exhibit_10-1.htm


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

                

                    Exhibit
              10.1      
      

                             

                    Execution
              Version      
      

                    
      
      

                    
      
      

                    
      
    

        

      

    

    


    


     

    Credit
      Agreement

    


    Dated
      as of

    September
      28, 2007

    


    among

    


    Rex
      Energy
      Corporation,

    as
      Borrower,

    


    KeyBank
      National Association,

    as
      Administrative Agent,

    


    BNP
      Paribas,

    as
      Syndication Agent,

    


    Sovereign
      Bank,

    as
      Documentation Agent,

    


    and

    


    The
      Lenders Party Hereto

    


     

    


     

    Sole
      Lead Arranger and Sole Bookrunner

     

    KeyBank
      National Association

    


    


     

    


    
      
        
                

                     
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    

      TABLE
        OF CONTENTS

       

      
        
          	 	
                  Page

                
	 	 
	
                  ARTICLE
                    I

                
	
                  DEFINITIONS
                    AND ACCOUNTING MATTERS

                
	 	 
	
                  Section
                    1.01                                Terms
                    Defined Above

                	
                  1

                
	
                  Section
                    1.02                                Certain
                    Defined Terms

                	
                  1

                
	
                  Section
                    1.03                                Types
                    of Loans and Borrowings

                	
                  20

                
	
                  Section
                    1.04                                Terms
                    Generally; Rules of Construction

                	
                  20

                
	
                  Section
                    1.05                                Accounting
                    Terms and Determinations; GAAP

                	
                  21

                
	 	 
	
                  ARTICLE
                    II

                
	
                  THE
                    CREDITS

                
	 	 
	
                  Section
                    2.01                                Commitments

                	
                  21

                
	
                  Section
                    2.02                                Loans
                    and Borrowings

                	
                  21

                
	
                  Section
                    2.03                                Requests
                    for Borrowings

                	
                  23

                
	
                  Section
                    2.04                                Interest
                    Elections

                	
                  24

                
	
                  Section
                    2.05                                Funding
                    of Borrowings

                	
                  25

                
	
                  Section
                    2.06                                Termination,
                    Reduction and Increase of Aggregate Maximum Credit Amounts

                	
                  26

                
	
                  Section
                    2.07                                Borrowing
                    Base

                	
                  28

                
	
                  Section
                    2.08                                Letters
                    of Credit

                	
                  30

                
	 	 
	
                  ARTICLE
                    III

                
	
                  PAYMENTS
                    OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

                
	 	 
	
                  Section
                    3.01                                Repayment
                    of Loans

                	
                  35

                
	
                  Section
                    3.02                                Interest

                	
                  35

                
	
                  Section
                    3.03                                Alternate
                    Rate of Interest

                	
                  36

                
	
                  Section
                    3.04                                Prepayments

                	
                  36

                
	
                  Section
                    3.05                                Fees

                	
                  38

                
	 	 
	
                  ARTICLE
                    IV

                
	
                  PAYMENTS;
                    PRO RATA TREATMENT; SHARING OF SET-OFFS

                
	 	 
	
                  Section
                    4.01                                Payments
                    Generally; Pro Rata Treatment; Sharing of Set-offs

                	
                  39

                
	
                  Section
                    4.02                                Presumption
                    of Payment by the Borrower

                	
                  40

                
	
                  Section
                    4.03                                Certain
                    Deductions by the Administrative Agent

                	
                  40

                
	
                  Section
                    4.04                                Disposition
                    of Proceeds

                	
                  40

                
	 	 
	
                  ARTICLE
                    V

                
	
                  INCREASED
                    COSTS; BREAK FUNDING PAYMENTS; TAXES;
                    ILLEGALITY

                
	 	 
	
                  Section
                    5.01                                Increased
                    Costs

                	
                  41

                
	
                  Section
                    5.02                                Break
                    Funding Payments

                	
                  42

                
	
                  Section
                    5.03                                Taxes

                	
                  42

                
	
                  Section
                    5.04                                Mitigation
                    Obligations; Replacement of Lenders

                	
                  44

                
	
                  Section
                    5.05                                Illegality

                	
                  45

                
	 	 
	
                  ARTICLE
                    VI

                
	
                  CONDITIONS
                    PRECEDENT

                
	 	 
	
                  Section
                    6.01                                Effective
                    Date

                	
                  45

                
	
                  Section
                    6.02                                Each
                    Credit Event

                	
                  48

                
	 	 
	
                  ARTICLE
                    VII

                
	
                  REPRESENTATIONS
                    AND WARRANTIES

                
	 	 
	
                  Section
                    7.01                                Organization;
                    Powers

                	
                  49

                
	
                  Section
                    7.02                                Authority;
                    Enforceability

                	
                  49

                
	
                  Section
                    7.03                                Approvals;
                    No Conflicts

                	
                  50

                
	
                  Section
                    7.04                                Financial
                    Condition; No Material Adverse Change

                	
                  50

                
	
                  Section
                    7.05                                Litigation

                	
                  51

                
	
                  Section
                    7.06                                Environmental
                    Matters

                	
                  51

                
	
                  Section
                    7.07                                Compliance
                    with the Laws and Agreements; No Defaults

                	
                  52

                
	
                  Section
                    7.08                                Investment
                    Company Act

                	
                  52

                
	
                  Section
                    7.09                                Taxes

                	
                  52

                
	
                  Section
                    7.10                                ERISA

                	
                  53

                
	
                  Section
                    7.11                                Disclosure;
                    No Material Misstatements

                	
                  54

                
	
                  Section
                    7.12                                Insurance

                	
                  54

                
	
                  Section
                    7.13                                Restriction
                    on Liens

                	
                  54

                
	
                  Section
                    7.14                                Subsidiaries

                	
                  55

                
	
                  Section
                    7.15                                Location
                    of Business and Offices

                	
                  55

                
	
                  Section
                    7.16                                Properties;
                    Titles, Etc.

                	
                  55

                
	
                  Section
                    7.17                                Maintenance
                    of Properties

                	
                  56

                
	
                  Section
                    7.18                                Gas
                    Imbalances, Prepayments

                	
                  57

                
	
                  Section
                    7.19                                Marketing
                    of Production

                	
                  57

                
	
                  Section
                    7.20                                Swap
                    Agreements

                	
                  57

                
	
                  Section
                    7.21                                Use
                    of Loans and Letters of Credit

                	
                  57

                
	
                  Section
                    7.22                                Solvency

                	
                  57

                
	 	 
	
                  ARTICLE
                    VIII

                
	
                  AFFIRMATIVE
                    COVENANTS

                
	 	 
	
                  Section
                    8.01                                Financial
                    Statements; Other Information

                	
                  58

                
	
                  Section
                    8.02                                Notices
                    of Material Events

                	
                  61

                
	
                  Section
                    8.03                                Existence;
                    Conduct of Business

                	
                  62

                
	
                  Section
                    8.04                                Payment
                    of Obligations

                	
                  62

                
	
                  Section
                    8.05                                Performance
                    of Obligations under Loan Documents

                	
                  62

                
	
                  Section
                    8.06                                Operation
                    and Maintenance of Properties

                	
                  62

                
	
                  Section
                    8.07                                Insurance

                	
                  63

                
	
                  Section
                    8.08                                Books
                    and Records; Inspection Rights

                	
                  64

                
	
                  Section
                    8.09                                Compliance
                    with Laws

                	
                  64

                
	
                  Section
                    8.10                                Environmental
                    Matters

                	
                  64

                
	
                  Section
                    8.11                                Further
                    Assurances

                	
                  65

                
	
                  Section
                    8.12                                Reserve
                    Reports

                	
                  66

                
	
                  Section
                    8.13                                Title
                    Information

                	
                  67

                
	
                  Section
                    8.14                                Additional
                    Collateral; Additional Guarantors

                	
                  67

                
	
                  Section
                    8.15                                ERISA
                    Compliance

                	
                  68

                
	
                  Section
                    8.16                                Swap
                    Agreements

                	
                  69

                
	
                  Section
                    8.17                                Marketing
                    Activities

                	
                  69

                
	 	 
	
                  ARTICLE
                    IX

                
	
                  NEGATIVE
                    COVENANTS

                
	 	 
	
                  Section
                    9.01                                Financial
                    Covenants

                	
                  70

                
	
                  Section
                    9.02                                Debt

                	
                  70

                
	
                  Section
                    9.03                                Liens

                	
                  71

                
	
                  Section
                    9.04                                Dividends,
                    Distributions and Redemptions

                	
                  72

                
	
                  Section
                    9.05                                Investments,
                    Loans and Advances

                	
                  72

                
	
                  Section
                    9.06                                Nature
                    of Business

                	
                  74

                
	
                  Section
                    9.07                                Limitation
                    on Leases

                	
                  74

                
	
                  Section
                    9.08                                Proceeds
                    of Loans

                	
                  74

                
	
                  Section
                    9.09                                ERISA
                    Compliance

                	
                  75

                
	
                  Section
                    9.10                                Sale
                    or Discount of Receivables

                	
                  76

                
	
                  Section
                    9.11                                Mergers,
                    Etc

                	
                  76

                
	
                  Section
                    9.12                                Sale
                    of Properties

                	
                  76

                
	
                  Section
                    9.13                                Environmental
                    Matters

                	
                  77

                
	
                  Section
                    9.14                                Transactions
                    with Affiliates

                	
                  77

                
	
                  Section
                    9.15                                Subsidiaries

                	
                  78

                
	
                  Section
                    9.16                                Negative
                    Pledge Agreements; Dividend Restrictions

                	
                  78

                
	
                  Section
                    9.17                                Gas
                    Imbalances, Take-or-Pay or Other Prepayments

                	
                  78

                
	
                  Section
                    9.18                                Swap
                    Agreements

                	
                  79

                
	 	 
	
                  ARTICLE
                    X

                
	
                  EVENTS
                    OF DEFAULT; REMEDIES

                
	 	 
	
                  Section
                    10.01                                Events
                    of Default

                	
                  79

                
	
                  Section
                    10.02                                Remedies

                	
                  81

                
	 	 
	
                  ARTICLE
                    XI

                
	
                  THE
                    AGENTS

                
	 	 
	
                  Section
                    11.01                                Appointment;
                    Powers

                	
                  82

                
	
                  Section
                    11.02                                Duties
                    and Obligations of Administrative Agent

                	
                  82

                
	
                  Section
                    11.03                                Action
                    by Administrative Agent

                	
                  83

                
	
                  Section
                    11.04                                Reliance
                    by Administrative Agent

                	
                  84

                
	
                  Section
                    11.05                                Subagents

                	
                  84

                
	
                  Section
                    11.06                                Resignation
                    or Removal of Administrative Agent

                	
                  84

                
	
                  Section
                    11.07                                Agents
                    as Lenders

                	
                  85

                
	
                  Section
                    11.08                                No
                    Reliance

                	
                  85

                
	
                  Section
                    11.09                                Administrative
                    Agent May File Proofs of Claim

                	
                  86

                
	
                  Section
                    11.10                                Authority
                    of Administrative Agent to Release Collateral, Liens and
                    Guarantors

                	
                  86

                
	
                  Section
                    11.11                                The
                    Arranger, the Syndication Agent and the Documentation
                    Agent

                	
                  87

                
	 	 
	
                  ARTICLE
                    XII

                
	
                  MISCELLANEOUS

                
	 	 
	
                  Section
                    12.01                                Notices

                	
                  87

                
	
                  Section
                    12.02                                Waivers;
                    Amendments

                	
                  87

                
	
                  Section
                    12.03                                Expenses,
                    Indemnity; Damage Waiver

                	
                  89

                
	
                  Section
                    12.04                                Successors
                    and Assigns

                	
                  91

                
	
                  Section
                    12.05                                Survival;
                    Revival; Reinstatement

                	
                  94

                
	
                  Section
                    12.06                                Counterparts;
                    Integration; Effectiveness

                	
                  95

                
	
                  Section
                    12.07                                Severability

                	
                  95

                
	
                  Section
                    12.08                                Right
                    of Setoff

                	
                  96

                
	
                  Section
                    12.09                                Governing
                    Law; Jurisdiction; Service Of Process

                	
                  96

                
	
                  Section
                    12.10                                Headings

                	
                  97

                
	
                  Section
                    12.11                                Confidentiality

                	
                  97

                
	
                  Section
                    12.12                                Interest
                    Rate Limitation

                	
                  98

                
	
                  Section
                    12.13                                Exculpation
                    Provisions

                	
                  99

                
	
                  Section
                    12.14                                Existing
                    Credit Agreement

                	
                  99

                
	
                  Section
                    12.15                                Collateral
                    Matters; Swap Agreements

                	
                  99

                
	
                  Section
                    12.16                                No
                    Third Party Beneficiaries

                	
                  100

                
	
                  Section
                    12.17                                USA
                    Patriot Act Notice

                	
                  100

                


        

      

       

                                                

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        



    

    
      
        	
                ANNEXES,
                  EXHIBITS AND SCHEDULES

              
	 	 
	
                Annex
                  I

              	
                List
                  of Maximum Credit Amounts

              
	 	 
	
                Exhibit
                  A

              	
                Form
                  of Note

              
	
                Exhibit
                  B

              	
                Form
                  of Borrowing Request

              
	
                Exhibit
                  C

              	
                Form
                  of Interest Election Request

              
	
                Exhibit
                  D-1

              	
                Form
                  of Compliance Certificate

              
	
                Exhibit
                  D-2

              	
                Form
                  of Section 8.01(c) Certificate

              
	
                Exhibit
                  E

              	
                Security
                  Instruments

              
	
                Exhibit
                  F

              	
                Form
                  of Assignment and Assumption

              
	
                Exhibit
                  G-1

              	
                Form
                  of Maximum Credit Amount Increase Certificate

              
	
                Exhibit
                  G-2

              	
                Form
                  of Additional Lender Certificate

              
	 	 
	
                Schedule
                  1.02

              	
                Holders
                  of Equity Interests

              
	
                Schedule
                  7.05

              	
                Litigation

              
	
                Schedule
                  7.06

              	
                Environmental

              
	
                Schedule
                  7.14

              	
                Subsidiaries
                  and Partnerships

              
	
                Schedule
                  7.18

              	
                Gas
                  Imbalances

              
	
                Schedule
                  7.19

              	
                Marketing
                  Contracts

              
	
                Schedule
                  7.20

              	
                Swap
                  Agreements

              
	
                Schedule
                  9.02

              	
                Existing
                  Debt

              
	
                Schedule
                  9.03

              	
                Existing
                  Liens

              
	
                Schedule
                  9.05

              	
                Investments

              
	
                Schedule
                  9.14

              	
                Existing
                  Affiliate Transactions

              
	
                Schedule
                  9.16

              	
                Existing
                  Negative Pledge Agreements; Dividend
                  Restrictions

              


      

    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    THIS
      CREDIT AGREEMENT dated as of September 28, 2007 is
      among: Rex Energy
      Corporation, a corporation duly
      formed and existing under the laws of the State of Delaware (the
“Borrower”);
      each of the Lenders from time to time party hereto; KeyBank National
      Association (in its individual capacity,
“KeyBank”), as administrative agent for the Lenders
      (in such capacity,
      together with its successors in such capacity, the “Administrative
      Agent”); BNP
      Paribas, as syndication agent for the Lenders (in such capacity, together
      with its successors in such capacity, the “Syndication Agent”); and Sovereign
      Bank, as
      documentation agent for the Lenders (in such capacity, together with its
      successors in such capacity, the “Documentation Agent”).

     

    R
      E C I T A L S

     

    A.           The
      Borrower has requested that the Lenders provide certain loans to and extensions
      of credit on behalf of the Borrower.

     

    B.           The
      Lenders have agreed to make such loans and extensions of credit subject to
      the
      terms and conditions of this Agreement.

     

    C.           In
      consideration of the mutual covenants and agreements herein contained and of
      the
      loans, extensions of credit and commitments hereinafter referred to, the parties
      hereto agree as follows:

     

    ARTICLE
      I

    Definitions
      and Accounting Matters

     

    


    Section
      1.01    Terms Defined
      Above.  As
      used in this Agreement, each term defined above has the meaning indicated
      above.

     

    Section
      1.02    Certain Defined
      Terms .  As
      used in this Agreement, the following terms have the meanings specified
      below:

     

    “ABR”,
      when used in reference to any Loan or Borrowing, refers to whether such Loan,
      or
      the Loans comprising such Borrowing, are bearing interest at a rate determined
      by reference to the Alternate Base Rate.

     

    “Additional
      Lender” has the meaning assigned to such term in Section
      2.06(c)(i).

     

    “Additional
      Lender Certificate” has the meaning assigned to such term in Section
      2.06(c)(ii)(F).

     

    “Adjusted
      LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
      Period, an interest rate per annum (rounded upwards, if necessary, to the next
      1/16 of 1%) equal to (i) the LIBO Rate for such Interest Period multiplied
      by
      (ii) the Statutory Reserve Rate.

     

    “Administrative
      Questionnaire” means an Administrative Questionnaire in a form supplied by
      the Administrative Agent.

     

    


    
      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

    

    


    “Affiliate”
      means, with respect to a specified Person, another Person that directly, or
      indirectly through one or more intermediaries, Controls or is Controlled by
      or
      is under common Control with the Person specified.

     

    “Agents”
      means, collectively, the Administrative Agent, the Syndication Agent and the
      Documentation Agent; and “Agent” shall mean either the Administrative Agent, the
      Syndication Agent or the Documentation Agent, as the context
      requires.

     

    “Aggregate
      Maximum Credit Amounts” at any time shall equal the sum of the Maximum
      Credit Amounts, as the same may be reduced, terminated or increased pursuant
      to
      Section 2.06.

     

    “Agreement”
      means this Credit Agreement, as the same may from time to time be amended,
      modified, supplemented or restated.

     

    “Alternate
      Base Rate” means, for any day, a rate per annum equal to the greater of (a)
      the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate
      in
      effect on such day plus 1⁄2 of 1%.  Any change in the Alternate Base
      Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
      shall
      be effective from and including the effective date of such change in the Prime
      Rate or the Federal Funds Effective Rate, respectively.

     

    “Applicable
      Margin” means, for any day, with respect to any ABR Loan or Eurodollar Loan,
      or with respect to the Commitment Fee Rate, as the case may be, the rate per
      annum set forth in the Borrowing Base Utilization Grid below based upon the
      Borrowing Base Utilization Percentage then in effect:

    


    
      	
              Borrowing
                Base Utilization Grid

            
	
              Borrowing
                Base Utilization Percentage

            	
              <33.0%

            	
              333.0%
                <66.0%

            	
              366.0%
                <90.0%

            	
              390.0%

            
	
              Eurodollar
                Loans

            	
              1.000%

            	
              1.250%

            	
              1.500%

            	
              1.750%

            
	
              ABR
                Loans

            	
              0.000%

            	
              0.000%

            	
              0.000%

            	
              0.250%

            
	
              Commitment
                Fee Rate

            	
              0.250%

            	
              0.250%

            	
              0.375%

            	
              0.375%

            


    

    


    Each
      change in the Applicable Margin shall apply during the period commencing on
      the
      effective date of such change and ending on the date immediately preceding
      the
      effective date of the next such change, provided, however, that if at any time
      the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
      then
      the “Applicable Margin” means the rate per annum set forth on the grid
      when the Borrowing Base Utilization Percentage is at its highest level until
      the
      day that such Reserve Report is delivered to the Administrative Agent, and
      as of
      such delivery date and until the effective date of the next change in the
      Applicable Margin, the Applicable Margin shall be based on the Borrowing Base
      reflected by such Reserve Report.

     

    “Applicable
      Percentage” means, with respect to any Lender, the percentage of the
      Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
      Amount as such percentage is set forth on Annex I.

     

    


    
      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

    

    


    “Approved
      Counterparty” means (a) any Lender or any Affiliate of a Lender and (b) any
      other Person whose long term senior unsecured debt rating is A-/A3 by S&P or
      Moody’s (or their equivalent) or higher.

     

    “Approved
      Fund” means any Person (other than a natural person) that is engaged in
      making, purchasing, holding or investing in bank revolving loans and similar
      extensions of credit in the ordinary course of its business and that is
      administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c)
      an
      entity or an Affiliate of an entity that administers or manages a
      Lender.

     

    “Approved
      Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
      (b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
      independent petroleum engineers reasonably acceptable to the Administrative
      Agent.

     

    “Arranger”
      means KeyBank National
      Association, in its capacities as the sole lead arranger and sole
      bookrunner hereunder.

     

    “Assignment
      and Assumption” means an assignment and assumption entered into by a Lender
      and an assignee (with the consent of any party whose consent is required
      by Section 12.04(b)), and accepted by the Administrative Agent, in the form
      of Exhibit F or any other form approved by the Administrative
      Agent.

     

    “Availability
      Period” means the period from and including the Effective Date to but
      excluding the Termination Date.

     

    “Board”
      means the Board of Governors of the Federal Reserve System of the United States
      of America or any successor Governmental Authority.

     

    “Borrowing”
      means Loans of the same Type, made, converted or continued on the same date
      and,
      in the case of Eurodollar Loans, as to which a single Interest Period is in
      effect.

     

    “Borrowing
      Base” means at any time an amount equal to the amount determined in
      accordance with Section 2.07, as the same may be adjusted from time to time
      pursuant to Section 8.13(c) or Section 9.12.

     

    “Borrowing
      Base Deficiency” means the deficiency which occurs any time the total
      Revolving Credit Exposures exceeds the Borrowing Base then in
      effect.

     

    “Borrowing
      Base Utilization Percentage” means, as of any day, the fraction expressed as
      a percentage, the numerator of which is the sum of the Revolving Credit
      Exposures of the Lenders on such day, and the denominator of which is the
      Borrowing Base in effect on such day.

     

    “Borrowing
      Request” means a request by the Borrower for a Borrowing in accordance with
      Section 2.03.

     

    “Business
      Day” means any day that is not a Saturday, Sunday or other day on which
      commercial banks in Cleveland, Ohio are authorized or required by law to remain
      closed; and if such day relates to a Borrowing or continuation of, a payment
      or
      prepayment of principal of or

     

    


    
      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

    

    


    interest
      on, or a conversion of or into, or the Interest Period for, a Eurodollar Loan
      or
      a notice by the Borrower with respect to any such Borrowing or continuation,
      payment, prepayment, conversion or Interest Period, any day which is also a
      day
      on which dealings in dollar deposits are carried out in the London interbank
      market.

     

    “Capital
      Leases” means, in respect of any Person, all leases which shall have been,
      or should have been, in accordance with GAAP, recorded as capital leases on
      the
      balance sheet of the Person liable (whether contingent or otherwise) for the
      payment of rent thereunder.

     

    “Casualty
      Event” means any loss, casualty or other insured damage to, or any
      nationalization, taking under power of eminent domain or by condemnation or
      similar proceeding of, any Property of the Borrower or any of its Subsidiaries
      having a fair market value in excess of $5,000,000 in the
      aggregate
      for any calendar year.

     

    “Change
      in Control” means (a) any Person or group (within the meaning of the
      Securities Exchange Act of 1934 and the rules of the SEC thereunder, but
      excluding any employee benefit plan of such Person or its Subsidiaries, and
      any
      Person acting in its capacity as trustee, agent or other fiduciary or
      administrator of any such plan), other than the holders of Equity Interests
      of
      the Borrower shown on Schedule 1.02 hereto, any wholly-owned enterprise or
      subsidiary of any such voting member or any of their Wholly-Owned Subsidiaries
      becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 of the
      Securities Exchange Act of 1934) of 51% or more of the equity securities of
      the
      Borrower entitled to vote for members of the board of directors of the Borrower,
      or (b) during any period of 24 consecutive months, a majority of the members
      on
      the board of directors of the Borrower cease to be Persons who were either
      (i)
      nominated by the board of directors of the Borrower or (ii) appointed by
      directors so nominated.

     

    “Change
      in Law” means (a) the adoption of any law, rule or regulation after the date
      of this Agreement, (b) any change in any law, rule or regulation or in the
      interpretation or application thereof by any Governmental Authority after the
      date of this Agreement or (c) compliance by any Lender or the Issuing Bank
      (or,
      for purposes of Section 5.01(b), by any lending office of such Lender or by
      such
      Lender’s or the Issuing Bank’s holding company, if any) with any request,
      guideline or directive (whether or not having the force of law) of any
      Governmental Authority made or issued after the date of this
      Agreement.

     

    “Code”
      means the Internal Revenue Code of 1986, as amended from time to time, and
      any
      successor statute.

     

    “Commitment”
      means, with respect to each Lender, the commitment of such Lender to make Loans
      and to acquire participations in Letters of Credit hereunder, expressed as
      an
      amount representing the maximum aggregate amount of such Lender’s Revolving
      Credit Exposure hereunder, as such commitment may be (a) modified from time
      to
      time pursuant to Section 2.06 and (b) modified from time to time pursuant
      to assignments by or to such Lender pursuant to Section 12.04(b).  The
      amount representing each Lender’s Commitment shall at any time be the lesser of
      such Lender’s Maximum Credit Amount and such Lender’s Applicable Percentage of
      the then effective Borrowing Base.

     

    


    
      
        
          
          

        

        
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    “Commitment
      Fee Rate” has the meaning set forth in the definition of “Applicable
      Margin”.

     

    “Consolidated
      Net Income” means with respect to the Borrower and the Consolidated
      Subsidiaries, for any period, the aggregate of the net income (or loss) of
      the
      Borrower and the Consolidated Subsidiaries after allowances for taxes for such
      period determined on a consolidated basis in accordance with GAAP; provided
      that
      there shall be excluded from such net income (to the extent otherwise included
      therein) the following: (a) the net income of any Person in which the Borrower
      or any Consolidated Subsidiary has an interest (which interest does not cause
      the net income of such other Person to be consolidated with the net income
      of
      the Borrower and the Consolidated Subsidiaries in accordance with GAAP), except
      to the extent of the amount of dividends or distributions actually paid in
      cash
      during such period by such other Person to the Borrower or to a Consolidated
      Subsidiary, as the case may be; (b) the net income (but not loss) during such
      period of any Consolidated Subsidiary to the extent that the declaration or
      payment of dividends or similar distributions or transfers or loans by that
      Consolidated Subsidiary is not at the time permitted by operation of the terms
      of its charter or any agreement, instrument or Governmental Requirement
      applicable to such Consolidated Subsidiary or is otherwise restricted or
      prohibited, in each case determined in accordance with GAAP; (c) the net income
      (or loss) of any Person acquired in a pooling-of-interests transaction for
      any
      period prior to the date of such transaction; (d) any extraordinary gains or
      losses during such period, (e) non-cash gains, losses or adjustments under
      FASB
      Statement No. 133 as a result of changes in the fair market value of derivatives
      and (f) any gains or losses attributable to writeups or writedowns of assets;
      and provided further that if the Borrower or any Consolidated Subsidiary shall
      acquire or dispose of any Property during such period, then Consolidated Net
      Income shall be calculated after giving pro forma effect to such
      acquisition or disposition, as if such acquisition or disposition had occurred
      on the first day of such period.

     

    “Consolidated
      Subsidiaries” means each Subsidiary of the Borrower (whether now existing or
      hereafter created or acquired) the financial statements of which shall be (or
      should have been) consolidated with the financial statements of the Borrower
      in
      accordance with GAAP.

     

    “Control”
      means the possession, directly or indirectly, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ability to exercise voting power, by contract (other than a contract under
      which
      a Person, or one or more Persons that otherwise constitute a Subsidiary of
      such
      Person, provides management, operation or similar services but does not control
      the policies of such Person (including the appointment of such management))
      or
      otherwise.  For the purposes of this definition, and without limiting
      the generality of the foregoing, any Person that owns directly or indirectly
      10%
      or more of the Equity Interests having ordinary voting power for the election
      of
      the directors or other governing body of a Person (other than as a limited
      partner of such other Person) will be deemed to “control” such other
      Person.  “Controlling” and “Controlled” have meanings
      correlative thereto.

     

    “Debt”
      means, for any Person, each of the following (without duplication): (a) all
      obligations of such Person for borrowed money or evidenced by bonds, bankers’
acceptances, debentures, notes or other similar instruments; (b) all
      reimbursement obligations of such Person (whether contingent or otherwise)
      in
      respect of letters of credit, surety or other bonds and similar

     

    


    
      
        
          
          

        

        
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    instruments;
      (c) all accounts payable and all accrued expenses, liabilities or other
      obligations of such Person to pay the deferred purchase price of Property or
      services; (d) all obligations of such Person under Capital Leases; (e) all
      obligations under Synthetic Leases; (f) all Debt (as defined in the other
      clauses of this definition) of others secured by (or for which the holder of
      such Debt has an existing right, contingent or otherwise, to be secured by)
      a
      Lien on any Property of such Person, whether or not such Debt is assumed by
      such
      Person; (g) all Debt (as defined in the other clauses of this definition) of
      others guaranteed by such Person or in which such Person otherwise assures
      a
      creditor against loss of such Debt (howsoever such assurance shall be made)
      to
      the extent of the lesser of the amount of such Debt and the maximum stated
      amount of such guarantee or assurance against loss; (h) all obligations or
      undertakings of such Person to maintain or cause to be maintained the financial
      position or covenants of others or to purchase the Debt or Property of others;
      (i) obligations of such Person to deliver commodities, goods or services,
      including, without limitation, Hydrocarbons, in consideration of one or more
      advance payments, other than gas balancing arrangements, take or pay
      arrangements or other similar arrangements, in each case in the ordinary course
      of business; (j) obligations of such Person to pay for goods or services even
      if
      such goods or services are not actually received or utilized by such Person;
      (k)
      any Debt of a partnership for which such Person is liable either by agreement,
      by operation of law or by a Governmental Requirement but only to the extent
      of
      such liability; (l) Disqualified Capital Stock of such Person; and (m) the
      undischarged balance of any production payment created by such Person or for
      the
      creation of which such Person directly or indirectly received
      payment.  Provided however, the term “Debt” shall not include accruals
      for plugging and abandonment costs.  The Debt of any Person shall
      include all obligations of such Person of the character described above to
      the
      extent such Person remains legally liable in respect thereof notwithstanding
      that any such obligation is not included as a liability of such Person under
      GAAP.

     

    “Default”
      means any event or condition which constitutes an Event of Default or which
      upon
      notice, lapse of time or both would, unless cured or waived, become an Event
      of
      Default.

     

    “Disqualified
      Capital Stock” means any Equity Interest that, by its terms (or by the terms
      of any security into which, mandatorily or at the option of the holder, it
      is
      convertible or for which it is exchangeable) or upon the happening of any event,
      (i) matures or is mandatorily redeemable for any consideration other than other
      Equity Interests (which would not constitute Disqualified Capital Stock),
      pursuant to a sinking fund obligation or otherwise, or (ii) is convertible
      or
      exchangeable for Debt or redeemable for any consideration other than other
      Equity Interests (which would not constitute Disqualified Capital Stock) at
      the
      option of the holder thereof, in whole or in part, in either case, on or prior
      to the date that is one year after the earlier of (a) the Maturity Date and
      (b)
      the date on which there are no Loans, LC Exposure or other obligations hereunder
      outstanding and all of the Commitments are terminated.

     

    “dollars”
      or “$” refers to lawful money of the United States of America.

     

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

     

    “EBITDAX”
      means, for any period, the sum of Consolidated Net Income for such period plus
      the following expenses or charges to the extent deducted from Consolidated
      Net
      Income in

     

    


    
      
        
          
          

        

        
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    such
      period: interest, income taxes, depreciation, depletion, amortization,
      exploration expenses and other similar non-cash charges (including non-cash
      expenses associated with the granting of stock options to employees and
      directors of the Borrower or its Subsidiaries), minus all non-cash income added
      to Consolidated Net Income.

     

    “Effective
      Date” means the date on which the conditions specified in Section 6.01are
      satisfied (or waived in accordance with Section 12.02).

     

    “Engineering
      Reports” has the meaning assigned such term in Section
      2.07(c)(i).

     

    “Environmental
      Laws” means any and all Governmental Requirements pertaining in any way to
      health, safety, the environment or the preservation or reclamation of natural
      resources, in effect in any and all jurisdictions in which the Borrower or
      any
      Subsidiary is conducting or at any time has conducted business, or where any
      Property of the Borrower or any Subsidiary is located, including without
      limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean
      Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
      and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water
      Pollution Control Act, as amended, the Occupational Safety and Health Act of
      1970, as amended, the Resource Conservation and Recovery Act of 1976
      (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic
      Substances Control Act, as amended, the Superfund Amendments and Reauthorization
      Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
      and other environmental conservation or protection Governmental
      Requirements.  The term “oil” shall have the meaning specified in OPA,
      the terms “hazardous substance” and “Release” (or “threatened
      Release”) have the meanings specified in CERCLA, the terms “solid
      waste” and “disposal” (or “disposed”) have the meanings
      specified in RCRA and the term “oil and gas waste” shall mean those waste
      that are excluded from the definition of “hazardous waste” pursuant to 40
      C.F.R. Section 261.4(b)(5) (“Section 261.4(b)(5)”); provided, however,
      that (a) in the event either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended
      so as to broaden the meaning of any term defined thereby, such broader meaning
      shall apply subsequent to the effective date of such amendment and (b) to the
      extent the laws of the state or other jurisdiction in which any Property of
      the
      Borrower or any Subsidiary is located establish a meaning for “oil,”
“hazardous substance,” “Release,” “solid waste,”
“disposal” or “oil and gas waste” which is broader than that
      specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5), such broader
      meaning shall apply.

     

    “Environmental
      Permit” means any permit, registration, license, approval, consent,
      exemption, variance, or other authorization required under or issued pursuant
      to
      applicable Environmental Laws.

     

    “Equity
      Interests” means shares of capital stock, partnership interests, membership
      interests in a limited liability company, beneficial interests in a trust or
      other equity ownership interests in a Person, and any warrants, options or
      other
      rights entitling the holder thereof to purchase or acquire any such Equity
      Interest.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended, and
      any
      successor statute.

     

    


    
      
        
          
          

        

        
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    “ERISA
      Affiliate” means each trade or business (whether or not incorporated) which
      together with the Borrower or a Subsidiary would be deemed to be a “single
      employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b),
      (c), (m) or (o) of section 414 of the Code.

     

    “ERISA
      Event” means (a) a “Reportable Event” described in section 4043 of ERISA and
      the regulations issued thereunder (other than an award for which the 30-day
      notice period is waived), (b) the withdrawal of the Borrower, a Subsidiary
      or
      any ERISA Affiliate from a Plan during a plan year in which it was a
“substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the filing
      of a notice of intent to terminate a Plan in a distress termination under
      Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination
      under section 4041 of ERISA, (d) the institution of proceedings to terminate
      a
      Plan by the PBGC, (e) receipt of a notice of withdrawal liability pursuant
      to
      Section 4202 of ERISA or (f) any other event or condition which might constitute
      grounds under section 4042 of ERISA for the termination of, or the appointment
      of a trustee to administer, any Plan.

     

    “Eurodollar”,
      when used in reference to any Loan or Borrowing, refers to whether such Loan,
      or
      the Loans comprising such Borrowing, are bearing interest at a rate determined
      by reference to the Adjusted LIBO Rate.

     

    “Event
      of Default” has the meaning assigned such term in Section
      10.01.

     

    “Excepted
      Liens” means:  (a) Liens for Taxes, assessments or other
      governmental charges or levies which are not delinquent or which are being
      contested in good faith by appropriate action and for which adequate reserves
      have been maintained in accordance with GAAP; (b) Liens in connection with
      workers’ compensation, unemployment insurance or other social security, old age
      pension or public liability obligations which are not delinquent or which are
      being contested in good faith by appropriate action and for which adequate
      reserves have been maintained in accordance with GAAP; (c) landlord’s liens,
      operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
      suppliers’, workers’, materialmen’s, construction or other like Liens, in each
      case arising in the ordinary course of business or incident to the exploration,
      development, operation and maintenance of Oil and Gas Properties each of which
      is in respect of obligations that are not delinquent or which are being
      contested in good faith by appropriate action and for which adequate reserves
      have been maintained in accordance with GAAP; (d) contractual Liens which arise
      in the ordinary course of business under operating agreements, joint venture
      agreements, oil and gas partnership agreements, oil and gas leases, farm-out
      agreements, division orders, contracts for the sale, transportation or exchange
      of oil and natural gas, unitization and pooling declarations and agreements,
      area of mutual interest agreements, overriding royalty agreements, marketing
      agreements, processing agreements, net profits agreements, development
      agreements, gas balancing or deferred production agreements, injection,
      repressuring and recycling agreements, salt water or other disposal agreements,
      seismic or other geophysical permits or agreements, and other agreements which
      are usual and customary in the oil and gas business and are for claims which
      are
      not delinquent or which are being contested in good faith by appropriate action
      and for which adequate reserves have been maintained in accordance with GAAP,
      provided that any such Lien referred to in this clause does not materially
      impair the use of the Property covered by such Lien for the purposes for which
      such Property is held by the Borrower or any Subsidiary or materially impair
      the
      value of such

     

    


    
      
        
          
          

        

        
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    Property
      subject thereto; (e) Liens arising solely by virtue of any statutory or common
      law provision relating to banker’s liens, rights of set-off or similar rights
      and remedies and burdening only deposit accounts or other funds maintained
      with
      a creditor depository institution, provided that no such deposit account is
      a
      dedicated cash collateral account or is subject to restrictions against access
      by the depositor in excess of those set forth by regulations promulgated by
      the
      Board and no such deposit account is intended by the Borrower or any of its
      Subsidiaries to provide collateral to the depository institution for any other
      purpose; (f) easements, restrictions, servitudes, permits, conditions,
      covenants, exceptions or reservations in any Property of the Borrower or any
      Subsidiary for the purpose of roads, pipelines, transmission lines,
      transportation lines, distribution lines for the removal of gas, oil, coal
      or
      other minerals or timber, and other like purposes, or for the joint or common
      use of real estate, rights of way, facilities and equipment, that do not secure
      any monetary obligations and which in the aggregate do not materially impair
      the
      use of such Property for the purposes of which such Property is held by the
      Borrower or any Subsidiary or materially impair the value of such Property
      subject thereto; (g) Liens on cash or securities pledged to secure performance
      of tenders, surety and appeal bonds, government contracts, performance and
      return of money bonds, bids, trade contracts, leases, statutory obligations,
      regulatory obligations and other obligations of a like nature incurred in the
      ordinary course of business and (h) judgment and attachment Liens not giving
      rise to an Event of Default, provided that any appropriate legal proceedings
      which may have been duly initiated for the review of such judgment shall not
      have been finally terminated or the period within which such proceeding may
      be
      initiated shall not have expired and no action to enforce such Lien has been
      commenced; provided, further that Liens described in clauses (a) through (e)
      shall remain “Excepted Liens” only for so long as no action to enforce such Lien
      has been commenced and no intention to subordinate the first priority Lien
      granted in favor of the Administrative Agent and the Lenders is to be hereby
      implied or expressed by the permitted existence of such Excepted
      Liens.

     

    “Excluded
      Taxes” means, with respect to the Administrative Agent, any Lender, the
      Issuing Bank or any other recipient of any payment to be made by or on account
      of any obligation of the Borrower or any Guarantor hereunder or under any other
      Loan Document, (a) income or franchise taxes (however denominated) imposed
      on
      (or measured by) its net income by the United States of America or such other
      jurisdiction under the laws of which such recipient is organized or in which
      its
      principal office is located or, in the case of any Lender, in which its
      applicable lending office is located, (b) any branch profits taxes imposed
      by
      the United States of America or any similar tax imposed by any other
      jurisdiction in which the Borrower or any Guarantor is located and (c) in the
      case of a Foreign Lender, any withholding tax that is imposed on amounts payable
      to such Foreign Lender at the time such Foreign Lender becomes a party to this
      Agreement (or designates a new lending office) or is attributable to such
      Foreign Lender’s failure to comply with Section 5.03(e), except to the extent
      that such Foreign Lender (or its assignor, if any) was entitled, at the time
      of
      designation of a new lending office (or assignment), to receive additional
      amounts with respect to such withholding tax pursuant to Section 5.03(a)
      or Section 5.03(c).

     

    “Existing
      Credit
      Agreement”
means that
      certain Credit Agreement dated October 2, 2006 by and among Rex Energy IV,
      LLC,
      as borrower and KeyBank National Association, as administrative
      agent.

     

    


    
      
        
          
          

        

        
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    “Federal
      Funds Effective Rate” means, for any day, the weighted average (rounded
      upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
      Federal funds transactions with members of the Federal Reserve System arranged
      by Federal funds brokers, as published on the next succeeding Business Day
      by
      the Federal Reserve Bank of New York, or, if such rate is not so published
      for
      any day that is a Business Day, the average (rounded upwards, if necessary,
      to
      the next 1/100 of 1%) of the quotations for such day for such transactions
      received by the Administrative Agent from three Federal funds brokers of
      recognized standing selected by it.

     

    “Financial
      Officer” means, for any Person, the chief financial officer, principal
      accounting officer, treasurer or controller of such Person.  Unless
      otherwise specified, all references herein to a Financial Officer means a
      Financial Officer of the Borrower.

     

    “Financial
      Statements” means the financial statement or statements of the Borrower and
      its Consolidated Subsidiaries referred to in Section 7.04(a).

     

    “Foreign
      Lender” means any Lender that is organized under the laws of a jurisdiction
      other than that in which the Borrower is located.  For purposes of
      this definition, the United States of America, each State thereof and the
      District of Columbia shall be deemed to constitute a single
      jurisdiction.

     

    “Foreign
      Subsidiary” means any Subsidiary that is not a Domestic
      Subsidiary.

     

    “GAAP”
      means generally accepted accounting principles in the United States of America
      as in effect from time to time subject to the terms and conditions set forth
      in
      Section 1.05.

     

    “Governmental
      Authority” means the government of the United States of America, any other
      nation or any political subdivision thereof, whether state or local, and any
      agency, authority, instrumentality, regulatory body, court, central bank or
      other entity exercising executive, legislative, judicial, taxing, regulatory
      or
      administrative powers or functions of or pertaining to government over the
      Borrower, any Subsidiary, any of their Properties, any Agent, the Issuing Bank
      or any Lender.

     

    “Governmental
      Requirement” means any law, statute, code, ordinance, order, determination,
      rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
      license, authorization or other directive or requirement, whether now or
      hereinafter in effect, including, without limitation, Environmental Laws, energy
      regulations and occupational, safety and health standards or controls, of any
      Governmental Authority.

     

    “Guarantors”
      means, until it or any of them is released as a Guarantor pursuant to the Loan
      Documents:

     

    (a)           Rex
      Energy I, LLC,

     

    (b)           Rex
      Energy Operating Corp.,

     

    (c)           Penn
      Tex Energy, Inc.,

     

    


    
      
        
          
          

        

        
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    (d)           PennTex
      Resources Illinois, Inc.,

     

    (e)           Rex
      Energy IV, LLC

     

    (f)           PennTex
      Resources, L.P.,
      and

     

    (g)           each
      other Subsidiary that guarantees the Indebtedness pursuant to Section
      8.14(b).

    


    “Guaranty
      Agreement” means an agreement executed by the Guarantors in form and
      substance satisfactory to the Administrative Agent, unconditionally guarantying
      on a joint and several basis, payment of the Indebtedness, as the same may
      be
      amended, modified or supplemented from time to time.

     

    “Hazardous
      Material” means any substance regulated or as to which liability might arise
      under any applicable Environmental Law and including, without
      limitation:  (a) any chemical, compound, material, product, byproduct,
      substance or waste defined as or included in the definition or meaning of
“hazardous substance,” “hazardous material,” “hazardous waste,” “solid waste,”
“toxic waste,” “extremely hazardous substance,” “toxic substance,”
“contaminant,” “pollutant,” or words of similar meaning or import found in any
      applicable Environmental Law; (b) petroleum hydrocarbons, petroleum products,
      petroleum substances, natural gas, oil, oil and gas waste, crude oil, and any
      components, fractions, or derivatives thereof; and (c) radioactive materials,
      asbestos containing materials, polychlorinated biphenyls, or radon.

     

    “Highest
      Lawful Rate” means, with respect to each Lender, the maximum nonusurious
      interest rate, if any, that at any time or from time to time may be contracted
      for, taken, reserved, charged or received on the Notes or on other Indebtedness
      under laws applicable to such Lender which are presently in effect or, to the
      extent allowed by law, under such laws from time to time in effect.

     

    “Hydrocarbon
      Interests” means all rights, titles, interests and estates now or hereafter
      acquired in and to oil and gas leases, oil, gas and mineral leases, or other
      liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty
      and royalty interests, net profit interests and production payment interests,
      including any reserved or residual interests of whatever nature.

     

    “Hydrocarbons”
      means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate,
      distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
      or separated therefrom.

     

    “Indebtedness”
      means, without duplication, any and all amounts owing or to be owing by the
      Borrower, any Subsidiary or any Guarantor whether direct or indirect (including
      those acquired by assumption), absolute or contingent, due or to become due,
      now
      existing or hereafter arising: (a) to the Administrative Agent, the Issuing
      Bank
      or any Lender under any Loan Document; (b) to any Lender or any Affiliate of
      a
      Lender under any Swap Agreement between the Borrower or any Subsidiary and
      such
      Lender or Affiliate of a Lender while such Person (or in the case of its
      Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
      renewals, extensions and/or rearrangements of any of the above.

     

    


    
      
        
          
          

        

        
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    “Indemnified
      Taxes” means Taxes other than Excluded Taxes.

     

    “Index
      Debt” means senior, unsecured, long-term indebtedness for borrowed money of
      the Borrower that is not guaranteed by any other Person (other than a Guarantor)
      or subject to any other credit enhancement.

     

    “Initial
      Reserve Report” means the report of Netherland, Sewell
      and
      Associates, Inc. dated as of February 22,
      2007,
      with respect to certain Oil and Gas Properties of the Borrower and its
      Subsidiaries as of December 31, 2006.

     

    “Interest
      Election Request” means a request by the Borrower to convert or continue a
      Borrowing in accordance with Section 2.04.

     

    “Interest
      Expense” means, for any period, the sum (determined without duplication) of
      the aggregate gross interest expense of the Borrower and the Consolidated
      Subsidiaries for such period, including to the extent included in interest
      expense under GAAP:  (a) amortization of debt discount, (b)
      capitalized interest and (c) the portion of any payments or accruals under
      Capital Leases allocable to interest expense, plus the portion of any payments
      or accruals under Synthetic Leases allocable to interest expense whether or
      not
      the same constitutes interest expense under GAAP.

     

    “Interest
      Payment Date” means (a) with respect to any ABR Loan, the last day of each
      March, June, September and December and (b) with respect to any Eurodollar
      Loan,
      the last day of the Interest Period applicable to the Borrowing of which such
      Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
      Period of more than three months’ duration, each day prior to the last day of
      such Interest Period that occurs at intervals of three months’ duration after
      the first day of such Interest Period.

     

    “Interest
      Period” means with respect to any Eurodollar Borrowing, the period
      commencing on the date of such Borrowing and ending on the numerically
      corresponding day in the calendar month that is one, two, three, six or nine
      months thereafter, as the Borrower may elect; provided, that (a) if any Interest
      Period would end on a day other than a Business Day, such Interest Period shall
      be extended to the next succeeding Business Day unless such next succeeding
      Business Day would fall in the next calendar month, in which case such Interest
      Period shall end on the next preceding Business Day and (b) any Interest Period
      pertaining to a Eurodollar Borrowing that commences on the last Business Day
      of
      a calendar month (or on a day for which there is no numerically corresponding
      day in the last calendar month of such Interest Period) shall end on the last
      Business Day of the last calendar month of such Interest Period.  For
      purposes hereof, the date of a Borrowing initially shall be the date on which
      such Borrowing is made and thereafter shall be the effective date of the most
      recent conversion or continuation of such Borrowing.

     

    “Interim
      Redetermination” has the meaning assigned such term in Section
      2.07(b).

     

    “Interim
      Redetermination Date” means the date on which a Borrowing Base that has been
      redetermined pursuant to an Interim Redetermination becomes effective as
      provided in Section 2.07(d).

     

    


    
      
        
          
          

        

        
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    “Investment”
      means, for any Person: (a) the acquisition (whether for cash, Property, services
      or securities or otherwise) of Equity Interests of any other Person or any
      agreement to make any such acquisition (including, without limitation, any
      “short sale” or any sale of any securities at a time when such securities are
      not owned by the Person entering into such short sale); (b) the making of any
      deposit with, or advance, loan or capital contribution to, the assumption of
      Debt of, the purchase or other acquisition of any other Debt of or equity
      participation or interest in, or other extension of credit to, any other Person
      (including the purchase of Property from another Person subject to an
      understanding or agreement, contingent or otherwise, to resell such Property
      to
      such Person, but excluding any such advance, loan or extension of credit having
      a term not exceeding ninety (90) days representing the purchase price of
      inventory or supplies sold by such Person in the ordinary course of business);
      (c) the purchase or acquisition (in one or a series of transactions) of Property
      of another Person that constitutes a business unit or (d) the entering into
      of
      any guarantee of, or other contingent obligation (including the deposit of
      any
      Equity Interests to be sold) with respect to, Debt or other liability of any
      other Person and (without duplication) any amount committed to be advanced,
      lent
      or extended to such Person.

     

    “Issuing
      Bank” means KeyBank National
      Association, in its capacity as the issuer of Letters of Credit
      hereunder, and its successors in such capacity as provided in Section
      2.08(i).  The Issuing Bank may, in its discretion, arrange for one or
      more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
      case the term “Issuing Bank” shall include any such Affiliate with
      respect to Letters of Credit issued by such Affiliate.

     

    “LC
      Commitment” at any time means ten million dollars
      ($10,000,000).

     

    “LC
      Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
      of Credit.

     

    “LC
      Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
      all outstanding Letters of Credit at such time plus (b) the aggregate amount
      of
      all LC Disbursements that have not yet been reimbursed by or on behalf of the
      Borrower at such time.  The LC Exposure of any Lender at any time
      shall be its Applicable Percentage of the total LC Exposure at such
      time.

     

    “Lenders”
      means the Persons listed on Annex I and any Person that shall have become a
      party hereto pursuant to an Assignment and Assumption, other than any such
      Person that ceases to be a party hereto pursuant to an Assignment and
      Assumption, and any Person that shall have become a party hereto as an
      Additional Lender pursuant to Section 2.06(c).

     

    “Letter
      of Credit” means any letter of credit issued pursuant to this
      Agreement.

     

    “Letter
      of Credit Agreements” means all letter of credit applications and other
      agreements (including any amendments, modifications or supplements thereto)
      submitted by the Borrower, or entered into by the Borrower, with the Issuing
      Bank relating to any Letter of Credit.

     

    “LIBO
      Rate” means, with respect to any Eurodollar Borrowing for any Interest
      Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or
      on
      any successor or substitute page of such Service, or any successor to or
      substitute for such Service, providing rate

     

    


    
      
        
          
          

        

        
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    quotations
      comparable to those currently provided on such page of such Service, as
      determined by the Administrative Agent from time to time for purposes of
      providing quotations of interest rates applicable to dollar deposits in the
      London interbank market) at approximately 11:00 a.m., London time, two Business
      Days prior to the commencement of such Interest Period, as the rate for dollar
      deposits with a maturity comparable to such Interest Period.  In the
      event that such rate is not available at such time for any reason, then the
      “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest
      Period shall be the rate at which dollar deposits of $5,000,000 and for a
      maturity comparable to such Interest Period are offered by the principal London
      office of the Administrative Agent in immediately available funds in the London
      interbank market at approximately 11:00 a.m., London time, two Business Days
      prior to the commencement of such Interest Period.

     

    “Lien”
      means any interest in Property securing an obligation owed to, or a claim by,
      a
      Person other than the owner of the Property, whether such interest is based
      on
      the common law, statute or contract, and whether such obligation or claim is
      fixed or contingent, and including but not limited to (a) the lien or security
      interest arising from a mortgage, encumbrance, pledge, security agreement,
      conditional sale or trust receipt or a lease, consignment or bailment for
      security purposes or (b) production payments and the like payable out of Oil
      and
      Gas Properties.  The term “Lien” shall include easements,
      restrictions, servitudes, permits, conditions, covenants, exceptions or
      reservations.

     

    “Loan
      Documents” means this Agreement, the Notes, the Letter of Credit Agreements,
      the Letters of Credit and the Security Instruments.

     

    “Loans”
      means the loans made by the Lenders to the Borrower pursuant to this
      Agreement.

     

    “Majority
      Lenders” means, at any time while no Loans or LC Exposure is outstanding,
      Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the
      Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure
      is outstanding, Lenders holding at least sixty-six and two-thirds percent
      (66-2/3%) of the outstanding aggregate principal amount of the Loans and
      participation interests in Letters of Credit (without regard to any sale by
      a
      Lender of a participation in any Loan under Section 12.04(c)).

     

    “Material
      Adverse Effect” means a material adverse change in, or material adverse
      effect on (a) the business, operations, Property, condition (financial or
      otherwise) or prospects of the Borrower and the Subsidiaries taken as a whole,
      (b) the ability of the Borrower, any Subsidiary or any Guarantor to perform
      any
      of its obligations under any Loan Document to which it is a party, (c) the
      validity or enforceability of any Loan Document or (d) the rights and remedies
      of or benefits available to the Administrative Agent, any other Agent, the
      Issuing Bank or any Lender under any Loan Document.

     

    “Material
      Domestic Subsidiary” means, as of any date, any Domestic Subsidiary that (a)
      is a Wholly-Owned Subsidiary and (b) together with its Subsidiaries, owns
      Property having a fair market value of $5,000,000 or
      more.

     

    


    
      
        
          
          

        

        
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    “Material
      Indebtedness” means any Debt (other than the Loans and Letters of Credit),
      or net obligations in respect of one or more Swap Agreements, of any one or
      more
      of the Borrower and its Subsidiaries, in either case in principal amount
      exceeding $2,000,000.  For
      purposes of determining Material Indebtedness, the “principal amount” of the
      obligations of the Borrower or any Subsidiary in respect of any Swap Agreement
      at any time shall be the Swap Termination Value determined under the
      circumstances and in accordance with the provision of clause (a) of such term
      “Swap Termination Value”.

     

    “Maturity
      Date” means September 28,
      2012.

     

    “Maximum
      Credit Amount” means, as to each Lender, the amount set forth opposite such
      Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same
      may be (a) reduced or terminated from time to time in connection with a
      reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
      Section 2.06(b), (b) increased from time to time pursuant to Section 2.06(c),
      or
      (c) modified from time to time pursuant to any assignment permitted by Section
      12.04(b).

     

    “Maximum
      Credit Amount Increase Certificate” has the meaning assigned to such term in
      Section 2.06(c)(ii)(E).

     

    “Moody’s”
      means Moody’s Investors Service, Inc. and any successor thereto that is a
      nationally recognized rating agency.

     

    “Mortgaged
      Property” means any Property owned by the Borrower or any Guarantor which is
      subject to the Liens existing and to exist under the terms of the Security
      Instruments.

     

    “Multiemployer
      Plan” means any employee pension plan as defined in Section 3(2) of ERISA
      covered by Title IV of ERISA that is a multiemployer plan as defined in section
      3(37) or 4001 (a)(3) of ERISA.

     

    “New
      Borrowing Base Notice” has the meaning assigned such term in Section
      2.07(d).

     

    “Notes”
      means the promissory notes of the Borrower described in Section 2.07(d) and
      being substantially in the form of Exhibit A, together with all amendments,
      modifications, replacements, extensions and rearrangements thereof.

     

    “Oil
      and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
      or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
      existing or future unitization, pooling agreements and declarations of pooled
      units and the units created thereby (including without limitation all units
      created under orders, regulations and rules of any Governmental Authority)
      which
      may affect all or any portion of the Hydrocarbon Interests; (d) all
      operating agreements, contracts and other agreements, including production
      sharing contracts and agreements, which relate to any of the Hydrocarbon
      Interests or the production, sale, purchase, exchange or processing of
      Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
      Hydrocarbons in and under and which may be produced and saved or attributable
      to
      the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
      profits, proceeds, products, revenues and other incomes from or attributable
      to
      the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances
      and
      Properties in any manner

     

    


    
      
        
          
          

        

        
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    appertaining,
      belonging, affixed or incidental to the Hydrocarbon Interests and (g) all
      Properties, rights, titles, interests and estates described or referred to
      above, including any and all Property, real or personal, now owned or
      hereinafter acquired and situated upon, used, held for use or useful in
      connection with the operating, working or development of any of such Hydrocarbon
      Interests or Property (excluding drilling rigs, automotive equipment, rental
      equipment or other personal Property which may be on such premises for the
      purpose of drilling a well or for other similar temporary uses) and including
      any and all oil wells, gas wells, injection wells or other wells, buildings,
      structures, fuel separators, liquid extraction plants, plant compressors, pumps,
      pumping units, field gathering systems, tanks and tank batteries, fixtures,
      valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
      equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
      and rods, surface leases, rights-of-way, easements and servitudes together
      with
      all additions, substitutions, replacements, accessions and attachments to any
      and all of the foregoing.

     

    “Organizational
      Documents” means, with respect to any Person, (a) in the case of any
      corporation, the certificate of incorporation and by-laws (or similar documents)
      of such Person, (b) in the case of any limited liability company, the
      certificate of formation and limited liability company agreement (or similar
      documents) of such Person, (c) in the case of any limited partnership, the
      certificate of formation and limited partnership agreement (or similar
      documents) of such Person, (d) in the case of any general partnership, the
      partnership agreement (or similar document) of such Person and (e) in any other
      case, the functional equivalent of the foregoing.

    


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

     

    “Participant”
      has the meaning set forth in Section 12.04(c)(i).

     

    “PBGC”
      means the Pension Benefit Guaranty Corporation, or any successor
      thereto.

     

    “Person”
      means any natural person, corporation, limited liability company, trust, joint
      venture, association, company, partnership, Governmental Authority or other
      entity.

     

    “Plan”
      means any employee pension benefit plan, as defined in section 3(2) of ERISA,
      that is subject to Title IV of ERISA, other than a Multiemployer Plan, which
      (a)
      is currently or hereafter sponsored, maintained or contributed to by the
      Borrower, a Subsidiary or an ERISA Affiliate or (b) the Borrower or a Subsidiary
      or an ERISA Affiliate may have any liability or obligation, whether known or
      unknown, asserted or unasserted, determined or determinable, absolute or
      contingent, accrued or unaccrued and whether due or to become due.

     

    “Prime
      Rate” means the rate of interest per annum publicly announced from time to
      time by KeyBank
as its prime
      rate in effect at its principal office in Cleveland, Ohio;
      each change in the Prime Rate shall be effective from and including the date
      such change is publicly announced as being effective.  Such rate is
      set by KeyBank as a general reference rate of interest, taking into account
      such
      factors as KeyBank may deem appropriate; it being understood that many
      of

     

    


    
      
        
          
          

        

        
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    KeyBank’s
      commercial or other loans are priced in relation to such rate, that it is not
      necessarily the lowest or best rate actually charged to any customer and that
      KeyBank may make various commercial or other loans at rates of interest having
      no relationship to such rate.

     

    “Property”
      means any interest in any kind of property or asset, whether real, personal
      or
      mixed, or tangible or intangible, including, without limitation, cash,
      securities, accounts and contract rights.

     

    “Proposed
      Borrowing Base” has the meaning assigned to such term in Section
      2.07(c)(i).

     

    “Proposed
      Borrowing Base Notice” has the meaning assigned to such term in Section
      2.07(c)(ii).

     

    “Proved
      Reserves” means “Proved Reserves” as defined in the Definitions for Oil and
      Gas Reserves (in this paragraph, the “Definitions”) promulgated by the
      Society of Petroleum Engineers (or any generally recognized successor) as in
      effect at the time in question.  “Proved Developed Producing
      Reserves” means Proved Reserves which are categorized as both “Developed”
and “Producing” in the Definitions, “Proved Developed Nonproducing
      Reserves” means Proved Reserves which are categorized as both “Developed”
and “Nonproducing” in the Definitions, “Proved Developed Reserves” means
      the sum of Proved Developed Producing Reserves and Proved Developed Nonproducing
      Reserves, and “Proved Undeveloped Reserves” means Proved Reserves which
      are categorized as “Undeveloped” in the Definitions.

     

    “Redemption”
      means with respect to any Debt, the repurchase, redemption, prepayment,
      repayment, defeasance or any other acquisition or retirement for value (or
      the
      segregation of funds with respect to any of the foregoing) of such
      Debt.  “Redeem” has the correlative meaning
      thereto.

     

    “Redetermination
      Date” means, with respect to any Scheduled Redetermination or any Interim
      Redetermination, the date that the redetermined Borrowing Base related thereto
      becomes effective pursuant to Section 2.07(d).

     

    “Register”
      has the meaning assigned such term
      in Section 12.04(b)(iv).

     

    “Regulation
      D” means Regulation D of the Board, as the same may be amended, supplemented
      or replaced from time to time.

     

    “Related
      Parties” means, with respect to any specified Person, such Person’s
      Affiliates and the respective directors, officers, employees, agents and
      advisors (including attorneys, accountants and experts) of such Person and
      such
      Person’s Affiliates.

     

    “Release”
      has the meaning assigned such term in the definition of the term “Environmental
      Laws”.

     

    “Remedial
      Work” has the meaning assigned such term in Section 8.10(a).

     

    “Reserve
      Report” means a report, in form and substance reasonably satisfactory to the
      Administrative Agent, setting forth, as of each January 1st or July 1st (or
      such
      other date in the

     

    


    
      
        
          
          

        

        
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    event
      of
      an Interim Redetermination) the oil and gas reserves attributable to the Oil
      and
      Gas Properties of the Borrower and the Subsidiaries, together with a projection
      of the rate of production and future net income, taxes, operating expenses
      and
      capital expenditures with respect thereto as of such date, based upon the
      economic assumptions consistent with the Administrative Agent’s lending
      requirements at the time.

     

    “Responsible
      Officer” means, as to any Person, the Chief Executive Officer, the
      President, any Financial Officer or any Vice President of such
      Person.  Unless otherwise specified, all references to a Responsible
      Officer herein shall mean a Responsible Officer of the Borrower.

     

    “Restricted
      Payment” means any dividend or other distribution (whether in cash,
      securities or other Property) with respect to any Equity Interests in the
      Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
      or other Property), including any sinking fund or similar deposit, on account
      of
      the purchase, redemption, retirement, acquisition, cancellation or termination
      of any such Equity Interests in the Borrower or any of its Subsidiaries or
      any
      option, warrant or other right to acquire any such Equity Interests in the
      Borrower or any of its Subsidiaries.

     

    “Revolving
      Credit Exposure” means, with respect to any Lender at any time, the sum of
      the outstanding principal amount of such Lender’s Loans and its LC Exposure at
      such time.

     

    “Scheduled
      Redetermination” has the meaning assigned such term in Section
      2.07(b).

     

    “Scheduled
      Redetermination Date” means the date on which a Borrowing Base that has been
      redetermined pursuant to a Scheduled Redetermination becomes effective as
      provided in Section 2.07(d).

     

    “SEC”
      means the Securities and Exchange Commission or any successor Governmental
      Authority.

     

    “Security
      Instruments” means the Guaranty Agreement, mortgages, deeds of trust and
      other agreements, instruments or certificates described or referred to in
      Exhibit E, and any and all other agreements, instruments, consents or
      certificates now or hereafter executed and delivered by the Borrower or any
      other Person (other than Swap Agreements with the Lenders or any Affiliate
      of a
      Lender or participation or similar agreements between any Lender and any other
      lender or creditor with respect to any Indebtedness pursuant to this Agreement)
      in connection with, or as security for the payment or performance of the
      Indebtedness, the Notes, this Agreement, or reimbursement obligations under
      the
      Letters of Credit, as such agreements may be amended, modified, supplemented
      or
      restated from time to time.

     

    “Senior
      Debt” means all Debt incurred under this Agreement.

     

    “S&P”
      means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
      Companies, Inc., and any successor thereto that is a nationally recognized
      rating agency.

     

    “Statutory
      Reserve Rate” means a fraction (expressed as a decimal), the numerator of
      which is the number one and the denominator of which is the number one minus
      the
      aggregate of

     

    


    
      
        
          
          

        

        
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    the
      maximum reserve percentages (including any marginal, special, emergency or
      supplemental reserves) expressed as a decimal established by the Board to which
      the Administrative Agent is subject, with respect to the Adjusted LIBO Rate,
      for
      eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
      Regulation D of the Board).  Such reserve percentages shall include
      those imposed pursuant to such Regulation D.  Eurodollar Loans shall
      be deemed to constitute eurocurrency funding and to be subject to such reserve
      requirements without benefit of or credit for proration, exemptions or offsets
      that may be available from time to time to any Lender under such Regulation
      D or
      any comparable regulation.  The Statutory Reserve Rate shall be
      adjusted automatically on and as of the effective date of any change in any
      reserve percentage.

     

    “Subsidiary”
      means: (a) any Person of which at least a majority of the outstanding Equity
      Interests having by the terms thereof ordinary voting power to elect a majority
      of the board of directors, manager or other governing body of such Person
      (irrespective of whether or not at the time Equity Interests of any other class
      or classes of such Person shall have or might have voting power by reason of
      the
      happening of any contingency) is at the time directly or indirectly owned or
      controlled by the Borrower or one or more of its Subsidiaries or by the Borrower
      and one or more of its Subsidiaries and (b) any partnership of which the
      Borrower or any of its Subsidiaries is a general partner.  Unless
      otherwise indicated herein, each reference to the term “Subsidiary” shall
      mean a Subsidiary of the Borrower.

     

    “Swap
      Agreement” means any agreement with respect to any swap, forward, future or
      derivative transaction or option or similar agreement, whether exchange traded,
      “over-the-counter” or otherwise, involving, or settled by reference to, one or
      more interest rates, currencies, commodities, equity or debt instruments or
      securities, or economic, financial or pricing indices or measures of economic,
      financial or pricing risk or value or any similar transaction or any combination
      of these transactions; provided that no phantom stock or similar plan providing
      for payments only on account of services provided by current or former
      directors, officers, employees or consultants of the Borrower or the
      Subsidiaries shall be a Swap Agreement.

     

    “Swap
      Termination Value” means, in respect of any one or more Swap Agreements,
      after taking into account the effect of any legally enforceable netting
      agreement relating to such Swap Agreements, (a) for any date on or after the
      date such Swap Agreements have been closed out and termination value(s)
      determined in accordance therewith, such termination value(s) and (b) for any
      date prior to the date referenced in clause (a), the amount(s) determined as
      the
      mark-to-market value(s) for such Swap Agreements, as determined by the
      counterparties to such Swap Agreements.

     

    “Synthetic
      Leases” means, in respect of any Person, all leases which shall have been,
      or should have been, in accordance with GAAP, treated as operating leases on
      the
      financial statements of the Person liable (whether contingently or otherwise)
      for the payment of rent thereunder and which were properly treated as
      indebtedness for borrowed money for purposes of U.S. federal income taxes,
      if
      the lessee in respect thereof is obligated to either purchase for an amount
      in
      excess of, or pay upon early termination an amount in excess of, 80% of the
      residual value of the Property subject to such operating lease upon expiration
      or early termination of such lease.

     

    


    
      
        
          
          

        

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

     

    “Termination
      Date” means the earlier of the Maturity Date and the date of termination of
      the Commitments.

     

    “Total
      Debt” means, at any date, all Debt of the Borrower and the Consolidated
      Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
      FAS 133 and (ii) accounts payable and other accrued liabilities (for the
      deferred purchase price of Property or services) from time to time incurred
      in
      the ordinary course of business which are not greater than sixty (60) days
      past
      the date of invoice or which are being contested in good faith by appropriate
      action and for which adequate reserves have been maintained in accordance with
      GAAP.

     

    “Transactions”
      means, with respect to (a) the Borrower, the execution, delivery and performance
      by the Borrower of this Agreement and each other Loan Document, the borrowing
      of
      Loans, the use of the proceeds thereof and the issuance of Letters of Credit
      hereunder, and the grant of Liens by the Borrower on Mortgaged Properties and
      other Properties pursuant to the Security Instruments and (b) each Guarantor,
      the execution, delivery and performance by such Guarantor of each Loan Document
      to which it is a party, the guaranteeing of the Indebtedness and the other
      obligations under the Guaranty Agreement by such Guarantor and such Guarantor’s
      grant of the security interests and provision of collateral under the Security
      Instruments, and the grant of Liens by such Guarantor on Mortgaged Properties
      and other Properties pursuant to the Security Instruments.

     

    “Type”,
      when used in reference to any Loan or Borrowing, refers to whether the rate
      of
      interest on such Loan, or on the Loans comprising such Borrowing, is determined
      by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

     

    “Wholly-Owned
      Subsidiary” means any Subsidiary of which all of the outstanding Equity
      Interests (other than any directors’ qualifying shares mandated by applicable
      law), on a fully-diluted basis, are owned by the Borrower or one or more of
      the
      Wholly-Owned Subsidiaries or are owned by the Borrower and one or more of the
      Wholly-Owned Subsidiaries.

     

    Section 
      1.03   Types of
      Loans and Borrowings. For
      purposes of this Agreement, Loans and Borrowings, respectively, may be
      classified and referred to by Type (e.g., a “Eurodollar Loan” or a
“Eurodollar Borrowing”).

     

    Section
      1.04   Terms
      Generally; Rules of Construction. The
      definitions of terms herein shall apply equally to the singular and plural
      forms
      of the terms defined.  Whenever the context may require, any pronoun
      shall include the corresponding masculine, feminine and neuter
      forms.  The words “include”, “includes” and “including” shall be
      deemed to be followed by the phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires otherwise, the word “or” is not
      exclusive.  Unless the context requires otherwise (a) any definition
      of or reference to any agreement, instrument or other document herein shall
      be
      construed as referring to such agreement, instrument or other document as from
      time to time amended, supplemented or otherwise modified (subject to any
      restrictions on such amendments, supplements or modifications set forth in
      the
      Loan

     

    


    
      
        
          
          

        

        
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    Documents),
      (b) any reference herein to any law shall be construed as referring to such
      law
      as amended, modified, codified or reenacted, in whole or in part, and in effect
      from time to time, (c) any reference herein to any Person shall be construed
      to
      include such Person’s successors and assigns (subject to the restrictions
      contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
      Agreement in its entirety and not to any particular provision hereof, (e) with
      respect to the determination of any time period, the word “from” means “from and
      including” and the word “to” means “to and including” and (f) any reference
      herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
      to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
      this Agreement.  No provision of this Agreement or any other Loan
      Document shall be interpreted or construed against any Person solely because
      such Person or its legal representative drafted such provision.

     

    Section
      1.05   Accounting Terms and
      Determinations; GAAP. Unless
      otherwise specified herein, all accounting terms used herein shall be
      interpreted, all determinations with respect to accounting matters hereunder
      shall be made, and all financial statements and certificates and reports as
      to
      financial matters required to be furnished to the Administrative Agent or the
      Lenders hereunder shall be prepared, in accordance with GAAP, applied on a
      basis
      consistent with the Financial Statements except for changes in which the
      Borrower’s independent certified public accountants concur and which are
      disclosed to the Administrative Agent on the next date on which financial
      statements are required to be delivered to the Lenders pursuant to Section
      8.01(a); provided that, unless the Borrower and the Majority Lenders shall
      otherwise agree in writing, no such change shall modify or affect the manner
      in
      which compliance with the covenants contained herein is computed such that
      all
      such computations shall be conducted utilizing financial information presented
      consistently with prior periods.

     

    ARTICLE
      II

    Credits

     

    Section
      2.01           
Commitments. Subject
      to the terms and conditions set forth herein, each Lender agrees to make Loans
      to the Borrower during the Availability Period in an aggregate principal amount
      that will not result in (a) such Lender’s Revolving Credit Exposure exceeding
      such Lender’s Commitment or (b) the total Revolving Credit Exposures exceeding
      the total Commitments.  Within the foregoing limits and subject to the
      terms and conditions set forth herein, the Borrower may borrow, repay and
      reborrow the Loans.

     

    Section
      2.02            Loans
      and Borrowings.

     

    (a)               
      Borrowings; Several Obligations.  Each Loan shall be made as
      part of a Borrowing consisting of Loans made by the Lenders ratably in
      accordance with their respective Commitments.  The failure of any
      Lender to make any Loan required to be made by it shall not relieve any other
      Lender of its obligations hereunder; provided that the Commitments are several
      and no Lender shall be responsible for any other Lender’s failure to make Loans
      as required.

     

    (b)              
      Types of Loans.  Subject to Section 3.03, each Borrowing shall
      be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
      request in accordance herewith.  Each Lender at its option may make
      any Eurodollar Loan by causing any

     

    


    
      
        
          
          

        

        
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    domestic
      or foreign branch or Affiliate of such Lender to make such Loan; provided that
      any exercise of such option shall not affect the obligation of the Borrower
      to
      repay such Loan in accordance with the terms of this Agreement.

     

    (c)        Minimum
      Amounts; Limitation on Number of Borrowings.  At the commencement
      of each Interest Period for any Eurodollar Borrowing, such Borrowing shall
      be in
      an aggregate amount that is an integral multiple of $1,000,000 and not less
      than $1,000,000.  At the time that each ABR Borrowing is made, such
      Borrowing shall be in an aggregate amount that is an integral multiple of
      $1,000,000 and not less than $1,000,000; provided that an ABR Borrowing may
      be
      in an aggregate amount that is equal to the entire unused balance of the total
      Commitments or that is required to finance the reimbursement of an LC
      Disbursement as contemplated by Section 2.08(e).  Borrowings of more
      than one Type may be outstanding at the same time, provided that there shall
      not
      at any time be more than a total of six Eurodollar
      Borrowings outstanding.  Notwithstanding any other provision of this
      Agreement, the Borrower shall not be entitled to request, or to elect to convert
      or continue, any Borrowing if the Interest Period requested with respect thereto
      would end after the Maturity Date.

     

    (d)            
        Notes.  The
      Loans made by each Lender shall be evidenced by a single promissory note of
      the
      Borrower in substantially the form of Exhibit A, dated, in the case of (i)
      any
      Lender party hereto as of the date of this Agreement, as of the date of this
      Agreement, or (ii) any Lender that becomes a party hereto pursuant to an
      Assignment and Assumption, as of the effective date of the Assignment and
      Assumption, payable to the order of such Lender in a principal amount equal to
      its Maximum Credit Amount as in effect on such date, and otherwise duly
      completed.  In the event that any Lender’s Maximum Credit Amount
      increases or decreases for any reason (whether pursuant to Section 2.06, Section
      12.04(b) or otherwise), the Borrower shall deliver or cause to be delivered
      on
      the effective date of such increase or decrease, a new Note payable to the
      order
      of such Lender in a principal amount equal to its Maximum Credit Amount after
      giving effect to such increase or decrease, and otherwise duly completed (and
      the prior Note shall be destroyed or, upon request of the Borrower, returned
      to
      the Borrower with an indication that the same has been
      discharged).  The date, amount, Type, interest rate and, if
      applicable, Interest Period of each Loan made by each Lender, and all payments
      made on account of the principal thereof, shall be recorded by such Lender
      on
      its books for its Note, and, prior to any transfer, may be endorsed by such
      Lender on a schedule attached to such Note or any continuation thereof or on
      any
      separate record maintained by such Lender.  Failure to make any such
      notation or to attach a schedule shall not affect any Lender’s or the Borrower’s
      rights or obligations in respect of such Loans or affect the validity of such
      transfer by any Lender of its Note.  

     

    (e)              
       Loans and Borrowings under the Existing Credit
      Agreement.  On the Effective Date:

     

    (i)    the
      Borrower
      shall pay all accrued and unpaid commitment fees, break funding fees under
      Section 5.02 and all other fees that are outstanding under the Existing Credit
      Agreement for the account of each “Lender” under the Existing Credit
      Agreement;

     

    


    
      
        
          
          

        

        
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    (ii)         
      each “ABR Loan” and “Eurodollar Loan” outstanding under the Existing Credit
      Agreement shall be deemed to be repaid with the proceeds of a new ABR Loan
      or
      Eurodollar Loan, as applicable, under this Agreement;

     

    (iii)        
      any letters of credit outstanding under the Existing Credit Agreement shall
      be
      deemed issued under this Agreement; and

     

    (iv)         the
      Existing Credit Agreement and the commitments thereunder shall be superceded
      by
      this Agreement and such commitments shall terminate.

     

    Section
      2.03    Requests for
      Borrowings.  To
      request a Borrowing, the Borrower shall notify the Administrative Agent of
      such
      request by telephone (a) in the case of a Eurodollar Borrowing, not later than
      12:00 noon, New York City time, three Business Days before the date of the
      proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00
      noon, New York City time, one Business Day before the date of the proposed
      Borrowing; provided that no such notice shall be required for any deemed request
      of an ABR Borrowing to finance the reimbursement of an LC Disbursement as
      provided in Section 2.08(e).  Each such telephonic Borrowing Request
      shall be irrevocable and shall be confirmed promptly by hand delivery or
      telecopy to the Administrative Agent of a written Borrowing Request in
      substantially the form of Exhibit B and signed by the Borrower.  Each
      such telephonic and written Borrowing Request shall specify the following
      information:

     

    (i)           the
      aggregate amount of the requested Borrowing;

     

    (ii)          the
      date of such Borrowing, which shall be a Business Day;

     

    (iii)        whether
      such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

     

    (iv)        
      in the case of a Eurodollar Borrowing, the initial Interest Period to be
      applicable thereto, which shall be a period contemplated by the definition
      of
      the term “Interest Period”;

     

    (v)          the
      amount of the then effective Borrowing Base, the current total Revolving Credit
      Exposures (without regard to the requested Borrowing) and the pro forma
      total Revolving Credit Exposures (giving effect to the requested Borrowing);
      and

     

    (vi)         the
      location and number of the Borrower’s account to which funds are to be
      disbursed, which shall comply with the requirements of Section
      2.05.

     

    If
      no
      election as to the Type of Borrowing is specified, then the requested Borrowing
      shall be an ABR Borrowing.  If no Interest Period is specified with
      respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
      to have selected an Interest Period of one month’s duration.  Each
      Borrowing Request shall constitute a representation that the amount of the
      requested Borrowing shall not cause the total Revolving Credit Exposures to
      exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit
      Amounts and the then effective Borrowing Base).

     

    


    
      
        
          
          

        

        
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    Promptly
      following receipt of a Borrowing Request in accordance with this Section 2.03,
      the Administrative Agent shall advise each Lender of the details thereof and
      of
      the amount of such Lender’s Loan to be made as part of the requested
      Borrowing.

     

    Section
      2.04    Interest
      Elections.

     

                  
      (a)             
      Conversion and Continuance.  Each Borrowing initially shall be
      of the Type specified in the applicable Borrowing Request and, in the case
      of a
      Eurodollar Borrowing, shall have an initial Interest Period as specified in
      such
      Borrowing Request.  Thereafter, the Borrower may elect to convert such
      Borrowing to a different Type or to continue such Borrowing and, in the case
      of
      a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided
      in
      this Section 2.04.  The Borrower may elect different options with
      respect to different portions of the affected Borrowing, in which case each
      such
      portion shall be allocated ratably among the Lenders holding the Loans
      comprising such Borrowing, and the Loans comprising each such portion shall
      be
      considered a separate Borrowing.

     

    (b)               Interest
      Election Requests.  To make an election pursuant to this Section
      2.04, the Borrower shall notify the Administrative Agent of such election by
      telephone, fax (or transmit by electronic communication, if arrangements for
      doing so have been approved by the Administrative Agent) by the time that a
      Borrowing Request would be required under Section 2.03 if the Borrower were
      requesting a Borrowing of the Type resulting from such election to be made
      on
      the effective date of such election.  Each such telephonic Interest
      Election Request shall be irrevocable and shall be confirmed promptly by hand
      delivery or telecopy to the Administrative Agent of a written Interest Election
      Request in substantially the form of Exhibit C and signed by the
      Borrower.

     

    (c)              
      Information in Interest Election Requests.  Each telephonic,
      fax, other approved electronic transmission and written Interest Election
      Request shall specify the following information:

     

    (i)           the
      Borrowing to which such Interest Election Request applies and, if different
      options are being elected with respect to different portions thereof, the
      portions thereof to be allocated to each resulting Borrowing (in which case
      the
      information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
      be
      specified for each resulting Borrowing);

     

    (ii)         
      the effective date of the election made pursuant to such Interest Election
      Request, which shall be a Business Day;

     

    (iii)         whether
      the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
      and

     

    (iv)          if
      the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
      applicable thereto after giving effect to such election, which shall be a period
      contemplated by the definition of the term “Interest Period”.

     

    


    
      
        
          
          

        

        
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    If
      any
      such Interest Election Request requests a Eurodollar Borrowing but does not
      specify an Interest Period, then the Borrower shall be deemed to have selected
      an Interest Period of one month’s duration.

     

               (d)           Notice
      to Lenders by the Administrative Agent.  Promptly following
      receipt of an Interest Election Request, the Administrative Agent shall advise
      each Lender of the details thereof and of such Lender’s portion of each
      resulting Borrowing.

     

    (e)           Effect
      of Failure to Deliver Timely Interest Election Request and Events of Default
      and
      Borrowing Base Deficiencies on Interest Election.  If the Borrower
      fails to deliver a timely Interest Election Request with respect to a Eurodollar
      Borrowing prior to the end of the Interest Period applicable thereto, then,
      unless such Borrowing is repaid as provided herein, at the end of such Interest
      Period such Borrowing shall be converted to an ABR
      Borrowing.  Notwithstanding any contrary provision hereof, if an Event
      of Default or a Borrowing Base Deficiency has occurred and is
      continuing:  (i) no outstanding Borrowing may be converted to or, at
      the end of its applicable Interest Period, continued as a Eurodollar Borrowing
      (and any Interest Election Request that requests such conversion of any
      Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall
      be ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be
      converted to an ABR Borrowing at the end of the Interest Period applicable
      thereto.

     

    Section
      2.05    Funding of
      Borrowings.

     

    (a)           Funding
      by Lenders.  Each Lender shall make each Loan to be made by it
      hereunder on the proposed date thereof by wire transfer of immediately available
      funds by 1:00 p.m., New York City time, to the account of the Administrative
      Agent most recently designated by it for such purpose by notice to the
      Lenders.  The Administrative Agent will make such Loans available to
      the Borrower by promptly crediting the amounts so received, in like funds,
      to an
      account of the Borrower designated by the Borrower in the applicable Borrowing
      Request; provided that ABR Loans made to finance the reimbursement of an LC
      Disbursement as provided in Section 2.08(e) shall be remitted by the
      Administrative Agent to the Issuing Bank.  Nothing herein shall be
      deemed to obligate any Lender to obtain the funds for its Loan in any particular
      place or manner or to constitute a representation by any Lender that it has
      obtained or will obtain the funds for its Loan in any particular place or
      manner.

     

    (b)           Presumption
      of Funding by the Lenders.  Unless the Administrative Agent shall
      have received notice from a Lender prior to the proposed date of any Borrowing
      that such Lender will not make available to the Administrative Agent such
      Lender’s share of such Borrowing, the Administrative Agent may assume that such
      Lender has made such share available on such date in accordance with Section
      2.05(a) and may, in reliance upon such assumption, make available to the
      Borrower a corresponding amount.  In such event, if a Lender has not
      in fact made its share of the applicable Borrowing available to the
      Administrative Agent, then the applicable Lender and the Borrower severally
      agree to pay to the Administrative Agent forthwith on demand such corresponding
      amount with interest thereon, for each day from and including the date such
      amount is made available to the Borrower to but excluding the date of payment
      to
      the Administrative Agent, at (i) in the case of such Lender, the greater of
      the
      Federal Funds Effective Rate and a rate determined by the Administrative Agent
      in accordance with

     

    


    
      
        
          
          

        

        
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    banking
      industry rules on interbank compensation or (ii) in the case of the Borrower,
      the interest rate applicable to ABR Loans.  If such Lender pays such
      amount to the Administrative Agent, then such amount shall constitute such
      Lender’s Loan included in such Borrowing.

     

    Section
      2.06    Termination,
      Reduction and Increase of Aggregate Maximum Credit Amounts.

     

    (a)           Scheduled
      Termination of Commitments.  Unless previously terminated, the
      Commitments shall terminate on the Maturity Date.  If at any time the
      Aggregate Maximum Credit Amounts or the Borrowing Base is terminated or reduced
      to zero, then the Commitments shall terminate on the effective date of such
      termination or reduction.

     

    (b)           Optional
      Termination and Reduction of Aggregate Credit Amounts.

     

    (i)           The
      Borrower may at any time terminate, or from time to time reduce, the Aggregate
      Maximum Credit Amounts; provided that (a) each reduction of the Aggregate
      Maximum Credit Amounts shall be in an amount that is an integral multiple of
      $1,000,000 and
      not less than $1,000,000 and (b) the Borrower shall not terminate or reduce
      the
      Aggregate Maximum Credit Amounts if, after giving effect to any concurrent
      prepayment of the Loans in accordance with Section 3.04(c), the total Revolving
      Credit Exposures would exceed the total Commitments.

     

    (ii)           The
      Borrower shall notify the Administrative Agent of any election to terminate
      or
      reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least
      three Business Days prior to the effective date of such termination or
      reduction, specifying such election and the effective date
      thereof.  Promptly following receipt of any notice, the Administrative
      Agent shall advise the Lenders of the contents thereof.  Each notice
      delivered by the Borrower pursuant to this Section 2.06(b)(ii) shall be
      irrevocable.  Any termination or reduction of the Aggregate Maximum
      Credit Amounts shall be permanent and may not be reinstated.  Each
      reduction of the Aggregate Maximum Credit Amounts shall be made ratably among
      the Lenders in accordance with each Lender’s Applicable Percentage.

     

    (c)           Optional
      Increase in Aggregate Maximum Credit Amounts.

     

    (i)           Subject
      to the conditions set forth in Section 2.06(c)(ii), the Borrower may increase
      the Aggregate Maximum Credit Amounts then in effect with the prior written
      consent of the Administrative Agent by increasing the Maximum Credit Amount
      of a
      Lender or by causing a Person that at such time is not a Lender to become a
      Lender (an “Additional Lender”).

     

    (ii)           Any
      increase in the Aggregate Maximum Credit Amounts shall be subject to the
      following additional conditions:

     

    (A)           such
      increase shall not be less than $10,000,000 unless the
      Administrative Agent otherwise consents, and no such increase shall be permitted
      if after giving effect thereto the Aggregate Maximum Credit Amounts would exceed
      $200,000,000;

     

    


    
      
        
          
          

        

        
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    (B)           no
      Default shall have occurred and be continuing at the effective date of such
      increase;

     

    (C)         
      on the effective date of such increase, no Eurodollar Borrowings shall be
      outstanding or if any Eurodollar Borrowings are outstanding, then the effective
      date of such increase shall be the last day of the Interest Period in respect
      of
      such Eurodollar Borrowings unless the Borrower pays compensation required by
      Section 5.02;

     

    (D)           no
      Lender’s Maximum Credit Amount may be increased without the consent of such
      Lender;

     

    (E)          
      if the Borrower elects to increase the Aggregate Maximum Credit Amount by
      increasing the Maximum Credit Amount of a Lender, the Borrower and such Lender
      shall execute and deliver to the Administrative Agent a certificate
      substantially in the form of Exhibit G-1 (a “Maximum Credit Amount Increase
      Certificate”), together with a processing and recordation fee of $5,000, and
      the Borrower shall deliver a new Note payable to the order of such Lender in
      a
      principal amount equal to its Maximum Credit Amount after giving effect to
      such
      increase, and otherwise duly completed; and

     

    (F)           If
      the Borrower elects to increase the Aggregate Maximum Credit Amounts by causing
      an Additional Lender to become a party to this Agreement, then the Borrower
      and
      such Additional Lender shall execute and deliver to the Administrative Agent
      a
      certificate substantially in the form of Exhibit G-2 (an “Additional Lender
      Certificate”), together with an Administrative Questionnaire and a
      processing and recordation fee of $5,000, and the Borrower shall deliver a
      Note
      payable to the order of such Additional Lender in a principal amount equal
      to
      its Maximum Credit Amount, and otherwise duly completed.

     

    (iii)             Subject
      to acceptance and recording thereof pursuant to Section 2.06(c)(iv), from and
      after the effective date specified in the Maximum Credit Amount Increase
      Certificate or the Additional Lender Certificate (or if any Eurodollar
      Borrowings are outstanding, then the last day of the Interest Period in respect
      of such Eurodollar Borrowings, unless the Borrower has paid compensation
      required by Section 5.02):  (c) the amount of the Aggregate Maximum
      Credit Amounts shall be increased as set forth therein, and (d) in the case
      of
      an Additional Lender Certificate, any Additional Lender party thereto shall
      be a
      party to this Agreement and the other Loan Documents and have the rights and
      obligations of a Lender under this Agreement and the other Loan
      Documents.  In addition, the Lender or the Additional Lender, as
      applicable, shall purchase a pro rata portion of the outstanding Loans (and
      participation interests in Letters of Credit) of each of the other Lenders
      (and
      such Lenders hereby agree to sell and to take all such further action to
      effectuate such sale) such that each Lender (including any Additional Lender,
      if
      applicable) shall hold its Applicable Percentage of the outstanding Loans (and
      participation interests) after giving effect to the increase in the Aggregate
      Maximum Credit Amount.

     

    (iv)             Upon
      its receipt of a duly completed Maximum Credit Amount Increase Certificate
      or an
      Additional Lender Certificate, executed by the Borrower and the Lender or the
      Borrower and the Additional Lender party thereto, as applicable,
      the

     

    


    
      
        
          
          

        

        
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    processing
      and recording fee referred to in Section 2.06(c)(ii), the Administrative
      Questionnaire referred to in Section 2.06(c)(ii), if applicable, and the written
      consent of the Administrative Agent to such increase required by Section
      2.06(c)(i), the Administrative Agent shall accept such Maximum Credit Amount
      Increase Certificate or Additional Lender Certificate and record the information
      contained therein in the Register required to be maintained by the
      Administrative Agent pursuant to Section 12.04(b)(iv).  No increase in
      the Aggregate Maximum Credit Amount shall be effective for purposes of this
      Agreement unless it has been recorded in the Register as provided in this
      Section 2.06(c)(iv).

     

    Section
      2.07    Borrowing
      Base.


     

    (a)           Initial
      Borrowing Base.  For the period from and including the Effective
      Date to but excluding the first Redetermination Date, the amount of the
      Borrowing Base shall be $75,000,000.  Notwithstanding
      the foregoing, the Borrowing Base may be subject to further adjustments from
      time to time pursuant to Section 8.13(c) or 0.

     

    (b)           Scheduled
      and Interim Redeterminations.  The Borrowing Base shall be
      redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
      Redetermination”), and, subject to Section 2.07(d), such redetermined
      Borrowing Base shall become effective and applicable to the Borrower, the
      Administrative Agent, the Issuing Bank and the Lenders on April 1st and October
      1st of each year, commencing October 1, 2007.  In
      addition, the Borrower may, by notifying the Administrative Agent thereof,
      and
      the Administrative Agent may, at the direction of the Majority Lenders, by
      notifying the Borrower thereof, one time during any calendar year, each elect
      to
      cause the Borrowing Base to be redetermined between Scheduled Redeterminations
      (each redetermination made pursuant to this sentence or the following sentence,
      an “Interim Redetermination”) in accordance with this Section
      2.07.  The Borrower shall have the right to request Interim
      Redeterminations in addition to the one otherwise provided in this Section
      2.07(b) upon the proposed acquisition of Proved Developed Producing Reserves
      (whether by purchase of the actual properties or of the Equity Interests in
      the
      Person owning such properties) whose purchase price is greater than 10% of
      the
      Borrowing Base, provided such Interim Redetermination is in accordance with
      this
      Section 2.07.

     

    (c)           Scheduled
      and Interim  Redetermination Procedure.

     

    (i)           Each
      Scheduled Redetermination and each Interim Redetermination shall be effectuated
      as follows:  Upon receipt by the Administrative Agent of (e) the
      Reserve Report and the certificate required to be delivered by the Borrower
      to
      the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
      to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
      pursuant to Section 8.12(b) and (c), and (f) such other reports, data and
      supplemental information, including, without limitation, the information
      provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
      requested by the Majority Lenders (the Reserve Report, such certificate and
      such
      other reports, data and supplemental information being the “Engineering
      Reports”), the Administrative Agent shall evaluate the information contained
      in the Engineering Reports and shall, in good faith, propose a new Borrowing
      Base (the “Proposed Borrowing Base”) based upon such
      information

     

    


    
      
        
          
          

        

        
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    and
      such
      other information (including, without limitation, the status of title
      information with respect to the Oil and Gas Properties as described in the
      Engineering Reports and the existence of any other Debt) as the Administrative
      Agent deems appropriate in its sole discretion and consistent with its normal
      oil and gas lending criteria as it exists at the particular time.  In
      no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit
      Amounts.

     

    (ii)           The
      Administrative Agent shall notify the Borrower and the Lenders of the Proposed
      Borrowing Base (the “Proposed Borrowing Base Notice”):

     

    (A)           in
      the case of a Scheduled Redetermination (i) if the Administrative Agent shall
      have received the Engineering Reports required to be delivered by the Borrower
      pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on
      or
      before the March 15th and September 15th of such year following the date of
      delivery or (ii) if the Administrative Agent shall not have received the
      Engineering Reports required to be delivered by the Borrower pursuant to Section
      8.12(a) and (c) in a timely and complete manner, then promptly after the
      Administrative Agent has received complete Engineering Reports from the Borrower
      and has had a reasonable opportunity to determine the Proposed Borrowing Base
      in
      accordance with Section 2.07(c)(i); and

     

    (B)           in
      the case of an Interim Redetermination, promptly, and in any event, within
      fifteen (15) days after the Administrative Agent has received the required
      Engineering Reports.

     

    (iii)           Any
      Proposed Borrowing Base that would increase the Borrowing Base then in effect
      must be approved or deemed to have been approved by all of the Lenders as
      provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that
      would decrease or maintain the Borrowing Base then in effect must be approved
      or
      be deemed to have been approved by the Majority Lenders as provided in this
      Section 2.07(c)(iii).  Upon receipt of the Proposed Borrowing Base
      Notice, each Lender shall have fifteen (15) days to agree with the Proposed
      Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
      alternate Borrowing Base.  If at the end of such fifteen (15) days,
      any Lender has not communicated its approval or disapproval in writing to the
      Administrative Agent, such silence shall be deemed to be an approval of the
      Proposed Borrowing Base.  If, at the end of such 15-day period, all of
      the Lenders, in the case of a Proposed Borrowing Base that would increase the
      Borrowing Base then in effect, or the Majority Lenders, in the case of a
      Proposed Borrowing Base that would decrease or maintain the Borrowing Base
      then
      in effect, have approved or deemed to have approved, as aforesaid, then the
      Proposed Borrowing Base shall become the new Borrowing Base, effective on the
      date specified in Section 2.07(d).  If, however, at the end of such
      15-day period, all of the Lenders or the Majority Lenders, as applicable, have
      not approved or deemed to have approved, as aforesaid, then the Administrative
      Agent shall poll the Lenders to ascertain the highest Borrowing Base then
      acceptable to all of the Lenders (if the Borrowing Base will be increased)
      or
      the Majority Lenders (if the Borrowing Base will be decreased), as the case
      may
      be, and such amount shall become the new Borrowing Base, effective on the date
      specified in Section 2.07(d).

     

    


    
      
        
          
          

        

        
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                   (d)    Effectiveness
        of a Redetermined
        Borrowing Base.  After a redetermined
        Borrowing Base is approved or is deemed to have been approved by all of the
        Lenders  or  the Majority Lenders, as applicable, pursuant
        to Section
        2.07(c)(iii), the
        Administrative Agent shall notify the Borrower and the Lenders of the amount
        of
        the redetermined Borrowing Base (the “New Borrowing
        Base
        Notice”), and such
        amount shall become the new Borrowing Base, effective and applicable to the
        Borrower, the Administrative Agent, the Issuing Bank and the
        Lenders:

    

     

                                                
      (i)    in
      the case of a Scheduled Redetermination, (A) if the Administrative Agent shall
      have received the Engineering Reports required to be delivered by the Borrower
      pursuant to Section 8.12(a) and (b) in a timely and complete manner, then on
      the
      April 1st or October 1st, as applicable, following such notice, or (B) if the
      Administrative Agent shall not have received the Engineering Reports required
      to
      be delivered by the Borrower pursuant to Section 8.12(a) and (b) in a timely
      and
      complete manner, then on the Business Day next succeeding delivery of such
      notice; and

     

    (ii)           in
      the case of an Interim Redetermination, on the Business Day next succeeding
      delivery of such notice.

     

    Such
      amount shall then become the Borrowing Base until the next Scheduled
      Redetermination Date, the next Interim Redetermination Date or the next
      adjustment to the Borrowing Base under Section 8.13(c) or 0, whichever occurs
      first.  Notwithstanding the foregoing, no Scheduled Redetermination or
      Interim Redetermination shall become effective until the New Borrowing Base
      Notice related thereto is received by the Borrower.

     

    Section
      2.08    Letters of
      Credit.

     

    (a)           General.  Subject
      to the terms and conditions set forth herein, the Borrower may request the
      issuance of dollar denominated Letters of Credit for its own account or for
      the
      account of any of its Subsidiaries, in a form reasonably acceptable to the
      Administrative Agent and the Issuing Bank, at any time and from time to time
      during the Availability Period; provided that the Borrower may not request
      the
      issuance, amendment (other than an amendment in respect to the reduction of
      the
      outstanding amount of a Letter of Credit or the termination of a Letter of
      Credit prior to its stated expiration date), renewal or extension of Letters
      of
      Credit hereunder if a Borrowing Base Deficiency exists at such time or would
      exist as a result thereof.  In the event of any inconsistency between
      the terms and conditions of this Agreement and the terms and conditions of
      any
      form of letter of credit application or other agreement submitted by the
      Borrower to, or entered into by the Borrower with, the Issuing Bank relating
      to
      any Letter of Credit, the terms and conditions of this Agreement shall
      control.

     

    (b)           Notice
      of Issuance, Amendment, Renewal, Extension; Certain
      Conditions.  To request the issuance of a Letter of Credit (or the
      amendment, renewal or extension of an outstanding Letter of Credit), the
      Borrower shall hand deliver or telecopy (or transmit by electronic
      communication, if arrangements for doing so have been approved by the Issuing
      Bank) to the Issuing Bank and the Administrative Agent (not less than five
      (5)
      Business Days in advance of the requested date of issuance, amendment, renewal
      or extension) a notice:

     

    


    
      
        
          
          

        

        
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                   (i)           requesting
      the issuance of a Letter of Credit or identifying the Letter of Credit to be
      amended, renewed or extended;

     

    (ii)          specifying
      the date of issuance, amendment, renewal or extension (which shall be a Business
      Day);

     

    (iii)         specifying
      the date on which such Letter of Credit is to expire (which shall comply with
      Section 2.08(c));

     

    (iv)         
      specifying the amount of such Letter of Credit;

     

    (v)         
      specifying the name and address of the beneficiary thereof and such other
      information as shall be necessary to prepare, amend, renew or extend such Letter
      of Credit; and

     

    (vi)        
      specifying the amount of the then effective Borrowing Base and whether a
      Borrowing Base Deficiency exists at such time, the current total Revolving
      Credit Exposures (without regard to the requested Letter of Credit or the
      requested amendment, renewal or extension of an outstanding Letter of Credit)
      and the pro forma total Revolving Credit Exposures (giving effect to
      the requested Letter of Credit or the requested amendment, renewal or extension
      of an outstanding Letter of Credit).

     

    Each
      notice shall constitute a representation that after giving effect to the
      requested issuance, amendment, renewal or extension, as applicable, (i) the
      LC
      Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit
      Exposures shall not exceed the total Commitments (i.e. the lesser of the
      Aggregate Maximum Credit Amounts and the then effective Borrowing
      Base).

     

    If
      requested by the Issuing Bank, the Borrower also shall submit a letter of credit
      application on the Issuing Bank’s standard form in connection with any request
      for a Letter of Credit.

     

    (c)           Expiration
      Date.  Each Letter of Credit shall expire at or prior to the close
      of business on the earlier of (2) the date one year after the date of the
      issuance of such Letter of Credit (or, in the case of any renewal or extension
      thereof, one year after such renewal or extension) and (3) the date that is
      five
      Business Days prior to the Maturity Date.

     

    (d)           Participations.  By
      the issuance of a Letter of Credit (or an amendment to a Letter of Credit
      increasing the amount thereof) and without any further action on the part of
      the
      Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender,
      and
      each Lender hereby acquires from the Issuing Bank, a participation in such
      Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate
      amount available to be drawn under such Letter of Credit.  In
      consideration and in furtherance of the foregoing, each Lender hereby absolutely
      and unconditionally agrees to pay to the Administrative Agent, for the account
      of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement
      made by the Issuing Bank and not reimbursed by the Borrower on the date due
      as
      provided in Section 2.08(e), or of any reimbursement payment required to be
      refunded to the Borrower for any reason.  Each Lender acknowledges and
      agrees that its obligation to acquire participations pursuant to this Section
      2.08(d) in respect of Letters of Credit is absolute and unconditional and shall
      not be affected by

     

    


    
      
        
          
          

        

        
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    any
      circumstance whatsoever, including any amendment, renewal or extension of any
      Letter of Credit or the occurrence and continuance of a Default, the existence
      of a Borrowing Base Deficiency or reduction or termination of the Commitments,
      and that each such payment shall be made without any offset, abatement,
      withholding or reduction whatsoever.

     

    (e)           Reimbursement.  If
      the Issuing Bank shall make any LC Disbursement in respect of a Letter of
      Credit, the Borrower shall reimburse such LC Disbursement by paying to the
      Administrative Agent an amount equal to such LC Disbursement not later than
      12:00 noon, New York City time, on the date that such LC Disbursement is made,
      if the Borrower shall have received notice of such LC Disbursement prior to
      10:00 a.m., New York City time, on such date, or, if such notice has not been
      received by the Borrower prior to such time on such date, then not later than
      12:00 noon, New York City time, on (i) the Business Day that the Borrower
      receives such notice, if such notice is received prior to 10:00 a.m., New York
      City time, on the day of receipt, or (ii) the Business Day immediately following
      the day that the Borrower receives such notice, if such notice is not received
      prior to such time on the day of receipt; provided that if such LC Disbursement
      is not less than $1,000,000, the Borrower shall, subject to the conditions
      to
      Borrowing set forth herein, be deemed to have requested, and the Borrower does
      hereby request under such circumstances, that such payment be financed with
      an
      ABR Borrowing in an equivalent amount and, to the extent so financed, the
      Borrower’s obligation to make such payment shall be discharged and replaced by
      the resulting ABR Borrowing.  If the Borrower fails to make such
      payment when due, the Administrative Agent shall notify each Lender of the
      applicable LC Disbursement, the payment then due from the Borrower in respect
      thereof and such Lender’s Applicable Percentage thereof.  Promptly
      following receipt of such notice, each Lender shall pay to the Administrative
      Agent its Applicable Percentage of the payment then due from the Borrower,
      in
      the same manner as provided in Section 2.05 with respect to Loans made by such
      Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
      obligations of the Lenders), and the Administrative Agent shall promptly pay
      to
      the Issuing Bank the amounts so received by it from the
      Lenders.  Promptly following receipt by the Administrative Agent of
      any payment from the Borrower pursuant to this Section 2.08(e), the
      Administrative Agent shall distribute such payment to the Issuing Bank or,
      to
      the extent that Lenders have made payments pursuant to this Section 2.08(e)
      to
      reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their
      interests may appear.  Any payment made by a Lender pursuant to this
      Section 2.08(e) to reimburse the Issuing Bank for any LC Disbursement (other
      than the funding of ABR Loans as contemplated above) shall not constitute a
      Loan
      and shall not relieve the Borrower of its obligation to reimburse such LC
      Disbursement.

     

    (f)           Obligations
      Absolute.  The Borrower’s obligation to reimburse LC Disbursements
      as provided in Section 2.08(e) shall be absolute, unconditional and irrevocable,
      and shall be performed strictly in accordance with the terms of this Agreement
      under any and all circumstances whatsoever and irrespective of (i) any lack
      of
      validity or enforceability of any Letter of Credit, any Letter of Credit
      Agreement or this Agreement, or any term or provision therein, (ii) any draft
      or
      other document presented under a Letter of Credit proving to be forged,
      fraudulent or invalid in any respect or any statement therein being untrue
      or
      inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter
      of
      Credit against presentation of a draft or other document that does not comply
      with the terms of such Letter of Credit or any Letter of Credit Agreement,
      or
      (iv) any other event or circumstance whatsoever, whether or not similar to
      any
      of the foregoing, that might, but for the provisions of this Section 2.08(f),
      constitute a legal

     

    


    
      
        
          
          

        

        
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    or
      equitable discharge of, or provide a right of setoff against, the Borrower’s
      obligations hereunder.  Neither the Administrative Agent, the Lenders
      nor the Issuing Bank, nor any of their Related Parties shall have any liability
      or responsibility by reason of or in connection with the issuance or transfer
      of
      any Letter of Credit or any payment or failure to make any payment thereunder
      (irrespective of any of the circumstances referred to in the preceding
      sentence), or any error, omission, interruption, loss or delay in transmission
      or delivery of any draft, notice or other communication under or relating to
      any
      Letter of Credit (including any document required to make a drawing thereunder),
      any error in interpretation of technical terms or any consequence arising from
      causes beyond the control of the Issuing Bank; provided that the foregoing
      shall
      not be construed to excuse the Issuing Bank from liability to the Borrower
      to
      the extent of any direct damages (as opposed to consequential damages, claims
      in
      respect of which are hereby waived by the Borrower to the extent permitted
      by
      applicable law) suffered by the Borrower that are caused by the Issuing Bank’s
      failure to exercise care when determining whether drafts and other documents
      presented under a Letter of Credit comply with the terms thereof.  The
      parties hereto expressly agree that, in the absence of gross negligence or
      willful misconduct on the part of the Issuing Bank (as finally determined by
      a
      court of competent jurisdiction), the Issuing Bank shall be deemed to have
      exercised all requisite care in each such determination.  In
      furtherance of the foregoing and without limiting the generality thereof, the
      parties agree that, with respect to documents presented which appear on their
      face to be in substantial compliance with the terms of a Letter of Credit,
      the
      Issuing Bank may, in its sole discretion, either accept and make payment upon
      such documents without responsibility for further investigation, regardless
      of
      any notice or information to the contrary, or refuse to accept and make payment
      upon such documents if such documents are not in strict compliance with the
      terms of such Letter of Credit.

     

    (g)           Disbursement
      Procedures.  The Issuing Bank shall, promptly following its
      receipt thereof, examine all documents purporting to represent a demand for
      payment under a Letter of Credit.  The Issuing Bank shall promptly
      notify the Administrative Agent and the Borrower by telephone (confirmed by
      telecopy) of such demand for payment and whether the Issuing Bank has made
      or
      will make an LC Disbursement thereunder; provided that any failure to give
      or
      delay in giving such notice shall not relieve the Borrower of its obligation
      to
      reimburse the Issuing Bank and the Lenders with respect to any such LC
      Disbursement.

     

    (h)           Interim
      Interest.  If the Issuing Bank shall make any LC Disbursement,
      then, until the Borrower shall have reimbursed the Issuing Bank for such LC
      Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
      the unpaid amount thereof shall bear interest, for each day from and including
      the date such LC Disbursement is made to but excluding the date that the
      Borrower reimburses such LC Disbursement, at the rate per annum then applicable
      to ABR Loans.  Interest accrued pursuant to this Section 2.08(h) shall
      be for the account of the Issuing Bank, except that interest accrued on and
      after the date of payment by any Lender pursuant to Section 2.08(e) to reimburse
      the Issuing Bank shall be for the account of such Lender to the extent of such
      payment.

     

    (i)           Replacement
      of the Issuing Bank.  The Issuing Bank may be replaced at any time
      by written agreement among the Borrower, the Administrative Agent, the replaced
      Issuing Bank and the successor Issuing Bank.  The Administrative Agent
      shall notify the Lenders of any such replacement of the Issuing
      Bank.  At the time any such replacement shall become effective, the
      Borrower shall pay all unpaid fees accrued for the account of the replaced
      Issuing  

     

    


    
      
        
          
          

        

        
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    Bank
      pursuant to Section 3.05(b).  From and after the effective date of any
      such replacement, (i) the successor Issuing Bank shall have all the rights
      and
      obligations of the Issuing Bank under this Agreement with respect to Letters
      of
      Credit to be issued thereafter and (ii) references herein to the term “Issuing
      Bank” shall be deemed to refer to such successor or to any previous Issuing
      Bank, or to such successor and all previous Issuing Banks, as the context shall
      require.  After the replacement of the Issuing Bank hereunder, the
      replaced Issuing Bank shall remain a party hereto and shall continue to have
      all
      the rights and obligations of the Issuing Bank under this Agreement with respect
      to Letters of Credit issued by it prior to such replacement, but shall not
      be
      required to issue additional Letters of Credit.

     

            (j)           Cash
      Collateralization.  If (i) any Event of Default shall occur and be
      continuing and the Borrower receives notice from the Administrative Agent or
      the
      Majority Lenders demanding the deposit of cash collateral pursuant to this
      Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
      Agent the excess attributable to an LC Exposure in connection with any
      prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in
      an
      interest bearing account with the Administrative Agent, in the name of the
      Administrative Agent and for the benefit of the Lenders, an amount in cash
      equal
      to, in the case of an Event of Default, the LC Exposure, and in the case of
      a
      payment required by Section 3.04(c), the amount of such excess as provided
      in
      Section 3.04(c), as of such date plus any accrued and unpaid interest thereon;
      provided that the obligation to deposit such cash collateral shall become
      effective immediately, and such deposit shall become immediately due and
      payable, without demand or other notice of any kind, upon the occurrence of
      any
      Event of Default with respect to the Borrower or any Subsidiary described in
      Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants to
      the Administrative Agent, for the benefit of the Issuing Bank and the Lenders,
      an exclusive first priority and continuing perfected security interest in and
      Lien on such account and all cash, checks, drafts, certificates and instruments,
      if any, from time to time deposited or held in such account, all deposits or
      wire transfers made thereto, any and all investments purchased with funds
      deposited in such account, all interest, dividends, cash, instruments, financial
      assets and other Property from time to time received, receivable or otherwise
      payable in respect of, or in exchange for, any or all of the foregoing, and
      all
      proceeds, products, accessions, rents, profits, income and benefits therefrom,
      and any substitutions and replacements therefor.  The Borrower’s
      obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute
      and unconditional, without regard to whether any beneficiary of any such Letter
      of Credit has attempted to draw down all or a portion of such amount under
      the
      terms of a Letter of Credit, and, to the fullest extent permitted by applicable
      law, shall not be subject to any defense or be affected by a right of set-off,
      counterclaim or recoupment which the Borrower or any of its Subsidiaries may
      now
      or hereafter have against any such beneficiary, the Issuing Bank, the
      Administrative Agent, the Lenders or any other Person for any reason
      whatsoever.  Such deposit shall be held as collateral securing the
      payment and performance of the Borrower’s and the Guarantor’s obligations under
      this Agreement and the other Loan Documents.  The Administrative Agent
      shall, subject to the terms of the Loan Documents, have exclusive dominion
      and
      control, including the exclusive right of withdrawal, over such
      account.  Interest or profits, if any, on such investments shall
      accumulate in such account.  Moneys in such account shall be applied
      by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements
      for which it has not been reimbursed and, to the extent not so applied, shall
      be
      held for the satisfaction of the reimbursement obligations of the Borrower
      for
      the LC Exposure at such time or, if the maturity of the Loans has been
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    obligations
      of the Borrower and the Guarantors under this Agreement or the other Loan
      Documents.  If the Borrower is required to provide an amount of cash
      collateral hereunder as a result of the occurrence of an Event of Default,
      and
      the Borrower is not otherwise required to pay to the Administrative Agent the
      excess attributable to an LC Exposure in connection with any prepayment pursuant
      to Section 3.04(c), then such amount (to the extent not applied as aforesaid)
      shall be returned to the Borrower within three Business Days after all Events
      of
      Default have been cured or waived.

     

    ARTICLE
      III

    Payments
      of Principal and Interest; Prepayments; Fees

     

    Section
      3.01    Repayment of
      Loans.   The
      Borrower hereby unconditionally promises to pay to the Administrative Agent
      for
      the account of each Lender the then unpaid principal amount of each Loan on
      the
      Termination Date.

     

    Section
      3.02    Interest.

     

    (a)           ABR
      Loans.  The Loans comprising each ABR Borrowing shall bear
      interest at the Alternate Base Rate plus the Applicable Margin, but in no event
      to exceed the Highest Lawful Rate.

     

    (b)           Eurodollar
      Loans.  The Loans comprising each Eurodollar Borrowing shall bear
      interest at the Adjusted LIBO Rate for the Interest Period in effect for such
      Borrowing plus the Applicable Margin, but in no event to exceed the Highest
      Lawful Rate.

     

    (c)           Post-Default
      Rate and Borrowing Base Deficiency Rate.  Notwithstanding the
      foregoing, (i) if an Event of Default has occurred and is continuing, or if
      any principal of or interest on any Loan or any fee payable by the Borrower
      pursuant to Section 3.05 or any Guarantor hereunder or under any other Loan
      Document is not paid when due, whether at stated maturity, upon acceleration
      or
      otherwise, and including any payments in respect of a Borrowing Base Deficiency
      under Section 3.04(c), then all Loans outstanding, in the case of an Event
      of
      Default, including such overdue amount, in the case of a failure to pay amounts
      when due, shall bear interest, after as well as before judgment, at a rate
      per
      annum equal to two percent (2%) plus the respective rates then in effect, but
      in
      no event to exceed the Highest Lawful Rate, until such Event of Default has
      been
      cured or such amount is fully paid, as the case may be, and (ii) if a Borrowing
      Base Deficiency has occurred and has continued unremedied for 45 days, then
      all
      Loans outstanding at such time shall bear interest, after as well as before
      judgment, at a rate per annum equal to two percent (2%) plus the respective
      rates then in effect,  but in no event to exceed the Highest Lawful
      Rate, until such Borrowing Base Deficiency has been cured, provided that such
      Borrowing Base Deficiency rate shall not apply while any default interest rate
      is in effect pursuant to Section 3.02(c)(i).

     

    (d)           Interest
      Payment Dates.  Accrued interest on each Loan shall be payable in
      arrears on each Interest Payment Date for such Loan and on the Termination
      Date;
      provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
      on demand, (ii) in the event of any repayment or prepayment of any Loan (other
      than an optional prepayment of an ABR Loan prior to the Termination Date),
      accrued interest on the principal amount repaid or prepaid shall be payable
      on
      the date of such repayment or prepayment, and (iii) in the event of any
      conversion

     

    


    
      
        
          
          

        

        
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    of
      any
      Eurodollar Loan prior to the end of the current Interest Period therefor,
      accrued interest on such Loan shall be payable on the effective date of such
      conversion.

     

    (e)           Interest
      Rate Computations.  All interest hereunder shall be computed on
      the basis of a year of 360 days, unless such computation would exceed the
      Highest Lawful Rate, in which case interest shall be computed on the basis
      of a
      year of 365 days (or 366 days in a leap year), except that interest computed
      by
      reference to the Alternate Base Rate at times when the Alternate Base Rate
      is
      based on the Prime Rate shall be computed on the basis of a year of 365 days
      (or
      366 days in a leap year), and in each case shall be payable for the actual
      number of days elapsed (including the first day but excluding the last
      day).  The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO
      Rate shall be determined by the Administrative Agent, and such determination
      shall be conclusive absent manifest error, and be binding upon the parties
      hereto.

     

    Section
      3.03    Alternate Rate of
      Interest.  If
      prior to the commencement of any Interest Period for a Eurodollar
      Borrowing:

     

    (a)           the
      Administrative Agent determines (which determination shall be conclusive absent
      manifest error) that adequate and reasonable means do not exist for ascertaining
      the Adjusted LIBO Rate or the LIBO Rate for such Interest Period;
      or

     

    (b)           the
      Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO
      Rate or LIBO Rate, as applicable, for such Interest Period will not adequately
      and fairly reflect the cost to such Lenders of making or maintaining their
      Loans
      included in such Borrowing for such Interest Period;

     

    then
      the
      Administrative Agent shall give notice thereof to the Borrower and the Lenders
      by telephone or telecopy as promptly as practicable thereafter and, until the
      Administrative Agent notifies the Borrower and the Lenders that the
      circumstances giving rise to such notice no longer exist, (i) any Interest
      Election Request that requests the conversion of any Borrowing to, or
      continuation of any Borrowing as, a Eurodollar Borrowing for an Interest Period
      having the duration of such Interest Period shall be ineffective, and (ii)
      if
      any Borrowing Request requests a Eurodollar Borrowing for an Interest Period
      having the duration of such Interest Period, such Borrowing shall be made as
      an
      ABR Borrowing.

     

    Section
      3.04    Prepayments.

     

    (a)           Optional
      Prepayments.  The Borrower shall have the right at any time and
      from time to time to prepay any Borrowing in whole or in part, subject to prior
      notice in accordance with Section 3.04(b).

     

    (b)           Notice
      and Terms of Optional Prepayment.  The Borrower shall notify the
      Administrative Agent by telephone (confirmed by telecopy) of any prepayment
      hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
      than 12:00 noon, New York City time, three Business Days before the date of
      prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
      than 12:00 noon, New York City time, one Business Day before the date of
      prepayment.  Each such notice shall be irrevocable and shall specify
      the prepayment date and the principal amount of each Borrowing or portion
      thereof to be prepaid.  Promptly following receipt of any such notice
      relating to a Borrowing, the Administrative Agent shall

     

    


    
      
        
          
          

        

        
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    advise
      the Lenders of the contents thereof.  Each partial prepayment of any
      Borrowing shall be in an amount that would be permitted in the case of an
      advance of a Borrowing of the same Type as provided in Section
      2.02.  Each prepayment of a Borrowing shall be applied ratably to the
      Loans included in the prepaid Borrowing.  Prepayments shall be
      accompanied by accrued interest to the extent required by Section
      3.02.

     

    (c)           Mandatory
      Prepayments.

     

    (i)           
      If, after giving effect to any termination or reduction of the Aggregate Maximum
      Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit Exposures
      exceeds the total Commitments, then the Borrower shall, on the same Business
      Day, (a) prepay the Borrowings on the date of such termination or reduction
      in
      an aggregate principal amount equal to such excess, and (b) if any excess
      remains after prepaying all of the Borrowings as a result of an LC Exposure,
      pay
      to the Administrative Agent on behalf of the Lenders an amount equal to such
      excess to be held as cash collateral as provided in Section
      2.08(j).

     

    (ii)           Upon
      any redetermination of or adjustment to the amount of the Borrowing Base in
      accordance with Section 2.07 or Section 8.13(c), if the total Revolving Credit
      Exposure exceeds the redetermined or adjusted Borrowing Base, then the Borrower
      shall (c) prepay the Borrowings in an aggregate principal amount equal to such
      excess, and (d) if any excess remains after prepaying all of the Borrowings
      as a
      result of an LC Exposure, pay to the Administrative Agent on behalf of the
      Lenders an amount equal to such excess to be held as cash collateral as provided
      in Section 2.08(j).  The Borrower shall be obligated to make the full
      payment and/or deposit of cash collateral within ninety (90) days following
      its
      receipt of the New Borrowing Base Notice in accordance with Section 2.07(d)
      or
      the date the adjustment occurs; provided that all payments required to be made
      pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination
      Date.

     

    (iii)         Upon
      any adjustments to the Borrowing Base pursuant to 0, if the total Revolving
      Credit Exposures exceeds the Borrowing Base as adjusted, then the Borrower
      shall
      (e) prepay the Borrowings in an aggregate principal amount equal to such excess,
      and (f) if any excess remains after prepaying all of the Borrowings as a result
      of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders
      an
      amount equal to such excess to be held as cash collateral as provided in Section
      2.08(j).  The Borrower shall be obligated to make such prepayment
      and/or deposit of cash collateral on the date it or any Subsidiary receives
      proceeds as a result of such disposition; provided that all payments required
      to
      be made pursuant to this Section 3.04(c)(iii) must be made on or prior to the
      Termination Date.

     

    (iv)           Each
      prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied,
      first, ratably to any ABR Borrowings then outstanding, and, second, to any
      Eurodollar Borrowings then outstanding, and if more than one Eurodollar
      Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
      priority beginning with the Eurodollar Borrowing with the least number of days
      remaining in the Interest

     

    


    
      
        
          
          

        

        
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    Period
      applicable thereto and ending with the Eurodollar Borrowing with the most number
      of days remaining in the Interest Period applicable thereto.

     

    (v)           Each
      prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied
      ratably to the Loans included in the prepaid Borrowings.  Prepayments
      pursuant to this Section 3.04(c) shall be accompanied by accrued interest to
      the
      extent required by Section 3.02.

     

    (d)           No
      Premium or Penalty.  Prepayments permitted or required under this
      Section 3.04 shall be without premium or penalty, except as required under
      Section 5.02.

     

    Section
      3.05    Fees.

     

    (a)           Commitment
      Fees.  The Borrower agrees to pay to the Administrative Agent for
      the account of each Lender a commitment fee, which shall accrue at the
      applicable Commitment Fee Rate on the average daily amount of the unused amount
      of the Commitment of such Lender during the period from and including the date
      of this Agreement to but excluding the Termination Date.  Accrued
      commitment fees shall be payable in arrears on the last day of March, June,
      September and December of each year and on the Termination Date, commencing
      on
      the first such date to occur after the date hereof.  All commitment
      fees shall be computed on the basis of a year of 360 days, unless such
      computation would exceed the Highest Lawful Rate, in which case interest shall
      be computed on the basis of a year of 365 days (or 366 days in a leap year),
      and
      shall be payable for the actual number of days elapsed (including the first
      day
      but excluding the last day).

     

    (b)           Letter
      of Credit Fees.  The Borrower agrees to pay (i) to the
      Administrative Agent for the account of each Lender a participation fee with
      respect to its participations in Letters of Credit, which shall accrue at the
      same Applicable Margin used to determine the interest rate applicable to
      Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
      (excluding any portion thereof attributable to unreimbursed LC Disbursements)
      during the period from and including the date of this Agreement to but excluding
      the later of the date on which such Lender’s Commitment terminates and the date
      on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank
      a
      fronting fee, which shall accrue at the rate of 0.125% per annum on the average
      daily amount of the LC Exposure (excluding any portion thereof attributable
      to
      unreimbursed LC Disbursements) during the period from and including the date
      of
      this Agreement to but excluding the later of the date of termination of the
      Commitments and the date on which there ceases to be any LC Exposure, provided
      that in no event shall such fee be less than $500 during any quarter, and (iii)
      to the Issuing Bank, for its own account, its standard fees with respect to
      the
      issuance, amendment, renewal or extension of any Letter of Credit or processing
      of drawings thereunder.  Participation fees and fronting fees accrued
      through and including the last day of March, June, September and December of
      each year shall be payable on the later of (i) the third Business Day following
      such last day or (ii) three Business Days after the Borrower’s receipt of a
      notice therefore from the Administrative Agent, commencing on the first such
      date to occur after the date of this Agreement; provided that all such fees
      shall be payable on the Termination Date and any such fees accruing after the
      Termination Date shall be payable on demand.  Any other fees payable
      to the Issuing Bank pursuant to this Section 3.05(b) shall be payable within
      10
      days after demand.

     

    


    
      
        
          
          

        

        
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    All
      participation fees and fronting fees shall be computed on the basis of a year
      of
      360 days, unless, if such fees are deemed interest, such computation would
      exceed the Highest Lawful Rate, in which case such fees shall be computed on
      the
      basis of a year of 365 days (or 366 days in a leap year), and shall be payable
      for the actual number of days elapsed (including the first day but excluding
      the
      last day).

     

    (c)           Administrative
      Agent Fees.  The Borrower agrees to pay to the Administrative
      Agent, for its own account, fees payable in the amounts and at the times
      separately agreed upon between the Borrower and the Administrative Agent in
      the
      Fee Letter between the Borrower and the Administrative Agent dated June 8,
      2007.

     

    ARTICLE
      IV

    Payments;
      Pro Rata Treatment; Sharing of Set-offs

     

    Section
      4.01    Payments
      Generally; Pro Rata Treatment; Sharing of Set-offs.

     

    (a)           Payments
      by the Borrower.  The Borrower shall make each payment required to
      be made by it hereunder (whether of principal, interest, fees or reimbursement
      of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
      Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the
      date
      when due, in immediately available funds, without defense, deduction,
      recoupment, set-off or counterclaim.  Fees, once paid, shall be fully
      earned and shall not be refundable under any circumstances.  Any
      amounts received after such time on any date may, in the discretion of the
      Administrative Agent, be deemed to have been received on the next succeeding
      Business Day for purposes of calculating interest thereon.  All such
      payments shall be made to the Administrative Agent at its offices specified
      in
      Section 12.01, except payments to be made directly to the Issuing Bank as
      expressly provided herein and except that payments pursuant to Section 5.01,
      Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
      Persons entitled thereto.  The Administrative Agent shall distribute
      any such payments received by it for the account of any other Person to the
      appropriate recipient promptly following receipt thereof.  If any
      payment hereunder shall be due on a day that is not a Business Day, the date
      for
      payment shall be extended to the next succeeding Business Day, and, in the
      case
      of any payment accruing interest, interest thereon shall be payable for the
      period of such extension.  All payments hereunder shall be made in
      dollars.

     

    (b)           Application
      of Insufficient Payments.  If at any time insufficient funds are
      received by and available to the Administrative Agent to pay fully all amounts
      of principal, unreimbursed LC Disbursements, interest and fees then due
      hereunder, such funds shall be applied (i) first, towards payment of interest
      and fees then due hereunder, ratably among the parties entitled thereto in
      accordance with the amounts of interest and fees then due to such parties,
      and
      (ii) second, towards payment of principal and unreimbursed LC Disbursements
      then
      due hereunder, ratably among the parties entitled thereto in accordance with
      the
      amounts of principal and unreimbursed LC Disbursements then due to such
      parties.

     

    (c)           Sharing
      of Payments by Lenders.  If any Lender shall, by exercising any
      right of set-off or counterclaim or otherwise, obtain payment in respect of
      any
      principal of or interest on any of its Loans or participations in LC
      Disbursements resulting in such Lender receiving payment of a greater proportion
      of the aggregate amount of its Loans and participations in LC Disbursements
      and
      accrued interest thereon than the proportion received by any other

     

    


    
      
        
          
          

        

        
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    Lender,
      then the Lender receiving such greater proportion shall purchase (for cash
      at
      face value) participations in the Loans and participations in LC Disbursements
      of other Lenders to the extent necessary so that the benefit of all such
      payments shall be shared by the Lenders ratably in accordance with the aggregate
      amount of principal of and accrued interest on their respective Loans and
      participations in LC Disbursements; provided that (i) if any such participations
      are purchased and all or any portion of the payment giving rise thereto is
      recovered, such participations shall be rescinded and the purchase price
      restored to the extent of such recovery, without interest, and (ii) the
      provisions of this Section 4.01(c) shall not be construed to apply to any
      payment made by the Borrower pursuant to and in accordance with the express
      terms of this Agreement or any payment obtained by a Lender as consideration
      for
      the assignment of or sale of a participation in any of its Loans or
      participations in LC Disbursements to any assignee or participant, other than
      to
      the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
      of this Section 4.01(c) shall apply).  The Borrower consents to the
      foregoing and agrees, to the extent it may effectively do so under applicable
      law, that any Lender acquiring a participation pursuant to the foregoing
      arrangements may exercise against the Borrower rights of set-off and
      counterclaim with respect to such participation as fully as if such Lender
      were
      a direct creditor of the Borrower in the amount of such
      participation.

     

    Section
      4.02    Presumption of
      Payment by the Borrower.  Unless
      the Administrative Agent shall have received notice from the Borrower prior
      to
      the date on which any payment is due to the Administrative Agent for the account
      of the Lenders or the Issuing Bank that the Borrower will not make such payment,
      the Administrative Agent may assume that the Borrower has made such payment
      on
      such date in accordance herewith and may, in reliance upon such assumption,
      distribute to the Lenders or the Issuing Bank, as the case may be, the amount
      due.  In such event, if the Borrower has not in fact made such
      payment, then each of the Lenders or the Issuing Bank, as the case may be,
      severally agrees to repay to the Administrative Agent forthwith on demand the
      amount so distributed to such Lender or Issuing Bank with interest thereon,
      for
      each day from and including the date such amount is distributed to it to but
      excluding the date of payment to the Administrative Agent, at the greater of
      the
      Federal Funds Effective Rate and a rate determined by the Administrative Agent
      in accordance with banking industry rules on interbank
      compensation.

     

    Section
      4.03    Certain Deductions
      by the Administrative Agent.  If
      any Lender shall fail to make any payment required to be made by it pursuant
      to
      Section 2.05(a), Section 2.08(d), Section 2.08(e) or Section 4.02 then the
      Administrative Agent may, in its discretion (notwithstanding any contrary
      provision hereof), apply any amounts thereafter received by the Administrative
      Agent for the account of such Lender to satisfy such Lender’s obligations under
      such Sections until all such unsatisfied obligations are fully
      paid.

     

    Section
      4.04    Disposition of
      Proceeds.  The
      Security Instruments contain a collateral assignment by the Borrower and/or
      the
      Guarantors unto and in favor of the Administrative Agent for the benefit of
      the
      Lenders of all of the Borrower’s or each Guarantor’s interest in and to
      production and all proceeds attributable thereto which may be produced from
      or
      allocated to the Mortgaged Property.  The Security Instruments further
      provide in general for the application of such proceeds to the satisfaction
      of
      the Indebtedness and other obligations described therein and secured
      thereby.  Notwithstanding such assignment contained in such Security
      Instruments, unless an Event of Default has occurred and is continuing, 1.
      the
      Administrative Agent and the

     

    


    
      
        
          
          

        

        
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    Lenders
      agree that they will neither notify the purchaser or purchasers of such
      production nor take any other action to cause such proceeds to be remitted
      to
      the Administrative Agent or the Lenders, but the Lenders will instead permit
      such proceeds to be paid to the Borrower and its Subsidiaries and 2. the Lenders
      hereby authorize the Administrative Agent to take such actions as may be
      necessary to cause such proceeds to be paid to the Borrower and/or such
      Subsidiaries.

     

    ARTICLE
      V

    Increased
      Costs; Break Funding Payments; Taxes; Illegality

     

    Section
      5.01    Increased
      Costs.

     

    (a)           Eurodollar
      Changes in Law.  If any Change in Law shall:

     

    (i)           impose,
      modify or deem applicable any
      reserve, special deposit or similar requirement against assets of, deposits
      with
      or for the account of, or credit extended by, any Lender (except  any
      such reserve requirement reflected in the Adjusted LIBO Rate);
      or

     

    (ii)          impose
      on any Lender or the London interbank market any other condition affecting
      this
      Agreement or Eurodollar Loans made by such Lender;

     

    and
      the
      result of any of the foregoing shall be to increase the cost to such Lender
      of
      making or maintaining any Eurodollar Loan (or of maintaining its obligation
      to
      make any such Loan) or to reduce the amount of any sum received or receivable
      by
      such Lender in connection with any such Loan (whether of principal, interest
      or
      otherwise), then the Borrower will pay to such Lender such additional amount
      or
      amounts as will compensate such Lender for such additional costs incurred or
      reduction suffered.

     

    (b)           Capital
      Requirements.  If any Lender or
      the
      Issuing Bank determines that any Change in Law regarding capital requirements
      has or would have the effect of reducing the rate of return on such Lender’s or
      the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing
      Bank’s holding company, if any, as a consequence of this Agreement or the Loans
      made by, or participations in Letters of Credit held by, such Lender, or the
      Letters of Credit issued by the Issuing Bank, to a level below that which such
      Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
      company could have achieved but for such Change in Law (taking into
      consideration such Lender’s or the Issuing Bank’s policies and the policies of
      such Lender’s or the Issuing Bank’s holding company with respect to capital
      adequacy), then from time to time the Borrower will pay to such Lender or the
      Issuing Bank, as the case may be, such additional amount or amounts as will
      compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
      Bank’s holding company for any such reduction suffered.

     

    (c)           Certificates.  A
      certificate of a Lender or the Issuing Bank setting forth in reasonable detail
      the computation of the amount or amounts (as determined reasonably and in good
      faith) necessary to compensate such Lender or the Issuing Bank or its holding
      company, as the case may be, as specified in Section 5.01(a) or (b) shall be
      delivered to the Borrower and shall be conclusive absent manifest
      error.  The Borrower shall pay such Lender or the Issuing Bank, as the
      case may be, the amount shown as due on any such certificate within 10 days
      after receipt thereof.  Each such certificate shall contain the
      representation and warranty of the Person sending it that the Borrower is being
      treated no less favorably with respect to amounts being 

     

    


    
      
        
          
          

        

        
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     charged
      under Section 5.01(a) and (b) than are other similarly situated customers of
      such Lenders or Issuing Bank.

     

    (d)           Effect
      of Failure or Delay in Requesting Compensation.  Failure or delay
      on the part of any Lender or the Issuing Bank to demand compensation pursuant
      to
      this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
      Bank’s right to demand such compensation; provided that the Borrower shall not
      be required to compensate a Lender or the Issuing Bank pursuant to this Section
      5.01 for any increased costs or reductions incurred more than 180 days prior
      to
      the date that such Lender or the Issuing Bank, as the case may be, notifies
      the
      Borrower of the Change in Law giving rise to such increased costs or reductions
      and of such Lender’s or the Issuing Bank’s intention to claim compensation
      therefor; provided further that, if the Change in Law giving rise to such
      increased costs or reductions is retroactive, then the 180-day period referred
      to above shall be extended to include the period of retroactive effect
      thereof.

     

    Section
      5.02    Break Funding
      Payments .  In
      the event of (a) the payment of any principal of any Eurodollar Loan other
      than
      on the last day of an Interest Period applicable thereto (including as a result
      of an Event of Default), (b) the conversion of any Eurodollar Loan into an
      ABR
      Loan other than on the last day of the Interest Period applicable thereto,
      or
      (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan
      on
      the date specified in any notice delivered pursuant hereto, then, in any such
      event, the Borrower shall compensate each Lender for the loss, cost and expense
      attributable to such event.  In the case of a Eurodollar Loan, such
      loss, cost or expense to any Lender shall be deemed to include an amount
      determined by such Lender to be the excess, if any, of (i) the amount of
      interest which would have accrued on the principal amount of such Loan had
      such
      event not occurred, at the Adjusted LIBO Rate that would have been applicable
      to
      such Loan, for the period from the date of such event to the last day of the
      then current Interest Period therefor (or, in the case of a failure to borrow,
      convert or continue, for the period that would have been the Interest Period
      for
      such Loan), over (ii) the amount of interest which would accrue on such
      principal amount for such period at the interest rate which such Lender would
      bid were it to bid, at the commencement of such period, for dollar deposits
      of a
      comparable amount and period from other banks in the eurodollar
      market.

     

    A
      certificate of any Lender setting forth in reasonable detail the computation
      thereof any amount or amounts (determined reasonably and in good faith) that
      such Lender is entitled to receive pursuant to this Section 5.02 shall be
      delivered to the Borrower and shall be conclusive absent manifest
      error.  The Borrower shall pay such Lender the amount shown as due on
      any such certificate within 10 days after receipt thereof.

     

    Section
      5.03    Taxes

     

    (a)           Payments
      Free of Taxes.  Any and all payments by or on account of any
      obligation of the Borrower or any Guarantor under any Loan Document shall be
      made free and clear of and without deduction or withholding for any Indemnified
      Taxes or Other Taxes; provided that if the Borrower or any Guarantor shall
      be
      required to deduct or withhold any Indemnified Taxes or Other Taxes from such
      payments, then (i) the sum payable shall be increased as necessary so that
      after making all required deductions or withholdings (including deductions
      applicable to additional sums payable under this Section 5.03(a)), the
      Administrative Agent, Lender or Issuing Bank (as the case may be) receives
      an
      amount equal to the sum it 

     

    


    
      
        
          
          

        

        
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    would
      have received had no such deductions been made, (ii) the Borrower or such
      Guarantor shall make such deductions or withholdings and (iii) the Borrower
      or such Guarantor shall pay the full amount deducted or withheld to the relevant
      Governmental Authority in accordance with applicable law.

     

    (b)           Payment
      of Other Taxes by the Borrower.  The Borrower shall pay any Other
      Taxes to the relevant Governmental Authority in accordance with applicable
      law.

     

    (c)           Indemnification
      by the
      Borrower.  The Borrower shall
      indemnify the Administrative Agent, each Lender and the Issuing Bank, within
      10
      days after written demand therefor, for the full amount of any Indemnified
      Taxes
      or Other Taxes paid by the Administrative Agent, such Lender or the Issuing
      Bank, as the case may be, on or with respect to any payment by or on account
      of
      any obligation of the Borrower hereunder (including Indemnified Taxes or Other
      Taxes imposed or asserted on or attributable to amounts payable under this
      Section 5.03)
      and any penalties, interest and
      reasonable expenses arising therefrom or with respect thereto, whether or not
      such Indemnified Taxes or Other Taxes were correctly or legally imposed or
      asserted by the relevant Governmental Authority.  A certificate of the
      Administrative Agent, a Lender or the Issuing Bank as to the amount of such
      payment or liability under this Section 5.03
      shall be delivered to the Borrower and
      shall be conclusive absent manifest error.

     

    (d)           Evidence
      of Payments.  As soon as practicable
      after any payment of Indemnified Taxes or Other Taxes by the Borrower or a
      Guarantor to a Governmental Authority, the Borrower shall deliver to the
      Administrative Agent the original or a certified copy of a receipt issued by
      such Governmental Authority evidencing such payment, a copy of the return
      reporting such payment or other evidence of such payment reasonably satisfactory
      to the Administrative Agent.

     

    (e)           Status
      of Lenders.  Any Foreign Lender that is entitled to an exemption
      from or reduction of withholding tax under the law of the jurisdiction in which
      the Borrower is located, or any treaty to which such jurisdiction is a party,
      with respect to payments under this Agreement or any other Loan Document shall
      deliver to the Borrower (with a copy to the Administrative Agent), at the time
      or times prescribed by applicable law, such properly completed and executed
      documentation prescribed by applicable law or reasonably requested by the
      Borrower as will permit such payments to be made without withholding or at
      a
      reduced rate.  In addition, any Lender, if requested by the Borrower
      or the Administrative Agent, shall deliver such properly completed and executed
      documentation prescribed by applicable law as will enable the Borrower or the
      Administrative Agent to determine whether or not such Lender is subject to
      backup withholding or information reporting requirements.  Without
      limiting the generality of the foregoing, any Foreign Lender shall deliver
      to
      the Borrower and the Administrative Agent (is such reasonable amount of copies
      requested by the recipient) on or prior to the date on which such Foreign Lender
      becomes a Lender, whichever of the following is applicable:

     

    (i)           duly
      completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
      for benefits of an income tax treaty to which the United States is a
      party;

     

    


    
      
        
          
          

        

        
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    (ii)           duly
      completed copies of Internal Revenue Service Form W-8ECI;

     

    (iii)         
      in the case of a Foreign Lender claiming the benefits of the exemption for
      portfolio interest under Section 881(c) of the Code, (A) a certificate to the
      effect that such Foreign Lender is not (I) a “bank” within the meaning of
      Section 881(c)(3)(A) of the Code, (II) a “10 percent shareholder” of the
      Borrower within the meaning of Section 881(c)(3(B) of the Code, or (III) a
      “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
      and (B) duly completed copies of Internal Revenue Service Form W-8BEN,
      or

     

    (iv)           any
      other form prescribed by applicable law as a basis for claiming exemption from
      or reduction in United States Federal withholding tax duly completed together
      with such supplementary documentation as may be prescribed by applicable law
      to
      permit the Borrower to determine the withholding or deduction required to be
      made.

     

    (f)           Tax
      Refunds.  If the Administrative Agent or a Lender determines, in
      its sole discretion, that it has received a refund of any Taxes or Other Taxes
      as to which it has been indemnified by the Borrower or with respect to which
      the
      Borrower has paid additional amounts pursuant to this Section 5.03, it shall
      pay
      over such refund to the Borrower (but only to the extent of indemnity payments
      made, or additional amounts paid, by the Borrower under this Section 5.03 with
      respect to the Taxes or Other Taxes giving rise to such refund), net of all
      out-of-pocket expenses of the Administrative Agent or such Lender and without
      interest (other than any interest paid by the relevant Governmental Authority
      with respect to such refund); provided, that the Borrower, upon the request
      of
      the Administrative Agent or such Lender, agrees to repay the amount paid over
      to
      the Borrower (plus any penalties, interest or other charges imposed by the
      relevant Governmental Authority) to the Administrative Agent or such Lender
      in
      the event the Administrative Agent or such Lender is required to repay such
      refund to such Governmental Authority.  This Section 5.03 shall not be
      construed to require the Administrative Agent or any Lender to make available
      its tax returns (or any other information relating to its taxes which it deems
      confidential) to the Borrower or any other Person.

     

    Section
      5.04    Mitigation
      Obligations; Replacement of Lenders.

     

    (a)           Designation
      of Different Lending Office.  If any Lender requests compensation
      under Section 5.01, or if the Borrower is required to pay any additional
      amount to any Lender or any Governmental Authority for the account of any Lender
      pursuant to Section 5.03, or any Lender gives a notice pursuant to Section
      5.05,
      then such Lender shall use reasonable efforts to designate a different lending
      office for funding or booking its Loans hereunder or to assign its rights and
      obligations hereunder to another of its offices, branches or affiliates, if,
      in
      the judgment of such Lender, such designation or assignment (i) would (A)
      eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03,
      as
      the case may be, in the future or (B) eliminate the need for the notice pursuant
      to Section 5.05, and (ii) would not subject such Lender to any unreimbursed
      cost
      or expense and would not otherwise be disadvantageous to such
      Lender.  The Borrower hereby agrees to pay all reasonable costs and
      expenses incurred by any Lender in connection with any such designation or
      assignment.

     

    


    
      
        
          
          

        

        
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    (b)           Replacement
      of Lenders.  If (i) any Lender or the Issuing Bank requests
      compensation under Section 5.01 or gives a notice pursuant to Section 5.05,
      (ii)
      the Borrower is required to pay any additional amount to any Lender, the Issuing
      Bank or any Governmental Authority for the account of any Lender or the Issuing
      Bank pursuant to Section 5.03, (iii) any Lender or the Issuing Bank defaults
      in
      its obligation to fund Loans hereunder or (iv) pursuant to Section 2.07(c)(iii),
      any Lender votes against an increase in the Borrowing Base when such increase
      has been approved by at least the Majority Lenders, then the Borrower may,
      at
      its sole expense and effort, upon notice to such Lender (or the Issuing Bank)
      and the Administrative Agent, require such Lender or the Issuing Bank to assign
      and delegate, without recourse (in accordance with and subject to the
      restrictions contained in Section 12.04(b)), all its interests, rights and
      obligations under this Agreement to an assignee that shall assume such
      obligations (which assignee may be another Lender, if a Lender accepts such
      assignment); provided that (i) the Borrower shall have received the prior
      written consent of the Administrative Agent, which consent shall not
      unreasonably be withheld, (ii) such Lender shall have received payment of an
      amount equal to the outstanding principal of its Loans and participations in
      LC
      Disbursements, accrued interest thereon, accrued fees and all other amounts
      payable to it hereunder, from the assignee (to the extent of such outstanding
      principal and accrued interest and fees) or the Borrower (in the case of all
      other amounts) and (iii) in the case of any such assignment resulting from
      a claim for compensation under Section 5.01 or payments required to be made
      pursuant to Section 5.03, such assignment will result in a reduction in such
      compensation or payments.

     

    Section
      5.05    Illegality.  Notwithstanding
      any other provision of this Agreement, in the event that it becomes unlawful
      for
      any Lender or its applicable lending office to honor its obligation to make
      or
      maintain Eurodollar Loans either generally or having a particular Interest
      Period hereunder, then iii) such Lender shall promptly notify the Borrower
      and
      the Administrative Agent thereof and such Lender’s obligation to make such
      Eurodollar Loans shall be suspended (the “Affected Loans”) until such
      time as such Lender may again make and maintain such Eurodollar Loans and iv)
      all Affected Loans which would otherwise be made by such Lender shall be made
      instead as ABR Loans (and, if such Lender so requests by notice to the Borrower
      and the Administrative Agent, all Affected Loans of such Lender then outstanding
      shall be automatically converted into ABR Loans on the date specified by such
      Lender in such notice) and, to the extent that Affected Loans are so made as
      (or
      converted into) ABR Loans, all payments of principal which would otherwise
      be
      applied to such Lender’s Affected Loans shall be applied instead to its ABR
      Loans.

     

    ARTICLE
      VI

    Conditions
      Precedent

     

    Section
      6.01    Effective
      Date.  The
      obligations of the Lenders to make Loans and of the Issuing Bank to issue
      Letters of Credit hereunder shall not become effective until the date on which
      each of the following conditions is satisfied (or waived in accordance with
      Section 12.02):

     

    (a)           The
      Administrative Agent, the Arranger and the Lenders shall have received all
      commitment, facility and agency fees and all other fees and amounts due and
      payable on or prior to the Effective Date, including, to the extent invoiced,
      reimbursement or payment of all out-of-pocket expenses required to be reimbursed
      or paid by the Borrower 

    


    
      
        
          
          

        

        
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      hereunder
        (including, without limitation, the fees and expenses of Vinson & Elkins
        L.L.P., counsel to the Administrative Agent).

    

     

    (b)           The
      Borrower shall have deposited $7,500 with Vinson & Elkins L.L.P., counsel
      for the Administrative Agent, to be held by such counsel and applied toward
      payment of costs and expenses for recordation of the Mortgaged Property, as
      provided pursuant to Section 12.03(a).  If such deposit exceeds the
      amount of such costs and expenses, the excess shall be returned to the
      Borrower.  If such deposit is less than such costs and expenses, the
      deficit shall be paid by Borrower pursuant to Section 12.03(a).

     

    (c)           The
      Administrative Agent shall have received a certificate of the Secretary or
      an
      Assistant Secretary of the Borrower and each Guarantor setting forth (i)
      resolutions of its board of directors or other appropriate governing body with
      respect to the authorization of the Borrower or such Guarantor to execute and
      deliver the Loan Documents to which it is a party and to enter into the
      transactions contemplated in those documents, (ii) the officers of the Borrower
      or such Guarantor (y) who are authorized to sign the Loan Documents to which
      the
      Borrower or such Guarantor is a party and (z) who will, until replaced by
      another officer or officers duly authorized for that purpose, act as its
      representative for the purposes of signing documents and giving notices and
      other communications in connection with this Agreement and the transactions
      contemplated hereby, (iii) specimen signatures of such authorized officers,
      and
      (iv) the Organizational Documents of the Borrower and such Guarantor, certified
      as being true and complete.  The Administrative Agent and the Lenders
      may conclusively rely on such certificate until the Administrative Agent
      receives notice in writing from the Borrower to the contrary.

     

    (d)           The
      Administrative Agent shall have received certificates of the appropriate State
      agencies with respect to the existence, qualification and good standing of
      the
      Borrower and each Guarantor.

     

    (e)           The
      Administrative Agent shall have received a compliance certificate which shall
      be
      substantially in the form of Exhibit D-1, duly and properly executed by a
      Responsible Officer and dated as of the date of Effective Date.

     

    (f)           The
      Administrative Agent shall have received from each party hereto counterparts
      (in
      such number as may be requested by the Administrative Agent) of this Agreement
      signed on behalf of such party.

     

    (g)           The
      Administrative Agent shall have received duly executed Notes payable to the
      order of each Lender in a principal amount equal to its Maximum Credit Amount
      dated as of the date hereof.

     

    (h)           The
      Administrative Agent shall have received from each party thereto duly executed
      counterparts (in such number as may be requested by the Administrative Agent)
      of
      the Security Instruments, including the Guaranty Agreement and the other
      Security Instruments described on Exhibit E.  In connection with the
      execution and delivery of the Security Instruments, the Administrative Agent
      shall:

     

     

    


    
      
        
          
          

        

        
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      (i)           
        be reasonably satisfied that the Security Instruments create first priority,
        perfected Liens (subject only to Excepted Liens identified in clauses (a)
        to (d)
        and (f) of the definition thereof, but subject to the provisos at the end
        of
        such definition) on at least 80% of the
        total
        value of the Oil and Gas Properties evaluated in the Initial Reserve Report,
        including Liens on the Oil and Gas Properties mortgaged pursuant to the Existing
        Credit Agreement;

    

     

    (ii)           to
      the extent such Equity Interests are certificated, have received certificates,
      together with undated, blank stock powers for each such certificate,
      representing all of the issued and outstanding Equity Interests of each of
      the
      Guarantors; and

     

    (iii)         
      be reasonably satisfied that it has a Lien on all Property of the Borrower
      and
      the Guarantors, as contemplated by the parties hereto.

     

    (i)           The
      Administrative Agent shall have received an opinion of (i) Fulbright &
Jaworski L.L.P., special counsel to the Borrower, in form and substance
      satisfactory to the Administrative Agent, and (ii) local counsel in each state
      in which a mortgage or deed of trust is filed naming the Administrative Agent
      as
      the secured party and any other jurisdictions reasonably requested by the
      Administrative Agent, substantially in form and substance satisfactory to the
      Administrative Agent.

     

    (j)           The
      Administrative Agent shall have received a certificate of insurance coverage
      of
      the Borrower evidencing that the Borrower is carrying insurance in accordance
      with Section 7.12.

     

    (k)           The
      Administrative Agent shall have received title information as the Administrative
      Agent may reasonably require satisfactory to the Administrative Agent setting
      forth the status of title to the Oil and Gas Properties evaluated in the Initial
      Reserve Report.

     

    (l)           The
      Administrative Agent shall be reasonably satisfied with the environmental
      condition of the Oil and Gas Properties of the Borrower and its
      Subsidiaries.

     

    (m)         The
      Administrative Agent shall have received a certificate of a Responsible Officer
      of the Borrower certifying that the Borrower has received all consents and
      approvals required by Section 7.03.

     

    (n)           The
      Administrative Agent shall have received the financial statements referred
      to in
      Section 7.04(a) and the Initial Reserve Report accompanied by a certificate
      covering the matters described in Section 8.12(c).

     

    (o)           The
      Administrative Agent shall be reasonably satisfied that the Borrower’s Existing
      Credit Agreement is being terminated and the liens securing such facilities
      are
      being released, contemporaneously with the proceeds of the initial funding
      under
      this Agreement.

     

     

    


    
      
        
          
          

        

        
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      (p)           The
        Administrative Agent shall have received appropriate UCC search certificates
        reflecting no prior Liens encumbering the Properties of the Borrower and
        the
        Guarantors for each of the following jurisdictions: Illinois, Indiana,
        Texas and any other jurisdiction reasonably requested by the
        Administrative Agent; other than those being assigned or released on or prior
        to
        the Effective Date or Liens permitted by Section 9.03.

       

    

    (q)           The
      Administrative Agent shall have received evidence that the Borrower has
      purchased one or more commodity price floors or collars (i) with one or more
      Approved Counterparties, (ii) which have aggregate notional volumes of not
      more
      than 75% of the
      reasonably estimated projected crude oil production and not more than 75% of
      the
      reasonably estimated projected natural gas production, in each case, from its
      proved developed, producing Oil and Gas Properties as determined by reference
      to
      the Initial Reserve Report for each year during the period commencing with
      the
      Effective Date and ending on the Maturity Date, provided however,
      that if
      the Borrower’s current commodity price floors and collars exceed such
      percentage, the Borrower will not be required to terminate any existing price
      floors or collars.

     

    (r)           The
      Borrower shall have completed its initial public offering and its capital
      structure shall be as described in the Borrower’s prospectus filed with the SEC
      on July 26, 2007, pursuant to Rule 424(b)(4) under the Securities Act
      of 1933, as amended.

     

    (s)           The
      Administrative Agent shall have received such other documents as the
      Administrative Agent or special counsel to the Administrative Agent may
      reasonably request.

     

    The
      Administrative Agent shall notify the Borrower and the Lenders of the Effective
      Date, and such notice shall be conclusive and
      binding.  Notwithstanding the foregoing, the obligations of the
      Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
      hereunder shall not become effective unless each of the foregoing conditions
      is
      satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m.,
      Houston, Texas time, on September 17, 2007 (and, in
      the
      event such conditions are not so satisfied or waived, the Commitments shall
      terminate at such time).

     

    Without
      limiting the generality of the provisions of Section 11.04, for purposes of
      determining compliance with the conditions specified in this Section 6.01,
      each Lender that has signed this Agreement shall be deemed to have consented
      to,
      approved or accepted or to be satisfied with, each document or other matter
      required thereunder to be consented to or approved by or acceptable or
      satisfactory to a Lender unless the Administrative Agent shall have received
      written notice from such Lender prior to the proposed Effective Date specifying
      its objection thereto.

     

    Section
      6.02    Each Credit Event
.  The
      obligation of each Lender to make a Loan on the occasion of any Borrowing
      (including the initial funding), and of the Issuing Bank to issue, amend, renew
      or extend any Letter of Credit, is subject to the satisfaction of the following
      conditions:

     

    (a)           At
      the time of and immediately after giving effect to such Borrowing or the
      issuance, amendment, renewal or extension of such Letter of Credit, as
      applicable, no Default shall have occurred and be continuing.

     

    (b)           At
      the time of and immediately after giving effect to such Borrowing or the
      issuance, amendment, renewal or extension of such Letter of Credit, as
      applicable, no event, 

    


    
      
        
          
          

        

        
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    development
      or circumstance has occurred or shall then exist that has resulted in, or could
      reasonably be expected to have, a Material Adverse Effect. 
       

      
        (c)  The
          representations and warranties of the Borrower and the Guarantors set forth
          in
          this Agreement and in the other Loan Documents shall be true and correct
          on and
          as of the date of such Borrowing or the date of issuance, amendment, renewal
          or
          extension of such Letter of Credit, as applicable, except to the extent
          any such
          representations and warranties are expressly limited to an earlier date,
          in
          which case, on and as of the date of such Borrowing or the date of issuance,
          amendment, renewal or extension of such Letter of Credit, as applicable,
          such
          representations and warranties shall continue to be true and correct as
          of such
          specified earlier date and except for purposes of this Section 6.02, the
          representations and warranties contained in Section 7.04(b) shall be deemed
          to
          refer to the fiscal year end date of the most recent financial statement
          delivered pursuant to Section 8.01(a).

      

    

     

    (d)           The
      receipt by the Administrative Agent of a Borrowing Request in accordance with
      Section 2.03 or a request for a Letter of Credit in accordance with Section
      2.08(b), as applicable.

     

    Each
      request for a Borrowing and each request for the issuance, amendment, renewal
      or
      extension of any Letter of Credit shall be deemed to constitute a representation
      and warranty by the Borrower on the date thereof as to the matters specified
      in
      Section 6.02(a) through (d).

     

    ARTICLE
      VII

    Representations
      and Warranties

     

    The
      Borrower represents and warrants to the Lenders that:

     

    Section
      7.01          
Organization; Powers.  Each
      of the Borrower and the Subsidiaries is duly organized, validly existing and
      in
      good standing under the laws of the jurisdiction of its organization, has all
      corporate or equivalent requisite power and authority, and has all material
      governmental licenses, authorizations, consents and approvals necessary, to
      own
      its assets and to carry on its business as now conducted, and is qualified
      to do
      business in, and is in good standing in, every jurisdiction where such
      qualification is required, except where failure to have such power, authority,
      licenses, authorizations, consents, approvals and qualifications could not
      reasonably be expected to have a Material Adverse Effect.

     

    Section
      7.02    Authority;
      Enforceability.  The
      Transactions are within the Borrower’s and each Guarantor’s corporate or
      equivalent powers and have been duly authorized by all necessary corporate
      or
      equivalent action including, without limitation, any action required to be
      taken
      by any other Person, whether interested or disinterested, in order to ensure
      the
      due authorization of the Transactions.  Each Loan Document to which
      the Borrower and each Guarantor is a party has been duly executed and delivered
      by the Borrower and such Guarantor and constitutes a legal, valid and binding
      obligation of the Borrower and such Guarantor, as applicable, enforceable in
      accordance with its terms, subject to applicable bankruptcy, insolvency,
      reorganization, moratorium or other laws affecting creditors’ rights generally
      and subject to general principles of equity, regardless of whether considered
      in
      a proceeding in equity or at law.

     

    


    
      
        
          
          

        

        
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      Section
        7.03    Approvals;
        No Conflicts.  The
        Transactions (a) do not require, as a condition thereto, any consent or approval
        of, registration or filing with, or any other action by, any Governmental
        Authority or any other third Person (including members, shareholders or any
        class of directors or managers, whether interested or disinterested, of the
        Borrower or any other Person) to be obtained or made by the Borrower or any
        Subsidiary pursuant to any statutory law or regulation applicable
        to it, nor is any such consent, approval, registration, filing or other action
        necessary for the validity or enforceability of any Loan Document against
        the
        Borrower or any Guarantor as herein provided or the consummation of the
        transactions contemplated thereby, except such as have been obtained or made
        and
        are in full force and effect other than (i) the recording and filing of the
        Security Instruments as required by this Agreement and (ii) those third party
        approvals or consents which, if not made or obtained, would not cause a Default
        hereunder, could not reasonably be expected to have a Material Adverse Effect
        or
        do not have an adverse effect on the enforceability of the Loan Documents,
        (b)
        will not violate any applicable law or regulation or the Organizational
        Documents of the Borrower or any Subsidiary or any order of any Governmental
        Authority applicable to the Borrower or any Subsidiary, (c) will not violate
        or
        result in a default under any indenture or other material instrument binding
        upon the Borrower or any Subsidiary or its Properties, or give rise to a
        right
        thereunder to require any payment to be made by the Borrower or such Subsidiary
        and (d) will not result in the creation or imposition of any consentual Lien
        by
        the Borrower or any Subsidiary on any Property of the Borrower or any Subsidiary
        (other than the Liens created by the Loan Documents).

    

     

    Section
      7.04    Financial
      Condition; No Material Adverse Change.

     

    (a)           The
      Borrower has heretofore furnished to the Lenders (i) its consolidated balance
      sheet and statements of income, stockholders equity and cash flows as of and
      for
      the fiscal year ended December 31, 2006,
      reported on by Malin,
      Berquist & Company, LLP or other independent public accountants, (ii)
      its consolidated balance sheet and statements of income, stockholders equity
      and
      cash flows as of and for the fiscal quarter ending March 30, 2007, certified
      by
      its chief financial officer and (iii) a pro forma consolidated balance sheet
      as
      of the Effective Date.  The financial statements described in
      clause (i), (ii) and (iii) of the preceding sentence present fairly, in all
      material respects, the financial position and results of operations and cash
      flows of the Borrower and its Consolidated Subsidiaries as of such dates and
      for
      such periods in accordance with GAAP, except as therein provided, subject to
      year-end audit adjustments and the absence of footnotes in the case of such
      unaudited quarterly financial statements.

     

    (b)           Since
      December 31,
      2006, (i) there has been no event, development or circumstance that has
      had or could reasonably be expected to have a Material Adverse Effect and (ii)
      the business of the Borrower and its Subsidiaries has been conducted only in
      the
      ordinary course consistent with past business practices.

     

    (c)           Neither
      the Borrower nor any Subsidiary has on the date hereof any material Debt
      (including Disqualified Capital Stock) or any contingent liabilities,
      off-balance sheet liabilities or partnerships, liabilities for taxes, unusual
      forward or long-term commitments or unrealized or anticipated losses from any
      unfavorable commitments, except as referred to or reflected or provided for
      in
      the Financial Statements or disclosed in any Schedules provided for herein
      prior
      to the Effective Date.

     

     

    


    
      
        
          
          

        

        
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      Section
        7.05    Litigation.

       

      (a)           Except
        as set forth on Schedule 7.05, there are no actions, suits, investigations
        or proceedings by or before any arbitrator or Governmental Authority pending
        against or, to the knowledge of the Borrower, threatened against or affecting
        the Borrower or any Subsidiary (i) not fully covered by insurance (except
        for
        normal deductibles) as to which there is a
        reasonable possibility of an adverse determination that, if adversely
        determined, could reasonably be expected, individually or in the aggregate,
        to
        result in a Material Adverse Effect, or (ii) that involve any Loan Document
        or
        the Transactions.

    

     

    (b)           Since
      the date of this Agreement, there has been no change in the status of the
      matters disclosed in Schedule 7.05 that, individually or in the aggregate,
      has resulted in, or materially increased the likelihood of, a Material Adverse
      Effect.

     

    Section
      7.06           Environmental
      Matters.  Except
      for such matters as set forth on Schedule 7.06 or that, individually or in
      the
      aggregate, could not reasonably be expected to have a Material Adverse Effect
      on
      the Borrower:

     

    (a)           the
      Borrower and its Subsidiaries and each of their respective Properties and
      operations thereon are, and within all applicable statute of limitation periods
      have been, in compliance with all applicable Environmental Laws;

     

    (b)           the
      Borrower and its Subsidiaries have obtained all Environmental Permits required
      for their respective operations and each of their Properties, with all such
      Environmental Permits being currently in full force and effect, and none of
      Borrower or its Subsidiaries has received any written notice or otherwise has
      knowledge that any such existing Environmental Permit will be revoked or that
      any application for any new Environmental Permit or renewal of any existing
      Environmental Permit will be protested or denied;

     

    (c)           there
      are no claims, demands, suits, orders, inquiries, or proceedings concerning
      any
      violation of, or any liability (including as a potentially responsible party)
      under, any applicable Environmental Laws that is pending or to the knowledge
      of
      a Responsible Officer of the Borrower threatened against the Borrower or its
      Subsidiaries or any of their respective Properties or as a result of any
      operations at the Properties;

     

    (d)           none
      of the Properties contain or have contained any:  (i) underground
      storage tanks; (ii) asbestos-containing materials; or (iii) landfills or dumps;
      (iv) hazardous waste management units as defined pursuant to RCRA or any
      comparable state law; or (v) sites on or nominated for the National Priority
      List promulgated pursuant to CERCLA or any state remedial priority list
      promulgated or published pursuant to any comparable state law;

     

    (e)           there
      has been no Release or threatened Release, of Hazardous Materials at, on, under
      or from any of Borrower’s or its Subsidiaries’ Properties, there are no
      investigations, remediations, abatements, removals, or monitorings of Hazardous
      Materials required under applicable Environmental Laws at such Properties and
      none of such Properties are adversely affected by any Release or threatened
      Release of a Hazardous Material originating or emanating from any other real
      property,

     

    (f)           neither
      the Borrower nor its Subsidiaries has received any written notice asserting
      an
      alleged liability or obligation under any applicable Environmental Laws with
      respect 

    


    
      
        
          
          

        

        
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    to
      the
      investigation, remediation, abatement, removal, or monitoring of any Hazardous
      Materials at, under, or Released or threatened to be Released from any real
      properties offsite the Borrower’s or its Subsidiaries’ Properties and there are
      no conditions or circumstances that would reasonably be expected to result
      in
      the receipt of such written notice.


    (g)           there
      has been no exposure of any Person or property to any Hazardous Materials as
      a
      result of or in connection with the operations and businesses of any of the
      Borrower’s or its Subsidiaries’ Properties that would reasonably be expected to
      form the basis for a claim for damages or compensation and there are no
      conditions or circumstances that would reasonably be expected to result in
      the
      receipt of notice regarding such exposure; and

     

    (h)           the
      Borrower and its Subsidiaries have provided to Lenders complete and correct
      copies of all environmental site assessment reports, investigations, studies,
      analyses, and correspondence on environmental matters (including matters
      relating to any alleged non-compliance with or liability under Environmental
      Laws) that are in any of the Borrower’s or its Subsidiaries’ possession or
      control and relating to their respective Properties or operations
      thereon.

     

    Section
      7.07    Compliance with
      the Laws and Agreements; No Defaults.

     

    (a)           Each
      of the Borrower and each Subsidiary (i) is in compliance with all Governmental
      Requirements applicable to it or its Property and all agreements and other
      instruments binding upon it or its Property, and (ii) possesses all licenses,
      permits, franchises, exemptions, approvals and other authorizations granted
      by
      Governmental Authorities necessary for the ownership of its Property and the
      conduct of its business, except in either case where the failure to do so,
      individually or in the aggregate, could not reasonably be expected to result
      in
      a Material Adverse Effect.

     

    (b)           Neither
      the Borrower nor any Subsidiary is in default nor has any event or circumstance
      occurred which, but for the expiration of any applicable grace period or the
      giving of notice, or both, would constitute a default or would require the
      Borrower or a Subsidiary to Redeem or make any offer to Redeem under any
      indenture, note, credit agreement or instrument pursuant to which any Material
      Indebtedness is outstanding or by which the Borrower or any Subsidiary or any
      of
      their Properties is bound.

     

    (c)           No
      Default has occurred and is continuing.

     

    Section
      7.08    Investment Company
      Act.  Neither
      the Borrower nor any Subsidiary is an “investment company” or a company
“controlled” by an “investment company,” within the meaning of, or subject to
      regulation under, the Investment Company Act of 1940, as amended.

     

    Section
      7.09    Taxes.  Each
      of the Borrower and its Subsidiaries has timely filed or caused to be filed
      all
      Tax returns and reports required to have been filed and has paid or caused
      to be
      paid all Taxes required to have been paid by it, except (a) Taxes that are
      being
      contested in good faith by appropriate proceedings and for which the Borrower
      or
      such Subsidiary, as applicable, has set aside on its books adequate reserves
      in
      accordance with GAAP or (b) to the extent that the failure to do so could not
      reasonably be expected to result in a Material Adverse Effect.  The
      charges, accruals and reserves on the books of the Borrower and its Subsidiaries
      in respect of Taxes and other governmental charges are, in the reasonable
      opinion of the Borrower, 

    


    
      
        
          
          

        

        
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    adequate.  No
      Tax Lien (other than an Excepted Lien of the type in (a) of the definition
      thereof) has been filed and, to the knowledge of the Borrower, no claim is
      being
      asserted with respect to any such Tax or other such governmental
      charge.

    
 

             
      Section 7.10        
ERISA.

     

    (a)           Except
      for such noncompliance as could not reasonably be expected to have, individually
      or in the aggregate, a Material Adverse Effect, the Borrower, the Subsidiaries
      and each ERISA Affiliate have complied with ERISA and, where applicable, the
      Code regarding each Plan.

     

    (b)           Except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, each Plan is, and has been, maintained in
      substan­tial compliance with ERISA and, where applicable, the
      Code.

     

    (c)           Except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, no act, omission or transaction has occurred which
      could result in imposition on the Borrower, any Subsidiary or any ERISA
      Affiliate (whether directly or indirectly) of (i) either a civil penalty
      assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or
      a
      tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach
      of fiduciary duty liability damages under section 409 of ERISA.

     

    (d)           No
      Plan (other than a defined contribution plan) or any trust created under any
      such Plan has been terminated in a distress termination under Section 4041(c)
      of
      ERISA since January 1, 2000.  Except as could not reasonably be
      expected to have, individually or in the aggregate, a Material Adverse Effect,
      no liability to the PBGC (other than for the payment of current premiums which
      are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has
      been incurred with respect to any Plan.  Except as could not
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect, no ERISA Event with respect to any Plan has
      occurred.

     

    (e)           Except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, full payment when due has been made of all amounts
      which the Borrower, the Subsidiaries or any ERISA Affiliate is required under
      the terms of each Plan or applicable law to have paid as contribu­tions to
      such Plan as of the date hereof, and no accumulated funding deficiency (as
      defined in section 302 of ERISA and section 412 of the Code), whether or not
      waived, exists with respect to any Plan.

     

    (f)           
      Except as could not reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect, the actuarial present value of the benefit
      liabilities under each Plan which is subject to Title IV of ERISA does not,
      as of the end of the Borrower’s most recently ended fiscal year, exceed the
      current value of the assets (computed on a plan termination basis in accordance
      with Title IV of ERISA) of such Plan allocable to such benefit
      liabilities.  The term “actuarial present value of the benefit
      liabilities” shall have the meaning specified in section 4041 of
      ERISA.

     

    (g)           Except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, neither the Borrower, the Subsidiaries nor any ERISA
      Affiliate sponsors, maintains, or contributes to an employee welfare benefit
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    section
      3(1) of ERISA, including, without limitation, any such plan maintained to
      provide benefits to former employees of such entities, that may not be
      terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole
      discretion at any time.

    
                      
      (h)           Except as
      could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, neither the Borrower, the Subsidiaries nor any ERISA
      Affiliate sponsors, maintains or contributes to, or has at any time in the
      six-year period preceding the date hereof sponsored, maintained or contributed
      to, any Multiemployer Plan.

     

    (i)           
      Except for amounts less than $100,000, neither the Borrower, the Subsidiaries
      nor any ERISA Affiliate is required to provide security under section 401(a)(29)
      of the Code due to a Plan amendment that results in an increase in current
      liability for the Plan.

     

    Section
      7.11    Disclosure; No
      Material Misstatements.  The
      Borrower has disclosed to the Administrative Agent and the Lenders all
      agreements, instruments and corporate or other restrictions to which it or
      any
      of its Subsidiaries is subject, and all other matters known to it, that,
      individually or in the aggregate, could, if breached or violated by, enforced
      against, or adversely determined in relation to, the Borrower or any of its
      Subsidiaries, reasonably be expected to result in a Material Adverse
      Effect.  No reports, financial statements, certificates or other
      information furnished by or on behalf of the Borrower or any Subsidiary to
      the
      Administrative Agent or any Lender or any of their Affiliates in connection
      with
      the negotiation of this Agreement or any other Loan Document or delivered
      hereunder or under any other Loan Document (as modified or supplemented by
      other
      information so furnished) contains any material misstatement of fact or omits
      to
      state any material fact necessary to make the statements therein, in the light
      of the circumstances under which they were made, not misleading; provided that,
      with respect to projected financial information, the Borrower represents only
      that such information was prepared in good faith based upon assumptions believed
      to be reasonable at the time.  There are no statements or conclusions
      in any Reserve Report prepared by the chief engineer of the Borrower (and with
      respect to a Reserve Report prepared by an Approved Petroleum Engineer, to
      the
      knowledge of a Responsible Officer of the Borrower), which are based upon or
      include misleading information or fail to take into account material information
      regarding the matters reported therein.

     

    Section
      7.12         
Insurance.  The
      Borrower maintains, and has caused to be maintained for each of its
      Subsidiaries, with financially sound and reputable insurance companies,
      insurance in such amounts and against such risks as are customarily maintained
      by companies engaged in the same or similar businesses operating in the same
      or
      similar locations.  The loss payable clauses or provisions in said
      insurance policy or policies insuring any of the collateral for the Loans are
      endorsed in favor of and made payable to the Administrative Agent as its
      interests may appear, and such policies name the Administrative Agent and the
      Lenders as “additional insureds” and provide that the insurer will endeavor to
      give at least 30 days prior notice of any cancellation to the Administrative
      Agent.

     

    Section
      7.13    Restriction on
      Liens.  Neither
      the Borrower nor any of the Subsidiaries is a party to any material agreement
      or
      arrangement (other than Capital Leases creating Liens permitted by Section
      9.03(c), but then only on the Property subject of such Capital Lease), or
      subject to any order, judgment, writ or decree, which either restricts or
      purports to restrict its 

     

    


    
      
        
          
          

        

        
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    ability
      to grant Liens to the Administrative Agent and the Lenders on or in respect
      of
      their Properties to secure the Indebtedness and the Loan Documents, except,
      in
      each case, as provided in Section 9.16.

    
 

          
      Section 7.14    Subsidiaries.  Except
      as set forth on Schedule 7.14 or as disclosed in writing to the Administrative
      Agent (which shall promptly furnish a copy to the Lenders), which shall be
      a
      supplement to Schedule 7.14, the Borrower has no Subsidiaries and the Borrower
      has no Foreign Subsidiaries.  Each Subsidiary on such schedule is a
      Wholly-Owned Subsidiary.

     

    Section
      7.15    Location of
      Business and Offices.  The
      Borrower’s jurisdiction of organization is Delaware; the name
      of
      the Borrower as listed in the public records of its jurisdiction of organization
      is Rex Energy
      Corporation; and the organizational identification number of the Borrower
      in its jurisdiction of organization is 4313846 (or, in each
      case, as
      set forth in a notice delivered to the Administrative Agent pursuant to
Section
      8.01(n) in
      accordance with Section 12.01).  The
      Borrower’s principal place of business and chief executive offices are located
      at the address specified in Section 12.01 (or as set forth in a notice delivered
      pursuant to Section 8.01(n) and Section 12.01(c)).  Each Subsidiary’s
      jurisdiction of organization, name as listed in the public records of its
      jurisdiction of organization, organizational identification number in its
      jurisdiction of organization, and the location of its principal place of
      business and chief executive office is stated on Schedule 7.14 (or as set forth
      in a notice delivered pursuant to Section 8.01(n)).

     

    Section
      7.16    Properties;
      Titles, Etc.

     

    (a)           Each
      of the Borrower and the Subsidiaries has good and defensible title to the Oil
      and Gas Properties evaluated in the most recently delivered Reserve Report
      and
      to all its personal Properties, in each case, free and clear of all Liens except
      Liens permitted by Section 9.03 and such defects in title as could not,
      individually or in the aggregate, reasonably be expected to materially distract
      from the value thereof to, or the use thereof in, the business of the Borrower
      and its Subsidiaries.  After giving full effect to the Excepted Liens,
      the Borrower or the Subsidiary specified as the owner owns the net interests
      in
      production attributable to the Hydrocarbon Interests as reflected in the most
      recently delivered Reserve Report, and the ownership of such Properties shall
      not in any material respect obligate the Borrower or such Subsidiary to bear
      the
      costs and expenses relating to the maintenance, development and operations
      of
      each such Property in an amount in excess of the working interest of each
      Property set forth in the most recently delivered Reserve Report that is not
      offset by a corresponding proportionate increase in the Borrower’s or such
      Subsidiary’s net revenue interest in such Property.

     

    (b)           All
      material leases and agreements necessary for the conduct of the business of
      the
      Borrower and the Subsidiaries in all material respects are valid and subsisting,
      in full force and effect, and there exists no default or event or circumstance
      which with the giving of notice or the passage of time or both would give rise
      to a default under any such lease or leases, which could reasonably be expected
      to have a Material Adverse Effect.

     

    (c)           The
      rights and Properties presently owned, leased or licensed by the Borrower and
      the Subsidiaries including, without limitation, all easements and rights of
      way,
      include all rights and Properties necessary to permit the Borrower and the
      Subsidiaries to 

    


    
      
        
          
          

        

        
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    conduct
      their business in all material respects in the same manner as its business
      has
      been conducted prior to the date hereof.


    (d)           All
      of the personal Properties of the Borrower and the Subsidiaries which are
      reasonably necessary for the operation of their businesses in all material
      respects are in good working condition and are maintained in accordance with
      prudent business standards, except for such Properties as could not reasonably
      be expected to have, individually or in the aggregate, a Material Adverse
      Effect.

     

    (e)           The
      Borrower and each Subsidiary owns, or possesses the right to use, all
      trademarks, tradenames, copyrights, patents and other intellectual Property
      material to its business, and the use thereof by the Borrower and such
      Subsidiary does not infringe upon the rights of any other Person, except for
      any
      such infringements that, individually or in the aggregate, could not reasonably
      be expected to result in a Material Adverse Effect.  The Borrower and
      its Subsidiaries either own or have valid licenses or other rights to use all
      databases, geological data, geophysical data, engineering data, seismic data,
      maps, interpretations and other technical information used in their businesses
      as presently conducted, subject to the limitations contained in the agreements
      governing the use of the same, which limitations are customary for companies
      engaged in the business of the exploration and production of Hydrocarbons,
      with
      such exceptions as could not reasonably be expected to have a Material Adverse
      Effect.

     

    Section
      7.17    Maintenance of
      Properties.  Except
      for such acts or failures to act as could not be reasonably expected to have
      a
      Material Adverse Effect, the Oil and Gas Properties (and Properties unitized
      therewith) of the Borrower and its Subsidiaries have been maintained, operated
      and developed by the Borrower or its Subsidiaries in a good and workmanlike
      manner and in conformity in all material respects with all applicable
      Governmental Requirements and in conformity in all material respects with the
      provisions of all leases, subleases or other contracts comprising a part of
      the
      Hydrocarbon Interests and other contracts and agreements forming a part of
      the
      Oil and Gas Properties of the Borrower and its Subsidiaries, in each case to
      which the Borrower or its Subsidiaries are a party.  Specifically in
      connection with the foregoing, except for those as could not be reasonably
      expected to have a Material Adverse Effect, (i) no Oil and Gas Property of
      the
      Borrower or any Subsidiary is subject to having allowable production reduced
      below the full and regular allowable (including the maximum permissible
      tolerance) because of any overproduction (whether or not the same was
      permissible at the time) and (ii) none of the wells comprising a part of the
      Oil
      and Gas Properties (or Properties unitized therewith) of the Borrower or any
      Subsidiary is deviated from the vertical more than the maximum permitted by
      Governmental Requirements, and such wells are, in fact, bottomed under and
      are
      producing from, and the well bores are wholly within, the Oil and Gas Properties
      (or in the case of wells located on Properties unitized therewith, such unitized
      Properties) of the Borrower or such Subsidiary.  All pipelines, wells,
      gas processing plants, platforms and other material improvements, fixtures
      and
      equipment owned in whole or in part by the Borrower or any of its Subsidiaries
      that are necessary to conduct normal operations in all material respects are
      being maintained in a condition reasonably adequate to conduct normal
      operations, and with respect to such of the foregoing which are operated by
      the
      Borrower or any of its Subsidiaries, in a manner consistent with the Borrower’s
      or its Subsidiaries’ past practices (other than those the 

    


    
      
        
          
          

        

        
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    failure
      of which to maintain in accordance with this Section 7.17 could not reasonably
      be expected to have a Material Adverse Effect.

    
 

           Section
      7.18    Gas Imbalances,
      Prepayments.  Except
      as set forth on Schedule 7.18 or on the most recent certificate delivered
      pursuant to Section 8.12(c), on a net basis there are no gas imbalances, take
      or
      pay or other prepayments which would require the Borrower or any of its
      Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties
      at
      some future time without then or thereafter receiving full payment therefor
      exceeding one-half bcf of gas (on an mcf equivalent basis) in the
      aggregate.

     

    Section
      7.19    Marketing of
      Production.  Except
      for contracts listed and in effect on the date hereof on Schedule 7.19, and
      thereafter either disclosed in writing to the Administrative Agent or included
      in the most recently delivered Reserve Report (with respect to all of which
      contracts the Borrower represents that it or its Subsidiaries are receiving
      a
      price for all production sold thereunder which is computed substantially in
      accordance with the terms of the relevant contract and are not having deliveries
      curtailed substantially below the subject Property’s delivery capacity), no
      material agreements exist which are not cancelable on 60 days notice or less
      without penalty or detriment for the sale of production from the Borrower’s or
      its Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other
      rights to purchase, production, whether or not the same are currently being
      exercised) that ix) pertain to the sale of production at a fixed price and
      x)
      have a maturity or expiry date of longer than six (6) months from the date
      hereof.

     

    Section
      7.20    Swap
      Agreements.  Schedule
      7.20, as of the date hereof, and after the date hereof, each report required
      to
      be delivered by the Borrower pursuant to Section 8.01(f), sets forth a true
      and
      complete list of all Swap Agreements of the Borrower and each Subsidiary, the
      material terms thereof (including the type, term, effective date, termination
      date and notional amounts or volumes), the net mark to market value thereof,
      all
      credit support agreements relating thereto (including any margin required or
      supplied) and the counterparty to each such agreement.

     

    Section
      7.21    Use of Loans and
      Letters of Credit.  The
      proceeds of the Loans and the Letters of Credit shall be used to provide working
      capital for exploration and production operations, to refinance Debt under
      the
      Existing Credit Agreement and other Debt of the Borrower, its Subsidiaries
      and
      other entities managed or operated by the Borrower and for general corporate
      purposes.  The Borrower and its Subsidiaries are not engaged
      principally, or as one of its or their important activities, in the business
      of
      extending credit for the purpose, whether immediate, incidental or ultimate,
      of
      buying or carrying margin stock (within the meaning of Regulation T, U or X
      of
      the Board).  No part of the proceeds of any Loan or Letter of Credit
      will be used for any purpose which violates the provisions of Regulations T,
      U
      or X of the Board.

     

    Section
      7.22    Solvency.  After
      giving effect to the transactions contemplated hereby, (a) the aggregate assets
      (after giving effect to amounts that could reasonably be received by reason
      of
      indemnity, offset, insurance or any similar arrangement), at a fair valuation,
      of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate
      Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt
      becomes absolute and matures, (b) each of the Borrower and the Guarantors will
      not have incurred or intended to incur, and will not believe 

    


    
      
        
          
          

        

        
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    that
      it
      will incur, Debt beyond its ability to pay such Debt (after taking into account
      the timing and amounts of cash to be received by each of the Borrower and the
      Guarantors and the amounts to be payable on or in respect of its liabilities,
      and giving effect to amounts that could reasonably be received by reason of
      indemnity, offset, insurance or any similar arrangement) as such Debt becomes
      absolute and matures and (c) each of the Borrower and the Guarantors will not
      have (and will have no reason to believe that it will have thereafter)
      unreasonably small capital for the conduct of its business.

     

    ARTICLE
      VIII

    Affirmative
      Covenants

     

    Until
      the
      Commitments have expired or been terminated and the principal of and interest
      on
      each Loan and all fees payable hereunder and all other amounts payable under
      the
      Loan Documents shall have been paid in full and all Letters of Credit shall
      have
      expired or terminated and all LC Disbursements shall have been reimbursed,
      the
      Borrower covenants and agrees with the Lenders that:

     

    Section
      8.01    Financial
      Statements; Other Information.  The
      Borrower will furnish to the Administrative Agent and each Lender:

     

    (a)           Annual
      Financial Statements.  As soon as available, but in any event in
      accordance with then applicable law and not later than 90 days after the end
      of
      each fiscal year of the Borrower, its audited consolidated balance sheet and
      related statements of operations, stockholders’ equity and cash flows as of the
      end of and for such year, setting forth in each case in comparative form the
      figures for the previous fiscal year, all reported on by Malin, Berquist &
Company, LLP or other
      independent public accountants of recognized
      national standing (without a “going concern” or like qualification or exception
      and without any qualification or exception as to the scope of such audit) to
      the
      effect that such consolidated financial statements present fairly in all
      material respects the financial condition and results of operations of the
      Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
      with GAAP consistently applied.

     

    (b)           Quarterly
      Financial Statements.  As soon as available, but in any event in
      accordance with then applicable law and not later than 45 days after the end
      of
      each of the first three fiscal quarters of each fiscal year of the Borrower,
      its
      consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the
      then
      elapsed portion of the fiscal year, setting forth in each case in comparative
      form the figures for the corresponding period or periods of (or, in the case
      of
      the balance sheet, as of the end of) the previous fiscal year, all certified
      by
      one of its Financial Officers as presenting fairly in all material respects
      the
      financial condition and results of operations of the Borrower and its
      Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
      consistently applied, subject to normal year-end audit adjustments and the
      absence of footnotes.

     

    (c)           Certificate
      of Financial Officer -- Compliance.  Concurrently with any
      delivery of financial statements under Section 8.01(a) or Section 8.01(b),
      a
      certificate of a Financial Officer in substantially the form of Exhibit D-2
      hereto (i) certifying as to whether a 

     

    


    
      
        
          
          

        

        
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    Default
      has occurred and, if a Default has occurred, specifying the details thereof
      and
      any action taken or proposed to be taken with respect thereto, (ii) setting
      forth reasonably detailed calculations demonstrating compliance with Section
      8.13(b) and Section 9.01 and (iii) stating whether any change in GAAP or in
      the
      application thereof has occurred since the date of the audited financial
      statements referred to in Section 7.03(a) that would affect the preparation
      of
      the financial statements most-recently required to be delivered in accordance
      with Section 8.01(a) and (b) or the computation of any financial ratio in
      Section 9.01 and, if any such change has occurred, specifying the effect of
      such change on the financial statements accompanying such
      certificate.

     

    (d)           Certificate
      of Accounting Firm -- Defaults.  Concurrently with any delivery of
      financial statements under Section 8.01(a), a certificate of the independent
      accounting firm that reported on such financial statements stating whether
      they
      obtained knowledge during the course of their examination of such financial
      statements of any Default (which certificate may be limited to the extent
      required by accounting rules or guidelines).

     

    (e)           Certificate
      of Financial Officer -- Consolidating Information.  If, at any
      time, all of the Subsidiaries of the Borrower are not Consolidated Subsidiaries,
      then concurrently with any delivery of financial statements under Section
      8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting forth
      consolidating spreadsheets that show all Subsidiaries and the eliminating
      entries, in such form as would be presentable to the independent accountants
      of
      the Borrower.

     

    (f)           Certificate
      of Financial Officer – Swap Agreements.  Concurrently with any
      delivery of financial statements under Section 8.01(a) and Section 8.01(b),
      a
      certificate of a Financial Officer, in form and substance satisfactory to the
      Administrative Agent, setting forth as of the last Business Day of such fiscal
      quarter or fiscal year, a true and complete list of all Swap Agreements of
      the
      Borrower and each Subsidiary, the material terms thereof (including the type,
      term, effective date, termination date and notional amounts or volumes), the
      net
      mark-to-market value therefor, any new credit support agreements relating
      thereto not listed on Schedule 7.19, any margin required or supplied under
      any
      credit support document, and the counterparty to each such
      agreement.

     

    (g)           Certificate
      of Insurer -- Insurance Coverage.  Concurrently with any delivery
      of financial statements under Section 8.01(a), a certificate of insurance
      coverage from each insurer or one or more insurance agencies with respect to
      the
      insurance required by Section 8.07, in form and substance satisfactory to the
      Administrative Agent, and, if requested by the Administrative Agent or any
      Lender, copies of the applicable policies.

     

    (h)           Other
      Accounting Reports.  Promptly upon receipt thereof, a copy of each
      other report or letter submitted to the Borrower or any of its Subsidiaries
      by
      independent accountants in connection with any annual, interim or special audit
      made by them of the books of the Borrower or any such Subsidiary, and a copy
      of
      any response by the Borrower or any such Subsidiary, or the board of directors
      or other appropriate governing body of the Borrower or any such Subsidiary,
      to
      such letter or report.

     

     

    


    
      
        
          
          

        

        
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      (i)           SEC
        and Other Filings; Reports to Shareholders.  Promptly after the
        same become publicly available, copies of all periodic and other reports,
        proxy
        statements and other materials filed by the Borrower or any Subsidiary with
        the
        SEC, or with any national securities exchange, or distributed by the Borrower
        to
        its security holders generally, as the case may be.

       

    

    (j)           Notices
      Under Material Instruments.  Promptly after the furnishing
      thereof, copies of any financial statement, report or notice furnished by the
      Borrower to any holder of debt securities of the Borrower or any Subsidiary
      pursuant to the terms of any preferred stock designation, indenture, loan or
      credit or other similar agreement, other than this Agreement and not otherwise
      required to be furnished to the Lenders pursuant to any other provision of
      this
      Section 8.01.

     

    (k)           Lists
      of Purchasers.  Promptly following the written request of the
      Administrative Agent, a list of all Persons, as of a specified date, purchasing
      Hydrocarbons from the Borrower or any Subsidiary.

     

    (l)           Notice
      of Sales of Oil and Gas Properties.  In the event the Borrower or
      any Subsidiary intends to sell, transfer, assign or otherwise dispose of any
      Oil
      or Gas Properties or any Equity Interests in any Subsidiary in accordance with
      Section 9.12, prior written notice of such disposition, the price thereof and
      the anticipated date of closing and any other details thereof reasonably
      requested by the Administrative Agent or any Lender.

     

    (m)        
      Notice of Casualty Events.  Prompt written notice, and in any
      event within three Business Days following the knowledge thereof by, or the
      services of process on, (as the case may be) a Responsible Officer of the
      Borrower, of the occurrence of any Casualty Event or the commencement of any
      action or proceeding that could reasonably be expected to result in a Casualty
      Event.

     

    (n)           Information
      Regarding Borrower and Guarantors.  Prompt written notice (and in
      any event within ten (10) Business Days thereafter) of any change (i) in
      the Borrower’s or any Guarantor’s company or corporate name or in any trade name
      used to identify such Person in the conduct of its business or in the ownership
      of its Properties, (ii) in the location of the Borrower’s or any
      Guarantor’s chief executive office or principal place of business, (iii) in
      the Borrower’s or any Guarantor’s identity or company or corporate structure or
      in the jurisdiction in which such Person is incorporated, organized or formed,
      (iv) in the Borrower’s or any Guarantor’s organizational identification number
      in its jurisdiction of organization, and (v) in the Borrower’s or any
      Guarantor’s federal taxpayer identification number.

     

    (o)           Production
      Report and Lease Operating Statements.  Within 60 days after the
      end of each fiscal quarter, a report setting forth, for each calendar month
      during the then elapsed portion of the fiscal year, the volume of production
      and
      sales attributable to production (and the prices at which such sales were made
      and the revenues derived from such sales) for each such calendar month from
      the
      Oil and Gas Properties, and setting forth the related ad valorem, severance
      and
      production taxes and lease operating expenses attributable thereto and incurred
      for each such calendar month.

     

     

    


    
      
        
          
          

        

        
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      (p)           Notices
        of Certain Changes.  Promptly, but in any event within five (5)
        Business Days after the execution thereof, copies of any amendment, modification
        or supplement to the Organizational Documents, any preferred stock designation
        or any other organic document of the Borrower or any Subsidiary.

       

    

    (q)           Ratings
      Change.  Promptly after Moody’s or S&P shall have announced a
      change in the rating established or deemed to have been established for the
      Index Debt or any other Material Indebtedness, written notice of such rating
      change.

     

    (r)           Other
      Requested Information.  Promptly following any request therefor,
      such other information regarding the operations, business affairs and financial
      condition of the Borrower or any Subsidiary (including, without limitation,
      any
      Plan or Multiemployer Plan and any reports or other information required to
      be
      filed under ERISA), or compliance with the terms of this Agreement or any other
      Loan Document, as the Administrative Agent or any Lender may reasonably
      request.

     

    Documents
      required to be delivered pursuant to Section 8.01(a), (b), (h), (i) or (j),
      to
      the extent any such documents are included in materials otherwise filed with
      the
      SEC, may be delivered electronically and if so delivered, shall be deemed to
      have been delivered to the Administrative Agent and each Lender on the date
      on
      which the Borrower notifies the Agent such documents (i) have been posted,
      or on
      which the Borrower provides a link thereto on the Borrower’s website on the
      Internet at the website address listed in Section 12.01; or (ii) are posted
      on the Borrower’s behalf on an Internet or intranet website, if any, to which
      Lender and the Administrative Agent have access (whether a commercial,
      third-party website or whether sponsored by the Administrative Agent); provided
      the Borrower shall notify the Administrative Agent (by telecopier or electronic
      mail) of the posting by the Borrower of its Annual Reports on form 10-K,
      Quarterly Reports on Form 10-Q and current Reports on Form 8-K.

     

    Section
      8.02    Notices of
      Material Events.  The
      Borrower will furnish to the Administrative Agent and each Lender prompt written
      notice of the following:

     

    (a)           
      the occurrence of any Default;

     

    (b)          
      the filing or commencement of, or the threat in writing of, any action,
      suit, proceeding, investigation or arbitration by or before any arbitrator
      or
      Governmental Authority against or affecting the Borrower or any Subsidiary
      not
      previously disclosed in writing to the Administrative Agent or any material
      adverse development in any action, suit, proceeding, investigation or
      arbitration (whether or not previously disclosed to the Administrative Agent)
      that, in either case, if adversely determined (and with respect to any threat,
      reasonably sustainable in the Borrower’s good faith determination), could
      reasonably be expected to result in a Material Adverse Effect;

     

    (c)          
      the occurrence of any ERISA Event that, alone or together with any other ERISA
      Events that have occurred, could reasonably be expected to result in liability
      of the Borrower and its Subsidiaries in an aggregate amount exceeding $5,000,000;

     

    (d)           the
      occurrence of any of the events described in Sections 10.01(h), (i) or (j)
      with
      respect to any Subsidiary that is not a Guarantor; and

     

     

    


    
      
        
          
          

        

        
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      (e)           any
        other development that results in, or could reasonably be expected to result
        in,
        a Material Adverse Effect.

       

    

    Each
      notice delivered under this Section 8.02 shall be accompanied by a statement
      of
      a Responsible Officer setting forth the details of the event or development
      requiring such notice and any action taken or proposed to be taken with respect
      thereto.

     

    Section
      8.03    Existence; Conduct
      of Business.  The
      Borrower will, and will cause each Subsidiary to, do or cause to be done all
      things necessary to preserve, renew and keep in full force and effect its legal
      existence and the rights, licenses, permits, privileges and franchises material
      to the conduct of its business and maintain, if necessary, its qualification
      to
      do business in each other jurisdiction in which its Oil and Gas Properties
      is
      located or the ownership of its Properties requires such qualification, except
      where the failure to so qualify could not reasonably be expected to have a
      Material Adverse Effect; provided that the foregoing shall not prohibit any
      merger, conversion, consolidation, liquidation or dissolution permitted under
      Section 9.11.

     

    Section
      8.04    Payment of
      Obligations.  The
      Borrower will, and will cause each Subsidiary to, pay its obligations, including
      Tax liabilities of the Borrower and all of its Subsidiaries before the same
      shall become delinquent or in default, except where (i) the validity or amount
      thereof is being contested in good faith by appropriate actions, (ii) the
      Borrower or such Subsidiary has set aside on its books adequate reserves with
      respect thereto in accordance with GAAP and (iii) the failure to make payment
      pending such contest could not reasonably be expected to result in a Material
      Adverse Effect or result in the seizure or levy of any material Property of
      the
      Borrower or any Subsidiary.

     

    Section
      8.05    Performance of
      Obligations under Loan Documents.  The
      Borrower will pay the Notes in accordance with the terms thereof, and the
      Borrower will, and will cause each Subsidiary to, do and perform every act
      and
      discharge all of the obligations to be performed and discharged by them under
      the Loan Documents, including, without limitation, this Agreement, at the time
      or times and in the manner specified.

     

    Section
      8.06    Operation and
      Maintenance of Properties.  The
      Borrower will, and will cause each Subsidiary to:

     

    (a)           operate
      its Oil and Gas Properties and other material Properties or cause such Oil
      and
      Gas Properties and other material Properties to be operated in a careful and
      efficient manner in accordance with the practices of the industry and in
      compliance with all applicable contracts and agreements and in compliance with
      all applicable Governmental Requirements, including, without limitation,
      applicable pro ration requirements and Environmental Laws, and all applicable
      laws, rules and regulations of every other Governmental Authority from time
      to
      time constituted to regulate the development and operation of its Oil and Gas
      Properties and the production and sale of Hydrocarbons and other minerals
      therefrom, except, in each case, where the failure to comply could not
      reasonably be expected to have a Material Adverse Effect.

     

    (b)           keep
      and maintain all Property material to the conduct of its business in good
      working order and condition, ordinary wear and tear excepted, and preserve,
      maintain and keep in good repair, working order and efficiency (ordinary wear
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    material
      Oil and Gas Properties and other material Properties, including, without
      limitation, all equipment, machinery and facilities.

    
 

    (c)           promptly
      pay and discharge, or make reasonable and customary efforts to cause to be
      paid
      and discharged, all delay rentals, royalties, expenses and indebtedness accruing
      under the leases or other agreements affecting or pertaining to its Oil and
      Gas
      Properties and will do all other things necessary to keep unimpaired their
      rights with respect thereto and prevent any forfeiture thereof or default
      thereunder, except where (i) the validity or amount thereof is being
      contested in good faith by appropriate actions, (ii) it has set aside
      adequate reserves with respect thereto in accordance with GAAP and
      (iii) the failure to so act could not reasonably be expected to result in a
      Material Adverse Effect or result in the forfeiture of any of its material
      Property.

     

    (d)           promptly
      perform or make reasonable and customary efforts to cause to be performed,
      in
      accordance with industry standards, the obligations required by each and all
      of
      the assignments, deeds, leases, sub-leases, contracts and agreements affecting
      its interests in its Oil and Gas Properties and other material Properties,
      except where (i) the validity or amount thereof is being contested in good
      faith by appropriate actions, (ii) it has set aside adequate reserves with
      respect thereto in accordance with GAAP and (iii) the failure to so act
      could not reasonably be expected to result in a Material Adverse Effect or
      result in the forfeiture of any of its material Property.

     

    (e)           to
      the extent the Borrower is not the operator of any Property, the Borrower shall
      use reasonable efforts to cause the operator to comply with this Section 8.06;
      provided, however, in no event shall it be required to expend any amounts,
      incur
      any obligations or expose itself to any economic consequences as a requirement
      to comply with this Section 8.06(e).

     

    Section
      8.07    Insurance.  The
      Borrower will, and will cause each Subsidiary to, maintain, with financially
      sound and reputable insurance companies, insurance in such amounts and against
      such risks as are customarily maintained by companies engaged in the same or
      similar businesses operating in the same or similar locations.  The
      loss payable clauses or provisions in said insurance policy or policies insuring
      any of the collateral for the Loans shall be endorsed in favor of and made
      payable to the Administrative Agent as its interests may appear and such
      policies shall name the Administrative Agent and the Lenders as “additional
      insureds” and provide that the insurer will endeavor to give at least 30 days
      prior notice of any cancellation to the Administrative Agent.

     

    


    
      
        
          
          

        

        
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      Section
        8.08    Books and Records;
        Inspection Rights.  The
        Borrower will, and will cause each Subsidiary to, keep proper books of record
        and account in which full, true and correct entries are made of all dealings
        and
        transactions in relation to its business and activities.  The Borrower
        will, and will cause each Subsidiary to, permit any representatives designated
        by the Administrative Agent or any Lender, upon reasonable prior notice and
        during normal business hours, to visit and inspect its Properties, to examine
        and make extracts from its books and records, and to discuss its affairs,
        finances and condition with its officers and independent accountants, all
        at
        such reasonable times and as often as reasonably requested, in each case,
        subject to applicable safety standards, applicable privilege and confidentiality
        restrictions, and restrictions of owners of such records or properties who
        are
        neither the Borrower nor any Subsidiary.

       

      Section
        8.09    Compliance with
        Laws.  The
        Borrower will, and will cause each Subsidiary to, comply in all material
        respects with all laws, rules, regulations and orders of any Governmental
        Authority applicable
        to it or its Property, except where (i) such law, rule, regulation or order
        is being contested in good faith by appropriate actions diligently conducted
        or
        (ii) the failure to do so, individually or in the aggregate, could not
        reasonably be expected to result in a Material Adverse
        Effect.

    

     

    Section
      8.10    Environmental
      Matters.

     

    (a)           The
      Borrower shall: (i) comply, and shall cause its Properties and operations and
      each Subsidiary and each Subsidiary’s Properties and operations to comply, with
      all applicable Environmental Laws, the breach of which could be reasonably
      expected to have a Material Adverse Effect; (ii) not dispose of or otherwise
      release, and shall cause each Subsidiary not to dispose of or otherwise release,
      any oil, oil and gas waste, hazardous substance, or solid waste on, under,
      about
      or from any of the Borrower’s or its Subsidiaries’ Properties or any other
      Property to the extent caused by the Borrower’s or any of its Subsidiaries’
operations except in compliance with applicable Environmental Laws, the disposal
      or release of which could reasonably be expected to have a Material Adverse
      Effect; (iii) timely obtain or file, and shall cause each Subsidiary to timely
      obtain or file, all notices, permits, licenses, exemptions, approvals,
      registrations or other authorizations, if any, required under applicable
      Environmental Laws to be obtained or filed in connection with the operation
      or
      use of the Borrower’s or its Subsidiaries’ Properties, which failure to obtain
      or file could reasonably be expected to have a Material Adverse Effect; (iv)
      promptly commence and diligently prosecute to completion, and shall cause each
      Subsidiary to promptly commence and diligently prosecute to completion, any
      assessment, evaluation, investigation, monitoring, containment, cleanup,
      removal, repair, restoration, remediation or other remedial obligations
      (collectively, the “Remedial Work”) in the event any Remedial Work is
      required or reasonably necessary under applicable Environmental Laws because
      of
      or in connection with the actual or suspected past, present or future disposal
      or other release of any oil, oil and gas waste, hazardous substance or solid
      waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties, which failure to commence and diligently prosecute to completion
      could reasonably be expected to have a Material Adverse Effect; and
      (v) establish and implement, and shall cause each Subsidiary to establish
      and implement, such policies of environmental audit and compliance as may be
      necessary to continuously determine and assure that the Borrower’s and its
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    this
      Section 8.10(a) are timely and fully satisfied, which failure to establish
      and
      implement could reasonably be expected to have a Material Adverse Effect.

       

      (b)           The
        Borrower will promptly, but in no event later than five days of the occurrence
        of a triggering event, notify the Administrative Agent and the Lenders in
        writing of any threatened action, investigation or inquiry by any Governmental
        Authority or any threatened demand or lawsuit by any landowner or other third
        party against the Borrower or its Subsidiaries or their Properties of which
        the
        Borrower has knowledge in connection with any Environmental Laws (excluding
        routine testing and corrective action) if the Borrower reasonably anticipates
        that such action will result in liability (whether individually or in the
        aggregate) in excess of $1,000,000, not fully covered by insurance, subject
        to
        normal deductibles.

       

      (c)           The
        Borrower will, and will cause each Subsidiary to, provide environmental audits
        and tests in accordance with American Society of Testing Materials standards
        upon request by the Administrative Agent and the Lenders and no more than
        once
        per year in the absence of any Event of Default (or as otherwise required
        to be
        obtained by the Administrative Agent or the Lenders by any Governmental
        Authority), in connection with any future acquisitions of Oil and Gas Properties
        or other Properties.

    

     

    Section
      8.11    Further Assurances.

     

    (a)           The
      Borrower at its sole expense will, and will cause each Subsidiary to, promptly
      execute and deliver to the Administrative Agent all such other documents,
      agreements and instruments reasonably requested by the Administrative Agent
      to
      comply with, cure any defects or accomplish the conditions precedent, covenants
      and agreements of the Borrower or any Subsidiary, as the case may be, in the
      Loan Documents, including the Notes, or to further evidence and more fully
      describe the collateral intended as security for the Indebtedness, or to correct
      any omissions in this Agreement or the Security Instruments, or to state more
      fully the obligations secured therein, or to perfect, protect or preserve any
      Liens created pursuant to this Agreement or any of the Security Instruments
      or
      the priority thereof, or to make any recordings, file any notices or obtain
      any
      consents, all as may be reasonably necessary or appropriate, in the sole
      discretion of the Administrative Agent, in connection therewith.

     

    (b)           The
      Borrower hereby authorizes the Administrative Agent to file one or more
      financing or continuation statements, and amendments thereto, relative to all
      or
      any part of the Mortgaged Property without the signature of the Borrower or
      any
      other Guarantor where permitted by law.  A carbon, photographic or
      other reproduction of the Security Instruments or any financing statement
      covering the Mortgaged Property or any part thereof shall be sufficient as
      a
      financing statement where permitted by law.

     

     

    


    
      
        
          
          

        

        
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      Section
        8.12    Reserve
        Reports.

       

      (a)           On
        or before March 1st and September 1st of each year, commencing September 1, 2007,
        the Borrower shall
        furnish to the Administrative Agent and the Lenders a Reserve Report evaluating
        the Oil and Gas Properties of the Borrower and its Subsidiaries as of the
        immediately preceding January 1st and July 1st.  The Reserve Report as
        of January 1 of each year shall be prepared by one or more Approved Petroleum
        Engineers, and the July 1 Reserve Report of each year shall be prepared by
        or
        under the supervision of the chief engineer of the Borrower who shall certify
        such Reserve Report to be true and accurate in all material respects and
        to have
        been prepared in accordance with the procedures used in the immediately
        preceding January 1 Reserve Report.

       

      (b)           In
        the event of an Interim Redetermination, the Borrower shall furnish to the
        Administrative Agent and the Lenders a Reserve Report prepared by or under
        the
        supervision of the chief engineer of the Borrower who shall certify such
        Reserve
        Report to be true and accurate in all material respects and, except as therein
        disclosed, to have been prepared in accordance with the procedures used in
        the
        immediately preceding January 1 Reserve Report.  For any Interim
        Redetermination requested by the Administrative Agent or the Borrower pursuant
        to Section 2.07(b), the Borrower shall provide such Reserve Report with an
“as
        of” date as required by the Administrative Agent as soon as possible, but in
        any
        event no later than thirty (30) days following the receipt of such
        request.

       

    

    (c)           With
      the delivery of each Reserve Report, the Borrower shall provide to the
      Administrative Agent and the Lenders a certificate from a Responsible Officer
      certifying that in all material respects: (i) the factual information contained
      in the Reserve Report and any other information delivered in connection
      therewith is true and correct, (ii) the Borrower or its Subsidiaries owns good
      and defensible title to the Oil and Gas Properties evaluated in such Reserve
      Report and such Properties are free of all Liens except for Liens permitted
      by
      Section 9.03, (iii) except as set forth on an exhibit to the certificate, on
      a
      net basis there are no gas imbalances, take or pay or other prepayments in
      excess of the volume specified in Section 7.18 with respect to its Oil and
      Gas
      Properties evaluated in such Reserve Report which would require the Borrower
      or
      any Subsidiary to deliver Hydrocarbons either generally or produced from such
      Oil and Gas Properties at some future time without then or thereafter receiving
      full payment therefor, (iv) none of their Oil and Gas Properties have been
      sold
      since the date of the last Borrowing Base determination except as set forth
      on
      an exhibit to the certificate, which certificate shall list all of its Oil
      and
      Gas Properties sold and in such detail as reasonably required by the
      Administrative Agent, (v) attached to the certificate is a list of all marketing
      agreements entered into subsequent to the later of the date hereof or the most
      recently delivered Reserve Report which the Borrower could reasonably be
      expected to have been obligated to list on Schedule 7.19 had such agreement
      been
      in effect on the date hereof and (vi) attached thereto is a schedule of the
      Oil
      and Gas Properties evaluated by such Reserve Report that are Mortgaged
      Properties and demonstrating the percentage of the total value of the Oil and
      Gas Properties that the value of such Mortgaged Properties
      represent.

     

     

    


    
      
        
          
          

        

        
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      Section
        8.13    Title
        Information.

       

      (a)           On
        or before the delivery to the Administrative Agent and the Lenders of each
        Reserve Report required by Section 8.12(a), the Borrower will deliver title
        information in form and substance acceptable to the Administrative Agent
        covering enough of the Oil and Gas Properties evaluated by such Reserve Report
        that were not included in the immediately preceding Reserve Report, so that
        the
        Administrative Agent shall have received together with title information
        previously delivered to the Administrative Agent, satisfactory title information
        on at least 80% of the total value of the Oil and Gas Properties evaluated
        by
        such Reserve Report.

       

      (b)           If
        the Borrower has provided title information for additional Properties under
        Section 8.13(a), the Borrower shall, within 60 days of notice from the
        Administrative Agent that title defects or exceptions (other than, of a
        (y) nature or type that constitutes a permitted Lien pursuant to
        Section 9.03 or (z) economically insignificant nature) exist with
        respect to such additional Properties, either (i) cure any such title defects
        or
        exceptions (including defects or exceptions as to priority) which are not
        permitted by Section 9.03 raised by such information, (ii) substitute acceptable
        Mortgaged Properties with no title defects or exceptions except for Excepted
        Liens (other than Excepted Liens described in clauses (e), (g) and (h) of
        such
        definition and other than, of a (y) nature or type that constitutes a
        permitted Lien pursuant to Section 9.03 or (z) economically
        insignificant nature) having an equivalent value or (iii) deliver title
        information in form and substance acceptable to the Administrative Agent
        so that
        the Administrative Agent shall have received, together with title information
        previously delivered to the Administrative Agent, satisfactory title information
        on at least 80% of the value of the Oil and Gas Properties evaluated by such
        Reserve Report.

       

    

    (c)           If
      the Borrower is unable to cure any title defect requested by the Administrative
      Agent or the Lenders to be cured pursuant to Section 8.13(c) within such 60-day
      period or the Borrower does not comply with the requirements to provide
      acceptable title information covering 80% of the value of the Oil and Gas
      Properties evaluated in the most recent Reserve Report, such default shall
      not
      be a Default, but instead the Administrative Agent and/or the Majority Lenders
      shall have the right to exercise the following remedy in their sole discretion
      from time to time, and any failure to so exercise this remedy at any time shall
      not be a waiver as to future exercise of the remedy by the Administrative Agent
      or the Lenders.  To the extent that the Administrative Agent or the
      Majority Lenders are not satisfied with title to any Mortgaged Property after
      the 60-day period has elapsed, such unacceptable Mortgaged Property shall not
      count towards the 80% requirement, and the Administrative Agent may send a
      notice to the Borrower and the Lenders that the then outstanding Borrowing
      Base
      shall be reduced by an amount as determined by the Majority Lenders to cause
      the
      Borrower to be in compliance with the requirement to provide acceptable title
      information on 80% of the value of the Oil and Gas Properties.  This
      new Borrowing Base shall become effective immediately after the Borrower’s
      receipt of such notice.

     

    Section
      8.14    Additional
      Collateral; Additional Guarantors.

     

                
      (a)    In
      connection with each redetermination of the Borrowing Base, the Borrower shall
      review the Reserve Report and the list of current Mortgaged Properties (as
      

    


    
      
        
          
          

        

        
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    described
      in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent
      at least 80% of the total value of the Oil and Gas Properties evaluated in
      the
      most recently completed Reserve Report after giving effect to exploration and
      production activities, acquisitions, dispositions and production.  In
      the event that the Mortgaged Properties do not represent at least 80% of such
      total value, then the Borrower shall, and shall cause its Subsidiaries to,
      grant
      (from its available unencumbered Property), within thirty (30) days of delivery
      of the certificate required under Section 8.12(c), to the Administrative Agent
      as security for the Indebtedness a first-priority Lien interest (provided that
      Excepted Liens of the type described in clauses (a) to (d) and (f) of the
      definition thereof may exist, but subject to the provisos at the end of such
      definition) on additional Oil and Gas Properties not already subject to a Lien
      of the Security Instruments such that after giving effect thereto, the Mortgaged
      Properties will represent at least 80% of such total value.  All such
      Liens will be created and perfected by and in accordance with the provisions
      of
      deeds of trust, security agreements and financing statements or other Security
      Instruments, all in form and substance reasonably satisfactory to the
      Administrative Agent and the Borrower and in sufficient executed (and
      acknowledged where necessary or appropriate) counterparts for recording
      purposes.  In order to comply with the foregoing, if any Subsidiary
      places a Lien on its Oil and Gas Properties and such Subsidiary is not a
      Guarantor, then it shall become a Guarantor and comply with Section 8.14(b).
      
       

      (b)           In
        the event that (i) the Borrower determines that any Subsidiary is a Material
        Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or guarantees
        any
        Debt (other than Debt of the nature described at clause (c) of the
        definition of the defined term “Debt”), the Borrower shall promptly cause such
        Subsidiary to guarantee the Indebtedness pursuant to the Guaranty
        Agreement.  In connection with any such guaranty, the Borrower shall,
        or shall cause such Subsidiary to, (a) execute and deliver a supplement to
        the
        Guaranty Agreement executed by such Subsidiary, (b) pledge all of the Equity
        Interests of such new Subsidiary (including, without limitation, delivery
        (if
        applicable) of original certificates evidencing the Equity Interests of such
        Subsidiary, together with an appropriate undated stock powers for each
        certificate duly executed in blank by the registered owner thereof) and (c)
        execute and deliver such other additional closing documents, certificates
        and
        legal opinions as shall reasonably be requested by the Administrative
        Agent.

    

     

    Section
      8.15    ERISA
      Compliance.  The
      Borrower will promptly furnish and will cause the Subsidiaries and any ERISA
      Affiliate to promptly furnish to the Administrative Agent (i) promptly after
      receipt of a written request by the Administrative Agent, copies of each annual
      and other report with respect to each Plan or any trust created thereunder,
      filed with the United States Secretary of Labor, the Internal Revenue Service
      or
      the PBGC, (ii) immediately upon becoming aware of the occurrence of any ERISA
      Event or of any “prohibited transaction,” as described in section 406 of ERISA
      or in section 4975 of the Code, in connection with any Plan or any trust created
      thereunder, a written notice signed by the Chief Executive Officer or the
      principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the
      case
      may be, specifying the nature thereof, what action the Borrower, the Subsidiary
      or the ERISA Affiliate is taking or proposes to take with respect thereto,
      and,
      when known, any action taken or proposed by the Internal Revenue Service, the
      Department of Labor or the PBGC with respect thereto, and (iii) immediately
      upon
      receipt thereof, copies of any notice of the PBGC’s intention to terminate or to
      have a trustee appointed to administer any Plan.  With respect to each
      Plan (other than a Multiemployer Plan), the Borrower will, and will cause each
      Subsidiary and ERISA Affiliate to,

     

    


    
      
        
          
          

        

        
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    (i)
      satisfy in full and in a timely manner, without incurring any late payment
      or
      underpayment charge or penalty and without giving rise to any lien, all of
      the
      contribution and funding requirements of section 412 of the Code (determined
      without regard to subsections (d), (e), (f) and (k) thereof) and of section
      302
      of ERISA (determined without regard to sections 303, 304 and 306 of ERISA),
      and
      (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring
      any late payment or underpayment charge or penalty, all premiums required
      pursuant to sections 4006 and 4007 of ERISA.

     

    
      Section
        8.16    Swap
        Agreements.  The
        Borrower shall maintain the hedge position established by the Swap Agreements
        required under Section 6.01(q) during the period specified therein and shall
        neither assign, terminate or unwind any such Swap Agreements nor sell any
        Swap
        Agreements if the effect of such action (when taken together with any other
        Swap
        Agreements executed contemporaneously with the taking of such action) would
        have
        the effect of canceling its positions under such Swap Agreements required
        hereby, unless, in each event, an event of default has occurred thereunder,
        and
        it is the non-defaulting party, or a termination event has occurred thereunder,
        and it is not the affected party, and it has notified the Administrative
        Agent
        of any such occurrence.

       

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

    

     

    ARTICLE
      IX

    Negative
      Covenants

     

    Until
      the
      Commitments have expired or terminated and the principal of and interest on
      each
      Loan and all fees payable hereunder and all other amounts payable under the
      Loan
      Documents have been paid in full and all Letters of Credit have expired or
      terminated and all LC Disbursements shall have been reimbursed, the Borrower
      covenants and agrees with the Lenders that:

     

    
      
        
        

      

      
        -69-

        
          

        

      

      
        
        

      

    

    Section
      9.01    Financial
      Covenants.

     

    (a)           Interest
      Coverage Ratio.  The Borrower will not, as of the last day of any
      fiscal quarter, permit its ratio of EBITDAX for the period of the four fiscal
      quarters ending on such day to Interest Expense for such period to be less
      than
      3.0 to 1.0.

     

    (b)           Ratio
      of Total Debt to EBITDAX.  The Borrower will not, as of the last
      day of any fiscal quarter, permit its ratio of Total Debt as of such date to
      EBITDAX for the period of the four fiscal quarters ending on such day to be
      greater than 4.00 to 1.00.

     

    (c)           Current
      Ratio.  The Borrower will not permit, as of the last day of any
      fiscal quarter, its ratio of (3) consolidated current assets (including the
      unused amount of the total Commitments, but excluding non-cash assets under
      FAS
      133) as of such day to (4) consolidated current liabilities (excluding non-cash
      obligations under FAS 133 and unused availability under this Agreement) as
      of
      such day to be less than 1.0 to 1.0.

     

    Section
      9.02           
Debt.  The
      Borrower will not, and will not permit any Subsidiary to, incur, create, assume
      or suffer to exist any Debt, except:

     

    (a)           the
      Notes or other Indebtedness or any guaranty of or suretyship arrangement for
      the
      Notes or other Indebtedness.

     

    (b)           Debt
      of the Borrower and its Subsidiaries existing on the date hereof and listed
      in
      Schedule 9.02, and any refinancings, refundings, renewals or extensions thereof;
      provided that (i) the amount of each such Debt has not increased at the
      time of such refinancing, funding, renewal or extension except by an amount
      equal to a reasonable premium or other reasonable amount paid, and fees and
      expenses reasonably incurred, in connection with such refinancing, refunding,
      renewal or extension, (ii) the terms related to principal amount,
      amortization, maturity, collateral (if any), and other material terms taken
      as a
      whole, of any such refinancing, refunding, renewal or extending Debt, and of
      any
      agreement entered into or of any instrument issued in connection therewith,
      are
      no more restrictive in any material respect to the Borrower or any Subsidiary
      then the terms of any agreement or instrument governing the Debt being
      refinanced, refunded, renewed or extended and the interest rate applicable
      to
      any such refinancing, refunding, renewing or extending Debt does not exceed
      the
      range of the market interest rates then available to the obligor thereunder
      for
      comparable transactions, and (iii) if such
      Debt
      is subordinated to the Indebtedness, the terms relating to subordination of
      any
      such refinancing, refunding, renewal or extending Debt are no less favorable
      to
      the Lenders and the terms of any agreement or instrument governing the Debt
      being refinanced, refunded, renewed or extended.

     

    (c)           accounts
      payable and accrued expenses, liabilities or other obligations to pay the
      deferred purchase price of Property or services, from time to time incurred
      in
      the ordinary course of business which are not greater than sixty (60) days
      past
      the date of invoice or which are being contested in good faith by appropriate
      action and for which adequate reserves have been maintained in accordance with
      GAAP.

     

    (d)           Debt
      under Capital Leases not to exceed $5,000,000 in the aggregate at any one
      time.

     

    
      
        
        

      

      
        -70-

        
          

        

      

      
        
        

      

    

    (e)           Debt
      associated with bonds or surety obligations required by Governmental
      Requirements in connection with the operation of the Oil and Gas
      Properties.

     

    (f)          
       intercompany Debt between the Borrower and any Subsidiary or between
      Subsidiaries to the extent permitted by Section 9.05(e); provided that (i)
      such
      Debt is not held, assigned, transferred, negotiated or pledged to any Person
      other than the Borrower or one of its Wholly-Owned Subsidiaries, (ii) any such
      Debt owed by either the Borrower or a Guarantor shall be subordinated to the
      Indebtedness on terms set forth in the Guaranty Agreement and (iii) any such
      Debt shall not have any scheduled amortization prior to March 1,
      2013.

     

    (g)           endorsements
      of negotiable instruments for collection in the ordinary course of
      business.

     

    (h)           guarantees
      of the Borrower and any Guarantor in respect of Debt otherwise permitted
      hereunder.

     

    (i)           
      other Debt not to exceed $10,000,000 in the aggregate at any one time
      outstanding.

     

    Section
      9.03         
 Liens.  The
      Borrower will not, and will not permit any Subsidiary to, create, incur, assume
      or permit to exist any Lien on any of its Properties (now owned or hereafter
      acquired), except:

     

    (a)           Liens
      securing the payment of any Indebtedness.

     

    (b)           Excepted
      Liens.

     

    (c)           Liens
      securing Capital Leases permitted by Section 9.02(d) but only on the Property
      under lease.

     

    (d)           Liens
      existing on the date hereof and listed in Schedule 9.03 and any renewals or
      extensions thereof, provided that (i) neither the property nor the description
      of the property covered thereby is changed other than as a result of maintenance
      capital expenditures, (ii) the amount secured or benefited thereby is not
      increased other than as contemplated by

     

    


    
      
        
          
          

        

        
          -71-

          
            

          

        

        
          
          

        

      

    

    


    Section 9.02(b),
      (iii) the direct or any contingent obligor with respect thereto is not changed
      other than in a transaction that is not prohibited by Section 9.11, and (iv)
      any
      renewal or extension of the obligations secured or benefited thereby is
      permitted by Section 9.02(b).

     

    (e)          
      Liens on Property not constituting collateral for the Indebtedness and not
      otherwise permitted by the foregoing clauses of this Section 9.03; provided
      that
      the aggregate principal or face amount of all Debt secured under this Section
      9.03(e) shall not exceed $5,000,000 at any time.

     

    (f)           
      Liens on the Property of a Person which becomes a Subsidiary, or Property
      acquired after the date hereof securing Debt permitted by Section 9.02; provided
      that (i) such Liens existed at the time such Person becomes a Subsidiary or
      such
      Property is acquired, as the case may be, and were not created in anticipation
      thereof, (ii) no such Lien covers any other 

     

    
      
        
        

      

      
        -72-

        
          

        

      

      
        
        

      

    

     

    Property
      of the Borrower or a Guarantor, and (iii) the amount of Debt secured thereby
      is
      not increased.

     

    Section
      9.04    Dividends,
      Distributions and Redemptions.

     

    (a)           Restricted
      Payments.  The Borrower will not, and will not permit any of its
      Subsidiaries to, declare or make, or agree to pay or make, directly or
      indirectly, any Restricted Payment, return any capital to its stockholders
      or
      make any distribution of its Property to its Equity Interest holders, except
      (a)
      the Borrower may declare and pay dividends with respect to its Equity Interests
      payable solely in additional shares of its Equity Interests (other than
      Disqualified Capital Stock), (b) Subsidiaries may declare and pay dividends
      ratably with respect to their Equity Interests and (c) the Borrower may make
      Restricted Payments pursuant to and in accordance with stock option plans or
      other benefit plans for management or employees of the Borrower and its
      Subsidiaries.

     

    (b)           Redemption
      or Repayment of Subordinated Debt.  The Borrower will not, and
      will not permit any Subsidiary to: (i) call, make or offer to make any
      Redemption of or otherwise Redeem (whether optional or mandatory and whether
      in
      whole or in part) or repay any subordinated Debt permitted to be incurred
      hereunder except for a payment of interest or principal at its scheduled payment
      date and otherwise in accordance with the terms of such Debt or at any time
      with
      proceeds from a sale or issuance of Equity Interests; (ii) amend, modify, waive
      or otherwise change, consent or agree to any amendment, modification, waiver
      or
      other change to, any of the terms of any notes evidencing any subordinated
      Debt
      permitted hereunder or any indenture, agreement, instrument, certificate or
      other document relating to any subordinated Debt permitted hereunder if (A)
      the
      effect of such amendment, modification or waiver is to shorten the final
      maturity, create amortization of principal thereof, or increase the amount
      of
      any payment of principal thereof or increase the interest rate or shorten any
      period for payment of interest thereon or modify the method of calculating
      the
      interest rate, (B) such action requires the payment of a consent,
      amendment, waiver or other similar fee on the stated principal amount thereof,
      (C) such action adds covenants, events of default or other agreements to the
      extent more restrictive than those contained in this Agreement, or (D) such
      action adds collateral unless the Loan Documents are being amended at the same
      time to reflect such new collateral or the addition of guarantors if required
      by
      the terms thereof; or (iii) designate any Debt (other than any
      Indebtedness) as “Specified Senior Indebtedness” or “Specified Guarantor Senior
      Indebtedness” or give any such other Debt any other similar designation for the
      purposes of any indentures or other documents relating to any subordinated
      Debt
      permitted hereunder.

     

     
      Section 9.05         Investments,
      Loans and Advances.  The
      Borrower will not, and will not permit any Subsidiary to, make or permit to
      remain outstanding any Investments in or to any Person, except that the
      foregoing restriction shall not apply to:

     

    (a)           Investments
      reflected in the Financial Statements or which are disclosed to the Lenders
      in
      Schedule 9.05.

     

    (b)           accounts
      receivable arising in the ordinary course of business.

     

    
      
        
        

      

      
        -73-

        
          

        

      

      
        
        

      

    

    (c)           direct
      obligations of the United States or any agency thereof, or obligations
      guaranteed or insured by the United States or any agency thereof, in each case
      maturing within one year from the date of acquisition thereof.

     

    (d)           
      commercial paper maturing within one year from the date of acquisition thereof
      rated in the highest grade by S&P or Moody’s.

     

    (e)           deposits
      maturing within one year from the date of acquisition thereof with, including
      certificates of deposit issued by, any Lender or any office located in the
      United States of any other bank or trust company which is organized under the
      laws of the United States or any state thereof, has capital, surplus and
      undivided profits aggregating at least $100,000,000 (as of the date of such
      bank
      or trust company’s most recent financial reports) and has a short term deposit
      rating of no lower than A2 or P2, as such rating is set forth from time to
      time,
      by S&P or Moody’s, respectively.

     

    (f)           
      repurchase obligations with a term of not more than 30 days from the date of
      acquisition thereof for underlying securities of the type described in Sections
      9.05(c) and (e).

     

    (g)           
      deposits in money market funds investing exclusively in Investments described
      in
      Section 9.05(c), Section 9.05(c), Section 9.05(d) or Section
      9.05(f).

     

    (h)          
      Investments a. made by the Borrower in or to the Guarantors, b. made by any
      Subsidiary in or to the Borrower or any Guarantor and c. made by the Borrower
      or
      any Subsidiary in or to all other Domestic Subsidiaries which are not Guarantors
      in an aggregate amount at any one time outstanding not to exceed $2,000,000.

     

    (i)           
      subject to the limits in Section 9.06, Investments (including, without
      limitation, capital contributions) in general or limited partnerships or other
      types of entities (each a “venture”) entered into by the Borrower or a
      Subsidiary with others in the ordinary course of business; provided that d.
      any
      such venture is engaged exclusively in oil and gas exploration, development,
      production, processing and related activities, including transportation, e.
      the
      interest in such venture is acquired in the ordinary course of business and
      on
      fair and reasonable terms and f. such venture interests acquired and capital
      contributions made (valued as of the date such interest was acquired or the
      contribution made) do not exceed, in the aggregate at any time outstanding
      an
      amount equal to $5,000,000.

    


    (j)           
      subject to the limits in Section 9.06, Investments in direct ownership interests
      in additional Oil and Gas Properties and gas gathering systems related thereto
      or related to farm-out, farm-in, joint operating, joint venture or area of
      mutual interest agreements, gathering systems, pipelines or other similar
      arrangements which are usual and customary in the oil and gas exploration and
      production business located within the geographic boundaries of the United
      States of America.

     

    (k)           loans
      or advances to employees, officers or directors in the ordinary course of
      business of the Borrower or any of its Subsidiaries, in each case only as
      permitted by applicable law, including Section 402 of the Sarbanes Oxley Act
      of
      2002, but in any event not to exceed $2,000,000 in the
      aggregate at any time outstanding.

     

    
      
        
        

      

      
        -74-

        
          

        

      

      
        
        

      

    

    (l)           
      Investments in stock, obligations or securities received in settlement of debts
      arising from Investments permitted under this Section 9.04(b) owing to the
      Borrower or any Subsidiary as a result of a bankruptcy or other insolvency
      proceeding of the obligor in respect of such debts or upon the enforcement
      of
      any Lien in favor of the Borrower or any of its Subsidiaries; provided that
      the
      Borrower shall give the Administrative Agent prompt written notice in the event
      that the aggregate amount of all Investments held at any one time under this
      Section 9.05(l) exceeds $5,000,000.

     

    (m)          Investments
      existing on the date hereof and listed in Schedule 9.05.

     

    (n)           (i)
      guarantees permitted by Section 9.02, and (ii) guarantees by the Borrower or
      any
      Subsidiary for the performance or payment obligations of the Borrower or any
      Wholly Owned Subsidiary, which obligations were incurred in the ordinary course
      of business and do not constitute Indebtedness.

     

    (o)           Investments
      in any Person to the extent such Investment represents the non-cash portion
      of
      consideration received for a disposition of any property that was made pursuant
      to and in compliance with Section 9.12.

     

    (p)           any
      Investments received solely in exchange for Equity Interests consisting of
      common stock of the Borrower.

     

    (q)           other
      Investments not to exceed $2,000,000 in the
      aggregate at any time.

     

    Section
      9.06    Nature of
      Business.  The
      Borrower will not, and will not permit any Subsidiary to, allow any material
      change to be made in the character of its business as an independent oil and
      gas
      exploration and production company.

     

    Section
      9.07    Limitation on
      Leases.  The
      Borrower will not, and will not permit any Subsidiary to, create, incur, assume
      or suffer to exist any obligation for the payment of rent or hire of Property
      of
      any kind whatsoever (real or personal but excluding Capital Leases and leases
      of
      Oil and Gas Properties), under leases or lease agreements which would cause
      the
      aggregate amount of all net payments made by the Borrower and the Subsidiaries
      pursuant to all such leases or lease agreements, including, without limitation,
      any residual payments at the end of any lease, to exceed $5,000,000 in
      any
      period of twelve consecutive calendar months during the life of such
      leases.

     

           
      Section 9.08    Proceeds of
      Loans.   The
      Borrower will not permit the proceeds of the Loans to be used for any purpose
      other than those permitted by Section 7.21.  Neither the Borrower nor
      any Person acting on behalf of the Borrower has taken or will take any action
      which might cause any of the Loan Documents to violate Regulations T, U or
      X or
      any other regulation of the Board or to violate Section 7 of the Securities
      Exchange Act of 1934 or any rule or regulation thereunder, in each case as
      now
      in effect or as the same may hereinafter be in effect.  If requested
      by the Administrative Agent, the Borrower will furnish to the Administrative
      Agent and each Lender a statement to the foregoing effect in conformity with
      the
      requirements of FR Form U-1 or such other form referred to in Regulation U,
      Regulation T or Regulation X of the Board, as the case may be.

     

    
      
        
        

      

      
        -75-

        
          

        

      

      
        
        

      

    

    Section
      9.09    ERISA
      Compliance.  The
      Borrower will not, and will not permit any Subsidiary to, at any
      time:

     

    (a)           engage
      in, or permit any ERISA Affiliate to engage in, any transaction in connection
      with which the Borrower, a Subsidiary or any ERISA Affiliate could be subjected
      to either a civil penalty assessed pursuant to subsections (c), (i) or (l)
      of
      section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of
      the Code.

     

    (b)           terminate,
      or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any
      other action with respect to any Plan, which could result in any liability
      of
      the Borrower, a Subsidiary or any ERISA Affiliate to the PBGC.

     

    (c)           fail
      to make, or permit any ERISA Affiliate to fail to make, full payment when due
      of
      all amounts which, under the provisions of any Plan, agreement relating thereto
      or applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required
      to pay as contribu­tions thereto.

     

    (d)           permit
      to exist, or allow any ERISA Affiliate to permit to exist, any accumulated
      funding deficiency within the meaning of section 302 of ERISA or section 412
      of
      the Code, whether or not waived, with respect to any Plan.

     

    (e)           except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, permit, or allow any ERISA Affiliate to permit, the
      actuarial present value of the benefit liabilities under any Plan maintained
      by
      the Borrower, a Subsidiary or any ERISA Affiliate which is regulated under
      Title IV of ERISA to exceed the current value of the assets (computed on a
      plan termination basis in accordance with Title IV of ERISA) of such Plan
      allocable to such benefit liabilities.  The term “actuarial present
      value of the benefit liabilities” shall have the meaning specified in section
      4041 of ERISA.

     

    (f)          
      except as could not reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect, contribute to or assume an obligation
      to
      contribute to, or permit any ERISA Affiliate to contribute to or assume an
      obligation to contribute to, any Multiemployer Plan.

     

    (g)           except
      as could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect, acquire, or permit any ERISA Affiliate to acquire,
      an
      interest in any Person that causes such Person to become an ERISA Affiliate
      with
      respect to the Borrower or a Subsidiary or with respect to any ERISA Affiliate
      of the Borrower or a Subsidiary if
      such
      Person sponsors, maintains or contributes to, or at any time in the six-year
      period preceding such acquisition has sponsored, maintained, or contributed
      to,
      (ii) any Multiemployer Plan, or (iii) any other Plan that is subject to
      Title IV of ERISA under which the actuarial present value of the benefit
      liabilities under such Plan exceeds the current value of the assets (computed
      on
      a plan termination basis in accordance with Title IV of ERISA) of such Plan
      allocable to such benefit liabilities.

     

    (h)           incur,
      or permit any ERISA Affiliate to incur, a liability to or on account of a Plan
      under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.

     

    
      
        
        

      

      
        -76-

        
          

        

      

      
        
        

      

    

    (i)           
      amend, or permit any ERISA Affiliate to amend, a Plan resulting in an increase
      in current liability such that the Borrower, a Subsidiary or any ERISA Affiliate
      is required to provide security to such Plan under section 401(a)(29) of the
      Code.

     

    Section
      9.10    Sale or Discount
      of Receivables.  Except
      for receivables obtained by the Borrower or any Subsidiary out of the ordinary
      course of business or the settlement of joint interest billing accounts in
      the
      ordinary course of business or discounts granted to settle collection of
      accounts receivable or the sale of defaulted accounts arising in the ordinary
      course of business in connection with the compromise or collection thereof
      and
      not in connection with any financing transaction, the Borrower will not, and
      will not permit any Subsidiary to, discount or sell (with or without recourse)
      any of its notes receivable or accounts receivable.

     

    Section
      9.11    Mergers,
      Etc.  Other
      than (i) a merger of the Borrower or a Domestic Subsidiary to effectuate a
      reincorporation or statutory conversion in another state of the United States
      or
      (ii) a statutory conversion in any state of the United States, in either case
      upon at least 30 days' prior written notice to the Administrative Agent, the
      Borrower will not, and will not permit any Subsidiary to, merge into or with
      or
      consolidate with any other Person, or permit any other Person to merge into
      or
      consolidate with it, or sell, transfer, lease or otherwise dispose of (whether
      in one transaction or in a series of transactions) all or substantially all
      of
      its Property to any other Person (whether now owned or hereafter acquired)
      (any
      such transaction, a “consolidation”), or liquidate or dissolve; except that
      (i) any Subsidiary may merge with or dissolve into any other Subsidiary,
      (ii) that the Borrower may merge with any Subsidiary (or such Subsidiary
      may be dissolved into the Borrower) so long as the Borrower is the survivor,
      (iii) any Subsidiary may dispose of all or substantially all of its assets
      (upon
      voluntary liquidation or otherwise) to the Borrower or to another Subsidiary,
      and may thereafter liquidate or dissolve if applicable; provided that if the
      transferor in such a transaction is a Guarantor, then the transferee must either
      be the Borrower or a Guarantor and (iv) the Borrower or any Subsidiary may
      dispose of all of the Equity Interests of any Subsidiary in accordance with
      Section 9.12.

     

    Section
      9.12    Sale of
      Properties.  The
      Borrower will not, and will not permit any Subsidiary to, sell, assign,
      farm-out, convey or otherwise transfer any Property except for (a) the sale
      of
      Hydrocarbons in the ordinary course of business; (b) farmouts in the ordinary
      course of business of non-proven acreage and assignments in connection with
      such
      farmouts, or the abandonment, farm-out, exchange, lease or sublease of Oil
      and
      Gas Properties not containing such reserves; (c) the sale or transfer of
      equipment that is no longer useful or necessary for the business of the Borrower
      or such Subsidiary or is replaced by equipment of at least comparable
value
      or
      use; (d) the sale or other disposition of any Oil and Gas Property or any
      interest therein or any Subsidiary owning Oil and Gas Properties; provided
      that
      (i) 100% of the consideration received in respect of such sale or other
      disposition shall be cash, (ii) the consideration received in respect of such
      sale or other disposition shall be equal to or greater than the fair market
      value of the Oil and Gas Property, interest therein or Subsidiary subject of
      such sale or other disposition (if such consideration exceeds $5,000,000, as
      reasonably determined by the board of directors or other governing body of
      the
      Borrower and, if requested by the Administrative Agent, the Borrower shall
      deliver a certificate of a Responsible Officer of the Borrower certifying to
      that effect), (iii) if such sale or other disposition of Oil and Gas Property
      or
      Subsidiary owning Oil and Gas Properties included in the most recently delivered
      Reserve Report during any period 

     

    
      
        
        

      

      
        -77-

        
          

        

      

      
        
        

      

    

     

    between
      two successive Scheduled Redetermination Dates has a fair market value in excess
      of $2,000,000 (as determined by the Administrative Agent, individually or in
      the
      aggregate, the Borrowing Base shall be reduced, effective immediately upon
      such
      sale or disposition, by an amount equal to the value, if any, assigned such
      Property in the most recently delivered Reserve Report and (iv) if any such
      sale
      or other disposition is of a Subsidiary owning Oil and Gas Properties, such
      sale
      or other disposition shall include all the Equity Interests of such Subsidiary;
      (e) dispositions permitted by Section 9.11; (f) the trade or exchange of Oil
      and
      Gas Properties for Oil and Gas Properties of equivalent value (including any
      cash or Investments of the nature described in any of Sections 9.05 (c), (d),
      (e) and (f) necessary in order to achieve an exchange of equivalent value);
      provided that (i) the Administrative Agent shall determine, in its sole
      discretion, whether the such value is equivalent and (ii) any Oil and Gas
      Properties to which any proved reserves are attributed in the most recent
      Reserve Report delivered hereunder may be traded or exchanged hereunder only
      for
      Oil and Gas Properties to which comparable quantities of proved reserves are
      attributable; (g) dispositions of assets received pursuant to Section 9.05(l);
      (h) the grant in the ordinary course of business of any non-exclusive license
      of
      patents, trademarks, registrations therefor and other similar intellectual
      property; (i) the granting of any Lien permitted hereunder and dispositions
      of
      property subject to any such Lien that is transferred to the lienholder or
      its
      designee in satisfaction or settlement of such lienholder’s claim; (j) any
      disposition of assets pursuant to (i) a condemnation, appropriation, seizure
      or
      similar taking or proceeding by a Governmental Authority, (ii) the requirement
      of, or at the direction of, a Governmental Authority or (iii) a Casualty Event;
      (k) dispositions of assets, other than collateral for the Indebtedness,
      constituting non-cash contributions to a joint venture to the extent such
      Investment is permitted pursuant to Section 9.02(i) (for the purpose of
      determining compliance with the limitations of such Section, the assets shall
      be
      valued at the value attributable thereto in the joint venture agreement, or,
      if
      greater, fair market value); (l) dispositions of Property to the Borrower or
      any
      Guarantor; and (m) sales and other dispositions of Properties not regulated
      by
      Section 9.12(a) to (d) having a fair market value not to exceed $5,000,000 during any
      12-month period.

     

    Section
      9.13    Environmental
      Matters.  The
      Borrower will not, and will not permit any Subsidiary to, cause or permit any
      of
      its Property to be in violation of, or perform any action or permit any action
      which will subject any such Property to any Remedial Work under any
      Environmental Laws, assuming disclosure to the applicable Governmental Authority
      of all relevant facts, conditions and circumstances, if any, pertaining to
      such
      Property where such violations or remedial obligations could reasonably be
      expected to have a Material Adverse Effect.

     

           
      Section 9.14         
Transactions with Affiliates. The
      Borrower will not, and will not permit any Subsidiary to, enter into any
      transaction, including, without limitation, any purchase, sale, lease or
      exchange of Property or the rendering of any service, with any Affiliate (other
      than the Guarantors and Wholly-Owned Subsidiaries of the Borrower, as the case
      may be) unless such transactions are upon fair and reasonable terms no less
      favorable to it than it would obtain in a comparable arm’s length transaction
      with a Person not an Affiliate provided that the foregoing restriction shall
      not
      apply to transactions as follows:  (i) transactions between or among
      the Borrower and any Guarantor or Wholly-Owned Subsidiary of the Borrower or
      between and among any Guarantors and Wholly-Owned Subsidiaries of the Borrower;
      (ii) any Restricted Payment permitted by Section 9.04(a); (iii) Investments
      permitted under Section 9.05(h), 9.05(i) 

     

    
      
        
        

      

      
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    or
      9.05(j); (iv) loans and advances permitted under Section 9.05(k) and
      Guarantees permitted under Section 9.05(n); (v) the performance of employment,
      equity award, equity option or equity appreciation agreements, plans or other
      similar compensation or benefit plans or arrangements (including vacation plans,
      health and insurance plans, deferred compensation plans and retirement or
      savings plans) entered into by the Borrower or any Subsidiary in the ordinary
      course of its business with its employees, officers and directors; (vi) the
      performance of any agreement set forth under Schedule 9.14 and existing on
      the
      date hereof or as otherwise in a form as provided on such Schedule, together
      with each extension, renewal, amendment or modification to the extent it does
      not expand the scope of undertakings provided thereby on more restrictive or
      onerous terms than as in effect on the date hereof; and (vii) fees and
      compensation to, and indemnity provided on behalf of, officers, directors,
      and
      employees of the Borrower or any Subsidiary in their capacity as such, to the
      extent such fees and compensation are customary.

     

    Section
      9.15    Subsidiaries.  The
      Borrower will not, and will not permit any Subsidiary to, create or acquire
      any
      additional Subsidiary unless the Borrower gives written notice to the
      Administrative Agent of such creation or acquisition and complies with Section
      8.14(b).  The Borrower shall not, and shall not permit any Subsidiary
      to, sell, assign or otherwise dispose of any Equity Interests in any Subsidiary
      except in compliance with Section 9.12.  Neither the Borrower nor any
      Subsidiary shall have any Foreign Subsidiaries.

     

    Section
      9.16    Negative Pledge
      Agreements; Dividend Restrictions.  Except
      for restrictions and conditions (i) imposed by law, (ii) existing on the date
      hereof and set forth in Schedule 9.16, together with each extension,
      renewal, amendment or modification to the extent it does not expand the scope
      of
      any such restriction or condition or otherwise make the same more restrictive,
      (iii) of a customary nature contained in agreements relating to the disposition
      of a Subsidiary otherwise permitted under this Agreement pending such
      disposition, provided such restrictions and conditions apply only to the
      Subsidiary that is to be Disposed of or (iv) contained in joint venture
      agreements or other similar agreements entered into in the ordinary course
      of
      business in respect to the disposition or distribution of assets of such joint
      venture, the Borrower will not, and will not permit any Subsidiary to, create,
      incur, assume or suffer to exist any contract, agreement or understanding (other
      than this Agreement, the Security Instruments or Capital Leases creating Liens
      permitted by Section 9.03(c)) which in any way prohibits or restricts the
      granting, conveying, creation or imposition of any Lien on any of its Property
      in favor of the Administrative Agent and the Lenders or restricts any Subsidiary
      from paying dividends or making distributions to the Borrower or any Guarantor,
      or which requires the consent of or notice to other Persons in connection
      therewith; provided, however, this Section 9.16 shall not (a) prohibit any
      negative pledge incurred or provided in favor of any holder of a Lien
      permitted by clause (g) in the defined term “Excepted Liens” and by Section
      9.03(f) solely to the extent such negative pledge relates to the property the
      subject of such Indebtedness, and (b) apply to customary provisions in leases,
      licenses and similar contracts restricting the assignment, encumbrance,
      sub-letting or transfer thereof.

     

    Section
      9.17    Gas Imbalances,
      Take-or-Pay or Other Prepayments.  The
      Borrower will not, and will not permit any Subsidiary to, allow gas imbalances,
      take-or-pay or other prepayments with respect to the Oil and Gas Properties
      of
      the Borrower or any Subsidiary that would require the Borrower or such
      Subsidiary to deliver Hydrocarbons at some future time 

     

    
      
        
        

      

      
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    without
      then or thereafter receiving full payment therefor to exceed one bcf of gas (on
      an
      mcf equivalent basis) in the aggregate.

     

    Section
      9.18    Swap
      Agreements. The
      Borrower will not, and will not permit any Subsidiary to, enter into any Swap
      Agreements with any Person other than (a) Swap Agreements in respect of
      commodities (i) with an Approved Counterparty and (ii) the notional volumes
      for
      which (when aggregated with other commodity Swap Agreements then in effect
      other
      than basis differential swaps on volumes already hedged pursuant to other Swap
      Agreements) do not exceed, as of the date such Swap Agreement is executed,
      75%
      of the reasonably anticipated projected production from Proved Developed
      Producing Reserves, for each of crude oil and natural gas for each month during
      the period during which such Swap Agreement is in effect for each of crude
      oil
      and natural gas, calculated separately, and (b) Swap Agreements in respect
      of
      interest rates with an Approved Counterparty, as follows: (i) Swap Agreements
      effectively converting interest rates from fixed to floating, the notional
      amounts of which (when aggregated with all other Swap Agreements of the Borrower
      and its Subsidiaries then in effect effectively converting interest rates from
      fixed to floating) do not exceed 50% of the then outstanding principal amount
      of
      the Borrower’s Debt for borrowed money which bears interest at a fixed rate and
      (ii) Swap Agreements effectively converting interest rates from floating to
      fixed, the notional amounts of which (when aggregated with all other Swap
      Agreements of the Borrower and its Subsidiaries then in effect effectively
      converting interest rates from floating to fixed) do not exceed 75% of the
      then
      outstanding principal amount of the Borrower’s Debt for borrowed money which
      bears interest at a floating rate, and (c) Swap Agreements required under
      Section 6.01(q)  In no event shall any Swap Agreement contain any
      requirement, agreement or covenant for the Borrower or any Subsidiary to post
      collateral or margin to secure their obligations under such Swap Agreement
      or to
      cover market exposures other than collateral provided for in, and upon the
      terms
      and conditions set forth in, this Agreement and the relevant Security
      Instruments.

     

    ARTICLE
      X

    Events
      of Default; Remedies

     

    Section
      10.01         Events of
      Default.  The
      occurrence of any one or more of the following events shall constitute an “Event
      of Default”:

     

    (a)           the
      Borrower shall fail to pay any principal of any Loan or any reimbursement
      obligation in respect of any LC Disbursement when and as the same shall become
      due and payable, whether at the due date thereof or at a date fixed for
      prepayment thereof, by acceleration or otherwise.

     

    (b)           the
      Borrower shall fail to pay any interest on any Loan or any fee or any other
      amount (other than an amount referred to in Section 10.01(a)) payable under
      any
      Loan Document, when and as the same shall become due and payable, and such
      failure shall continue unremedied for a period of three Business
      Days.

     

    (c)           any
      representation or warranty made or deemed made by or on behalf of the Borrower
      or any Subsidiary in or in connection with any Loan Document or any amendment
      or
      modification of any Loan Document or waiver under such Loan Document, or in
      any
      report, certificate, financial statement or other document furnished by or
      on
      behalf of the Borrower or 

     

     

    
      
        
        

      

      
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    any
      Subsidiary pursuant to or in connection with any Loan Document or any amendment
      or modification thereof or waiver thereunder, shall prove to have been incorrect
      when made or deemed made.

     

    (d)           the
      Borrower or any Subsidiary shall fail to observe or perform any covenant,
      condition or agreement contained in Section 3.04(c), Section 8.01(j), Section
      8.01(n), Section 8.01(q), Section 8.02, Section 8.03, Section 8.14, Section
      8.15
      or in ARTICLE IX.

     

    (e)           the
      Borrower or any Subsidiary shall fail to observe or perform any covenant,
      condition or agreement contained in this Agreement (other than those specified
      in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or any other Loan
      Document, and such failure shall continue unremedied for a period of 30 days
      after the earlier to occur of (a) notice thereof from the Administrative Agent
      to the Borrower (which notice will be given at the request of any Lender) or
      (b)
      a Responsible Officer of the Borrower or such Subsidiary otherwise becoming
      aware of such default.

     

    (f)           the
      Borrower or any Subsidiary shall fail to make any payment (whether of principal
      or interest and regardless of amount) in respect of any Material Indebtedness,
      when and as the same shall become due and payable.

     

    (g)           any
      event or condition occurs that results in any Material Indebtedness becoming
      due
      prior to its scheduled maturity or that enables or permits (with or without
      the
      giving of notice, the lapse of time or both) the holder or holders of any
      Material Indebtedness or any trustee or agent on its or their behalf to cause
      any Material Indebtedness to become due, or to require the Redemption thereof
      or
      any offer to Redeem to be made in respect thereof, prior to its scheduled
      maturity or require the Borrower or any Subsidiary to make an offer in respect
      thereof.

     

    (h)           an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed seeking (i) liquidation, reorganization or other relief in respect of
      the
      Borrower or any Guarantor or its debts, or of a substantial part of its assets,
      under any  Federal, state or foreign bankruptcy, insolvency,
      receivership or similar law now or hereafter in effect or (ii) the appointment
      of a receiver, trustee, custodian, sequestrator, conservator or similar official
      for the Borrower or any Guarantor or for a substantial part of its assets,
      and,
      in any such case, such proceeding or petition shall continue undismissed for
      sixty (60) days or an order or decree approving or ordering any of the foregoing
      shall be entered.

     

    (i)           the
      Borrower or any Guarantor shall (i) voluntarily commence any proceeding or
      file
      any petition seeking liquidation, reorganization or other relief under any
      Federal,
      state or foreign bankruptcy, insolvency, receivership or similar law now or
      hereafter in effect, (ii) consent to the institution of, or fail to contest
      in a
      timely and appropriate manner, any proceeding or petition described in Section
      10.01(h), (iii) apply for or consent to the appointment of a receiver, trustee,
      custodian, sequestrator, conservator or similar official for the Borrower or
      any
      Guarantor or for a substantial part of its assets, (iv) file an answer admitting
      the material allegations of a petition filed against it in any such proceeding,
      (v) make a general assignment for the benefit of creditors or (vi) take any
      action for the purpose of effecting any of the foregoing.

     

     

    
      
        
        

      

      
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    (j)           the
      Borrower or any Guarantor shall become unable, admit in writing its inability
      or
      fail generally to pay its debts as they become due.

     

    (k)           (i)
      one or more judgments for the payment of money in an aggregate amount in excess
      of $2,000,000
(to the extent
      not covered by independent third party insurance provided
      by financially sound and reputable insurers as to which the insurer does not
      dispute coverage and is not subject to an insolvency proceeding) or (ii) any
      one
      or more non-monetary judgments that have, or could reasonably be expected to
      have, individually or in the aggregate, a Material Adverse Effect, shall be
      rendered against the Borrower, any Subsidiary or any combination thereof and
      the
      same shall remain undischarged for a period of 30 consecutive days during which
      execution shall not be effectively stayed, or any action shall be legally taken
      by a judgment creditor to attach or levy upon any assets of the Borrower or
      any
      Subsidiary to enforce any such judgment.

     

    (l)           any
      material provision of any Loan Document after delivery thereof shall for any
      reason, except to the extent permitted by the terms thereof, cease to be in
      full
      force and effect and valid, binding and enforceable in accordance with their
      terms against the Borrower or a Guarantor party thereto as represented and
      warranted pursuant to Section 7.02 or shall be repudiated by any of them,
      or cease to create a valid and perfected Lien of the priority required thereby
      on any of the collateral purported to be covered thereby, except to the extent
      permitted by the terms of this Agreement, or the Borrower or any Guarantor
      shall
      so state in writing.

     

    (m)         an
      ERISA Event shall have occurred that, when taken together with all other ERISA
      Events that have occurred, could reasonably be expected to result in a Material
      Adverse Effect.

     

    (n)           a
      Change in Control shall occur.

     

    Section
      10.02        
Remedies.

     

    (a)           In
      the case of an Event of Default other than one described in Section 10.01(h),
      Section 10.01(i) or Section 10.01(j), at any time thereafter during the
      continuance of such Event of Default, the Administrative Agent may, and at
      the
      request of the Majority Lenders, shall, by notice to the Borrower, take either
      or both of the following actions, at the same or different times:  (i)
      terminate the Commitments, and thereupon the Commitments shall terminate
      immediately, and (ii) declare the principal amount of the Notes and the Loans
      then outstanding, and accrued interest, fees and other similar amounts thereon,
      to be due and payable in whole (or in part, in which case any principal not
      so
      declared to be due and payable may thereafter be declared
      to be due and payable), and thereupon the principal of the Loans so declared
      to
      be due and payable, together with accrued interest thereon and all fees and
      other obligations of the Borrower and the Guarantors accrued hereunder and
      under
      the Notes and the other Loan Documents (including, without limitation, the
      payment of cash collateral to secure the LC Exposure as provided in Section
      2.08(j)), shall become due and payable immediately, without presentment, demand,
      protest, notice of intent to accelerate, notice of acceleration or other notice
      of any kind, all of which are hereby waived by the Borrower and each Guarantor;
      and in case of an Event of Default described in Section 10.01(h), Section
      10.01(i) or  Section 10.01(j), the Commitments shall automatically
      terminate and the principal amount of the Notes and the


     

    
      
        
        

      

      
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principal
      of the Loans then outstanding, together with accrued interest thereon and all
      fees and the other obligations of the Borrower and the Guarantors accrued
      hereunder and under the Notes and the other Loan Documents (including, without
      limitation, the payment of cash collateral to secure the LC Exposure as provided
      in Section 2.08(j)), shall automatically become due and payable, without
      presentment, demand, protest or other notice of any kind, all of which are
      hereby waived by the Borrower and each Guarantor.

     

    (b)           In
      the case of the occurrence of an Event of Default, the Administrative Agent
      and
      the Lenders will have all other rights and remedies available at law and
      equity.

     

    (c)           All
      proceeds realized from the liquidation or other disposition of collateral or
      otherwise received after maturity of the Notes, whether by acceleration or
      otherwise, shall be applied:

     

    (i)           first,
      to payment or reimbursement of that portion of the Indebtedness constituting
      fees, expenses and indemnities payable to the Administrative Agent in its
      capacity as such;

     

    (ii)         second,
      pro rata to payment or reimbursement of that portion of the Indebtedness
      constituting fees, expenses and indemnities payable to the Lenders;

     

    (iii)        third,
      pro rata to payment of accrued interest on the Loans;

     

    (iv)          fourth,
      pro rata to payment of principal outstanding on the Loans and Indebtedness
      referred to in Clause (b) of the definition of Indebtedness owing to a Lender
      or
      an Affiliate of a Lender;

     

    (v)           fifth,
      pro rata to any other Indebtedness;

     

    (vi)         sixth,
      to serve as cash collateral to be held by the Administrative Agent to secure
      the
      LC Exposure; and

     

    (vii)        seventh,
      any excess, after all of the Indebtedness shall have been indefeasibly paid
      in
      full in cash, shall be paid to the Borrower or as otherwise required by any
      Governmental Requirement.

     

    ARTICLE
      XI
The
      Agents

     

           Section
      11.01         Appointment;
      Powers.  Each
      of the Lenders and the Issuing Bank hereby irrevocably appoints the
      Administrative Agent as its agent and authorizes the Administrative Agent to
      take such actions on its behalf and to exercise such powers as are delegated
      to
      the Administrative Agent by the terms hereof and the other Loan Documents,
      together with such actions and powers as are reasonably incidental
      thereto.

     

    Section
      11.02         Duties and Obligations
      of Administrative Agent.  The
      Administrative Agent shall not have any duties or obligations except those
      expressly set forth in the Loan Documents.  Without limiting the
      generality of the foregoing, (a) the Administrative Agent shall 

     

     

    
      
        
        

      

      
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    not
      be
      subject to any fiduciary or other implied duties, regardless of whether a
      Default has occurred and is continuing (the use of the term “agent” herein and
      in the other Loan Documents with reference to the Administrative Agent is not
      intended to connote any fiduciary or other implied (or express) obligations
      arising under agency doctrine of any applicable law; rather, such term is used
      merely as a matter of market custom, and is intended to create or reflect only
      an administrative relationship between independent contracting parties), xxv)
      the Administrative Agent shall have no duty to take any discretionary action
      or
      exercise any discretionary powers, except as provided in Section 11.03, and
      xxvi) except as expressly set forth herein, the Administrative Agent shall
      not
      have any duty to disclose, and shall not be liable for the failure to disclose,
      any information relating to the Borrower or any of its Subsidiaries that is
      communicated to or obtained by the bank serving as Administrative Agent or
      any
      of its Affiliates in any capacity.  The Administrative Agent shall be
      deemed not to have knowledge of any Default unless and until written notice
      thereof is given to the Administrative Agent by the Borrower or a Lender, and
      shall not be responsible for or have any duty to ascertain or inquire into
      (i)
      any statement, warranty or representation made in or in connection with this
      Agreement or any other Loan Document, (ii) the contents of any certificate,
      report or other document delivered hereunder or under any other Loan Document
      or
      in connection herewith or therewith, (iii) the performance or observance of
      any
      of the covenants, agreements or other terms or conditions set forth herein
      or in
      any other Loan Document, (iv) the validity, enforceability, or effectiveness
      of
      this Agreement, any other Loan Document or any other agreement, instrument
      or
      document, (v) theatisfaction of any condition set forth in ARTICLE VI or
      elsewhere herein, other than to confirm receipt of items expressly required
      to
      be delivered to the Administrative Agent or as to those conditions precedent
      expressly required to be to the Administrative Agent’s satisfaction, (vi) the
      existence, value, perfection or priority of any collateral security or the
      financial or other condition of the Borrower and its Subsidiaries or any other
      obligor or guarantor, or (vii) any failure by the Borrower or any other Person
      (other than itself) to perform any of its obligations hereunder or under any
      other Loan Document or the performance or observance of any covenants,
      agreements or other terms or conditions set forth herein or
      therein.  For purposes of determining compliance with the conditions
      specified in ARTICLE VI, each Lender shall be deemed to have consented to,
      approved or accepted or to be satisfied with, each document or other matter
      required thereunder to be consented to or approved by or acceptable or
      satisfactory to a Lender unless the Administrative Agent shall have received
      written notice from such Lender prior to the proposed closing date specifying
      its objection thereto.

     

    Section
      11.03         Action by
      Administrative Agent.  The
      Administrative Agent shall have no duty to take any discretionary action or
      exercise any discretionary powers, except discretionary rights and powers
      expressly contemplated hereby or by the other Loan Documents that the
      Administrative Agent is required to exercise in writing as directed by the
      Majority Lenders (or such other number or percentage of the Lenders as shall
      be
      necessary under the circumstances as provided in Section 12.02) and in all
      cases
      the Administrative Agent shall be fully justified in failing or refusing to
      act
      hereunder or under any other Loan Documents unless it shall (i) receive written
      instructions from the Majority Lenders or the Lenders, as applicable, (or such
      other number or percentage of the Lenders as shall be necessary under the
      circumstances as provided in Section 12.02) specifying the action to be taken
      and (ii) be indemnified to its satisfaction by the Lenders against any and
      all
      liability and expenses which may be incurred by it by reason of taking or
      continuing to take any such action.  The instructions as aforesaid and
      any action taken or failure to act pursuant thereto by the Administrative Agent
      shall be binding on all of the 

     

     

    
      
        
        

      

      
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    Lenders.  If
      a Default has occurred and is continuing, then the Administrative Agent shall
      take such action with respect to such Default as shall be directed by the
      requisite Lenders in the written instructions (with indemnities) described
      in
      this Section 11.03, provided that, unless and until the Administrative Agent
      shall have received such directions, the Administrative Agent may (but shall
      not
      be obligated to) take such action, or refrain from taking such action, with
      respect to such Default as it shall deem advisable in the best interests of
      the
      Lenders.  In no event, however, shall the Administrative Agent be
      required to take any action which exposes the Administrative Agent to personal
      liability or which is contrary to this Agreement, the Loan Documents or
      applicable law.  If a Default has occurred and is continuing, neither
      the Syndication Agent nor the Documentation Agent shall have any obligation
      to
      perform any act in respect thereof.  The Administrative Agent shall
      not be liable for any action taken or not taken by it with the consent or at
      the
      request of the Majority Lenders or the Lenders (or such other number or
      percentage of the Lenders as shall be necessary under the circumstances as
      provided in Section 12.02), and otherwise the Administrative Agent shall not
      be
      liable for any action taken or not taken by it hereunder or under any other
      Loan
      Document or under any other document or instrument referred to or provided
      for
      herein or therein or in connection herewith or therewith INCLUDING ITS OWN
      ORDINARY NEGLIGENCE, except for its own gross negligence or willful
      misconduct.

     

    Section
      11.04        Reliance by Administrative
      Agent.  The
      Administrative Agent shall be entitled to rely upon, and shall not incur any
      liability for relying upon, any notice, request, certificate, consent,
      statement, instrument, document or other writing believed by it to be genuine
      and to have been signed or sent by the proper Person.  The
      Administrative Agent also may rely upon any statement made to it orally or
      by
      telephone and believed by it to be made by the proper Person, and shall not
      incur any liability for relying thereon and each of the Borrower, the Lenders
      and the Issuing Bank hereby waives the right to dispute the Administrative
      Agent’s record of such statement, except in the case of gross negligence or
      willful misconduct by the Administrative Agent.  The Administrative
      Agent may consult with legal counsel (who may be counsel for the Borrower),
      independent accountants and other experts selected by it, and shall not be
      liable for any action taken or not taken by it in accordance with the advice
      of
      any such counsel, accountants or experts.  The Administrative Agent
      may deem and treat the payee of any Note as the holder thereof for all purposes
      hereof unless and until a written notice of the assignment or transfer thereof
      permitted hereunder shall have been filed with the Administrative
      Agent.

     

    Section
      11.05        Subagents.  The
      Administrative Agent may perform any and all its duties and exercise its rights
      and powers by or through any one or more sub-agents appointed by the
      Administrative Agent.  The Administrative Agent and any such sub-agent
      may perform any and all its duties and exercise its rights and powers through
      their respective Related Parties.  The exculpatory provisions of the
      preceding Sections of this ARTICLE XI shall apply to any such sub-agent and
      to
      the Related Parties of the Administrative Agent and any such sub-agent, and
      shall apply to their respective activities in connection with the syndication
      of
      the credit facilities provided for herein as well as activities as
      Administrative Agent.

     

    Section
      11.06        Resignation or Removal of
      Administrative Agent.  Subject
      to the appointment and acceptance of a successor Administrative Agent as
      provided in this Section 11.06, the Administrative Agent may resign at any
      time
      by notifying the Lenders, the Issuing 

     

     

    
      
        
        

      

      
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    Bank
      and
      the Borrower, and the Administrative Agent may be removed at any time with
      or
      without cause by the Majority Lenders, with the consent of the Borrower (if
      no
      Event of Default has occurred and is not then continuing), such consent not
      to
      be unreasonably withheld, delayed or conditioned.  Upon any such
      resignation or removal, the Majority Lenders shall have the right, in
      consultation with the Borrower in any event, and with the consent of the
      Borrower if no Event of Default has occurred and is then continuing, to appoint
      a successor.  If no successor shall have been so appointed by the
      Majority Lenders and shall have accepted such appointment within 30 days after
      the retiring Agent gives notice of its resignation or removal of the retiring
      Agent, then the retiring Agent may, on behalf of the Lenders and the Issuing
      Bank, appoint a successor Agent which shall be a bank with an office in New
      York, New York, or an Affiliate of any such bank.  Upon the acceptance
      of its appointment as Agent hereunder by a successor, such successor shall
      succeed to and become vested with all the rights, powers, privileges and duties
      of the retiring Agent, and the retiring Agent shall be discharged from its
      duties and obligations hereunder.  The fees payable by the Borrower to
      a successor Agent shall be the same as those payable to its predecessor unless
      otherwise agreed between the Borrower and such successor.  After the
      Agent’s resignation hereunder, the provisions of this ARTICLE XI and Section
      12.03 shall continue in effect for the benefit of such retiring Agent, its
      sub-agents and their respective Related Parties in respect of any actions taken
      or omitted to be taken by any of them while it was acting as Agent.

     

    Section
      11.07        Agents as
      Lenders.  Each
      bank serving as an Agent hereunder shall have the same rights and powers in
      its
      capacity as a Lender as any other Lender and may exercise the same as though
      it
      were not an Agent, and such bank and its Affiliates may accept deposits from,
      lend money to and generally engage in any kind of business with the Borrower
      or
      any Subsidiary or other Affiliate thereof as if it were not an Agent
      hereunder.

     

    Section
      11.08       No Reliance.  Each
      Lender acknowledges that it has, independently and without reliance upon the
      Administrative Agent, any other Agent or any other Lender and based on such
      documents and information as it has deemed appropriate, made its own credit
      analysis and decision to enter into this Agreement and each other Loan Document
      to which it is a party.  Each Lender also acknowledges that it will,
      independently and without reliance upon the Administrative Agent, any other
      Agent or any other Lender and based on such documents and information as it
      shall from time to time deem appropriate, continue to make its own decisions
      in
taking
      or
      not taking action under or based upon this Agreement, any other Loan Document,
      any related agreement or any document furnished hereunder or
      thereunder.  The Agents shall not be required to keep themselves
      informed as to the performance or observance by the Borrower or any of its
      Subsidiaries of this Agreement, the Loan Documents or any other document
      referred to or provided for herein or to inspect the Properties or books of
      the
      Borrower or its Subsidiaries.  Except for notices, reports and other
      documents and information expressly required to be furnished to the Lenders
      by
      the Administrative Agent hereunder, no Agent or the Arranger shall have any
      duty
      or responsibility to provide any Lender with any credit or other information
      concerning the affairs, financial condition or business of the Borrower (or
      any
      of its Affiliates) which may come into the possession of such Agent or any
      of
      its Affiliates.  In this regard, each Lender acknowledges that Vinson
& Elkins L.L.P. is acting in this transaction as special counsel to the
      Administrative Agent only, except to the extent otherwise expressly stated
      in
      any legal opinion or any Loan Document.  Each other party hereto will
      consult with its own legal counsel 

     

     

    
      
        
        

      

      
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    to
      the
      extent that it deems necessary in connection with the Loan Documents and the
      matters contemplated therein.

     

    Section
      11.09      Administrative Agent May File Proofs of
      Claim.  In
      case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
      reorganization, arrangement, adjustment, composition or other judicial
      proceeding relative to the Borrower or any of its Subsidiaries, the
      Administrative Agent (irrespective of whether the principal of any Loan shall
      then be due and payable as herein expressed or by declaration or otherwise
      and
      irrespective of whether the Administrative Agent shall have made any demand
      on
      the Borrower) shall be entitled and empowered, by intervention in such
      proceeding or otherwise:

     

    (a)           to
      file and prove a claim for the whole amount of the principal and interest owing
      and unpaid in respect of the Loans and all other Indebtedness that are owing
      and
      unpaid and to file such other documents as may be necessary or advisable in
      order to have the claims of the Lenders and the Administrative Agent (including
      any claim for the reasonable compensation, expenses, disbursements and advances
      of the Lenders and the Administrative Agent and their respective agents and
      counsel and all other amounts due the Lenders and the Administrative Agent
      under
      Section 12.03) allowed in such judicial proceeding; and

     

    (b)           to
      collect and receive any monies or other property payable or deliverable on
      any
      such claims and to distribute the same;

     

    and
      any
      custodian, receiver, assignee, trustee, liquidator, sequestrator or other
      similar official in any such judicial proceeding is hereby authorized by each
      Lender to make such payments to the Administrative Agent and, in the event
      that
      the Administrative Agent shall consent to the making of such payments directly
      to the Lenders, to pay to the Administrative Agent any amount due for the
      reasonable compensation, expenses, disbursements and advances of the
      Administrative Agent and its agents and counsel, and any other amounts due
      the
      Administrative Agent under Section 12.03.

     

    Nothing
      contained herein shall be deemed to authorize the Administrative Agent to
      authorize or consent to or accept or adopt on behalf of any Lender any plan
      of
      reorganization, arrangement, adjustment or composition affecting the
      Indebtedness or the rights of any Lender or to authorize the Administrative
      Agent to vote in respect of the claim of any Lender in any such
      proceeding.

     

             
      Section 11.10    Authority of Administrative Agent to Release
      Collateral, Liens and Guarantors.  Each
      Lender and the Issuing Bank hereby authorizes the Administrative Agent to
      release any collateral that is permitted to be sold or released and release
      any
      Guarantor that is permitted to be released from its obligations under the Loan
      Documents, in each case pursuant to the applicable terms of the Loan
      Documents.  Each Lender and the Issuing Bank hereby authorizes the
      Administrative Agent to execute and deliver to the Borrower, at the Borrower’s
      sole cost and expense, any and all releases of Liens, termination statements,
      assignments, release of guarantees or Guarantors (as the case may be) or other
      documents reasonably requested by the Borrower in connection with any sale
      or
      other disposition of Property or any one or more Guarantors to the extent such
      sale or other disposition is permitted by the terms of Section 9.12 or is
      otherwise authorized by the terms of the Loan Documents.

     

     

    
      
        
        

      

      
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    Section
      11.11       The Arranger, the Syndication Agent
      and the Documentation Agent.  The
      Arranger, the Syndication Agent and the Documentation Agent shall have no
      duties, responsibilities or liabilities under this Agreement and the other
      Loan
      Documents other than their duties, responsibilities and liabilities in their
      capacity as Lenders hereunder.

     

    ARTICLE
      XII

    Miscellaneous

     

    Section
      12.01    Notices.

     

        
      (a)           Except in
      the case of notices and other communications expressly permitted to be given
      by
      telephone (and subject to Section 12.01(b)), all notices and other
      communications provided for herein shall be in writing and shall be delivered
      by
      hand or overnight courier service, mailed by certified or registered mail or
      sent by telecopy, as follows:

     

    (i)           if
      to the Borrower, to it at 1975 Waddle Road, State College, PA 16803, Attention
      of Thomas C. Stabley, Chief Financial Officer  (Telecopy No.
      814.278.7286, and regarding the Borrower’s website for electronic delivery of
      documents as referred to in the concluding paragraph of Section 8.02, such
      website is www.rexenergycorp.com);

     

    (ii)           if
      such notice is not a payment, to the Administrative Agent or the Issuing Bank,
      to it at 8117 Preston
      Road, Suite 440, Dallas, TX 75225, Attention of Thomas Rajan (Telecopy
      No. 214-414-2610), with a copy to 127 Public Square, Cleveland, Ohio 44114,
      Attention of Yvette Dyson-Owens (Facsimile:  (216)
      689-5962);

     

    (iii)      
         if such notice is a payment, to the Administrative Agent or
      the Issuing Bank, to it at 127 Public Square, Cleveland, Ohio 44114, Attention
      of Yvette Dyson-Owens (Facsimile: (216)689-5962, email:
      Yvette_Dyson-Owens@KeyBank.com) or to such wire transfer number as the
      Administrative Agent may provide; and

     

    (iv)           the
      Administrative Agent will forward all relevant notices from the Borrower to
      the
      Lenders.

     

    (b)           Notices
      and other communications to the Lenders hereunder may be delivered or furnished
      by electronic communications pursuant to procedures approved by the
      Administrative Agent; provided that the foregoing shall not apply to notices
      pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V unless otherwise
      agreed by the Administrative
      Agent and the applicable Lender.  The Administrative Agent or the
      Borrower may, in its discretion, agree to accept notices and other
      communications to it hereunder by electronic communications pursuant to
      procedures approved by it; provided that approval of such procedures may be
      limited to particular notices or communications.

     

    (c)           Any
      party hereto may change its address or telecopy number for notices and other
      communications hereunder by notice to the other parties hereto.  All
      notices and other communications given to any party hereto in accordance with
      the provisions of this Agreement shall be deemed to have been given on the
      date
      of receipt.

     

    Section
      12.02    Waivers;
      Amendments.

     

    (a)           No
      failure on the part of the Administrative Agent, any other Agent, the Issuing
      Bank or any Lender to exercise and no delay in exercising, 

     

     

    
      
        
        

      

      
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    and
      no
      course of dealing with respect to, any right, power or privilege, or any
      abandonment or discontinuance of steps to enforce such right, power or
      privilege, under any of the Loan Documents shall operate as a waiver thereof,
      nor shall any single or partial exercise of any right, power or privilege under
      any of the Loan Documents preclude any other or further exercise thereof or
      the
      exercise of any other right, power or privilege.  The rights and
      remedies of the Administrative Agent, any other Agent, the Issuing Bank and
      the
      Lenders hereunder and under the other Loan Documents are cumulative and are
      not
      exclusive of any rights or remedies that they would otherwise
      have.  No waiver of any provision of this Agreement or any other Loan
      Document or consent to any departure by the Borrower therefrom shall in any
      event be effective unless the same shall be permitted by Section 12.02(b),
      and
      then such waiver or consent shall be effective only in the specific instance
      and
      for the purpose for which given.  Without limiting the generality of
      the foregoing, the making of a Loan or issuance of a Letter of Credit shall
      not
      be construed as a waiver of any Default, regardless of whether the
      Administrative Agent, any other Agent, any Lender or the Issuing Bank may have
      had notice or knowledge of such Default at the time.

     

    (b)           Any
      provision of this Agreement or any Security Instrument may be waived, amended
      or
      modified pursuant to an agreement or agreements in writing entered into by
      the
      Borrower and the Majority Lenders, or with the Majority Lenders’ prior written
      consent provided that no amendment, modification or waiver shall (i) increase
      the Commitment or the Maximum Credit Amount of any Lender without the written
      consent of such Lender, (ii) increase the Borrowing Base without the written
      consent of each Lender, or modify Section 2.07 in any manner without the consent
      of each Lender, (iii) reduce the principal amount of any Loan or LC Disbursement
      or reduce the rate of interest thereon, or reduce any fees payable hereunder,
      or
      reduce any other Indebtedness hereunder or under any other Loan Document,
      without the written consent of each Lender affected thereby, provided, however,
      that only the consent of the Majority Lenders shall be necessary (A) to
      amend the meaning of "default rate" or to waive any obligation of the Borrower
      to pay interest or Letter of Credit fees at such default rate or (B) to
      amend any financial covenant hereunder (or any defined term used therein) even
      if the effect of such amendment would be to reduce the rate of interest on
      any
      Loan or LC Disbursement or to reduce any fee payable hereunder, (iv) postpone
      the scheduled date of payment or prepayment of the principal amount of any
      Loan
      or LC Disbursement, or any interest thereon, or any fees payable hereunder,
      or
      any other Indebtedness hereunder or under any other Loan Document, or reduce
      the
      amount of, waive or excuse any such payment, or postpone or extend the
      Termination Date without the written consent of each Lender affected thereby,
      (v) change Section 4.01(b) or Section 4.01(c)
      in a
      manner that would alter the pro rata sharing of payments required thereby,
      without the written consent of each Lender, (vi) waive or amend Section 3.04(c),
      Section 6.01, Section 8.14, Section 10.02(c) or Section 12.15 or change the
      definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, or
“Subsidiary”, other than of a ministerial nature, without the written consent of
      each Lender affected thereby, (vii) release any Guarantor (except as set forth
      in the Guaranty Agreement or in any other Loan Document), release all or
      substantially all of the collateral (other than as provided in Section 11.10),
      or reduce the percentage set forth in Section 8.14(a) to less than 80%, without
      the written consent of each Lender, or (viii) change any of the provisions
      of
      this Section 12.02(b) or Section 12.04(a)(i) or the definition of “Majority
      Lenders” or any other provision hereof specifying the number or percentage of
      Lenders required to waive, amend or modify any rights hereunder or under any
      other Loan Documents or make any determination or grant any consent hereunder
      or
      any other Loan Documents, without the

     

     

    
      
        
        

      

      
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     written
      consent of each Lender; provided further that no such agreement shall amend,
      modify or otherwise affect the rights or duties of the Administrative Agent,
      any
      other Agent, or the Issuing Bank hereunder or under any other Loan Document
      without the prior written consent of the Administrative Agent, such other Agent
      or the Issuing Bank, as applicable.  Notwithstanding the foregoing,
      any supplement to Schedule 7.14 (Subsidiaries) shall be effective upon delivery
      by the Borrower to the Administrative Agent a supplemental schedule clearly
      marked as such and, upon receipt, the Administrative Agent will promptly deliver
      a copy thereof to the Lenders.

     

    Section
      12.03    Expenses,
      Indemnity; Damage Waiver.

     

    (a)           The
      Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
      Administrative Agent and its Affiliates, including, without limitation, the
      reasonable fees, charges and disbursements of counsel and other outside
      consultants for the Administrative Agent, the reasonable travel, photocopy,
      mailing, courier, telephone and other similar expenses, and the cost of
      environmental audits and surveys and appraisals, in connection with the
      syndication of the credit facilities provided for herein, the preparation,
      negotiation, execution, delivery and administration (both before and after
      the
      execution hereof and including advice of counsel to the Administrative Agent
      as
      to the rights and duties of the Administrative Agent and the Lenders with
      respect thereto) of this Agreement and the other Loan Documents and any
      amendments, modifications or waivers of or consents related to the provisions
      hereof or thereof (whether or not the transactions contemplated hereby or
      thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments
      and
      other charges incurred by any Agent or any Lender in connection with any filing,
      registration, recording or perfection of any security interest contemplated
      by
      this Agreement or any Security Instrument or any other document referred to
      therein, (iii) all reasonable out-of-pocket expenses incurred by the Issuing
      Bank in connection with the issuance, amendment, renewal or extension of any
      Letter of Credit or any demand for payment thereunder, (iv) all out-of-pocket
      expenses incurred by any Agent, the Issuing Bank or any Lender, including the
      fees, charges and disbursements of any counsel for any Agent, the Issuing Bank
      or any Lender, in connection with the enforcement or protection of its rights
      in
      connection with this Agreement or any other Loan Document, including its rights
      under this Section 12.03, or in connection with the Loans made or Letters of
      Credit issued hereunder, including, without limitation, all such out-of-pocket
      expenses incurred during any workout, restructuring or negotiations in respect
      of such Loans or Letters of Credit.

     

    (b)           THE
      BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND EACH
      LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
      BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS
      FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES,
      INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE,
      INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION
      WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR
      ANY
      OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
      THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER
      LOAN
      DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
      CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR 

     

     

    
      
        
        

      

      
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    BY
      ANY
      OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO
      COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH
      ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR
      ANY
      BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH
      IN
      ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
      DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE
      USE
      OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY
      THE
      ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
      DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
      THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
      LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
      IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v)
      ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
      OF
      THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii)
      ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
      RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
      APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES,
      INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
      THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
      TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES
      ON
      ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER
      OR
      ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
      SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY
      OF
      THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
      LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY,
      (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION,
      THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR
      DISPOSAL
      OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY
      OF
      THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL
      OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY
      OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY
      ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
      SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION
      IN
      CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
      LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
      WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
      ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
      INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND
      OR
      CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN 

     

     

    
      
        
        

      

      
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    AFFIRMATIVE
      ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
      IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
      INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE
      OR
      MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
      INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
      LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
      JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE
      GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT OF, OR VIOLATION OF LAW BY, SUCH
      INDEMNITEE.  NOTWITHSTANDING THE FOREGOING, NO INDEMNIFICATION SHALL
      BE GIVEN TO THE EXTENT IT ARISES (y) BY REASON OF A CLAIM BY ONE OR MORE
      INDEMNITEES AGAINST ONE OR MORE OTHER INDEMNITEES, OR (z)  FROM A CLAIM
      BROUGHT BY THE BORROWER AGAINST AN INDEMNITEE FOR (1) SUCH INDEMNITEE’S
      BREACH OF ITS OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT OR
      (2) BAD FAITH OF SUCH INDEMNITEE HEREUNDER OR UNDER ANY OTHER LOAN
      DOCUMENT, IN EITHER CASE IF THE BORROWER HAS OBTAINED A FINAL NON NONAPPEALABLE
      JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT
      JURISDICTION.  SO LONG AS NO DEFAULT IS CONTINUING AND THE BORROWER IS
      FINANCIALLY SOLVENT, NO INDEMNITEE MAY SETTLE ANY CLAIM TO BE INDEMNIFIED
      HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF THE BORROWER, WHICH CONSENT
      WILL
      NOT BE UNREASONABLY OR UNTIMELY WITHHELD.

     

    (c)           To
      the extent that the Borrower fails to pay any amount required to be paid by
      it
      to any Agent, the Arranger or the Issuing Bank under Section 12.03(a) or (b)
      (and provided that such failure is not due to such Agent’s, Arranger’s or
      Issuing Bank’s gross negligence or willful misconduct), each Lender severally
      agrees to pay to such Agent, the Arranger or the Issuing Bank, as the case
      may
      be, such Lender’s Applicable Percentage (determined as of the time that the
      applicable unreimbursed expense or indemnity payment is sought) of such unpaid
      amount; provided that the unreimbursed expense or indemnified loss, claim,
      damage, liability or related
      expense, as the case may be, was incurred by or asserted against such Agent,
      the
      Arranger or the Issuing Bank in its capacity as such.

     

    (d)           To
      the extent permitted by applicable law, the Borrower shall not assert, and
      hereby waives, any claim against any Indemnitee, on any theory of liability,
      for
      special, indirect, consequential or punitive damages (as opposed to direct
      or
      actual damages) arising out of, in connection with, or as a result of, this
      Agreement, any other Loan Document or any agreement or instrument contemplated
      hereby or thereby, the Transactions, any Loan or Letter of Credit or the use
      of
      the proceeds thereof.

     

    (e)           All
      amounts due under this Section 12.03 shall be payable within 30 days following
      receipt by the Borrower of a reasonably detailed statement
      therefor.

     

    Section
      12.04    Successors and
      Assigns.

     

     

    
      
        
        

      

      
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    (a)           The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the parties hereto and their respective successors and assigns permitted hereby
      (including any Affiliate of the Issuing Bank that issues any Letter of Credit),
      except that (i) the Borrower may not assign or otherwise transfer any of its
      rights or obligations hereunder without the prior written consent of each Lender
      (and any attempted assignment or transfer by the Borrower without such consent
      shall be null and void) and (ii) no Lender may assign or otherwise transfer
      its
      rights or obligations hereunder except in accordance with this Section
      12.03(e).  Nothing in this Agreement, expressed or implied, shall be
      construed to confer upon any Person (other than the parties hereto, their
      respective successors and assigns permitted hereby (including any Affiliate
      of
      the Issuing Bank that issues any Letter of Credit), Participants (to the extent
      provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
      the Related Parties of each of the Administrative Agent, the Issuing Bank and
      the Lenders) any legal or equitable right, remedy or claim under or by reason
      of
      this Agreement.

     

    (b)           (i)
      Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may
      assign to one or more assignees all or a portion of its rights and obligations
      under this Agreement (including all or a portion of its Commitment and the
      Loans
      at the time owing to it) with the prior written consent (such consent not to
      be
      unreasonably withheld) of:

     

    (A)           the
      Borrower, provided that no consent of the Borrower shall be required if such
      assignment is to a Lender, an Affiliate of a Lender, an Approved Fund or, if
      an
      Event of Default has occurred and is continuing, is to any other assignee;
      and

     

    (B)           the
      Administrative Agent, provided that no consent of the Administrative Agent
      shall
      be required for an assignment to an assignee that is a Lender immediately prior
      to giving effect to such assignment.

     

    (ii)           Assignments
      shall be subject to the following additional conditions:

     

    (A)           except
      in the case of an assignment to a Lender or an Affiliate of a Lender or an
      assignment of the entire remaining amount of the assigning Lender’s Commitment
      or Loans, the amount of the Commitment or Loans of the assigning Lender subject
      to
      each
      such assignment (determined as of the date the Assignment and Assumption with
      respect to such assignment is delivered to the Administrative Agent) shall
      not
      be less than $10,000,000 unless each of the Borrower and the Administrative
      Agent otherwise consent, provided that no such consent of the Borrower shall
      be
      required if an Event of Default has occurred and is continuing;

     

    (B)           each
      partial assignment shall be made as an assignment of a proportionate part of
      all
      the assigning Lender’s rights and obligations under this Agreement;

     

    (C)           the
      parties to each assignment shall execute and deliver to the Administrative
      Agent
      an Assignment and Assumption, together with a processing and recordation fee
      of
      $3,500; and

     

    (D)           the
      assignee, if it shall not be a Lender, shall deliver to the Administrative
      Agent
      an Administrative Questionnaire.

     

     

    
      
        
        

      

      
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    (iii)                      Subject
      to Section 12.04(b)(iv) and the acceptance and recording thereof, from and
      after
      the effective date specified in each Assignment and Assumption the assignee
      thereunder shall be a party hereto and, to the extent of the interest assigned
      by such Assignment and Assumption, have the rights and obligations of a Lender
      under this Agreement, and the assigning Lender thereunder shall, to the extent
      of the interest assigned by such Assignment and Assumption, be released from
      its
      obligations under this Agreement (and, in the case of an Assignment and
      Assumption covering all of the assigning Lender’s rights and obligations under
      this Agreement, such Lender shall cease to be a party hereto but shall continue
      to be entitled to the benefits of Section 5.01, Section 5.02, Section 5.03
      and
      Section 12.03).  Any assignment or transfer by a Lender of rights or
      obligations under this Agreement that does not comply with this Section 12.03(e)
      shall be treated for purposes of this Agreement as a sale by such Lender of
      a
      participation in such rights and obligations in accordance with Section
      12.04(c).

     

    (iv)                      The
      Administrative Agent, acting for this purpose as an agent of the Borrower,
      shall
      maintain at one of its offices a copy of each Assignment and Assumption
      delivered to it and a register for the recordation of the names and addresses
      of
      the Lenders, and the Maximum Credit Amount of, and principal amount of the
      Loans
      and LC Disbursements owing to, each Lender pursuant to the terms hereof from
      time to time (the “Register”).  The entries in the Register
      shall be conclusive, and the Borrower, the Administrative Agent, the Issuing
      Bank and the Lenders may treat each Person whose name is recorded in the
      Register pursuant to the terms hereof as a Lender hereunder for all purposes
      of
      this Agreement, notwithstanding notice to the contrary.  The Register
      shall be available for inspection by the Borrower, the Issuing Bank and any
      Lender, at any reasonable time and from time to time upon reasonable prior
      notice.  In connection with any changes to the Register, if necessary,
      the Administrative Agent will reflect the revisions on Annex I and forward
      a
      copy of such revised Annex I to the Borrower, the Issuing Bank and each
      Lender.

     

    (v)           Upon
      its receipt of a duly completed Assignment and Assumption executed by an
      assigning Lender and an assignee, the assignee’s completedAdministrative
      Questionnaire (unless the assignee shall already be a Lender hereunder), the
      processing and recordation fee referred to in Section 12.04(b) and any written
      consent to such assignment required by Section 12.04(b), the Administrative
      Agent shall accept such Assignment and Assumption and record the information
      contained therein in the Register.  No assignment shall be effective
      for purposes of this Agreement unless it has been recorded in the Register
      as
      provided in this Section 12.04(b).

     

    (c)           (i)           Any
      Lender may, without the consent of
      the Borrower, the Administrative Agent or the Issuing Bank, sell participations
      to one or more banks or other entities (a “Participant”)
      in all or a portion of such Lender’s
      rights and obligations under this Agreement (including all or a portion of
      its
      Commitment and the Loans owing to it); provided that (A) such Lender’s
      obligations under this Agreement shall remain unchanged, (B) such Lender
      shall remain solely responsible to the other parties hereto for the performance
      of such obligations and (C) the Borrower, the Administrative Agent, the
      Issuing Bank and the other Lenders shall continue to deal solely and directly
      with such Lender in connection with such Lender’s rights and obligations under
      this Agreement.  Any agreement or instrument pursuant to


     

     

    
      
        
        

      

      
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    which
      a Lender sells such a
      participation shall provide that such Lender shall retain the sole right to
      enforce this Agreement and to approve any amendment, modification or waiver
      of
      any provision of this Agreement; provided that such agreement or instrument
      may
      provide that such Lender will not, without the consent of the Participant,
      agree
      to any amendment, modification or waiver that affects such
      Participant.  In addition such agreement must provide that the
      Participant be bound by the provisions of Section 12.03.  Subject
      to Section 12.04(c)(ii),
      the Borrower agrees that each
      Participant shall be entitled to the benefits of Section 5.01,
Section
      5.02 and Section
      5.03 to the same extent
      as if it were a
      Lender and had acquired its interest by assignment pursuant to Section 12.04(b).  To
      the extent permitted by
      law, each Participant also shall be entitled to the benefits of Section 12.08
      as though it were a Lender, provided
      such Participant agrees to be subject to Section 4.01(c)
      as though it were a
      Lender.

     

    (ii)           A
      Participant shall not be entitled to receive any greater payment under Section
      5.01 or Section 5.03 than the applicable Lender would have been entitled to
      receive with respect to the participation sold to such Participant, unless
      the
      sale of the participation to such Participant is made with the Borrower’s prior
      written consent.  A Participant that would be a Foreign Lender if it
      were a Lender shall not be entitled to the benefits of Section 5.03 unless
      the
      Borrower is notified of the participation sold to such Participant and such
      Participant agrees, for the benefit of the Borrower, to comply with Section
      5.03(e) as though it were a Lender.

     

    (d)           Any
      Lender may at any time pledge or assign a security interest in all or any
      portion of its rights under this Agreement to secure obligations of such Lender,
      including, without limitation, any pledge or assignment to secure obligations
      to
      a Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such
      pledge or assignment of a security interest; provided that no such pledge or
      assignment of a security interest shall release a Lender from any of its
      obligations hereunder or substitute any such pledgee or assignee for such Lender
      as a party hereto.

     

    (e)           Notwithstanding
      any other provisions of this Section 12.03(e), no transfer or assignment of
      the
      interests or obligations of any Lender or any grant of participations therein
      shall be permitted if such transfer, assignment or grant would require the
      Borrower and the Guarantors to file a registration statement with the SEC or
      to
      qualify the Loans under the “Blue Sky” laws of any state.

     

    Section
      12.05    Survival; Revival;
      Reinstatement.

     

    (a)           All
      covenants, agreements, representations and warranties made by the Borrower
      herein and in the certificates or other instruments delivered in connection
      with
      or pursuant to this Agreement or any other Loan Document shall be considered
      to
      have been relied upon by the other parties hereto and shall survive the
      execution and delivery of this Agreement and the making of any Loans and
      issuance of any Letters of Credit, regardless of any investigation made by
      any
      such other party or on its behalf and notwithstanding that the Administrative
      Agent, any other Agent, the Issuing Bank or any Lender may have had notice
      or
      knowledge of any Default or incorrect representation or warranty at the time
      any
      credit is extended hereunder, and shall continue in full force and effect as
      long as the principal of or any accrued interest on any Loan or any fee or
      any
      other amount payable under this Agreement is outstanding and unpaid or any
      Letter of Credit is outstanding and so long as the Commitments have not expired
      or terminated.  The provisions of Section 5.01, 

     

     

    
      
        
        

      

      
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    Section
      5.02, Section 5.03 and Section 12.03 and ARTICLE XI shall survive, on an
      unsecured and non-guaranteed basis, and remain in full force and effect
      regardless of the consummation of the transactions contemplated hereby, the
      repayment of the Loans, the expiration or termination of the Letters of Credit
      and the Commitments or the termination of this Agreement, any other Loan
      Document or any provision hereof or thereof.

     

    (b)           To
      the extent that any payments on the Indebtedness or proceeds of any collateral
      are subsequently invalidated, declared to be fraudulent or preferential, set
      aside or required to be repaid to a trustee, debtor in possession, receiver
      or
      other Person under any bankruptcy law, common law or equitable cause, then
      to
      such extent, the Indebtedness so satisfied shall be revived and continue as
      if
      such payment or proceeds had not been received and the Administrative Agent’s
      and the Lenders’ Liens, security interests, rights, powers and remedies under
      this Agreement and each Loan Document shall continue in full force and
      effect.  In such event, each Loan Document shall be automatically
      reinstated and the Borrower shall take such action as may be reasonably
      requested by the Administrative Agent and the Lenders to effect such
      reinstatement.

     

    Section
      12.06    Counterparts;
      Integration; Effectiveness.

     

    (a)           This
      Agreement may be executed in counterparts (and by different parties hereto
      on
      different counterparts), each of which shall constitute an original, but all
      of
      which when taken together shall constitute a single contract.

     

    (b)           This
      Agreement, the other Loan Documents and any separate letter agreements with
      respect to fees payable to the Administrative Agent constitute the entire
      contract among the parties relating to the subject matter hereof and thereof
      and
      supersede any and all previous agreements and understandings, oral or written,
      relating to the subject matter hereof and thereof.  THIS AGREEMENT
      AND
      THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO
      AND THERETO 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.

     

    (c)           Except
      as provided in Section 6.01, this Agreement shall become effective when it
      shall
      have been executed by the Administrative Agent and when the Administrative
      Agent
      shall have received counterparts hereof which, when taken together, bear the
      signatures of each of the other parties hereto, and thereafter shall be binding
      upon and inure to the benefit of the parties hereto and their respective
      successors and assigns.  Delivery of an executed counterpart of a
      signature page of this Agreement by telecopy or other electronic transmission
      shall be effective as delivery of a manually executed counterpart of this
      Agreement.

     

    Section
      12.07    Severability.  Any
      provision of this Agreement or any other Loan Document held to be invalid,
      illegal or unenforceable in any jurisdiction shall, as to such jurisdiction,
      be
      ineffective to the extent of such invalidity, illegality or unenforceability
      without affecting the validity, legality and enforceability of the remaining
      provisions hereof or thereof; and the invalidity of a particular provision
      in a
      particular jurisdiction shall not invalidate such provision in any other
      jurisdiction.

     

     

    
      
        
        

      

      
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    Section
      12.08    Right of
      Setoff.  If
      an Event of Default shall have occurred and be continuing, each Lender and
      each
      of its Affiliates is hereby authorized at any time and from time to time, to
      the
      fullest extent permitted by law, to set off and apply any and all deposits
      (general or special, time or demand, provisional or final) at any time held
      and
      other obligations (of whatsoever kind, including, without limitation,
      obligations under Swap Agreements) at any time owing by such Lender or Affiliate
      to or for the credit or the account of the Borrower or any Subsidiary against
      any of and all the obligations of the Borrower or any Subsidiary owed to such
      Lender now or hereafter existing under this Agreement or any other Loan
      Document, irrespective of whether or not such Lender shall have made any demand
      under this Agreement or any other Loan Document and although such obligations
      may be unmatured.  The rights of each Lender under this Section 12.08
      are in addition to other rights and remedies (including other rights of setoff)
      which such Lender or its Affiliates may have.

     

    Section
      12.09    GOVERNING LAW;
      JURISDICTION; SERVICE OF PROCESS.

     

    (a)           THIS
      AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
      THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL
      LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR TAKE
      INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS
      LOCATED (AND IN SUCH EVENT, SUCH FEDERAL LAWS SHALL PERTAIN SOLELY TO SUCH
      LENDER).  CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES
      CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL
      NOT APPLY TO THIS AGREEMENT OR THE NOTES.

     

    (b)           ANY
      LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS MAY BE BROUGHT
      IN
      THE COURTS OF HARRIS COUNTY IN 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, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED
      BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
      JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY
      WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
      OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
      OR
      HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
      RESPECTIVE JURISDICTIONS.  THIS SUBMISSION TO JURISDICTION IS
      NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER
      ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

     

    (c)           EACH
      PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
      AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
      THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
      SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
      SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
      EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN


     

     

    
      
        
        

      

      
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    SHALL
      AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
      OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
      PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

     

    (d)           EACH
      PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
      PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
      TO
      THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN;
      (ii)
      IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
      IT
      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,
      ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE,
      OR
      AGENT OF 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 (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED
      TO
      ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
      HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
      CONTAINED IN THIS SECTION 12.09.

     

    Section
      12.10    Headings.  Article
      and Section headings and the Table of Contents used herein are for convenience
      of reference only, are not part of this Agreement and shall not affect the
      construction of, or be taken into consideration in interpreting, this
      Agreement.

     

    Section
      12.11      
Confidentiality.
      Each of
      the Administrative Agent, the other Agents, the Arranger, the Issuing Bank,
      the
      Lenders and each other party hereto or to any other Loan Document, agrees to
      maintain, and agrees to cause each of its Affiliates to maintain, the
      confidentiality of the Information (as defined below), except that Information
      may be disclosed (a) to its and its Affiliates’
      directors, officers, employees and agents, including accountants, legal counsel
      and other advisors (it being understood that the Persons to whom such disclosure
      is made will be informed of the confidential nature of such Information and
      instructed to keep such Information confidential), (b) to the extent requested
      by any regulatory authority purporting to have jurisdiction over it, (c) to
      the
      extent required by applicable laws or regulations or by any subpoena or similar
      legal process (and in each such case, such Person shall, if permitted by law,
      notify the Borrower of such occurrence as soon as reasonably practicable
      following the service of any such process on such Person), (d) to any other
      party to this Agreement or any other Loan Document, (e) in connection with
      the
      exercise of any remedies hereunder or under any other Loan Document or any
      suit,
      action or proceeding relating to this Agreement or any other Loan Document
      or
      the enforcement of rights hereunder or thereunder, (f) subject to an agreement
      containing provisions substantially the same as those of this Section 12.11,
      to
      (i) any assignee of or Participant in, or any prospective assignee of or
      Participant in, any of its rights or obligations under this Agreement or (ii)
      any actual or prospective counterparty (or its advisors) to any Swap Agreement
      relating to the Borrower and its obligations, (g) with the consent of the
      Borrower or (h) to the extent such Information (i) becomes publicly available
      other than as a result of a breach of this Section 12.11 or (ii) becomes
      available to the Administrative Agent, an other Agent, the Arranger, the Issuing
      Bank, any Lender or other party hereto on a nonconfidential basis from a source
      other than the Borrower.  For the purposes of this Section 12.11,
“Information” means all information received from the Borrower or any Subsidiary
      relating to the Borrower or any Subsidiary and their businesses, other than
      any
      such information that is available to the Administrative Agent, the other
      Agents, the Arranger, the Issuing Bank, any Lender or any other party hereto
      on
      a nonconfidential basis prior to disclosure by the Borrower or a Subsidiary;
      provided that, in the case of information received from the Borrower or any
      Subsidiary after the date hereof, such information is clearly identified at
      the
      time of delivery as confidential.  Any Person required to maintain the
      confidentiality of Information as provided in this Section 12.11 shall be
      considered to have complied with its obligation to do so if such Person has
      exercised the same degree of care to maintain the confidentiality of such
      Information as such Person would accord to its own confidential
      information.

     

    Section
      12.12    Interest
      Rate Limitation.  It
      is the intention of the parties hereto that each Lender shall conform strictly
      to usury laws applicable to it.  Accordingly, if the transactions
      contemplated hereby would be usurious as to any Lender under laws applicable
      to
      it (including the laws of the United States of America and the State of Texas
      or
      any other jurisdiction whose laws may be mandatorily applicable to such Lender
      notwithstanding the other provisions of this Agreement), then, in that event,
      notwithstanding anything to the contrary in any of the Loan Documents or any
      agreement entered into in connection with or as security for the Notes, it
      is
      agreed as follows:  (i) the aggregate of all consideration which
      constitutes interest under law applicable to any Lender that is contracted
      for,
      taken, reserved, charged or received by such Lender under any of the Loan
      Documents or agreements or otherwise in connection with the Notes shall under
      no
      circumstances exceed the maximum amount allowed by such applicable law, and
      any
      excess shall be canceled automatically and if theretofore paid shall be credited
      by such Lender on the principal amount of the Indebtedness (or, to the extent
      that the principal amount of the Indebtedness shall have been or would thereby
      be paid in full, refunded by such Lender to the Borrower); and (ii) in the
      event
      that the maturity of the Notes or any other Indebtedness is accelerated by
      reason of an election of the holder thereof resulting from any Event of Default
      under this Agreement or otherwise, or in the event of any required or permitted
      prepayment, then such
      consideration that constitutes interest under law applicable to any Lender
      may
      never include more than the maximum amount allowed by such applicable law,
      and
      excess interest, if any, provided for in this Agreement or otherwise shall
      be
      canceled automatically by such Lender as of the date of such acceleration or
      prepayment and, if theretofore paid, shall be credited by such Lender on the
      principal amount of the Indebtedness (or, to the extent that the principal
      amount of the Indebtedness shall have been or would thereby be paid in full,
      refunded by such Lender to the Borrower).  All sums paid or agreed to
      be paid to any Lender for the use, forbearance or detention of sums due
      hereunder shall, to the extent permitted by law applicable to such Lender,
      be
      amortized, prorated, allocated and spread throughout the stated term of the
      Loans evidenced by the Notes until payment in full so that the rate or amount
      of
      interest on account of any Loans hereunder does not exceed the maximum amount
      allowed by such applicable law.  If at any time and from time to time
      (i) the amount of interest payable to any Lender on any date shall be computed
      at the Highest Lawful Rate applicable to such Lender pursuant to this Section
      12.12 and (ii) in respect of any subsequent interest computation period the
      amount of interest otherwise payable to such Lender would be less than the
      amount of interest payable to such Lender computed at the Highest Lawful Rate
      applicable to such Lender, then the amount of interest payable to such Lender
      in
      respect of such subsequent interest computation

     

     

    
      
        
        

      

      
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     period
      shall continue to be computed at the Highest Lawful Rate applicable to such
      Lender until the total amount of interest payable to such Lender shall equal
      the
      total amount of interest which would have been payable to such Lender if the
      total amount of interest had been computed without giving effect to this Section
      12.12.  To the extent that Chapter 303 of the Texas Finance Code is
      relevant for the purpose of determining the Highest Lawful Rate applicable
      to a
      Lender, such Lender elects to determine the applicable rate ceiling under such
      Chapter by the weekly ceiling from time to time in effect.  Chapter
      346 of the Texas Finance Code does not apply to the Borrower’s obligations
      hereunder.

     

    Section
      12.13    EXCULPATION
      PROVISIONS.  EACH
      OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE
      AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS;
      THAT
      IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE
      AND
      KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS
      BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
      NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN
      DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN
      OF
      THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY
      ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
      THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY
      HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
      ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER
      LOAN
      DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
      PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

     

    Section
      12.14    Existing Credit
      Agreement.  On
      the date of the initial funding, the loans and other Debt of the Borrower under
      the Existing Credit Agreement shall be paid in full with the proceeds of the
      initial funding and the commitments of the lenders thereunder shall be
      superseded by this Agreement and terminated.

     

    Section
      12.15    Collateral
      Matters; Swap Agreements.  The
      benefit of the Security Instruments and of the provisions of this Agreement
      relating to any collateral securing the Indebtedness shall also extend to and
      be
      available to those Lenders or their Affiliates which are counterparties to
      any
      Swap Agreement with the Borrower or any of its Subsidiaries on a pro
      rata basis in respect of any obligations of the Borrower or any of its
      Subsidiaries which arise under any such Swap Agreement while such Person or
      its
      Affiliate is a Lender, but only while such Person or its Affiliate is a Lender,
      including any Swap Agreements between such Persons in existence prior to the
      date hereof; provided, however, such benefits shall automatically cease to
      extend, and shall automatically terminate in regard, to any such counterparties
      on the date that all Letters of Credit are terminated, all Loans are discharged
      and repaid and all Commitments are terminated, and from such date and then
      and
      thereafter, such benefits shall terminate and no longer be available to any
      such
      counterparties, irrespective if any Swap Agreement, to which 

     

     

    
      
        
        

      

      
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    they
      or
      any of them and the Borrower or any Subsidiary are a party, remains in effect
      on
      and after such date, is about to be entered into or otherwise.  No
      Lender or any Affiliate of a Lender shall have any voting rights under any
      Loan
      Document as a result of the existence of obligations owed to it under any such
      Swap Agreements.

     

    Section
      12.16    No Third Party
      Beneficiaries.  This
      Agreement, the other Loan Documents, and the agreement of the Lenders to make
      Loans and the Issuing Bank to issue, amend, renew or extend Letters of Credit
      hereunder are solely for the benefit of the Borrower, and no other Person
      (including, without limitation, any Subsidiary of the Borrower, any obligor,
      contractor, subcontractor, supplier or materialsman) shall have any rights,
      claims, remedies or privileges hereunder or under any other Loan Document
      against the Administrative Agent, any other Agent, the Issuing Bank or any
      Lender for any reason whatsoever.  There are no third party
      beneficiaries.

     

    Section
      12.17    USA Patriot Act
      Notice.  Each
      Lender hereby notifies the Borrower that pursuant to the requirements of the
      USA
      Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
      (the “Act”), it is required to obtain, verify and record information that
      identifies the Borrower, which information includes the name and address of
      the
      Borrower and other information that will allow such Lender to identify the
      Borrower in accordance with the Act.

     

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    The
      parties hereto have caused this Agreement to be duly executed as of the day
      and
      year first above written.

     

     

    
      	 BORROWER:	REX
              ENERGY CORPORATION 	 
	 	 	 
	 	
              By:

            	
              /s/
                Benjamin W. Hulburt

            	 
	 	 	
              Benjamin
                W. Hulburt, Chief Executive Officer

            	 


    

    


    


    


    


    
      
        
                

                       
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    
      	ADMINISTRATIVE
              AGENT:	KEYBANK
              NATIONAL ASSOCIATION	 
	 	as
              Administrative Agent and a Lender	 
	 	 	 
	 	
              By:

            	
              /s/
                Thomas Rajan

            	 
	 	 	
              Thomas
                Rajan

            	 
	 	 	Director	 


    

    


    


    
      
        
                

                       
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	 SYNDICATION
              AGENT:	 BNP
              PARIBAS 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Douglas R. Liftman

            	 
	 	
              Name:

            	
              Douglas
                R. Liftman

            	 
	 	
              Title:

            	
              Managing
                Director

            	 


    

    


    
      	 	
              By:

            	
              /s/
                Polly Schott

            	 
	 	
              Name:

            	
              Polly
                Schott

            	 
	 	
              Title:

            	
              Vice
                President

            	 


    

    


    


    


    
      
        
                

                         
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


                                                                                                  

     

    
      	 DOCUMENTATION
              AGENT:  	 SOVEREIGN
              BANK 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Robert D. Lanigan

            	 
	 	
              Name:

            	
              Robert
                D. Lanigan

            	 
	 	
              Title:

            	
              Senior
                Vice President

            	 


    

    


     

    


    


    
      
        
                

                        
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


     

    
      	LENDERS:	KEYBANK
              NATIONAL ASSOCIATION	 
	 	as
              Administrative Agent and a Lender	 
	 	 	 
	 	
              By:

            	
              /s/
                Thomas Rajan

            	 
	 	 	
              Thomas
                Rajan

            	 
	 	 	Director	 


    

     

     

    


    
      
        
                

                     
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    
      	 	 BNP
              PARIBAS 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Douglas R. Liftman

            	 
	 	
              Name:

            	
              Douglas
                R. Liftman

            	 
	 	
              Title:

            	
              Managing
                Director

            	 


      


      
        	 	
                By:

              	
                /s/
                  Polly Schott

              	 
	 	
                Name:

              	
                Polly
                  Schott

              	 
	 	
                Title:

              	
                Vice
                  President

              


      

    

    


    


    


    
      
        
                

                        
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    
      	 	 SOVEREIGN
              BANK 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Robert D. Lanigan

            	 
	 	
              Name:

            	
              Robert
                D. Lanigan

            	 
	 	
              Title:

            	
              Senior
                Vice President

            	 


    

     

    


    


    
      
        
                

                        
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


     

     

    
      	 	 ALLIED
              IRISH BANKS, P.L.C.	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Vaughn Buck

            	 
	 	
              Name:

            	
              Vaughn
                Buck

            	 
	 	
              Title:

            	
              Director

            	 


      


      
        	 	
                By:

              	
                /s/
                  Aidan Lanigan

              	 
	 	
                Name:

              	
                Aidan
                  Lanigan

              	 
	 	
                Title:

              	
                Vice
                  President

              




    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 M&T
              BANK	 
	 	 	 	 
	 	
              By:

            	
              /s/
                David Ladori

            	 
	 	
              Name:

            	
              David
                Ladori

            	 
	 	
              Title:

            	
              Assistant Vice
                President

            


    

     

     

     

     

    
      
        
                

                          
      

                              
                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    ANNEX
      I

     

    LIST
      OF MAXIMUM CREDIT AMOUNTS

     

    Aggregate
      Maximum Credit Amounts

     

    
      	
              Name
                of Lender

            	
              Maximum
                Credit Amount

            
	
              KeyBank
                National Association

            	
              $20,000,000

            
	
              BNP
                Paribas

            	
              $15,000,000

            
	
              Sovereign
                Bank

            	
              $15,000,000

            
	
              Allied
                Irish Bank

            	
              $12,500,000

            
	
              M&T
                Bank

            	
              $12,500,000

            
	
              TOTAL

            	
              $75,000,000

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      A

     

    FORM
      OF NOTE

     

    $[          ][          ],
      200[     ]

     

    FOR
      VALUE
      RECEIVED, Rex Energy
      Corporation, a Delawarecorporation
      (the
“Borrower”) hereby promises to pay to the order of [          ]
      (the “Lender”), at the principal office of KeyBank National Association
      (the “Administrative Agent”) designated in Section 4.01(a) of the Credit
      Agreement, as hereinafter defined, the principal sum of [          ]
Dollars ($[          ])
      (or such lesser amount as shall equal the aggregate unpaid principal amount
      of
      the Loans made by the Lender to the Borrower under the Credit Agreement), in
      lawful money of the United States of America and in immediately available funds,
      on the dates and in the principal amounts provided in the Credit Agreement,
      and
      to pay interest on the unpaid principal amount of each such Loan, at such
      office, in like money and funds, for the period commencing on the date of such
      Loan until such Loan shall be paid in full, at the rates per annum and on the
      dates provided in the Credit Agreement.

     

    The
      date,
      amount, Type, interest rate, Interest Period and maturity of each Loan made
      by
      the Lender to the Borrower, and each payment made on account of the principal
      thereof, shall be recorded by the Lender on its books and, prior to any transfer
      of this Note, may be endorsed by the Lender on the schedules attached hereto
      or
      any continuation thereof or on any separate record maintained by the
      Lender.  Failure to make any such notation or to attach a schedule
      shall not affect any Lender’s or the Borrower’s rights or obligations in respect
      of such Loans or affect the validity of such transfer by any Lender of this
      Note.

     

    This
      Note
      is one of the Notes referred to in the Credit Agreement dated as of September 28, 2007
      among the Borrower, the Administrative Agent, and the other agents and
      lenders signatory thereto (including the Lender), and evidences Loans made
      by
      the Lender thereunder (such Credit Agreement as the same may be amended,
      supplemented or restated from time to time, the “Credit
      Agreement”).  Capitalized terms used in this Note have the
      respective meanings assigned to them in the Credit Agreement.

     

    This
      Note
      is issued pursuant to, and is subject to the terms and conditions set forth
      in,
      the Credit Agreement and is entitled to the benefits provided for in the Credit
      Agreement and the other Loan Documents.  The Credit Agreement provides
      for the acceleration of the maturity of this Note upon the occurrence of certain
      events, for prepayments of Loans upon the terms and conditions specified therein
      and other provisions relevant to this Note.

     

    THIS
      NOTE
      SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
      OF
      TEXAS.

     

                        REX
      ENERGY
      CORPORATION

     

                        By:

                        Name:                                                                           

                        Title:                                                                           

    


    
      
        
                

                                                                     
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      B

     

    FORM
      OF BORROWING REQUEST

     

    [                   ],
      200[   ]

     

    Rex
      Energy Corporation, a Delawarecorporation
      (the
“Borrower”), pursuant to Section 2.03 of the Credit Agreement dated as of
      September 28, 2007 (together with all amendments, restatements, supplements
      or
      other modifications thereto, the “Credit Agreement”) among the Borrower,
      KeyBank National Association, as Administrative Agent and the other agents
      and
      lenders (the “Lenders”) which are or become parties thereto (unless
      otherwise defined herein, each capitalized term used herein is defined in the
      Credit Agreement), hereby requests a Borrowing as follows:

     

    (i)           Aggregate
      amount of the requested Borrowing is
      $[                   ];

     

    (ii)          Date
      of such Borrowing is
      [                   ],
      200[   ];

     

    (iii)         Requested
      Borrowing is to be [an ABR Borrowing] [a Eurodollar Borrowing];

     

    (iv)          In
      the case of a Eurodollar Borrowing, the initial Interest Period applicable
      thereto is
      [                   ];

     

    (v)           Amount
      of Borrowing Base in effect on the date hereof is
      $[                   ];

     

    (vi)          Total
      Revolving Credit Exposures on the date hereof (i.e., outstanding principal
      amount of Loans and total LC Exposure without regard to the Borrowing requested
      hereby) is
      $[                   ];
      and

    


    (vii)         Pro
      forma total Revolving Credit Exposures (giving effect to the requested
      Borrowing) is
      $[                   ];
      and

    


    (viii)        Location
      and number of the Borrower’s account to which funds are to be disbursed, which
      shall comply with the requirements of Section 2.05 of the Credit Agreement,
      is
      as follows:

    


    [                                           ]

    [                                           ]

    [                                           ]

    [                                           ]

    [                                           ]

    


    The
      undersigned certifies that he/she is the
      [                ]
      of the Borrower, and that as such he/she is authorized to execute this
      certificate on behalf of the Borrower.  The undersigned further
      certifies, represents and warrants on behalf of the Borrower that the Borrower
      is entitled to receive the requested Borrowing under the terms and conditions
      of
      the Credit Agreement.

    


                            REX
      ENERGY
      CORPORATION

     

                            By:

                            Name:                                                                           

                            Title:

     

    


    
      
        
                

                        
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      C

     

    FORM
      OF INTEREST ELECTION REQUEST

     

    [                ],
      200[   ]

     

    Rex
      Energy Corporation, a Delawarecorporation
      (the
“Borrower”), pursuant to Section 2.04 of the Credit Agreement dated as of
      September 28, 2007 (together with all amendments, restatements, supplements
      or
      other modifications thereto, the “Credit Agreement”) among the Borrower,
      KeyBank National Association, as Administrative Agent and the other agents
      and
      lenders (the “Lenders”) which are or become parties thereto (unless
      otherwise defined herein, each capitalized term used herein is defined in the
      Credit Agreement), hereby makes an Interest Election Request as
      follows:

     

    (i)    The
      Borrowing
      to which this Interest Election Request applies, and if different options are
      being elected with respect to different portions thereof, the portions thereof
      to be allocated to each resulting Borrowing (in which case the information
      specified pursuant to (iii) and (iv) below shall be specified for each resulting
      Borrowing) is
      [                ];

     

    (ii)   The
      effective date
      of the election made pursuant to this Interest Election Request is
      [                ],
      200[   ];[and]

     

    (iii)         The
      resulting Borrowing is to be [an ABR Borrowing] [a Eurodollar Borrowing][;
      and]

     

    [(iv)        [If
      the resulting Borrowing is a Eurodollar Borrowing] The Interest Period
      applicable to the resulting Borrowing after giving effect to such election
      is
      [                ]].

     

    The
      undersigned certifies that he/she is the
      [                ]
      of the Borrower, and that as such he/she is authorized to execute this
      certificate on behalf of the Borrower.  The undersigned further
      certifies, represents and warrants on behalf of the Borrower that the Borrower
      is entitled to receive the requested continuation or conversion under the terms
      and conditions of the Credit Agreement.

     

                        REX
      ENERGY
      CORPORATION

     

                        By:

                        Name:                                                                           

                        Title:

     

    


    


    
      
        
                

                                                               
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      D-1

     

    FORM
      OF

     

    COMPLIANCE
      CERTIFICATE

     

    The
      undersigned hereby certifies that he/she is the [          ]
      of Rex Energy
      Corporation, a Delawarecorporation
      (the
“Borrower”), and that as such he/she is authorized to execute this
      certificate on behalf of the Borrower.  With reference to the Credit
      Agreement dated as of September 28, 2007 (together with all amendments,
      restatements, supplements or other modifications thereto being the
“Agreement”) among the Borrower, KeyBank National
      Association, as Administrative Agent, and the other agents and lenders
      (the “Lenders”) which are or become a party thereto, and such Lenders,
      the undersigned represents and warrants as follows (each capitalized term used
      herein having the same meaning given to it in the Agreement unless otherwise
      specified):

     

    (a)    The
      representations and warranties of the Borrower contained in Article VII of
      the
      Agreement and in the Loan Documents and otherwise made in writing by or on
      behalf of the Borrower pursuant to the Agreement and the Loan Documents were
      true and correct when made, and are repeated at and as of the time of delivery
      hereof and are true and correct in all material respects at and as of the time
      of delivery hereof, except (i) to the extent such representations and warranties
      are expressly limited to an earlier date, provided that, except for purposes
      of
      Section 6.02, the representations and warranties contained in Section 7.04(b)
      shall be deemed to refer to the fiscal year end date of the most recent
      financial statement delivered pursuant to Section 8.01(a) or (ii) as the
      Borrower has disclosed pursuant to Section 8.02 in writing to the contrary
      or
      (iii) as the Lenders have expressly consented in writing to the
      contrary.

     

    (b)    The
      Borrower has performed and complied with all agreements and conditions contained
      in the Agreement and in the Loan Documents required to be performed or complied
      with by it prior to or at the time of delivery hereof [or specify default and
      describe].

     

    (c)    Since
      [same
      date as audited financials in Section 7.04(a)], no change has occurred, either
      in any case or in the aggregate, in the condition, financial or otherwise,
      of
      the Borrower or any Subsidiary which could reasonably be expected to have a
      Material Adverse Effect [or specify event].

     

    (d)           There
      exists no Default or Event of Default [or specify Default and
      describe].

     

    (e)           Attached
      hereto are the detailed computations necessary to determine whether the Borrower
      is in compliance with Section 9.01 and Section 8.14 as of the end of the [fiscal
      quarter][fiscal year] ending [          ].

     

     

         EXECUTED
      AND
      DELIVERED this [          ]
      day of [          ].

     

                REX
      ENERGY
      CORPORATION

     

                By:

                Name:                                                                           

                Title:                                                                           

     

    


    
      
        
                

                    
      
      

                        
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      D-2

     

    FORM
      OF SECTION 8.01(c) CERTIFICATE

     

    The
      undersigned hereby certifies that he/she is the [          ]
      of Rex Energy
      Corporation, a Delawarecorporation
      (the
“Borrower”), and that as such he/she is authorized to execute this
      certificate on behalf of the Borrower.  With reference to the Credit
      Agreement dated as of September 28, 2007 (together with all amendments,
      restatements, supplements or other modifications thereto being the
“Agreement”) among the Borrower, KeyBank National
      Association, as Administrative Agent, and the other agents and lenders
      (the “Lenders”) which are or become a party thereto, and such Lenders,
      the undersigned represents and warrants as follows (each capitalized term used
      herein having the same meaning given to it in the Agreement unless otherwise
      specified):

     

    (a)           The
      representations and warranties of the Borrower contained in Article VII of
      the
      Agreement and in the Loan Documents and otherwise made in writing by or on
      behalf of the Borrower pursuant to the Agreement and the Loan Documents were
      true and correct when made, and are repeated at and as of the time of delivery
      hereof and are true and correct in all material respects at and as of the time
      of delivery hereof, except (i) to the extent such representations and warranties
      are expressly limited to an earlier date, provided that, except for purposes
      of
      Section 6.02, the representations and warranties contained in Section 7.04(b)
      shall be deemed to refer to the fiscal year end date of the most recent
      financial statement delivered pursuant to Section 8.01(a) or (ii) as the
      Borrower has disclosed pursuant to Section 8.02 in writing to the contrary
      or
      (iii) as the Lenders have expressly consented in writing to the
      contrary.

     

    (b)           There
      exists no Default or Event of Default [or specify Default and
      describe].

     

    (b)           Attached
      hereto are the detailed computations necessary to determine whether the Borrower
      is in compliance with Section 9.01 and 8.14 as of the end of the [fiscal
      quarter][fiscal year] ending [          ].

     

    (c)           [Select
      one of the following as applicable:]  [There has been no change
      in GAAP or in the application thereof, in each case as GAAP was applied in
      the
      Financial Statements, (i) in the preparation of the Borrower’s financial
      statements most-recently required to be delivered in accordance with Section
      8.01(a) or (b), or (ii) that would affect the computation of any financial
      ratio
      in Section 9.01] or [There has been one or more changes in GAAP or in
      the application thereof, in each case as GAAP was applied in the Financial
      Statements, (i) in the preparation of the Borrower’s financial statements
      most-recently required to be delivered in accordance with Section 8.01(a) or
      (b), or (ii) that would affect the computation of any financial ratio in Section
      9.01, as follows and with the following
      effects:  [specify].

     

     
           EXECUTED AND
      DELIVERED this [          ]
      day of [          ].

     

                REX
      ENERGY
      CORPORATION

     

                By:

                Name:                                                                           

                Title:

     

    


    
      
        
                

                    
      
      

                
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      E

     

    SECURITY
      INSTRUMENTS

     

    1)           Guaranty
      and
      Collateral Agreement dated as of September 28, 2007
      by the Borrower
      and Rex Energy I, LLC, Rex Energy Operating Corp., Penn Tex Energy, Inc.,
      PennTex Resources, L.P., PennTex Resources Illinois, Inc. and Rex Energy IV,
      LLC, as the
      Guarantors, in favor of the Administrative Agent and the
      Lenders.

     

    2)           Financing
      Statements in respect of item 1, by

     

    a)           the
      Borrower

     

    b)           Rex
      Energy I, LLC

     

    c)           Rex
      Energy Operating Corp.

     

    d)           Penn
      Tex Energy, Inc.

     

    e)           PennTex
      Resources, L.P.

     

    f)    PennTex
      Resources Illinois, Inc.

     

    g)    Rex
      Energy
      IV, LLC

     

    3)           Stock
      Powers delivered in respect of item 1.

     

    a)           Penn
      Tex Energy, Inc., a Delaware corporation

     

    b)           PennTex
      Resources Illinois, Inc., a Delaware corporation

     

    c)           Rex
      Energy Operating Corp., a Delaware corporation

     

    4)            Deed
      of Trust, Mortgage, Assignment of As-Extracted Collateral, Security Agreement
      and Financing Statement dated as of September 28, 2007 by
      each of Rex Energy I, LLC, PennTex Resources, L.P. and PennTex Resources
      Illinois, Inc., as mortgagors, for the benefit the Administrative Agent, the
      Lenders and others.

     

    5)           Financing
      Statements in respect of item 4.

     

    6)           First
      Amendment to Deed of Trust, Mortgage, Assignment of As-Extracted Collateral,
      Security Agreement and Financing Statement dated as of September 28, 2007 by
      Rex Energy IV, LLC, as mortgagor, for the benefit the Administrative Agent,
      the
      Lenders and others.

     

    


     

    


    
      
        
                

                    
      
      

                 
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      F

     

    FORM
      OF ASSIGNMENT AND ASSUMPTION

     

    This
      Assignment and Assumption (the
“Assignment and Assumption”) is dated as of the Effective Date set forth
      below and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized terms used but not defined
      herein
      shall have the meanings given to them in the Credit Agreement identified below
      (as amended, the “Credit Agreement”), receipt of a copy of which is
      hereby acknowledged by the Assignee.  The Standard Terms and
      Conditions set forth in Annex 1 attached hereto are hereby agreed to and
      incorporated herein by reference and made a part of this Assignment and
      Assumption as if set forth herein in full.

    


    For
      an agreed consideration, the
      Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee
      hereby irrevocably purchases and assumes from the Assignor, subject to and
      in
      accordance with the Standard Terms and Conditions and the Credit Agreement,
      as
      of the Effective Date inserted by the Administrative Agent as contemplated
      below
      (i) all of the Assignor’s rights and obligations in its capacity as a Lender
      under the Credit Agreement and any other documents or instruments delivered
      pursuant thereto to the extent related to the amount and percentage interest
      identified below of all of such outstanding rights and obligations of the
      Assignor under the respective facilities identified below (including any letters
      of credit and guarantees included in such facilities) and (ii) to the extent
      permitted to be assigned under applicable law, all claims, suits, causes of
      action and any other right of the Assignor (in its capacity as a Lender) against
      any Person, whether known or unknown, arising under or in connection with the
      Credit Agreement, any other documents or instruments delivered pursuant thereto
      or the loan transactions governed thereby or in any way based on or related
      to
      any of the foregoing, including contract claims, tort claims, malpractice
      claims, statutory claims and all other claims at law or in equity related to
      the
      rights and obligations sold and assigned pursuant to clause (i) above (the
      rights and obligations sold and assigned pursuant to clauses (i) and (ii) above
      being referred to herein collectively as the “Assigned
      Interest”).  Such sale and assignment is without recourse to the
      Assignor and, except as expressly provided in this Assignment and Assumption,
      without representation or warranty by the Assignor.

     

     

    
      	 1.    	 Assignor	 	 _______________________________________________________
	 	 	 	 
	 2.    	 Assignee	 	 _______________________________________________________
	 	 	 	 [and
              is an Affiliate/Approved Fund of [identify
              Lender]1]
	 	 	 	 
	 3.
              	 Borrower	 	 Rex
              Energy Corporation
	 	 	 	 
	 4.        	 Adminstrative
              Agent	 	 KeyBank
              National Association, as the adminsitrative agent under the Credit
              Agreement
	 	 	 	 
	 5.    	 Credit
              Agreement	 	 The
              Credit Agreement dated as of September 28, 2007 among Rex Energy
              Corporation, the Lenders parties thereto, KeyBank National Association,
              as
              Administrative Agent, and the other agents parties thereto
	 	 	 	 


    

     

    
      

    

     

      1
        Select as
        applicable.

    

    
 

    
      	
               

            	
              6.

            	
              Assigned
                Interest:

            


    

    


    
      	
              Commitment
                Assigned

            	
              Aggregate
                Amount of Commitment/Loans for all Lenders

            	
              Amount
                of Commitment/Loans Assigned

            	
              Percentage
                Assigned of Commitment/Loans2

            
	 	
              $

            	
              $

            	
              %

            
	 	
              $

            	
              $

            	
              %

            
	 	
              $

            	
              $

            	
              %

            


    

    


    


    Effective
      Date:   _____________ ___, 20___ [TO BE INSERTED BY
      ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
      TRANSFER IN THE REGISTER THEREFOR.]

    


    The
      terms
      set forth in this Assignment and Assumption are hereby agreed to:

    


                                  
ASSIGNOR

    


    
      	
               

            	
              [NAME
                OF ASSIGNOR]

            


    

    


    


    By:______________________________

       Title:

    


    


    ASSIGNEE

    


    [NAME
      OF ASSIGNEE]

    


    


    By:______________________________

       Title:

    


    


    

      

    

     

      2
        Set forth, to at
        least 9 decimals, as a percentage of the Commitment/Loans of all Lenders
        thereunder.

    

    


    
      
        
                

                    -
                    
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    [Consented
      to and]3 Accepted:

    


    [NAME
      OF
      ADMINISTRATIVE AGENT], as

      Administrative
      Agent

    


    


    By_________________________________

      Title:

    


    


    [Consented
      to:]4

    


    [NAME
      OF
      RELEVANT PARTY]

    


    


    By________________________________

      Title:

    

      

    

     

      3
        To be added only if
        the consent of the Administrative Agent is required by the terms of the Credit
        Agreement.

    

     

      4
        To be added only if
        the consent of the Borrower and/or other parties (e.g. Issuing Bank) is required
        by the terms of the Credit Agreement.

    

    


    
      
        
                

                        
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    ANNEX
      1

    


    REX
      ENERGY CORPORATION CREDIT AGREEMENT

    


    STANDARD
      TERMS AND CONDITIONS FOR

    ASSIGNMENT
      AND ASSUMPTION

    


    1.  Representations
      and
      Warranties.

    


    1.1   Assignor.  The
      Assignor (a) represents and warrants that (i) it is the legal and beneficial
      owner of the Assigned Interest, (ii) the Assigned Interest is free and clear
      of
      any lien, encumbrance or other adverse claim and (iii) it has full power and
      authority, and has taken all action necessary, to execute and deliver this
      Assignment and Assumption and to consummate the transactions contemplated
      hereby; and (b) assumes no responsibility with respect to (i) any statements,
      warranties or representations made in or in connection with the Credit Agreement
      or any other Loan Document, (ii) the execution, legality, validity,
      enforceability, genuineness, sufficiency or value of the Loan Documents or
      any
      collateral thereunder, (iii) the financial condition of the Borrower, any of
      its
      Subsidiaries or Affiliates or any other Person obligated in respect of any
      Loan
      Document or (iv) the performance or observance by the Borrower, any of its
      Subsidiaries or Affiliates or any other Person of any of their respective
      obligations under any Loan Document.

    


    1.2.  Assignee.  The
      Assignee (a) represents and warrants that (i) it has full power and authority,
      and has taken all action necessary, to execute and deliver this Assignment
      and
      Assumption and to consummate the transactions contemplated hereby and to become
      a Lender under the Credit Agreement, (ii) it satisfies the requirements, if
      any,
      specified in the Credit Agreement that are required to be satisfied by it in
      order to acquire the Assigned Interest and become a Lender, (iii) from and
      after
      the Effective Date, it shall be bound by the provisions of the Credit Agreement
      as a Lender thereunder and, to the extent of the Assigned Interest, shall have
      the obligations of a Lender thereunder, (iv) it has received a copy of the
      Credit Agreement, together with copies of the most recent financial statements
      delivered pursuant to Section 8.01 thereof, as applicable, and such other
      documents and information as it has deemed appropriate to make its own credit
      analysis and decision to enter into this Assignment and Assumption and to
      purchase the Assigned Interest on the basis of which it has made such analysis
      and decision independently and without reliance on the Administrative Agent
      or
      any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
      and Assumption is any documentation required to be delivered by it pursuant
      to
      the terms of the Credit Agreement, duly completed and executed by the Assignee;
      and (b) agrees that (i) it will, independently and without reliance on the
      Administrative Agent, the Assignor or any other Lender, and based on such
      documents and information as it shall deem appropriate at the time, continue
      to
      make its own credit decisions in taking or not taking action under the Loan
      Documents, and (ii) it will perform in accordance with their terms all of the
      obligations which by the terms of the Loan Documents are required to be
      performed by it as a Lender.

    


    2.   Payments.    From
      and after the Effective Date, the Administrative Agent shall make all payments
      in respect of the Assigned Interest (including payments of principal, interest,
      fees and other amounts) to the Assignor for amounts which have accrued to but
      excluding the Effective Date and to the Assignee for amounts which have accrued
      from and after the Effective Date.

    


    3.  General
      Provisions. This Assignment and Assumption shall be binding upon, and inure
      to the benefit of, the parties hereto and their respective successors and
      assigns.  This Assignment and Assumption may be executed in any number
      of counterparts, which together shall constitute one
      instrument.  Delivery of an executed counterpart of a signature page
      of this Assignment and Assumption by telecopy shall be effective as delivery
      of
      a manually executed counterpart of this Assignment and Assumption.  This
      Assignment and Assumption shall be governed by, and construed in accordance
      with, the law of the State of Texas.

    


    


    
      
        
                

                         
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      G-1

     

    FORM
      OF MAXIMUM CREDIT AMOUNT INCREASE CERTIFICATE

     

    


    


    [          ],
      200[    ]

    


    


    To:           [                                           ],

    as
      Administrative Agent

    


    The
      Borrower, the Administrative Agent and the other Agents and certain Lenders
      have
      heretofore entered into a Credit Agreement, dated as of September 28, 2007, as
      amended from time to time (the “Credit
      Agreement”).  Capitalized terms not otherwise defined herein shall
      have the meaning given to such terms in the Credit Agreement.

    


    This
      Maximum Credit Amount Increase Certificate is being delivered pursuant to
      Section 2.06(c) of the Credit Agreement.

    


    Please
      be
      advised that the undersigned has agreed to increase its Maximum Credit Amount
      under the Credit Agreement effective [          ],
      200[    ]
      from $[          ]
      to $[          ]
      and (b) that it shall continue to be a party in all respect to the Credit
      Agreement and the other Loan Documents.

    


    The
      [Borrower/Lender] shall pay the fee payable to the Administrative Agent pursuant
      to Section 2.06(c)(ii) of the Credit Agreement.

    


    Very
      truly yours,

    


    [                                                      ]

    


    


    


    By:

      Name:                                                                

      Title:                                                                

    


    


    


    
      
        
                

                                                            
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Accepted
      and Agreed:

    


    [                                           ],

      as
      Administrative Agent

    


    


    


    By:                                                                           

      Name:                                                                

      Title:                                                                

    


    


    


    Accepted
      and Agreed:

    


    [                                           ]

    


    


    


    By:                                                                           

      Name:                                                                

      Title:                                                                

    


     

    


    


    
      
        
                

                        
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      G-2

     

    FORM
      OF ADDITIONAL LENDER CERTIFICATE

     

    


    


    [          ],
      200[    ]

    


    


    To:           [                                           ],

    as
      Administrative Agent

    


    The
      Borrower, the Administrative Agent and the other Agents and certain Lenders
      have
      heretofore entered into a Credit Agreement, dated as of September 28, 2007, as
      amended from time to time (the “Credit
      Agreement”).  Capitalized terms not otherwise defined herein shall
      have the meaning given to such terms in the Credit Agreement.

    


    This
      Additional Lender Certificate is being delivered pursuant to Section 2.06(c)
      of
      the Credit Agreement.

    


    Please
      be
      advised that the undersigned has agreed (a) to become a Lender under the Credit
      Agreement effective [          ],
      200[    ]
      with a Maximum Credit Amount of $[          ]
      and (b) that it shall be a party in all respect to the Credit Agreement and
      the
      other Loan Documents.

    


    This
      Additional Lender Certificate is being delivered to the Administrative Agent
      together with (i) if the Additional Lender is a Foreign Lender, any
      documentation required to be delivered by such Additional Lender pursuant to
      Section 5.03(e) of the Credit Agreement, duly completed and executed by the
      Additional Lender, and (ii) an Administrative Questionnaire in the form supplied
      by the Administrative Agent, duly completed by the Additional
      Lender.  The [Borrower/Additional Lender] shall pay the fee payable to
      the Administrative Agent pursuant to Section 2.06(c)(ii) of the Credit
      Agreement.

    


    Very
      truly yours,

    


    [                                                      ]

    


    


    


    By:

      Name:                                                                

      Title:                                                                

    


    
      
        
                

                        
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    Accepted
      and Agreed:

    


    [                                                      ],

      as
      Administrative Agent

    


    


    


    By:                                                                           

      Name:                                                                

      Title:                                                                

    


    


    


    Accepted
      and Agreed:

    


    [                                                      ]

    


    


    


    By:                                                                           

      Name:                                                                

      Title:                                                                

    


    


    


    
      
        
                

                       
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      7.05

    LITIGATION

     

    An
      environmental enforcement action brought in the United States District Court
      for
      the Southern District of Illinois styled The United States of America and
      the State of Illinois v. PennTex Resources Illinois, Inc. and Rex Energy
      Operating Corp., Case No. 3:07-cv-241-DRH, relating to alleged emissions of
      hydrogen sulfide from wells and facilities owned or operated by the defendants
      near the towns of Bridgeport and Petrolia, Illinois.

     

    A
      putative class action lawsuit brought in the United States District Court for
      the Southern District of Illinois styled Julia Leib, et al. v. Rex Energy
      Operating Corp. and PennTex Resources Illinois, Inc., Cause Number
      3:06-cv-00802-JPG-CJP, relating to alleged emissions of hydrogen sulfide from
      wells and facilities owned or operated by the defendants near the towns of
      Bridgeport and Petrolia, Illinois.

     

    


     

    


    
      
        
                

                         
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      7.06

    ENVIRONMENTAL
      MATTERS

     

    In
      approximately 2002, predecessors of PennTex Resources Illinois, Inc. (“PennTex
      Illinois”) received complaints from local residents of the cities of Bridgeport
      and Petrolia, Illinois concerning odors alleged to be emanating from oil wells,
      emergency pits and facilities located in the company’s Lawrence field
      operations. The complainants alleged that the odors were caused by hydrogen
      sulfide (“H2S”)
      gas.  The complainants alleged that H2S gas emissions
      from
      the oil wells and associated facilities also caused corrosion damages to HVAC
      systems and other personal property at each of their residences. Each
      complainant requested compensation for the repair or replacement of personal
      items located at their residences. Predecessors of PennTex Illinois entered
      into
      settlement agreements with certain of these residents relating to their claims
      of corrosion damages. On October 7, 2004, a predecessor of PennTex Illinois
      (then known as ERG Illinois, Inc.) received a Violation Notice dated October
      6,
      2004, pursuant to Section 31(a)(1) of the Illinois Environmental Protection
      Act
      from the Illinois Environmental Protection Agency (“Illinois EPA”) regarding
      odors allegedly emanating from its Newell Facility emergency pit or in the
      general vicinity of the emergency pit. Thereafter, on December 16, 2004, the
      company received a letter entitled “Request to Provide Information Pursuant to
      the Clean Air Act” from the U.S. EPA. The U.S. EPA requested information
      necessary to determine whether the operations surrounding the Newell Facility
      were in compliance with the Illinois State Implementation Plan and the Clean
      Air
      Act. On December 27, 2004, ERG Illinois, Inc. submitted to the Illinois EPA
      a
      proposed Compliance Commitment Agreement (“CCA”) that responded to the October
      6, 2004 Violation Notice with a denial of the alleged violations, but
      accompanied by a proposal to periodically clean the emergency pit. On January
      26, 2005, the  Illinois EPA provided a letter to the company
      indicating that the company’s previously submitted CCA had been accepted, thus
      resolving the Violation Notice.

     

    On
      January 28, 2005, PennTex Illinois submitted a response to the U.S. EPA’s
      December 16, 2004 information request. On February 9, 2005, the U.S. EPA
      requested additional data from PennTex Illinois regarding the quantity of H2S emissions
      from
      various sources including the Newell Facility and the wells in and around the
      city of Bridgeport, Illinois. In March 2005, PennTex Illinois engaged a third
      party environmental consulting firm to prepare a Preliminary Action Plan
      designed to identify and analyze emissions from PennTex Illinois’ operations and
      to propose recommendations to address any identified concerns. A report entitled
      “PAP/Odor Investigation Results” with recommendations and a cover letter were
      sent to the U.S. EPA on July 18, 2005 (the “PAP Report”). The PAP Report
      concluded that, for all wells monitored, PennTex Illinois was in compliance
      with
      all known federal, state and local rules and regulations in regard to H2S emissions
      and
      exposures. The PAP Report recommended that additional H2S controls,
      such as
      the installation of scavenger drums, be implemented with respect to some of
      the
      monitored wells. The PAP Report described the results of high range and low
      range H2S
      instrument sampling in the vicinity of the Newell Facility and concluded that
      no
      additional operational controls or modifications appeared to be necessary or
      feasible to further reduce H2S concentrations
      in
      the vicinity of the Newell Facility.

     

    On
      March
      13, 2006, PennTex Illinois received a second information request from the U.S.
      EPA requesting additional information relating to, among other matters, the
      company’s installation of flares and scavenger drums to control H2S emissions
      at its
      oil well locations. On

     

    


    
      
        
                

                           
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    March
      27,
      2006, PennTex Illinois submitted a response to the U.S. EPA’s second information
      request. In September 2006, the U.S. DOJ and the U.S. EPA initiated an
      enforcement action seeking mandatory injunctive relief and potential civil
      penalties from PennTex Illinois and Rex Energy Operating Corp. (“Rex Operating”)
      based on allegations that the companies were violating the Clean Air Act in
      connection with the release of H2S and other
      volatile
      organic compounds (“VOCs”) in the course of PennTex Illinois’ oil operations in
      the Lawrence Field near the towns of Bridgeport and Petrolia, Illinois. Senior
      management of the companies met with representatives of the U.S. EPA, U.S.
      DOJ,
      Illinois EPA and the Agency for Toxic Substances and Disease Registry (“ATSDR”)
      on September 7, 2006, to discuss matters relating to the enforcement action.
      This meeting had been preceded by certain monitoring of air emissions in the
      areas surrounding Bridgeport and Petrolia, Illinois that the U.S. EPA and ATSDR
      had conducted in May 2006.

     

    In
      October 2006, PennTex Illinois and Rex Operating entered into a non-binding
      agreement in principle with the U.S. EPA to address matters that were the
      subject of the pending enforcement action. Pursuant to this agreement, the
      companies agreed to (i) develop and carry out a detailed and comprehensive
      written response plan designed to further reduce possible emissions of H2S and VOCs
      from
      PennTex Illinois’ oil wells and associated facilities in the Lawrence Field that
      were closest to populated areas, (ii) operate and maintain the control measures
      described in the response plan in accordance with a written operations and
      maintenance plan to be approved by the U.S. EPA, (iii) evaluate the
      effectiveness of the control measures in the Lawrence Field through a monitoring
      program, and (iv) evaluate the need for additional control measures at other
      facilities within the Lawrence Field within 60 days.  In April 2007,
      PennTex Illinois, Rex Operating and the U.S. EPA and U.S. DOJ executed a
      comprehensive consent decree in which PennTex Illinois and Rex Operating,
      without any admission of wrongdoing or liability and without any agreement
      to
      pay any civil fine or penalty, agreed to install certain control measures and
      to
      implement certain operating and maintenance procedures in the Lawrence Field.
      Under the terms of the proposed consent decree, PennTex Illinois and Rex
      Operating agreed to establish a monitoring protocol that would be designed
      to
      facilitate the reduction of possible emissions of H2S and VOCs
      from
      PennTex Illinois’ operations near Bridgeport and Petrolia. On June 1, 2007, the
      United States filed a motion for the approval and entry of the proposed consent
      decree with the United States District Court for the Southern District of
      Illinois. On June 6, 2007, the court granted the United States’ motion for
      approval and entry of the proposed consent decree.

     

    PennTex
      Illinois and Rex Operating are defendants in a putative class action lawsuit
      that has been filed in the United States District Court for the Southern
      District of Illinois. This action was commenced on October 17, 2006, by
      plaintiffs Julia Leib and Lisa Thompson, individually and as putative class
      representatives on behalf of all persons and non-governmental entities that
      own
      property or reside on property located in the towns of Bridgeport and Petrolia,
      Illinois. The complaint asserts that the operation of oil wells that are
      controlled, owned or operated by PennTex Illinois and Rex Operating has resulted
      in “serious contamination” of the class area with H2S. The complaint
      asserts several causes of action, including violation of the Illinois
      Environmental Protection Act, negligence, private nuisance, trespass, and
      willful and wanton misconduct. The complaint seeks, among other things,
      injunctive relief under the Illinois Environmental Protection Act and Illinois
      common law, compensatory and other damages, punitive damages, and attorneys’
fees and costs. In addition, the complaint seeks the creation of a

     

    


    
      
        
                

                        
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    court-supervised,
      defendant-financed fund to pay for medical monitoring for the plaintiffs and
      others in the class area. On November 14, 2006, PennTex Illinois and Rex
      Operating filed a joint answer to the complaint specifically denying virtually
      all of the allegations in the complaint and asserting affirmative defenses
      thereto. On December 20, 2006, the plaintiffs filed a motion for class
      certification requesting that the court certify the case as a class
      action.

     

    On
      January 31, 2007, the plaintiffs filed a motion for leave seeking permission
      to
      file an amended complaint that would add a claim against the defendants for
      alleged violation of Section 7002(a)(1) of the Resource Conservation And
      Recovery Act. Plaintiffs’ proposed amended complaint makes factual allegations
      similar to those previously asserted in the plaintiffs’ prior pleadings. On
      February 6, 2007, the court set a final pretrial conference for this case for
      August 7, 2008. The case is scheduled for jury trial on August 18, 2008, in
      the
      United States District Court for the Southern District of Illinois located
      in
      Benton, Illinois.  The parties to this lawsuit have exchanged initial
      pretrial disclosures as required under the applicable rules, each side has
      served and responded to pre-deposition written discovery and one of the
      plaintiffs’ expert witnesses on the issue of class certification has been
      deposed by the defendants.

     

    


    
      
        
                

                 
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      7.14

    SUBSIDIARIES
      AND PARTNERSHIPS

     

    


    Borrower:

     

    
      	
              Legal
                Name/Address

            	
              Trade
                Names Used in Past 5 Years

            	
              Current
                Jurisdiction of Organization

            	
              Jurisdiction
                of Organizations in Past 5 Years

            	
              Organizational
                No.

            	
              Taxpayer
                Identification No.

            	
              Chief
                Executive Office or Sole Place of Business over the last 5
                years

            
	
              Rex
                Energy Corporation

              1975
                Waddle Road

              State
                College, PA 16803

               

               

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              4313846

            	
              20-8814402

            	
              1975
                Waddle Road

              State
                College, PA 16803

            


    

    


    Subsidiaries
      and Partnerships:

    


    
      	
              Legal
                Name/Address

            	
              Trade
                Names Used in Past 5 Years

            	
              Current
                Jurisdiction of Organization

            	
              Jurisdiction
                of Organizations in Past 5 Years

            	
              Organizational
                No.

            	
              Taxpayer
                Identification No.

            	
              Chief
                Executive Office or Sole Place of Business over the last 5
                years

            
	
              Rex
                Energy I, LLC

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              4335969

            	
              20-8909799

            	
              1975
                Waddle Road

              State
                College, PA 16803

            
	
              Rex
                Energy Operating Corp.

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              3865470

            	
              20-2120390

            	
              1975
                Waddle Road

              State
                College, PA 16803

               

              1965
                Waddle Road

              State
                College, PA

              16803

               

            
	
              Rex
                Energy IV, LLC

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              4219136

            	
              20-5549688

            	
              1975
                Waddle Road

              State
                College, PA 16803

               

              Route
                1, Box 197, Bridgeport, Illinois 62417

               

              Highway
                250, P.O. Box 318, Bridgeport, Illinois 62417

               

            
	
              PennTex
                Resources Illinois, Inc.

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              ERG
                Illinois, Inc.

            	
              Delaware

            	
              Not
                Applicable

            	
              3757111

            	
              20-0660609

            	
              1975
                Waddle Road

              State
                College, PA 16803

               

              1965
                Waddle Road

              State
                College, PA

              16803

               

              1100
                Louisiana, Suite 2650, Houston, Texas

              77002

               

            
	
              Penn
                Tex Energy, Inc.

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              2822522

            	
              23-2933817

            	
              1975
                Waddle Road

              State
                College, PA 16803

               

              1965
                Waddle Road

              State
                College, PA

              16803

               

            
	
              PennTex
                Resources, L.P.

              1975
                Waddle Road

              State
                College, PA 16803

               

               

            	
              None

            	
              Texas

            	
              Not
                Applicable

            	
              10295910

            	
              23-2933816

            	
              1975
                Waddle Road

              State
                College, PA 16803

               

              1965
                Waddle Road

              State
                College, PA

              16803

               

            
	
              Rex
                Energy Marketing, LLC

              1975
                Waddle Road

              State
                College, PA 16803

               

            	
              None

            	
              Delaware

            	
              Not
                Applicable

            	
              4256285

            	
              20-5956080

            	
              1975
                Waddle Road

              State
                College, PA 16803

            


    

    


    
      
        
                

                          
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      7.18

    GAS
      IMBALANCES

     

    


    None.

    


    


     

    


    
      
        
                

                           
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    
      	
              SCHEDULE
                7.19

            


    

    
      	
              MARKETING
                CONTRACTS

            


    

     

    


    Long
      Term Crude Oil Sales Agreements

     

    None.

    


    Long
      Term Natural Gas Sales Agreements

     

    None.

    


    
      
        
                

                          
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      7.20

    SWAP
      AGREEMENTS

     

    


     

    
      	
              Derivative
                Instrument

            	
               

               

               

              Counter-

              party

            	
              Notional

              Volume

              (Mcf)

            	
              Notional

              Volume

              (Bls)

            	
              Period

            	
              Floor

              Price

            	
              Ceiling

              Price

            	
              Fixed

              Price

            	
              Fair
                Market

              Value

            
	 	 	 	 	 	 	 	 	 
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
                    84,000

            	
              Sep.
                07 - Dec. 07

            	 	 	
               $
                65.00

            	
                $     (669,790)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
                      12,000

            	
              Sep.
                07 - Dec. 07

            	 	 	
               $
                64.75

            	
                       (117,389)

            
	
              Swap
                Contracts

            	
              Shell

            	
              -

            	
                        1,000

            	
              Sep.
                07 - Sep. 07

            	 	 	
               $
                59.75

            	
                       (26,576)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
                      40,000

            	
              -

            	
              Sep.
                07 - Dec. 07

            	 	 	
               $   7.54

            	
                          53,431

            
	
              Collars

            	
              Shell

            	
                    160,000

            	
              -

            	
              Sep.
                07 - Dec. 07

            	
               $   8.00

            	
               $
                14.65

            	 	
                       315,193

            
	
              Collars

            	
              Shell

            	
              -

            	
                      32,000

            	
              Sep.
                07 - Dec. 07

            	
               $
                40.00

            	
               $
                42.55

            	 	
                  (952,145)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
              12,000

            	
              Sep.
                07 - Dec. 07

            	 	 	
              $
                68.24

            	
              (64,935)

            
	
              Swap
                Contracts

            	
              Shell

            	
              -

            	
                      16,000

            	
              Sep.
                07 - Dec. 07

            	 	 	
               $
                68.25

            	
                       (86,391)

            
	
              Collars

            	
              Shell

            	
              -

            	
                      16,000

            	
              Sep.
                07 - Dec. 07

            	
               $
                55.00

            	
               $
                61.25

            	 	
                     (228,969)

            
	
              Collars

            	
              Shell

            	
              -

            	
                      8,000

            	
              Sep.
                07 - Dec. 07

            	
               $
                70.00

            	
               $
                82.60

            	 	
                          10,816

            
	
              Collars

            	
              Shell

            	
                    80,000

            	
              -

            	
              Sep.
                07 - Dec. 07

            	
               $   6.67

            	
               $
                12.95

            	 	
                          58,652

            
	
              Collars

            	
              Shell

            	
              -

            	
                      28,000

            	
              Sep.
                07 - Dec. 07

            	
               $
                50.00

            	
               $
                73.40

            	 	
                      (66,843)

            
	
              Collars

            	
              Shell

            	
              -

            	
                      88,000

            	
              Sep.
                07 - Jul. 08

            	
               $
                65.00

            	
               $
                76.00

            	 	
                       (24,508)

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                    136,000

            	
              Jan.
                08 - Aug. 08

            	 	 	
              $
                65.58

            	
                       (520,169)

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                      49,000

            	
              Jan.
                08 - Jul. 08

            	
               $
                62.00

            	
               $
                70.00

            	 	
                     (166,211)

            
	
              Collars

            	
              KeyBank

            	
                    400,000

            	
              -

            	
              Jan.
                08 - Aug. 08

            	
               $   7.00

            	
               $   9.35

            	 	
                     41,494

            
	
              Collars

            	
              KeyBank

            	
                    160,000

            	
              -

            	
              Jan.
                08 - Aug. 08

            	
               $   7.00

            	
               $   8.80

            	 	
                     (3,169)

            
	
              Collars

            	
              Shell

            	
              -

            	
                    96,000

            	
              Jan.
                08 - Aug. 08

            	
               $
                60.00

            	
               $
                89.25

            	 	
                          131,126

            
	
              Collars

            	
              Shell

            	
              -

            	
                      5,000

            	
              Aug.
                08 - Aug 08

            	
               $
                65.00

            	
               $
                76.05

            	 	
              3,741

            
	
              Collars

            	
              Shell

            	
              -

            	
                      35,000

            	
              Feb.
                08 - Aug. 08

            	
               $
                65.00

            	
               $
                80.20

            	
               

            	
              $           47,689

            
	
              Total
                Current Portion

            	 	
                    840,000

            	
                    618,000

            	 	 	 	 	
               $
                (2,264,993)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
                    68,000

            	
              Sep.
                08 - Dec. 08

            	 	 	
               $
                65.58

            	
                     (371,549)

            
	
              Collars

            	
              KeyBank

            	
                    200,000

            	
              -

            	
              Sep.
                08 - Dec. 08

            	
               $   7.00

            	
               $   9.35

            	 	
                     20,747

            
	
              Collars

            	
              Shell

            	
              -

            	
                      48,000

            	
              Sep.
                08 - Dec. 08

            	
               $
                60.00

            	
               $
                89.25

            	 	
                          65,563

            
	
              Collars

            	
              Shell

            	
              -

            	
                      20,000

            	
              Sep.
                08 - Dec. 08

            	
               $
                65.00

            	
               $
                80.20

            	 	
                            27,251

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                      32,000

            	
              Sep.
                08 - Dec. 08

            	
               $
                62.00

            	
               $
                69.10

            	 	
                     (132,888)

            
	
              Collars

            	
              Shell

            	
              -

            	
                      55,000

            	
              Sep.
                08 - Jul. 09

            	
               $
                65.00

            	
               $
                76.05

            	 	
                       41,151

            
	
              Collars

            	
              KeyBank

            	
                    80,000

            	
              -

            	
              Sep.
                08 - Dec. 08

            	
               $   7.00

            	
               $   8.80

            	 	
                     (1,585)

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                    175,000

            	
              Jan.
                09 - Jul. 09

            	
               $
                62.00

            	
               $
                67.80

            	 	
                  (611,233)

            
	
              Collars

            	
              KeyBank

            	
                    600,000

            	
              -

            	
              Jan.
                09 - Dec. 09

            	
               $   7.00

            	
               $   9.00

            	 	
                     (181,762)

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                    140,000

            	
              Aug.
                09 - Dec. 09

            	
               $
                62.00

            	
               $
                66.10

            	 	
                    (802,572)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
                    192,000

            	
              Jan.
                09 - Dec. 09

            	 	 	
               $
                64.00

            	
                   (893,168)

            
	
              Swap
                Contracts

            	
              KeyBank

            	
              -

            	
                    180,000

            	
              Jan.
                10 - Dec. 10

            	 	 	
               $
                62.20

            	
                   (971,154)

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                    180,000

            	
              Jan.
                10 - Dec. 10

            	
               $
                60.00

            	
               $
                77.20

            	 	
              47,562

            
	
              Collars

            	
              KeyBank

            	
              -

            	
                    108,000

            	
              Jan.
                10 - Dec. 10

            	
               $
                60.00

            	
               $
                80.00

            	 	
               $    31,391

            
	
              Total
                Long-Term Portion

            	 	
                    880,000

            	
                 1,198,000

            	 	 	 	 	
                $
                (3,732,246)

            
	
              Total
                Derivative Instruments

            	 	
                 1,720,000

            	
                 1,816,000

            	 	 	 	 	
               $
                (5,997,239)

            


    

    


    
      
        
                

                           
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    SCHEDULE
      9.02

    EXISTING
      DEBT

    


     

    None.

     

    


     

    


    
      
        
                

                
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      9.03

    EXISTING
      LIENS

    


    


    None.

     

    


    


    
      
        
                

                                                          
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      9.05

    INVESTMENTS

     

    Rex
      Energy I, LLC owns all of the outstanding membership interest of Rex Energy
      Marketing, LLC, a Delaware limited liability company.

     

    Rex
      Energy Operating Corp. owns a 24.75% limited partnership interest in Charlie
      Brown II Limited Partnership, a Delaware limited partnership, and a 25%
      membership interest in its general partner, L&B Air LLC, a Delaware limited
      liability company.

     

    


    
      
        
                

                                                        
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      9.14

    EXISTING
      AFFILIATE TRANSACTIONS

     

    Clerical,
      administrative and management services provided by Shaner Hotel Group Limited
      Partnership relating to the administration of Rex Energy Operating Corp.’s
      401(k) retirement plan pursuant to a Service Provider Agreement, dated April
      1,
      2007, between Shaner Hotel Group Limited Partnership and Rex Energy Operating
      Corp.

     

    Tax
      planning and preparation services provided by Shaner Hotel Group Limited
      Partnership pursuant to a Tax Return Engagement Letter Agreement, dated April
      13, 2007, between Shaner Hotel Group Limited Partnership and Rex Energy
      Operating Corp.

     

    The
      leasing of the Borrower’s headquarters office building located at 1975 Waddle
      Road, State College, Pennsylvania 16803 pursuant to a Lease Agreement, dated
      September 1, 2006, between Shaner Brothers, LLC and Rex Energy Operating
      Corp.

     

    The
      use
      of two airplanes owned by Charlie Brown Air Corp. pursuant to an oral
      month-to-month agreement between Rex Energy Operating Corp. and Charlie Brown
      Air Corp.

     

    The
      use
      of an Eclipse 500 Airplane to be owned by Charlie Brown II Limited Partnership
      pursuant to the terms of (i) the Amended and Restated Limited Liability Company
      Agreement, dated June 21, 2007, of L&B Air LLC, (ii) the Amended and
      Restated Limited Partnership Agreement, dated June 21, 2007, of Charlie
      Brown II Limited Partnership and (iii) the First Amended and Restated Aircraft
      Joint Ownership and Management Agreement, dated June 21, 2007, between Charlie
      Brown Air Corp. and Charlie Brown II Limited Partnership.

     

    


     

    


    
      
        
                

                                                       
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      9.16

    EXISTING
      NEGATIVE PLEDGE AGREEMENTS; DIVIDEND RESTRICTIONS

     

    None.