by a third
      party on their
      behalf in connection with the obtaining of the credit facility provided for
      in
      this Agreement
      or in connection with the business transactions giving rise to Borrowers'
      seeking such credit are, taken as a whole, complete and accurate in all material
      respects and contain no material omission or misstatement.

     

    (q)
      Holding Company.
      No
      Borrower nor General Partner is a "holding company"
      or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding
      company" or a "public utility" within the meaning of the Public Utility Holding
      Company
      Act of 1935, as amended.

    



    
      
        
          
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    (r) Investment
      Company. No
      Borrower nor General Partner is an "investment

    company"
      within the meaning of the Investment Company Act of 1940, as
      amended.

     

    Environmental
      and Other Laws. Except
      as
      disclosed on Schedule
      4.1(s), (i)
      Borrowers are conducting their business in material compliance with all
      applicable federal, state or local laws, including Environmental Laws, and
      have
      been and are in compliance with any licenses and permits required under any
      such
      laws which affect or relate
      to
      the Collateral; (ii) none of the operations or properties of Borrowers is the
      subject
      of federal, state or local investigation evaluating whether any material
      remedial action
      is
      needed to respond to a release of any Hazardous Materials into the environment
      or
      to the
      improper storage or disposal (including storage or disposal at offsite
      locations) of
      any
      Hazardous Materials; (iii) no Borrower has filed or received any notice under
      any federal,
      state or local law indicating that it is or may be responsible for the improper
      release
      into the environment, or the improper storage or disposal, of any material
      amount of
      any
      Hazardous Materials or that any Hazardous Materials have been improperly
      released, or are improperly stored or disposed of, upon the Properties; and
      (iv)
      no Borrower
      is aware of any material contingent liability under any Environmental Laws
      or
in
      connection with the release into the environment, or the storage or disposal,
      of
      any Hazardous
      Materials, upon the Properties.

     

    (t) Equipment.
      Schedule
      4.1(t) sets
      forth all of the information described in Section
      6.1 for
      all
      Equipment owned by Borrowers as of the Closing Date.

     

    (u) Purchasers
      of Hydrocarbons, etc. All
      of
      the Purchasers of Hydrocarbons produced
      from or allocated to the Properties and all Pipeline Parties, and the most
      recent address
      of each such Persons as shown in Borrowers' records, are set forth on
Schedule
      4.1(u).

     

    (v) Hydrocarbon
      Sales and Related Agreements. All
      existing agreements that are binding on Borrowers or the Properties and that
      are
      not terminable upon thirty (30) days
      or
      less notice for the sale, purchase, (including, but not limited to, calls on
      production
      and preferential rights to purchase production) gathering, transportation,
      handling,
      processing, treating and/or storage of Hydrocarbons are described on
Schedule
      4.1(v).

     

    (w) Swap
      Agreements. All
      existing Swap Agreements or other hedge agreements
      to which any Borrower is a party or by which any Borrower is bound are
described
      on Schedule
      4.1(w).

     

    (x)
      Employees.
      Except
      as
      set forth on Schedule
      4.1(x), no
      Borrower is a party
      to
      any existing employment agreements, deferred compensation, stock option,
bonus,
      consulting or retirement agreements or plans, or other employee benefit plans
      of
any
      kind,
      including without limitation any pension or welfare benefit plans with any
      employee of any Borrower not terminable at-will. No Borrower maintains nor
      has
      ever maintained
      an Employee Pension Benefit Plan as defined in Section
      3(a) of
      ERISA,
      or a multi
      employer plan as defined in Section
      3(37) of
      ERISA.
      No employees of any Borrower
      are represented by any labor union or collective bargaining agreement, nor
      is
      any union organization effort pending or threatened against any
      Borrower.

    



    
      
        
          
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    (y) Operations.
      WEO
      (i)
      has obtained all operating rights previously held by EBS
      Operating and covering the Properties in connection with the PSAs and serves
      as
      the Operator
      therefor and (ii) has obtained all necessary qualifications under the laws
      of
Texas
      to
      serve as Operator.

     

    (z) Ownership
      In Properties. Except
      through their respective ownership interests
      in Borrowers, no partners or shareholders of Borrower or any Affiliates of
      partners
      or shareholders of Borrowers own any interests in the Properties.

     

    (aa)
      Lease
      Bank Agreement. As
      of the
      date of this Agreement, the Lease Bank Agreement has been terminated and no
      Borrower is owed, and no Borrower owes, any liability or obligation under the
      Lease Bank Agreement.

     

    (bb)
      Project
      Area. Except
      for the Properties owned by the Borrowers, no Affiliate
      of either Borrower (including but not limited to Parent) owns or has the right
      to acquire
      an interest in any Lease, Unit or Well within the Project Area.

     

    (cc)
      No
      Unusual Agreements. All
      agreements (including but not limited to any Industry
      Agreements) applicable to Borrower's Working Interest and Net Revenue Interest
      in the Properties are of the type generally found in the oil and gas industry
      and the
      gathering and transmission industry, as applicable, and do not (individually
      or
      in the aggregate) contain any unusual provisions which may operate in a material
      and adverse manner with respect to Borrower's Working Interest or Net Revenue
      Interest in the Properties.

     

    ARTICLE
      V

     

    NOTICE
      OF CERTAIN EVENTS

     

    So
      long
      as any Obligations are owing to Lender under this Agreement or any other Loan
      Documents,
      Borrowers shall deliver to Lender or notify Lender of, as the case may be,
      the
      following items:

     

    Section
      5.1 Notice
      of Unmatured Event of Default, Event of Default and Other
Matters.
      Borrowers
      shall notify Lender within five (5) Business Days after becoming aware of
the
      existence of any Unmatured Event of Default or Event of Default or after
      becoming aware of any
      developments or other information which may materially and adversely affect
      the
      properties, business,
      prospects, profits or condition (financial or otherwise) of Borrowers or their
      ability to perform
      their Obligations, including, without limitation, the following:

     

    (a) any
      material dispute (including tax liability disputes) that may arise between
      any Borrower and any governmental regulatory body or law enforcement
      authority;

     

    (b) the
      commencement of any material litigation or proceeding affecting any Borrower
      (whether by the filing of a complaint, service of process or by attachment
      or
arrest
      of
      any asset);

    



    
      
        
          
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    (c) any
      material labor dispute or controversy resulting in or threatening to
result
      in
      a strike or work stoppage against any Borrower;

     

    (d) any
      proposal by any public authority to acquire any assets or business of any
      Borrower;

     

    (e) the
      location of any Collateral other than at the places indicated in or
      as

     

    permitted
      under the Loan Documents;

     

    (1) any
      proposed or actual change of the name, identity or structure of any

     

    Borrower;

     

    any
      material loss or damage to any of any Borrower's property, business

    or
      operations;

     

    (h) any
      environmental situation, circumstance or condition that causes or may
cause
      Section
      4.1(s) to
      be
      false; or

     

    (i) any
      other
      matter which has resulted or may result in a material adverse change
      in
      the financial condition, operations or assets of any Borrower.

     

    Section
      5.2
      Other
      Information. Borrowers
      shall provide such other information regarding the financial condition of
      Borrowers or any property of Borrowers as Lender reasonably
      may request from time to time.

     

    ARTICLE
      VI

     

    SECURITY;
      GUARANTY; ETC.

     

    Section
      6.1 Security.
      The
      Obligations will be secured by first priority Liens on the Collateral as set
      forth in the various Security Documents concurrently or hereafter delivered,
      including,
      without limitation, a separate Deed of Trust, Mortgage, Security Agreement,
      Financing
      Statement and Assignment of Production, covering the Properties (whether one
      or
more,
      the
"Deed
      of Trust"), the
      Security Agreement and the Pledge Agreement, each in form and substance
      satisfactory to Lender. Lender may in its sole discretion permit the
      counterparty under a
      Permitted Swap Agreement to obtain Liens from Borrowers covering, all or a
      portion of, the Properties that are pari
      passu with
      Lender's first prior liens; provided,
      however,
      Borrowers, Lender
      and such counterparty shall enter into an Intercreditor Agreement. Any time
      any
Borrower
      obtains any new Property following Closing using any Loan proceeds hereunder,
      Borrower
      agrees to promptly execute and deliver to Lender a Deed of Trust and any other
      Security
      Documents described in this Section
      6.1 to
      grant
      Lender a first priority lien in such Property,
      and further agrees to promptly execute and deliver an Overriding Royalty
      Interest Conveyance as required under Section
      8.4.

     

    Section
      6.2 Perfection'
      and Protection of Security Interests and Liens. Borrowers
      will
      from
      time to time deliver to Lender any security agreements, financing statements,
      continuation
      statements, extension agreements, amendments, confirmations and other
documents,
      properly completed and executed (and acknowledged when required) in form and
      substance
      satisfactory to Lender, which Lender reasonably requests for the purpose of
      perfecting,

    



    
      
        
          
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    confirming,
      protecting or establishing the priority of any Liens or other rights in the
      Collateral securing any Obligations. Lender agrees not to submit the Letters
      in
      Lieu to any Purchaser of Production
      prior to the occurrence of an Event of Default.

     

    Section
      6.3 Release
      of Collateral. Upon
      the
      payment and performance in full by Borrowers
      of all Obligations (other than those arising under the Overriding Royalty
      Interest Conveyance),
      Lender shall deliver or cause to be delivered to Borrowers, at Borrowers'
      expense, releases
      and satisfactions of all Security Documents with respect to the Collateral
      and
      Borrowers shall
      deliver to Lender a general release of all of Lender's liabilities and
      obligations under the Loan Documents and an acknowledgment that the same have
      been terminated.

     

    Section
      6.4 Account
      Debtors. All
      account debtors (including any Operator, Purchasers
      of Hydrocarbons, Pipeline Parties and counterparties under Permitted Swap
Agreements)
      relating to the Working Interests and/or Net Revenue Interests in the Properties
      and relating
      to Permitted Swap Agreements will receive notification from Lender (as assignee)
      and Borrowers, in form and substance satisfactory to Lender, of the assignment
      into the Lockbox or directly
      into the Lender Account of all proceeds (the "Notice
      of Assignment of Proceeds") from
      sales
      of
      all production from or allocable to Borrowers' Net Revenue Interests in the
      Properties and
      all
      other Gross Receipts into the Lockbox or directly into the Lender Account
      Borrowers shall
      use
      commercially reasonable efforts to obtain and deliver, within thirty (30) days
      after the Closing Date, from all Purchasers of Hydrocarbons, Pipeline Parties
      and counterparties under Permitted Swap Agreements, an executed Notice of
      Assignment of Proceeds which will instruct the
      Purchasers of Hydrocarbons, Pipeline Parties and counterparties under Permitted
      Swap Agreements
      to remit all proceeds from sales of all production from or allocable to the
      Net
Revenue
      Interest of Borrowers in the Properties and all other Gross Receipts into the
      Lockbox or directly into the Lender Account. Lender may prohibit Borrowers
      from
      selling any Hydrocarbon production
      to a Purchaser that refuses to execute and deliver to Lender a Notice of
      Assignment of
      Proceeds. If Borrower receives any Gross Receipts, Borrowers shall promptly
      notify Lender and
      follow Lender's instructions regarding submitting such proceeds to the Lockbox
      or the Lender
      Account, and, until received by Lender, Borrowers shall hold such proceeds
      in
      trust for Lender.

     

    Section
      6.5 Location;
      Records. Except
      in
      the ordinary course of business, all Equipment
      owned by or on behalf of Borrowers will be kept at its current location, except
      as permitted
      by this Agreement or by the prior written consent of Lender, and except that,
      so
      long as
      no
      Unmatured Event of Default or Event of Default shall have occurred and be
      continuing, Borrowers
      may dispose of Equipment in accordance with the terms of the applicable
      Operating Agreements
      and may dispose of obsolete, broken or worn Equipment, in either case without
      Lender's
      consent but upon prior written notice to Lender if such disposition is not
      immaterial; provided
      that
      the
      proceeds of any such disposition shall either (i) be used to purchase
substantially
      similar replacement Equipment or (ii) be delivered to Lender to be applied
      pursuant to
      Section
      2.6(b). Borrowers
      will at all times hereafter keep correct and accurate records itemizing
      and describing the location, kind, type, age and condition of all Equipment
      currently owned or hereafter acquired by Borrowers, Borrowers' cost therefor
      and
      the accumulated depreciation thereon, all of which records shall be available
      during Borrowers' usual business hours upon reasonable notice of any officer,
      employee, agent or representative of Lender.

    



    
      
        
          
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    Section
      6.6 Maintenance.
      Borrowers
      will keep all of their Equipment in a good state of
      repair
      and good operating condition, will make all repairs and replacements when and
      where necessary,
      will not waste or destroy it or any part thereof, and will not be negligent
      in
      the care or use
      thereof. Borrowers shall repair and maintain all of their Equipment in a manner
      sufficient to continue
      the operation of Borrowers' business. Borrowers shall use their Equipment in
      accordance
      with law and the manufacturer's instructions.

     

    Section
      6.7 Dispositions.
      Where
      Borrowers are permitted to dispose of any Equipment
      under this Agreement or by consent thereto hereafter given by Lender, Borrowers
      shall
      do
      so in an arm's length transaction, in good faith and by obtaining the maximum
      amount of
      recovery practicable therefor and without impairing the operating integrity
      of
      their remaining Equipment
      or the Properties.

     

    Section
      6.8 Parent
      Guaranty. To
      further secure the full payment and perfounance of

     

    the
      Obligations, Borrowers shall cause Parent to execute and deliver a Guaranty
      to
      Lender.

     

    ARTICLE
      VII

     

    COVENANTS
      OF BORROWER

     

    Section
      7.1 Affirmative
      Covenants. Borrowers
      warrant, covenant and agree that until
      full and final repayment and perfoiiiiance of the Obligations and the
      termination of this Agreement,
      they will comply with the following covenants, or where such compliance is
      dependant
      on the Operator of any Properties for which no Borrower is the Operator, they
      will use commercially
      reasonable efforts to cause the Operator to comply with the following
      covenants:

     

    (a) Payment
      and Performance. Borrowers
      will pay all amounts due to Lender under
      the
      Loan Documents in accordance with the terms thereof and will observe,
perform
      and comply with every covenant, teim and condition expressed or implied in
      the
      Loan Documents.

     

    (b) Compliance
      with Tax Laws. Borrowers
      shall comply with all federal, state
      or
      local laws and regulations regarding the collection, payment and deposit of
      employee income, employment, and social security and sales and use taxes and
      royalty payments.

     

    (c)
      Books,
      Financial Statements and Reports. Borrowers
      will at all times maintain
      full and accurate books of account and records and a standard system of
      accounting and will furnish the following statements and reports to Lender
      at
      Borrowers' expense:

     

    (i)
      As soon
      as available, and in any event within ninety (90) days after the
      end
      of each Fiscal Year, complete audited financial statements of Borrowers,
prepared
      in reasonable detail in accordance with GAAP by a mutually agreeable
independent
      accounting firm. These financial statements shall contain a balance sheet
      as
      of the end of such Fiscal Year and statements of earnings, and cash flows,
      and
      changes in partner's capital accounts for such Fiscal Year, each setting forth
      in
      comparative form the corresponding figures for the preceding Fiscal Year.
      The

    



    
      
        
          
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    initial
      audited financial statements due under this Section
      7.1(c)(i) are
      due
      on or before
      March 31, 2006 and will be for the Fiscal Year ending December 31,
      2005.

     

    (ii) As
      soon
      as available, and in any event within sixty (60) days after the
      end
      of each Fiscal Quarter, Borrowers' balance sheet as of the end of such
Fiscal
      Quarter and statements of Borrowers' earnings and cash flows for the
period
      from the beginning of the then current Fiscal Year to the end of such Fiscal
      Quarter,
      all in reasonable detail and prepared in accordance with GAAP, subject
to
      changes resulting from normal year-end adjustments.

     

    (iii) Within
      ninety (90) days after the end of each Fiscal Year, a comfort
      letter prepared by Parent's auditor or a mutually agreeable independent
accounting
      firm confirming that such firm has, on behalf of Borrowers, reviewed the joint
      interests billings ("J113s")
      charged
      to Borrowers by the Operator during the prior Fiscal Year and confirmed that
      the
      JIBs presented to Borrowers by Operator
      accurately account for the amounts owed by and to Borrowers under the
applicable
      Operating Agreements during that period.

     

    (iv) As
      and
      when furnished, copies of all reports and other information provided
      by any other Person to Borrowers in connection with the Loan Documents.
      Borrowers may arrange for such reports and information to be provided
      directly to Lender by the Person providing the same to Borrowers.

     

    (v) Within
      three (3) Business Days after the end of each Fiscal Quarter, a report setting
      forth any change in the list of Purchasers of Hydrocarbons
      and Pipeline Parties listed on Schedule
      4.1(u).

     

    (d) Other
      Information and Inspections. Borrowers
      will furnish to Lender any information
      which Lender may from time to time request concerning any covenant, provision
      or condition of the Loan Documents or any matter in connection with Borrowers'
      assets, business and/or operations. Borrowers will permit representatives
appointed
      by Lender (including independent accountants, agents, attorneys, appraisers
      and
      any
      other Persons) to visit and inspect, during reasonable business hours and upon
      two (2) Business Days written notice, any of Borrowers' property, including
      their books of
      account, other books and records, and any facilities or other business assets,
      and to make
      extra copies therefrom and photocopies and photographs thereof, and to write
      down and
      record any information such representatives obtain, and Borrowers shall permit
      Lender
      or
      its representatives to investigate and verify the accuracy of the information
      furnished
      to Lender in connection with the Loan Documents and to discuss all such
matters
      with its officers, employees and representatives.

     

    (e) Reserve
      Reports. On
      or
      before March 31 of each year (but effective as of the preceding December 31)
      and
      on or before September 30 of each year (but effective as of
      the
      preceding June 30), Borrowers shall cause the preparation and delivery to Lender
      of
      petroleum engineering reports in a form satisfactory to Lender (collectively,
      the "Reserve
      Reports" and
      individually, a "Reserve
      Report"). Lender
      shall also have the right
      to
      request and receive from Borrowers, within 90 days of such request, one
additional
      Reserve Report during the course of each calendar year, which shall update
      the

    



    
      
        
          
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    last
      Reserve Report previously delivered by Borrowers with an effective date of
      no
earlier
      than 90 days prior to the date of delivery of such additional Reserve Report.
      Each Reserve
      Report to .be delivered hereunder shall be prepared by an Engineer; provided
      that,
      with regard to the Reserve Report effective January 1, 2006 and thereafter,
      Lender approves LaRoche Petroleum Consultants, Ltd., as the Engineer unless,
      for
      periods following January 1, 2006, Lender provides Borrowers 60-day prior
      written notice that Lender
      does not consider such Person a satisfactory Engineer. All Reserve Reports
      required
      by this paragraph shall be prepared at Borrowers' sole expense. Each Reserve
      Report
      shall set forth updated estimates of Proved Reserves which are further
      categorized as
      Proved
      Developed Producing Reserves, Proved Developed Non-Producing Reserves,
Proved
      Undeveloped Reserves, and shall also set forth projected production profiles
      and
overall
      economics of the Properties. Furthermore, the additional parameters and
      guidelines set forth on Schedule
      7.1(e) shall
      also be applied in the preparation of each Reserve
      Report. Each Reserve Report will be based on the following
      assumptions:

     

    (i) Oil
      and
      gas pricing used will be determined by Lender based on eighty-five percent
      (85%)
      of futures market prices reduced
      by, in
      Lender's sole discretion,
      (A) the historical average basis differential between the pricing employed
      by independent third-party over-the-counter counterparties compared to
the
      prevailing wellhead prices at the production location and (B) any other
      adjustments as may be necessary including but not limited to gathering,
      transportation, and processing fees, and further adjusted to reflect the
      economic effect of transactions under any Permitted Swap Agreement.

     

    (ii) Average
      lease operating expenses and production taxes will be derived by the Engineer(s)
      who prepare such report from the Operator's best estimate
      and, in any event, not less than the historical operating expenses, subject
      to
      Lender's approval (which shall not be unreasonably withheld).

     

    (f) Notice
      of Investigations or Proceedings. Borrowers
      shall give Lender immediate
      written notice of any proceeding at law or in equity against Borrowers, or
      any
investigation
      or proceeding before or by any administrative or governmental
      agency.

     

    (g) Notice
      of Damage to Collateral. Borrowers
      shall give Lender prompt written
      notice of any destruction or substantial damage to any of the Collateral and
      of
      the occurrence
      of any condition or event which has caused, or may cause, material loss or
      depreciation in the value of any Collateral.

     

    (h) Maintenance
      of Licenses. Borrowers
      shall maintain all licenses, permits, charters and registrations which are
      required for the conduct of their businesses.

     

    (i) Maintenance
      of Rights. Borrowers
      will maintain, preserve, protect and keep
      all
      of their contractual and property rights, other than in connection with the
      Loan
Documents
      and will not waive, amend or release any such rights without the prior written
      consent
      of Lender.

     

    (j) Maintenance
      of Existence and Qualifications. Borrowers
      will maintain

     

    and
      preserve their corporate and limited partnership existence, as applicable,
      and
      their

    



    
      
        
          
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    rights
      and franchises in full force and effect and will qualify and/or remain qualified
      to do business
      as a foreign corporation and limited partnership, as applicable, in all states
      or jurisdictions where required by applicable law.

     

    (k)
      Payment
      of Trade Debt. Borrowers
      will (i) timely pay all taxes, assessments
      and other governmental charges or levies imposed upon them or upon their income,
      profits or property; (ii) within 30 days after the same becomes due pay all
      Debt
(other
      than the Obligations) owed by them, in connection with the preceding clauses
      (i)
and
      (ii)
      except to the extent Borrowers are disputing such items in good faith; and
      (iii)
maintain
      appropriate accruals and reserves for all of the foregoing Debt in accordance
      with
      GAAP_

     

    (1)
      Creditors.
      Promptly
      upon Lender's request, Borrowers shall provide Lender
      with a statement showing the identity of Borrowers' creditors, the amount due
      to
each
      and
      the date each payment is due thereunder. Borrowers shall notify Lender
immediately
      if any Borrower fails to make any payment to lessors, suppliers, vendors,
owners
      of
      royalty interest, tax authorities or other Persons, where such nonpayment could
      result
      in
      any Lien against any item of Collateral or otherwise interfere with or
      jeopardize performance
      by any Borrower of its obligations under the Loan Documents.

     

    (m) Interest.
      Borrowers
      hereby promise to pay interest to Lender on all Obligations
      (including Obligations to pay fees or to reimburse or indemnify Lender) at
      the
      Interest Rate with respect to the principal amount of the Loans as set forth
      in
Section
      2.2
      and
      otherwise as stated in Section
      7.1(fj)
      after
      such Obligations become due. Borrower
      further agrees that any interest, which has accrued and is not paid when due,
      shall
      be
      added to and become part of the principal under the Note.

     

    (n) Compliance
      with Regulations, Orders and Law. Borrowers
      will conduct their
      business and affairs in compliance with all laws, regulations and orders
      applicable thereto,
      including without limitation, Environmental Laws and the regulations of any
      state
      or
      federal agency which has jurisdiction over the exploration and production
activities
      to be conducted on any Property.

     

    (o) Insurance.
      Borrowers
      shall keep or cause to be kept all of the Collateral that
      are
      fixtures or personal property insured in an amount as lender may require from
      time
      to
      time and subject to coverage that is commercially reasonable and customary
      within
      the oil and gas industry and issued by companies satisfactory to Lender.
      Borrowers shall deliver the policy or policies of such insurance or certificates
      of insurance
      to Lender and such policies and all proceeds thereof shall be security for
      all
Obligations.
      All such insurance shall contain endorsements in form reasonably satisfactory
      to Lender showing Lender as a loss payee and additional party insured as its
      interest may appear.

     

    (p) Policy
      Counterparts or Certificates of Insurance. Borrowers
      shall deliver to
      Lender
      valid counterparts of all insurance policies and all endorsements thereto (or,
      at its
      option, valid certificates of such insurance) which are required hereunder
      to be
obtained
      and maintained by Borrowers.

    



    
      
        
          
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    (q) Prudent
      Operations. Borrowers
      shall prudently develop, and cause the Properties to be continuously operated
      and maintained to produce the output from or allocable
      to such Property over the productive life thereof in a good and workmanlike
      manner
      consistent with prudent operator practices.

     

    (r) Maintenance
      of Leases. Borrowers
      shall use commercially reasonable efforts as a prudent operator to keep and
      perform all of the tellus, conditions and covenants
      of the Leases constituting Properties which are to be kept and performed by
      the
lessee
      for the benefit of the Lender and the holder of the ORR1.

     

    (s) Weekly/Daily
      Field Activity Reports. Beginning
      60 days after Closing, Borrowers shall provide Lender, to the extent possible,
      by telecopy or e-mail, a weekly report
      on
      Tuesday of each week detailing all drilling, completions and workovers for
      the
preceding
      week with respect to the Properties in form and substance reasonably
satisfactory
      to Lender. At Lender's request, Borrowers will provide such reports on a
daily
      basis for activities associated with major expenditures or other extraordinary
      circumstances.

     

    (t) Weekly
      Production Reports. Beginning
      60 days after Closing, Borrowers shall
      provide Lender with weekly reports by telecopy or e-mail setting forth the
      quantities,
      types and specifications of Hydrocarbons produced from or allocable to each
      of
      the
      Properties, in form and substance reasonably satisfactory to Lender and a report
      detailing
      all costs and expenses associated with the activities specified in the reports
      delivered pursuant to this Section
      7.1(t)
      for
      the
      preceding week.

     

    (u) Monthly
      Review Conference. At
      Lender's request, within fourteen (14) days after Borrowers have submitted
      to
      Lender each monthly Property Operating Statement
      pursuant to Section
      2.6, representatives
      of Lender and Borrowers shall meet at a
      mutually acceptable time and place to conduct a monthly review conference that
      will focus
      on,
      among other things, the data contained in the most recently submitted Property
      Operating
      Statement and such other operational and financial data and information as
      Lender may reasonably request.

     

    (v) Operating
      Reports. Within
      thirty (30) days of the Closing, and on a calendar quarterly basis thereafter,
      Borrowers shall provide Lender with a rolling revenue,
      lease operating expense and capital expenditure forecast by month covering
      Borrowers'
      interest in the Properties for the succeeding 12 month period ("Operating
      Report").
      Such
      Operating Reports shall include a brief discussion by Borrowers of operating
      and financial variances from the prior Operating Report delivered to
      Lender.

     

    (w) AFEs.
      Borrowers
      shall provide Lender with all AFEs, representing an estimate
      of work to be done, each of which shall be supported by appropriate invoices,
      bids,
      estimates, contracts or other support, prior to commencing the activity
      contemplated by
      such
      AFE.

     

    (x) Hydrocarbon
      Production Swap Agreements. In
      addition to the initial Permitted
      Swap Agreement described in Section
      2.9, Borrowers
      will from time to time, upon
      thirty (30) days' notice by Lender, enter into one or more Hydrocarbon price
      swaps

    



    
      
        
          
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    pursuant
      to a Permitted Swap Agreement in form and substance reasonably satisfactory
      to
Lender,
      such that up to but not more than ninety percent (90%) of the volume of
Borrowers'
      Net Revenue Interest share of the Proved Developed Producing Reserves scheduled
      to be produced during the term of this Agreement, but not beyond the Loan
Termination
      Date (based upon the most recent Reserve Report) and in an amount not to
exceed
      the sum of (i) the outstanding Obligations plus
      (ii) any
      undrawn availability under this
      Agreement plus
      (iii) the
      total
      availability under the Permitted Swap Agreement, are dedicated
      to the Permitted Swap Agreements or such other price risk management
program
      as approved by Lender; provided,
      however, if
      projected Net Revenue is insufficient to fully amortize the Loans by their
      stated maturity, as more particularly described
      in Section
      10.1(h)(i), Lender
      may require that Borrowers enter into one or more
      such
      swaps for a term or terms that extend beyond the Loan Termination Date.
      Borrowers and Lender shall endeavor to agree upon a swap strategy that will
      most
accurately
      reflect the make-up and pricing of the Hydrocarbons produced and sold by
Borrowers,
      but if the parties are unable to agree on the swap strategy, Borrowers shall
      not
be
      released from their obligation to implement the Permitted Swap Agreement(s)
      required
      by this Section
      7.1(x).

     

    (y) Post-Closing
      Title Opinions. Borrowers
      will deliver to Lender, within sixty
      (60) days following the Closing Date, Title Opinions covering Leases comprising
      85%
      of
      the PWIO of Borrowers' Proved Developed Producing Reserves in the Properties
      as
      of
      Closing showing Defensible Title to the Properties in Borrowers subject only
      to:
(i)
      a
      first
      priority lien created by the Deed of Trust and the ORRI, each in favor of
      Lender, and
      (II)
      the Permitted Encumbrances, and otherwise satisfactory in form and substance
      to
Lender.

     

    (z) Legal
      Fees; etc. Borrowers
      will pay, on or before the Closing Date, all third-party
      and out-of-pocket costs, fees and expenses incurred by Lender in connection
      with
      this
      Agreement, including, without limitation, all title, due diligence,
      environmental, engineering,
      technical, travel, legal and related expenses incurred by Lender in connection
      with the Credit Agreement and the Loan Documents and the transactions
contemplated
      thereunder (to be financed by Lender as a portion of the Initial Loan) up to
      a
      maximum
      of $85,000, and, thereafter, reimburse Lender for all such expenses incurred
      in
      connection therewith, including, without limitation, any subsequent amendment,
      mortgage,
      extension, release or renewal of any Loan Document or the legal expenses
attributable
      to the enforcement of the same or continuing or additional due
      diligence.

     

    (aa)
      Environmental
      Compiia_nce. Within
      sixty (60) days of Closing, Borrowers shall
      (i)
      remedy all material matters set forth in the Environmental Report and any
environmental
      compliance issues listed on Schedule
      4.1(s) so
      as to
      be in compliance in all
      material respects with all applicable Environmental Laws and (ii) provide all
      relevant information
      to Lender in relation thereto.

     

    (bb)
      Facility
      Fee. The
      Facility Fee in relation to the Initial Fee shall be earned and
      payable by Borrowers to Lender out of the Initial Loan advances evidenced by
      the
Note.
      A
      Loan in the amount of the Facility Fee will be deemed to have been advanced
      by
Lender
      to
      Borrowers on the Closing Date, with such Facility Fee having been deemed
      contemporaneously paid by Borrowers to Lender. Each time Lender advances a
      Loan

    



    
      
        
          
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    (other
      than the Initial Loan), a Loan in the amount of an additional Facility Fee
      will
      be earned
      and Borrowers shall be deemed to have requested that Lender advance to
Borrowers
      such additional Facility Fee on such date, with such additional Facility Fee
      having been contemporaneously paid by Borrowers to Lender.

     

     (cc)
      Development
      Operations. Borrowers
      shall submit a Request for Commitment
      to Lender for each of proposed Development Operation for which Borrowers
      seek funding hereunder. With respect to all Development Operations that are
      approved by Lender as set forth in Section
      2.1(b), Borrowers
      shall conduct all such Development Operations in accordance with and within
      the
      cost and time parameters specified in the Request for Commitment specific to
      those Development Operations; provided
      that
      Lender is not obligated to commit funds for Development Operations except
      as
      specifically described in
      Section
      2.1(b) for
      any
      specific Development Operations,
      including any associated cost overruns; and provided
      further that
      if
Borrowers
      are unable to conduct all such Development Operations within the amounts funded
      as the Development Loans described in the specified Request for Commitment,
      Borrowers shall use their own capital to conduct and complete all such
      Development

    Operations.
      Borrowers' intent, willingness and ability to conduct each of the Development
      Operations and the actual implementation of such Development Operations
is
      a
      material inducement to Lender's entry into this Agreement, in the absence of
      which Lender
      would not have done so. Time is of the essence in the proposal and conduct
      by
      Borrowers of each of the Development Operations approved by Lender.

     

    (dd)
      Protection
      Against Drainage. Until
      the
      Obligations have been fully and finally
      paid and performed, (i) to the extent that Properties are operated by Borrowers,
      Borrowers
      shall act as a prudent operator in an effort to identify and prevent the
occurrence
      of any drainage of Hydrocarbons from the Properties and (ii) to the extent
      that
Properties
      are not operated by Borrowers, Borrowers shall utilize their property and
contractual
      rights as a prudent owner in an effort to identify and prevent the occurrence
      of
      any
      drainage of Hydrocarbons from the Properties.

     

     (ee)
      Expenditures
      Related to Initial Loan. On
      or
      before thirty (30) days following
      the Closing Date, Borrowers will deliver to Lender a report which provides
      an
itemized
      and detailed description of the expenditures paid with the Initial Loan
      proceeds, together
      with all relevant documentation evidencing such expenditures.

     

     (ff)
      Interest
      on Lender's Third Party Costs, Expenses and Fees. All
      third-party costs,
      fees and expenses incurred by Lender for which Borrowers are obligated to pay
      or
reimburse
      Lender pursuant to the provisions of this Agreement which are not paid on or
      before
      the Closing Date in accordance with Section
      7.1(z)
      shall be payable within fifteen (15) days after Borrowers' receipt of an invoice
      therefor from either Lender or its third-party
      consultants or vendors and Borrowers shall pay interest at the Default Rate
      from
      the date
      payable until paid on all such amounts.

     

    (gg)
      Further
      Assurances. Borrowers
      agree, upon request of Lender and at Borrowers'
      expense, to furnish to Lender such information, to execute and deliver to
Lender
      such documents, and to do such other acts and things, all as Lender may
reasonably
      request.

    



    
      
        
          
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    (hh)
      Administration
      Fee. At
      Closing, and on the last day of each Fiscal Quarter,
      Borrower shall pay to Lender an administration fee in the amount of $5,000
      ("Administration
      Fee").
      The initial Administration Fee shall be deemed advanced by Lender
      to
      Borrower on the Closing Date as part of the Initial Loan and paid by Borrower
      to
      Lender
      contemporaneously therewith, and each subsequent Administration Fee shall
be
      paid
      by Borrower to Lender as part of the Obligations pursuant to Section
      2.6.

     

    Section
      7.2 Negative
      Covenants. Borrowers
      warrant, covenant and agree that until the
      full
      and final repayment and performance of the Obligations and the termination
      of
      each of the
      Loan
      Documents (other than the Overriding Royalty Conveyance):

     

    (a) Limitation
      on Sales of Collateral. Borrowers
      will not sell, transfer, lease, exchange,
      alienate or otherwise dispose of any Collateral or any interest therein except
      for:
      (i)
      sales
      of
      Hydrocarbon production in the ordinary course of business, (II)
      dispositions expressly permitted by other provisions of this Agreement,
      including the Sale
      of a
      Promoted Interest pursuant to Section
      11.13,
      and
      (iii)
      dispositions
      to which Lender
      has granted its express written consent.

     

    (b) Limitation
      on Distributions. Without
      Lender's prior written approval, Borrowers
      shall not, either directly or indirectly, make any distribution, pay any
compensation,
      or make any advances to any of its partners; provided
      that
      nothing in this subpart (b) shall prevent or prohibit Borrowers from (i) making
      payments permitted by Section
      7.2(e)
      to
      officers, directors and employees who are also partners, (ii) distributing
      (as
      long
      as no Unmatured Event of Default or Event of Default then exists or would result
      from
      such
      distributions) to their partners (A) those receipts identified in Section
      2.6(c), (B)
      the
      proceeds of any Overhead Advance, or (C) a portion of the Initial Loan up to
      an
amount
      equal to the Reimbursed Costs, or (iii) to the extent no Event of Default has
      occurred and is continuing, distributions for the payment of Corporate Income
      Taxes.

     

    (c) Limitation
      on Credit Extensions. Without
      Lender's prior written approval, Borrowers
      will not extend credit, make advances or make loans to any Person, whether
      or
not
      an
      Affiliate of any Borrower.

     

    (d) Certain
      Contracts; Amendments; ERISA Plans. Without
      Lender's-prior
      written
      approval, Borrowers will not amend or permit any amendment to any contract
      or
lease
      which releases, qualifies, limits, makes contingent or otherwise detrimentally
      affects
      the rights and benefits of Lender under or acquired pursuant to any Loan
Documents.
      Borrowers will not incur any fixed or contingent obligation to contribute to
      any
      ERISA
      Plan.

     

    (e)
      Compensation.
      Borrowers
      shall not, directly or indirectly, enter into any employment
      agreement or other arrangement with or for the benefit of an officer, director
      or
      employee of Borrowers other than reasonable compensation for services as an
      officer, director,
      employee or third-party provider of services. No fee shall be paid to any
      Person

    for
      serving as the General Pastiler,
      except any commercially reasonable and necessary

    expenses
      incurred by the General Partner on behalf of Borrowers shall be reimbursed
      by
Borrower_
      Notwithstanding the foregoing, any such expenses or compensation
      permitted

    



    
      
        
          
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    under
      this Section
      7.2(e), shall
      be
      payable only out of Net Revenue distributed to Borrowers
      pursuant to Section
      2.6(d).

     

    (f) Debt.
      Except
      (i)
      for
      Debt
      (A) arising in connection with Permitted Encumbrances
      or (B) related to the Pipeline and included on Schedule
      4.1(h) or
      (ii)
      as
      otherwise
      expressly provided in this Section
      7.2(f), Borrowers
      shall not (x) create, incur, assume or suffer to exist any Debt, except
      Obligations to Lender hereunder and trade payables incurred in the ordinary
      course of Borrowers' business, or (y) sell, discount or factor
      their accounts, instruments, intangibles, leases or chattel paper; provided,
      however, Borrowers
      may incur Debt not to exceed $150,000 in the aggregate at any time outstanding
      with regard to direct costs and expenses incurred in the operation of the
      Properties.

     

    (g) Guarantees.
      Except
      as
      expressly provided herein, Borrowers shall not assume, Guarantee, or endorse
      or
      otherwise become directly or contingently liable in connection
      with any other liability of any other Person except for the indemnification
      contained
      herein.

     

    (h) Acquisition.
      Borrowers
      shall not acquire or commit or agree to acquire any
      of
      the stock, securities or assets of any other Person other than as disclosed
      in
      writing to,
      and
      approved by, Lender in connection with Borrowers' acquisition of any of the
      Properties.

     

    (i) Cancellation
      of Claims. Borrowers
      shall not cancel any claim or Debt in excess
      of
      a total of $15,000 in the aggregate during the term of this Agreement, except
      for
      reasonable consideration and in the ordinary course of their
      businesses.

     

    Defaults.
      Except
      as
      previously disclosed to Lender, Borrowers shall not cause
      a
      default under any lease, mortgage, deed of trust or lien on real estate owned
      or
      leased by Borrowers including an Unmatured Event of Default or an Event of
      Default.

     

    (k)
      Security
      Interests and Liens. Borrowers
      shall not suffer to exist any valid lien,
      encumbrance, mortgage or security interest or consent to the filing of any
      financing statements
      on any of the Collateral other than the Liens created by the Loan Documents
      granted
      herein and Permitted Encumbrances.

     

    (1)
      Creation
      of Subsidiary. Borrowers
      shall not (i) create any direct or indirect
      subsidiary or divest themselyes of any material assets by transferring them
      to
      any future
      subsidiary or by entering into a partnership, joint venture or similar
      arrangement, (ii)
      make, or permit the General Partner to make, any material change in its capital
      structures,
      or (iii) enter into any management contract permitting a third party any
      management rights with respect to Borrowers' business.

     

    (m)
      Certain
      Changes. Borrowers
      shall not transfer their principal office or their
      registered offices from their current locations or change their name or keep
      Collateral at any location(s) other than those at which the same are presently
      kept or without
      written consent of Lender. Borrowers shall not change their Fiscal
      Year.

    



    
      
        
          
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    (n) Loan
      Documents. Borrowers
      shall not alter, amend or cause the alteration or
      amendment of any of the Loan Documents without the prior written consent of
      Lender.

     

    (o) Amendments
      to Formation Documents. Without
      Lender's prior written approval, Borrowers shall not (i) adopt any amendment,
      modification or waiver of any provision
      of their Certificates of Incorporation, Bylaws, Certificates of Limited
Partnership
      or Agreements of Limited Partnership, as applicable, nor shall Borrowers permit
      General Partner to adopt any amendment, modification or waiver of any provision
      of
      its
      Certificate of Organization or its Limited Liability Agreement or (ii) opt
      into
Chapter
      8
      of the Texas Uniform Commercial Code for purposes of determining whether
the
      partnership interests issued by Borrowers are "securities" as defined under
      that
Chapter.

     

    (p) Investments.
      Without
      Lender's prior written consent, Borrowers will not make,
      or
      suffer to exist, any Investment except Investments in certificates of deposit
      or
      other obligations of a bank or trust company having capital, surplus and
      undivided profits of at least $100,000,000, or obligations of the United States
      government or any agency thereof.

     

    (q) Partners;
      General Partner. Without
      Lender's prior written consent, Borrowers
      will not permit General Partner to withdraw or be removed as General Partner,
      nor
      shall
      Borrowers permit the membership interests or voting rights with respect to
      the
membership
      interests of the General Partner be sold or transferred by the current owners
      thereof.

     

    (r)
      Change
      of Operator. Borrowers
      shall not take any action to remove any Operator of any of the Properties and
      shall not take any action to appoint, remove or replace
      any other Operator without Lender's prior written consent.

     

    Affiliate
      Transactions. Borrowers
      shall not enter into one or more transactions
      with any Affiliate of any Borrower, except with Lender's prior written
approval
      and then only to the extent the terms of any such transaction are fair and
      reasonable
      (at least as favorable as would be obtainable by such Borrower at the time
      in a
comparable
      arm's length transaction with a Person other than an Affiliate).

     

    (t)
      Ratios.
      Borrowers
      shall not permit at any time (i) the market value of their
      combined current liabilities (excluding from the calculation of current
      liabilities the Loans
      and
      any required mark-to-market of unliquidated commodity-hedge contracts
required
      under FASB 133) to exceed the market value of their combined current assets
      (excluding from the calculation of current assets any required mark-to-market
      of
      unliquidated commodity-hedge contracts required under FASB 133) (calculated
      in
accordance
      with GAAP) and (ii) their Loan to Value Ratio to be greater than (A) 1.0 to
      1.0
      for
      the period commencing on the date Lender receives the Reserve Report dated
      effective
      as of June 30, 2007 or (B) 0.7 to 1.0 for the period commencing on the date
      Lender
      receives the Reserve Report dated effective as of June 30, 2008 and at any
      time
      thereafter.

    



    
      
        
          
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    (u)PSAs.
      Without
      Lender's prior written consent, Borrowers will not amend

    or
      otherwise modify, or agree to amend or modify either PSA.

     

    ARTICLE
      VIII

     

    FURTHER
      RIGHTS OF LENDER

     

     Section
      8.1 Maintenance
      of Security Interests. Borrowers
      authorize Lender to execute alone any financing statement or other documents
      or
      instruments that Lender may require
      under Section
      6.2 to
      perfect, protect or establish any Lien hereunder or under any Security
      Documents and further authorizes Lender, upon notice to Borrowers, to sign
      Borrowers' names
      on
      the same. Borrowers hereby authorize Lender, during the continuance of any
      Event
      of Default,
      to appoint such Person or Persons as Lender may designate as its agent and
      attorney-in-fact
      to endorse the name of any Borrower on any checks, notes, drafts or other forms
      of
      payment or security that may come into the possession of either Lender or any
      Affiliate of Lender,
      to sign any Borrower's name on invoices or bills of lading, drafts against
      customers, notices of assignment, verifications and schedules and, generally,
      to
      do all things necessary to carry
      out
      this Agreement and the Security Documents. The powers granted herein, being
      coupled
      with an interest, are irrevocable. Neither Lender nor the agent and
      attorney-in-fact shall be liable for any act or omission, error in judgment
      or
      mistake of law so long as the same is not malicious
      or grossly negligent. Upon payment and performance of all Obligations of
      Borrowers to
      Lender, such power of attorney will become null and void.

     

     Section
      8.2 Performance
      of Obligations. In
      the
      event that Borrowers fail to purchase or
      maintain insurance in accordance with the requirements of this Agreement, or
      to
      pay any tax, assessment,
      government charge or levy, except as the same may be otherwise permitted
hereunder,
      or in the event that any Lien prohibited hereby shall not be paid in full or
      discharged, or
      in the
      event that Borrowers shall fail to perform or comply with any other covenant,
      promise or
      Obligation to Lender hereunder or under any Loan Document, Lender may, but
      shall
      not be required
      to, perform, pay, satisfy, discharge or bond the same for the account of
      Borrowers, and all
      monies so paid by Lender, including, without limitation, reasonable attorneys'
      fees and disbursements,
      shall be treated as an additional Obligation of Borrowers to Lender hereunder
      and under
      the
      Loan Documents.

     

     Section
      8.3 Access
      to Collateral. In
      addition to Lender's rights under Section
      7.1(d), upon
      the
      occurrence and during the continuance of an Event of Default, Lender may (i)
      enter Borrowers'
      premises at any time on reasonable notice; and (II) until it completes the
      enforcement of
      its
      rights in the Equipment or other Collateral subject to its Lien and the sale
      or
      other disposition
      of any property subject thereto, take possession of such premises without
      charge, rent or
      payment therefor, or place custodians in control thereof, remain on such
      premises and use the same
      and
      any of Borrowers' Equipment and other Collateral for the purpose of completing
      any work
      in
      process, preparing any Collateral for disposing of or collecting any
      Collateral.

     

     Section
      8.4 Overriding
      Royalty Interest. ORRIs
      Conveyed
      at Closing. At
      Closing, Borrowers shall assign to Lender an ORRI (i) equal to one percent
      (1.0%) of 8/8ths proportionately
      reduced to Borrowers' Working Interest in the Properties, including the Leases
      described
      on Exhibit
      "A" and
      Wells
      described on Exhibit
      "A"
      and
      related Units, and (ii) an additional
      one and one-half percent (1.50%) of 8/8ths proportionately reduced to Borrowers'
      Working
      Interest in each Well described on Exhibit
      "A"
      and
      related Unit, in each case by

    



    
      
        
          
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    executing
      and delivering to Lender the Overriding Royalty Interest Conveyance. The
      effective date of the ORRI conveyed to Lender at Closing will be March 1,
      2006.

     

    (a)
      Additional
      ORRIs Conveyed After Closing. In
      addition to the ORRI assigned
      to Lender at Closing pursuant to Section
      8.4(a) above,
      Borrowers shall, contemporaneous with each advance by Lender under a Development
      Loan and to the extent not previously assigned to Lender, assign to Lender
      an
      ORRI (i)
      equal
      to
      an additional
      one percent (1.00%) of 8/8ths proportionately reduced to Borrowers' Working
      Interests
      in any Leases and Wells (and related Units) acquired after the Closing Date
      which
      are
      paid for in whole or in part with Development Loans, and (ii)
      an
      additional one and one-half percent (1.50%) of 8/8ths proportionately reduced
      to
      Borrowers' Working Interest
      in each new Well (i.e., other than the Wells described on Schedule
      2.1(b) or
      Exhibit
      "A"
      but
      including any
      Well
      acquired in a transaction pursuant to Section
      8.6 below)
      and related Unit for which Lender advances a Development Loan, in each case
      by
executing
      and delivering to Lender the Overriding Royalty Interest
      Conveyance.

     

    Section
      8.5 Set-Off
      Rights. Upon
      the
      occurrence and during the continuance of an Event
      of
      Default, Lender shall have the right to set-off and apply against the
      Obligations in such manner as Lender may determine, any and all deposits
      (general or special, time or demand, provisional
      or final) or other sums at any time credited by or owing from Lender or any
      depositary
      to any Borrower whether or not the Obligations are then due, except for any
      amounts owing
      to
      third-party Working Interest and royalty interest holders of which Lender shall
      have been
      notified. Lender shall provide reasonable notice to. Borrowers following any
      application of such
      funds. As further security for the Obligations, Borrowers hereby grant to Lender
      a security interest
      in all money, instruments, and other property of Borrowers now or hereafter
      held
      by Lender,
      including, without limitation, property held in safekeeping. In addition to
      Lender's right of
      set-off and as further security for the Obligations, Borrowers hereby grant
      to
      Lender a security interest
      and lien in all deposits (general or special, time or demand, provisional or
      final) and other
      accounts of Borrowers now or hereafter on deposit with or held by Lender or
      any
depositary
      and all other sums at any time credited by or owing from Lender or any
      depositary to any
      Borrower. The rights and remedies of Lender hereunder are in addition to other
      rights and remedies (including, without limitation, other rights of set-off)
      which Lender may have.

     

    Section
      8.6Right
      of Lender to Finance Affiliate Prospects in Project Area.


    (a)
      Right
      to Finance Acquisitions. If,
      at
      any time after the date of this Agreement,
      any Affiliate of either Borrower acquires an interest in any Lease, Unit or
      Well
      within the Project Area (an "Affiliate-Owned
      Barnett Interest"), Borrowers
      shall promptly
      prepare and submit to Lender a Request for Commitment requesting a Development.
      Loan advance to purchase such Affiliate-Owned Barnett Interest on the same
      terms
      and at the same price as such Affiliate acquired the interest. The approval
      of
      each such Request for Commitment will be at the sole and absolute discretion
      of
      Lender. If
      Lender
      approves the Request for Commitment, Borrowers shall promptly (i)
      cause
      such
      Affiliate to assign such Affiliate-Owned Barnett Interest to Borrowers,
(ii)
      execute
      and
      deliver to ,Lenders
      a
      supplement to the Deed of Trust covering such Affiliate-Owned Barnett
      Interest and (iii)
      assign
      to
      Lenders the ORRI in accordance with Section
      8.4 above.

    



    
      
        
          
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     (b)
      Right
      to Finance Development. If,
      at
      any time after the date of this Agreement,
      any Affiliate of either Borrower proposes to drill any new Well(s) on an
Affiliate-Owned
      Barnett Interest—and without regard to whether Lenders have previously
      declined to approve a Request for Commitment from Borrowers to acquire
such
      Affiliate-Owned Barnett Interest—Borrowers shall promptly prepare and submit to
      Lender a Request for Commitment requesting a Development Loan advance to
      purchase such Affiliate-Owned Barnett Interest (on the same terms and at the
      same price as such Affiliate acquired the interest) and drill the proposed
      Well(s). The approval of each such Request for Commitment will be at the sole
      and absolute discretion of Lender. If Lender approves
      the Request for Commitment, Borrowers shall promptly (i) cause such Affiliate
      to
      assign
      such Affiliate-Owned Barnett Interest to Borrowers, (ii) execute and deliver
      to
Lenders
      a
      supplement to the Deed of Trust covering such Affiliate-Owned Barnett
Interest
      and (iii) assign to Lenders the ORRI in accordance with Section
      8.4 above.

     

    ARTICLE
      IX

     

    CLOSING;
      CONDITIONS TO CLOSING

     

    Section
      9.1Closing.
      Subject
      to the conditions set forth in this Agreement, the closing

    shall
      occur at a mutually agreeable time on or before March,
      2006
      (the "Closing").
      The
      date

    the
      Closing actually occurs is hereby called the "Closing
      Date." The
      Closing shall be held at the offices of Lender's counsel in Houston, Texas,
      or
      at such other place as Borrowers and Lender may agree in writing.

     

     Section
      9.2 Conditions
      to Closing. As
      conditions precedent to the making of the Initial
      Loan hereunder and to the making of any other Loans, Lender shall have obtained
      approval
      of its management and Borrowers shall deliver to Lender the following items
      duly
      executed (where required) and in form and substance satisfactory to Lender
      and
      its counsel:

     

    (a) the
      Note
      and multiple counterparts of this Agreement and satisfactory evidence
      in Lender's sole discretion that the PSAs have irrevocably closed and in
      relation thereto,
      Borrowers own all the interests in the Properties;

     

    (b) a
      Permitted Swap Agreement covering matters addressed in Section
      2.9,

     

    together
      with the Intercreditor Agreement executed by the counterparty
      thereunder;

     

     (c)
      the
      Overriding Royalty Interest Conveyance, the Deed of Trust, the Security
      Agreement, the Pledge Agreement and the other Loan Documents and in as
many
      counterparts as Lender may require;

     

    (d) duly
      executed copies of the assignment instruments contemplated as

     

    closing
      conditions under the PSAs, as Lender may request;

     

    (e) a
      certificate of an authorized officer of Parent and General Paltimer
      on

     

    behalf
      of
      each Borrower dated the Closing Date, certifying the incumbency of their
officers
      executing this Agreement and any other documents required hereby and
certifying
      resolutions adopted by the board of director, board or managers or similar
      governing
      body Borrowers, Parent and General Partner authorizing their respective
execution
      and delivery of this Agreement, the Note, the Deed of Trust, the other
      Loan

    



    
      
        
          
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    Documents
      and all other documents and instruments contemplated by this Agreement to which
      each of them is a party;

     

    a
      certificate of an authorized officer of Parent and General Partner on
behalf
      o
      each Borrower dated the Closing Date, certifying the truth and accuracy of
      the
      representations and warranties of Borrowers set forth in this Agreement and
      Borrowers' performance
      and compliance with all agreements and covenants required by this Agreement
      to
      be performed or complied with prior to the making of the Loans;

     

    (g) a
      certificate of an authorized officer of General Partner on behalf of each
Borrower
      dated the Closing Date, certifying the truth and accuracy of the following
      lists
to
      be
      provided by Borrowers: (i) a list dated the Closing Date of all existing sales
      contracts
      and all Purchasers of Production and Pipeline Parties; (ii) a list of all
mechanics'
      and materialmen's liens (and other similar liens), and liens under operating
      and
      similar agreements, to the extent the same relate to expenses incurred in the
      ordinary course
      of
      business; (iii) a list of statutory liens for taxes which are not yet
      delinquent; and (iv)
      a
      list of all outstanding Debts of Borrowers;

     

    (h) Certificates
      of Limited Partnership of each of the Borrowers certified by the
      Secretary of State of the state of their formation and their Agreement of
      Limited Partnership
      certified by an authorized officer of General Partner, together with the
Articles
      of Organization and the Limited Liability Company Agreement of the General
      Partner
      certified by the Secretary of State of the state of its formation and certified
      by an authorized
      officer of the General Partner;

     

    certificates,
      as of the most recent dates practicable, of the Secretary of State
      of
      Texas attesting to Borrowers' and General Partner's existence, as applicable,
      and of each state in which Borrower and General Partner are qualified to do
      business as a limited partnership and a limited liability company, respectively,
      attesting to such qualification,
      and from the comptroller or department of revenue or taxation of each of
the
      foregoing states, as to the good standing of Borrowers and General
      Partner;

     

    the
      written opinion of Borrowers' counsel dated the Closing Date and addressed
      to Lender;

     

    (k) evidence
      that Borrowers have obtained insurance in accordance with

     

    Sections
      7.1(o) and
      (p);

     

    (1)
      title
      materials satisfactory to Lender establishing that Borrowers have acquired
      and/or own Defensible Title to the Properties, subject only to Permitted
      Encumbrances;

     

    (m) the
      Pro
      Forma Financial Statements of Borrowers as of the Closing Date;

     

    (n) the
      results of a Uniform Commercial Code search showing all financing statements
      and other documents or instruments on file against Borrowers and General
Partner
      from the Offices of the Secretary of State of the States in which Borrowers
      and
General
      Partner are formed;

    



    
      
        
          
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    (o) fully
      executed Petro Releases satisfactory to Lender covering all the liens
and
      security interests granted in connection with the EBS Loans and evidence
      satisfactory to
      Lender
      of the payment in full of the EBS Loans;

     

    (p) evidence
      satisfactory to Lender that it is obtaining first priority security interests
      and liens on the Collateral;

     

    (q) any
      and
      all fees required under this Agreement are paid in full; and

     

    (r) such
      other documents and instruments as T
      .ender
      may reasonably request.

     

    Section
      9.3 Additional
      Conditions to Loans. In
      addition to the conditions set forth in
      Section
      9.2 above,
      each Loan (including the Initial Loan) to be made by Lender shall be
subject
      to Borrowers' satisfaction or Lender's written waiver of each of the following
      conditions:

     

    (a) There
      is
      no Event of Default, Unmatured Event of Default or Tax Claim;

     

    (b) All
      of
      Borrowers' representations and warranties made in any Loan Document
      shall be true and correct as if made on the date of such Loan (except to the
      extent
      that the facts upon which such representation are based have been changed by
      the
extension
      of credit hereunder);

     

    (c) Borrowers
      shall have performed and complied with all agreements and conditions in the
      Loan
      Documents which are required to be performed or complied with by them on or
      prior to the date of such Loans;

     

    (d) No
      law,
      regulation, order, judgment or decree of any governmental authority is in effect
      or pending which shall enjoin, prohibit or restrain such Loan or impose, or
      result in the imposition of, any adverse condition upon Lender;

     

    (e) Lender
      shall have received all documents and instruments which Lender has
      then
      reasonably requested as to, (i) the accuracy and validity of or compliance
      with
all
      representations, warranties and covenants made by any Person in any Loan
      Document, (ii)
      the
      satisfaction of all conditions contained herein or therein, and (iii) all other
      matters pertaining
      hereto and thereto. All such additional documents and instruments shall be
      satisfactory
      to Lender (in reasonable exercise of its discretion) in form, substance, and
      date;

     

    (f) Lender
      shall have received satisfactory due diligence analysis including, but
      not
      limited to, financial and operational data, title and environmental review,
      all
      such data to be provided by Borrowers;

     

    (g)
      Lender shall have received satisfactory information regarding existing
operating
      agreements and also all existing gas sales and oil sales which will include,
      for
gas
      sales
      on a well-by-well basis, where applicable, transportation costs, gathering
      costs, processing
      costs; gas stream heating content, then-current market prices for gas of similar
      quality
      and copies of existing sales contracts and for oil sales, individual well
      specific

    



    
      
        
          
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    gravity
      of produced oil, transportation costs, sulfur content, purchase bonuses,
      then-current market prices for oil of similar quality, and copies of existing
      sales contracts;

     

    (h) To
      the
      extent Borrowers have not previously delivered them to Lender in connection
      with a prior Loan, Borrowers shall have (i)
      executed
      and delivered to Lender any
      agreement, document, instrument or other Loan Document required of Borrowers
      in
connection
      with the Loan requested and (ii)
      to
      the
      extent any agreement, instrument, report
      or
      other documents to be prepared or executed by any other Person and delivered
      to
      Lender
      in accordance with the terms and conditions of this Agreement (including but
      not
      limited to the Environmental Report), Borrowers shall have caused such other
      Person to
      do
      so;

     

    (i) Borrowers
      have implemented a hedging and commodity pricing risk
      management program satisfactory to Lender in its sole and absolute discretion
      pursuant to the Permitted Swap Agreement;

     

    at
      all
      times after the implementation of the initial hedging and commodity pricing
      risk management program pursuant to Section
      9.3(i) above,
      Lenders shall be satisfied
      in its sole discretion with Borrowers' hedging and commodity pricing risk
management
      program and its implementation pursuant to the Permitted Swap Agreement;
and

     

    (k)
      Borrowers shall have delivered to Lender the financial statements described
      in Section
      4.1(g)
      and
      such
      financial statements are acceptable to Lender; provided
      that,
      upon the delivery of such financial statements to Lender, (i)
      such
      financial statements
      will be deemed to have been delivered to Lender and made part of this
Agreement
      as of the Closing Date and (it) the representation set forth in Section
      4.1(g)
      will
      be
      deemed to have been made by Borrowers as of the Closing Date.

     

    ARTICLE
      X

     

     

    EVENTS
      OF DEFAULT AND REMEDIES

     

    Section
      10.1Events
      of Default. Each
      of
      the following events constitutes an

    Unmatured
      Event of Default under this Agreement:

     

    (a) Borrowers
      fail to pay any Obligation for principal or interest owing under the
      Note
      when the same is due and payable, whether at a date for the payment of an
installment
      or as a contingent or other payment becomes due and payable or as a result
      of
acceleration
      or otherwise;

     

    (b) Projected
      Net Revenue attributable to Proved Reserves, based on any of the
      Reserve Reports to be delivered to Lender after the Closing Date (after being
      adjusted to
      incorporate Lender's then-current assumptions with respect to pricing, Expenses,
      discount rates and hedges under Permitted Swap Agreements) is insufficient
      to
      fully amortize the Loans by their stated maturity;

     

    (c)Any
      Loan
      Document at any time ceases to be valid, binding and

     

    enforceable
      against any Borrower for any reason other than its release or
      subordination

    



    
      
        
          
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    made
      with
      the consent of Lender; or any Borrower or General Partner assert that any
Loan
      Document to which it is a Party is not valid, binding and enforceable against
      any Borrower or General Partner;

     

    (d) Borrowers
      fail to duly observe, perform or comply with any covenant set forth in
Section
      7.2;

     

    (e) Any
      "Event of Default" (as defined in the Security Document) (other than
an
      event
      which is referred to in. subsections
      (a) through
      (d)
      above)
      occurs under the Security
      Document, and the same is not remedied within the applicable period of grace
      (if
      any)
      provided in such Security Document;

     

    (f) Borrowers
      fail (other than as referred to in subsections
      (a) through
      (e)
      above)
      to
      duly observe, perform or comply with any covenant, agreement, condition or
      provision
      of any Loan Document, and such failure is not remedied within thirty (30) days
      of
      the
      time at which Borrowers receive notice from Lender or otherwise knows or should
      have
      known of such failure;

     

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

     

    (h)
      Any
      Lien against the Property, resulting from a Tax Claim or otherwise, for
      $50,000 or more is asserted against any Borrower and such claim is not
      withdrawn, formally disputed in good faith, or otherwise disposed of within
      ninety days (90) thereafter;

     

    Subject
      to Permitted Encumbrances, Lender shall at any time not have a perfected first
      priority Lien on all or any part of the Collateral;

     

    Except
      in
      connection with Borrowers' sale of a Promoted Interest in accordance
      with Section
      11.13
      below,
      Borrowers' Working Interest in the Properties increases
      or its Net Revenue Interest in the Properties decreases from the interests
      set
forth
      in
Exhibit
      "A" without
      the prior written consent of Lender;

     

    (k)Any
      Borrower:

     

    (i) has
      entered against it a judgment, decree or order for relief by a court
      of
      competent jurisdiction in an involuntary proceeding commenced under any
      applicable bankruptcy, insolvency or other similar law of any jurisdiction
      now
      or
      hereafter in effect, including the federal Bankruptcy Code, as from time to
      time
      amended, or has any such proceeding commenced against it; or

     

    (ii) commences
      a voluntary case under any applicable bankruptcy, insolvency or similar law
      now
      or hereafter in effect, including the federal Bankruptcy Code, as from time
      to
      time amended; or applies for or consents to the entry of an order for relief
      in
      an involuntary case under any such law; or makes a

    



    
      
        
          
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    general
      assignment for the benefit of creditors; or fails generally to pay (or admits
      in
      writing its inability to pay) Debts as such Debts become due; or takes action
      to
authorize
      any of the foregoing; or

     

    (iii) suffers
      the appointment of or taking possession by a receiver, liquidator, assignee,
      custodian, trustee, sequestrator or similar official of all or a substantial
      part of its assets or of any part of the Collateral in a proceeding brought
      against or initiated by it, or such appointment or taking possession is at
      any
      time
      consented to, requested by or acquiesced to by it; or

     

    (iv) suffers
      the entry against it of a final judgment for the payment of money
      in
      excess of $100,000, unless the same is discharged within thirty (30)
days
      after the date of entry thereof or an appeal or appropriate proceeding for
      review
      thereof is taken within such period and a stay of execution pending such
appeal
      is
      obtained; or

     

    (v) suffers
      a
      writ or warrant of attachment or any similar process to be issued
      by
      any court against all or any substantial part of its assets or any part of
      the
      Collateral, and such writ or warrant of attachment or any similar process is
      not
stayed
      or
      released within thirty (30) days after the entry or levy thereof or after
any
      stay
      is vacated or set aside; or

     

    (vi) fails
      to
      pay any Debt in excess of $150,000 (other than the Obligations) or any interest
      or premium thereon, when due (whether at scheduled maturity or by acceleration,
      demand or otherwise) and such failure shall continue after the applicable grace
      period, if any, specified in the agreement or instrument relating
      to any such Debt or any other event shall occur and shall continue after
the
      applicable grace period, if any, specified in such agreement or instrument,
      if
the
      effect of such default or event is to accelerate or to permit the acceleration
      of, the
      maturity of such Debt, or if, as the result of such a default, any such Debt
      shall
      be
      declared to be due and payable, or is required to be prepaid, prior to the
      stated maturity thereof; or

     

    (vii)
      fails to perform its obligations under the Overriding Royalty Interest
      Conveyance or any Permitted Swap Agreement and such failure continues
beyond
      any applicable grace period set forth therein; or

     

    (1)a
      Change
      of Control occurs with regard to any Borrower General Partner;

     

    (m) any
      Borrower that is or becomes the Operator of any of the Properties ceases
      to
      be the Operator of such Properties without the prior written consent of
      Lender;

     

    (n) Borrower
      fails to deliver the Environmental Report on or before the 90th day
      following Closing;

     

    (o)
      Borrower fails to implement pursuant to the Permitted Swap Agreement a
hedging
      and commodity pricing risk management program satisfactory to Lender on or
      before
      the 10th
      day
      following Closing; or

    



    
      
        
          
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    (p)
      the
      counterparty under any Permitted Swap Agreement fails to consent to the
      making of any Loan advance to the extent the consent of such counterparty is
      required
      pursuant to the Intercreditor Agreement; and

     

    upon
      the
      delivery of written notice to Borrowers by Lender and the continuation of such
      Unmatured
      Event of Default after the expiration of any applicable cure period, such
      Unmatured Event
      of
      Default shall constitute an Event of Default; provided,
      however, the
      occurrence of any of
      the
      events described in Section
      10.1(k)(i), (k)(ii) or
      (k)(iii)
      above
      will constitute an Event of Default
      without regard to whether Lender provides written notice to
      Borrowers.

     

    Section
      10.2 AccelerationAutomatic
      Acceleration.
      Upon
      the
      occurrence of an Event of Default
      described in Section
      10.1(k)(0,
      (k)(ii) or
      (k)(iii), all of the Obligations shall thereupon
      be immediately due and payable, without demand, presentment, notice of
demand
      or
      of dishonor and nonpayment, protest, notice of protest, notice of intention
      to
      accelerate, declaration or notice of acceleration, or any other notice or
      declaration of any kind, all of which are hereby expressly waived by Borrowers
      and each obligor who at any time
      ratifies or approves this Agreement. After any acceleration under this
      subsection, any
      obligation of Lender to make any further Loans or advances of any kind under
      any
      Loan Document shall at the option of Lender be permanently
      temfinated.

     

    (b)
      Other
      Acceleration. Upon
      the
      occurrence and during the continuance of any
      Event
      of Default not described in the preceding. Section
      10.2(a), Lender
      may at any time and from time to time and without notice to Borrowers, except
      as
      may otherwise be required
      hereunder, declare any or all of the Obligations immediately due and payable,
      and all such Obligations shall thereupon be immediately due and payable, without
      demand, presentment, notice of demand or of dishonor and nonpayment, protest,
      notice of
      protest, notice of intention to accelerate, declaration or notice of
      acceleration, or any other
      notice or declaration of any kind, all of which are hereby expressly waived
      by
Borrowers.

     

    Section
      10.3 Remedies.
      If
      any
      Event of Default shall occur and be continuing, Lender's
      obligation to make any Loan(s) shall be suspended, and Lender may protect and
      enforce its rights under the Loan Documents by any appropriate proceedings,
      including proceedings
      for specific performance of any covenant or agreement contained in any Loan
      Document,
      and Lender may enforce the payment of any Obligations due or enforce any other
      legal
      or
      equitable right. All rights, remedies and powers conferred upon Lender under
      the
      Loan Documents
      shall be deemed cumulative and not exclusive of any other rights, remedies
      or
powers
      available under the Loan Documents or at law or in equity. If any Unmatured
      Event of Default
      shall occur and be continuing, Lender's obligation to make any Loans shall
      be
suspended,
      so long as any such Unmatured Events of Default or resulting Events of Default
      is continuing.

     

    Section
      10.4 Indemnity_
      Borrowers
      agree to indemnify Lender, upon demand, from and
      against any and all liabilities, obligations, claims, losses, damages,
      penalties, fines, actions, judgments,
      suits, settlements, costs, expenses or disbursements (including reasonable
      fees
      of attorneys,
      experts and advisors) of any kind or nature whatsoever (in this Section
      10.4 collectively
      called "liabilities and costs") which to any extent (in whole or in part) may
      be
imposed
      on, incurred by or asserted against Lender growing out of, resulting from or
      in
      any other

    



    
      
        
          
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    way
      associated with any of the Collateral, the Loan Documents or the transactions
      and events including,
      without limitation, the enforcement or defense thereof at any time associated
      therewith or
      contemplated therein (including any violation or noncompliance with any
      Environmental Laws
      by
      any Person or any liabilities or duties of any Person with respect to Hazardous
      Materials found
      in
      or released into the environment). THE FOREGOING INDEMNIFICATION SHALL
APPLY
      WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT
      CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
      OF ANY KIND BY LENDER PROVIDED ONLY THAT NO PERSON SHALL BE
      ENTITLED
      UNDER THIS SECTION
      10.4 TO
      RECEIVE INDEMNIFICATION FOR THAT
      PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS CAUSED BY LENDER'S
      GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. As used in this Section
      10.4,
      the
      term
      "Lender" shall refer not only to the Person designated as such in Section
      1.1, but
      also
      to
      its lender(s) and members and, with respect to each of the foregoing, each
      director, officer,
      agent, attorney, employee, representative and Affiliate of such
      Person.

     

    ARTICLE
      XI

     

    MISCELLANEOUS

     

    Section
      11.1 Waivers
      and Amendments; Acknowledgments and Admissions.Waivers
      and Amendments. No
      failure or delay (whether by course of conduct or otherwise)
      by Lender in exercising any right, power or remedy which Lender may have under
      any
      of
      the Loan Documents shall operate as a waiver thereof or of any other right,
      power or remedy,
      nor shall any single or partial exercise by Lender of any such right, power
      or
      remedy preclude
      any other or further exercise thereof or of any other right, power or remedy.
      No
      waiver of
      any
      provision of any Loan Document and no consent to any departure therefrom shall
      ever be effective
      unless it is in writing and signed by Lender, and then such waiver or consent
      shall be effective only in the specific instances and for the purposes for
      which
      given and to the extent specified in such writing. No notice to or demand on
      Borrowers shall in any case of itself entitle

    Borrowers
      to any other or further notice or demand in similar or other circumstances.
      This
Agreement
      and the other Loan Documents set forth the entire understanding and agreement
      of
the
      parties hereto and thereto with respect to the transactions contemplated herein
      and therein and
      supersede all prior discussions and understandings with respect to the subject
      matter hereof and
      thereof, and no modification or amendment of or supplement to this Agreement
      or
      the other Loan Documents shall be valid or effective unless the same is in
      writing and signed by the party against
      whom it is sought to be enforced.

     

    (a)
      Acknowledgments
      and Admissions. Each
      Borrower hereby represent, warrant
      and acknowledge that (i) it has been advised by counsel in the negotiation,
      execution
      and delivery of the Loan Documents to which it is a party, (ii) it has made
      independent
      decisions to enter into this Agreement and the other Loan Documents to
which
      it
      is a party, without reliance on any representation, warranty, covenant or
undertaking
      by Lender, whether written, oral or implicit, other than as expressly set out
      in
this
      Agreement or in another Loan Document delivered on or after the date hereof,
      (iii) there
      are
      no representations, warranties, covenants, undertakings or agreements by
Lender
      to
      Borrowers as to the Loan Documents except as expressly set out in this
Agreement
      or in another Loan Document delivered on or after the date hereof, (iv)
Lender
      owes no fiduciary duty to Borrowers with respect to any Loan Document or
      the

    



    
      
        
          
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    transactions
      contemplated thereby, (v) the relationship pursuant to the Loan Documents
between
      Borrowers, on one hand, and Lender, on the other hand, is and shall be solely
      that
      of
      debtor and creditor, respectively; (vi) no partnership or joint venture exists
      with respect
      to the Loan Documents between. Borrowers and Lender, (vii) should an Event
      of
Default
      or Unmatured Event of Default occur or exist Lender will determine in its sole
      discretion
      and for its own reasons what remedies and actions it will or will not exercise
      or take
      at
      that time, (viii) without limiting any of the foregoing, no Borrower is relying
      upon any
      representation or covenant by Lender, or any representative thereof, and no
      such
representation
      or covenant has been made, that Lender will, at the time of an Event of Default
      or Unmatured Event of Default, or at any other time, waive, negotiate, discuss
      or take
      or
      refrain from taking any action permitted under the Loan Documents with respect
      to
      any
      such Event of Default or Unmatured Event of Default or any other provision
      of
      the Loan
      Documents, and (ix) Lender has relied upon the truthfulness of the acknowledgments
      in this Section
      11.1(b)
      in
      deciding to execute and deliver this Agreement
      and to make the Loans.

     

    THIS
      WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
      THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
      BE
      CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
      OF THE PARTIES.

     

    THERE
      ARE
      NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     

    THIS
      WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS SUPERCEDE
      THAT CERTAIN TERM SHEET DATED ON OR ABOUT FEBRUARY
      6, 2006, EXECUTED BY PARENT AND LENDER.

     

    Section
      11.2 Assignments;
      Survival of Agreements; Cumulative Nature. Lender
      may
      assign and/or transfer a portion or all of its rights and privileges under
      the
      Loan Documents at
      any
      time and from time to time, including, but not limited to, any collateral
      assignment to secure
      any indebtedness of Lender to any other Person and shall provide written notice
      thereof to Borrowers_
      Any assignee of any of Lender's rights under any of the Loan Documents shall
      be
subrogated
      to any related rights and remedies that Lender may exercise against Borrowers.
      All of
      the
      various representations, warranties, covenants and agreements of Borrowers
      in
      the Loan Documents
      shall survive the execution and delivery of this Ageement and the other Loan
      Documents
      and the performance hereof and thereof, including the making or granting of
      the
Loans
      and
      the delivery of the Note and the other Loan Documents, and shall further survive
      until all
      of
      the Obligations are paid in full to Lender and all of Lender's obligations
      to
      Borrowers are terminated.
      The representations, warranties and covenants made by Borrowers in the Loan
      Documents,
      and the rights, powers and privileges granted to Lender in the Loan Documents,
      are cumulative,
      and, except for expressly specified waivers and consents, no Loan Document
      shall
be
      construed in the context of another to diminish, nullify or otherwise reduce
      the
      benefit to Lender
      of
      any such representation, warranty, covenant, right, power or privilege. In
      particular and
      without limitation, no exception set out in this Agreement to any
      representation, warranty or covenant
      herein contained shall apply to any similar representation, warranty or covenant
      contained in any other Loan Document, and each such similar representation,
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    covenant
      shall be subject only to those exceptions which are expressly made applicable
      to
      it by the terms of the various Loan Documents.

     

    Section
      113 Notices.
      All
      notices, requests, consents, demands and other communications
      required or permitted under any Loan Document shall be in writing, unless
otherwise
      specifically provided in such Loan Document, and shall be deemed sufficiently
      given or furnished if delivered by personal delivery, by telecopy, by delivery
      service with proof of delivery
      or by registered or certified United States mail, postage prepaid, (unless
      changed by similar
      notice in writing given by the particular Person whose address is to be
      changed). Any such
      notice or communication shall be deemed to have been given (a) in the case
      of
      personal delivery
      or delivery service, as of the date of delivery at the address and in the manner
      provided herein,
      (b) in the case of telecopy, upon receipt, or (c) in the case of registered
      or
      certified United States
      mail three (3) Business Days after deposit in the mail.

     

    For
      delivery to Borrowers:

     

    Westside
      Energy Production Company, LP Attn:
      Jimmy Wright

    4400
      Post
      Oak Parkway, Suite 2530
      Houston,
      Texas 77027

    Telephone:
      (713) 979-2660

    Telecopy:
      (713) 979-2665

     

    with
      copies to:

     

    Greenberg
      Traurig, LLP Attn: Doug Atnipp

     

    1000
      Louisiana, Suite 1800 Houston,
      Texas 77002 Telephone:
      (713) 374-3515 Telecopy:
      (713) 374-3505

     

    For
      delivery to:Lender:

     

    GasRock
      Capital LLC

    Attn:
      Marshall Lynn Bass

    1
      Houston
      Center

    1221
      McKinney
      St., Suite 3180 Houston,
      Texas 77010-2026
      Telephone:
      (713)
      300-1400
      Telecopy: (713) 300-1401

     

    with
      copies to:

     

    Porter
      & Hedges, L.L.P. Attn:
      Ephraim del Pozo 1000
      Main
      Street, 36th Floor Houston, Texas 77002

    



    
      
        
          
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    Telephone:
      (713) 226-6660 Telecopy:
      (713) 226-6260

     

    Section
      11.4 Parties
      in Interest; Transfers. All
      grants, covenants and agreements contained
      in the Loan Documents shall bind and inure to the benefit of the parties thereto
      and their
      respective successors and assigns; provided,
      however, that
      no
      Borrower shall assign or transfer
      any of its rights or delegate any of its duties or obligations under any Loan
      Document without the prior written consent of Lender. Nothing expressed or
      referred to in this Agreement shall
      be
      construed to give any Person other than the parties to this Agreement any legal
      or equitable
      right, remedy, or claim under or with respect to this Agreement or any provision
      of this Agreement.
      This Agreement and all of its provisions and conditions are for the sole and
      exclusive
      benefit of the parties to this Agreement and their successors and permitted
      assigns.

     

    Section
      11.5 Governing
      Law; Submission to Process. Except
      to
      the extent that the law
      of
      another jurisdiction is expressly elected in a Loan Document, the Loan Documents
      shall be
      deemed
      contracts and instruments made under the laws of the State of Texas and shall
      be
construed
      and enforced in accordance with and governed by the laws of the State of Texas,
      without
      regard to principles of conflicts of law. This Agreement has been entered into
      in Houston,
      Texas and shall be performable for all purposes in Harris County, Texas. Subject
      to the provisions of Article
      XII, courts
      within the State of Texas shall have jurisdiction over any and all disputes
      between any Borrower and Lender, whether in law or equity, including, but not
      limited to,
      any
      and all disputes arising out of or relating to this Agreement or any other
      Loan
      Document; and
      venue
      in any such dispute whether in federal or state court shall be laid in Harris
      County, Texas.

     

    Section
      11.6 Limitation
      on Interest. Lender,
      Borrowers and any other parties to any Loan
      Documents intend to contract in strict compliance with applicable usury law
      from
      time to time in effect. In furtherance thereof, the parties stipulate and agree
      that none of the terms and provisions contained in the Loan Documents shall
      ever
      be construed to create a contract to pay, for
      the
      use, forbearance or detention of money, interest in excess of the maximum amount
      of interest
      permitted to be charged by applicable law from time to time in effect. No
      Borrower nor any
      present or future guarantors, endorsers or other Persons hereafter becoming
      liable for payment
      of any Obligation shall ever be liable for unearned interest thereon or shall
      ever be required
      to pay interest thereon in excess of the maximum amount that may be lawfully
      charged under applicable law from time to time in effect, and the provisions
      of
      this Section
      11.6 shall
      control
      over all other provisions of the Loan Documents which may be in conflict or
      apparent conflict
      herewith. Lender expressly disavows any intention to charge or collect excessive
      unearned
      interest or finance charges in the event the maturity of any Obligation is
      accelerated. If (a) the maturity of any Obligation is accelerated for any
      reason, (b) any Obligation is prepaid and as
      a
      result any amounts held to constitute interest are determined to be in excess
      of
      the legal maximum,
      or (c) Lender or any other holder of any or all of the Obligations shall
      otherwise collect
      moneys which are determined to constitute interest which would otherwise
      increase the interest
      on any or all of the Obligations to an amount in excess of that permitted to
      be
      charged by applicable
      law then in effect, then all such sums determined to constitute interest in
      excess of such
      legal limit shall, without penalty, be promptly applied to reduce the then
      outstanding principal
      of the related Obligations or, at Lender's or such holder's option, promptly
      returned to Borrowers
      or the other payor thereof upon such determination. In determining whether
      or
      not

    



    
      
        
          
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    the
      interest paid or payable under any specific circumstance exceeds the maximum
      amount permitted
      under applicable law, Lender and Borrowers (and any other payors thereof) shall
      to the greatest
      extent pemiitted under applicable law, (x) characterize any non-principal
      payment as an expense,
      fee or premium rather than as interest, (y) exclude voluntary prepayments and
      the effects
      thereof, and (z) amortize, prorate, allocate and spread the total amount of
      interest throughout
      the entire contemplated term of the instruments evidencing the Obligations
      in
accordance
      with the amounts outstanding from time to time thereunder and the maximum legal
      rate of interest from time to time in effect under applicable law in order
      to
      lawfully charge the maximum amount of interest permitted under applicable
      law.

     

    Section
      11.7 Termination;
      Limited Survival. In
      their
      sole and absolute discretion, Borrowers and Lender may each, at any time that
      no
      Obligations are owing, elect in a notice delivered
      to the other to terminate this Agreement. Upon receipt of such a notice, if
      no
Obligations
      are then owing, this Agreement and all other Loan Documents shall thereupon
      be
      terminated and the parties thereto released from any prospective obligations
      thereunder. Notwithstanding
      the foregoing or anything herein to the contrary, any waivers or admissions
      made
      by
      Borrowers or Lender in any Loan Documents, and any obligations which any Person
      may
      have
      to indemnify or compensate Lender shall survive any termination of this
      Agreement or any other Loan Document. At the request and expense of Borrowers,
      Lender shall prepare and execute
      all necessary instruments to reflect and effect such teiiiiination of the Loan
      Documents; provided,
      however, that
      nothing in this Section
      11.7
      shall
      affect any and all continuing rights, validity
      and enforceability of the ORRI.

     

    Section
      11.8 Severability.
      If
      any
      teiin or provision of any Loan Document shall be deteimined to be illegal or
      unenforceable, all other terms and provisions of the Loan Documents shall
      nevertheless remain effective and shall be enforced to the fullest extent
      permitted by applicable law.

     

    Section
      11.9 Counterparts.
      This
      Agreement may be separately executed in any number
      of
      counterparts and by different parties hereto in separate counterparts, each
      of
      which when
      so
      executed shall be deemed to constitute one and the same Agreement.

     

    SCction
      11.10 Further
      Assurances. The
      parties agree (a) to furnish upon request to each
      other such information, (b) to execute and deliver to each other such documents,
      and (c) to do
      such
      other acts and things, all as the other party may reasonably request for the
      purpose of carrying
      out the intent of this Agreement and the Loan Documents.

     

    Section
      11.11 Waiver
      of Jury Trial, Punitive Damages, Etc. EACH
      BORROWER AND
      LENDER HEREBY (a) KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE,
      TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL
      BY
      JURY IN RESPECT OF ANY LITIGATION 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; (b) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED
      BY LAW ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY
      SUCH
      LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
      DAMAGES OR DAMAGES OTHER THAN, OR IN ADDITION TO,

    



    
      
        
          
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    ACTUAL
      DAMAGES; (c) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
      COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE OR IMPLIED
      THAT SUCH PARTY WOULD
      NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
      (d)
      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
      11.11.

     

    Section
      11.12 Controlling
      Provision Upon Conflict. Except
      as
      may be expressly provided
      otherwise herein, in the event of a conflict between the provisions of this
      Agreement and
      those
      of any other Loan Document or any other instrument referred to herein or
      executed in connection
      with this Agreement, the provisions of this Agreement shall
      control.

     

    Section
      11.13 Promotional
      Sale of Leases; Etc.Sale of
      Promoted Interest. Subject
      to the
      other
      terms and conditions of this Section
      11.13
      and
      if no
      Event of Default exists, Borrowers may,
      from
      time to time and prior to the spudding of a well on an undeveloped Lease or
      Unit, sell, convey,
      or otherwise transfer ("Sell") for cash or other valuable consideration (each
      transaction being
      a
      "Sale") pursuant to an Industry Agreement one or more interests in such
      undeveloped Lease
      or
      Unit (each a "Promoted
      Interest") to
      any
      Person other than Parent or an Affiliate of Parent or either Borrower;
provided,
      however, that
      Borrowers shall not be authorized to Sell a Promoted Interest under this
Section
      11.13
      if,
      after
      giving effect to the contemplated Sale, (i)
      Borrowers'
      remaining Net Revenue Interest in the applicable Lease or Unit would be less
      than 50%
      of
      its Net Revenue Interest in such Lease or Unit immediately prior to such Sale
      or
(ii)
      Borrowers'
      remaining Working Interest in such Lease or Unit would be less than
      25%.

     

    (a) Proceeds
      from Sale of Promoted Interests. Notwithstanding
      Section
      11.13(a) above,
      Borrower shall promptly (and in any event within one Business Day following
      its
      receipt thereof) deposit all Gross Promotional Proceeds in the Lockbox.
Borrowers
      authorize Lenders to retain such Gross Proceeds in the Lockbox until
disbursed
      pursuant to Section
      11.13(c) below.
      Promptly following the completion or abandonment
      of a Promoted Well, Borrowers shall deliver to Lenders a certificate (the
"Promoted
      Well Cost Certificate"), signed
      by
      an authorized officer of each Borrower, setting
      forth in reasonable detail (and supported by documentation acceptable to Lender)
      Borrowers'
      calculation of the Promoted Well Drilling Costs and the Net Promotional
Proceeds,
      if any, for such Promoted Well.

     

    (b) Return
      of Drilling Costs. Following
      Lender's approval of the Promoted Well
      Cost
      Certificate, Lender will return to Borrower the lesser of (i)
      the
      Gross
Promotional
      Proceeds on deposit in the Lockbox with respect to such Promoted Well or
(ii)
      the
      Promoted Well Drilling Costs related to such Promoted Well.

     

    (c)
      Disbursement
      of Net Promotional Proceeds. Following
      the disbursement of
      the
      amount described in Section
      11.13(c) above,
      Borrowers irrevocably authorize and direct Lender to disburse the Net
      Promotional Proceeds, if any, as follows:

     

    (i) eighty-five
      percent (85%) to Lender to be applied as a prepayment

     

    of
      the
      Obligations; and

    



    
      
        
          
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    (ii) fifteen
      percent (15%) to Borrowers to be used in accordance with

    this
      Agreement.

     

    (d) Lender's
      ORRI on Promoted Interests. Notwithstanding
      Borrowers' Sale of
      a
      Promoted Interest pursuant to this Section
      11.13,
      Lender
      will be entitled to receive and
      Borrowers shall convey to Lenders the ORRI in accordance with Section
      8.4 above,
      proportionately
      reduced to the highest Working Interest to which Borrower is or may become
      entitled pursuant to the terms and conditions of the Industry Agreement pursuant
      to
      which
      such Promoted Interest was Sold.

     

    (e) Partial
      Release of Lien on Promoted Interests. To
      the
      extent Borrowers Sell
      a
      Promoted Interest in accordance with the terms and conditions of this
Section
      11.13,
      Lender
      agrees, upon the written request of Borrowers, to promptly execute and
deliver
      to Borrowers a mutually acceptable release of Lender's Lien on such Promoted
      Interest.

     

    ARTICLE
      XII

     

    ARBITRATION

     

    Section
      12.1 Arbitration.Borrowers and
      Lender and any other obligor party (the "parties")
      will
      attempt in good faith to resolve any controversy or dispute arising out of
      or
relating
      to this Agreement, the Loan Documents or Collateral promptly by negotiations
      between themselves.
      The negotiation process may be started by the giving of written notice by any
      party to
      the
      other parties in accordance with the terms of Section
      11.3,
      and
      the
      parties agree to negotiate
      in good faith, and select an independent mediator to facilitate the negotiations
      and conduct up to eight consecutive hours of mediated negotiations in Houston,
      Texas within 30 days after the notice is first sent. If, within 10 days after
      the initial notice, the parties are not able to agree
      upon a mediator, the party originally giving the notice shall promptly notify
      American Arbitration
      Association ("AAA"), 1331 Lamar, Suite 1180, Houston, Texas 77010, (713)
      739-1302.
      AAA
      will promptly designate a mediator who is independent and impartial, and AAA's
      decision
      about the identity of the mediator will be final and binding.

     

    (a) No
      arbitration may be commenced by any party unless and until a negotiation
      complying with the foregoing paragraph has been completed, and no litigation
      or
      other proceeding may ever be instituted at any time in any court for the
purpose
      of adjudicating, interpreting or, except as may be set forth in Section
      12.1(h), enforcing
      any rights or obligations of the parties hereto or any rights or obligations
      relating
      to the subject matter hereof, whether or not covered by the express terms of
      this Agreement,
      or for the purpose of adjudicating a breach or determination of the validity
      of
this
      Agreement, or for the purpose of appealing any decision of an
      arbitrator.

     

    (b) If
      a
      controversy or dispute is not resolved after completion of the negotiation
      process described above, then, upon notice by any party to the other parties
      (an
      "Arbitration
      Notice") and
      to
      AAA, the controversy or dispute shall be submitted to an arbitration
      panel for binding arbitration in Houston, Texas, in accordance with AAA's
Commercial
      Arbitration Rules (the "Rules").
      The
      parties agree that they will faithfully observe
      this Agreement and the Rules and that they will abide by and perform any
      award

    



    
      
        
          
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    rendered
      by the arbitration panel. The arbitration shall be governed by the Federal
      Arbitration Act, 9 U.S.C. Section 1-16 (or by the same principles enunciated
      by
      such Act in
      the
      event it may not be technically applicable). The award or judgment of the
arbitration
      panel shall be final and binding on all parties and judgment upon the award
      or
judgment
      of the arbitration panel may be entered and enforced by any court having
jurisdiction.
      If any party becomes the subject of a bankruptcy, receivership or other
similar
      proceeding under the laws of the United States of America, any state or
      commonwealth or any other nation or political subdivision thereof, then, to
      the
      extent permitted
      or not prohibited by applicable law, any factual or substantive legal issues
      arising
      in or during the pendency of any such proceeding shall be subject to all of
      the
      foregoing mandatory mediation and arbitration provisions and shall be resolved
      in accordance
      therewith. The agreements contained herein have been given for valuable
consideration,
      are coupled with an interest and are not intended to be executory contracts.
      The
      fees
      and expenses of the arbitration panel will be shared by all parties engaged
      in
      the dispute
      or controversy on a basis determined to be fair and equitable by the arbitrator,
      taking
      into account the relative fault of each party, the relative credibility and
      merit of all claims
      and defenses made by each party and the cooperation, speed and efficiency of
      each
      party in conducting the arbitration proceedings and complying with the Rules
      and
with
      orders and requests of the arbitrator.

     

    (c) Promptly
      after the Arbitration Notice is given, each party will select an independent
      and
      impartial arbitrator who will in turn select an independent and impartial
third
      arbitrator (each such arbitrator must be experienced or have extensive
      familiarity with
      the
      oil and gas industry). If the arbitrators selected by the parties are unable
      to
      agree on
      a
      third arbitrator, then one of the parties shall notify AAA and AAA shall select
      the third
      arbitrator with oil and gas industry experience or familiarity. The decision
      of
      AAA with respect to the selection of the arbitrator will be final and binding
      in
      such case. Such three
      arbitrators will constitute the arbitration panel.

     

    (d) Within
      10
      days after the selection of the arbitration panel, the parties and their
      counsel will appear before the arbitration panel at a place and time in Houston,
      Texas,
      as
      may be designated by the arbitration panel for the purpose of each party making
      a
      one
      hour or less presentation and summary of the case. Thereafter, the arbitration
      panel will
      set
      dates and times for additional hearings until the proceeding is concluded.
      The
      desire and goal of the parties is, and the arbitration panel will be advised
      that its goal should
      be, to conduct and conclude the arbitration proceeding as expeditiously as
      possible. If any party or his counsel fails to appear at any scheduled hearing,
      the arbitration
      panel shall be entitled to reach a decision based on the evidence which has
      been
      presented to it by the parties who did appear. Any arbitral award may be
      confirmed by a Texas state court.

     

    (e)
      Any
      arbitral award may be enforced in the courts of the state of Texas or
of
      the
      United States of America for the Southern District of Texas, and, by execution
      and delivery
      of this Agreement, the parties hereby accept for themselves and in respect
      of
their
      property, generally and unconditionally, the nonexclusive jurisdiction of the
      aforesaid courts for said purpose and the parties hereby irrevocably waive
      to
      the fullest extent
      permitted by law any objection, including without limitation, any objection
      to
      the

    



    
      
        
          
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    laying
      of
      venue or based on the grounds of forum non conveniens, which they may now
or
      hereafter have to the bringing of any such action or proceeding in such
      respective jurisdictions_

     

    (0
      The
      arbitration panel will have no authority to award punitive or other damages
      not measured by the prevailing party's actual damages and may not, in any
event,
      make any ruling, finding, or award that does not conform to the terms and
conditions
      of this Agreement.

     

    (g)
      The
      provisions of this Section
      12.1
      relating
      to arbitration of disputes shall not
      apply
      to litigation that is instituted for the sole purpose of either: (i) compelling
      a party
      to
      submit to arbitration in accordance with the provisions of this Section
      12.1, (ii)
      obtaining
      enforcement of any award or judgment of the arbitrator(s) issued pursuant to
      this
      Section
      12.1,
      or
      (iii)
      Lender's enforcement of any rights or remedies under this Agreement
      or any Security Documents arising out of an Event of Default.

     

    ARTICLE
      XIII

     

    NOTICE
      TO BORROWERS

     

    THIS
      WRITTEN CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS BETWEEN THE PARTIES
      REPRESENT THE FINAL EXPRESSION OF THE AGREEMENTS BETWEEN THE PARTIES. THIS
      WRITTEN CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS BETWEEN , THE PARTIES
      MAY
      NOT BE CONTRADICTED
      BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
      AGREEMENTS BETWEEN THE PARTIES.

     

    THERE
      ARE
      NO UNWRITTEN, ORAL AGREEMENTS BETWEEN THE PARTIES.

     

    [signature
      page follows]

    



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

     

    



    
      
        
          
            921350_11.DOC

          

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    



     

    
      [Missing
        Graphic Reference]

      B
BORROWERS:

     

    Westside
      Energy Production Company, LP, a
      Texas
      limited partnership

     

    
      


      By:
        Westside
        Energy GP, L.L.C.

       

      By:

       
Westside
      Energy Operating Company, LP,

     

    
      


      By:
        Westside
        Energy GP, L.L.C.

      a
        Texas
        limited liability company,

      its
        general partner

       

      [Missing
        Graphic Reference]

      By:
GUARANTOR:

    
      


      [Missing
        Graphic Reference]

      


      


      By:
LENDER:

     

    GasRock
      Capital LLC,

    a
      Delaware limited liability company