Document:

ex10-2.htm

    
      

    

    Exhibit
10.2

     

    

    AMENDED
AND RESTATED CREDIT AGREEMENT

     

    Dated
as of April 28, 2008

     

    Among

     

    ISRAMCO
RESOURCES, LLC

    as
Borrower,

     

    THE
BANK OF NOVA SCOTIA,

    as
Administrative Agent,

     

    CAPITAL
ONE, N.A.,

    as
Syndication Agent

     

    and

     

    THE
LENDERS SIGNATORY HERETO

     

    _____________________________________________________________________________________

    

     

    SCOTIA
CAPITAL,

     

    as
Lead Arranger and Sole Bookrunner

     

    $150,000,000
Senior Secured Revolving Credit Facility

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE OF
CONTENTS

    Page

     

    
      	
              ARTICLE
      I Definitions and Accounting Matters, Etc.

            	
              1

            
	 	 	 
	
              Section
      1.01

            	
              Terms
      Defined Above

            	
              1

            
	
              Section
      1.02

            	
              Certain
      Defined Terms

            	
              1

            
	
              Section
      1.03

            	
              Accounting
      Terms and Determinations

            	
              14

            
	
              Section
      1.04

            	
              References;
      Use of Word “Including”

            	
              14

            
	 	 	 
	
              ARTICLE
      II Commitments

            	
              15

            
	 	 
	
              Section
      2.01

            	
              Loans
      and Letters of Credit

            	
              15

            
	
              Section
      2.02

            	
              Borrowings,
      Continuations and Conversions, Letters of Credit

            	
              15

            
	
              Section
      2.03

            	
              Changes
      of Commitments

            	
              17

            
	
              Section
      2.04

            	
              Fees

            	
              17

            
	
              Section
      2.05

            	
              Several
      Obligations

            	
              18

            
	
              Section
      2.06

            	
              Notes

            	
              18

            
	
              Section
      2.07

            	
              Prepayments

            	
              19

            
	
              Section
      2.08

            	
              Borrowing
      Base

            	
              20

            
	
              Section
      2.09

            	
              Overadvance
      Amount

            	
              22

            
	
              Section
      2.10

            	
              Assumption
      of Risks

            	
              22

            
	
              Section
      2.11

            	
              Obligation
      to Reimburse and to Prepay

            	
              23

            
	
              Section
      2.12

            	
              Lending
      Offices

            	
              24

            
	 	 	 
	
              ARTICLE
      III Payments of Principal and Interest

            	
              24

            
	 	 	 
	
              Section
      3.01

            	
              Repayment
      of Loans

            	
              24

            
	
              Section
      3.02

            	
              Interest

            	
              24

            
	 	 	 
	
              ARTICLE
      IV Payments; Pro Rata Treatment; Computations;
      Etc.

            	
              25

            
	 	 
	
              Section
      4.01

            	
              Payments

            	
              25

            
	
              Section
      4.02

            	
              Pro Rata Treatment

            	
              26

            
	
              Section
      4.03

            	
              Computations

            	
              26

            
	
              Section
      4.04

            	
              Non-receipt
      of Funds by Administrative Agent

            	
              26

            
	
              Section
      4.05

            	
              Set-off,
      Sharing of Payments, Etc.

            	
              26

            
	
              Section
      4.06

            	
              Taxes

            	
              27

            
	
              Section
      4.07

            	
              Disposition
      of Proceeds

            	
              30

            
	 	 	 
	
              ARTICLE
      V Capital Adequacy and Additional Costs

            	
              30

            
	 	 
	
              Section
      5.01

            	
              Additional
      Costs

            	
              30

            
	
              Section
      5.02

            	
              Limitation
      on LIBOR Loans

            	
              31

            
	
              Section
      5.03

            	
              Illegality

            	
              32

            
	
              Section
      5.04

            	
              Base
      Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03

            	
              32

            
	
              Section
      5.05

            	
              Compensation

            	
              32

            
	 	 	 
	ARTICLE
      VI Conditions Precedent 32	 
      
	 	 
	
              Section
      6.01

            	
              Initial
      Funding

            	
              32

            
	
              Section
      6.02

            	
              Initial
      and Subsequent Loans and Letters of Credit

            	
              34

            
	
              Section
      6.03

            	
              Conditions
      Precedent for the Benefit of Lenders

            	
              35

            
	
              Section
      6.04

            	
              No
      Waiver

            	
              35

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE
      VII Representations and Warranties

            	
              35

            
	 	 
	
              Section
      7.01

            	
              Existence

            	
              35

            
	
              Section
      7.02

            	
              Financial
      Condition

            	
              35

            
	
              Section
      7.03

            	
              Litigation

            	
              36

            
	
              Section
      7.04

            	
              No
      Breach

            	
              36

            
	
              Section
      7.05

            	
              Authority

            	
              36

            
	
              Section
      7.06

            	
              Approvals

            	
              36

            
	
              Section
      7.07

            	
              Use
      of Loans

            	
              36

            
	
              Section
      7.08

            	
              ERISA

            	
              36

            
	
              Section
      7.09

            	
              Taxes

            	
              37

            
	
              Section
      7.10

            	
              Titles,
      Etc.

            	
              37

            
	
              Section
      7.11

            	
              No
      Material Misstatements

            	
              38

            
	
              Section
      7.12

            	
              Investment
      Company Act

            	
              38

            
	
              Section
      7.13

            	
              Subsidiaries

            	
              38

            
	
              Section
      7.14

            	
              Location
      of Business and Offices, Etc.

            	
              38

            
	
              Section
      7.15

            	
              Defaults

            	
              38

            
	
              Section
      7.16

            	
              Environmental
      Matters

            	
              38

            
	
              Section
      7.17

            	
              Compliance
      with the Law

            	
              39

            
	
              Section
      7.18

            	
              Insurance

            	
              40

            
	
              Section
      7.19

            	
              Hedging
      Agreements

            	
              40

            
	
              Section
      7.20

            	
              Restriction
      on Liens

            	
              40

            
	
              Section
      7.21

            	
              Material
      Agreements

            	
              40

            
	
              Section
      7.22

            	
              Solvency

            	
              41

            
	
              Section
      7.23

            	
              Gas
      Imbalances

            	
              41

            
	
              Section
      7.24

            	
              Permits,
      Licenses, Franchises, Patents and Trademarks

            	
              41

            
	 	 	 
	
              ARTICLE
      VIII Affirmative Covenants

            	
              41

            
	 	 
	
              Section
      8.01

            	
              Reporting
      Requirements

            	
              41

            
	
              Section
      8.02

            	
              Litigation

            	
              43

            
	
              Section
      8.03

            	
              Maintenance,
      Etc.

            	
              43

            
	
              Section
      8.04

            	
              Environmental
      Matters

            	
              44

            
	
              Section
      8.05

            	
              Further
      Assurances

            	
              45

            
	
              Section
      8.06

            	
              Performance
      of Obligations

            	
              45

            
	
              Section
      8.07

            	
              Engineering
      Reports

            	
              45

            
	
              Section
      8.08

            	
              Title
      Information

            	
              46

            
	
              Section
      8.09

            	
              Collateral;
      Additional Guarantors

            	
              47

            
	
              Section
      8.10

            	
              ERISA
      Information and Compliance

            	
              47

            
	
              Section
      8.11

            	
              Hedging
      Agreements

            	
              48

            
	 	 	 
	
              ARTICLE
      IX Negative Covenants

            	
              48

            
	 	 
	
              Section
      9.01

            	
              Debt

            	
              48

            
	
              Section
      9.02

            	
              Liens

            	
              49

            
	
              Section
      9.03

            	
              Investments,
      Loans and Advances

            	
              49

            
	
              Section
      9.04

            	
              Dividends,
      Distributions and Redemptions

            	
              50

            
	
              Section
      9.05

            	
              Sales
      and Leasebacks

            	
              50

            
	
              Section
      9.06

            	
              Nature
      of Business

            	
              50

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Section
      9.07

            	
              Mergers,
      Etc.

            	
              50

            
	
              Section
      9.08

            	
              Proceeds
      of Notes; Letters of Credit

            	
              50

            
	
              Section
      9.09

            	
              ERISA
      Compliance

            	
              50

            
	
              Section
      9.10

            	
              Sale
      or Discount of Receivables

            	
              51

            
	
              Section
      9.11

            	
              Financial
      Covenants

            	
              51

            
	
              Section
      9.12

            	
              Sale
      of Properties

            	
              52

            
	
              Section
      9.13

            	
              Environmental
      Matters

            	
              52

            
	
              Section
      9.14

            	
              Transactions
      with Affiliates

            	
              52

            
	
              Section
      9.15

            	
              Subsidiaries

            	
              52

            
	
              Section
      9.16

            	
              Negative
      Pledge Agreements

            	
              53

            
	
              Section
      9.17

            	
              Gas
      Imbalances, Take-or-Pay or Other Prepayments

            	
              53

            
	
              Section
      9.18

            	
              Material
      Operational Agreements

            	
              53

            
	 	 	 
	
              ARTICLE
      X Events of Default; Remedies

            	
              53

            
	 	 
	
              Section
      10.01

            	
              Events
      of Default

            	
              53

            
	
              Section
      10.02

            	
              Remedies

            	
              55

            
	 	 	 
	
              ARTICLE
      XI Administrative Agent

            	
              55

            
	 	 
	
              Section
      11.01

            	
              Appointment,
      Powers and Immunities

            	
              55

            
	
              Section
      11.02

            	
              Reliance
      by Administrative Agent

            	
              56

            
	
              Section
      11.03

            	
              Defaults

            	
              56

            
	
              Section
      11.04

            	
              Rights
      as a Lender

            	
              56

            
	
              Section
      11.05

            	
              Indemnification

            	
              56

            
	
              Section
      11.06

            	
              Non-Reliance
      on Administrative Agent and other Lenders

            	
              57

            
	
              Section
      11.07

            	
              Action
      by Administrative Agent

            	
              57

            
	
              Section
      11.08

            	
              Resignation
      of Administrative Agent

            	
              57

            
	 	 	 
	
              ARTICLE
      XII Miscellaneous

            	
              58

            
	 	 
	
              Section
      12.01

            	
              Waiver

            	
              58

            
	
              Section
      12.02

            	
              Notices

            	
              58

            
	
              Section
      12.03

            	
              Payment
      of Expenses, Indemnities, Etc.

            	
              58

            
	
              Section
      12.04

            	
              Amendments,
      Etc.

            	
              60

            
	
              Section
      12.05

            	
              Successors
      and Assigns

            	
              61

            
	
              Section
      12.06

            	
              Assignments
      and Participations

            	
              61

            
	
              Section
      12.07

            	
              Invalidity

            	
              62

            
	
              Section
      12.08

            	
              Counterparts;
      Electronic Delivery of Signature Page

            	
              62

            
	
              Section
      12.09

            	
              Survival

            	
              62

            
	
              Section
      12.10

            	
              Captions

            	
              63

            
	
              Section
      12.11

            	
              No
      Oral Agreements

            	
              63

            
	
              Section
      12.12

            	
              Governing
      Law; Submission to Jurisdiction

            	
              63

            
	
              Section
      12.13

            	
              Interest

            	
              64

            
	
              Section
      12.14

            	
              Confidentiality

            	
              65

            
	
              Section
      12.15

            	
              Hedging
      Agreement Security

            	
              65

            
	
              Section
      12.16

            	
              USA
      Patriot Act

            	
              65

            
	
              Section
      12.17

            	
              Exculpation
      Provisions

            	
              66

            
	
              Section
      12.18

            	
              Prior
      Credit Agreement

            	
              66

            
	
              Section
      12.19

            	
              Ratification
      of Security Instruments

            	
              66

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ANNEXES,
EXHIBITS AND SCHEDULES

    

    

    Annex
I - List of Percentage Shares  and Maximum Revolving Credit
Amounts

     

    
      	
              Exhibit
      A

            	
              -
      Form of Note

            
	
              Exhibit
      B

            	
              -
      Form of Borrowing, Continuation and Conversion Request

            
	
              Exhibit
      C

            	
              -
      Form of Compliance Certificate

            
	
              Exhibit
      D

            	
              -
      Security Instruments

            
	
              Exhibit
      E

            	
              -
      Form of Assignment Agreement

            
	
              Exhibit
      F

            	
              -
      Form of Reserve Report Certificate

            
	
              Exhibit
      G

            	
              -
      Form of Letter-in-Lieu

            
	 
      	 
      
	
              Schedule
      7.02

            	
              -
      Liabilities

            
	
              Schedule
      7.03

            	
              -
      Litigation

            
	
              Schedule
      7.09

            	
              -
      Taxes

            
	
              Schedule
      7.10

            	
              -
      Titles, etc.

            
	
              Schedule
      7.13

            	
              -
      Subsidiaries, Etc.

            
	
              Schedule
      7.14

            	
              -
      Location of Business and Offices, Etc.

            
	
              Schedule
      7.17

            	
              -
      Environmental Matters

            
	
              Schedule
      7.18

            	
              -
      Insurance

            
	
              Schedule
      7.19

            	
              -
      Hedging Agreements

            
	
              Schedule
      7.21

            	
              -
      Material Agreements

            
	
              Schedule
      7.22

            	
              -
      Gas Imbalances

            
	
              Schedule
      9.01

            	
              -
      Debt

            
	
              Schedule
      9.02

            	
              -
      Liens

            
	
              Schedule
      9.03

            	
              -
      Investments, Loans and Advances

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    THIS AMENDED AND RESTATED CREDIT
AGREEMENT dated as of April 28, 2008 is among ISRAMCO RESOURCES, LLC,
limited liability company formed under the laws of the State of Texas (the
“Borrower”);
each of the lenders that is a signatory hereto or which becomes a signatory
hereto as provided in Section 12.06 (individually, together with its successors
and assigns, a “Lender” and,
collectively, the “Lenders”); THE BANK OF NOVA SCOTIA (in
its individual capacity, “Scotia Capital”), as
agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Administrative
Agent”) and CAPITAL ONE,
N.A., a national banking association, as Syndication Agent.

     

    R E C I T A L
S

     

    A.           Borrower
has requested that the Lenders amend and restate the Existing Obligations (as
defined in Section 1.02); and

     

    B.           The
Lenders have agreed to amend and restated the Existing Obligations and to make
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, the
loans, extensions of credit and commitments hereinafter referred to and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Prior Credit Agreement (as
defined in Section 1.02) is hereby amended and restated as follows:

     

    ARTICLE
I

     

    Definitions and Accounting
Matters,
Etc.

     

    Section
1.01      Terms Defined
Above.  As
used in this Agreement, the terms defined in the opening paragraph and the
Recitals above shall have the meanings indicated therein.

     

    Section
1.02      Certain Defined
Terms.  As
used herein, the following terms shall have the following meanings (all terms
defined in this Article I or in other provisions of this Agreement in the
singular to have equivalent meanings when used in the plural and vice
versa):

     

    “Additional Costs”
shall have the meaning assigned such term in Section 5.01(a).

     

    “Affected Loans” shall
have the meaning assigned such term in Section 5.04.

     

    “Affiliate” of any
Person shall mean (i) any Person directly or indirectly controlled by,
controlling or under common control with such first Person, (ii) any director or
officer of such first Person or of any Person referred to in clause (i) above
and (iii) if any Person in clause (i) above is an individual, any member of the
immediate family (including parents, spouse and children) of such individual and
any trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member or
trust.  For purposes of this definition, any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to “control” (including,
with its correlative meanings, “controlled by” and
“under common control
with”) such corporation or other Person.

     

    “Agreement” shall mean
this Amended and Restated Credit Agreement, as the same may from time to time be
amended or supplemented.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Aggregate
Commitments” at any time shall equal the amount calculated in accordance
with Section 2.03.

     

    “Aggregate Maximum Revolving
Credit Amounts” at any time shall equal the sum of the Maximum Revolving
Credit Amounts of the Lenders, as the same may be reduced pursuant to Section
2.03(b).  As of the Closing Date, the Aggregate Maximum Revolving
Credit Amounts equal $150,000,000.

     

    “Applicable Lending
Office” shall mean, for each Lender and for each Type of Loan, the
lending office of such Lender (or an Affiliate of such Lender) designated for
such Type of Loan on the signature pages hereof or such other offices of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to time
specify to Administrative Agent and Borrower as the office by which its Loans of
such Type are to be made and maintained.

     

    “Applicable Margin”
shall mean the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the Borrowing Base Utilization
as in effect from time to time:

     

    
      	
              Borrowing
      Base Utilization

            	
              Applicable
      Margin

            
	 
      	
              LIBOR
      Loans

            	
              Base
      Rate Loans

            
	
              Less
      than 50%

            	
              1.25%

            	
              0.25%

            
	
              Greater
      than or equal to 50%, but less than 75%

            	
              1.50%

            	
              0.50%

            
	
              Greater
      than or equal to 75%, but less than 90%

            	
              1.75%

            	
              0.75%

            
	
              Greater
      than or equal to 90%, but less than or equal to 100%

            	
              2.00%

            	
              1.00%

            
	
              Greater
      than 100%

            	
              2.25%

            	
              1.25%

            

    

    

     

    ;provided, however, at any time
that a Borrowing Base Deficiency exists, “Applicable Margin” shall mean 4.00%
for LIBOR Loans and 3.00% for Base Rate Loans.

     

    Each
change in the Applicable Margin resulting from a change in the Borrowing Base
Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs.

     

    “Assignment” shall
have the meaning assigned such term in Section 12.06(b).

     

    “Bank Products” means
any financial accommodation extended to Borrower or its Subsidiaries by any
Lender or any Lender Affiliate, including, without limitation: (i) credit cards,
(ii) credit card processing services, (iii) debit cards, (iv) purchase cards,
and (v) any overdraft or unpaid amount relating to cash management, including
controlled disbursement, accounts or services.

     

    “Base Rate” shall
mean, with respect to
any Base Rate Loan, for any day, the higher of (i) the Federal Funds Rate for
any such day plus 1/2 of 1% or (ii) the Prime Rate for such day.  Each
change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of such
change in the Base Rate.

     

    “Base Rate Loans”
shall mean Loans that bear interest at rates based upon the Base
Rate.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Beneficiaries” shall
mean Administrative Agent, the Lenders, each Issuing Bank and each Affiliate of
a Lender that is a party to a Hedging Agreement with Borrower.

     

    “Borrowing Base” shall
mean at any time an amount equal to the amount determined in accordance with
Section 2.08, plus, during the period from and after the Closing Date until
September 30, 2008, the Overadvance Amount.

     

    "Borrowing Base
Deficiency" shall mean, and occur when, the amount by which the sum of
(i) the aggregate outstanding principal amount of the Loans, plus (ii) the LC
Exposure, exceeds the Borrowing Base, whether as the result of a
redetermination, a scheduled reduction, or otherwise.

     

    “Borrowing Base
Utilization” shall mean at any time, an amount equal to the quotient of
(i) the aggregate principal amount of Loans outstanding plus LC Exposure,
divided by (ii) the Borrowing Base, excluding the Overadvance
Amount.

     

    “Business Day” shall
mean any day other than a day on which commercial banks are authorized or
required to close in Texas and, if such day relates
to a borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a LIBOR
Loan or a notice by 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 Securities”
means, with respect to any Person, any and all shares, units representing
interests, participations, rights in or other equivalents (however designated)
of such Persons capital stock, including (x) with respect to partnerships,
partnership interests (whether general or limited) and any other interest or
participation that confers upon a Person the right to receive a share of the
profits and losses of, or distributions of assets of, such partnership, (y) with
respect to limited liability companies, member interests, and (z) with respect
to any Person, any rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible into such capital
stock.

     

    “Change of Control”
means the occurrence of an event the result of which is that Parent shall cease
to own, directly or indirectly, 100% of the outstanding shares of voting Capital
Securities of Borrower on a fully-diluted basis.

     

    “Charter Documents”
shall mean , as applicable for any Person that is not an individual, the
articles or certificate of incorporation or formation, certificate of limited
partnership, regulations, bylaws, operating agreement, partnership or limited
partnership agreement, and all similar documents related to the formation and
governance of that Person, together with all amendments thereto.

     

    “Closing Date” shall
mean April 28, 2008.

     

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

     

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

     

    “Commitment” shall
mean, for any Lender, its obligation to make Loans and to participate in the
Letters of Credit as provided in Section 2.01(b) up to the lesser of (i) such
Lender’s Maximum Revolving Credit Amount and (ii) the Lender’s Percentage Share
of the amount equal to the then effective Borrowing Base.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Compliance
Certificate” shall mean a certificate from Borrower substantially in the
form of Exhibit
C.

     

    “Consolidated Net
Income” shall mean with respect to Borrower and its Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of
Borrower and its 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: (i) the net income of any Person in which 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
Borrower and its Consolidated Subsidiaries in accordance with GAAP), except to
the extent of the amount of dividends or distributions actually paid in such
period by such other Person to Borrower or to a Consolidated Subsidiary, as the
case may be; (ii) the net income (but not loss) 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; (iii) 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; (iv) any extraordinary gains or losses, including gains or losses
attributable to Property sales not in the ordinary course of business; and (v)
the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or write downs of assets.

     

    “Consolidated
Subsidiaries” shall mean each Subsidiary of a Person (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
such Person in accordance with GAAP.  Unless otherwise indicated, each
reference to the term “Consolidated Subsidiary” shall mean a Subsidiary
consolidated with Borrower.

     

    “Debt” shall mean, for
any Person the sum of the following (without duplication): (i) all obligations
of such Person for borrowed money or evidenced by bonds, debentures, notes or
other similar instruments (including principal, interest, fees and charges);
(ii) all obligations of such Person (whether contingent or otherwise) in respect
of bankers’ acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred purchase
price of Property or services (other than for borrowed money); (iv) all
obligations under leases which shall have been, or should have been, in
accordance with GAAP, recorded as capital leases in respect of which such Person
is liable (whether contingent or otherwise); (v) all obligations of such Person
under “synthetic lease” transactions or other off balance sheet financings; (vi)
all Debt (as described in the other clauses of this definition) and other
obligations of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person; (vii) all Debt (as described in the
other clauses of this definition) and other obligations of others guaranteed by
such Person or in which such Person otherwise assures a creditor against loss of
the debtor or obligations of others; (viii) 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; (ix)
obligations to deliver goods or services including
Hydrocarbons in
consideration of advance payments, except as permitted by Section 9.17 and
disclosed in a Reserve Report Certificate; (x) obligations to pay for goods or
services whether or not such goods or services are actually received or utilized
by such Person; (xi) any capital stock of such Person in which such Person has a
mandatory obligation to redeem such stock; (xii) any Debt of a Subsidiary for
which such Person is liable either by agreement or because of a Governmental
Requirement; (xiii) the undischarged balance of any production payment created
by such Person or for the creation of which such Person directly or indirectly
received payment; and (xiv) all obligations of such Person under Hedging
Agreements.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

    “Dollars” and “$” shall mean lawful
money of the United States of America.

     

    “EBITDA” shall mean,
for any period, without duplication, the sum of Consolidated Net Income, plus
the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: (i) interest expense, income taxes, depreciation,
depletion, and amortization, plus (ii) other non-cash items reducing
Consolidated Net Income.]

     

    “Engineering Reports”
shall have the meaning assigned such term in Section 2.08.

     

    “Environmental Laws”
shall mean any and all Governmental Requirements pertaining to health or the
environment in effect in any and all jurisdictions in which Borrower or any
Subsidiary is conducting or at any time has conducted business, or where any
Property of Borrower or any Subsidiary is located, including without limitation,
the Oil Pollution Act of 1990 (“OPA”), 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 laws.  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, and
the terms “solid waste” and “disposal” (or “disposed”) have the meanings
specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA 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 (ii) to the extent the laws of the state in
which any Property of Borrower or any Subsidiary is located establish a meaning
for “oil,” “hazardous substance,” “release,” “solid waste” or “disposal” which
is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply.

     

    “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to time
and any successor statute.

     

    “ERISA Affiliate”
shall mean each trade or business (whether or not incorporated) which together
with Borrower or any 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” shall
mean (i) a “Reportable Event” described in Section 4043 of ERISA and the
regulations issued thereunder, (ii) the withdrawal of Borrower, any 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, (iii) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC or (v) 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.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Excepted Liens” shall
mean:  (i) Liens for taxes, assessments or other governmental charges
or levies not yet due or which are being contested in good faith by appropriate
action and for which adequate reserves have been maintained; (ii) Liens in
connection with workmen’s compensation, unemployment insurance or other social
security, old age pension or public liability obligations not yet due or which
are being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (iii) operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, workmen’s,
materialmen’s, construction or other like Liens arising by operation of law in
the ordinary course of business or incident to the exploration, development,
operation and maintenance of Oil and Gas Properties or statutory landlord’s
liens, each of which is in respect of obligations that have not been outstanding
more than 90 days or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been maintained in accordance
with GAAP; (iv) any Liens reserved in leases or farmout agreements for rent or
royalties and for compliance with the terms of the farmout agreements or leases
in the case of leasehold estates, to the extent 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 Borrower or any
Subsidiary or materially impair the value of such Property subject thereto; (v)
encumbrances (other than to secure the payment of borrowed money or the deferred
purchase price of Property or services), easements, restrictions, servitudes,
permits, conditions, covenants, exceptions or reservations in any rights of way
or other Property of 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, and defects, irregularities, zoning restrictions and deficiencies in
title of any rights of way or other Property which in the aggregate do not
materially impair the use of such rights of way or other Property for the
purposes of which such rights of way and other Property are held by Borrower or
any Subsidiary or materially impair the value of such Property subject thereto;
(vi) deposits of cash or securities to secure the performance of bids, trade
contracts, leases, statutory obligations and other obligations of a like nature
incurred in the ordinary course of business; and (vii) Liens permitted by the
Security Instruments; provided, however,
that Liens described in clauses (i) through (vi) and (vii) 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 Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens.

     

    “Existing Loans” shall
mean the Loans, as defined in and made pursuant to the Prior Credit Agreement,
the outstanding principal balance of which, on the Closing Date, is
$­­­­­­­­­­­­­­­­­­­­­­­­­­­54,000,000.

     

    “Existing Obligations”
shall mean the outstanding Obligations, as defined in and existing under the
Prior Credit Agreement.

     

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

     

    “Fee Letter” shall
mean that certain letter agreement from Administrative Agent to Borrower, dated
as of February 14, 2008, concerning certain fees in connection with this
Agreement and any agreements or instruments executed in connection therewith, as
the same may be amended or replaced from time to time.

     

    “Funded Debt” shall
mean the sum of the following (without duplication): (i) all obligations of
Borrower and its Consolidated Subsidiaries for borrowed money or evidenced by
bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of Borrower and its
Consolidated Subsidiaries (whether contingent or otherwise) in respect of
bankers’ acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of Borrower and its Consolidated Subsidiaries
to pay the deferred purchase price of Property or services (other than for
borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which Borrower or any of its Consolidated Subsidiaries is liable (whether
contingent or otherwise).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “GFB Acquisition”
shall mean the acquisition of various Oil and Gas Properties of GFB
Acquisition-I, L.P. and Trans Republic Resources, Ltd. by Borrower, as assignee
of Jay Petroleum, LLC, pursuant to (i) that certain Purchase and Sale Agreement
dated February 15, 2008 between GFB Acquisition-I, L.P. and Jay Petroleum, LLC
and (ii) that certain Purchase and Sale Agreement dated February 15, 2008
between Trans Republic Resources, Ltd. and Jay Petroleum, LLC.

     

    “GAAP” shall mean
generally accepted accounting principles in the United States of America in
effect from time to time.

     

    “Governmental
Authority” shall include the country, the state, county, city and
political subdivisions in which any Person or such Person’s Property is located
or which exercises valid jurisdiction over any such Person or such Person’s
Property, and any court, agency, department, commission, board, bureau or
instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person’s
Property.  Unless otherwise specified, all references to Governmental
Authority herein shall mean a Governmental Authority having jurisdiction over,
where applicable, Borrower, its Subsidiaries or any of their Property or
Administrative Agent,
any Lender or any Applicable Lending Office.

     

    “Governmental
Requirement” shall mean any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

     

    “Guarantor” shall mean
all existing or hereafter acquired or created Subsidiaries of
Borrower.

     

    “Guaranty Agreement”
shall mean an agreement executed by each Guarantor in form and substance
satisfactory to Administrative Agent guarantying, unconditionally, payment of
the Obligations, as the same may be amended, modified or supplemented from time
to time.

     

    “Hedging Agreements”
shall mean any commodity, interest rate or currency swap, cap, floor, collar,
forward agreement or other exchange or protection agreements or any option with
respect to any such transaction.

     

    “Highest Lawful Rate”
shall mean, 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 any other Obligations under
laws applicable to such Lender which are presently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than applicable laws now
allow.

     

    “Hydrocarbon
Interests” shall mean 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.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

    “Indemnified Parties”
shall have the meaning assigned such term in Section 12.03(a)(ii).

     

    “Indemnity Matters”
shall mean any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, demands and causes of action
made or threatened against a Person and, in connection therewith, all losses,
liabilities, damages (including, without limitation, consequential damages) or
reasonable costs and expenses of any kind or nature whatsoever incurred by such
Person whether caused by the sole or concurrent negligence of such Person
seeking indemnification.

     

    “Initial Funding”
shall mean the funding of the initial Loans or issuance of the initial Letters
of Credit upon satisfaction of the conditions set forth in Sections 6.01 and
6.02.

     

    “Initial Reserve
Report” shall mean the report of Cawley, Gillespie &Associates, Inc.,
dated March 12, 2008 with respect to the Oil and Gas Properties being acquired
pursuant to the GFB Acquisition, as of January 1, 2008, a copy of which has been
delivered to Administrative Agent.

     

    “Interest Period”
shall mean, with respect to any LIBOR Loan, the period commencing on the date
such LIBOR Loan is made and ending on the numerically corresponding day in the
first, second, third, sixth or twelfth calendar month thereafter, as Borrower
may select as provided in Section 2.02 (or such longer period as may be
requested by Borrower and agreed to by the Majority Lenders), except that each
Interest Period which commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.

     

    Notwithstanding
the foregoing:  (i) no Interest Period may end after the Revolving
Credit Termination Date; (ii) no Interest Period for any LIBOR Loan may end
after the due date of any installment, if any, provided for in Section 3.01 to
the extent that such LIBOR Loan would need to be prepaid prior to the end of
such Interest Period in order for such installment to be paid when due; (iii)
each Interest Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iv) no Interest Period shall have a duration of less than
one month and, if the Interest Period for any LIBOR Loans would otherwise be for
a shorter period, such Loans shall not be available hereunder.

     

    “Issuing Bank” shall
mean Scotia Capital or any other Lender agreed to by Borrower and Administrative
Agent to issue Letters of Credit.

     

    “LC Commitment” at any
time shall mean $5,000,000.

     

    “LC Exposure” at any
time shall mean the aggregate face amount of all undrawn and uncancelled Letters
of Credit plus the aggregate of all amounts drawn under all Letters of Credit
and not yet reimbursed.

     

    “Lender Affiliate”
means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii)
any Person that is engaged in making, purchasing, holding or otherwise investing
in bank loans and similar extensions of credit in the ordinary course of its
business and is administered or managed by a Lender or an Affiliate of such
Lender and (b) with respect to any Lender that is a fund which invests in bank
loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment
advisor.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Letter of Credit
Agreements” shall mean the written agreements with the Issuing Bank, as
issuing lender for any Letter of Credit, executed in connection with the
issuance by the Issuing Bank of the Letters of Credit, such agreements to be on
the Issuing Bank’s customary form for letters of credit of comparable amount and
purpose as from time to time in effect or as otherwise agreed to by Borrower and
the Issuing Bank.

     

    “Letters of Credit”
shall mean the letters of credit issued pursuant to Section 2.01(b) and all
reimbursement obligations pertaining to any such letters of credit, and “Letter
of Credit” shall mean any one of the Letters of Credit and the reimbursement
obligations pertaining thereto.

     

    “Letter-in-Lieu” shall
mean a letter addressed to a Purchaser or in blank, substantially in the form of
Exhibit G.

     

    “LIBOR” shall mean,
for any LIBOR Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Dow Jones Market
Service Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period.  If for any reason such rate is not available,
the term “LIBOR” shall mean, for any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.  In the event that such rate
does not appear on either Dow Jones Market Service Page 3750 or Reuters Screen
LIBO Page, “LIBOR” shall be determined by Administrative Agent to be the rate
per annum at which deposits in Dollars are offered by leading reference banks in
the London interbank market to Scotia Capital at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of the applicable
Interest Period for a period equal to such Interest Period and in an amount
substantially equal to the amount of the applicable Loan.

     

    “LIBOR Loans” shall
mean Loans the interest rates on which are determined on the basis of rates
referred to in the definition of “LIBOR Adjusted Rate”.

     

    “LIBOR Adjusted Rate”
shall mean, with respect to any LIBOR Loan, a rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to
be equal to the quotient of (i) LIBOR for such Loan for the Interest Period for
such Loan divided by (ii) 1 minus the Reserve Requirement for such Loan for such
Interest Period.

     

    “Lien” shall mean 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 (i) 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 (ii) production payments and the like payable out of Oil and Gas
Properties.  The term “Lien” shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property.  For the purposes of this Agreement, Borrower or
any Subsidiary shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, or leases under a
financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person in a transaction intended to
create a financing.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Loan Documents” shall
mean this Agreement, the Notes, the Fee Letter, all Letters of Credit and the
Security Instruments.

     

    “Loans” shall mean the
Existing Loans and the loans as provided for by Sections 2.01(a).

     

    “Majority Lenders”
shall mean, at any time while no Loans are outstanding, Administrative Agent and
Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the
Aggregate Commitments and, at any time while Loans are outstanding,
Administrative Agent and Lenders holding at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans
(without regard to any sale by a Lender of a participation in any Loan under
Section 12.06(c)).

     

    “Material Adverse
Effect” shall mean any set of circumstances or events that (i) has
or could reasonably be expected to have any material and adverse effect
whatsoever upon, or result in or reasonably be expected to result in a material
adverse change in, (A) the assets, liabilities, financial condition,
business, operations or affairs of Borrower and its Subsidiaries taken as a
whole different from the facts represented or warranted in any Loan Document, or
(B) the ability of Borrower and its Subsidiaries taken as a whole to carry out
their business as at the Closing Date or as proposed as of the Closing Date to
be conducted or meet their obligations under the Loan Documents on a timely
basis, (ii) impairs materially or could be reasonably expected to impair
materially the ability of Borrower and its Subsidiaries to duly and punctually
pay and perform their obligations under the Loan Documents or (iii) impairs
materially or could reasonably be expected to impair materially the ability of
Administrative Agent or any of the Lenders, to the extent permitted, to enforce
its legal remedies pursuant to the Loan Documents, except, in all cases, for
depletions and routine changes which occur in the normal course of the day to
day ownership or operation of the wells or the Properties.

     

    “Material Agreements”
means, with respect to any Person, (i) all agreements, leases (other than oil
and gas leases), purchase agreements, joint venture agreements and other
agreements and contracts which are material to the business of such Person and
the ownership and operation of such Person’s Properties, including all
agreements and other instruments relating to the purchase, transportation,
processing, marketing, sale and supply of natural gas and other Hydrocarbons
that are not cancelable upon notice of not more than 60 days, and regardless,
any agreement or other instruments affecting such Person’s Oil and Gas
Properties which in the aggregate comprise more than five percent (5%) of the
value of such Person’s Oil and Gas Properties (ii) all indentures, letters of
credit, guarantees, and other instruments and agreements (other than Hedging
Agreements) providing for, evidencing, securing or otherwise relating to any
Debt of such Person, and all obligations of such Person to issuers of surety or
appeal bonds issued for account of such Person; and (iii) all amendments,
supplements or other modifications to any of the foregoing.  Unless
otherwise indicated herein, each reference to the term “Material Agreements”
means Material Agreements of Borrower and its Subsidiaries.

     

    “Maximum Revolving Credit
Amount” shall mean, as to each Lender, the amount set forth opposite such
Lender’s name on Annex
I under the caption “Maximum Revolving Credit Amounts” (as the same may
be reduced pursuant to Section 2.03(b) pro rata to each Lender based on its
Percentage Share), as modified from time to time to reflect any assignments
permitted by Section 12.06(b).

     

    “Multiemployer Plan”
shall mean a Plan defined as such in Section 3(37) or 4001(a)(3) of
ERISA.

     

    “Notes” shall mean the
Notes provided for by Section 2.06, together with any and all renewals,
extensions for any period, increases, rearrangements, substitutions or
modifications thereof.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    “Obligations” shall
mean all indebtedness, obligations and liabilities of Borrower or any Subsidiary
to any of the Lenders, any of the Lenders’ Affiliates, Administrative Agent, or
the Issuing Bank, individually or collectively, existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising or incurred under this Agreement, any Hedging Agreement, any
of the other Loan Documents or in respect of any of the Loans made,
reimbursement obligations incurred, any automated clearing house transactions,
any Bank Products or any of the Notes, Letters of Credit or other instruments at
any time evidencing any of the foregoing, and including interest accruing
subsequent to the filing of a petition or other action concerning bankruptcy or
other similar proceedings, and all renewals, extensions, refinancings and
replacements for the foregoing.

     

    “Oil and Gas
Properties” shall mean Hydrocarbon Interests; the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; 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; all operating agreements,
contracts and other 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; all Hydrocarbons in and under and
which may be produced and saved or attributable to the Hydrocarbon Interests,
including all oil in tanks, the lands covered thereby and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests; and 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 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.  Unless otherwise indicated herein, each
reference to the term “Oil and Gas Properties” shall mean the Oil and Gas
Properties of Borrower and/or its Subsidiaries.

     

    “Other Taxes” shall
have the meaning assigned such term in Section 4.06(b).

     

    “Overadvance Amount”
shall mean at any time the amount determined in accordance with Section
2.09.

     

    “Parent” shall mean
Isramco, Inc., a Delaware corporation.

     

    “PBGC” shall mean the
Pension Benefit Guaranty Corporation or any entity succeeding to any or all of
its functions.

     

    “Percentage Share”
shall mean the percentage of the Aggregate Commitments to be provided by a
Lender under this Agreement as indicated on Annex I hereto, as
modified from time to time to reflect any assignments permitted by Section
12.06(b).

     

    “Permitted Tax
Distributions” means distributions by Borrower to its members for the
payment of income tax liabilities resulting from being a member of Borrower, but
not to exceed 40% of the net income of Borrower in such calendar
year.

     

    
      
        
        

      

      
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    “Person” shall mean
any individual, corporation, company, voluntary association, partnership, joint
venture, trust, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of
entity.

     

    “Phoenix Agreement”
means that certain agreement between Borrower and Phoenix Hydrocarbon Operating
Corp for the continued operation on a contract basis of various of the Oil and
Gas Properties acquired by Borrower in the GFB Acquisition.

     

    “Plan” shall mean any
employee pension benefit plan, as defined in Section 3(2) of ERISA, which (i) is
currently or hereafter sponsored, maintained or contributed to by Borrower, any
Subsidiary or an ERISA Affiliate or (ii) was at any time during the preceding
six calendar years sponsored, maintained or contributed to, by Borrower, any
Subsidiary or an ERISA Affiliate.

     

    “Post Default Rate”
shall mean, in respect of any principal of any Loan (including LIBOR Loans after
the last day of the Interest Period therefore) or any other amount
payable by Borrower under this Agreement or any other Loan Document , a rate per
annum during the period commencing on the date of occurrence of an Event of
Default until such amount is paid in full or all Events of Default are cured or
waived equal to 2% per annum above the Base Rate as in effect from time to time
plus the Applicable Margin (if any), but in no event to exceed the Highest
Lawful Rate; provided, however, for a LIBOR
Loan, the “Post
Default Rate” for such principal shall be, for the period commencing on
the date of occurrence of an Event of Default and ending on the earlier to occur
of the last day of the Interest Period therefor or the date all Events of
Default are cured or waived, 2% per annum above the interest rate for such Loan
as provided in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful
Rate.

     

    “Prime Rate” shall
mean the variable per annum rate of interest then most recently announced within
Scotia Capital at its principal office in New York, as its "prime rate" for
loans made in Dollars in the United States, with the understanding that Scotia
Capital's "prime rate" is one of its base rates and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Scotia Capital may
designate.  Each change in any interest rate provided for herein based
upon the Prime Rate resulting from a change in the Prime Rate shall take effect
on the day the change is announced within Scotia Capital without notice to
Borrower at the time of such change in the Prime Rate.

     

    “Principal Office”
shall mean the principal office of Administrative Agent, presently located at
One Liberty Plaza, 165 Broadway, New York, NY 10006.

     

    “Prior Credit
Agreement” shall mean that certain Credit Agreement dated as of March 27,
2008, among Borrower, Administrative Agent and the Lenders, as amended,
supplemented or otherwise modified.

     

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

     

    “Purchasers” shall
mean each of the Persons that at any time purchase the Hydrocarbons of Borrower
and/or its Subsidiaries from their Oil and Gas Properties.

     

    “Quarterly Dates”
shall mean the last day of each March, June, September, and December, in each
year, the first of which shall be June 30, 2008; provided, however, that if any
such day is not a Business Day, such Quarterly Date shall be the next succeeding
Business Day.

     

    
      
        
        

      

      
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    “Redetermination Date”
shall mean the date that the redetermined Borrowing Base becomes effective
subject to the notice requirements specified in Section 2.08(g) both for
scheduled redeterminations and unscheduled redeterminations.

     

    “Regulation D” shall
mean Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as the same may be amended or supplemented from time to
time.

     

    “Regulatory Change”
shall mean, with respect to any Lender, any change after the Closing Date in any
Governmental Requirement (including Regulation D) or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of lenders (including such Lender or its Applicable Lending Office) of or
under any Governmental Requirement (whether or not having the force of law) by
any Governmental Authority charged with the interpretation or administration
thereof.

     

    “Required Payment”
shall have the meaning assigned such term in Section 4.04.

     

    “Reserve Report” shall
mean a report, in form and substance satisfactory to Administrative Agent,
setting forth, as of each December 31 and June 30 (or such other date
in the event of an unscheduled redetermination); (i) the oil and gas reserves
attributable to Borrower’s Oil and Gas Properties together with a projection of
the rate of production and future net income (including, where applicable,
taking into account existing Hedging Agreements), taxes, operating expenses and
capital expenditures with respect thereto as of such date, based upon the
pricing assumptions consistent with SEC reporting requirements at the time or
otherwise as satisfactory to Administrative Agent and (ii) such other
information as Administrative Agent may reasonably request.

     

    “Reserve Report
Certificate” shall mean a certificate from Borrower substantially in the
form of Exhibit F.

     

    “Reserve Requirement”
shall mean, for any Interest Period for any LIBOR Loan, the average maximum rate
at which reserves (including any marginal, supplemental or emergency reserves)
are required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against “Eurocurrency liabilities” (as such term
is used in Regulation D).  Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required to
be maintained by such member banks by reason of any Regulatory Change against
(i) any category of liabilities which includes deposits by reference to which
LIBOR is to be determined as provided in the definition of “LIBOR” or (ii) any
category of extensions of credit or other assets which include a LIBOR
Loan.

     

    “Responsible Officer”
shall mean, as to any Person, the Chief Executive Officer, the President or any
Vice President of such Person and, with respect to financial matters, the term
“Responsible Officer” shall include the Chief Financial Officer of such
Person.  Unless otherwise specified, all references to a Responsible
Officer herein shall mean a Responsible Officer of Borrower.

     

    “Revolving Credit Termination
Date” shall mean the earlier to occur of (i) the fourth anniversary of
the Closing Date or (ii) the date that the Commitments are sooner terminated
pursuant to Sections 2.03(b) or 10.02.

     

    “Scheduled Redetermination
Date” shall have the meaning assigned to such term in
Section 2.08(d).

     

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

     

    
      
        
        

      

      
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    “Security Instruments”
shall mean the Letter of Credit Agreements, the agreements or instruments
described or referred to in Exhibit D, and any
and all other agreements or instruments now or hereafter executed and delivered
by Borrower, any Guarantor or any other Person (other than participation or
similar agreements between any Lender and any other lender or creditor with
respect to any Obligations pursuant to this Agreement) in connection with, or as
security for or guarantee of the payment or performance of, the Obligations, the
Notes, this Agreement, or reimbursement obligations under the Letters of Credit,
as such agreements or instruments may be amended, supplemented, modified or
restated from time to time.

     

    “Subsidiary” shall
mean (i) any corporation of which at least a majority of the outstanding shares
of stock having by the terms thereof ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether or not at
the time stock of any other class or classes of such corporation 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 another Person or one or more
of such Person’s Subsidiaries or by such Person and one or more of its
Subsidiaries and (ii) any joint venture, limited liability company or
partnership, trust company, general or limited partnership or any other type of
partnership or entity other than a corporation in which a Person or one or more
of its other Subsidiaries is a member, owner, partner or joint venturer and
owns, directly or indirectly, at least a majority of the equity of such entity
or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law.  For purposes of this
definition, any Person which owns directly or indirectly an equity investment in
another Person which allows the first Person to manage or elect managers who
manage the normal activities of such second Person will be deemed to “control”
such second Person (e.g. a sole general
partner controls a limited partnership).  Unless otherwise indicated
herein, each reference to the term “Subsidiary” shall mean a Subsidiary of
Borrower.

     

    “Taxes” shall have the
meaning assigned such term in Section 4.06(a).

     

    “Transfer” shall mean
any sale, assignment, farm-out, conveyance or other transfer of any Property, or
any interest in any Property (including, without limitation, any working
interest, overriding royalty interest, production payments, net profits
interest, royalty interest, or mineral fee interest in any Oil and Gas Property)
of Borrower or any Subsidiary, except for (i) the sale of Hydrocarbons in
the ordinary course of business, (ii) the sale or transfer of equipment
that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the
ordinary course of business, (B) no longer necessary for the business of
Borrower or such Guarantor or (C) contemporaneously replaced by equipment of at
least comparable value and use.

     

    “Type” shall mean,
with respect to any Loan, a Base Rate Loan or a LIBOR Loan.

     

    Section
1.03      Accounting Terms and
Determinations.  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 Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the audited financial statements of Borrower referred to in
Section 7.02 (except for changes concurred with by Borrower’s independent public
accountants).

     

    Section
1.04      References; Use of Word
“Including”.  The
words “herein,” “hereof,” “hereunder” and other words of similar import when
used in this Agreement refer to this Agreement as a whole, and not to any
particular article, section or subsection.  Any reference herein to a
Section or Article shall be deemed to refer to the applicable Section or Article
of this Agreement unless otherwise stated herein.  Any reference
herein to an exhibit, schedule, or other attachment shall be deemed to refer to
the applicable exhibit, schedule, or other attachment attached hereto unless
otherwise stated herein.  The word “including”, “includes” and words
of similar import means “including, without limitation”.

     

    
      
        
        

      

      
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    ARTICLE
II

     

    Commitments

     

    Section
2.01      Loans and Letters of
Credit.

     

    (a)       Loans.  Each
Lender severally agrees, on the terms and conditions of this Agreement, to
continue the Existing Loans and make additional loans to Borrower during the
period from and including (i) the Closing Date or (ii) such later date that such
Lender becomes a party to this Agreement as provided in Section 12.06(b), to and
up to, but excluding, the Revolving Credit Termination Date in an aggregate
principal amount at any one time outstanding up to, but not exceeding, the
amount of such Lender’s Commitment as then in effect; provided, however, that the
aggregate principal amount of all such Loans by all Lenders hereunder at any one
time outstanding together with the LC Exposure shall not exceed the Aggregate
Commitments.  Subject to the terms of this Agreement, during the
period from the Closing Date to and up to, but excluding, the Revolving Credit
Termination Date, Borrower may borrow, repay and reborrow the amount described
in this Section 2.01(a).

     

    (b)       Letters of
Credit.  During the period from and including the Closing Date
to, but excluding, the Revolving Credit Termination Date, the Issuing Bank, as
issuing bank for the Lenders, agrees to extend credit for the account of
Borrower or any Subsidiary at any time and from time to time by issuing,
renewing, extending or reissuing Letters of Credit; provided, however, the LC
Exposure at any one time outstanding shall not exceed the lesser of (i) the LC
Commitment and (ii) the Aggregate Commitments, as then in effect, minus the
aggregate principal amount of all Loans then outstanding.  The Lenders
shall participate in such Letters of Credit according to their respective
Percentage Shares.  Each of the Letters of Credit shall (i) be
issued by the Issuing Bank, (ii) contain such terms and provisions as are
reasonably required by the Issuing Bank, (iii) be for the account of
Borrower or a Subsidiary and (iv) expire not later than the Revolving Credit
Termination Date.

     

    (c)       Limitation on Types of
Loans.  Subject to the other terms and provisions of this
Agreement, at the option of Borrower, the Loans may be Base Rate Loans or LIBOR
Loans; provided that, without the prior written consent of the Majority Lenders,
no more than three (3) LIBOR Loans may be outstanding at any time.

     

    Section
2.02      Borrowings, Continuations
and Conversions, Letters of Credit

     

    (a)       Borrowings.  Borrower
shall give Administrative Agent (which shall promptly notify the Lenders)
advance notice as hereinafter provided of each borrowing hereunder, which shall
specify (i) the aggregate amount of such borrowing, (ii) the Type and (iii) the
date (which shall be a Business Day) of the Loans to be borrowed, and (iv) (in
the case of LIBOR Loans) the duration of the Interest Period
therefor.

     

    (b)      Minimum
Amounts.  All Base Rate Loan borrowings shall be in amounts of
at least $500,000 or the remaining balance of the Aggregate Commitments, if
less, or any whole multiple of $500,000 in excess thereof, and all LIBOR Loans
shall be in amounts of at least $500,000 or any whole multiple of $500,000 in
excess thereof.

     

    
      
        
        

      

      
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    (c)       Notices.  All
borrowings, continuations and conversions shall require advance written notice
to Administrative Agent (which shall promptly notify the Lenders) in the form of
Exhibit
B  (or telephonic notice promptly confirmed by such a written
notice), which in each case shall be irrevocable and accompanied by a Compliance
Certificate (excluding the information required by clauses (f) and (g) thereof)
from Borrower, to be received by Administrative Agent not later than
11:00 a.m. Houston, Texas time at least one Business Day prior to the date
of each Base Rate Loan borrowing and three Business Days prior to the date of
each LIBOR Loan borrowing, continuation or conversion.  Without in any
way limiting Borrower’s obligation to confirm in writing any telephonic notice,
Administrative Agent may act without liability upon the basis of telephonic
notice believed by Administrative Agent in good faith to be from Borrower prior
to receipt of written confirmation.  In each such case, Borrower
hereby waives the right to dispute Administrative Agent’s record of the terms of
such telephonic notice except in the case of gross negligence or willful
misconduct by Administrative Agent.

     

    (d)      Continuation
Options.  Subject to the provisions made in this Section
2.02(d), Borrower may elect to continue all or any part of any LIBOR Loan beyond
the expiration of the then current Interest Period relating thereto by giving
advance notice as provided in Section 2.02(c) to Administrative Agent (which
shall promptly notify the Lenders) of such election, specifying the amount of
such Loan to be continued and the Interest Period therefor.  In the
absence of such a timely and proper election, Borrower shall be deemed to have
elected to convert such LIBOR Loan to a Base Rate Loan pursuant to Section
2.02(e).  All or any part of any LIBOR Loan may be continued as
provided herein, provided that (i) any continuation of any such Loan shall be
(as to each Loan as continued for an applicable Interest Period) in amounts of
at least $500,000 or any whole multiple of $500,000 in excess thereof and (ii)
no Default shall have occurred and be continuing.  If a Default shall
have occurred and be continuing, each LIBOR Loan shall be converted to a Base
Rate Loan on the last day of the Interest Period applicable
thereto.

     

    (e)       Conversion
Options.  Borrower may elect to convert all or any part of any
LIBOR Loan on the last day of the then current Interest Period relating thereto
to a Base Rate Loan by giving advance notice to Administrative Agent (which
shall promptly notify the Lenders) of such election.  Subject to the
provisions made in this Section 2.02(e), Borrower may elect to convert all or
any part of any Base Rate Loan at any time and from time to time to a LIBOR Loan
by giving advance notice as provided in Section 2.02(c) to Administrative Agent
(which shall promptly notify the Lenders) of such election.  All or
any part of any outstanding Loan may be converted as provided herein, provided
that (i) any conversion of any Base Rate Loan into a LIBOR Loan shall be (as to
each such Loan into which there is a conversion for an applicable Interest
Period) in amounts of at least $500,000 or any whole multiple of $500,000 in
excess thereof and (ii) no Default shall have occurred and be
continuing.  If a Default shall have occurred and be continuing, no
Base Rate Loan may be converted into a LIBOR Loan.

     

    (f)       Advances.  Not
later than 11:00 a.m. Houston, Texas time on the date specified for each
borrowing hereunder, each Lender shall make available the amount of the Loan to
be made by it on such date to Administrative Agent, to an account which
Administrative Agent shall specify, in immediately available funds, for the
account of Borrower.  The amounts so received by Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to Borrower by depositing the same, in immediately available funds, in an
account of Borrower, designated by Borrower and maintained at the Principal
Office.

     

    
      
        
        

      

      
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    (g)      Letters of
Credit.  Borrower shall give the Issuing Bank (which shall
promptly notify the Lenders of such request and their Percentage Share of such
Letter of Credit) advance notice to be received by the Issuing Bank not later
than 11:00 a.m. Houston, Texas time not less than three (3) Business Days prior
thereto of each request for the issuance, and at least thirty (30) Business Days
prior to the date of the renewal or extension, of a Letter of Credit hereunder
which request shall specify (i) the amount of such Letter of Credit, (ii) the
date (which shall be a Business Day) such Letter of Credit is to be issued,
renewed or extended, (iii) the duration thereof, (iv) the name and address of
the beneficiary thereof, (v) the type of the Letter of Credit and (vi) such
other information as the Issuing Bank may reasonably request, all of which shall
be reasonably satisfactory to the Issuing Bank.  Subject to the terms
and conditions of this Agreement, on the date specified for the issuance,
renewal or extension of a Letter of Credit, the Issuing Bank shall issue, renew
or extend such Letter of Credit to the beneficiary thereof.

     

    In
conjunction with the issuance of each Letter of Credit, Borrower and the
Subsidiary, if the account party, shall execute a Letter of Credit
Agreement.  In the event of any conflict between any provision of a
Letter of Credit Agreement and this Agreement, Borrower, the Issuing Bank,
Administrative Agent and the Lenders hereby agree that the provisions of this
Agreement shall govern.

     

    The
Issuing Bank will send to Borrower and each Lender, promptly upon issuance of
any Letter of Credit, or an amendment thereto, a true and complete copy of such
Letter of Credit, or such amendment thereto.

     

    Section
2.03      Changes of
Commitments.

     

    (a)       The
Aggregate Commitments shall at all times be equal to the lesser of (i) the
Aggregate Maximum Revolving Credit Amounts after adjustments resulting from
reductions pursuant to Section 2.03(b) or (ii) the Borrowing Base as
determined from time to time.

     

    (b)       Borrower
shall have the right to terminate or to reduce the amount of the Aggregate
Maximum Revolving Credit Amounts at any time, or from time to time, upon not
less than three (3) Business Days prior notice to Administrative Agent (which
shall promptly notify the Lenders) of each such termination or reduction, which
notice shall specify the effective date thereof and the amount of any such
reduction (which shall not be less than $1,000,000 or any whole multiple of
$500,000 in excess thereof) and shall be irrevocable and effective only upon
receipt by Administrative Agent.

     

    (c)       The
Aggregate Maximum Revolving Credit Amounts once terminated or reduced may not be
reinstated.

     

    Section
2.04      Fees.

     

    (a)       Commitment
Fee.  Borrower shall pay to Administrative Agent for the
account of each Lender a commitment fee on the daily average unused amount of
the Aggregate Commitments for the period from and including the Closing Date up
to, but excluding, the earlier of the date the Aggregate Commitments are
terminated or the Revolving Credit Termination Date at a rate per annum equal to
the applicable percentage set forth at the appropriate intersection in the table
shown below, based on the Borrowing Base Utilization as in effect from time to
time:

     

    
      	
              Borrowing
      Base Utilization

            	
              Applicable
      Percentage

            
	
              Less
      than or equal to 100%

            	
              0.375%

            
	
              Greater
      than 100%

            	
              0.500%

            

    

     

    
      
        
        

      

      
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    Each
change in the applicable percentage resulting from a change in the Borrowing
Base Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs.  Accrued commitment fees shall be payable
quarterly in arrears on each Quarterly Date and on the earlier of the date the
Aggregate Commitments are terminated or the Revolving Credit Termination
Date.

     

    (b)           Letter of Credit
Fees.

     

    (i)           Borrower
agrees to pay Administrative Agent, for the account of each Lender, commissions
for issuing the Letters of Credit on the daily average outstanding of the
maximum liability of the Issuing Bank existing from time to time under each
Letter of Credit (calculated separately for each Letter of Credit) at the rate
per annum equal to the Applicable Margin in effect from time to time for LIBOR
Loans.  Each Letter of Credit shall be deemed to be outstanding up to
the full face amount of the Letter of Credit until the Issuing Bank has received
the canceled Letter of Credit or a written cancellation of the Letter of Credit
from the beneficiary of such Letter of Credit in form and substance acceptable
to the Issuing Bank, or for any reductions in the amount of the Letter of Credit
(other than from a drawing), written notification from the beneficiary of such
Letter of Credit.  Such commissions are payable quarterly in arrears
on each Quarterly Date and upon cancellation or expiration of each such Letter
of Credit.

     

    (ii)          Upon
each issuance, renewal or extension of any Letter of Credit, Borrower shall pay
to Administrative Agent for the account of the Issuing Bank an upfront fee equal
to the greater of (a) 0.1875% of the face amount of the Letter of Credit and (b)
$500.

     

    (iii)         Borrower
shall pay to the Issuing Bank such other usual and customary fees of the Issuing
Bank associated with any transfers, amendments, drawings, negotiations or
reissuances of any Letters of Credit.

     

    (c)           Engineering
Fee.  In connection with any unscheduled redetermination of the
Borrowing Base requested by Borrower, Borrower agrees to pay Administrative
Agent the engineering and administration fee in the amount and at such time as
provided in Section 8.07(b).

     

    (d)           Fee
Letter.  Borrower shall pay such other fees as are set forth in
the Fee Letter pursuant to the provisions thereof.

     

    Section
2.05      Several
Obligations.  The
failure of any Lender to make any Loan to be made by it or to provide funds for
disbursements or reimbursements under Letters of Credit on the date specified
therefor shall not relieve any other Lender of its obligation to make its Loan
or provide funds on such date, but no Lender shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender or to
provide funds to be provided by such other Lender.

     

    Section
2.06      Notes.  The
Loans made by each Lender shall be evidenced by a single promissory note of
Borrower in substantially the form of Exhibit A, dated (i) the Closing Date
or (ii) the effective date of an Assignment pursuant to Section 12.06(b),
payable to the order of such Lender in a principal amount equal to its Maximum
Revolving Credit Amount as originally in effect and otherwise duly completed and
such substitute Notes as required by Section 12.06(b).  The
date, amount, Type,
interest rate and 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
Borrower’s rights or obligations in respect of such Loans or affect the validity
of such transfer by any Lender of its Note.

     

    
      
        
        

      

      
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    Section
2.07      Prepayments.

     

    (a)       Voluntary
Prepayments.  Borrower may prepay the Base Rate Loans upon not
less than one (1) Business Day’s prior notice to Administrative Agent (which
shall promptly notify the Lenders), which notice shall specify the prepayment
date (which shall be a Business Day) and the amount of the prepayment (which
shall be at least $1,000,000 or any whole multiple of $500,000 in excess
thereof, or the remaining aggregate principal balance outstanding on the Notes
if less than $1,000,000) and shall be irrevocable and effective only upon
receipt by Administrative Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the prepayment
date.  Borrower may prepay LIBOR Loans
on the same conditions as for Base Rate Loans (except that prior notice to
Administrative Agent shall be not less than three (3) Business Days for LIBOR
Loans) and in addition such prepayments of LIBOR Loans shall be subject to the
terms of Section 5.05.

     

    (b)       Mandatory
Prepayments.

     

    (i)             
Termination or
Reduction of Aggregate Maximum Revolving Credit Amounts.  If,
after giving effect to any termination or reduction of the Aggregate Maximum
Revolving Credit Amounts pursuant to Section 2.03(b), the outstanding
aggregate principal amount of the Revolving Credit Loans plus the LC Exposure
exceeds the Aggregate Maximum Revolving Credit Amounts, Borrower shall (i)
prepay the Loans on the date of such termination or reduction in an aggregate
principal amount equal to the excess, together with interest on the principal
amount paid accrued to the date of such prepayment and (ii) if any excess
remains after prepaying all of the Loans because of LC Exposure, pay to
Administrative Agent on behalf of the Lenders an amount equal to the excess to
be held as cash collateral as provided in Section 2.10(b) hereof.

     

    (ii)         
   Redetermination of Borrowing
Base.  Upon any redetermination of the amount of the Borrowing
Base in accordance with Section 2.08, if the redetermined Borrowing Base results
in a Borrowing Base Deficiency, then Borrower shall within fifteen (15) days of
receipt of written notice thereof deliver to Agent a written response indicating
which of the following actions it intends to take to remedy the Borrowing Base
Deficiency (and the failure of Borrower to deliver such election notice or to
perform the action chosen to remedy such Borrowing Base Deficiency shall
constitute an Event of Default):

     

    (w)           within
thirty (30) days of receipt of written notice of the Borrowing Base Deficiency,
prepay the Loans in an aggregate principal amount sufficient to eliminate such
Borrowing Base Deficiency, together with interest on the principal amount paid
accrued to the date of such prepayment;

     

    (x)           prepay
the Loans in six (6) monthly installments equal to one-sixth of such Borrowing
Base Deficiency (after taking into account any Properties mortgaged to Agent
pursuant to clause (c) below), with the first such installment due 30 days after
the date such Borrowing Base Deficiency notice is received by Borrower and each
of the other five installments due 30 days after the preceding installment, and
make each of such payments within such time periods;

     

    
      
        
        

      

      
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    (y)           within
thirty (30) days of receipt of written notice of the Borrowing Base Deficiency,
grant to Agent a first priority Lien in additional Properties of Borrower, which
in the Lenders’ sole determination, have sufficient loan value to eliminate such
Borrowing Base Deficiency; or

     

    (z)           eliminate
the Borrowing Base Deficiency through a combination of the actions described in
clauses (w) or (x) and (y).

     

    If,
because of LC Exposure, a Borrowing Base Deficiency remains after prepaying all
of the Loans and granting first priority Liens in additional Properties to
Administrative Agent, Borrower shall pay to Administrative Agent on behalf of
the Lenders an amount equal to such remaining Borrowing Base Deficiency to be
held as cash collateral as provided in Section 2.10(b).

     

    (iii)         Transfer.  If,
after a Transfer of any Property to the extent allowed by Section 9.12 and
the reduction in the Borrowing Base pursuant to Section 2.08(f), a
Borrowing Base Deficiency exists, then Borrower shall, concurrently with the
receipt thereof, prepay the Loans with the net proceeds received from such
Transfer in an amount necessary to eliminate such Borrowing Base
Deficiency.  If, because of LC Exposure, a Borrowing Base Deficiency
remains after prepaying all of the Loans, Borrower shall pay to Administrative
Agent on behalf of the Lenders an amount equal to such remaining Borrowing Base
Deficiency to be held as cash collateral as provided in Section
2.10(b).  Notwithstanding anything in this Agreement to the contrary,
if at the time of any permitted Transfer a Borrowing Base Deficiency exists,
then Borrower shall, concurrently with the receipt thereof, prepay the Loans
with the net proceeds received from such Transfer to the extent necessary to
eliminate the portion of the Borrowing Base Deficiency resulting from such
Transfer and such preexisting Borrowing Base Deficiency; and Borrower shall
remain obligated, pursuant to the terms of this Agreement, to eliminate any
Borrowing Base Deficiency remaining after prepaying the Loans with the net
proceeds from such Transfer.  If Borrower Transfers any Property at
such time as a Default exits, Borrower shall, concurrently with the receipt of
proceeds therefrom, prepay the Loans in an amount equal to the lesser of (x) the
aggregate principal amount outstanding on the Loans and (y) 100% of the net
proceeds received from such Transfer.  The preceding sentence shall
not be interpreted as permitting the sale of any Property at such time as a
Default exists without the prior written consent of the Lenders.

     

    (iv)         Proceeds from Hedging
Agreements.  At any time that a Default exists, any proceeds
received by Borrower under any Hedging Agreements, including as a result of the
early termination thereof, shall be used immediately upon receipt thereof to
prepay the Loans in an amount equal to the lesser of (x) the aggregate principal
amount outstanding on the Loans and (y) 100% of the net proceeds
received.

     

    (c)       Generally.  Prepayments
permitted or required under this Section 2.07 shall be without premium or
penalty, except as
required under Section 5.05 for prepayment of LIBOR Loans.  Any
prepayments on the Loans may be reborrowed subject to the then effective
Aggregate Commitments.  Any prepayments made while a Borrowing Base
Deficiency exists shall be applied first to the Borrowing Base Deficiency and
then otherwise as provided by the Loan Documents.

     

    
      
        
        

      

      
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    Section
2.08      Borrowing
Base.

     

    (a)       Borrowing
Base.  The Borrowing Base shall be determined in accordance
with Section 2.08(b) by Administrative Agent with the concurrence of the Lenders
and is subject to redetermination in accordance with Sections
2.08(d), (e) and (f).  Upon any redetermination of the
Borrowing Base, such redetermination shall remain in effect until the next
successive Redetermination Date.  So long as any of the Commitments
are in effect or any LC Exposure or Loans are outstanding hereunder, this
facility shall be governed by the then effective Borrowing
Base.  During the period from and after the Closing Date until the
next redetermination pursuant to Sections 2.08(d), (e) or (f) or
adjusted pursuant to Section 8.08(c), the amount of the Borrowing Base shall be
$54,000,000.

     

    (b)      Determination
Procedure.  Upon receipt of the reports required by Section
8.07 and such other reports, data and supplemental information as may from time
to time be reasonably requested by Administrative Agent (the “Engineering
Reports”), Administrative Agent will redetermine the Borrowing
Base.  Such redetermination will be in accordance with its normal and
customary practices and procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time, and may also take into
consideration the financial condition, Debt, and business of Borrower and its
Subsidiaries and such other factors as Administrative Agent customarily deems
appropriate.  Administrative Agent, in its sole discretion, may make
adjustments to the rates, volumes and prices and other assumptions set forth
therein in accordance with its normal and customary procedures for evaluating
oil and gas reserves and other related assets as such exist at that particular
time.  Administrative Agent shall propose to the Lenders a new
Borrowing Base within 15 days following receipt by Administrative Agent and the
Lenders of the Engineering Reports in a timely and complete
manner.  After having received notice of such proposal by
Administrative Agent, the Lenders shall have 15 days to agree or disagree with
such proposal.  If at the end of the 15 days, the Lenders have not
communicated their approval or disapproval, such silence shall be deemed to be
an approval and Administrative Agent’s proposal shall be the new Borrowing
Base.  If however, the Lenders notify Administrative Agent within 15
days of their disapproval, the Lenders shall, within a reasonable period of
time, agree on a new Borrowing Base.  Administrative Agent and all of
the Lenders must approve any increase in the Borrowing Base, and Administrative
Agent and Majority Lenders must approve any reaffirmation of or decrease in the
Borrowing Base.  If Borrower does not timely furnish the Engineering
Reports as required, the Lenders may nevertheless determine a new Borrowing Base
in good faith and based upon information previously supplied by Borrower or
otherwise available to Administrative Agent and the Lenders.  It is
expressly understood that the Lenders have no obligation to determine the
Borrowing Base for any particular amount, either in relation to the Aggregate
Maximum Revolving Credit Amount or otherwise.

     

    (c)       Excluded
Property.  Administrative Agent may exclude any Oil and Gas
Property or portion of production therefrom or any income from any other
Property from the Borrowing Base, at any time, because title information is not
reasonably satisfactory, such Property is not Collateral or such Property is not
assignable.

     

    (d)       Redeterminations.  So
long as any of the Commitments are in effect and until payment in full of all
Loans hereunder, on or around the first Business Day of each May and November,
commencing November, 2008 (each being a “Scheduled Redetermination
Date”), the Lenders shall redetermine the amount of the Borrowing Base in
accordance with Section 2.08(b).

     

    
      
        
        

      

      
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    (e)       Unscheduled
Redeterminations.  In addition to the redeterminations of the
Borrowing Base described in Section 2.08(d), (i) Borrower may initiate a
redetermination of the Borrowing Base at any other time as it so elects by
specifying in writing to Administrative Agent (who will promptly notify the
Lenders) the date by which Borrower will furnish to Administrative Agent and the
Lenders a Reserve Report in accordance with Section 8.07(b) and the date by
which such redetermination is requested to occur; provided, however, that
Borrower may initiate only one such unscheduled redetermination between
Scheduled Redetermination Dates, (ii) the Majority Lenders or
Administrative Agent may initiate a redetermination of the Borrowing Base at any
other time as they so elect by specifying in writing to Borrower the date by
which Borrower is to furnish a Reserve Report in accordance with Section 8.07(b)
and the date on which such redetermination is to occur; provided, however, that the
Majority Lenders or Administrative Agent may initiate only one such
unscheduled redetermination between Scheduled Redetermination
Dates.

     

    (f)        Redetermination Concurrent
with Transfer.  To the extent allowed by Section 9.12, if
Borrower Transfers any Property between Scheduled Redetermination Dates with an
aggregate fair market value in excess of $500,000, the Borrowing Base shall
automatically be reduced upon execution of such Transfer by an amount equal to
the Borrowing Base values (as determined by the Majority Lenders in their
reasonable discretion) attributed in the immediately preceding determination of
the Borrowing Base to the Property which is the subject of such
Transfer.

     

    (g)       Effective Upon
Notice.  Administrative Agent shall promptly notify in writing
Borrower and the Lenders of the new Borrowing Base.  Any
redetermination of the Borrowing Base shall not be in effect until written
notice is received by Borrower.

     

    Section
2.09      Overadvance
Amount.

     

    (a)       Overadvance
Amount.  During the period from and after the Closing Date
until September 30, 2008, the Overadvance Amount shall be $4,000,000, subject to
any redetermination pursuant to Section 2.09(b).  From and after
September 30, 2008, the Overadvance Amount shall be $0.00.

     

    (b)       Redetermination.  If
prior to September 30, 2008, the portion of the Borrowing Base as determined by
Section 2.08 is redetermined, the Overadvance Amount shall be increased or
decreased proportionately with any increase or decrease in such portion of the
Borrowing Base, as redetermined.

     

    Section
2.10      Assumption of
Risks.  Borrower
assumes all risks of the acts or omissions of any beneficiary of any Letter of
Credit or any transferee thereof with respect to its use of such Letter of
Credit.  Neither the Issuing Bank (except in the case of gross
negligence or willful misconduct on the part of the Issuing Bank or any of its
employees), its correspondents nor any Lender shall be responsible for the
validity, sufficiency or genuineness of certificates or other documents or any
endorsements thereon, even if such certificates or other documents should in
fact prove to be invalid, insufficient, fraudulent or forged; for errors,
omissions, interruptions or delays in transmissions or delivery of any messages
by mail, telex, or otherwise, whether or not they be in code; for errors in
translation or for errors in interpretation of technical terms; the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; the failure of any beneficiary or any transferee of
any Letter of Credit to comply fully with conditions required in order to draw
upon any Letter of Credit; or for any other consequences arising from causes
beyond the Issuing Bank’s control or the control of the Issuing Bank’s
correspondents.  In addition, neither the Issuing Bank, Administrative
Agent nor any Lender shall be responsible for any error, neglect, or default of
any of the Issuing Bank’s correspondents; and none of the above shall affect,
impair or prevent the vesting of any of the Issuing Bank’s, Administrative
Agent’s or any Lender’s rights or powers hereunder or under the Letter of Credit
Agreements, all of which rights shall be cumulative.  The Issuing Bank
and its correspondents may accept certificates or other documents that appear on
their face to be in order, without responsibility for further investigation of
any matter contained therein regardless of any notice or information to the
contrary.  In furtherance and not in limitation of the foregoing
provisions, Borrower agrees that any action, inaction or omission taken or not
taken by the Issuing Bank or by any correspondent for the Issuing Bank in good
faith in connection with any Letter of Credit, or any related drafts,
certificates, documents or instruments, shall be binding on Borrower and shall
not put the Issuing Bank or its correspondents under any resulting liability to
Borrower.

     

    
      
        
        

      

      
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    Section
2.11      Obligation to Reimburse and
to Prepay.

     

    (a)       Reimbursement
Obligations.  If a disbursement by the Issuing Bank is made
under any Letter of Credit, Borrower shall pay to Administrative Agent within
two (2) Business Days after notice of any such disbursement is received by
Borrower, the amount of each such disbursement made by the Issuing Bank under
the Letter of Credit (if such payment is not sooner effected as may be required
under this Section 2.10 or under other provisions of the Letter of Credit),
together with interest on the amount disbursed from and including the date of
disbursement until payment in full of such disbursed amount at a varying rate
per annum equal to (i) the then applicable interest rate for Base Rate Loans
through the second Business Day after notice of such disbursement is received by
Borrower and (ii) thereafter, the Post Default Rate for Base Rate Loans (but in
no event to exceed the Highest Lawful Rate) for the period from and including
the third Business Day following the date of such disbursement to and including
the date of repayment in full of such disbursed amount.  The
obligations of Borrower under this Agreement with respect to each Letter of
Credit shall be absolute, unconditional and irrevocable and shall be paid or
performed strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, but only to the fullest
extent permitted by applicable law, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit or any of the
Security Instruments; (ii) any amendment or waiver of (including any default),
or any consent to departure from this Agreement (except to the extent permitted
by any amendment or waiver), any Letter of Credit or any of the Security
Instruments; (iii) the existence of any claim, set-off, defense or other rights
which Borrower may have at any time against the beneficiary of any Letter of
Credit or any transferee of any Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), the Issuing Bank,
Administrative Agent, any Lender or any other Person, whether in connection with
this Agreement, any Letter of Credit, the Security Instruments, the transactions
contemplated hereby or any unrelated transaction; (iv) any statement,
certificate, draft, notice or any other document presented under any Letter of
Credit proves to have been forged, fraudulent, insufficient or invalid in any
respect or any statement therein proves to have been untrue or inaccurate in any
respect whatsoever; (v) payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which appears on its face to
comply, but does not comply, with the terms of such Letter of Credit; and (vi)
any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing.

     

    Notwithstanding
anything in this Agreement to the contrary, Borrower will not be liable for
payment or performance that results from the gross negligence or willful
misconduct of the Issuing Bank, except where Borrower or any Subsidiary actually
recovers the proceeds for itself or the Issuing Bank of any payment made by the
Issuing Bank in connection with such gross negligence or willful
misconduct.

     

    
      
        
        

      

      
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    (b)      Cash Collateral for LC
Exposure.  In the event of the occurrence of any Event of
Default, a payment or prepayment pursuant to Section 2.07(b) or the maturity of
the Notes, whether by acceleration or otherwise, an amount equal to the LC
Exposure (or the excess in the case of Section 2.07(b)) shall be deemed to be
forthwith due and owing by Borrower to the Issuing Bank, Administrative Agent
and the Lenders as of the date of any such occurrence; and Borrower’s obligation
to pay such amount 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
Borrower may now or hereafter have against any such beneficiary, the Issuing
Bank, Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such payments shall be held by the Issuing Bank on behalf
of the Lenders as cash collateral securing the LC Exposure in an account or
accounts at the Principal Office; and Borrower hereby grants to and by its
deposit with Administrative Agent grants to Administrative Agent a security
interest in such cash collateral.  In the event of any such payment by
Borrower of amounts contingently owing under outstanding Letters of Credit and
in the event that thereafter drafts or other demands for payment complying with
the terms of such Letters of Credit are not made prior to the respective
expiration dates thereof, Administrative Agent agrees, if no Event of Default
has occurred and is continuing or if no other amounts are outstanding under this
Agreement, the Notes or any other Loan Documents, to remit to Borrower amounts
for which the contingent obligations evidenced by the Letters of Credit have
ceased.

     

    (c)       Lender
Reimbursement.  Each Lender severally and unconditionally
agrees that it shall promptly reimburse the Issuing Bank an amount equal to such
Lender’s Percentage Share of any disbursement made by the Issuing Bank under any
Letter of Credit that is not reimbursed according to this Section
2.10.

     

    (d)       Automatic Funding as
Loan.  Notwithstanding anything to the contrary contained
herein, if no Default exists or would result therefrom, to the extent Borrower
has not reimbursed the Issuing Bank for any drawn upon Letter of Credit within
two (2) Business Days after notice of such disbursement has been received by
Borrower, the amount of such Letter of Credit reimbursement obligation shall
automatically be funded by the Lenders as a Loan hereunder and used by the
Lender to pay such Letter of Credit reimbursement obligation.  If an
Event of Default exists, such Letter of Credit reimbursement obligation shall
not be funded as a Loan, but instead shall accrue interest as provided in
Section 2.10(a).

     

    Section
2.12      Lending
Offices.  The
Loans of each Type made by each Lender shall be made and maintained at such
Lender’s Applicable Lending Office for Loans of such Type.

     

    ARTICLE
III

     

    Payments of Principal and
Interest

     

    Section
3.01      Repayment of
Loans.

     

    (a)       Loans.  On
the Revolving Credit Termination Date Borrower shall repay the outstanding
aggregate principal amount of the Notes.

     

    (b)       Generally.  Borrower
will pay to Administrative Agent, for the account of each Lender, the principal
payments required by this Section 3.01.

     

    Section
3.02      Interest.

     

    (a)       Interest
Rates.  Borrower will pay to Administrative Agent, for the
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to,
but excluding, the date such Loan shall be paid in full, at the following rates
per annum:

     

    
      
        
        

      

      
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    (i)           if
such a Loan is a Base Rate Loan, the Base Rate (as in effect from time to time)
plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate;
and

     

    (ii)          if
such a Loan is a LIBOR Loan, for each Interest Period relating thereto, the
LIBOR Adjusted Rate for such Loan plus the Applicable Margin (as in effect from
time to time), but in no event to exceed the Highest Lawful Rate.

     

    (b)           Post Default
Rate.  Notwithstanding the foregoing, Borrower will pay to
Administrative Agent, for the account of each Lender interest at the applicable
Post Default Rate on any principal of any Loan made by such Lender, and (to the
fullest extent permitted by law) on any other amount payable by Borrower
hereunder, under any Loan Document or under any Note held by such Lender to or
for account of such Lender, for the period commencing on the date of an Event of
Default until the same is paid in full or all Events of Default are cured or
waived.

     

    (c)           Due
Dates.  Accrued interest on Base Rate Loans shall be payable
quarterly on each Quarterly Date commencing June 30, 2008, and accrued interest
on each LIBOR Loan shall be payable on the last day of the Interest Period
therefor and, if such Interest Period is longer than three months at three-month
intervals following the first day of such Interest Period, except that interest
payable at the Post Default Rate shall be payable from time to time on demand
and interest on any LIBOR Loan that is converted into a Base Rate Loan (pursuant
to Section 5.04) shall be payable on the date of conversion (but only to
the extent so converted).  Any accrued and unpaid interest on the
Loans on the Revolving Credit Termination Date shall be paid on such
date.

     

    (d)           Determination of
Rates.  Promptly after the determination of any interest rate
provided for herein or any change therein, Administrative Agent shall notify the
Lenders to which such interest is payable and Borrower thereof.  Each
determination by Administrative Agent of an interest rate or fee hereunder
shall, except in cases of manifest error, be final, conclusive and binding on
the parties.

     

    ARTICLE
IV

     

    Payments; Pro Rata
Treatment; Computations; Etc.

     

    Section
4.01          Payments.  Except
to the extent otherwise provided herein, all payments of principal, interest and
other amounts to be made by Borrower under this Agreement, the Notes, the Letter
of Credit Agreements or any other Loan Document shall be made in Dollars, in
immediately available funds, to Administrative Agent at such account as
Administrative Agent shall specify by notice to Borrower from time to time, not
later than 11:00 a.m. Houston, Texas time on the date on which such payments
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).  Such
payments shall be made without (to the fullest extent permitted by applicable
law) defense, set-off or counterclaim and in connection therewith, Borrower and
each Guarantor hereby waives (to the fullest extent permitted by applicable law)
all defenses, rights of set-off and counterclaims it may have with respect to
such payments.  Each payment received by Administrative Agent under
this Agreement or any Note for account of a Lender shall be paid promptly
to such Lender in immediately available funds.  Except as otherwise
provided in the definition of “Interest Period”, if the due date of any
payment under this Agreement or any Note would otherwise fall on a day which is
not a Business Day such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension.  At the time of each payment to Administrative
Agent of any principal of or interest on any borrowing, Borrower shall notify
Administrative Agent of the Loans to which such payment shall
apply.  In the absence of such notice Administrative Agent may specify
the Loans to which such payment shall apply, but to the extent possible such
payment or prepayment will be applied first to the Loans comprised of Base Rate
Loans.

     

    
      
        
        

      

      
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    Section
4.02           Pro Rata Treatment.  Except
to the extent otherwise provided herein each Lender agrees
that:  (i) each borrowing from the Lenders under
Section 2.01 and each continuation and conversion under Section 2.02 shall
be made from the Lenders pro rata in accordance with their Percentage Share,
each payment of fees under Section 2.04(a) and Section 2.04(b)(i) shall be
made for account of the Lenders pro rata in accordance with their Percentage
Share, and each termination or reduction of the amount of the Aggregate Maximum
Revolving Credit Amounts under Section 2.03(b) shall be applied to the
Commitment of each Lender, pro rata according to the amounts of its
respective Commitment; (ii) each payment of principal of Loans by Borrower
shall be made for account of the Lenders pro rata in accordance with the
respective unpaid principal amount of the Loans held by the Lenders;
(iii) each payment of interest on Loans by Borrower shall be made for
account of the Lenders pro rata in accordance with the amounts of interest due
and payable to the respective Lenders; and (iv) each reimbursement by Borrower
of disbursements under Letters of Credit shall be made for account of the
Issuing Bank or, if funded by the Lenders, pro rata for the account of the
Lenders, in accordance with the amounts of reimbursement obligations due and
payable to each respective Lender.

     

    Section
4.03           Computations.  Interest
on LIBOR Loans and fees shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable, unless such
calculation would exceed the Highest Lawful Rate, in which case interest shall
be calculated on the per annum basis of a year of 365 or 366 days, as the case
may be.  Interest on Base Rate Loans shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.

     

    Section
4.04           Non-receipt of Funds by
Administrative Agent.  Unless
Administrative Agent shall have been notified by a Lender or Borrower prior to
the date on which such notifying party is scheduled to make payment to
Administrative Agent (in the case of a Lender) of the proceeds of a Loan or a
payment under a Letter of Credit to be made by it hereunder or (in the case of
Borrower) a payment to Administrative Agent for account of one or more of the
Lenders hereunder (such payment being herein called the “Required Payment”),
which notice shall be effective upon receipt, that it does not intend to make
the Required Payment to Administrative Agent, Administrative Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date and, if such Lender or Borrower (as the
case may be) has not in fact made the Required Payment to Administrative Agent,
the recipient(s) of such payment shall, on demand, repay to Administrative Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by Administrative Agent until, but excluding, the date Administrative Agent
recovers such amount at a rate per annum which, for any Lender as recipient,
will be equal to the Federal Funds Rate, and for Borrower as recipient, will be
equal to the Base Rate plus the Applicable Margin.

     

    Section
4.05           Set-off, Sharing of
Payments, Etc.

     

    (a)           Borrower
agrees that, in addition to (and without limitation of) any right of set-off,
bankers’ lien or counterclaim a Lender may otherwise have, each Lender shall
have the right and be entitled (after consultation with Administrative Agent),
at its option, to offset balances held by it or by any of its Affiliates for
account of Borrower or any Subsidiary at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Lender’s
Loans, or any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to Borrower), in
which case it shall promptly notify Borrower and Administrative Agent thereof,
provided that such Lender’s failure to give such notice shall not affect the
validity thereof.

     

    
      
        
        

      

      
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    (b)           If
any Lender shall obtain payment of any principal of or interest on any Loan made
by it to Borrower under this Agreement (or reimbursement as to any Letter of
Credit) through the exercise of any right of set-off, banker’s lien or
counterclaim or similar right or otherwise, and, as a result of such payment,
such Lender shall have received a greater percentage of the principal or
interest (or reimbursement) then due hereunder by Borrower to such Lender than
the percentage received by any other Lenders, it shall promptly (i) notify
Administrative Agent and each other Lender thereof and (ii) purchase from such
other Lenders participation in (or, if and to the extent specified by such
Lender, direct interests in) the Loans (or participations in Letters of Credit)
made by such other Lenders (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with
the unpaid principal and/or interest on the Loans held by each of the Lenders
(or reimbursements of Letters of Credit).  To such end all the Lenders
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.  Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the Loans made by other Lenders (or in
interest due thereon, as the case may be) may exercise all rights of set-off,
banker’s lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans (or Letters of Credit)
in the amount of such participation.  Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of Borrower.  If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a set-off to which this Section 4.05 applies,
such Lender shall, to the extent practicable, exercise its rights in respect of
such secured claim in a manner consistent with the rights of the Lenders
entitled under this Section 4.05 to share the benefits of any recovery on
such secured claim.

     

    Section
4.06           Taxes.

     

    (a)           Payments Free and
Clear.  Any and all payments by Borrower hereunder shall be
made, in accordance with Section 4.01, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender, the Issuing Bank and Administrative Agent, taxes imposed on
its income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which Administrative Agent,
the Issuing Bank or such Lender, as the case may be, is a citizen or resident or
in which such Lender has an Applicable Lending Office, (ii) the jurisdiction (or
any political subdivision thereof) in which Administrative Agent, the Issuing
Bank or such Lender is organized, or (iii) any jurisdiction (or political
subdivision thereof) in which such Lender, the Issuing Bank or Administrative
Agent is presently doing business which taxes are imposed solely as a result of
doing business in such jurisdiction (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as “Taxes”).  If
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to the Lenders, the Issuing Bank or Administrative Agent
(i) the sum payable shall be increased by the amount necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.06) such Lender, the Issuing
Bank or Administrative Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions and (iii) Borrower shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.

     

    
      
        
        

      

      
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    (b)           Other
Taxes.  In addition, to the fullest extent permitted by
applicable law, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Assignment or any other Loan Document (hereinafter referred to as “Other
Taxes”).

     

    (c)           Indemnification.  To the fullest extent
permitted by applicable law, Borrower will indemnify each Lender and the Issuing
Bank and the  Administrative Agent for the full amount of Taxes and
Other Taxes (including, but not limited to, any Taxes or Other Taxes imposed by
any Governmental Authority on amounts payable under this section 4.06) paid by
such Lender, the Issuing Bank or Administrative Agent (on their behalf or on
behalf of any Lender), as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted
unless the payment of such Taxes was not correctly or legally asserted and such
Lender’s payment of such Taxes or Other Taxes was the result of its gross
negligence or willful misconduct.  Any payment pursuant to such
indemnification shall be made within thirty (30) days after the date any Lender,
the Issuing Bank or Administrative Agent, as the case may be, makes written
demand therefor.  If any Lender, the Issuing Bank or Administrative
Agent receives a refund or credit in respect of any Taxes or Other Taxes for
which such Lender, Issuing Bank or Administrative Agent has received payment
from Borrower it shall promptly notify Borrower of such refund or credit and
shall, if no default has occurred and is continuing, within thirty (30) days
after receipt of a request by Borrower (or promptly upon receipt, if Borrower
has requested application for such refund or credit pursuant hereto), pay an
amount equal to such refund or credit to Borrower without interest (but with any
interest so refunded or credited), provided that Borrower, upon the request of
such Lender, the Issuing Bank or Administrative Agent, agrees to return such
refund or credit (plus penalties, interest or other charges) to such Lender or
Administrative Agent in the event such Lender or Administrative Agent is
required to repay such refund or credit.

     

    (d)           Lender
Representations.

     

    (i)           Each
Lender represents that it is either (1) a banking association or
corporation organized under the laws of the United States of America or any
state thereof or (2) it is entitled to complete exemption from United
States withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement (A) under an applicable
provision of a tax convention to which the United States of America is a party
or (B) because it is acting through a branch, agency or office in the United
States of America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of
America.  Each Lender that is not a banking association or corporation
organized under the laws of the United States of America or any state thereof
agrees to provide to Borrower and Administrative Agent on the Closing Date, or
on the date of its delivery of the Assignment pursuant to which it becomes a
Lender, and at such other times as required by United States law or as Borrower
or Administrative Agent shall reasonably request, two accurate and complete
original signed copies of either (A) Internal Revenue Service Form W-8ECI
(or successor form) certifying that all payments to be made to it hereunder will
be effectively connected to a United States trade or business (the “Form W-8ECI
Certification”) or (B) Internal Revenue Service Form W-8BEN (or
successor form) certifying that it is entitled to the benefit of a provision of
a tax convention to which the United States of America is a party which
completely exempts from United States withholding tax all payments to be made to
it hereunder (the “Form W-8BEN
Certification”).  In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver to Borrower and
Administrative Agent a new Form W-8ECI Certification prior to the first payment
date occurring in each of its subsequent taxable years; and if it previously
filed a Form W-8BEN Certification, it will deliver to Borrower and
Administrative Agent a new certification prior to the first payment date falling
in the third year following the previous filing of such
certification.  Each Lender also agrees to deliver to Borrower and
Administrative Agent such other or supplemental forms as may at any time be
required as a result of changes in applicable law or regulation in order to
confirm or maintain in effect its entitlement to exemption from United States
withholding tax on any payments hereunder, provided that the circumstances of
such Lender at the relevant time and applicable laws permit it to do
so.  If a Lender determines, as a result of any change in either
(i) a Governmental Requirement or (ii) its circumstances, that it is
unable to submit any form or certificate that it is obligated to submit pursuant
to this Section 4.06, or that it is required to withdraw or cancel any such form
or certificate previously submitted, it shall promptly notify Borrower and
Administrative Agent of such fact.  If a Lender is organized under the
laws of a jurisdiction outside the United States of America, unless Borrower and
Administrative Agent have received a Form W-8BEN Certification or
Form W-8ECI Certification satisfactory to them indicating that all payments
to be made to such Lender hereunder are not subject to United States withholding
tax, Borrower shall withhold taxes from such payments at the applicable
statutory rate.  Each Lender agrees to indemnify and hold harmless
Borrower or Administrative Agent, as applicable, from any United States taxes,
penalties, interest and other expenses, costs and losses incurred or payable by
(i) Administrative Agent as a result of such Lender’s failure to submit any form
or certificate that it is required to provide pursuant to this Section 4.06 or
(ii) Borrower or Administrative Agent as a result of their reliance on any
such form or certificate which such Lender has provided to them pursuant to this
Section 4.06.

     

    
      
        
        

      

      
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    (ii)           For
any period with respect to which a Lender has failed to provide Borrower with
the form required pursuant to this Section 4.06, if any, (other than if such
failure is due to a change in a Governmental Requirement occurring subsequent to
the date on which a form originally was required to be provided), such Lender
shall not be entitled to indemnification under Section 4.06 with respect to
taxes imposed by the United States which taxes would not have been imposed but
for such failure to provide such forms; provided, however, that if a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to taxes because of its failure to deliver a
form required hereunder, Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such taxes.

     

    (iii)           Any
Lender claiming any additional amounts payable pursuant to this
Section 4.06 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document requested by
Borrower or Administrative Agent or to change the jurisdiction of its Applicable
Lending Office or to contest any tax imposed if the making of such a filing or
change or contesting such tax would avoid the need for or reduce the amount of
any such additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to such
Lender.

     

    
      
        
        

      

      
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    Section
4.07           Disposition of
Proceeds.  Some
of the Security Instruments contain an assignment by Borrower unto and in favor
of Administrative Agent for the benefit of the Lenders of all production and all
proceeds attributable thereto which may be produced from or allocated to Oil and
Gas Properties, and such Security Instruments further provide in general for the
application of such proceeds to the satisfaction of the Obligations and other
indebtedness, liabilities and obligations described therein and secured
thereby.  Notwithstanding the assignment contained in such Security
Instruments, until the occurrence of an Event of Default, the Lenders agree that
they will neither notify the Purchasers of such production nor take any other
action to cause such proceeds to be remitted to the Lenders, but the Lenders
will instead permit such proceeds to be paid to Borrower.

     

    ARTICLE
V

     

    Capital Adequacy and
Additional Costs

     

    Section
5.01           Additional
Costs.

     

    (a)           LIBOR Regulations,
etc.  Borrower shall pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs which it determines are attributable to its making or
maintaining of any LIBOR Loans or issuing or participating in Letters of Credit
hereunder or its obligation to make any LIBOR Loans or issue or participate in
any Letters of Credit hereunder, or any reduction in any amount receivable by
such Lender hereunder in respect of any of such LIBOR Loans, Letters of Credit
or such obligation (such increases in costs and reductions in amounts receivable
being herein called “Additional Costs”),
resulting from any Regulatory Change which: (i) changes the basis of
taxation of any amounts payable to such Lender under this Agreement or any Note
in respect of any of such LIBOR Loans or Letters of Credit (other than taxes
imposed on the overall net income of such Lender or of its Applicable Lending
Office for any of such LIBOR Loans by the jurisdiction in which such Lender has
its principal office or Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of such Lender, or the Commitment or Loans of
such Lender or the London interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such extensions of
credit or liabilities) or such Lender’s Commitment or Loans.  Each
Lender will notify Administrative Agent and Borrower of any event occurring
after the Closing Date which will entitle such Lender to compensation pursuant
to this Section 5.01(a) as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation, and will
designate a different Applicable Lending Office for the Loans of such Lender
affected by such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender, provided that such Lender shall have
no obligation to so designate an Applicable Lending Office located in the United
States.  If any Lender requests compensation from Borrower under this
Section 5.01(a), Borrower may, by notice to such Lender, suspend the obligation
of such Lender to make additional Loans of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).

     

    
      
        
        

      

      
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    (b)           Regulatory Change.
Without limiting the effect of the provisions of Section 5.01(a), in the
event that at any time (by reason of any Regulatory Change or any other
circumstances arising after the Closing Date affecting (A) any Lender,
(B) the London interbank market or (C) such Lender’s position in such
market), the LIBOR Adjusted Rate, as determined in good faith by such Lender,
will not adequately and fairly reflect the cost to such Lender of funding its
LIBOR Loans, then, if such Lender so elects, by notice to Borrower and
Administrative Agent, the obligation of such Lender to make additional LIBOR
Loans shall be suspended until such Regulatory Change or other circumstances
ceases to be in effect (in which case the provisions of Section 5.04 shall
be applicable).

     

    (c)           Capital
Adequacy.  Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), Borrower shall
pay directly to any Lender from time to time on request such amounts as such
Lender may reasonably determine to be necessary to compensate such Lender or its
parent or holding company for any costs which it determines are attributable to
the maintenance by such Lender or its parent or holding company (or any
Applicable Lending Office), pursuant to any Governmental Requirement following
any Regulatory Change, of capital in respect of its Commitment, its Note, its
Loans or any interest held by it in any Letter of Credit, such compensation to
include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender or its parent or holding company (or
any Applicable Lending Office) to a level below that which such Lender or its
parent or holding company (or any Applicable Lending Office) could have achieved
but for such Governmental Requirement.  Such Lender will notify
Borrower that it is entitled to compensation pursuant to this Section 5.01(c) as
promptly as practicable after it determines to request such
compensation.

     

    (d)           Compensation
Procedure.  Any Lender notifying Borrower of the incurrence of
Additional Costs under this Section 5.01 shall in such notice to Borrower and
Administrative Agent set forth in reasonable detail the basis and amount of its
request for compensation.  Determinations and allocations by each
Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to Section 5.01(a) or (b), or of the effect of capital
maintained pursuant to Section 5.01(c), on its costs or rate of return of
maintaining Loans or its obligation to make Loans or issue Letters of Credit, or
on amounts receivable by it in respect of Loans or Letters of Credit, and of the
amounts required to compensate such Lender under this Section 5.01, shall
be conclusive and binding for all purposes, provided that such determinations
and allocations are made on a reasonable basis.  Any request for
additional compensation under this Section 5.01 shall be paid by Borrower within
thirty (30) days of the receipt by Borrower of the notice described in this
Section 5.01(d).

     

    Section
5.02           Limitation on LIBOR
Loans.  Anything
herein to the contrary notwithstanding, if, on or prior to the determination of
any LIBOR Adjusted Rate for any Interest Period:

     

    (a)           Administrative
Agent determines (which determination shall be conclusive, absent manifest
error) that quotations of interest rates for the relevant deposits referred to
in the definition of “LIBOR Adjusted Rate” in Section 1.02 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for LIBOR Loans as provided herein;
or

     

    (b)           Administrative
Agent determines (which determination shall be conclusive, absent manifest
error) that the relevant rates of interest referred to in the definition of
“LIBOR Adjusted Rate” in Section 1.02 upon the basis of which the rate of
interest for LIBOR Loans for such Interest Period is to be determined are not
sufficient to adequately cover the cost to the Lenders of making or maintaining
LIBOR Loans;

     

    
      
        
        

      

      
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    then
Administrative Agent shall give Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional LIBOR Loans.

     

    Section
5.03           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 LIBOR Loans hereunder, then such Lender shall promptly notify Borrower
thereof and such Lender’s obligation to make LIBOR Loans shall be suspended
until such time as such Lender may again make and maintain LIBOR Loans (in which
case the provisions of Section 5.04 shall be applicable).

     

    Section
5.04           Base Rate Loans Pursuant to
Sections 5.01, 5.02 and 5.03.  If
the obligation of any Lender to make LIBOR Loans shall be suspended pursuant to
Sections 5.01, 5.02 or 5.03 (“Affected Loans”), all Affected Loans which would
otherwise be made by such Lender shall be made instead as Base Rate Loans (and,
if an event referred to in Section 5.01(b) or Section 5.03 has occurred and
such Lender so requests by notice to Borrower, all Affected Loans of such Lender
then outstanding shall be automatically converted into Base Rate 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) Base Rate Loans, all payments of
principal which would otherwise be applied to such Lender’s Affected Loans shall
be applied instead to its Base Rate Loans.

     

    Section
5.05          Compensation.  Borrower
shall pay to each Lender within thirty (30) days of receipt of written request
of such Lender (which request shall set forth, in reasonable detail, the basis
for requesting such amounts and which shall be conclusive and binding for all
purposes provided that such determinations are made on a reasonable basis), such
amount or amounts as shall compensate it for any loss, cost, expense or
liability which such Lender determines are attributable to:

     

    (a)           any
payment, prepayment or conversion of a LIBOR Loan properly made by such Lender
or Borrower for any reason (including, without limitation, the acceleration of
the Loans pursuant to Section 10.01) on a date other than the last day of the
Interest Period for such Loan; or

     

    (b)           any
failure by Borrower for any reason (including but not limited to, the failure of
any of the conditions precedent specified in Article VI to be satisfied) to
borrow, continue or convert a LIBOR Loan from such Lender on the date for such
borrowing, continuation or conversion specified in the relevant notice given
pursuant to Section 2.02(c).

     

    Without
limiting the effect of the preceding sentence, such compensation shall include
an amount equal to the excess, if any, of (i) the amount of interest which
would have accrued on the principal amount so paid, prepaid or converted or not
borrowed for the period from the date of such payment, prepayment or conversion
or failure to borrow to the last day of the Interest Period for such Loan (or,
in the case of a failure to borrow, the Interest Period for such Loan which
would have commenced on the date specified for such borrowing) at the applicable
rate of interest for such Loan provided for herein over (ii) the interest
component of the amount such Lender would have bid in the London interbank
market for Dollar deposits of leading banks in amounts comparable to such
principal amount and with maturities comparable to such period (as reasonably
determined by such Lender).

     

    ARTICLE
VI

     

    Conditions
Precedent

     

    Section
6.01           Initial
Funding.  The
obligation of the Lenders to make the Initial Funding is subject to the receipt
by Administrative Agent and the Lenders of all fees payable pursuant to Section
2.04 on or before the Closing Date and the receipt by Administrative Agent of
the following documents (in sufficient original counterparts, other than the
Notes, for each Lender) and satisfaction of the other conditions provided in
this Section 6.01, each of which shall be satisfactory to Administrative
Agent in form and substance:

     

    
      
        
        

      

      
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    (a)           A
certificate of officer of Borrower setting forth (i) resolutions of its Managers
with respect to the authorization of Borrower 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 Borrower (y) who are authorized to sign
the Loan Documents to which Borrower 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 the authorized officers, and
(iv) the Charter Documents of Borrower, certified as being true and
complete.  Administrative Agent and the Lenders may conclusively rely
on such certificate until Administrative Agent receives notice in writing from
Borrower to the contrary.

     

    (b)           Certificates
of the appropriate state agencies with respect to the existence, qualification
and good standing of Borrower.

     

    (c)          
 A Compliance Certificate duly and properly executed by a Responsible
Officer and dated as of the date of the Initial Funding.

     

    (d)           The
Notes, duly completed and executed.

     

    (e)           The
Security Instruments, including those described on Exhibit D, duly
completed and executed in sufficient number of counterparts for recording, if
necessary.

     

    (f)           
A favorable opinion of Schaeffer Hutchinson P.C., counsel to Borrower, in form
and substance satisfactory to Administrative Agent, as to such matters incident
to the transactions herein contemplated as Administrative Agent may reasonably
request.

     

    (g)           Environmental
assessment reports relating to the Oil and Gas Properties of Borrower as may be
requested by Administrative Agent, including environmental audits, phase I
reports or other environmental reports of any nature whatsoever (whether
prepared internally or by third party consultants); and Administrative Agent
must be satisfied with the results of the review of such reports and
environmental condition of such Oil and Gas Properties.

     

    (h)           Administrative
Agent shall have received, reviewed and be satisfied with the results of the
review of the Initial Reserve Report and any other related engineering data with
respect to the Oil and Gas Properties included therein for which value was given
to the Borrowing Base.

     

    (i)          
 A certificate of insurance coverage of Borrower evidencing that Borrower
is carrying insurance in accordance with Section 7.18.

     

    (j)          
 Title information as Administrative Agent may require setting forth a
status of title acceptable to Administrative Agent and the Lenders to at least
85% of the value of the Oil and Gas Properties included in the Initial Reserve
Report.

     

    (k)           Administrative
Agent shall have received and reviewed, with respect to Borrower and its
Subsidiaries, (i) Charter Documents and (ii) information regarding litigation,
insurance, contingent liabilities, pension liabilities (actual and contingent)
and the material contracts described in Section 7.21; and Administrative Agent,
the Lenders and counsel to Administrative Agent shall be satisfied with the
results of such reviews.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (l)           Administrative
Agent shall have received, reviewed and be satisfied with the most recent
consolidated annual and interim financial statements of Parent and its
Subsidiaries.

     

    (m)           Administrative
Agent shall have received and reviewed (i) a pro-forma balance sheet of Borrower
reflecting Borrower’s financial position immediately upon closing of the GFB
Acquisition and (ii) projections and budget of Borrower for the operations of
Borrower through December 31, 2011; and be satisfied with the results of such
review.

     

    (n)           Administrative
Agent shall have received and reviewed documentation pursuant to which Parent is
to contribute to Borrower net cash proceeds as equity in an amount of at least
$43,000,000 and be satisfied with the results of such review, and received
evidence reasonably satisfactory to Administrative Agent that prior to or
concurrently with the Initial Funding, Borrower shall have received such equity
contribution in the amount of at least $43,000,000.

     

    (o)           Administrative
Agent shall have received a certificate of a Responsible Officer, in form and
substance satisfactory to Administrative Agent, certifying to various matters in
connection with the GFB Acquisition, including that concurrently with the
Initial Funding, Borrower is consummating the GFB Acquisition.

     

    (p)           Appropriate
UCC search certificates reflecting no prior Liens in any Property of Borrower
and releases of Liens and UCC Termination Statements relating to Liens in favor
of prior lienholders or secured parties covering various of the Properties being
acquired as part of the GFB Acquisition.

     

    (q)           Letters
in Lieu executed by Borrower to Purchasers as of the Closing Date, Letters in
Lieu executed by Borrower in blank, and a list of Purchasers with address,
telephone and facsimile numbers, e-mail address (if available) and contact
individual for each Purchaser.

     

    (r)         
  Such other documents as Administrative Agent or any Lender or
special counsel to Administrative Agent may reasonably request.

     

    Section
6.02           Initial and Subsequent Loans
and Letters of Credit.  The
obligation of the Lenders to make Loans to Borrower upon the occasion of each
borrowing hereunder and to issue, renew, extend or reissue Letters of Credit for
the account of Borrower (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans and after giving
effect thereto:

     

    (a)           no
Default shall exist;

     

    (b)           no
Material Adverse Effect shall have occurred; and

     

    (c)           the
representations and warranties made by Borrower in Article VII and by Borrower
and Guarantors in the other Loan Documents to which they are a party shall be
true on and as of the date of the making of such Loans or issuance, renewal,
extension or reissuance of a Letter of Credit with the same force and effect as
if made on and as of such date and following such new borrowing, except to the
extent such representations and warranties are expressly limited to an earlier
date or the Majority Lenders may expressly consent in writing to the
contrary.

     

    
      
        
        

      

      
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    Each
request for a borrowing or issuance, renewal, extension or reissuance of a
Letter of Credit by Borrower hereunder shall constitute a certification by
Borrower that the statements set forth in Section
6.02(a), (b) and (c) are true (both as of the date of such notice
and, unless Borrower otherwise notifies Administrative Agent prior to the date
of and immediately following such borrowing or issuance, renewal, extension or
reissuance of a Letter of Credit, as of the date thereof).

     

    Section
6.03           Conditions Precedent for the
Benefit of Lenders.  All
conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.

     

    Section
6.04           No Waiver.  No
waiver of any condition precedent shall preclude Administrative Agent or the
Lenders from requiring such condition to be met prior to making any subsequent
Loan or preclude the Lenders from thereafter declaring that the failure of
Borrower to satisfy such condition precedent constitutes a Default.

     

    ARTICLE
VII

     

    Representations and
Warranties

     

    Borrower
represents and warrants to Administrative Agent and the Lenders that (each
representation and warranty herein is given as of the Closing Date and shall be
deemed repeated and reaffirmed on the dates of each borrowing and issuance,
renewal, extension or reissuance of a Letter of Credit as provided in Section
6.02):

     

    Section
7.01           Existence.  Each
of Borrower and each Subsidiary:  (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation; (ii) has all requisite entity power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse
Effect.

     

    Section
7.02          Financial
Condition.  The
audited consolidated balance sheet of Parent and its Consolidated Subsidiaries
as at December 31, 2006 and the related consolidated statement of income,
stockholders’ equity and cash flow of Parent and its Consolidated Subsidiaries
for the fiscal year ended on said date, with the opinion thereon of Malone &
Bailey, P.C. heretofore furnished to each of the Lenders and the unaudited
consolidated balance sheet of Parent and its Consolidated Subsidiaries as at
September 30, 2007 and their related consolidated statements of income,
stockholders’ equity and cash flow of Parent and its Consolidated Subsidiaries
for the nine month period ended on such date heretofore furnished to
Administrative Agent, are complete and correct and fairly present in all
material respects the consolidated financial condition of Parent and its
Consolidated Subsidiaries as at said dates and the results of its operations for
the fiscal year and the nine month period on said dates, all in accordance with
GAAP, as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments).  Neither
Borrower nor any Subsidiary has on the Closing Date any material Debt,
contingent liabilities, 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 Schedule
7.02.  Since the date of formation of Borrower, there has been
no change or event having a Material Adverse Effect.  Since the date
of formation of Borrower, neither the business nor the Properties of Borrower or
any Subsidiary have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public
enemy.

     

    
      
        
        

      

      
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    Section
7.03           Litigation.  Except
as disclosed to the Lenders in Schedule 7.03 hereto,
at the Closing Date there is no litigation, legal, administrative or arbitral
proceeding, investigation or other action of any nature pending or, to the
knowledge of Borrower threatened against or affecting Borrower or any Subsidiary
which involves the possibility of any judgment or liability against Borrower or
any Subsidiary not fully covered by insurance (except for normal
deductibles).

     

    Section
7.04           No Breach.  Neither
the execution and delivery of the Loan Documents, nor compliance with the terms
and provisions hereof will conflict with or result in a breach of, or require
any consent which has not been obtained as of the Closing Date under, the
respective charter or by-laws of Borrower or any Subsidiary, or any Governmental
Requirement or any agreement or instrument to which Borrower or any Subsidiary
is a party or by which it is bound or to which it or its Properties are subject,
or constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the revenues or assets of
Borrower or any Subsidiary pursuant to the terms of any such agreement or
instrument other than the Liens created by the Loan Documents.

     

    Section
7.05           Authority.  Borrower
and each Subsidiary have all necessary corporate power and authority to execute,
deliver and perform its obligations under the Loan Documents to which it is a
party; and the execution, delivery and performance by Borrower and each
Subsidiary of the Loan Documents to which it is a party, have been duly
authorized by all necessary corporate action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of Borrower and each
Subsidiary, enforceable in accordance with their terms.

     

    Section
7.06           Approvals.  No
authorizations, approvals or consents of, and no filings or registrations with,
any Governmental Authority are necessary for the execution, delivery or
performance by Borrower or any Subsidiary of the Loan Documents or for the
validity or enforceability thereof, except for the recording and filing of the
Security Instruments as required by this Agreement.

     

    Section
7.07           Use of
Loans.  The
proceeds of the Loans shall be used (i) for the GFB Acquisition, (ii) for
working capital, capital expenditures and other lawful general business purposes
of Borrower and its Subsidiaries (excluding distributions to holders of Capital
Securities in Borrower or any Subsidiary) and (iii) to finance permitted
acquisitions of Oil and Gas Properties and other assets related to the
exploration, production and development of Oil and Gas Properties; provided, however, none of the
funds comprising the Overadvance Amount will be used for the GFB
Acquisition.  Borrower is not engaged principally, or as one of its
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 of Governors of
the Federal Reserve System) and no part of the proceeds of any Loan hereunder
will be used to buy or carry any margin stock.

     

    Section
7.08            ERISA.

     

    (a)          
 Borrower, each Subsidiary and each ERISA Affiliate have complied in all
material respects with ERISA and, where applicable, the Code regarding each
Plan.

     

    (b)           Each
Plan is, and has been, maintained in substantial compliance with ERISA and,
where applicable, the Code.

     

    (c)           
No act, omission or transaction has occurred which could result in imposition on
Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly)
of (i) either a civil penalty assessed pursuant to section 502(c), (i) or (l) 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.

     

    
      
        
        

      

      
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    (d)           No
Plan (other than a defined contribution plan) or any trust created under any
such Plan has been terminated since September 2, 1974.  No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by Borrower, any Subsidiary or any ERISA Affiliate has been or is
expected by Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan.  No ERISA Event with respect to any Plan has
occurred.

     

    (e)           Full
payment when due has been made of all amounts which Borrower, any Subsidiary or
any ERISA Affiliate is required under the terms of each Plan or applicable law
to have paid as contributions to such Plan, 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)           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 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)           None
of Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains, or
contributes to an employee welfare benefit plan, as defined in 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
Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any material liability.

     

    (h)           None
of Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains or
contributes to, or has at any time in the preceding six calendar years,
sponsored, maintained or contributed to, any Multiemployer Plan.

     

    (i)          
 None of Borrower, any Subsidiary or 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
7.09           Taxes.  Except
as set out in Schedule 7.09,
each of Borrower and its Subsidiaries has filed all United States Federal income
tax returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by Borrower or any Subsidiary.  The charges,
accruals and reserves on the books of Borrower and its Subsidiaries in respect
of taxes and other governmental charges are, in the opinion of Borrower,
adequate.  No tax lien has been filed and, to the knowledge of
Borrower, no claim is being asserted with respect to any such tax, fee or other
charge.

     

    Section
7.10            Titles,
Etc.

     

    (a)           Except
as set out in Schedule 7.10,
each of Borrower and its Subsidiaries has good and indefeasible title to its
material (individually or in the aggregate) Properties comprised of real
Property and has good and marketable title to and is possessed of its material
(individually or in the aggregate) Properties comprised of personal Property,
free and clear of all Liens, except Liens permitted by Section
9.02.  Except as set forth in Schedule 7.10,
after giving full effect to the Excepted Liens, Borrower owns the net interests
in production attributable to the Hydrocarbon Interests reflected in the most
recently delivered Reserve Report and the ownership of such Properties shall not
in any material respect obligate Borrower 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.  All information contained in
the most recently delivered Reserve Report is true and correct in all material
respects as of the date thereof.

     

    
      
        
        

      

      
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    (b)           All
leases and agreements necessary for the conduct of the business of Borrower and
its Subsidiaries 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 would affect in any material respect the conduct of the business
of Borrower and its Subsidiaries.

     

    (c)           All
of the assets and Properties of Borrower and its Subsidiaries which are
reasonably necessary for the operation of its business are in good working
condition and are maintained in accordance with prudent business
standards.

     

    Section
7.11           No Material
Misstatements.  No
written information, statement, exhibit, certificate, document or report
furnished to Administrative Agent and the Lenders (or any of them) by or on
behalf of Borrower or any Subsidiary in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to Borrower and its Subsidiaries taken as a whole.  There is
no fact peculiar to Borrower or any Subsidiary which has a Material Adverse
Effect or in the future is reasonably likely to have (so far as Borrower can now
foresee) a Material Adverse Effect and which has not been set forth in this
Agreement or the other documents, certificates and statements furnished to
Administrative Agent by or on behalf of Borrower or any Subsidiary prior to, or
on, the Closing Date in connection with the transactions contemplated
hereby.  To the best knowledge of Borrower, there are no statements or
conclusions in any Reserve Reports which are based upon or include misleading
information or fail to take into account material information regarding the
matters reported therein.

     

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

     

    Section
7.13           Subsidiaries.  Except
as set forth on Schedule 7.13,
Borrower has no Subsidiaries.

     

    Section
7.14           Location of Business and
Offices, Etc.

     

      Borrower’s
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement.  The principal
place of business and chief executive office of each Subsidiary are located at
the addresses stated on Schedule
7.14.  The tax identification number, organizational
identification number and state of formation for Borrower and each Subsidiary
are set forth on Schedule 7.14.

     

    Section
7.15           Defaults.  Neither
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 under any Material
Agreement to which Borrower or any Subsidiary is a party or by which Borrower or
any Subsidiary is bound which default would have a Material Adverse
Effect.  No Default hereunder has occurred and is
continuing.

     

    Section
7.16           Environmental
Matters.  Except
(i) as provided in Schedule 7.16 or (ii)
as would not have a Material Adverse Effect (or with respect to (c), (d) and (e)
below, where the failure to take such actions would not have a Material Adverse
Effect):

     

    
      
        
        

      

      
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    (a)           
Neither any Property of Borrower or any Subsidiary nor the operations conducted
thereon violate any order or requirement of any court or Governmental Authority
or any Environmental Laws;

     

    (b)           Without
limitation of clause (a) above, no Property of Borrower or any Subsidiary nor
the operations currently conducted thereon or, to the best knowledge of
Borrower, by any prior owner or operator of such Property or operation, are in
violation of or subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority or to any remedial obligations under Environmental Laws;

     

    (c)           All
notices, permits, licenses or similar authorizations, if any, required to be
obtained or filed in connection with the operation or use of any and all
Property of Borrower and each Subsidiary, including without limitation past or
present treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed or will be
duly obtained and filed promptly after the closing of the GFB Acquisition, and
Borrower and each Subsidiary are in compliance with the terms and conditions of
all such notices, permits, licenses and similar authorizations;

     

    (d)           All
hazardous substances, solid waste, and oil and gas exploration and production
wastes, if any, generated at any and all Property of Borrower or any Subsidiary
have in the past been transported, treated and disposed of in accordance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and, to the best
knowledge of Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to public health or
welfare or the environment, and are not the subject of any existing, pending or
threatened action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;

     

    (e)           Borrower
has taken all steps reasonably necessary to determine and has determined that no
hazardous substances, solid waste, or oil and gas exploration and production
wastes, have been disposed of or otherwise released and there has been no
threatened release of any hazardous substances on or to any Property of Borrower
or any Subsidiary except in compliance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or welfare or the
environment;

     

    (f)           To
the extent applicable, all Property of Borrower and each Subsidiary currently
satisfies all design, operation, and equipment requirements imposed by the OPA
or scheduled as of the Closing Date to be imposed by OPA during the term of this
Agreement, and Borrower does not have any reason to believe that such Property,
to the extent subject to OPA, will not be able to maintain compliance with the
OPA requirements during the term of this Agreement; and

     

    (g)           Neither
Borrower nor any Subsidiary has any known contingent liability in connection
with any release or threatened release of any oil, hazardous substance or solid
waste into the environment.

     

    Section
7.17           Compliance with the
Law.  Neither
Borrower nor any Subsidiary has violated any Governmental Requirement or failed
to obtain any license, permit, franchise or other governmental authorization
necessary for the ownership of any of its Properties or the conduct of its
business, which violation or failure would have (in the event such violation or
failure were asserted by any Person through appropriate action) a Material
Adverse Effect.  Except for such acts or failures to act as would not
have a Material Adverse Effect, the Oil and Gas Properties (and properties
unitized therewith) have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of all duly constituted authorities having jurisdiction
and in conformity 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.  Specifically
in this connection, (i) after the Closing Date, no Oil and Gas Property 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) prior to
the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas
Properties (or properties unitized therewith) are deviated from the vertical
more than the maximum permitted by applicable laws, regulations, rules and
orders, 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).

     

    
      
        
        

      

      
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    Section
7.18           Insurance.  Schedule 7.18
attached hereto contains an accurate and complete description of all material
policies of fire, liability, workmen’s compensation and other forms of insurance
owned or held by Borrower and each Subsidiary.  All such policies are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date of the closing have been paid, and no notice of
cancellation or termination has been received with respect to any such
policy.  Such policies are sufficient for compliance with
all requirements of law and of all agreements to which Borrower or any
Subsidiary is a party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage in at least such amounts and against at least such
risks (but including in any event public liability) as are usually insured
against in the same general area by companies engaged in the same or a similar
business for the assets and operations of Borrower and each Subsidiary; will
remain in full force and effect through the respective dates set forth in Schedule 7.18 without
the payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.  Schedule 7.18
identifies all material risks, if any, which Borrower and its Subsidiaries and
their respective Board of Directors or officers have designated as being self
insured.  Neither Borrower nor any Subsidiary has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited below usual and customary policy limits, by an insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance during the last three years.

     

    Section
7.19           Hedging
Agreements.  Schedule 7.19 sets
forth, as of the Closing Date, a true and complete list of all Hedging
Agreements (including commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of 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 counter party to each such agreement.

     

    Section
7.20           Restriction on
Liens.  Neither
Borrower nor any of its Subsidiaries is a party to any agreement or arrangement
(other than the Loan Documents), or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its ability to grant
Liens to other Persons on or in respect of their respective assets or
Properties.

     

    Section
7.21           Material
Agreements.  Set
forth on Schedule 7.21
hereto is a complete and correct list of all Material Agreements in effect or to
be in effect on the Closing Date, other than the standard A.A.P.L. form 610
operating agreements relating to Borrower’s Oil and Gas
Properties.  Borrower has heretofore delivered to the Agent and the
Lenders a complete and correct copy of all Material Agreements, including the
Phoenix Agreement, but excluding the standard A.A.P.L. form 610 operating
agreements relating to Borrower’s Oil and Gas Properties.

     

    
      
        
        

      

      
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    Section
7.22           Solvency.  Immediately
after the Initial Funding and after giving effect to the application of the
proceeds of the Initial Funding, (a) the fair value of the Property of Borrower,
at a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (b) the present fair saleable value of the Property of
Borrower will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(c) Borrower will be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) Borrower will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted  following the Initial
Funding.

     

    Section
7.23           Gas
Imbalances.  Except
as set forth on Schedule 7.23 or on
the most recent certificate delivered pursuant to Section 8.07(c), on a net
basis there are no gas imbalances, take or pay or other prepayments with respect
to Borrower’s Oil and Gas Properties which would require Borrower to deliver, in
the aggregate, two percent (2.0%) or more of the monthly production from
Hydrocarbons produced from Borrower’s Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor.

     

    Section
7.24           Permits, Licenses,
Franchises, Patents and Trademarks.  Borrower
and each Subsidiary has all permits and owns or is licensed or otherwise has the
right to use all of the patents, trademarks, trade names, copyrights,
franchises, licenses and rights, as the case may be, necessary for the conduct
of its business, which ownership, patents, trademarks, trade names, copyrights,
licenses, franchises, permits and rights of Borrower and each Subsidiary, as the
case may be, are free and clear of Liens, except for Liens permitted by the Loan
Documents.  There does not exist, nor to the knowledge of Borrower,
has there been threatened against Borrower or any Subsidiary, any material
liability of Borrower or any Subsidiary in respect of any claim or infringement
of any of the foregoing.

     

    ARTICLE
VIII

     

    Affirmative
Covenants

     

    Borrower
covenants and agrees that, so long as any of the Commitments are in effect and
until payment in full of all Loans hereunder, all interest thereon and all other
amounts payable by Borrower hereunder:

     

    Section
8.01           Reporting
Requirements.  Borrower
shall deliver, or shall cause to be delivered, to Administrative Agent with
sufficient copies for each of the Lenders and Administrative Agent shall deliver
such copies to the Lenders:

     

    (a)           Annual Financial
Statements.  As soon as available and in any event within 90
days after the end of each fiscal year of Borrower, the audited consolidated
statements of income, members’ equity, changes in financial position and cash
flows of Borrower and its Consolidated Subsidiaries for such fiscal year, and
the related consolidated and consolidating balance sheets of Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year, and setting forth
in each case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by the related opinion of Malone & Bailey, PC
or other independent public accountants of recognized national standing
acceptable to Administrative Agent which opinion shall state that said financial
statements fairly present in all material respects the consolidated and
consolidating financial condition and results of operations of Borrower and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year and that
such financial statements have been prepared in accordance with GAAP, except for
such changes in such principles with which the independent public accountants
shall have concurred and such opinion shall not contain a “going concern” or
like qualification or exception, and a certificate of such accountants stating
that, in making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default.

     

    
      
        
        

      

      
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    (b)           Quarterly Financial
Statements.  As soon as available and in any event within 45
days after the end of each of the first three fiscal quarterly periods of each
fiscal year of Borrower beginning with the fiscal quarter ending September 30,
2008, consolidated statements of income, members’ equity, changes in financial
position and cash flows of Borrower and its Consolidated Subsidiaries for such
period and for the period from the beginning of the respective fiscal year to
the end of such period, and the related consolidated balance sheets as at the
end of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
accompanied by the certificate of a Responsible Officer, which certificate shall
state that said financial statements fairly present in all material respects the
consolidated and consolidating financial condition and results of operations of
Borrower and its Consolidated Subsidiaries in accordance with GAAP, as at the
end of, and for, such period (subject to normal year-end audit
adjustments).

     

    (c)           Compliance
Certificate.  At the time each set of financial statements
pursuant to Sections 8.01(a) or (b) above and each report pursuant to
Section 8.01(f) below is furnished, a Compliance Certificate executed by a
Responsible Officer, which among other things, (i) certifies as to the matters
set forth therein and states that no Default exists (or, if any Default exists,
describing the same in reasonable detail), and (ii) sets forth in reasonable
detail the computations necessary to determine whether Borrower is in compliance
with Section 9.11 as of the end of the respective fiscal quarter or fiscal
year.

     

    (d)           Notice of Default,
Etc.  Promptly after Borrower knows that any Default or any
Material Adverse Effect has occurred, a notice of such Default or Material
Adverse Effect, describing the same in reasonable detail and the action Borrower
proposes to take with respect thereto.

     

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

     

    (f)           
Hedging Agreements and
Property Reports.  As soon as available and in any event within
15 days after the last day of each calendar quarter, a report certified as true
and complete in all material respects by a Responsible Officer, in form and
substance satisfactory to Administrative Agent, (i) setting forth as of the last
Business Day of such calendar quarter a true and complete list of all Hedging
Agreements (including commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of 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, and the
counter party to each such agreement, and (ii) setting forth a list of any Oil
and Gas Properties acquired and any oil or gas wells drilled or brought on line
not reflected in a previous report.

     

    (g)           Production Reports,
Etc.  As soon as available and in any event within 15 days
after the end of each month, reports certified as true and complete in all
material respects by a Responsible Officer, regarding production and general and
administrative cost summaries by lease for its Oil and Gas Properties, in form
and substance satisfactory to Administrative Agent, which reports shall include
(i) quantities or volume of production, revenue, realized product prices,
operating expenses, taxes, capital expenditures and lease operating costs which
have accrued to Borrower’s accounts in such period, (ii) the name, address,
telephone and facsimile numbers, e-mail address (if available) and contact
individual for each Purchaser, and (iii) such other information with respect
thereto as Administrative Agent or the Lenders may require.

     

    
      
        
        

      

      
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    (h)           Reserve Report
Certificate.  Concurrent with delivery of each Reserve Report
furnished pursuant to Section 8.07, a completed Reserve Report Certificate,
duly executed by a Responsible Officer.

     

    (i)          
 Tax
Returns.  As soon as available and in any event within 15 days
after the filing of any tax return, or any other filing with a taxing authority,
of the Guarantor, Borrower or any Subsidiary, a copy of such filed tax return or
other filing, together with all exhibits and attachments thereto.

     

    (j)          
 SEC Filings,
Etc.  Promptly upon its becoming available, each financial
statement, report, notice or proxy statement sent by Parent and/or Borrower to
stockholders or equity holders generally and each regular or periodic report and
any registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by Parent and/or Borrower with or
received by Parent and/or Borrower in connection therewith from any securities
exchange or the SEC or any successor agency.

     

    (k)           
Notices Under Other
Loan Agreements.  Promptly after the furnishing thereof, copies
of any statement, report or notice furnished to any Person pursuant to the terms
of any 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.

     

    (l)           
Other
Matters.  From time to time such other information regarding
the business, affairs or financial condition of Borrower or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA) as any Lender or
Administrative Agent may reasonably request.

     

    Section
8.02           Litigation.  Borrower
shall promptly give to Administrative Agent notice of: (i)  all legal
or arbitral proceedings, and of all proceedings before any Governmental
Authority affecting Borrower or any Subsidiary, except proceedings which, if
adversely determined, would not have a Material Adverse Effect, and (ii) of any
litigation or proceeding against or adversely affecting Borrower or any
Subsidiary in which the amount involved is not covered in full by insurance
(subject to normal and customary deductibles and for which the insurer has not
assumed the defense), or in which injunctive or similar relief is
sought.  Borrower will, and will cause each of its Subsidiaries to,
promptly notify Administrative Agent and each of the Lenders of any claim,
judgment, Lien or other encumbrance affecting any Property of Borrower or any
Subsidiary.

     

    Section
8.03            Maintenance,
Etc.

     

    (a)          
 Generally.  Borrower
shall and shall cause each Subsidiary to: preserve and maintain its corporate
existence and all of its material rights, privileges, licenses, franchises and
other rights necessary to conduct its business; keep books of record and account
in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all
Governmental Requirements if failure to comply with such requirements will have
a Material Adverse Effect; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; upon reasonable notice, permit representatives of
Administrative Agent or any Lender, during normal business hours, to examine,
copy and make extracts from its books and records, to inspect its Properties,
and to discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or Administrative Agent (as the case may
be).

     

    
      
        
        

      

      
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    (b)           Insurance.  Borrower
shall and shall cause each Subsidiary to keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character usually
insured by Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against by such Persons and carry such other insurance as is usually carried by
such Persons including, without limitation, environmental risk insurance to the
extent reasonably available.  Borrower shall promptly obtain
endorsements to such insurance policies naming “The Bank of Nova Scotia, as
Administrative Agent for the Lenders” as joint loss payee and containing
provisions that such policies will not be canceled without 30 days prior written
notice having been given by the insurance company to Administrative
Agent.

     

    (c)           Proof of
Insurance.  Contemporaneously with the delivery of the
financial statements required by Section 8.01(a) to be delivered for each year,
Borrower will furnish or cause to be furnished to Administrative Agent and the
Lenders a certificate of insurance coverage from the insurer in form and
substance satisfactory to Administrative Agent and, if requested, will furnish
Administrative Agent and the Lenders copies of the applicable
policies.

     

    (d)           Oil and Gas
Properties.  Borrower will and will cause each Subsidiary to,
at its own expense, do or cause to be done all things reasonably necessary to
preserve and keep in good repair, working order and efficiency all of its Oil
and Gas Properties and other material Properties including, without limitation,
all equipment, machinery and facilities, and from time to time will make all the
reasonably necessary repairs, renewals and replacements so that at all times the
state and condition of its Oil and Gas Properties and other material Properties
will be fully preserved and maintained, except to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts.  Borrower will and will cause each Subsidiary to
promptly: (i) 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, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with industry
standards, the obligations required by each and all of the assignments, deeds,
leases, subleases, contracts and agreements affecting its interests in its Oil
and Gas Properties and other material Properties, and (iii) do all other things
necessary to keep unimpaired, except for Liens described in Section 9.02, its
rights with respect to its Oil and Gas Properties and other material Properties
and prevent any forfeiture thereof or a default thereunder, except to the extent
a portion of such Properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts and except for dispositions permitted by
Section 9.12.  Borrower will and will cause each Subsidiary to
operate its Oil and Gas Properties and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas Properties and
other material Properties to be operated in the manner of a prudent operator in
accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance in all material respects
with all Governmental Requirements.

     

    Section
8.04           Environmental
Matters.

     

    
      
        
        

      

      
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    (a)           Establishment of
Procedures.  Borrower will and will cause each Subsidiary to
establish and implement such procedures as may be reasonably necessary to
continuously determine and assure that any failure of the following does not
have a Material Adverse Effect: (i) all Property of Borrower and its
Subsidiaries and the operations conducted thereon and other activities of
Borrower and its Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous substances
or solid wastes are disposed of or otherwise released on or to any Property
owned by any such party except in compliance with Environmental Laws, (iii) no
hazardous substance will be released on or to any such Property in a quantity
equal to or exceeding that quantity which requires reporting pursuant to Section
103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or
hazardous substance is released on or to any such Property so as to pose an
imminent and substantial endangerment to public health or welfare or the
environment.

     

    (b)           Notice of
Action.  Borrower will promptly notify Administrative Agent and
the Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority of which Borrower has knowledge in connection with any
Environmental Laws, excluding routine testing and corrective
action.

     

    (c)           Future
Acquisitions.  Borrower will and will cause each Subsidiary to
provide environmental audits and tests as reasonably requested by Administrative
Agent and the Lenders (or as otherwise required to be obtained by Administrative
Agent or the Lenders by any Governmental Authority) in connection with any
future acquisitions of Oil and Gas Properties or other material
Properties.

     

    Section
8.05           Further
Assurances.  Borrower
will and will cause each Subsidiary to cure promptly any defects in the creation
and issuance of the Notes and the execution and delivery of this Agreement and
any other Loan Document.  Borrower, at its expense, will and will
cause each Subsidiary to promptly execute and deliver to Administrative Agent
upon request all such other documents, agreements and instruments to comply with
or accomplish the covenants and agreements of Borrower or any Subsidiary, as the
case may be, in this Agreement and any other Loan Document, or to further
evidence and more fully describe the collateral intended as security for the
Obligations or to correct any omissions in the Loan Documents, or to state more
fully the security obligations set out herein or in any of the Loan Documents,
or to perfect, protect or preserve any Liens created pursuant to any of the
Security Instruments, or to make any recordings, to file any notices or obtain
any consents, all as may be necessary or appropriate in connection
therewith.

     

    Section
8.06           Performance of
Obligations.  Borrower
will pay the Notes according to the reading, tenor and effect thereof; and
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, at the time or times and in the manner
specified.

     

    Section
8.07           Engineering
Reports.

     

    (a)           
Scheduled
Redetermination.  On or before May 1 of each year Borrower
shall furnish, or cause to be furnished, to Administrative Agent and the Lenders
the as of December 31 Reserve Report, and on or before November 1 of each
year Borrower shall furnish, or cause to be furnished, to Administrative Agent
and the Lenders the as of June 30 Reserve Report; provided, however, the Initial
Reserve Report shall satisfy the requirement for the Reserve Report required to
be delivered on or before May 1, 2008.  The as of December 31
Reserve Report of each year shall be prepared by certified independent petroleum
engineers or other independent petroleum consultant(s) acceptable to
Administrative Agent and the as of June 30 Reserve Report of each year
shall be prepared by or under the supervision of the chief engineer of Borrower
who shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately proceeding as
of December 31 Reserve Report; provided, however, the as of
June 30 Reserve Report to be delivered on or before November 1, 2008 shall
be prepared by certified independent petroleum engineers or other independent
petroleum consultant(s) acceptable to Administrative Agent.

     

    
      
        
        

      

      
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    (b)           Unscheduled
Redetermination.  In the event of an unscheduled
redetermination, Borrower shall furnish to Administrative Agent and the Lenders
a Reserve Report prepared by or under the supervision of the chief engineer of
Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding Reserve Report.  For any unscheduled redetermination
requested by the Majority Lenders or Administrative Agent pursuant to Section
2.08(e), Borrower shall provide as soon as possible, but in any event no later
than 30 days following the receipt of the request by Administrative Agent, such
Reserve Report with an “as of” date not more than 60 days prior to the
anticipated date of redetermination or as otherwise required by the Majority
Lenders or Administrative Agent. For each request by Borrower of an
unscheduled redetermination of the Borrowing Base, Borrower agrees to pay
Administrative Agent an engineering and administration fee in an amount agreed
to between Borrower and Administrative Agent and reflective of the market for
such fee at the time, payable concurrent with delivery of the Reserve Report
required by this Section.

     

    Section
8.08           Title
Information.

     

    (a)           
Delivery.  On
or before the delivery to Administrative Agent and the Lenders of each Reserve
Report required by Section 8.07(a), Borrower will deliver title information in
form and substance acceptable to 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 Administrative Agent shall
have received together with title information previously delivered to
Administrative Agent, satisfactory title information on at least eighty-five
percent (85%) of the value of the Oil and Gas Properties evaluated by such
Reserve Report.

     

    (b)         
  Cure of
Title Defects.  Borrower shall cure any title defects or
exceptions which are not Excepted Liens raised by the information described in
Section 8.08(a), or substitute as Collateral acceptable Oil and Gas Properties
with no title defects or exceptions except for Excepted Liens covering Oil and
Gas Properties of an equivalent value (but for such title defects or
exceptions), within 60 days after a request by Administrative Agent or the
Lenders to cure such defects or exceptions.

     

    (c)         
  Failure to
Cure Title Defects.  If Borrower is unable to cure any title
defect requested by Administrative Agent or the Lenders to be cured within the
60 day period or Borrower does not comply with the requirements to provide
acceptable title information covering eighty-five percent (85%) of the value of
the Oil and Gas Properties evaluated in the most recent Reserve Report, such
default shall not be a Default or an Event of Default, but instead
Administrative Agent and the Lenders shall have the right to exercise, in their
sole discretion from time to time, the remedy described in the next sentence,
and any failure to so exercise this remedy at any time shall not be a waiver as
to future exercise of such remedy by Administrative Agent or the
Lenders.  To the extent that Administrative Agent or the Lenders are
not satisfied with title to any Oil and Gas Properties comprising Collateral
after the time period in Section 8.08(b) has elapsed, such unacceptable Oil and
Gas Property Collateral shall not count towards the eighty-five percent (85%)
requirement, and Administrative Agent may send a notice to Borrower and the
Lenders that the then outstanding Borrowing Base shall be reduced by an amount
as determined by all of the Lenders to cause Borrower to be in compliance with
the requirement to provide acceptable title information on eighty-five percent
(85%) of the value of the Oil and Gas Properties comprising
Collateral.  This new Borrowing Base shall become effective
immediately after receipt of such notice.

     

    
      
        
        

      

      
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    Section
8.09           Collateral; Additional
Guarantors.

     

    (a)           
Collateral.  The
Obligations shall be secured by a perfected first priority Lien (subject only to
Excepted Liens) granted to Administrative Agent for the benefit of the
Beneficiaries in (i) all of Borrower’s and its Subsidiaries’ rights, titles
and interests, now owned or hereafter acquired, in any Oil and Gas Properties,
and contracts and any other rights related thereto, (ii) all personal
Property of Borrower and its Subsidiaries and (iii) all of the issued and
outstanding Capital Securities of all existing and/or hereafter created and/or
acquired Subsidiaries of Borrower.

     

    (b)           Lien in Acquired Oil and Gas
Properties.  Should Borrower or any of its Subsidiaries acquire
any additional Oil and Gas Properties or additional interests in its existing
Oil and Gas Properties, Borrower and/or such Subsidiary, as applicable, will
grant to Administrative Agent as security for the Obligations a first priority
Lien interest (subject only to Excepted Liens) on Borrower’s or such
Subsidiary’s interest in any Oil and Gas Properties not already subject to a
Lien of the Security Instruments, which Lien will be created and perfected by
and in accordance with the provisions of mortgages, deeds of trust, security
agreements and financing statements, or other Security Instruments, all in form
and substance satisfactory to Administrative Agent in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.

     

    (c)           Title
Information.  Concurrently with the granting of the Lien or
other action referred to in Subsection (b) of this Section, Borrower will
provide, or cause to be provided, to Administrative Agent title information in
form and substance satisfactory to Administrative Agent in its sole discretion
with respect to Borrower’s and each Subsidiary’s interests in its Oil and Gas
Properties.

     

    (d)           Legal
Opinions.  Also, concurrently with the filing of any new
Security Instrument in any state wherein Security Instruments have not
previously been filed or there is reason to believe the law applicable to
Security Instruments may have changed, upon the reasonable request of
Administrative Agent, Borrower will provide to Administrative Agent an opinion
addressed to Administrative Agent for the benefit of the Lenders in form and
substance satisfactory to Administrative Agent in its sole discretion from
counsel acceptable to Administrative Agent, stating that the Security Instrument
is valid, binding and enforceable in accordance with its terms in legally
sufficient form for such jurisdiction, and the means by which such Security
Instrument will perfect the Lien created thereby.

     

    (e)           Additional
Guarantors.  If, at any time, the necessary consent to create
or acquire a Subsidiary is obtained, then Borrower shall, or shall cause such
new Subsidiary, to promptly (x) execute and deliver a Guaranty Agreement or a
joinder to a Guaranty Agreement (y) pledge all of the Capital Securities of such
new Subsidiary (including, without limitation, delivery of original certificates
evidencing the Capital Securities of such new Subsidiary, together with an
appropriate undated transfer power for each certificate duly executed in blank
by the registered owner thereof) and (z) execute and deliver such other Loan
Documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.

     

    
      
        
        

      

      
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    Section
8.10           ERISA Information and
Compliance.  Borrower
will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to Administrative Agent with sufficient copies to the Lenders
(i) promptly after the filing thereof with the United States Secretary of Labor,
the Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (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 a Responsible Officer specifying the nature thereof, what
action 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),
Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (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
8.11           Hedging
Agreements.  Borrower
may maintain Hedging Agreements; provided that such Hedging
Agreements (i) are in form and substance satisfactory to Administrative Agent
and the Majority Lenders (ii) shall be with a Lender or, as approved by
Administrative Agent and the Majority Lenders, other unsecured counterparty,
(iii) are entered into as a part of Borrower’s normal business operations as a
risk management strategy and/or hedge against changes resulting from market
conditions related to Borrower’s operations, and (iv) shall not at any time, in
the aggregate, cover more than eighty-five percent (85%) of estimated production
of Hydrocarbons of Borrower from its Oil and Gas Properties for each individual
period covered by Hedging Agreements.  At any time that Borrower has
Loans outstanding in an amount exceeding seventy-five percent (75%) of the
Borrowing Base, the Lenders may require Borrower to maintain Hedging Agreements
or other contractual agreements upon terms, including projected production
volumes, and pursuant to documentation, in form and substance satisfactory to
Administrative Agent and the Majority Lenders.  For purposes of this
Section 8.11, the notional volumes and corresponding swap volumes so
determined shall be calculated and recorded separately for natural gas and crude
oil, and natural gas volumes shall include associated natural gas liquids
volumes.  In no event shall any Hedging Agreement contain any current
requirement, agreement or covenant for the Borrower or any Subsidiary to pledge
collateral or post margin, to secure their obligations under such Hedging
Agreements or to cover market exposures.

     

    ARTICLE
IX

     

    Negative
Covenants

     

    Borrower
covenants and agrees that, so long as any of the Commitments are in effect and
until payment in full of Loans hereunder, all interest thereon and all other
amounts payable by Borrower hereunder, without the prior written consent of the
Majority Lenders:

     

    Section
9.01           Debt.  Neither
Borrower nor any Subsidiary will incur, create, assume or permit to exist any
Debt, except:

     

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

     

    (b)           Debt
of Borrower existing on the Closing Date which is disclosed in Schedule 9.01, and
any renewals or extensions (but not increases) thereof.

     

    (c)           accounts
payable (for the deferred purchase price of Property or services) from time to
time incurred in the ordinary course of business which, if greater than 90 days
past the invoice or billing date, are being contested in good faith by
appropriate proceedings if reserves adequate under GAAP shall have been
established therefore.

     

    (d)           Debt
under capital leases (as required to be reported on the financial statements of
Borrower pursuant to GAAP) and purchase money Debt, in each case for the
acquisition of equipment, which in each purchase money Debt case shall not
exceed 100% of the lesser of the total purchase price and the fair market value
of the Property acquired as determined at the time of acquisition; provided that
all Debt incurred as described in this clause (d) shall not exceed $500,000 in
the aggregate outstanding at any time.

     

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

     

    (f)           Subject
to the provisions of Section 8.11, Debt of Borrower and its Subsidiaries under
Hedging Agreements with a Lender or as approved by the Majority Lenders entered
into as a part of its normal business operations as a risk management strategy
and/or hedge against changes resulting from market conditions related to
Borrower’s operations.

     

    Section
9.02           Liens.  Neither
Borrower nor any Subsidiary will 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 Obligations.

     

    (b)           Excepted
Liens.

     

    
      
        
        

      

      
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    (c)         
  Liens securing capital leases or purchase money Debt allowed under
Section 9.01(d), but only on the Property under lease or acquired with such Debt
or the proceeds thereof.

     

    (d)           Liens
disclosed on Schedule
9.02 .

     

    (e)           
Liens on cash or securities of Borrower securing the Debt described in Section
9.01(e).

     

    Section
9.03           Investments, Loans and
Advances.  Neither
Borrower nor any Subsidiary will make or permit to remain outstanding any loans
or advances to or investments in any Person, except that the foregoing
restriction shall not apply to:

     

    (a)          
 investments, loans or advances which are disclosed to the Lenders in Schedule 9.03;

     

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

     

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

     

    (d)           commercial
paper maturing within one year from the date of creation thereof rated in the
highest grade by Standard & Poor’s Corporation or Moody’s Investors
Service, Inc.

     

    (e)           deposits
maturing within one year from the date of creation 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 $500,000,000 (as of the date of such
Lender’s or 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 Standard & Poor’s Corporation or Moody’s Investors
Service, Inc., respectively.

     

    
      
        
        

      

      
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    (f)           deposits
in money market funds investing exclusively in investments described in Section
9.03(c), 9.03(d) or 9.03(e).

     

    (g)           investments
by Borrower in direct ownership interests in additional Oil and Gas Properties
and gas gathering systems related thereto.

     

    Section
9.04          Dividends, Distributions and
Redemptions.  Borrower
will not declare or pay any dividend or distribution, return any capital to its
members or make any distribution of its assets to its members; provided, however, Borrower may
make Permitted Tax Distributions for which Borrower provides to Administrative
Agent reasonable verification of the corresponding tax liability of its
member.

     

    Section
9.05           Sales and
Leasebacks.  Neither
Borrower nor any Subsidiary will enter into any arrangement, directly or
indirectly, with any Person whereby Borrower or any Subsidiary shall sell or
transfer any of its Property, whether now owned or hereafter acquired, and
whereby Borrower or any Subsidiary shall then or thereafter rent or lease as
lessee such Property or any part thereof or other Property which Borrower or any
Subsidiary intends to use for substantially the same purpose or purposes as the
Property sold or transferred.

     

    Section
9.06           Nature of
Business.  Neither
Borrower nor any Subsidiary will allow any material change to be made in the
character of its business as an independent oil and gas acquisition, exploration
and production company.

     

    Section
9.07            Mergers,
Etc.

     

      Neither
Borrower nor any Subsidiary will merge into or with or consolidate with any
other Person, or sell, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its Property or
assets to any other Person.

     

    Section
9.08           Proceeds of Notes; Letters
of Credit.  Borrower
will not permit the proceeds of the Notes or Letters of Credit to be used for
any purpose other than those permitted by Section 7.07, and specifically, will
not use any of the funds comprising the Overadvance Amount for the GFB
Acquisition.  Neither Borrower nor any Person acting on behalf of
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation T, U or X or any other regulation of the Board
of Governors of the Federal Reserve System 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.

     

    Section
9.09            ERISA
Compliance.  Borrower
will not at any time:

     

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

     

    (b)           Terminate,
or permit any Subsidiary or 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 to Borrower, any Subsidiary or any ERISA Affiliate to the
PBGC;

     

    
      
        
        

      

      
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    (c)          
 Fail to make, or permit any Subsidiary or 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, Borrower, a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto;

     

    (d)           Permit
to exist, or allow any Subsidiary or 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)         
  Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
Borrower, any 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)          
 Contribute to or assume an obligation to contribute to, or permit any
Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;

     

    (g)           Acquire,
or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any
Person that causes such Person to become an ERISA Affiliate with respect to
Borrower, any Subsidiary or any ERISA Affiliate 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, (1) any
Multiemployer Plan, or (2) 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 Subsidiary or ERISA Affiliate to incur, a liability to or on
account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA;

     

    (i)         
  Contribute to or assume an obligation to contribute to, or permit
any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in 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
such entities in their sole discretion at any time without any material
liability; or

     

    (j)          
 Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that Borrower, any 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.  Neither
Borrower nor any Subsidiary will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable.

     

    Section
9.11            Financial
Covenants.

     

    (a)           Current
Ratio  Borrower will not permit the ratio of (i) consolidated
current assets (including any amounts available under the facility of this
Agreement) to (ii) consolidated current liabilities (excluding current
maturities of the Notes) to be less than 1.0 to 1.0 at any time.  As
used in this Section, “consolidated current
assets” shall mean shall mean shall mean assets which would, in
accordance with GAAP, be included as current assets on a consolidated balance
sheet of Borrower and its Consolidated Subsidiaries, but excluding non-cash
assets under FAS 133, and “consolidated current
liabilities” shall mean liabilities which would, in accordance with GAAP,
be included as current liabilities on a consolidated balance sheet of Borrower
and its Consolidated Subsidiaries, but excluding non-cash obligations under FAS
133.

     

    
      
        
        

      

      
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    (b)           Leverage
Ratio.  Borrower will not permit its Leverage Ratio as of the
end of any fiscal quarter of Borrower (calculated quarterly at the end of each
fiscal quarter) to be greater than 3.50 to 1.00.  For purposes of this
Section 9.11(b), “Leverage Ratio” shall
mean the ratio of (i) Funded Debt as of the end of such four fiscal quarters of
Borrower and its Consolidated Subsidiaries to (ii) EBITDA for the four fiscal
quarters ending on such date.  For purposes of the calculations in
this Section to be made prior to the fourth full fiscal quarter to elapse after
the Closing Date, EBITDA shall be determined by multiplying the sum of EBITDA
for each of the fiscal quarters actually elapsed from and including the first
fiscal quarter of 2008 through and including the fourth fiscal quarter of 2008
by a fraction, the numerator of which is 4 and the denominator of which is the
number of such actually elapsed fiscal quarters.

     

    (c)        
   Interest Coverage
Ratio.  Borrower will not permit its Interest Coverage Ratio as
of the end of any fiscal quarter of Borrower (calculated quarterly at the end of
each fiscal quarter) to be less than 2.50 to 1.00.  For the purposes
of this Section 9.11(c), “Interest Coverage
Ratio” shall mean the ratio of (i) EBITDA for the four fiscal quarters
ending on such date to (ii) cash interest payments made for such four fiscal
quarters of Borrower and its Consolidated Subsidiaries.  For purposes
of the calculations in this Section to be made prior to the fourth full fiscal
quarter to elapse after the Closing Date, EBITDA and the amount of cash interest
payments shall be determined by multiplying the sum of each such component for
each of the fiscal quarters actually elapsed from and including the first fiscal
quarter of 2008 through and including the fourth fiscal quarter of 2008 by a
fraction, the numerator of which is 4 and the denominator of which is the number
of such actually elapsed fiscal quarters.

     

    Section
9.12           Sale of
Properties.  Borrower
will not, and will not permit any Subsidiary to, Transfer between immediately
successive Scheduled Redetermination Dates any Oil and Gas Properties, or any
interest in any Oil and Gas Properties, for which value was given in the most
recent Borrowing Base redetermination which in the aggregate have a fair market
value in excess of $500,000.

     

    Section
9.13           Environmental
Matters.  Neither
Borrower nor any Subsidiary will cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will
subject any such Property to any remedial obligations 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 would have a Material
Adverse Effect.

     

    Section
9.14           Transactions with
Affiliates.  Neither
Borrower nor any Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate, except (i) such transactions as are in the
ordinary course of its business and 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 and (ii) capital contributions from Parent in the
form of common equity.

     

    Section
9.15           Subsidiaries.  Borrower
shall not, and shall not permit any Subsidiary to, create any additional
Subsidiaries.  Borrower shall not and shall not permit any Subsidiary
to sell or to issue any stock or ownership interest of a Subsidiary, except to
Borrower or any Subsidiary that is a Guarantor and except in compliance with
Section 9.03.

     

    
      
        
        

      

      
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    Section
9.16           Negative Pledge
Agreements.  Neither
Borrower nor any Subsidiary will create, incur, assume or permit to exist any
contract, agreement or understanding (other than the Loan Documents) which in
any way prohibits or restricts the granting, conveying, creation or imposition
of any Lien on any of its Property or restricts any Subsidiary from paying
dividends to Borrower, or which requires the consent of or notice to other
Persons in connection therewith.

     

    Section
9.17           Gas Imbalances, Take-or-Pay
or Other Prepayments.  Borrower
will not allow gas imbalances, take-or-pay or other prepayments with respect to
the Oil and Gas Properties of Borrower or any Subsidiary which would require
Borrower or any Subsidiary to deliver in the aggregate two percent (2.0%) or
more of their Hydrocarbons produced on a monthly basis from such Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor.

     

    Section
9.18           Material Operational
Agreements.  Without
the prior written consent of the Lenders, Borrower shall not enter into any
amendment, supplement, restatement or other modification of any Material
Agreement, including the Phoenix Agreement.

     

    ARTICLE
X

     

    Events of Default;
Remedies

     

    Section
10.01          Events of
Default.  One
or more of the following events shall constitute an “Event of
Default”:

     

    (a)          
 Borrower shall default in the payment or prepayment when due of any
principal of or interest on any Loan, or any reimbursement obligation for a
disbursement made under any Letter of Credit, or any fees or other amount
payable by it hereunder or under any Loan Document; or

     

    (b)          
 Borrower or any Subsidiary shall default in the payment when due of any
principal of or interest on any of its other Debt, or any event specified in any
note, agreement, indenture or other document evidencing or relating to any such
Debt shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit the holder or holders of such
Debt (or a trustee or agent on behalf of such holder or holders) to cause, such
Debt to become due prior to its stated maturity; or

     

    (c)           any
representation, warranty or certification made or deemed made herein or in any
other Loan Document by Borrower or any Subsidiary, or any certificate furnished
to any Lender or Administrative Agent pursuant to the provisions hereof or any
other Loan Document, shall prove to have been false or misleading as of the time
made or furnished in any material respect; or

     

    (d)           Borrower
shall default in the performance of any of its obligations under Article IX,
Sections 8.01(a) or (d) or any other Article of this Agreement other
than under Article VIII (excluding Sections 8.01(a) and (d)); or
Borrower shall default in the performance of any of its obligations under
Article VIII (excluding Sections 8.01(a) and (d)) or any other Loan
Document (other than the payment of amounts due which shall be governed by
Section 10.01(a)) and such default shall continue unremedied for a period of
thirty (30) days after the earlier to occur of (i) notice thereof to Borrower by
Administrative Agent or any Lender (through Administrative Agent), or (ii)
Borrower otherwise becoming aware of such default; or

     

    (e)           any
Guarantor shall default in the performance of any of its obligations under its
Guaranty Agreement (other than the payment of amounts due, which shall have no
grace period) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to Borrower and
such Guarantor by Administrative Agent or any Lender (through Administrative
Agent), or (ii) Borrower or any Guarantor otherwise becoming aware of such
default; or

     

    
      
        
        

      

      
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    (f)           Borrower
shall admit in writing its inability to, or be generally unable to, pay its
debts as such debts become due; or

     

    (g)           Borrower
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing;
or

     

    (h)           a
proceeding or case shall be commenced, without the application or consent of
Borrower, in any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of Borrower of all or any substantial part of its assets,
or (iii) similar relief in respect of Borrower under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against Borrower shall be entered in an involuntary case under the
Federal Bankruptcy Code; or

     

    (i)          
 a judgment or judgments for the payment of money in excess of $100,000 in
the aggregate shall be rendered by a court against Borrower or any Subsidiary
and the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured by posting a
bond or otherwise, within thirty (30) days from the date of entry thereof and
Borrower or such Subsidiary shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;
or

     

    (j)          
 the Loan Documents 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, 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 Borrower or any Guarantor shall so state in
writing; or

     

    (k)         
  an event having a Material Adverse Effect shall occur;
or

     

    (l)          
 Borrower discontinues its usual business or a Change of Control occurs;
or

     

    (m)           any
Subsidiary or Guarantor takes, suffers or permits to exist any of the events or
conditions referred to in paragraphs (f), (g), (h) or (i), or if any provision
of any Guaranty Agreement related thereto shall for any reason cease to be valid
and binding on such Guarantor or if such Guarantor shall so state in
writing.

     

    
      
        
        

      

      
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    Section
10.02          Remedies.

     

    (a)           In
the case of an Event of Default other than one referred to in clauses (f), (g)
or (h) of Section 10.01 or in clause (m) to the extent it relates to clauses
(f), (g) or (h), Administrative Agent, upon request of the Majority Lenders,
shall, by notice to Borrower, cancel the Commitments (in whole or part) and/or
declare the principal amount then outstanding of, and the accrued interest on,
the Loans and all other amounts payable by Borrower hereunder and under the
Notes (including without limitation the payment of cash collateral to secure the
LC Exposure as provided in Section 2.10(b)) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by
Borrower.

     

    (b)           In
the case of the occurrence of an Event of Default referred to in clauses (f),
(g) or (h) of Section 10.01 or in clause (m) to the extent it relates to clauses
(f), (g) or (h), the Commitments shall be automatically canceled and the
principal amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by Borrower hereunder and under the Notes (including
without limitation the payment of cash collateral to secure the LC Exposure as
provided in Section 2.10(b)) shall become automatically immediately due and
payable without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are hereby
expressly waived by Borrower.

     

    (c)           All
proceeds received after maturity of the Notes, whether by acceleration or
otherwise shall be applied first to reimbursement of expenses and indemnities
provided for in this Agreement and the other Loan Documents; second to fees;
third pro rata to accrued interest on the Notes; fourth pro rata to principal
outstanding on the Notes and any other Obligations; fifth to serve as cash
collateral to be held by Administrative Agent to secure the LC Exposure; and any
excess shall be paid to Borrower or as otherwise required by any Governmental
Requirement.

     

    ARTICLE
XI

     

    Administrative
Agent

     

    Section
11.01         Appointment, Powers and
Immunities.  Each
Lender hereby irrevocably appoints and authorizes Administrative Agent to act as
its agent hereunder and under the other Loan Documents with such powers as are
specifically delegated to Administrative Agent by the terms of this Agreement
and the other Loan Documents, together with such other powers as are reasonably
incidental thereto.  Administrative Agent (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 shall
include reference to its Affiliates and its and its Affiliates’ officers,
directors, employees, attorneys, accountants, experts and
agents):  (i) shall have no duties or responsibilities except those
expressly set forth in the Loan Documents, and shall not by reason of the Loan
Documents be a trustee or fiduciary for any Lender; (ii) makes no
representation or warranty to any Lender and shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by Borrower or any other
Person (other than Administrative Agent) to perform any of its obligations
hereunder or thereunder or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of Borrower, its
Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section
11.07 shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (iv) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith including its own
ordinary negligence, except for its own gross negligence or willful
misconduct.  Administrative Agent may employ agents, accountants,
attorneys and experts and shall not be responsible for the negligence or
misconduct of any such agents, accountants, attorneys or experts selected by it
in good faith or any action taken or omitted to be taken in good faith by it in
accordance with the advice of such agents, accountants, attorneys or
experts.  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 Administrative Agent.  Administrative Agent is authorized
to release any collateral that is permitted to be sold or released pursuant to
the terms of the Loan Documents.

     

    
      
        
        

      

      
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    Section
11.02        Reliance by Administrative
Agent.  Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telecopier, telegram
or cable) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by Administrative Agent.

     

    Section
11.03         Defaults.  Administrative
Agent shall not be deemed to have knowledge of the occurrence of a Default
(other than the non-payment of principal of or interest on Loans or of fees or
failure to reimburse for Letter of Credit drawings) unless Administrative Agent
has received notice from a Lender or Borrower specifying such Default and
stating that such notice is a “Notice of Default.”  In the event that
Administrative Agent receives such a notice of the occurrence of a Default,
Administrative Agent shall give prompt notice thereof to the
Lenders.  In the event of a payment Default, Administrative Agent
shall give each Lender prompt notice of each such payment Default.

     

    Section
11.04         Rights as a
Lender.   With
respect to its Commitments and the Loans made by it and its participation in the
issuance of Letters of Credit, Scotia Capital (and any successor acting as
Administrative Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Administrative Agent, and the term “Lender” or
“Lenders” shall, unless the context otherwise indicates, include Administrative
Agent in its individual capacity.  Scotia Capital (and any successor
acting as Administrative Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with Borrower
(and any of its Affiliates) as if it were not acting as Administrative Agent,
and Scotia Capital and its Affiliates may accept fees and other consideration
from Borrower for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.

     

    Section
11.05        Indemnification.  The
Lenders agree to indemnify Administrative Agent and the Issuing Bank ratably in
accordance with their Percentage Shares for the Indemnity Matters as described
in section 12.03 to the extent not indemnified or reimbursed by Borrower under
section 12.03, but without limiting the obligations of Borrower under said
section 12.03 and for any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against Administrative Agent or the Issuing Bank in any way relating to
or arising out of: (i) this Agreement, the other Loan Documents or any other
documents contemplated by or referred to herein or the transactions contemplated
hereby, but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder or (ii) the enforcement of any of the terms of this Agreement,
any Loan Document or of any such other documents; whether or not any of the
foregoing specified in this section 11.05 arises from the sole or concurrent
negligence of Administrative Agent or the Issuing Bank, provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of Administrative Agent.

     

    
      
        
        

      

      
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    Section
11.06         Non-Reliance on
Administrative Agent and other Lenders.  Each
Lender acknowledges and agrees that it has, independently and without reliance
on Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
Borrower and its decision to enter into this Agreement, and that it will,
independently and without reliance upon Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement.  Administrative Agent shall not be
required to keep itself informed as to the performance or observance by Borrower
of this Agreement, the Notes, any other Loan Document or any other document
referred to or provided for herein or to inspect the properties or books of
Borrower.  Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by Administrative
Agent hereunder, Administrative Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
affairs, financial condition or business of Borrower (or any of its Affiliates)
which may come into the possession of Administrative Agent or any of its
Affiliates.  In this regard, each Lender acknowledges that Burleson
Cooke L.L.P. is acting in this transaction as special counsel to Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document.  Each Lender will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

     

    Section
11.07         Action by Administrative
Agent.  Except
for action or other matters expressly required of Administrative Agent
hereunder, Administrative Agent shall in all cases be fully justified in failing
or refusing to act hereunder unless it shall (i) receive written instructions
from the Majority Lenders (or all of the Lenders as expressly required by
Section 12.04) 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 of the Majority Lenders (or all of the
Lenders as expressly required by Section 12.04) and any action taken or failure
to act pursuant thereto by Administrative Agent shall be binding on all of the
Lenders.  If a Default has occurred and is continuing, Administrative
Agent shall take such action with respect to such Default as shall be directed
by the Majority Lenders (or all of the Lenders as required by Section 12.04) in
the written instructions (with indemnities) described in this Section 11.07,
provided that, unless and until Administrative Agent shall have received such
directions, 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 Administrative Agent be required to take any action which
exposes Administrative Agent to personal liability or which is contrary to this
Agreement and the other Loan Documents or applicable law.  In
connection with taking any action pursuant to this Section or otherwise under
this Agreement, Administrative Agent may engage legal counsel and/or other
qualified consultants to act at the instructions of and on behalf of
Administrative Agent, and such legal counsel and/or consultants shall be
afforded all of the indemnities and other protections afforded to Administrative
Agent pursuant to Article XI.

     

    Section
11.08         Resignation of
Administrative Agent.  Subject
to the appointment and acceptance of a successor Administrative Agent as
provided below, Administrative Agent may resign at any time by giving notice
thereof to the Lenders and Borrower.  Upon any such resignation, the
Majority Lenders shall have the right to appoint a successor Administrative
Agent.  If no successor Administrative Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the resigning Administrative Agent’s giving of
notice of resignation, then the resigning Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent.  Upon the
acceptance of such appointment hereunder by a successor Administrative Agent,
such successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the resigning
Administrative Agent, and the resigning Administrative Agent shall be discharged
from its duties and obligations hereunder.  After any resigning
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Article XI and Section 12.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.

     

    
      
        
        

      

      
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    ARTICLE
XII

     

    Miscellaneous

     

    Section
12.01         Waiver.  No
failure on the part of Administrative Agent or any Lender to exercise and no
delay in exercising, and no course of dealing with respect to, any 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 remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

     

    Section
12.02         Notices.  All
notices and other communications provided for herein and in the other Loan
Documents (including, without limitation, any modifications of, or waivers or
consents under, this Agreement or the other Loan Documents) shall be given or
made in writing by telecopy, e-mail, courier or U.S. Mail and telecopied,
e-mailed, mailed or delivered to the intended recipient according to the “Notice
Information” specified below its name on the signature pages hereof or in the
Loan Documents or, as to any party, at such other address as shall be designated
by such party in a notice to each other party; provided, however, any notice
or request pursuant to Section 2.02 for any borrowing, continuation or
conversion of a Loan or issuance, renewal or extension of a Letter of Credit
shall not be given or made by e-mail and any other notice or communication that
is made or given by e-mail shall be promptly followed by notice made or given by
at least one other method described in this Section.  Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given (i) when transmitted
before 3:00 p.m. Houston, Texas time on a Business Day (otherwise on the
next succeeding Business Day) by telecopier and evidence or confirmation of
receipt is obtained, (ii) when delivered if personally delivered or (iii) in the
case of a mailed notice, three (3) Business Days after the date deposited in the
mails, postage prepaid, and in each case given or addressed as
aforesaid.

     

    Section
12.03          Payment of Expenses,
Indemnities, Etc.

     

    (a)           Borrower
agrees:

     

    (i)           whether
or not the transactions hereby contemplated are consummated, to pay all
reasonable expenses of Administrative Agent in the administration (both before
and after the execution hereof and including advice of counsel as to the rights
and duties of Administrative Agent and the Lenders with respect thereto) of, and
in connection with the negotiation, syndication, investigation, preparation,
execution and delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of, the Loan
Documents and any amendment, waiver or consent relating thereto (including,
without limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of Administrative Agent, the cost of environmental audits,
surveys and appraisals at reasonable intervals, the reasonable fees and
disbursements of counsel and other outside consultants for Administrative Agent
and, in the case of enforcement, the reasonable fees and disbursements of
counsel for Administrative Agent and any of the Lenders); and promptly reimburse
Administrative Agent for all amounts reasonably expended, advanced or incurred
by Administrative Agent or the Lenders to satisfy any obligation of Borrower
under this Agreement or any other Loan Document, including without limitation,
all costs and expenses of foreclosure;

     

    
      
        
        

      

      
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    (ii)           to indemnify Administrative Agent and
each Lender and each of their Affiliates and each of their officers, directors,
employees, representatives, agents, attorneys, accountants and experts
(“Indemnified
Parties”) from, hold
each of them harmless against and promptly upon demand pay or reimburse each of
them for, the Indemnity Matters which may be incurred by or asserted against or
involve any of them (whether or not any of them is designated a party thereto)
as a result of, arising out of or in any way related to (i) any actual or
proposed use by Borrower of the proceeds of any of the Loans or
Letters of Credit, (ii)
the execution, delivery and performance of the Loan Documents, (iii) the
operations of the business of Borrower and its Subsidiaries, (iv)
the failure of Borrower or any Subsidiary to comply with the terms of any Loan
Document, or with any Governmental Requirement, (v) any inaccuracy of any
representation or any breach of any warranty of Borrower or any Guarantor set
forth in any of the Loan Documents, (vi) the issuance, execution and delivery or
transfer of or payment or failure to pay under any Letter of Credit, or (vii)
the payment of a drawing under any Letter of Credit notwithstanding the
non-compliance, non-delivery or other improper presentation of the manually
executed draft(s) and certification(s), (viii) any assertion that the
Lenders were not entitled to receive the proceeds received pursuant to the
Security Instruments or (ix) any other aspect of the Loan Documents, including,
without limitation, the reasonable fees and disbursements of counsel and all
other expenses incurred in connection with investigating, defending or preparing
to defend any such action, suit, proceeding (including any investigations,
litigation or inquiries) or claim and including all Indemnity Matters arising by
reason of the ordinary negligence of any Indemnified Party, but excluding all
Indemnity Matters arising solely by reason of claims between the Lenders or any
Lender and Administrative Agent or a Lender’s shareholders against
Administrative Agent or Lender or by reason of the gross negligence or willful
misconduct on the part of the Indemnified Party; and

     

    (iii)           to
indemnify and hold harmless from time to time the Indemnified Parties from and
against any and all losses, claims, cost recovery actions, administrative orders
or proceedings, damages and liabilities to which any such Person may become
subject (i) under any Environmental Law applicable to Borrower or any Subsidiary
or any of their Properties, including without limitation, the treatment or
disposal of hazardous substances on any of their Properties, (ii) as a result of
the breach or non-compliance by Borrower or any Subsidiary with any
Environmental Law applicable to Borrower or any Subsidiary, (iii) due to past
ownership by 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, (iv) the presence, use, release,
storage, treatment or disposal of hazardous substances on or at any of the
Properties owned or operated by Borrower or any Subsidiary, or (v) any other
environmental, health or safety condition in connection with the Loan Documents;
provided,
however, no
indemnity shall be afforded under this section 12.03(a)(iii) in respect of any
Property for any occurrence arising from the acts or omissions of Administrative
Agent or any Lender during the period after which such Person, its successors or
assigns shall have obtained possession of such Property (whether by foreclosure
or deed in lieu of foreclosure, as mortgagee-in-possession or
otherwise).

     

    
      
        
        

      

      
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    (b)           No
Indemnified Party may settle any claim to be indemnified without the consent of
the indemnitor, such consent not to be unreasonably withheld; provided, that the
indemnitor may not reasonably withhold consent to any settlement that an
Indemnified Party proposes, if the indemnitor does not have the financial
ability to pay all its obligations outstanding and asserted against the
indemnitor at that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section 12.03.

     

    (c)           In
the case of any indemnification hereunder, Administrative Agent or Lender, as
appropriate shall give notice to Borrower of any such claim or demand being made
against the Indemnified Party and Borrower shall have the non-exclusive right to
join in the defense against any such claim or demand provided that if Borrower
provides a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between Borrower and such Indemnified
Party.

     

    (d)           The
foregoing indemnities shall extend to the Indemnified Parties notwithstanding
the sole or concurrent negligence of every kind or character whatsoever, whether
active or passive, whether an 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 Indemnified Parties or by reason of
strict liability imposed without fault on any one or more of the Indemnified
Parties.  to the extent that an Indemnified Party is found to have
committed an act of gross negligence or willful misconduct, this contractual
obligation of indemnification shall continue but shall only extend to the
portion of the claim that is deemed to have occurred by reason of events other
than the gross negligence or willful misconduct of the Indemnified
Party.

     

    (e)           Borrower’s
obligations under this Section 12.03 shall survive any termination of this
Agreement and the payment of the Notes and shall continue thereafter in full
force and effect.

     

    (f)          
 Borrower shall pay any amounts due under this Section 12.03 within thirty
(30) days of the receipt by Borrower of notice of the amount due.

     

    Section
12.04          Amendments,
Etc.  Any
provision of this Agreement or any other Loan Document may be amended, modified
or waived with Borrower’s and the Majority Lenders’ prior written consent;
provided that (i) no amendment, modification or waiver which extends the final
maturity of the Loans, increases the Aggregate Maximum Revolving Credit
Amounts, increases the Borrowing Base, forgives the principal amount of any
Obligations outstanding under this Agreement, releases any guarantor of any
Obligations or releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or
modifies the definition of “Majority Lenders” shall be effective without consent
of all Lenders; (ii) no amendment, modification or waiver which increases the
Maximum Revolving Credit Amount of any Lender shall be effective without the
consent of such Lender; and (iii) no amendment, modification or waiver which
modifies the rights, duties or obligations of Administrative Agent shall be
effective without the consent of Administrative Agent.

     

    
      
        
        

      

      
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    Section
12.05         Successors and
Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.

     

    Section
12.06         Assignments and
Participations.

     

    (a)           Borrower
may not assign its rights or obligations hereunder or under the Notes or any
Letters of Credit without the prior consent of all of the Lenders and
Administrative Agent.

     

    (b)           Any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement pursuant to an Assignment Agreement
substantially in the form of Exhibit E (an “Assignment”); provided, however, that (i)
except in the case of an assignment to a Lender or a Lender Affiliate, such
assignment shall require the written consent of Administrative Agent and, if no
Event of Default has occurred and is continuing, Borrower (which consent will
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or a Lender Affiliate, any such assignment shall be in the amount of
at least $5,000,000 or such lesser amount to which Borrower and Administrative
Agent have consented and if the assigning Lender has assigned less than all of
its Percentage Share of the Loans, such assigning Lender shall retain a
Percentage Share of the Loans equating to at least $5,000,000 or such lesser
amount to which Borrower and Administrative Agent have consented and (iii) the
assignee or assignor shall pay to Administrative Agent a processing and
recordation fee of $5,000 for each assignment.  Any such assignment
will become effective upon the execution and delivery to Administrative Agent of
the Assignment, payment of the recordation fee and, if required, the consent of
Administrative Agent and Borrower.  Promptly after receipt of an
executed Assignment, Administrative Agent shall send to Borrower a copy of such
executed Assignment.  Upon receipt of such executed Assignment,
Borrower, will, at its own expense, execute and deliver new Notes to the
assignor and/or assignee, as appropriate, in accordance with their respective
interests as they appear.  Upon the effectiveness of any assignment
pursuant to this Section 12.06(b), the assignee will become a “Lender,” if not
already a “Lender,” for all purposes of this Agreement and the other Loan
Documents.  The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender no
longer holds any rights or obligations under this Agreement, such assigning
Lender shall cease to be a “Lender” hereunder except that its rights under
Sections 4.06, 5.01, 5.05 and 12.03 shall not be
affected).  Administrative Agent will prepare on the last Business Day
of each month during which an assignment has become effective pursuant to this
Section 12.06(b), a new Annex I giving effect
to all such assignments effected during such month, and will promptly provide
the same to Borrower and each of the Lenders.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 12.06(b) 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 12.06(c).

     

    (c)           Each
Lender may, without the consent of Borrower, Administrative Agent or the Issuing
Bank, transfer, grant or assign participations in all or any part of such
Lender’s interests hereunder pursuant to this Section 12.06(c) to any Person,
provided that:
(i) such Lender shall remain a “Lender” for all purposes of this Agreement
and the transferee of such participation shall not constitute a “Lender”
hereunder, (ii) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iv) Borrower, 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 which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce the Loan Documents and to approve
any amendment, modification or waiver of any provision of the Loan Documents;
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 would (x) forgive any principal owing on any
Obligations or extend the final maturity of the Loans, (y) reduce the
interest rate (other than as a result of waiving the applicability of any Post
Default increases in interest rates) or fees applicable to any of the
Commitments, Loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the Obligations or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of the
Commitments, Loans or Letters of Credit in which such participant is
participating.  In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the other Loan
Documents (the participant’s rights against the granting Lender in respect of
such participation to be those set forth in the agreement with such Lender
creating such participation), and all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, provided that such
participant shall be entitled to receive additional amounts under Article V on
the same basis as if it were a Lender and be indemnified under Section 12.03 as
if it were a Lender.  In addition, each agreement creating any
participation must include an agreement by the participant to be bound by the
provisions of Section 12.14.

     

    
      
        
        

      

      
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    (d)           The
Lenders may furnish any information concerning Borrower in the possession of the
Lenders from time to time to assignees and participants (including prospective
assignees and participants); provided that, such Persons agree to be bound by
the provisions of Section 12.14.

     

    (e)           Notwithstanding
anything in this Section 12.06 to the contrary, any Lender may assign and pledge
its Note to any Federal Reserve Bank   No such assignment and/or
pledge shall release the assigning and/or pledging Lender from its obligations
hereunder.

     

    (f)           
Notwithstanding any other provisions of this Section 12.06, 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 Borrower to file a registration statement with the SEC or to
qualify the Loans under the “Blue Sky” laws of any state.

     

    Section
12.07         Invalidity.  In
the event that any one or more of the provisions contained in any of the Loan
Documents, the Letters of Credit or the Letter of Credit Agreements shall, for
any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of the Notes, this Agreement or any other Loan Document.

     

    Section
12.08         Counterparts; Electronic
Delivery of Signature Page.  This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such
counterpart.  Delivery of an executed signature page of this Agreement
and the other Loan Documents by telecopier, e-mail or other electronic means
shall be effective as delivery of an original executed signature page of this
Agreement and such other Loan Documents and shall be binding on the parties
hereto and thereto.  Any party delivering an executed counterpart
signature page of this Agreement and any other Loan Documents by electronic
means shall also physically deliver original executed counterpart signature
pages of this Agreement and such other Loan Documents in the manner and quantity
as requested by Agent or Agent’s counsel, but the failure to physically deliver
such original executed counterpart signature pages shall not affect the
validity, enforceability, and binding effect of this Agreement or such other
Loan Documents.

     

    
      
        
        

      

      
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    Section
12.09         Survival.  The
obligations of the parties under Section 4.06, Article V, and Sections 11.05 and
12.03 shall survive the repayment of the Loans and the termination of the
Commitments.  To the extent that any payments on the Obligations 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 Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been received and
Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each of the other Loan Documents
shall continue in full force and effect.  In such event, each Loan
Document shall be automatically reinstated and Borrower shall take such action
as may be reasonably requested by Administrative Agent and the Lenders to effect
such reinstatement.

     

    Section
12.10         Captions.  Captions
and section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.

     

    Section
12.11       No Oral
Agreements.  The Loan
Documents embody the entire agreement and understanding between the parties and
supersede all other agreements and understandings between such parties relating
to the subject matter hereof and thereof.  The Loan Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties.  There are no unwritten oral agreements between the
parties.

     

    Section
12.12        Governing
Law; Submission to Jurisdiction.

     

    (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 charge interest at the rate allowed by the laws of the
state where such Lender is located. Ch. 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 shall be brought in the
courts of the State of Texas or of the United States of America for the Southern
District of Texas, and, by execution and delivery of this Agreement, Borrower
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.  Borrower 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 Administrative Agent or any Lender from
obtaining jurisdiction over Borrower in any court otherwise having
jurisdiction.

     

    (c)           Borrower
hereby 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 Borrower at its
said address, such service to become effective thirty (30) days after such
mailing.  Nothing herein shall affect the right of Administrative
Agent, any Lender 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
Borrower or its Properties in any other jurisdiction.

     

    
      
        
        

      

      
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    (d)           Borrower,
Administrative Agent and each Lender hereby (i) irrevocably and unconditionally
waive, to the fullest extent permitted by law, trial by jury in any legal action
or proceeding relating to this Agreement or any Loan Document and for any
counterclaim therein; (ii) irrevocably waive, 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) certify that no party
hereto nor any representative,  agent or counsel for any party hereto
has represented, expressly or otherwise, or implied that such party would not,
in the event of litigation, seek to enforce the foregoing waivers, and (iv)
acknowledge that it has been induced to enter into  this Agreement and
the other Loan Documents and the transactions contemplated hereby and thereby
by, among other things, the mutual waivers and certifications contained in this
section 12.12.

     

    Section
12.13         Interest.  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 Obligations (or, to the extent
that the principal amount of the Obligations shall have been or would thereby be
paid in full, refunded by such Lender to Borrower); and (ii) in the
event that the maturity of the Notes 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 Obligations (or, to the extent that the principal amount
of the Obligations shall have been or would thereby be paid in full, refunded by
such Lender to 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 full 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 12.13 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 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
12.13.  To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate, such Lender
elects to determine the applicable rate ceiling under such Chapter by the
indicated weekly rate ceiling from time to time in effect.

     

    
      
        
        

      

      
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    Section
12.14         Confidentiality.   In
the event that Borrower provides to Administrative Agent or the Lenders written
confidential information belonging to Borrower, if Borrower shall denominate
such information in writing as “confidential”, Administrative Agent and the
Lenders shall thereafter maintain such information in confidence in accordance
with the standards of care and diligence that each utilizes in maintaining its
own confidential information.  This obligation of confidence shall not
apply to such portions of the information which (i) are in the public domain,
(ii) hereafter become part of the public domain without Administrative Agent or
the Lenders breaching their obligation of confidence to Borrower, (iii) are
previously known by Administrative Agent or the Lenders from some source other
than Borrower, (iv) are hereafter developed by Administrative Agent or the
Lenders without using Borrower’s information, (v) are hereafter obtained by or
available to Administrative Agent or the Lenders from a third party who owes no
obligation of confidence to Borrower with respect to such information or through
any other means other than through disclosure by Borrower, (vi) are disclosed
with Borrower’s consent, (vii) must be disclosed either pursuant to any
Governmental Requirement or to Persons regulating the activities of
Administrative Agent or the Lenders, or (viii) as may be required by law or
regulation or order of any Governmental Authority in any judicial, arbitration
or governmental proceeding.  Further, Administrative Agent or a Lender
may disclose any such information to any other Lender, any independent petroleum
engineers or consultants, any independent certified public accountants, any
legal counsel employed by such Person in connection with this Agreement or any
other Loan Document, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
Administrative Agent or the Lenders shall receive a confidentiality agreement
from the Person to whom such information is disclosed such that said Person
shall have the same obligation to maintain the confidentiality of such
information as is imposed upon Administrative Agent or the Lenders
hereunder.  Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three (3) years from the date the
information was furnished, unless Borrower requests in writing at least thirty
(30) days prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three year
period.  Borrower waives any and all other rights it may have to
confidentiality as against Administrative Agent and the Lenders arising by
contract, agreement, statute or law except as expressly stated in this Section
12.14.

     

    Section
12.15         Hedging Agreement
Security.  The
Obligations of Borrower under Hedging Agreements with a Lender or Lender
Affiliate entered into while such Lender (or the Lender of a Lender Affiliate)
was a party to this Agreement shall remain secured by the Liens of the Security
Instruments after such Lender (or such Lender of a Lender Affiliate) has
assigned all of its obligations, rights and interests in and to the Loans and
under this Agreement (i.e. such Lender is no longer a Lender or the Lender of a
Lender Affiliate is no longer a Lender under this Agreement), but, for sake of
clarification, any liabilities, obligations or indebtedness of Borrower under
Hedging Agreements entered into with any counterparty that is not a Lender or
Lender Affiliate at the time such Hedging Agreement is entered into (even if
such counterparty previously was or later becomes a Lender or Lender Affiliate),
will not be secured by the Liens of the Security Instruments.

     

    Section
12.16         USA Patriot
Act.  Each
Lender hereby notifies 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 Borrower, which information includes the name and address of Borrower
and other information that will allow such Lender to identify Borrower in
accordance with the Act.

     

    
      
        
        

      

      
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    Section
12.17        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
12.18         Prior Credit
Agreement.  This
Agreement amends and restates in its entirety the terms and conditions set forth
in the Prior Credit Agreement.  Accordingly, upon the execution and
delivery hereof by all of the parties hereto, the Prior Credit Agreement shall
be void and of no further force or effect.  Furthermore,
simultaneously with the execution and delivery of the Notes required under
Section 2.03 hereof, all of the promissory notes executed by Borrower
pursuant to the terms of the Prior Credit Agreement are hereby replaced with the
Notes and such promissory notes under the Prior Credit Agreement shall be marked
accordingly by the Lenders and returned to Borrower.

     

    Section
12.19         Ratification of Security
Instruments.  Borrower
acknowledges and agrees that the Obligations under this Agreement are an
amendment and restatement of the Obligations under and as defined in the Prior
Credit Agreement, and as such are and shall be secured by all of the Property in
which Administrative Agent has a Lien pursuant to the Security Instruments
without the necessity to formally amend any such Security Instruments to
specifically describe the Obligations or this Agreement.  Borrower
hereby ratifies and confirms all of the Security Instruments heretofore executed
and the terms and provisions contained therein, and acknowledges and agrees that
all Liens, claims, rights, titles, interests and benefits created and granted
thereby shall continue to exist, remain valid and subsisting, shall not be
impaired or released hereby, shall remain in full force and effect and are
hereby renewed, extended, carried forward and conveyed as security for the
Obligations.  Notwithstanding the foregoing, Borrower shall execute
any amendments, supplements, modifications or restatements of any Security
Instruments and any new Security Instruments as reasonably requested by the
Lenders.

     

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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:

            	ISRAMCO
      RESOURCES, LLC	 
	 	 	 	 
	 	 	 	 
	 	

              By:

            	 	 
	 	 	

              Yossi
      Levy

            	 
	 	 	
              President

            	 
	 	 	 	 
	 	Notice
      Information:	 
	 	 	 	 
	 	4801
      Woodway, Suite 100E	 
	 	Houston,
      Texas 77056	 
	 	Telephone
      No.:  (713) 621–5946	 
	 	Telecopier
      No.:(713) 621-3988	 
	 	e-mail:  jayoil@swbell.net	 
	 	Attention:  Yossi
      Levy	 
	 	 	 	 
	 	With
      copy to:	 
	 	 	 	 
	 	Schaeffer
      Hutchinson P.C.	 
	 	2204
      Louisiana, Suite 220	 
	 	Houston,
      Texas 77002-8657	 
	 	Telephone
      No.:  (713) 524-7300	 
	 	Telecopier
      No.:(713) 528-5677	 
	 	e-mail:  jhutchinson@schalaw.com	 
	 
      	Attention:  James
      H. Hutchinson, III	 

    

     

    
      	
              LENDER
      AND

            	
              THE
      BANK OF NOVA SCOTIA, individually and
      as Administrative Agent

            
	

              ADMINISTRATIVE
      AGENT:

            	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	

              David
      Mills

            	 
	 	 	
              Director

            	 
	 	 	 	 
	 	Lending Office for
      Loans:	 
	 	 	 	 
	 	One
      Liberty Plaza	 
	 	165
      Broadway	 
	 	New
      York, New York 10006	 
	 	 	 	 
	 	Notice
      Information:	 
	 	 	 	 
	 	The
      Bank of Nova Scotia	 
	 	c/o
      GWS Loan Operations	 
	 	720
      King Street West, 2nd Floor	 
	 	Toronto,
      Ontario  M5V 2T3	 
	 	Telephone
      No.:  (212) 225-5706 or (416) 649-4000
	 	Telecopier
      No.:  (212) 225-5708 or (416) 350-5701
	 	e-mail:  Karen_lam@scotiacapital.com;
      John_hall@scotiacapital.com
	 	Attention:  U.S.
      Agency Loan Operations / Karen Lam / John Hall
	 	 	 	 
	 	With copies
      to:	 
	 	 	 	 
	 	Scotia
      Capital	 
	 	711
      Louisiana Street, Suite 1400	 
	 	Houston,
      TX 77002-2716	 
	 	Telephone
      No.:  (713) 759-3438	 
	 	Telecopier
      No.:  (713) ­752-2425	 
	 	e-mail:  david_mills@scotiacapital.com
	 	Attention:  David
      Mills	 
	 	 	 	 
	 	Burleson
      Cooke L.L.P.	 
	 	711
      Louisiana Street, Suite 1701	 
	 	Houston,
      Texas 77002	 
	 	Telephone
      No.:  (713) 358-1725	 
	 	Telecopier
      No.:(713) 358-1717	 
	 	e-mail:  rmourglia@burlesoncooke.com
	 	Attention:  Richard
      H. Mourglia	 

    

    

    
      
        
        

      

      
        67

        
          

        

      

      
        
        

      

    

     

    
      	
              LENDER
      AND

              SYNDICATION
      AGENT:

            	
              CAPITAL ONE, N.A.,
      individually

              and
      as Syndication Agent

            	 
	 	 	 	 
	 	 	 	 
	 	

              By:

            	 	 
	 	 	

              Paul
      D. Hein

            	 
	 	 	

              Vice
      President

            	 
	 	 	 	 
	 	Lending Office for
      Loans:	 
	 	 	 	 
	 	5718
      Westheimer, Suite 600	 
	 	Houston,
      Texas 77057	 
	 	 	 	 
	 	 	 	 
	 	Notice
      Information:	 
	 	 	 	 
	 	Capital
      One, N.A.	 
	 	5718
      Westheimer, Suite 600	 
	 	Houston,
      Texas 77057	 
	 	Telephone
      No.:  (713) 435-5281	 
	 	Telecopier
      No.:  (713) 435-5106	 
	 	e-mail:  kimberley.lopez@capitalonebank.com
	 	Attention:  Kimberley
      Lopez	 

    

    

    

    
      
        
        

      

      
        68

        
          

        

      

      
        
        

      

    

     

    ANNEX
I

     

    LIST OF PERCENTAGE SHARES
AND MAXIMUM REVOLVING CREDIT AMOUNTS

    

    

    
      	
              Name of
      Lender

            	
              Percentage
      Share

            	
              Maximum
      Revolving

              Credit
      Amount

            
	
              The
      Bank of Nova Scotia

            	
              50%

            	
              $75,000,000

            
	
              Capital
      One, N.A.

            	
              50%

            	
              $75,000,000

            
	
              TOTAL

            	
              100%

            	
              $150,000,000

            

    

     

     

     

    
      
        
        

      

      
        69

        
          

        

      

      
        
        

      

    

     

    EXHIBIT A

     

    FORM OF
NOTE

     

    
      	
              $_____________________________

            	
              ___________________,
      200__

            

    

    FOR VALUE
RECEIVED, ISRAMCO RESOURCES,
LLC, a Texas limited liability company (the “Borrower”) hereby
promises to pay to the order of ______________________________ (the “Lender”), at the
Principal Office of The Bank of Nova Scotia (the “Administrative
Agent”), at One Liberty Plaza, 165 Broadway, New York, NY 10006, 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 Borrower under the Credit Agreement, as hereinafter defined), 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 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, endorsed by the Lender on the schedules attached hereto or any
continuation thereof.

     

    This Note
is one of the Notes referred to in the Amended and Restated Credit Agreement
dated as of April 28, 2008 among Borrower, the Lenders which are or become
parties thereto (including the Lender), Administrative Agent and Capital One,
N.A., as Syndication Agent (as the same may be amended or supplemented from time
to time, the “Credit
Agreement”), and evidences Loans made by the Lender
thereunder.  Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.

     

    This Note
is issued pursuant to 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.

     

    
      	 
      	
              ISRAMCO
      RESOURCES, LLC

            	 
      
	 	 	 
	 	 	 
	 
      	
              By:
      ____________________________

            
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

    

    
      
        
        

      

      
        70

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B

     

    FORM OF BORROWING,
CONTINUATION AND CONVERSION REQUEST

     

    _____________________,
200__

     

    ISRAMCO
RESOURCES, LLC, a Texas limited liability company (the “Borrower”), pursuant
to the Amended and Restated Credit Agreement dated as of April 28, 2008
among Borrower, The Bank of Nova Scotia, as Administrative Agent for the lenders
(the “Lenders”)
which are or become parties thereto, Capital One, N.A., as Syndication Agent and
such Lenders (together with all amendments or supplements thereto, the “Credit Agreement”),
hereby makes the requests indicated below (unless otherwise defined herein,
capitalized terms are defined in the Credit Agreement):

     

    
      	 
      	
              1.

            	
              Loans:

            
	 	 	 
	 
      	
              (a)

            	
              Aggregate
      amount of new Loans to be $______________________;

            
	 	 	 
	 
      	
              (b)

            	
              Requested
      funding date is _________________, 200__;

            
	 	 	 
	 
      	
              (c)

            	
              $_____________________
      of such borrowings are to be LIBOR Loans;

            
	 	 	 
	 
      	 
      	
              $_____________________
      of such borrowings are to be Base Rate Loans; and

            
	 	 	 
	 
      	
              (d)

            	
              Length
      of Interest Period for LIBOR Loans is:

            
	 	 	 
	 
      	
              2.

            	
              LIBOR
      Loan Continuation for LIBOR Loans maturing on
      _____________________:

            
	 	 	 
	 
      	
              (a)

            	
              Aggregate
      amount to be continued as LIBOR Loans is
      $____________________;

            
	 	 	 
	 
      	
              (b)

            	
              Aggregate
      amount to be converted to Base Rate Loans is
      $____________________;

            
	 	 	 
	 
      	
              (c)

            	
              Length
      of Interest Period for continued LIBOR Loans is
      ________________________.

            
	 	 	 
	 
      	
              3.

            	
              Conversion
      of Outstanding Base Rate Loans to LIBOR Loans:

            
	 	 	 
	 
      	 
      	
              Convert
      $__________________ of the outstanding Base Rate Loans to LIBOR Loans on
      ____________________ with an Interest Period of
      ______________________.

            
	 	 	 
	 
      	
              4.

            	
              Conversion
      of outstanding LIBOR Loans to Base Rate Loans:

            
	 	 	 
	 
      	 
      	
              Convert
      $__________________ of the outstanding LIBOR Loans with Interest Period
      maturing on  ______________________, 200_, to Base Rate
      Loans.

            

    

     

     

    
      
        
        

      

      
        71

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 
      	
              ISRAMCO
      RESOURCES, LLC

            	 
      
	 	 	 
	 	 	 
	 
      	
              By:
      ____________________________

            
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

     

    
      
        
        

      

      
        72

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
C

     

    FORM OF COMPLIANCE
CERTIFICATE

     

    The
undersigned hereby certifies that he is the ________________ of ISRAMCO
RESOURCES, LLC, a Texas limited liability company (the “Borrower”) and that
as such he is authorized to execute this certificate on behalf of
Borrower.  With reference to the Amended and Restated Credit Agreement
dated as of April 28, 2008 among Borrower, The Bank of Nova Scotia, as
Administrative Agent for the lenders (the “Lenders”) which are
or become a party thereto, Capital One, N.A., as Syndication Agent and such
Lenders (together with all amendments or supplements thereto being the “Credit Agreement”),
the undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Credit Agreement unless
otherwise specified):

     

    (a)           The
representations and warranties of Borrower contained in Article VII of the
Credit Agreement and in the other Loan Documents [, and of each Guarantor in
each Loan Document to which it is a party,] and otherwise made in writing by or
on behalf of Borrower [or any Guarantor] pursuant to the Credit Agreement and
the other 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 at and as of the
time of delivery hereof, except to the extent any such representations and
warranties are expressly limited to an earlier date or the Majority Lenders have
expressly consented in writing to the contrary.

     

    (b)           Borrower
[and each Guarantor] has performed and complied with all agreements and
conditions contained in the Credit Agreement and in the other Loan Documents [to
which it is a party] required to be performed or complied with by it prior to or
at the time of delivery hereof.

     

    (c)           Neither
Borrower nor any Subsidiary has incurred any material liabilities, direct or
contingent, since _________________, except those set forth in Schedule 9.01 to
the Credit Agreement and except those allowed by the terms of the Credit
Agreement or consented to by the Lenders in writing.

     

    (d)           Since
__________________, no change has occurred, either in any case or in the
aggregate, in the condition, financial or otherwise, of Borrower or any
Subsidiary which would have a Material Adverse Effect.

     

    (e)           There
exists, and, after giving effect to the loan or loans with respect to which this
certificate is being delivered, will exist, no Default under the Credit
Agreement or any event or circumstance which constitutes, or with notice or
lapse of time (or both) would constitute, an event of default under any loan or
credit agreement, indenture, deed of trust, security agreement or other
agreement or instrument evidencing or pertaining to any Debt of Borrower or any
Subsidiary, or under any Material Agreement or instrument to which Borrower or
any Subsidiary is a party or by which Borrower or any Subsidiary is
bound.

     

    (f)           The
financial statements furnished to Administrative Agent with this certificate
fairly present the consolidated financial condition and results of operations of
Borrower and its Consolidated Subsidiaries as at the end of, and for, the
[fiscal quarter] [fiscal year] ending _________________________ and such
financial statements have been prepared in accordance with the accounting
procedures specified in the Credit Agreement.

     

    
      
        
        

      

      
        73

        
          

        

      

      
        
        

      

    

     

    (g)           Attached
hereto are the detailed computations necessary to determine whether Borrower and
its Consolidated Subsidiaries are in compliance with Section 9.11 of the Credit
Agreement as of the end of the [fiscal quarter] [fiscal year] ending
_________________________.

     

    EXECUTED
AND DELIVERED this ____ day of ______________.

     

    
      	 
      	
              ISRAMCO
      RESOURCES, LLC

            	 
      
	 	 	 
	 	 	 
	 
      	
              By:
      ____________________________

            
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

     

    
      
        
        

      

      
        74

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              ISRAMCO
      RESOURCES, LLC

            	 
      	 
      
	
              Financial
      Statement Ratios

            	 
      	 
      
	
              For
      period ended:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              9.11(a)

            	
              Current
      Ratio

            	 
      	 
      
	 
      	
              Current
      Assets

            	 
      	 
      
	 
      	
              Available
      Borrowing Base

            	 
      	 
      
	 
      	
              FAS
      133 Assets

            	 
      	 
      
	 
      	 
      	
              Current
      Assets

            	
                            -

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Current
      Liabilities

            	 
      	 
      
	 
      	
              FAS
      133 Liabilities

            	 
      	 
      
	 
      	 
      	
              Current
      Liabilities

            	
                            -

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Current
      Ratio

            	
              x

            	 
      
	 
      	
              Minimum
      Current Ratio

            	
              1.00x

            	 
      
	 
      	 
      	 
      	 
      	 
      
	
              9.11(b)

            	
              Leverage
      Ratio

            	 
      	 
      
	 
      	
              Total
      Funded Debt

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Twelve
      Months of:

            	 
      	 
      
	 
      	
              Net
      Income

            	 
      	 
      
	 
      	
              Interest
      Expense

            	 
      	 
      
	 
      	
              D,D&A

            	 
      	 
      
	 
      	
              Other
      Non-cash Expense

            	 
      	 
      
	 
      	 
      	
              EBITDA

            	
                            -

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Total
      Debt/EBITDA

            	
              x

            	 
      
	 
      	
              Maximum
      Debt/EBITDA

            	
              3.50x

            	 
      
	 
      	 
      	 
      	 
      	 
      
	
              9.11(c)

            	
              Interest
      Coverage Ratio

            	 
      	 
      
	 
      	
              Twelve
      Months of:

            	 
      	 
      
	 
      	
              Net
      Income

            	 
      	 
      
	 
      	
              Interest
      Expense

            	 
      	 
      
	 
      	
              D,D&A

            	 
      	 
      
	 
      	
              Other
      Non-cash Expense

            	 
      	 
      
	 
      	 
      	
              EBITDA

            	
                            -

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Interest
      Expense

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              EBITDA/Interest
      Expense

            	
              x

            	 
      
	 
      	
              Minimum
      EBITDAX/Interest

            	
              2.50x

            	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

    

    
      
        
        

      

      
        75

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
D

     

    SECURITY
INSTRUMENTS

     

    

    
      	
              1.

            	
              Mortgage,
      Line of Credit Mortgage, Deed of Trust, Assignment of Production, Security
      Agreement, Fixture Filing and Financing Statement, executed by Borrower,
      covering oil and gas properties located in various counties in the States
      of:

            

    

    

    
      	 
      	
              (a)

            	
              Colorado

            	 
      
	 
      	
              (b)

            	
              New
      Mexico

            	 
      
	 
      	
              (c)

            	
              Oklahoma

            	 
      
	 
      	
              (d)

            	
              Texas

            	 
      
	 
      	
              (e)

            	
              Utah

            	 
      

    

     

    
      	
              2.

            	
              UCC-1
      Financing Statement relating to the Mortgage

            
	 	 
	
              3.

            	
              Security
      Agreement executed by Borrower relating to all of the assets of
      Borrower

            
	 	 
	
              4.

            	
              UCC-1
      Financing Statement in connection with the Security Agreement covering all
      personal property assets

            
	 	 
	
              5.

            	
              Letters-in-Lieu
      addressed to Purchasers and in
blank

            

    

     

    
      
        
        

      

      
        76

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
E

     

    FORM OF ASSIGNMENT
AGREEMENT

     

    ASSIGNMENT
AGREEMENT (“Agreement”) dated as
of ________________, 200__ between:
________________________________________________ (the “Assignor”) and
___________________________________ (the “Assignee”).

     

    RECITALS

     

    A.           The
Assignor is a party to the Amended and Restated Credit Agreement dated as of
April 28, 2008 (as amended and supplemented and in effect from time to
time, the “Credit
Agreement”) among Isramco Resources, LLC, a Texas limited liability
company (the “Borrower”), each of
the lenders that is or becomes a party thereto as provided in Section 12.06
of the Credit Agreement (individually, together with its successors and assigns,
a “Lender”, and
collectively, together with their successors and assigns, the “Lenders”), The Bank
of Nova Scotia, in its individual capacity, (“Scotia Capital”) and
as agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Administrative
Agent”) and Capital One, N.A., as Syndication Agent.

     

    B.           The
Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee
proposes to purchase and assume from the Assignor, [all][a portion] of the
Assignor’s Maximum Revolving Credit Amount, outstanding Loans and its Percentage
Share of the outstanding LC Exposure, all on the terms and conditions of this
Agreement.

     

    C.           In
consideration of the foregoing and the mutual agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     

    ARTICLE
I

     

    Definitions.

     

    Section
1.01           Definitions.  All
capitalized terms used but not defined herein have the respective meanings given
to such terms in the Credit Agreement.

     

    Section
1.02           Other
Definitions.  As used herein, the following terms have the
following respective meanings:

     

    “Assigned Interest”
shall mean all of Assignor’s (in its capacity as a “Lender”) rights and
obligations under the Credit Agreement and the other Loan Documents in respect
of (i) the Revolving Credit Commitment of the Assignor relating to the
Assignor’s Maximum Revolving Credit Amount in the principal amount equal to
$____________________ and the principal amount of the Revolving Credit Loans
outstanding thereunder, currently in the amount of $_________________ (the
“Loan
Balance”), plus the interest and fees which will accrue from and after
the Assignment Date.

     

    “Assignment Date”
shall mean _____________________, 200__.

     

    
      
        
        

      

      
        77

        
          

        

      

      
        
        

      

    

     

    ARTICLE
II

     

    Sale
and Assignment.

     

    Section
2.01           Sale and
Assignment.  On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns
and transfers to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, all of the right, title and interest of the Assignor in and
to, and all of the obligations of the Assignor in respect of, the Assigned
Interest.  Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.

     

    Section
2.02           Assumption of
Obligations.  The Assignee agrees with the Assignor (for the
express benefit of the Assignor and Borrower) that the Assignee will, from and
after the Assignment Date, perform all of the obligations of the Assignor in
respect of the Assigned Interest.  From and after the Assignment Date:
(a) the Assignor shall be released from the Assignor’s obligations in respect of
the Assigned Interest, and (b) the Assignee shall be entitled to all of the
Assignor’s rights, powers and privileges under the Credit Agreement and the
other Loan Documents in respect of the Assigned Interest.

     

    Section
2.03          Consent by Administrative
Agent.  By executing this Agreement as provided below, in
accordance with Section 12.06(b) of the Credit Agreement, Administrative Agent
hereby acknowledges notice of the transactions contemplated by this Agreement
and consents to such transactions.

     

    ARTICLE
III

     

    Payments.

     

    Section
3.01           Payments.  As
consideration for the sale, assignment and transfer contemplated by
Section 2.01 hereof, the Assignee shall, on the Assignment Date, assume
Assignor’s obligations in respect of the Assigned Interest and pay to the
Assignor an amount equal to the Loan Balance, if any.  An amount equal
to all accrued and unpaid interest and fees shall be paid to the Assignor as
provided in Section 3.02 (iii) below.  Except as otherwise provided in
this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or
counterclaim.

     

    Section
3.02           Allocation of
Payments.  The Assignor and the Assignee agree that
(i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments
of principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and
(iii) Administrative Agent is authorized and instructed to allocate
payments received by it for account of the Assignor and the Assignee as provided
in the foregoing clauses.  Each party hereto agrees that it will hold
any interest, fees or other amounts that it may receive to which the other party
hereto shall be entitled pursuant to the preceding sentence for account of such
other party and pay, in like money and funds, any such amounts that it may
receive to such other party promptly upon receipt.

     

    Section
3.03           Delivery of
Notes.  Promptly following the receipt by the Assignor of the
consideration required to be paid under Section 3.01 hereof, the Assignor
shall, in the manner contemplated by Section 12.06(b) of the Credit
Agreement, (i) deliver to Administrative Agent (or its counsel) the Note
held by the Assignor and (ii) notify Administrative Agent to request that
Borrower execute and deliver new Notes to the Assignor, if Assignor continues to
be a Lender, and the Assignee, dated the date of this Agreement in respective
principal amounts equal to the respective Maximum Revolving Credit Amounts of
the Assignor (if appropriate) and the Assignee after giving effect to the sale,
assignment and transfer contemplated hereby.

     

    
      
        
        

      

      
        78

        
          

        

      

      
        
        

      

    

     

    Section
3.04           Further
Assurances.  The Assignor and the Assignee hereby agree to
execute and deliver such other instruments, and take such other actions, as
either party may reasonably request in connection with the transactions
contemplated by this Agreement.

     

    ARTICLE
IV

     

    Conditions
Precedent.

     

    Section
4.01           Conditions
Precedent.  The effectiveness of the sale, assignment and
transfer contemplated hereby is subject to the satisfaction of each of the
following conditions precedent:

     

    (a)         
  the execution and delivery of this Agreement by the Assignor and the
Assignee;

     

    (b)          
 the receipt by the Assignor of the payment required to be made by the
Assignee under Section 3.01 hereof; and

     

    (c)          
 the acknowledgment and consent by Administrative Agent contemplated by
Section 2.03 hereof.

     

    ARTICLE
V

     

    Representations
and Warranties.

     

    Section
5.01            Representations and
Warranties of the Assignor.  The Assignor represents and
warrants to the Assignee as follows:

     

    (a)           
it has all requisite power and authority, and has taken all action necessary to
execute and deliver this Agreement and to fulfill its obligations under, and
consummate the transactions contemplated by, this Agreement;

     

    (b)          
 the execution, delivery and compliance with the terms hereof by Assignor
and the delivery of all instruments required to be delivered by it hereunder do
not and will not violate any Governmental Requirement applicable to
it;

     

    (c)          
 this Agreement has been duly executed and delivered by it and constitutes
the legal, valid and binding obligation of the Assignor, enforceable against it
in accordance with its terms;

     

    (d)           all
approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its
obligations under this Agreement have been obtained;

     

    (e)          
 the Assignor has good title to, and is the sole legal and beneficial owner
of, the Assigned Interest, free and clear of all Liens, claims, participations
or other charges of any nature whatsoever; and

     

    (f)          
 the transactions contemplated by this Agreement are commercial banking
transactions entered into in the ordinary course of the banking business of the
Assignor.

     

    
      
        
        

      

      
        79

        
          

        

      

      
        
        

      

    

     

    Section
5.02          Disclaimer.  Except
as expressly provided in Section 5.01 hereof, the Assignor does not make any
representation or warranty, nor shall it have any responsibility to the
Assignee, with respect to the accuracy of any recitals, statements,
representations or warranties contained in the Credit Agreement or in any
certificate or other document referred to or provided for in, or received by any
Lender under, the Credit Agreement, or for the value, validity, effectiveness,
genuineness, execution, effectiveness, legality, enforceability or sufficiency
of the Credit Agreement, the Notes or any other document referred to or provided
for therein or for any failure by Borrower or any other Person (other than
Assignor) to perform any of its obligations thereunder prior or for the
existence, value, perfection or priority of any collateral security or the
financial or other condition of Borrower or the Subsidiaries [or any other
obligor or guarantor], or any other matter relating to the Credit Agreement or
any other Loan Document or any extension of credit thereunder.

     

    Section
5.03           Representations and
Warranties of the Assignee.  The Assignee represents and
warrants to the Assignor as follows:

     

    (a)          
 it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its obligations
under, and consummate the transactions contemplated by, this
Agreement;

     

    (b)          
 the execution, delivery and compliance with the terms hereof by Assignee
and the delivery of all instruments required to be delivered by it hereunder do
not and will not violate any Governmental Requirement applicable to
it;

     

    (c)          
 this Agreement has been duly executed and delivered by it and constitutes
the legal, valid and binding obligation of the Assignee, enforceable against it
in accordance with its terms;

     

    (d)           all
approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its
obligations under this Agreement have been obtained;

     

    (e)         
  the Assignee has fully reviewed the terms of the Credit Agreement
and the other Loan Documents and has independently and without reliance upon the
Assignor, and based on such information as the Assignee has deemed appropriate,
made its own credit analysis and decision to enter into this
Agreement;

     

    (f)          
 the Assignee hereby affirms that the representations contained in Section
4.06(d)(i) of the Credit Agreement are true and accurate as to it and, the
Assignee has contemporaneously herewith delivered to Administrative Agent and
Borrower such certifications as are required thereby to avoid the withholding
taxes referred to in Section 4.06; and

     

    (g)           the
transactions contemplated by this Agreement are commercial banking transactions
entered into in the ordinary course of the banking business of the
Assignee.

     

    ARTICLE
VI

     

    Miscellaneous.

     

    Section
6.01           Notices.  All
notices and other communications provided for herein (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telex or telecopy) to the intended recipient at its “Address for Notices”
specified below its name on the signature pages hereof or, as to either party,
at such other address as shall be designated by such party in a notice to the
other party.

     

    
      
        
        

      

      
        80

        
          

        

      

      
        
        

      

    

     

    Section
6.02           Amendment, Modification or
Waiver.  No provision of this Agreement may be amended,
modified or waived except by an instrument in writing signed by the Assignor and
the Assignee, and consented to by Administrative Agent.

     

    Section
6.03           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.  The representations and warranties made herein by the
Assignee are also made for the benefit of Administrative Agent and Borrower, and
the Assignee agrees that Administrative Agent and Borrower are entitled to rely
upon such representations and warranties.

     

    Section
6.04           Assignments.  Neither
party hereto may assign any of its rights or obligations hereunder except in
accordance with the terms of the Credit Agreement.

     

    Section
6.05          Captions.  The
captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.

     

    Section
6.06           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
identical and all of which, taken together, shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.

     

    Section
6.07           Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the law of the State of Texas.

     

    Section
6.08           Expenses.  To
the extent not paid by Borrower pursuant to the terms of the Credit Agreement,
each party hereto shall bear its own expenses in connection with the execution,
delivery and performance of this Agreement.

     

    Section
6.09           Waiver of Jury
Trial.  EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be
executed and delivered as of the date first above written.

     

    
      	 
      	ASSIGNOR:	 
      
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 
      	

              By:

            	 	 
      
	 
      	

              Name:

            	 	 
      
	 
      	

              Title:

            	 	 
      

    

    

    
      
        
        

      

      
        81

        
          

        

      

      
        
        

      

    

     

    Address
for Notices:

    
      	 	 	 	 
	 	 	 	 
	 	 	 	 
	 
      	 	

              Telephone
      No.: ______________________

            
	 
      	 	
              Telecopier
      No.: ______________________

            
	 	 	

              Attention:
      __________________________

            
	 
      	 	 
      	 
      
	 
      	 	
              ASSIGNEE:

            	 
      
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 
      	 	

              By:
      _______________________________

            
	 	 	

              Name:
      _____________________________

            
	 	 	

              Title: ______________________________

            
	 	 	
            	 
      
	 	 	
              Address
      for Notices:

            	 
      
	 
      	 	 
      	 
      
	 	 	 	 
	 
      	 	 
      	 
      
	 
      	 	
              Telephone
      No.: ______________________

            
	 	 
      	

              Telecopier
      No.: ______________________

            
	 
      	 	

              Attention:
      __________________________

            

    

    ACKNOWLEDGED
AND CONSENTED TO:

     

    
      	
              THE
      BANK OF NOVA SCOTIA,

            	 
      
	
              as
      Administrative Agent

            	 
      
	 
	 
	
              By:
      _______________________________

            
	

              Name:

            	 
	
              Title:

            	 
      
	 
      	 
      
	
              [ISRAMCO
      RESOURCES, LLC,

            	 
      
	 	 
	 	 
	
              Borrower]

            	 
      
	
              By:
      _______________________________

            
	

              Name:

            	 
	
              Title:

            	 
      

    

     

    
      
        
        

      

      
        82

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
F

     

    FORM OF RESERVE REPORT
CERTIFICATE

     

    The
undersigned hereby certifies that he is the ________________ of ISRAMCO
RESOURCES, LLC, a Texas limited liability company (the “Borrower”) and that
as such he is authorized to execute this certificate on behalf of
Borrower.  With reference to (i) the Amended and Restated Credit
Agreement dated as of April 28, 2008 among Borrower, The Bank of Nova
Scotia, as Administrative Agent for the lenders (the “Lenders”) which are
or become a party thereto, Capital One, N.A., as Syndication Agent and such
Lenders (together with all amendments or supplements thereto being the “Credit Agreement”)
and (ii) the Reserve Report with which this certificate is being delivered (the
“Current Reserve
Report”), the undersigned certifies that, to the best of his knowledge
and in all material respects (each capitalized term used herein having the same
meaning given to it in the Credit Agreement unless otherwise
specified):

     

    (a)           the
information provided by Borrower in connection with the preparation of the
Current Reserve Report and any other information delivered in connection
therewith by Borrower is true and correct, and any projections based upon such
information have been prepared in good faith based upon assumptions believed by
Borrower to be reasonable, subject to uncertainties inherent in all
projections;

     

    (b)           Borrower
[and/or Guarantor] owns good and defensible title to the Oil and Gas Properties
evaluated in the Current Reserve Report and such Properties are free of all
Liens except for Liens permitted by Section 9.02 of the Credit
Agreement;

     

    (c)           except
as set forth on Schedule I
attached to and made a part of this certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to its Oil and Gas
Properties evaluated in the Current Reserve Report which would require Borrower
[or Guarantor, as applicable] to deliver Hydrocarbons produced from such Oil and
Gas Properties at some future time without then or thereafter receiving full
payment therefor;

     

    (d)           except
as set forth on Schedule II
attached to and made a part of this certificate, none of the Oil and Gas
Properties have been sold since the date of the last Borrowing Base
determination;

     

    (e)           Schedule III attached
to and made a part of this certificate (i) lists all Oil and Gas Properties
added to and deleted from the Current Reserve Report since the immediately prior
Reserve Report [and any Oil and Gas Properties acquired and any oil or gas wells
drilled or brought on line since the date of the immediately prior Reserve
Report], (ii) shows all changes in working interests and net revenue interests
in the Oil and Gas Properties occurring since the immediately prior Reserve
Report and (iii) the reason for each such change in working interests and net
revenue interests;

     

    (f)           Schedule IV attached
to and made a part of this certificate lists the names, addresses, phone
numbers, facsimile numbers, e-mail addresses and contact individuals for all
Purchasers.

     

    (g)           except
as set forth on Schedule V
attached to and made a part of this certificate, all of the Oil and Gas
Properties evaluated by the Current Reserve Report are Collateral.

     

    
      
        
        

      

      
        83

        
          

        

      

      
        
        

      

    

     

    EXECUTED
AND DELIVERED this ____ day of ______________.

     

     

    
      	 
      	
              ISRAMCO
      RESOURCES, LLC

            	 
      
	 	 	 
	 	 	 
	 
      	
              By:
      _______________________________

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

     

    
      
        
        

      

      
        84

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
I

     

    GAS IMBALANCES,
ETC.

     

     

     

     

     

    
      
        
        

      

      
        85

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
II

     

    OIL AND GAS PROPERTIES
SOLD.

     

     

     

     

     

     

    
      
        
        

      

      
        86

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
III

     

    ADDED/DELETED PROPERTIES,
ETC.

    
       

       

       

       

       

      
        
          
          

        

        
          87

          
            

          

        

        
          
          

        

      

    

     

    SCHEDULE
IV

     

    PURCHASERS

    
       

       

       

       

       

      
        
          
          

        

        
          88

          
            

          

        

        
          
          

        

      

    

     

    SCHEDULE
V

     

    NON-MORTGAGED OIL AND GAS
PROPERTIES

    
       

       

       

       

       

      
        
          
          

        

        
          89

          
            

          

        

        
          
          

        

      

    

     

    EXHIBIT
G

     

    

     

    FORM OF
LETTER-IN-LIEU

     

    ________________________________

     

    ________________________________

     

    ________________________________

     

    VIA
CERTIFIED MAIL

    RETURN
RECEIPT REQUESTED

    ________________________________

    ________________________________

    ________________________________

     

    ATTN: __________________________                     

     

    Ladies
and Gentlemen:

     

    Isramco
Resources, LLC (“Isramco”) [along with
various of its affiliates], the lenders parties thereto (the “Lenders”), and The
Bank of Nova Scotia, as agent for the Lenders (the “Administrative
Agent”) entered into an Amended and Restated Credit Agreement dated as of
April 28, 2008 (as amended, supplemented, restated or otherwise modified,
the “Credit
Agreement”).  Pursuant to the terms of the Credit Agreement,
Isramco mortgaged its rights, titles and interests in and to the properties
and/or wells listed on the attached Exhibit A (hereinafter referred to as
the “Mortgaged
Properties”) to Administrative Agent, and pursuant thereto assigned
Isramco's proceeds from production from the Mortgaged Properties to
Administrative Agent.

     

    Accordingly,
please have all payments of proceeds from the Mortgaged Properties due and owing
to Isramco to be submitted to the following address:

     

    

    P.O.
Box  _______________________

    Houston,
Texas __________________

    Attention:  ______________________

     

    or, if
payment of such proceeds is made by wire transfer, pursuant to the following
wire instructions:

     

    The Bank
of Nova Scotia

    Account
No.  __________________

    ABA No.
(Routing No.) __________

    Attention:  ____________________

     

    We
request that you continue to remit payment according to these instructions
unless and until modified in writing and signed by both Administrative Agent and
Isramco or its assignee.

     

    If you
should have any questions or need additional information, please contact Michael
Roberts at (713) 759-3449 or by written correspondence to The Bank of Nova
Scotia, 711 Louisiana, Suite 1300, Houston, Texas 77002, Attention: Michael
Roberts.

     

    
      
        
        

      

      
        90

        
          

        

      

      
        
        

      

    

     

    Please
acknowledge your receipt and acceptance of this letter and the instructions
contained herein by completing the information requested in the Company
Acknowledgment on the signature page and signing and returning one copy of this
letter in the envelope provided.  Thank you for your
cooperation.

     

    Executed
as of __________________.

     

     

    
      	ISRAMCO RESOURCES,
      LLC	 	THE BANK OF NOVA
      SCOTIA, AS AGENT	 
	 	 	 	 
	 	 	 	 
	By:
      ___________________________	 	By:
      ___________________________
	
              Yossi
      Levy

            	
               

            	 	 
	
              President

            	
               

            	
              __________________

            	 
	 	 	
              __________________

            	 

    

     

    COMPANY
ACKNOWLEDGMENT

     

    The
company to which this letter is addressed has made the requested changes in its
records for revenues effective ______________________, 20__.

     

    
       

      
        	By: 
      _________________________	 	Date:
      ____________________________
	 	 	 	 
	 	 	 	 
	Name: _______________________	 	Telephone:
      ________________________
	Title:
      ________________________	 	Facsimile:
      _________________________

      

       

      
        
          
          

        

        
          91

          
            

          

        

        
          
          

        

      

    

     

    SCHEDULE
7.02

     

    LIABILITIES

     

    None

     

     

    
      
        
        

      

      
        92

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.03

     

    LITIGATION

     

    None.

     

     

    
      
        
        

      

      
        93

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.09

     

    TAXES

     

    None.

     

     

     

    
      
        
        

      

      
        94

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.10

     

    TITLES,
ETC.

     

    None.

     

     

     

    
      
        
        

      

      
        95

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.13

     

    SUBSIDIARIES,
ETC.

     

    None.

     

     

    
 

    
      
        
        

      

      
        96

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.14

     

    LOCATION
OF BUSINESS AND OFFICES, ETC.

     

    
      	
              ISRAMCO
      RESOURCES, LLC

               

            
	
              Tax
      ID:

            	
              26-2203983

            
	
              Organization
      ID:

            	
              800845972

            
	
              State
      of Formation:

            	
              Texas

            

    

    

    
      
        
        

      

      
        97

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
7.17

     

    ENVIRONMENTAL
MATTERS

     

    None.

     

     

    
      
        
        

      

      
        98

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.18

     

    INSURANCE

     

    See
attached certificate.

    

    
      
        
        

      

      
        99

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
7.19

     

    HEDGING
AGREEMENTS

     

    None.

     

     

    
      
        
        

      

      
        100

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
7.21

     

    MATERIAL
AGREEMENTS

     

    

    

    

    A.A.P.L.
Form 610 Operating Agreements applicable to the Oil and Gas
Properties.

    

    Agreement
for Operations (the “Phoenix Agreement”) of even date herewith between Isramco
Resources, LLC and Phoenix Hydrocarbons Operating Corp. and associated letter
agreement relating to ownership of saltwater disposal facilities.

    

    Agreements
related to the GFB Acquisition, including Letters in Lieu of Transfer Order and
Conveyances.

    

    The Loan
Documents.

    

    ISDA
Master Agreement dated as of March 26, 2008 (the “Agreement”), between Isramco
Resources, LLC, a Texas limited liability company (“Isramco”) and The Bank of
Nova Scotia (the “Bank”).

    

    Equity
Contribution Agreement between Isramco Resources, LLC and Isramco,
Inc.

    

    Company
Agreement of Isramco Resources, LLC.

    

    Hedging
Agreements reflected on Schedule 7.19

    

    

    

    
      
        
        

      

      
        101

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
7.22

     

    GAS
IMBALANCES

     

     

    

     

    
      
        
        

      

      
        102

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
9.01

     

    DEBT

     

    None.

     

     

    
      
        
        

      

      
        103

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULE
9.02

     

    LIENS

     

    None.

     

     

    
      
        
        

      

      
        104

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
9.03

     

    INVESTMENTS,
LOANS AND ADVANCES

     

    None.

     

     

     

    105Product and Services Supply Agreement dated March 12, 2007

 Exhibit 10.1 
 Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission. 
 CONFIDENTIAL TREATMENT 
 AMENDED AND RESTATED PRODUCT AND SERVICES SUPPLY AGREEMENT 
 THIS AMENDED AND RESTATED PRODUCT SERVICES AND SUPPLY AGREEMENT (the or this “Agreement”) is made and entered into as of March 12, 2007, (the “Effective Date”) by and between eDiets.com, Inc., a Delaware
corporation, together with its affiliates, subsidiaries, successors in interest, entities it controls or entities under similar or common ownership (“EDI”), and PURFOODS, LLC, an Iowa limited liability company, together with its
affiliates, subsidiaries, successors in interest, entities it controls or entities under similar or common ownership (“Purfoods”). 
 WHEREAS, EDI owns and/or manages internet web sites which, among other things, allow its users to search for and access health, nutrition, fitness, and lifestyle content on the Internet; 
 WHEREAS, Purfoods is a USDA approved producer and continental USA distributor of fresh meals with extended shelf life; 
 WHEREAS, the parties desire for Purfoods to supply a number of lines of fresh meals possibly incorporating meals and/or specific food items or
products supplied by vendors other than Purfoods (“Meals”) which will be marketed by EDI under the brands of Purfoods or its partners or the brands of EDI or its partners, as more fully set forth in Exhibit A hereto (the
“Program”); 
 WHEREAS, the parties have entered into a Product and Services Supply Agreement dated August 11, 2005 and
May 1, 2006 which this Agreement replaces in its entirety; 
 NOW, THEREFORE, in consideration of the foregoing, the mutual
promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 
  

	1.	Supply of Meals. Purfoods shall prepare, package and ship Meals pursuant to orders received by Purfoods and/or EDI in accordance with the terms of this Agreement.

  

	2.	Sales and Marketing. EDI and Purfoods have developed detailed meal programs. Subject to the provisions below under Interim Services, EDI will be responsible for all
aspects of sales and marketing of such programs and will develop and underwrite all marketing efforts although Purfoods, at its option, may participate in joint marketing projects with EDI. EDI shall have sole authority to set prices for Meals.

  

	3.	Interim Services. Purfoods will provide EDI certain agreed services to support EDI’s sales and customer service, including inbound and outbound call handling services
described in Exhibit C attached hereto. Upon 90 days notice to the other party, EDI will have the option to take over such services and Purfoods will have the right to discontinue providing such services. For so long as Purfoods is responsible for
these services a 3% service charge will be added to the weekly invoiced amount described below under Payment. 

  

 1 

	4.	Customer Data and Communications. EDI will have sole ownership of all customer data gained through the execution of the Program. Purfoods agrees that so long as EDI offers
the Program, Purfoods will not use any such customer data except for the purposes of fulfilling its duties pursuant to this Agreement or at the direction of EDI or in cooperation with EDI in any joint marketing efforts undertaken by the parties.

  

	5.	Order Placement, Payment 

  

	 	5.1.	Order Placement. On a daily basis, EDI shall transfer to Purfoods, in the previously agreed electronic format, all customer orders and other information required for order
fulfillment and customer service (including exact food order, delivery and other preference information). Purfoods shall deliver or make available to EDI the tracking numbers for each shipment. Purfoods shall process client’s credit card
payments through EDI’s credit card processing account. All credit card fees and maintenance of the credit card processing account shall be the responsibility of EDI. 

  

	 	5.2.	Payment. By 5:00 PM EST on Friday of each week, Purfoods shall invoice EDI for all Meals ordered, whether shipped or manufactured for inventory, and for the actual freight
charges incurred during such week. EDI shall pay invoiced amounts by wiring to Purfoods’ account no later than 2:00 PM EST on the following Thursday (Friday if any day of that week is a Federal holiday). Invoices will reflect the cost of Meals
and snacks as set forth in Exhibit A. EDI’s payment obligation to Purfoods for food item charges shall take effect when a customer order is submitted. 

  

	 	5.3.	Deposit. EDI will maintain a deposit at Purfoods (the “Deposit”) in the amount of $150,000. The parties intend for the deposit to reasonably assure payment to
Purfoods for Meals consisting of food items which have been ordered by EDI but for which payment has not yet been remitted by EDI pursuant to the procedure explained above in Paragraph 5.2. 

  

	 	5.3.1.	Revision of Deposit. In the event that invoiced amounts during any 3 week period exceed 110% of the Deposit, within five (5) days of written notice by Purfoods, EDI will
increase the Deposit to the total of such invoices. Upon the six month anniversary of this Agreement, the parties will review the level of the Deposit and in good faith determine whether the Deposit should be revised. 

  

	 	5.3.2.	Return of Deposit. The deposit, subject to set off for any outstanding balance owed to Purfoods by EDI, will be returned to EDI upon termination of this Agreement.

  

	6.	Prepayment. Upon signing of this Agreement, EDI will pay to Purfoods $125,000, as a prepayment of Meals to be purchased by EDI from Purfoods (the “Prepayment”). The
$125,000 Prepayment will be repaid to EDI by crediting to EDI amounts due from EDI to Purfoods for food item purchases in an amount of $0.30 for each meal item purchased by an EDI customer. The balance, if any, of all previous prepayments will also
be repaid to EDI by crediting to EDI amounts due from EDI to Purfoods for food item purchases in an amount of $0.30 for each meal item purchased by an EDI customer. Any remaining balance of the Prepayment will be returned to EDI upon termination of
this Agreement. 

  

	7.	Reports. EDI and Purfoods will work together to create on-line reports, accessible by password, that facilitate each party’s ability to fulfill their duties pursuant to
this Agreement, provide timely and complete financial information and reporting, product customer demands due to media spending, and provide performance metrics for identifying operational and quality issues. 

  

 2 

	8.	Shipping and Handling. Purfoods will ship Meals from Monday to Friday in accordance with orders placed by EDI customers. Included in Exhibit A is a schedule of shipping
charges and volume-based shipping credits which will be applied to weekly amounts invoiced to EDI. Purfoods will select and maintain the relationship with either FedEx or UPS as the freight carrier. The EDI program will be a Purfoods “Quick
Ship” program which typically provides for shipment of orders during the shipping cycle within 48 hours of placement. The shipping cost of any special shipments requested by EDI will be billed direct to EDI’s shipping account.

  

	9.	Customer Service. EDI will be responsible for all customer service interactions except fulfillment and items not provided by Purfoods in accordance with Exhibit C.

  

	10.	Labeling. Purfoods will label Meal products with labels approved by EDI; provided, that Purfoods logo shall appear on the USDA nutritional label for each Meal. All prepared
meals will be labeled to indicate that they are “best if consumed within two weeks of receipt”. With respect to other labels on packaging to identify the applicable food product, Purfoods will specify the physical dimensions and location
of each brand identification label and EDI shall provide the graphic design to be used thereon. Purfoods will specify the dimensions, location and design of each product identification label and each USDA nutritional information label.

  

	11.	Meals, Menus and Program Development. Meals will be prepared pursuant to recipes and formulae developed jointly by EDI and Purfoods, provided that Purfoods shall have final
authority with respect to all decisions regarding recipes and menus. 

  

	 	11.1.	Original recipes provided by EDI will remain the property of EDI. All modified recipes will be the property of Purfoods. 

  

	 	11.2.	All Purfoods’ costs of recipe development, shelf testing, packaging testing, and ingredient costs will be paid by Purfoods. Any costs incurred by EDI in the Meals, Menus, and
Program Development will be paid by EDI. 

  

	 	11.3.	In the event that snacks are used as part of the Program, Purfoods and EDI will work together to appropriately utilize snack products available from EDI. These snacks will be
acquired at the lowest price per unit paid by any other purchaser of these snacks. 

  

	12.	Program Review. On the six month anniversary of this Agreement and each six months thereafter, the parties will arrange to meet, in a mutually convenient forum, in order to
review and discuss all aspects of the Program and to evaluate any proposed mutually beneficial opportunities to improve the quality, growth potential or profitability related to any aspects of the Program. 

  

	13.	Representation and Warranties of Purfoods. 

  

	 	13.1.	Purfoods guarantees 100% customer satisfaction and that, if handled as directed, the shelf life of all Meals will not be less than fourteen (14) days from the date shipped. In
particular, if a customer of the Program is dissatisfied as a result of an action or inaction of Purfoods related to the production or shipping of Meals, Purfoods will reship replacement Meals at no cost to EDI or such customer, or Purfoods may
elect to issue a credit to EDI for the cost of such meals. Purfoods guarantees that it will fulfill customer orders at a level of consistency recognized as generally accepted in the meal delivery industry. 

  

	 	13.2.	 Purfoods guarantees that, as of the date of shipment or delivery, each Meal is, on such date, (i) not adulterated or misbranded within the meaning of the
Federal Food, Drug, and Cosmetic Act; (ii) not an article which may not, under 

  

 3 

	 	 
the provisions of Section 404 or 505 of said Act, be introduced into interstate commerce; and (iii) not adulterated or misbranded within the
meaning of or in violation of any disclosure or warning required under the pure food and drug or health, safety or environmental laws, regulations or ordinances of any state or other government authority which are applicable to such shipment or
delivery. 

  

	 	13.3.	Purfoods represents and warrants that it has all licenses necessary to prepare, store, package and ship Meals in accordance with the terms of this Agreement and Purfoods represents,
warrants and covenants that it will comply with all rules, regulations and/or other requirements of the USDA during the term of this Agreement. 

  

	14.	Representations and Warranties of EDI 

  

	 	14.1.	EDI hereby covenants that it shall use commercially reasonable efforts to market and promote the Program. 

  

	15.	Indemnification and Insurance. 

  

	 	15.1.	Purfoods shall indemnify, defend and hold EDI and its owners, shareholders, directors, officers, employees, agents, representatives, successors and permitted assigns harmless from
any and all claims, liabilities, demands, suits, damages or costs arising out of Purfoods performance under this Agreement including the loss and reasonable expenses (including, without limitation, attorney’s fees and costs), if any, incurred
by EDI. 

  

	 	15.2.	Purfoods must obtain, and continuously maintain throughout the Term of this Agreement, at its own expense, an occurrence based Commercial General Liability Insurance Policy,
including contractual liability, products/completed operations liability and advertising liability coverage endorsed to name EDI as an additional insured and with minimum limits of: 

  

	 	15.2.1.	$1,000,000 (one million dollars) Each Occurrence; 

  

	 	15.2.2.	$1,000,000 (one million dollars) General Aggregate; and 

  

	 	15.2.3.	$1,000,000 (one million dollars) Products/Completed Operations Aggregate. 

  

	 	15.2.4.	Umbrella Liability Insurance, for the amounts in excess of those set forth in paragraph A., above, with minimum limits of: 

  

	 	15.2.4.1.	$5,000,000 (five million dollars) Each Occurrence; and 

  

	 	15.2.4.2.	$5,000,000 (five million dollars) General Aggregate. 

  

	 	15.2.5.	All of these policies must contain Cross Liability Endorsements. Such policies shall be endorsed to provide that in the event of cancellation, non-renewal or material modification
EDI shall receive thirty (30) days prior written notice thereof. Purfoods shall furnish EDI with certificates of insurance evidencing compliance with all insurance provisions set forth above prior to the commencement of first delivery of Meals.

  

	 	15.3.	EDI shall indemnify, defend and hold Purfoods and its owners, members, directors, officers, employees, agents, representatives, successors and permitted assigns harmless from any
and all claims, liabilities, demands, suits, damages or costs arising out of EDI’s performance under this Agreement or sales practices or other actions related to its sales of Meals, including the loss and reasonable expenses (including,
without limitation, attorney's fees and costs), if any, incurred by Purfoods. 

  

 4 

	16.	Term. The term of this Agreement will begin on the Effective Date and will continue for a period of three (3) years. This Agreement will automatically renew for
additional terms of two years each, unless either party notifies the other in writing at least one hundred eighty (180) days prior to automatic renewal that it does not wish to renew this Agreement. 

  

	17.	Termination. This Agreement may be terminated as follows: 

  

	 	17.1.	Either party may terminate this Agreement if the other party materially breaches its obligations hereunder and such breach remains uncured for ninety (90) days following the
notice to the breaching party of the breach. 

  

	 	17.2.	By mutual agreement between the parties in writing. 

  

	 	17.3.	Either party may terminate this Agreement, at any time, by written notice, in the event that the other party files a voluntary petition in bankruptcy or under any similar insolvency
law; or a receiver is appointed for, or a levy or attachment is made against, substantially all of its assets, if any such petition is not dismissed or such receiver or levy or attachment is not discharged within ninety (90) days after the
filing or appointment. 

  

	 	17.4.	The parties may terminate this Agreement pursuant to the terms of Paragraph 21 below. 

  

	18.	Assignment of This Agreement. This Agreement and each party’s obligations hereunder are not assignable without the prior written consent of the non-assigning Party.

  

	19.	No Hiring Of Personnel. During the term of this Agreement and during the one year period thereafter, each party agrees (i) not to, directly or indirectly, employ, engage
or solicit (as an employee or consultant) on their own behalf or on behalf of others, any of the other party's employees and or consultants, who are or were engaged by such other party during the term of this Agreement or otherwise cause, directly
or indirectly, any of such persons to terminate or materially alter their relationship with such other party (such employees are collectively referred to as the “Employees”), (ii) not to, directly or indirectly, reveal the name or
identity of any of the Employees to any third party for the purpose of such third party, directly or indirectly, employing, soliciting or engaging any of the Employees (as an employee or consultant), and (iii) not to refer any of the Employees
to any third party for the purpose of such third party, directly or indirectly, employing, soliciting or engaging any of the Employees (as an employee or consultant). 

  

	20.	 Confidentiality. During the term of this Agreement, each party (the “Disclosing Party”) may disclose Confidential Information (as defined below) to
the other party (the “Recipient”). Recipient agrees that the Confidential Information it receives from the Disclosing Party will be kept strictly confidential and, except with the specific prior written consent of the Disclosing Party or
as expressly otherwise permitted by the terms hereof, will not be disclosed to anyone. It is understood that the Recipient may disclose any of the Confidential Information to those of its employees, officers, directors, representatives or agents
(collectively, “Representatives”) who require such material for the purpose of performing services for the Recipient; provided that such Representatives (i) shall be informed of the confidential nature of the Confidential Information;
(ii) shall be provided with a copy of this letter agreement and shall agree in writing to be bound by the terms and conditions hereof as if they were a party hereto; and (iii) shall only be disclosed that portion of the Confidential
Information required for performing such services (and in particular, EDI will not disclose any of the Exhibits to this agreement to anyone without a strict need to know such 

  

 5 

	 	 
information). The Recipient agrees that it and its Representatives will not use any of the Confidential Information for any reason or purpose other than in
connection with the business relationship with the Disclosing Party contemplated by this agreement. The Recipient also agrees to be responsible for enforcing the confidentiality of the Confidential Information and agrees to take such action, legal
or otherwise, to the extent necessary to prevent any disclosure of the Confidential Information by any of its Representatives. 

 As used herein, the term “Confidential Information” shall mean any and all menus, recipes, pricing, product development, marketing, strategic plans, business plans, financial information, technical information, customer lists,
names of suppliers, names of vendors, names of licensees, computer software, intellectual property, patents, trademarks, “know-how” or commercial, logistical, personnel or other information provided by the Disclosing Party to the Recipient
concerning the business and affairs of the Disclosing Party that has been or may hereafter be provided orally or in writing or shown to the Recipient or its Representatives, irrespective of the form of the communication, by the Disclosing Party or
its representatives or agents (including attorneys) and also includes all (i) notes, analyses, compilations, studies or other material prepared by Recipient or its Representatives and (ii) this agreement and the terms and provisions
herein; provided, however, that the term “Confidential Information” does not include information that (a) is or becomes generally available to the public other than as a breach of this provision by the Recipient or its
Representatives, (b) was within the possession of the Recipient or its Representatives prior to its being furnished by or on behalf of the Disclosing Party, provided that the source of such information was not known to the Recipient or its
Representatives to be bound by a confidentiality agreement with the Disclosing Party or (c) becomes available to Recipient or its Representatives on a non-confidential basis from a source other than the Disclosing Party, provided that such
source is not known to the Recipient or its Representatives to be bound by a confidentiality agreement with the Disclosing Party with respect to such information 
 Upon notice from the Disclosing Party, the Recipient shall promptly deliver to the Disclosing Party all documents or other matter furnished by the Disclosing Party constituting Confidential Information, together with
all copies thereof in the possession of Recipient or its Representatives without retaining a copy of any such material and the Recipient shall destroy any compilations, notes, analyses or other materials prepared internally or by its Representatives
except for one copy which may be kept in its legal files to ensure compliance with this agreement. Notwithstanding the return of any Confidential Information, the parties will continue to be bound by the obligations under this letter agreement.
Notwithstanding any other provisions of this agreement, each of the parties will be permitted to retain and use any information required to comply with the requirements of the IRS or its accounting firms standards for financial information.

 If the Recipient or its Representatives is requested or required by a legal, regulatory or administrative body to disclose any of the
Confidential Information, then the Recipient and its Representatives will promptly notify the Disclosing Party of such request or requirement so as to allow the Disclosing Party to seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this letter agreement. If in the absence of such protective order or waiver, the Recipient or its Representatives is nonetheless required to disclose the Confidential Information, then the Recipient or its
Representatives may, without liability hereunder, disclose to such tribunal only that portion of the Confidential Information which counsel reasonably advises is required to be disclosed. In particular, however, EDI will use its best efforts to
limit public or private disclosure of the key financial provisions of this agreement including all attached Exhibits. 
  

 6 

 The Parties understand and acknowledge that any disclosure or misappropriation of any of the others
Confidential or Proprietary Information in violation of this Agreement will cause irreparable harm, the amount of which may be difficult to ascertain, and therefore agrees that each shall have the right to apply to a court of competent jurisdiction
for specific performance and/or an Order restraining and enjoining any such further disclosure or breach and for such other relief as the Court shall deem appropriate. Such right shall be in addition to the remedies otherwise available at law or in
equity. Both Parties expressly waive the defense that a remedy in damages will be adequate and any requirement in an action for specific performance or injunction for the posting of a bond. 
  

	21.	License. 

  

	 	21.1.	Trademark Ownership and License. 

  

	 	21.1.1.	EDI will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, including any goodwill associated therewith, subject to the limited
license granted to Purfoods hereunder. Any use of any such trademarks by Purfoods shall inure to the benefit of EDI and Purfoods shall take no action that is inconsistent with EDI’s ownership thereof. Subject to the terms and conditions of this
Agreement, EDI hereby grants to Purfoods a non-exclusive, worldwide license to use, reproduce, distribute, transmit and publicly display the EDI trademarks, service marks, logos and trade names (the “EDI Marks”) in accordance with this
Agreement—to enable Purfoods to implement, promote and advertise the Program. 

  

	 	21.1.2.	Purfoods will retain all right, title and interest in and to its trademarks, service marks and trade names worldwide, including any goodwill associated therewith, subject to the
limited license granted to EDI hereunder. Any use of any such trademarks by EDI shall inure to the benefit of Purfoods and EDI shall take no action that is inconsistent with Purfood’s ownership thereof. Subject to the terms and conditions of
this Agreement, Purfoods hereby grants to EDI a non-exclusive, worldwide license to use, reproduce, distribute, transmit and publicly display the Purfoods trademarks, service marks, logos and trade names (the “Purfoods Marks”) in
accordance with this Agreement—to enable EDI to implement, promote and advertise the Program. 

  

	 	21.1.3.	Upon the expiration or termination of this Agreement, each party will cease using the trademarks, service marks and/or trade names of the other except: (i) as the parties may
agree in writing, or (ii) to the extent permitted by applicable law. 

  

	 	21.2.	Marking, Quality Control & Maintenance. 

  

	 	21.2.1.	Each party shall use the other’s mark consistent with the terms set forth in Sections 3(a) and 3(b) above. Moreover, each party shall affix the proper trademark symbols when
referencing the other’s marks. As such, each party shall use such trademark notice in connection with the other’s mark as may be prescribed by the other party from time-to-time. By way of example, both EDIETS and EDIETS.COM are registered
trademarks; therefore, EDI requests that Licensor affix the ® symbol to prominent uses of EDIETS and EDIETS.COM. 

  

	 	21.2.2.	 Each party shall only affix the other’s mark to high quality promotional materials, at least equal to comparable promotional materials previously developed and
marketed by that affixing party (i.e., licensee). If the quality of the promotional materials falls below such quality, the licensee shall use best efforts to 

  

 7 

	 	 
restore such quality. In the event that the licensee has not taken appropriate steps to restore such quality within ten (10) days after notification by
the mark owner (i.e., licensor), the licensor shall have the right to require that the licensee cease using licensor’s mark. 

  

	 	21.2.3.	Purfoods recognizes the value of the goodwill associated with the EDI Marks and acknowledges that the EDI Marks and all rights therein, including the goodwill pertaining thereto,
belong exclusively to EDI. EDI recognizes the value of the goodwill associated with the Purfoods Marks and acknowledges that the Purfoods Marks and all rights therein, including the goodwill pertaining thereto, belong exclusively to Purfoods and
that the Purfoods Marks have acquired secondary meaning in the minds of the purchasing public. 

  

	22.	Exclusive Relationship. During the term of this Agreement: 

  

	 	22.1.	During the Term, and subject to the terms of this Section 22, EDI will not compete with Purfoods in the area of prepared food meals (but not frozen or ever frozen) utilizing
fresh vacuum sealed technology or some other proprietary technology that preserves meal freshness (“Fresh Meals”) and will place exclusively with Purfoods all customer orders for Fresh Meals. 

  

	 	22.2.	During the Term, and subject to the terms of this Section 22, EDI will not compete with Purfoods in the delivery or production (either by itself or through subcontractors), for
supply to either itself or to third parties, of Fresh Meals. 

  

	 	22.3.	Subject to the terms of Paragraphs 22.4 and 22.5 below, Purfoods will not: (i) supply, produce, package, promote, market, advertise, sell, or distribute for any competitor
listed on Exhibit B hereto, Fresh Meals, whether bearing any such competitor’s or entity’s label or brand, or the label or brand of any other party; or (ii) license the right from any such competitor or entity to do any of the
foregoing. 

  

	 	22.4.	EDI’s minimum food purchases, excluding freight charges, from the date of this agreement though March 31, 2008 will be $8 million. Purfoods and EDI will use their best
efforts to agree, before March 31, 2008, on minimum quarterly food purchase goals for the remainder of the term of this Agreement; provided that such minimums will be no less than 100% of the annualized rate of food purchases achieved during
the period from the date of this agreement and March 31, 2008. If the parties cannot agree, either party will have the right to terminate this agreement for fifteen (15) days beginning on April 1, 2008, such termination to take effect
180 days thereafter. In the event EDI does not achieve a quarterly minimum food purchase goal, as explained above, EDI shall have the following quarter to correct the shortfall. In the event the shortfall is not corrected in the following quarter,
Purfoods shall have the option for thirty (30) days subsequent to the end of the period to be released from any restrictions stated in Paragraph 22.3 above and if Purfoods elects to be released from such restrictions, EDI may, at its option,
within thirty (30) days of receipt of Purfoods’s election, terminate this Agreement upon one hundred eighty (180) days written notice to Purfoods. 

  

 8 

	 	22.5.	EDI shall have the option to be released from the terms of Paragraph 22.1 above in the event that a Nutrio a/k/a eDiets Corporate Services customer does not approve Purfoods as a
vendor for that customer’s Fresh Meal delivery program. In this case, EDI will be released from the terms of Paragraph 22.1 to the extent necessary to fulfill the requirements of that customer’s Fresh Meal delivery program.

  

	 	22.6.	In the event that EDI purchases from Purfoods exceed the minimums provided for in paragraph 22.4 above, and Purfoods declines or is unable to provide a portion of the total orders
placed by EDI, EDI will have the right to arrange for a third party to supply such portion of meals. Such meals will be delivered to Purfoods in a form and on a deadline which will allow Purfoods to ship such meals as part of customer orders without
incremental cost or delay to Purfoods’ operations. 

  

	23.	Independent Contractor Relationship. In accordance with the mutual intentions of the parties, this Agreement establishes between them an independent contractor relationship,
and all of the terms and conditions of this Agreement shall be interpreted in light of that relationship. This Agreement does not create any employer-employee, agency, partnership or joint venture relationship. As an independent contractor,
Purfoods’ fees and expenses shall be limited to those expressly stated in this Agreement (including any schedules hereto). Neither party will have the right to bind the other party to any other agreements or commitments.

  

	24.	Governing Law. The parties agree that this Agreement will be governed by and construed in accordance with the laws of the state of Iowa without giving effect to any choice of
law rule that would cause the application of the laws of any jurisdiction other than the internal laws of a neutral state to the rights and duties of the parties. Any dispute arising hereunder shall be adjudicated exclusively in the Federal and
State Courts of the state of Iowa, as to which courts the parties waive any claim of inconvenient forum. 

  

	25.	Notices. All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be sent to the following
addresses, unless such addresses are changed by written notification to the other party: 

  

			
	If to EDI:	  	If to Purfoods:
	eDiets.com, Inc.	  	Purfoods, L.L.C.
	1000 Corporate Drive, Suite 600	  	718 SE Shurfine Dr.
	Fort Lauderdale, FL 33334	  	Ankeny, Iowa 50021
	Attn: President, General Counsel	  	Attn: Rick Anderson, Mike Anderson
	(f) (954) 938-4080	  	Ph 515-963-0641

  

	26.	Amendment. No amendment or modification relating in any manner to this Agreement shall be effective unless executed in writing and signed by both parties.

  

	27.	Entire Agreement. This Agreement shall constitute the entire agreement between the parties as it relates to the subject matter contained herein and supersedes any prior
agreement or understanding between the parties relating hereto. 

  

	28.	Severability. If any provision of this Agreement is deemed invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect
or limit the validity or enforceability of any other provision hereof. 

  

 9 

	29.	No Publicity. Each party agrees not to use any name, trademark, service mark or logo of the other party in any publicity, advertising or information that is disseminated to
the general public without the prior written approval of such other party. 

  

	30.	Execution and Authority. Each party represents that: (a) it has the full right, power and authority to execute and deliver this Agreement and to perform its terms;
(b) the execution and delivery of this Agreement will not violate or conflict with any charter provision or bylaw of the party or any of its subsidiaries or affiliates; (c) the party has taken all required corporate, company or other
actions to approve this Agreement; (d) this Agreement is enforceable against the party according to its terms, subject to bankruptcy, insolvency, and other laws relating to or affecting creditors’ rights and to general equity principles;
and (e) the person executing this Agreement on the party’s behalf is duly authorized and empowered to do so. 

  

	31.	Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same
instrument. 

  

	32.	Force Majeure. Any delay in or failure of performance by either party under this Agreement will not be considered a breach of this Agreement and will be excused to the extent
caused by any occurrence beyond the reasonable control of such party including, but not limited to, acts of God, power outages and governmental or regulatory restrictions. Purfoods, however, will notify EDI immediately of problems that may lead to
late or non-delivery of Meals. 

 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.

 eDiets.com, Inc., a Delaware corporation 
  

									
	By:	 	  
	 		 	Date:	 	  

	Its:	 	President	 		 		 	

 Purfoods, LLC an Iowa limited Liability Company 
  

									
	By:	 	  
	 		 	Date:	 	  

	Its:	 	President	 		 		 	

  

 10 

 Exhibit A 
 Food Item Charges 
 Food items charges for 2007 shall be based on the following schedule. This schedule may be
updated as food items are added to or deleted from the current program. 
 All general Program pricing for both $15 and $25 per day programs:

 Excel Spreadsheet titled: EDI – Purfoods Program Item Pricing Grid 5 dated 3-9-07 
 Prepackaged Menu Items subject to EDI substitution: 
 EDI may, on
reasonable notice, provide alternative prepackaged items sourced from EDI or Nutrio clients that will be substituted for equivalent items in the Program. EDI will arrange for the timely delivery of required amounts of such items to Purfoods’
facility and per Purfoods’ schedule. Any increase or decrease in Purfoods’ cost related to such substituted item will be charged or credited to EDI as part of weekly invoiced amounts. All EDI substitutions must conform to the nutritional
parameters as well of the physical specifications, including packaging, labeling, shelf life and any special handling, of the product being replaced. The following list of prepackaged menu items and their corresponding costs shall be used for the
purpose of cost adjustment calculation, when EDI makes a substitution under the provisions of this paragraph. All costs listed are net total cost delivered to Purfoods designated address. 
  

					
	 Product Name
	  	 Description
	  	 Total Cost

	 APPLE RASPBERRY MUFFIN
	  	310 cal, individually boxed	  	[***]
	 BANANA MUFFIN
	  	300 cal, individually boxed	  	[***]
	 Instant Oatmeal
	  	1 oz packet	  	[***]
	 Almonds
	  	.6 oz bag	  	[***]
	 Breakfast bar-Nutri-grain Apple
	  	37 g bar	  	[***]
	 Hard Boiled Egg (1)
	  	in plastic bag	  	[***]
	 Raisins
	  	.5 oz box	  	[***]
	 Cereal Raisin Brand Bowl pack (w/out milk)
	  	1.25 oz bowl	  	[***]
	 Cereal, Cheerio honey nut bowl pack (w/out milk)
	  	1 oz bowl	  	[***]
	 Whole wheat english muffin
	  	in plastic bag	  	[***]
	 Peanut Butter
	  	.75 oz cup (Peter Pan)	  	[***]
	 BLUEBERRY MUFFIN
	  	290 cal, individually boxed	  	[***]
	 Strawberry Orange Muffin
	  	310 cal, individually boxed	  	[***]
	  1/2 Whole Grain
Sliced Bagel
	  	individually bagged	  	[***]
	 Reduced Fat Cream Cheese
	  	1 oz cup w/ foil top (Kraft)	  	[***]
	 All-Bran
	  	1.76 oz box	  	[***]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-1 

					
	 Wheat Roll
	  	in plastic bag	  	[***]
	 Wheat Cracker
	  	2ct bag	  	[***]
	 Wheat Bread
	  	in plastic bag	  	[***]
	 2oz Carrots
	  	2 oz bag	  	[***]
	 Applesauce
	  	4oz cup, foil top	  	[***]
		  		  	[***]
		  		  	[***]
	 BBQ Soy Nuts
	  	.75 oz bag	  	[***]
	 SUNFLOWER SEEDS
	  	.6 oz bag	  	[***]
	 GRANOLA BAR
	  	24g	  	[***]
	 Ranch Soy Nuts
	  	.75 oz bag	  	[***]
	 PUMPKIN SEEDs
	  	.6 oz bag	  	[***]
	 HONEY ROASTED PEANUTS
	  	1 oz bag	  	[***]
	 Granola with Raisins, Dates and Pecans
	  	1 oz mix	  	[***]
	 Peanut and dried cranberries mix
	  	.6 oz peanuts, .5oz cranberries	  	[***]
	 Wheat Crackers and Cheese Stick
	  	2ct cracker/ 1oz mozzarella cheese	  	[***]
	 SUGAR FREE PUDDING
	  	4oz tub w/lid	  	[***]
	 Raisin, sunflower seed, walnut mix
	  	.5 oz raisins, .25 oz walnuts, .25 oz sunflower seeds	  	[***]
	 Cashews and raisin mix
	  	.75 oz raisins/5oz cashews in bag	  	[***]
		  		  	[***]
		  		  	[***]
	 CHOCOLATE SWIRL CHEESECAKE
	  	3.5 oz slice - individually boxed	  	[***]
	 RASPBERRY SWIRL CHEESECAKE
	  	3.5 oz slice - individually boxed	  	[***]
	 LEMON MIST CHEESECAKE
	  	3.5 oz slice - individually boxed	  	[***]

 Shipping and Handling: 
 The follow shipping and Handling pricing grid shall be used for all programs shipped under this agreement. The total “cooler count shipped” shall be the total of the all client coolers shipped for the $15 and the $25 programs per
week. 
  

				
	 Number of Coolers Shipped Per Week
	  	Shipping and Handling
Charge	 
	 0 - 500
	  	[***	]
	 501-2500
	  	[***	]
	 2501-5000
	  	[***	]
	 5001-7500
	  	[***	]
	 7501-10000
	  	[***	]
	 10000 and up
	  	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-2 

 Purfoods will be responsible for including starter kits, packing lists and menus in any customer shipments. To the extent
that EDI elects to include other materials, Purfoods will also include such materials and will charge EDI the cost of such materials plus a mutually agreed handling fee. 
 General program meal policy: 
 Purfoods reserves the right to make meal substitutions of similar
nutritional profile in client orders due to inventory restrictions. 
 Upon sixty (60) days notice, the Purfoods shall have the option of
adjusting food item charges to reflect changes during the year in the Consumer Price Index or with respect to an ingredient which increases in cost by more than 10% cumulatively. Such notice shall include the specific food item(s) and the charge(s)
that the party wishes to adjust. 
 Upon 30 days notice, Purfoods shall have the right to discontinue any meals that are ordered less than 200
in a week. 
 After 6-1-07, Purfoods may elect to charge EDI a meal item development charge of $4,000 for each food item which is developed at
EDI’s request; provided, however, that Purfoods will provide, at EDI’s request and at no cost to EDI, ten new meals in each twelve month period and seasonal substitutions for up to 10% of the entrée items; provided, further, that no
such new meals or seasonal substitutions, in the aggregate, will increase Purfoods’ overall cost. 
 Purfoods shall be responsible to
make sure that each customer delivery is packaged adequately. Purfoods shall have the right to change the type and style of packaging as it deems necessary. Purfoods will provide EDI with 20 (twenty) days notice of any substantive packaging changes.

  

 A-3 

													
	 	  	sales / day	  	days / yr	  	days / sale	  	sale price /day	  	wholesale
	 EDIETS Gross Wholesale Income calculation
	  	100	  	365	  	42	  	$	20.00	  	$	30,660,000

  

																											
	 Item Description
	 	Item
Number	 	Volume
0
TO

2000000	 	 	Volume
2000000
TO
4000000	 	 	Volume
4000000
TO
8000000	 	 	Volume
8000000
TO
12000000	 	 	Volume
12000000
TO
16000000	 	 	Volume
16000000
TO
20000000	 	 	Volume
20000000
TO
24000000	 	 	Volume
24000000
and
Up	 
	 $15 Fresh Low Cost Program reviewed 4-01-07 added meals 9-24-07
	 		 			 			 			 			 			 			 			 		
										
	 Breakfast
	 		 			 			 			 			 			 			 			 		
	 Rolled Oats Granola with Honey, Yogurt
	 	2764	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 APPLE RASPBERRY MUFFIN
	 	2715	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BANANA MUFFIN
	 	2712	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Instant Oatmeal and Almonds
	 	2765	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Breakfast bar-Nutri-grain Apple with Hard Boiled Egg (1)
	 	2766	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Instant Oatmeal and Raisins
	 	2767	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cereal Raisin Brand Bowl pack (w/out milk) with Hard Boiled Egg (1)
	 	2768	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 California Breakfast
	 	3116	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cereal, Cheerio honey nut bowl pack (w/out milk) with Hard Boiled Egg (1)
	 	2769	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Whole wheat english muffin with Peanut Butter
	 	2770	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BLUEBERRY MUFFIN
	 	2714	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Strawberry Orange Muffin
	 	2709	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	  1/2 Whole Grain
Sliced Bagel with Reduce Fat Cream Cheese
	 	2771	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 All-Bran with Almonds
	 	2772	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Lunch
	 		 			 			 			 			 			 			 			 		
	 HEARTY LENTIL SOUP with Wheat Roll
	 	2854	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Chili with Black Beans
	 	2855	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 TURKEY HAM AND BROWN RICE SALAD with Wheat Cracker
	 	2856	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Hoisin Glazed Chicken breast meat with Shredded Vegetable Salad and Asian Dressing topped with crunchy noodles with Wheat Bread (client
will toast)
	 	2857	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Meat Loaf Sandwich On Wheat Bread With Baby Carrots
	 	2275	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roasted Garlic Tomato Soup with soda cracker (vegetarian)
	 	2858	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Asian stir fry w/ brown rice
	 	2859	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Breast Sandwich on Wheat Bread—new packaging with 2 oz carrots
	 	2860	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef and Noodles (7oz) with Raisins
	 	2861	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken and Noodles (7oz) with Wheat Roll
	 	2862	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken breast and Tomato basil salad with Ranch Dressing
	 	2863	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Creamy potato soup w/ ham, Wheat Roll
	 	2864	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Slammin Ham and Cheese (CSI item #10808—new package) with Julienne Vegetables
	 	2865	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chunky Chicken and Rice Soup, Wheat Bread, Applesauce
	 	2866	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken Breast salad with Chick pea-carrot slaw over Ice berg Lettuce
	 	2867	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chef's Chicken Noodle Soup with soda cracker, Wheat Bread ( client will toast)
	 	2868	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Smokin Chili with beef and beans
	 	2869	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Chili Tostada with Salsa and Wheat Cracker
	 	2870	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roast Beef Sandwich on Wheat Bread—new packaging
	 	2871	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Penne Pasta and Cheese with 2 oz Carrots
	 	2872	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Bounty Vegetable Soup with Wheat Bread (client will toast)
	 	2873	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-4 

																											
	 Dinner
	  		  			 			 			 			 			 			 			 		
	 Louisiana Style Red Beans and Rice w/ Sausage
	  	2874	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SPAGHETTI AND MEATBALLS WITH MARINARA SAUCE, SICILIAN VEGETABLES
	  	9127	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BBQ Chicken Breast with Roasted Red Potatoes and sweet corn
	  	2875	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 GOULASH, MIXED VEGETABLES
	  	9137	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Bolognese
	  	2397	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Jerk Pork Loin with Honey-pineapple glaze, black beans and vegetables with brown rice
	  	2876	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHICKEN VESUVIO (CHICKEN BREAST WITH NEW POTATOES AND PEAS)
	  	2319	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SLICED HAM, HASHED BROWN POTATO, SICILIAN VEGETABLES
	  	9124	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 TUNA CASSEROLE
	  	9105	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BEEF POT ROAST WITH STEAMED BROCCOLI with 2 oz carrots
	  	2877	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Meatballs with Spaghetti Squash, Marinara Sauce, Roll
	  	2878	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BEEF POT ROAST WITH NEW POTATOES AND CORN
	  	2322	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cumin chicken with black beans and brown rice salad
	  	2879	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 White Chicken Verdure with Chick Peas
	  	2391	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 GRILLED PORK LOIN WITH BARLEY PILAF & GREEN BEANS
	  	2313	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken Breast with Herb potatoes and broccoli flowerets
	  	2880	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 PORK FRIED RICE
	  	9142	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BAKED BONELESS CHICKEN, CHEESY POTATO CASSEROLE
	  	9120	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chipotle Ranch White Turkey Wrap with Cabbage Slaw
	  	2299	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 LASAGNA, MALIBU BLEND VEGETABLES
	  	8008	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 TURKEY MEATLOAF WITH PESTO AND SPINACH AND ITALIAN GREEN BEANS
	  	3203	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Orange Chipotle Chicken Breast with Mung Bean Noodles and Garbanzo-Carrot Slaw
	  	2389	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef & Bean Burrito with Spanish Rice
	  	2881	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 MEATLOAF WITH MASHED POTATOES, AND CORN
	  	2934	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHICKEN STRIPS WITH FETTUCCINI, MARINARA AND PARMESAN CHEESE
	  	2935	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Lemon Herb Chicken Breast with Roasted Red Potatoes and Green Beans with Peppers
	  	2390	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Sweet basil chicken w/ brown rice & veggies
	  	2882	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Kung Pao Chicken w/ brown rice salad
	  	2883	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Snack
	  		  			 			 			 			 			 			 			 		
	 BBQ Soy Nuts (.75 oz)
	  	4326	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SUNFLOWER SEEDS
	  	2482	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 GRANOLA BAR
	  	2473	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Ranch Soy Nuts (.75 oz)
	  	4327	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 PUMPKIN SEEDs
	  	2477	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 HONEY ROASTED PEANUTS
	  	3422	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Almonds
	  	2457	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Granola with Raisins, Dates and Pecans
	  	2515	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Peanut and dried cranberries mix
	  	2516	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Wheat Crackers and Cheese Stick
	  	3932	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SUGAR FREE PUDDING
	  	5409	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Breakfast bar-Nutri-grain Apple
	  	2517	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Raisin, sunflower seed, walnut mix
	  	2518	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cashews and raisin mix
	  	2519	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 New Meals Quoted 9-11-07
	  		  			 			 			 			 			 			 			 		
	 CINNAMON RAISIN GRANOLA CEREAL
	  	B	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Breakfast Skillet with Turkey Ham and Scrambled Egg Substitute
	  	B	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-5 

																											
	 Sweet and Spicy Black Bean Salad and Wheat Roll
	  	L	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Brazilian Black Bean Soup and Wheat Cracker
	  	L	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Steak Fajita Wrap
	  	L	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Curry and Coconut Chicken Breast with Spicy Brown Rice
	  	L	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 London Broil with Butternut Squash Mashed Potatoes, Asparagus, and Pesto
	  	D	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Pasta Salad with Roasted Vegetables
	  	D	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 New Meals Quoted 9-24-07
	  		  			 			 			 			 			 			 			 		
	 Ranch Skillet with Scrambled Eggs AND Cheddar Cheese
	  	2532	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Southwestern Skillet (Hash, Scrambled Eggs, Salsa and Cheddar Cheese)
	  	2533	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cinnamon Nut Oatmeal
	  	2537	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Vegetarian Red Beans & Rice
	  	2552	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Vegetarian Lentil Soup with Whole Wheat Roll and Cheese
	  	2553	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Breast Wrap with Black Beans and Tomato Zucchini Salad
	  	2554	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken Breast Wrap with Grilled Vegetables and Honey Dijon Mustard
	  	2202	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Breast and Mung Bean Noodle Salad
	  	2558	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Vegetarian Fiesta Lasagna with Zucchini Red Pepper Salad
	  	2559	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Herb Rubbed Beef Steak with Quinoa Pilaf and Sauteed Carrots
	  	2800	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Steak with Mushrooms, Broccoli and Brown Rice
	  	2899	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Hummus with Vegetables and Pita
	  	2549	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Vegetable Curry with Chick Peas and Brown Rice
	  	2548	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Desserts
	  		  			 			 			 			 			 			 			 		
	 BAKED APPLE W/ RICOTTA
	  	2415	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BERRIES AND RICOTTA PHYLLO SNACK
	  	2428	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Angle Food Cake with Lemon Pudding
	  	2926	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHOCOLATE SWIRL CHEESECAKE
	  	2442	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 RASPBERRY SWIRL CHEESECAKE
	  	2443	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 LEMON MIST CHEESECAKE
	  	2444	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 eDiets Fresh Gourmet $24.95 Program revised 4-01-07
	  		  			 			 			 			 			 			 			 		
										
	 Breakfast
	  		  			 			 			 			 			 			 			 		
	 Blueberry Bagel Half With Cream Cheese
	  	2722	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Peanut Butter & Jelly French Toast with Egg Whites
	  	2723	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SWEET POTATO HASH WITH TURKEYPASTRAMI
	  	2130	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 HEARTY OATMEAL
	  	2733	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 GREAT GRAINS CEREAL WITH CRUNCHY PECANS
	  	2724	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 MUESLIX CEREAL
	  	2725	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Smart Start Cereal
	  	2726	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 EGGS WITH TURKEY BACON AND HOLLANDAISE SAUCE ON AN ENGLISH MUFFIN
	  	2119	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CINNAMON SWIRL FRENCH TOAST WITH TURKEY SAUSAGE AND SUGAR FREE SYRUP
	  	2787	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CRANBERRY ORANGE MUFFIN
	  	2710	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Apple Cinnamon Muffin
	  	2711	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-6 

																											
	 PUMPKIN MUFFIN
	  	2713	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 VEGETABLE AND POTATO SKILLET WITH MOZZARELLA CHEESE AND EGG SUBSTITUTE
	  	2788	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHEDDAR CHEESE OMELET WITH HASH BROWNS
	  	2789	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Rolled Oats Granola and Yogurt
	  	2524	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Apple Raspberry Muffin
	  	2523	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Banana Muffin
	  	2521	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Instant Oatmeal with Almonds
	  	2525	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Apple Breakfast Bar and Hard Boiled Egg
	  	2526	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Instant Oatmeal with Raisins
	  	2527	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Raisin Bran Cereal with Hard Boiled Egg
	  	2528	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 California Breakfast Skillet
	  	2531	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Honey Nut Cheerios Cereal with Hard Boiled Egg
	  	2529	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Peanut Butter English Muffin
	  	2727	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Blueberry Muffin
	  	2522	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Strawberry Orange Muffin
	  	2520	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	  1/2 Whole Grain
Bagel w/ Cream Cheese
	  	2732	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 All Bran Cereal with Almonds
	  	2530	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Lunch
	  		  			 			 			 			 			 			 			 		
	 GRILLED CHICKEN BLT CLUB SALAD
	  	2209	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BERRY GOOD CHICKEN BREAST WITH ROSEMARY ROASTED VEGETABLES AND GREENS (PACKAGED SEPERATELY)
	  	2224	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Canadian Bacon Flatbread Pizza
	  	2267	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Flatbread Pizza
	  	2268	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Patty with German Potato Salad and Sweet Gherkins
	  	2281	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Vegetable Ratatouille with Baked Chicken Breast and Garlic Toast (packaged separately)
	  	2298	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Tuna and noodles
	  	2815	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Baked white chicken and cheesy potatoes
	  	2816	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Asian Duck Breast Salad with Citrus Vinaigrette and Greens (packaged separately)
	  	2850	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BBQ CHICKEN WITH TOMATO ZUCCHINI SALAD
	  	3212	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Tomata Basil Bruschetta
	  	2925	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHICKEN BREAST CACCIATORE WITH SPAGHETTI SQUASH
	  	3214	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 LEMON ROSEMARY CHICKEN WITH TOMATO ZUCCHINI SALAD
	  	3312	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 WHITE CHICKEN MARSALA WITH ITALIAN GREEN BEANS
	  	3305	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHICKEN AND NOODLES, SICILIAN VEGETABLES and Roll
	  	2824	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SCALLOPED POTATOES AND HAM, RIVIERA BLEND VEGETABLES
	  	9107	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 MEATLOAF, MASHED POTATOES AND GRAVY, RIVIERA BLEND VEGETABLES
	  	9108	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BEEF POT ROAST, MASHED POTATOES AND GRAVY WITH RIVIERA BLEND VEGETABLES
	  	9115	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BEEF AND NOODLES, RIVIERA BLEND VEGETABLES
	  	9130	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 PORK ROAST WITH MASHED POTATOES, MUSHROOM GRAVY, RIVIERA BLEND VEGETABLES
	  	9178	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 LASAGNA SANDWICH WITH CHEESE
	  	2825	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SHRIMP SCAMPI AND SPAGHETTI SQUASH and roll
	  	2937	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Hearty Lentil Soup and Crackers
	  	2828	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Chili with Beans
	  	2829	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Ham and Brown Rice Salad and Roll
	  	2830	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Hoisin Chicken Breast with Vegetable Salad and Wheat Bread
	  	2831	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Meat Loaf on Wheat Bread with Carrots
	  	2826	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roasted Garlic Tomato Soup
	  	2832	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Asian Vegetable Stir Fry and Brown Rice
	  	2833	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Sandwich on Wheat with Carrots
	  	2834	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken & Noodles and Roll
	  	2835	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken and Tomato Basil Salad
	  	2836	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Creamy Potato Soup with Ham and Roll
	  	2837	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Ham & Cheese Sandwich with Julienne Vegetables
	  	2838	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-7 

																											
	 Chunky Chicken & Rice Soup with Apple Sauce Cup and Bread
	  	2839	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken Breast Salad with Chick Pea-Carrot Slaw
	  	2840	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chef's Chicken Noodle Soup with Crackers and Carrots
	  	2841	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chili with Beef and Beans
	  	2842	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Chili Tostada with Salsa and Crackers
	  	2843	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roast Beef Sandwich on Wheat
	  	2844	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cheesy Penne Pasta and Carrots
	  	2845	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Bounty Vegetable Soup with Wheat Bread
	  	2846	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Dinners
	  		  			 			 			 			 			 			 			 		
	 OVEN ROASTED SNAPPER WITH BARLEY PILAF AND SICILIAN VEGETABLES
	  	2315	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Steak with Chili Sauce and Asian Style Vegetables
	  	2804	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SALISBURY STEAK, MASHED POTATOES, MUSHROOM GRAVY, SICILIAN VEGETABLES
	  	9109	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Boneless Pork Rib with BBQ Sauce and Bun
	  	2265	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 PORCUPINE MEATBALLS, MASHED POTATOES AND GRAVY, SICILIAN VEGETABLES
	  	9110	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Bourbon Pork Tenderloin with Butternut Squash Mashed Potatoes, BBQ Apples and Julienne Vegetable Salad
	  	2393	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Tuna Nicoise Salad with Hard Boiled Egg and Wheat Bread (packaged separately)
	  	2805	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Shitake Salad with White Rice
	  	2802	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 TURKEY MEATLOAF WITH CHICK PEA SALAD
	  	2301	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 SMOKED AMANA HAM WITH ASPARAGUS BAKE, CORN COBBETTE AND PINEAPPLE
	  	2372	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken Breast Caesar Salad with Apple Compote and Greens (packaged separately)
	  	2803	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Breast A La Marinara with Whole Wheat Spaghetti
	  	2396	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 FIERY CHICKEN BREAST WITH CHICKEN FLAVORED COUSCOUS AND NORMANDY BLEND VEGETABLES
	  	2318	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 ROASTED LAMB ROSEMARY WITH BARLEY SALAD AND SWEET POTATOES
	  	2371	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHICKEN SALAD IN BREAD BOWL
	  	2262	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chili Rubbed Beef Steak with Candied Sweet Potatoes, Sauteed Vegetables and Feta Cheese
	  	2297	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Blackened Chicken Breast with Louisiana Style Red Beans and Rice
	  	2807	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 TACO SALAD
	  	2225	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Patty with Herb Potato and Gravy
	  	2279	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Pork Rosemary with Candied Sweet Potatoes and Summer Squash
	  	2398	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chicken Breast with New Potatoes and Peas
	  	2931	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roast Beef with Potatoes and Sweet Corn
	  	2932	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey and Tomato Mushroom Sauce
	  	2933	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey, Pesto and Spinach Meatloaf with Green Beans
	  	2811	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Ham, Potato Patty and Vegetables
	  	2812	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Old Fashioned Goulash and Vegetables
	  	2814	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey with Stuffing, Mashed Potatoes, Gravy and Malibu Blend Vegetables
	  	9128	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Quesadilla
	  	2278	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Louisiana Style Red Beans & Rice with Sausage
	  	2847	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Spaghetti and Meatballs with Marinara and Sicilian Vegetables
	  	2892	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BBQ Chicken with Roasted Potatoes and Corn
	  	2848	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Jerk Pork Loin, Black Beans and Vegetables with Brown Rice
	  	2849	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef Pot Roast with Broccoli and Fresh Carrots
	  	2885	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Turkey Meatballs and Spaghetti Squash with Marinara Sauce
	  	2886	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cumin Chicken with Beans and Brown Rice Salad
	  	2887	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 White Chicken Verdure and Chick Peas
	  	2367	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Roasted Pork with Barley Pilaf and Green Beans
	  	2368	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Grilled Chicken with Herb Potatoes and Broccoli
	  	2888	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Pork Fried Rice and Asian Vegetables
	  	2894	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chipotle Ranch Turkey Wrap with Slaw
	  	2827	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Lasagna with Malibu Vegetables
	  	2893	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Orange Chipotle Chicken with Mung Bean Noodles and Slaw
	  	2365	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Beef & Bean Burrito and Spanish Rice
	  	2889	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Meatloaf and Mashed Potatoes with Corn
	  	2369	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-8 

																											
	 Chicken Strips with Fettuccini and Marinara
	  	2884	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Lemon Herb Chicken with Red Potatoes and Green Beans
	  	2366	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Sweet Basil Chicken, Brown Rice & Veggies
	  	2890	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Kung Pao Chicken and Brown Rice Salad
	  	2891	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Snacks
	  		  			 			 			 			 			 			 			 		
	 BAKED APPLE W/ RICOTTA
	  	2415	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 BERRIES AND RICOTTA PHYLLO SNACK
	  	2428	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Angel Food Cake with Lemon Pudding
	  	2926	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 CHOCOLATE SWIRL CHEESECAKE
	  	2442	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 RASPBERRY SWIRL CHEESECAKE
	  	2443	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 LEMON MIST CHEESECAKE
	  	2444	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 MOCHA CHEESECAKE
	  	2445	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 PEACH COBBLER
	  	2409	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Low Fat Brownie
	  	2966	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Lemon Bar
	  	2967	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
										
	 Southwestern Soy Nuts
	  	2905	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Sunflower Nuts
	  	2906	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Chocolate chip granola bar
	  	2950	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Seasoned Soy Nuts
	  	2907	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Pepitas
	  	2951	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Sweet and Salty Peanuts
	  	2908	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Crunchy Almonds
	  	2909	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Cruncy Fruit and Nut Snack
	  	2910	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Nut and Craisin Mixture
	  	2960	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 String Cheese and Stone Ground Wheat Crackers
	  	2961	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Sugar Free Chocolate Pudding
	  	2962	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Apple Cinnamon Cereal Bar
	  	2963	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Dried Fruit & Nut Combo
	  	2964	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]
	 Raisin & Cashew Blend
	  	2965	  	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]	 	[***	]

  
 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 
  

 A-9 

 Exhibit B 
 Excluded Providers and Brands 
 List of EDI Competitors 
 Weight Watchers 
 Waterfront Media including, but not limited to, South Beach
Diet, Denise Austin, Zone Diet Advantage, zonediet.com, drsears.com, and Dr. Andrew Weil’s My Optimum Health Plan 
 Nutrisystem 
 Jenny Craig 
 Diet.com 
 Sparkpeople.com 
 Dietsite.com 
 Cyberdiet.com 
 Dietwatch.com 
 Yahoo 
 MSN 
 AOL1 
 Ivillage 
 WebMD

 Bally’s2 
 Diet-to-Go 
 Rodale Properties 
 Harper Collins Properties1 
 AllRecipes 
 Curves2 
 Lady of America Fitness2 
 Golds Gym2 
 World Gym2 
 American Family Fitness2 
 Living Well 
 Diettoyourdoor.com 
 All Nutrio a/k/a eDiets Corporate Services customers 
  

	1	Excludes Jorge Cruise’s “Three Hour Diet” in its format at the time of contract execution. 

	2	Applies to online programs only; excludes leads generated at the physical establishment. 

  

 B-1 

 List of Restricted EDI Brands 
 Glycemic Impact DietTM 
 eDiets.com® Weightloss Plan 
 Bill Phillips’ Eating for Life

 Slim-Fast® Optima DietTM 

The Blood Type Diet 
 Perricone Nutritional Face-LiftTM 
 eDiets.com® Alternative to Jenny Craig* 
 Trim Kids 
 Dietsmart Plan 
 Mediterranean Diet 
 Total Body Makeover 
 Get Moving with Bob Greene 
 eDiets.com Fitness Plan 
 eDiets.com® SolutionsSM 
 eDiets.com Recipe Club 
  

 B-2 

 Exhibit C 
 Call Center Services 
 General Call Center Guidelines: 
 1) Sales Call responding to inbound inquiries where there was “No Initial Sale” 
 Purfoods will follow up with such potential client a minimum of once 
 2) Follow up calls to clients after order 
 Purfoods will follow up with each client a minimum of
once (between days 2 and 5), including two attempts at contact, and will make at least one “re-up” call near the end of each clients order cycle (including two attempts at contact). 
 3) Customer Service 
 All general customer service
calls, with regard to the eDiets Food Program, will be handled by PF. Callers with questions relating to a membership service or a specific nutritional question will be forwarded to a number provided by eDiets. 
 Program IT issues: 
 Purfoods shall be responsible for all regular
operational IT issues regarding the daily operation of order taking, call center operations and fulfillment of client orders. Any additional IT enhancements beyond what Purfoods deems necessary to perform these regular operations will be paid for by
EDI. In each such instance, EDI shall request the enhancement. Purfoods will then provide an estimate to EDI for such enhancement and EDI may then elect whether or not to proceed. 
  

 C-1

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