Document:

petro_8k-ex1002.htm

    Exhibit 10.2

     

    Second
Lien Term Loan Agreement

     

    Dated
as of

    September
9, 2008

     

    among

     

    Petro
Resources Corporation,

    as
Borrower,

     

    CIT
Capital USA Inc.,

    as
Administrative Agent,

     

    and

     

    The
Lenders Party Hereto

     

    
      

    

     

    

     

    Sole
Lead Arranger and Sole Bookrunner

     

    CIT
Capital Securities LLC

     

    REFERENCE
IS MADE TO THE INTERCREDITOR AGREEMENT DATED AS OF SEPTEMBER 9, 2008 (AS
AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“INTERCREDITOR AGREEMENT”), AMONG THE
BORROWER, CIT CAPITAL USA INC., AS FIRST LIEN COLLATERAL AGENT (AS DEFINED
THEREIN), AND CIT CAPITAL USA INC., AS SECOND LIEN COLLATERAL AGENT (AS DEFINED
THEREIN).  EACH LENDER HEREUNDER (A) ACKNOWLEDGES
THAT IT HAS RECEIVED A COPY OF THE INTERCREDITOR AGREEMENT, (B) CONSENTS TO
THE SUBORDINATION OF LIENS PROVIDED FOR IN THE INTERCREDITOR AGREEMENT, (C) AGREES THAT
IT WILL BE BOUND BY AND WILL TAKE NO ACTIONS CONTRARY TO THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT AND (D) AUTHORIZES
AND INSTRUCTS THE SECOND LIEN COLLATERAL AGENT TO ENTER INTO THE INTERCREDITOR
AGREEMENT AS SECOND LIEN COLLATERAL AGENT AND ON BEHALF OF SUCH
LENDER.  THE FOREGOING PROVISIONS ARE INTENDED AS AN INDUCEMENT TO THE
LENDERS UNDER THE FIRST LIEN CREDIT AGREEMENT TO PERMIT THE INCURRENCE OF
INDEBTEDNESS UNDER THE SECOND LIEN CREDIT AGREEMENT AND TO EXTEND CREDIT TO THE
BORROWER AND SUCH LENDERS ARE INTENDED THIRD PARTY BENEFICIARIES OF SUCH
PROVISIONS.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    TABLE
OF CONTENTS

     

    Page

    
      
        	
                ARTICLE
      I

              
	
                DEFINITIONS
      AND ACCOUNTING MATTERS

              
	 
      	 
      	 
      
	
                Section
      1.01

              	
                Terms
      Defined Above

              	
                1

              
	
                Section
      1.02

              	
                Certain
      Defined Terms

              	
                1

              
	
                Section
      1.03

              	
                Types
      of Loans and Borrowings

              	
                20

              
	
                Section
      1.04

              	
                Terms
      Generally; Rules of Construction

              	
                20

              
	
                Section
      1.05

              	
                Accounting
      Terms and Determinations; GAAP

              	
                20

              
	 
      	 
      	 
      
	
                ARTICLE
      II

              
	
                THE
      CREDITS

              
	 
      	 
      	 
      
	
                Section
      2.01

              	
                Term
      Loans

              	
                21

              
	
                Section
      2.02

              	
                Loans
      and Borrowings.

              	
                21

              
	
                Section
      2.03

              	
                Requests
      for Loans

              	
                22

              
	
                Section
      2.04

              	
                Interest
      Elections; Conversions.

              	
                22

              
	
                Section
      2.05

              	
                Funding
      of Loans.

              	
                24

              
	
                Section
      2.06

              	
                Total
      Reserve Value

              	
                24

              
	
                Section
      2.07

              	
                Termination

              	
                25

              
	
                Section
      2.08

              	
                Intercreditor
      Agreement

              	
                25

              
	 
      	 
      	 
      
	
                ARTICLE
      III

              
	
                PAYMENTS
      OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

              
	 
      	 
      	 
      
	
                Section
      3.01

              	
                Repayment
      of Loans

              	
                25

              
	
                Section
      3.02

              	
                Interest.

              	
                25

              
	
                Section
      3.03

              	
                Alternate
      Rate of Interest

              	
                26

              
	
                Section
      3.04

              	
                Prepayments.

              	
                26

              
	
                Section
      3.05

              	
                Administrative
      Agent Fees

              	
                28

              
	 
      	 
      	 
      
	
                ARTICLE
      IV

              
	
                PAYMENTS;
      PRO RATA TREATMENT; SHARING OF SET-OFFS

              
	 
      	 
      	 
      
	
                Section
      4.01

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

              	
                28

              
	
                Section
      4.02

              	
                Presumption
      of Payment by the Borrower

              	
                29

              
	
                Section
      4.03

              	
                Certain
      Deductions by the Administrative Agent

              	
                29

              
	
                Section
      4.04

              	
                Disposition
      of Proceeds

              	
                29

              
	 
      	 
      	 
      
	
                ARTICLE
      V

              
	
                INCREASED
      COSTS; BREAK FUNDING PAYMENTS; TAXES

              
	
                Section
      5.01

              	
                Increased
      Costs.

              	
                30

              
	
                Section
      5.02

              	
                Break
      Funding Payments

              	
                31

              
	
                Section
      5.03

              	
                Taxes.

              	
                31

              
	
                Section
      5.04

              	
                Designation
      of Different Lending Office

              	
                32

              
	 
      	 
      	 
      
	
                ARTICLE
      VI

              
	
                CONDITIONS
      PRECEDENT

              

      

       

      
 

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      

      
        	 
      	 
      	 
      
	
                Section
      6.01

              	
                Effective
      Date

              	
                32

              
	
                Section
      6.02

              	
                Additional
      Conditions

              	
                35

              
	 
      	 
      	 
      
	
                ARTICLE
      VII

              
	
                REPRESENTATIONS
      AND WARRANTIES

              
	 
      	 
      	 
      
	
                Section
      7.01

              	
                Organization;
      Powers

              	
                36

              
	
                Section
      7.02

              	
                Authority;
      Enforceability

              	
                36

              
	
                Section
      7.03

              	
                Approvals;
      No Conflicts

              	
                36

              
	
                Section
      7.04

              	
                Financial
      Condition; No Material Adverse Change.

              	
                36

              
	
                Section
      7.05

              	
                Litigation.

              	
                37

              
	
                Section
      7.06

              	
                Environmental
      Matters

              	
                37

              
	
                Section
      7.07

              	
                Compliance
      with the Laws and Agreements; No Defaults.

              	
                38

              
	
                Section
      7.08

              	
                Investment
      Company Act

              	
                39

              
	
                Section
      7.09

              	
                Taxes

              	
                39

              
	
                Section
      7.10

              	
                ERISA.

              	
                39

              
	
                Section
      7.11

              	
                Disclosure;
      No Material Misstatements

              	
                40

              
	
                Section
      7.12

              	
                Insurance

              	
                40

              
	
                Section
      7.13

              	
                Restriction
      on Liens

              	
                40

              
	
                Section
      7.14

              	
                Subsidiaries

              	
                40

              
	
                Section
      7.15

              	
                Location
      of Business and Offices

              	
                41

              
	
                Section
      7.16

              	
                Properties;
      Titles, Etc.

              	
                41

              
	
                Section
      7.17

              	
                Maintenance
      of Properties

              	
                42

              
	
                Section
      7.18

              	
                Gas
      Imbalances, Prepayments

              	
                42

              
	
                Section
      7.19

              	
                Marketing
      of Production

              	
                43

              
	
                Section
      7.20

              	
                Swap
      Agreements

              	
                43

              
	
                Section
      7.21

              	
                Use
      of Loans

              	
                43

              
	
                Section
      7.22

              	
                Solvency

              	
                43

              
	
                Section
      7.23

              	
                Casualty
      Events

              	
                43

              
	
                Section
      7.24

              	
                Material
      Agreements

              	
                44

              
	
                Section
      7.25

              	
                No
      Brokers

              	
                44

              
	
                Section
      7.26

              	
                Reliance

              	
                44

              
	
                Section
      7.27

              	
                Payments
      by Purchasers of Production

              	
                44

              
	
                Section
      7.28

              	
                Existing
      Accounts Payable

              	
                45

              
	
                Section
      7.29

              	
                Development
      Plan.

              	
                45

              
	 
      	 
      	 
      
	
                ARTICLE
      VIII

              
	
                AFFIRMATIVE
      COVENANTS

              
	 
      	 
      	 
      
	
                Section
      8.01

              	
                Financial
      Statements; Ratings Change; Other Information

              	
                45

              
	
                Section
      8.02

              	
                Notices
      of Material Events

              	
                48

              
	
                Section
      8.03

              	
                Existence;
      Conduct of Business

              	
                48

              
	
                Section
      8.04

              	
                Payment
      of Obligations

              	
                48

              
	
                Section
      8.05

              	
                Operation
      and Maintenance of Properties

              	
                49

              
	
                Section
      8.06

              	
                Insurance

              	
                49

              
	
                Section
      8.07

              	
                Books
      and Records; Inspection Rights

              	
                50

              
	
                Section
      8.08

              	
                Compliance
      with Laws

              	
                50

              
	
                Section
      8.09

              	
                Environmental
      Matters.

              	
                50

              
	
                Section
      8.10

              	
                Further
      Assurances.

              	
                51

              

      

      

      

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      

      
        	
                Section
      8.11

              	
                Reserve
      Reports.

              	
                51

              
	
                Section
      8.12

              	
                Title
      Information.

              	
                52

              
	
                Section
      8.13

              	
                Additional
      Collateral; Additional Guarantors.

              	
                53

              
	
                Section
      8.14

              	
                ERISA
      Compliance

              	
                54

              
	
                Section
      8.15

              	
                Swap
      Agreements

              	
                54

              
	
                Section
      8.16

              	
                Marketing
      Activities

              	
                55

              
	
                Section
      8.17

              	
                Modifications
      to Development Plan

              	
                55

              
	
                Section
      8.18

              	
                Operating
      Account, Deposit Accounts and Securities Accounts.

              	
                55

              
	
                Section
      8.19

              	
                Performance
      of Obligations under Loan Documents

              	
                56

              
	 
      	 
      	 
      
	
                ARTICLE
      IX

              
	
                NEGATIVE
      COVENANTS

              
	 
      	 
      	 
      
	
                Section
      9.01

              	
                Financial
      Covenants.

              	
                56

              
	
                Section
      9.02

              	
                Debt

              	
                56

              
	
                Section
      9.03

              	
                Liens

              	
                57

              
	
                Section
      9.04

              	
                Dividends,
      Distributions and Redemptions

              	
                58

              
	
                Section
      9.05

              	
                Investments,
      Loans and Advances

              	
                58

              
	
                Section
      9.06

              	
                Nature
      of Business

              	
                59

              
	
                Section
      9.07

              	
                Limitation
      on Leases

              	
                59

              
	
                Section
      9.08

              	
                Proceeds
      of Notes

              	
                60

              
	
                Section
      9.09

              	
                ERISA
      Compliance

              	
                60

              
	
                Section
      9.10

              	
                Sale
      or Discount of Receivables

              	
                60

              
	
                Section
      9.11

              	
                Mergers,
      Etc

              	
                60

              
	
                Section
      9.12

              	
                Sale
      of Properties

              	
                61

              
	
                Section
      9.13

              	
                Environmental
      Matters

              	
                61

              
	
                Section
      9.14

              	
                Transactions
      with Affiliates

              	
                62

              
	
                Section
      9.15

              	
                Subsidiaries

              	
                62

              
	
                Section
      9.16

              	
                Negative
      Pledge Agreements; Dividend Restrictions

              	
                62

              
	
                Section
      9.17

              	
                Gas
      Imbalances, Take-or-Pay or Other Prepayments

              	
                62

              
	
                Section
      9.18

              	
                Swap
      Agreements

              	
                62

              
	
                Section
      9.19

              	
                Development
      Plan

              	
                63

              
	 
      	 
      	 
      
	
                ARTICLE
      X

              
	
                EVENTS
      OF DEFAULT; REMEDIES

              
	 
      	 
      	 
      
	
                Section
      10.01

              	
                Events
      of Default

              	
                63

              
	
                Section
      10.02

              	
                Remedies.

              	
                65

              
	 
      	 
      	 
      
	
                ARTICLE
      XI

              
	
                THE
      ADMINISTRATIVE AGENT

              
	 
      	 
      	 
      
	
                Section
      11.01

              	
                Appointment;
      Powers

              	
                66

              
	
                Section
      11.02

              	
                Duties
      and Obligations of Administrative Agent

              	
                66

              
	
                Section
      11.03

              	
                Action
      by Administrative Agent

              	
                67

              
	
                Section
      11.04

              	
                Reliance
      by Administrative Agent

              	
                68

              
	
                Section
      11.05

              	
                Subagents

              	
                68

              
	
                Section
      11.06

              	
                Resignation
      or Removal of Administrative Agent

              	
                68

              
	
                Section
      11.07

              	
                Administrative
      Agent as Lender

              	
                69

              
	
                Section
      11.08

              	
                No
      Reliance.

              	
                69

              

      

      

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      

      
        	
                Section
      11.09

              	
                Administrative
      Agent May File Proofs of Claim

              	
                70

              
	
                Section
      11.10

              	
                Authority
      of Administrative Agent to Release Collateral and Liens

              	
                70

              
	
                Section
      11.11

              	
                The
      Arranger

              	
                70

              
	 
      	 
      	 
      
	
                ARTICLE
      XII

              
	
                MISCELLANEOUS

              
	 
      	 
      	 
      
	
                Section
      12.01

              	
                Notices.

              	
                71

              
	
                Section
      12.02

              	
                Waivers;
      Amendments.

              	
                71

              
	
                Section
      12.03

              	
                Expenses,
      Indemnity; Damage Waiver.

              	
                72

              
	
                Section
      12.04

              	
                Successors
      and Assigns.

              	
                75

              
	
                Section
      12.05

              	
                Survival;
      Revival; Reinstatement.

              	
                77

              
	
                Section
      12.06

              	
                Counterparts;
      Integration; Effectiveness.

              	
                78

              
	
                Section
      12.07

              	
                Severability

              	
                78

              
	
                Section
      12.08

              	
                Right
      of Setoff

              	
                78

              
	
                Section
      12.09

              	
                GOVERNING
      LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

              	
                79

              
	
                Section
      12.10

              	
                Headings

              	
                80

              
	
                Section
      12.11

              	
                Confidentiality

              	
                80

              
	
                Section
      12.12

              	
                Interest
      Rate Limitation

              	
                81

              
	
                Section
      12.13

              	
                EXCULPATION
      PROVISIONS

              	
                82

              
	
                Section
      12.14

              	
                No
      Third Party Beneficiaries

              	
                82

              
	
                Section
      12.15

              	
                USA
      Patriot Act Notice

              	
                82

              

      

      

    

    

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

     

    
      

       

      ANNEXES,
EXHIBITS AND SCHEDULES

       

       

      

       

      
        	
                Annex
      I

              	
                Commitments

              
	 
      	 
      
	
                Exhibit
      A

              	
                Form
      of Note

              
	
                Exhibit
      B

              	
                Form
      of Loan Notice

              
	
                Exhibit
      C

              	
                Form
      of Interest Election Request

              
	
                Exhibit
      D

              	
                Form
      of Compliance Certificate

              
	
                Exhibit
      E

              	
                Development
      Plan

              
	
                Exhibit
      F

              	
                Security
      Instruments

              
	
                Exhibit
      G

              	
                Form
      of Assignment and Assumption

              
	 
      	 
      
	 
      	 
      
	
                Schedule
      7.05

              	
                Litigation

              
	
                Schedule
      7.14

              	
                Subsidiaries
      and Partnerships

              
	
                Schedule
      7.18

              	
                Gas
      Imbalances

              
	
                Schedule
      7.19

              	
                Marketing
      Contracts

              
	
                Schedule
      7.20

              	
                Swap
      Agreements

              
	
                Schedule
      7.24

              	
                Material
      Agreements

              
	
                Schedule
      7.28

              	
                Existing
      Accounts Payable

              
	
                Schedule
      8.13

              	
                Additional
      Oil & Gas Properties

              
	
                Schedule
      9.12

              	
                Oil
      & Gas Properties subject to the Assignment of Overriding Royalty
      Interest

              

      

      

    

     

     

    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

    

    
 

    THIS SECOND LIEN TERM LOAN
AGREEMENT dated as of September 9, 2008,
is among Petro Resources Corporation, a corporation duly formed and existing
under the laws of the State of Delaware (the
“Borrower”);
each of the Lenders from time to time party hereto and CIT Capital USA
Inc. (in its
individual capacity, “CIT”),
as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative
Agent”).

     

    R E C I T A L
S

     

    A.           The
Borrower has requested that the Lenders provide certain second lien loans to the
Borrower.

     

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

     

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

     

    ARTICLE
I

    Definitions
and Accounting Matters

     

    

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

     

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

     

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

     

    “Adjusted LIBO Rate”
means, with respect to any Eurodollar Borrowing for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%)
equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the
Statutory Reserve Rate.

     

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

     

    “Aggregate
Commitments” means the Commitments of all the Lenders in the aggregate
amount of $15,000,000.

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    “Applicable Margin”
means, on any day, (a) with respect to any Eurodollar Loan, a rate per annum
equal to 7.50% and (b) with respect to any ABR Loan, a rate per annum equal to
6.50%.

     

    “Applicable
Percentage” means, with respect to any Lender, on or prior to the
Effective Date, the percentage of the Aggregate Commitments represented by such
Lender’s Commitment as such percentage is set forth on Annex I.

     

    “Approved
Counterparty” means (a) any “Lender” as such term is defined under the
Senior Revolving Credit Agreement or any Affiliate of any such “Lender” at such
time the Swap Agreements were entered into; (b) any other Person whose long term
senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their
equivalent) or higher or (c) with regard to Swap Agreements in respect of
commodities, and subject to the conditions set forth therein, any other Person
listed on Schedule 1.02 of the Senior Revolving Credit Agreement as of the
Effective Date or approved by the Lenders in writing hereafter, provided that,
with respect to (b) and (c) above, such Person shall have executed an
intercreditor agreement in form and substance reasonably acceptable to the
Administrative Agent.

     

    “Approved Fund” means
(i) any Person (other than a natural person) engaged in making, purchasing,
holding, or investing in commercial loans and similar extensions of credit and
that is advised, administered, or managed by a Lender, an Affiliate of a Lender
(or an entity or an Affiliate of an entity that administers, advises or manages
a Lender); (ii) with respect to any Lender that is an investment fund, any other
investment fund that invests in loans and that is advised, administered or
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor; and (iii) any third party which provides “warehouse
financing” to a Person described in the preceding clause (i) or (ii) (and any
Person described in said clause (i) or (ii) shall also be deemed an Approved
Fund with respect to such third party providing such warehouse
financing).

     

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

     

    “Arranger” means CIT Capital Securities
LLC, in its capacities as the sole lead arranger and sole bookrunner
hereunder.

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

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

     

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

     

    “Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks in
New York City or Houston, Texas are authorized or required by law to remain
closed; and if such day relates to a Borrowing or continuation of, a payment or
prepayment of principal of or interest on, or a conversion of or into, or the
Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect
to any such Borrowing or continuation, payment, prepayment, conversion or
Interest Period, any day which is also a day on which banks are open for
dealings in dollar deposits in the London interbank market.

     

    “Capital Expenditures”
means, in respect of any Person, for any period, the aggregate (determined
without duplication) of all exploration and development expenditures and costs
that should be capitalized in accordance with GAAP and any other expenditures
that are capitalized on the balance sheet of such Person in accordance with
GAAP.

     

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

     

    “Cash Receipts” means
all cash or cash equivalents received by or on behalf of the Borrower and its
Subsidiaries with respect to the following: (a) sales from the Oil and Gas
Properties (including any other working interest owner receipts received by
Borrower or its Affiliates as operator of Oil and Gas Properties), (b) cash
representing operating revenue earned or to be earned by the Borrower and its
Subsidiaries, (c) any insurance proceeds received by the Borrower or its
Subsidiaries, (d) any net proceeds from Swap Agreements and (e) any other cash
or cash equivalents received by the Borrower or its Subsidiaries from whatever
source; provided that
advances under the Loans, and any capital contributions or transfers made to the
Borrower by any of its members, or by the Borrower to any of its Subsidiaries,
shall not constitute “Cash Receipts”.

     

     “Casualty Event” means
any loss, casualty or other insured damage to, or any nationalization, taking
under power of eminent domain or by condemnation or similar proceeding of, any
Property of the Borrower or any of its Subsidiaries, in each case having a fair
market of value to such Property in excess of $250,000.

     

    “Change in Control”
means the occurrence of the following events (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group of
Equity Interests representing more than 30% of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Interests of the Borrower, (b) occupation of a majority of the seats (other than
vacant seats) on the board of directors of the Borrower by Persons who were
neither (i) nominated by the board of directors of the Borrower nor (ii)
appointed by directors so nominated, (c) the management of the Borrower is, in
the reasonable opinion of the Lenders, substantially diminished as a result of
the departure of Donald L. Kirkendall or Wayne P. Hall, (d) Eagle Operating Inc.
is no longer the operator of the Oil and Gas Properties located in the Williston
Basin in North Dakota or (e) Approach Resources Inc. is no longer the operator
of the Oil and Gas Properties located in West Texas.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

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

     

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

     

    “Collateral” means any
and all (a) Oil and Gas Properties of the Borrower and its Subsidiaries of
whatsoever kind or description (whether now owned or hereafter acquired), (b) of
the issued and outstanding Equity Interests of all existing or future acquired
or created Subsidiaries of the Borrower and (c) other Properties of whatsoever
kind or description, in each case, in which an interest is granted or pledged
under a Security Instrument.

     

    “Commitment” means,
with respect to each Lender, the obligation of such Lender to make its Loan to
the Borrower pursuant to Section 2.01 on the Effective Date in an aggregate
principal amount not to exceed the amount set forth opposite such Lender’s name
on Annex I under the caption “Commitment”.

     

    “Consolidated Net
Income” means with respect to the Borrower and the Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the
Borrower and the Consolidated Subsidiaries after allowances for taxes for such
period determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded from such net income (to the extent otherwise included
therein) the following: (a) the net income of any Person in which the Borrower
or any Consolidated Subsidiary has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
the Borrower and its Consolidated Subsidiaries in accordance with GAAP), except
to the extent of the amount of dividends or distributions actually paid in cash
during such period by such other Person to the Borrower or to a Consolidated
Subsidiary, as the case may be; (b) the net income (but not loss) during such
period of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) the net income
(or loss) of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (d) any extraordinary gains or
losses during such period; (e) non-cash gains, losses or adjustments under FASB
Statement Nos. 133 or 143; and (f) any gains or losses attributable to writeups
or writedowns of assets, including ceiling test writedowns and writedowns under
FASB Statements Nos. 19, 142 and 144; and provided further that
if the Borrower or any Consolidated Subsidiary shall acquire or dispose of any
Property during such period, then Consolidated Net Income shall be calculated
after giving pro forma
effect to such acquisition or disposition, as if such acquisition or disposition
had occurred on the first day of such period.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

    “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  For the purposes
of this definition, and without limiting the generality of the foregoing, any
Person that owns directly or indirectly 10% or more of the Equity Interests
having ordinary voting power for the election of the directors or other
governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person.  “Controlling” and
“Controlled”
have meanings correlative thereto.

     

    “Debt” means, for any
Person, without duplication and on a consolidated basis, the sum of the
following (without duplication): (a) all obligations of such Person for borrowed
money or evidenced by bonds, bankers’ acceptances, debentures, notes or other
similar instruments; (b) all obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, surety or other bonds and similar
instruments; (c) all accounts payable and all accrued expenses, liabilities or
other obligations of such Person to pay the deferred purchase price of Property
or services incurred in the ordinary course of business, in each case which are
greater than ninety (90) days past the date of invoice or delinquent; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person, to the extent of the
value of such Property; (g) all Debt (as defined in the other clauses of this
definition) of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the Debt (howsoever such assurance
shall be made) to the extent of the lesser of the amount of such Debt and the
maximum stated amount of such guarantee or assurance against loss; (h) all
obligations or undertakings of such Person to maintain or cause to be maintained
the financial position or covenants of others or to purchase the Debt or
Property of others; (i) obligations to deliver commodities, goods or
services, including, without limitation, Hydrocarbons, in consideration of one
or more advance payments, other than gas balancing arrangements in the ordinary
course of business; (j) obligations to pay for goods or services whether or not
such goods or services are not actually received or utilized by such Person; (k)
any Debt of a partnership for which such Person is liable either by agreement,
by operation of law or by a Governmental Requirement but only to the extent of
such liability; (l) Disqualified Capital Stock of such Person; and (m) the
undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received
payment.  The Debt of any Person shall include all obligations of such
Person of the character described above to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
not included as a liability of such Person under
GAAP.  Notwithstanding anything herein to the contrary, Debt shall not
include obligations of any Person under, or in respect of, any Swap
Agreements.  For the avoidance of doubt, any amount owing in respect
of the Eagle PSA shall not be considered Debt.

     

     

    
      
        
        

      

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

     

    “Development Plan”
shall mean the Borrower’s Plan of Development for the Oil and Gas Properties and
the related Hydrocarbon Interests as of the Effective Date attached hereto as
Exhibit E, as
approved by Administrative Agent and as updated pursuant to Section 8.01(k)(iii)
and from time to time pursuant to Section 9.19.

     

    “Disqualified Capital
Stock” means any Equity Interest that, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable) or
upon the happening of any event, matures or is mandatorily redeemable for any
consideration other than other Equity Interests (which would not constitute
Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise,
or is convertible or exchangeable for Debt or redeemable for any consideration
other than other Equity Interests (which would not constitute Disqualified
Capital Stock) at the option of the holder thereof, in whole or in part, on or
prior to the date that is one year after Termination Date.

     

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

     

    “Eagle PSA” means that
certain Purchase and Sale Agreement, dated as of December 11, 2006, by and
between Eagle Operating Inc. and the Borrower.

     

    “EBITDAX” means, for
any period, the sum of Consolidated Net Income for such period plus the
following expenses or charges to the extent deducted from Consolidated Net
Income in such period: interest, income taxes, depreciation, depletion,
amortization, exploration expenses and other similar noncash charges (including,
without limitation, accretion related to non-cash stock based compensation),
minus all noncash income added to Consolidated Net Income; provided that EBITDAX
for the fiscal quarters ending December 31, 2008, March 31, 2009 and June 30,
2009 shall be calculated as follows:

     

    (a)           for
the fiscal quarter ending December 31, 2008, EBITDAX shall be EBITDAX for such
quarter multiplied by four;

     

    (b)           for
the fiscal quarter ending March 31, 2009, EBITDAX shall be EBITDAX for the
six-month period ending on such date multiplied by two.

     

    (c)           for
the fiscal quarter ending June 30, 2009, EBITDAX shall be EBITDAX for the
nine-month period ending on such date multiplied by four/thirds.

     

    Thereafter,
EBITDAX shall be calculated using EBITDAX for the period of four fiscal quarters
ending on the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available.

     

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

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Environmental Laws”
means any and all Governmental Requirements pertaining in any way to health,
safety, the environment, the preservation or reclamation of natural resources,
or the management, Release or threatened Release of any Hazardous Materials, in
effect in any and all jurisdictions in which the Borrower or any Subsidiary is
conducting, or at any time has conducted, business, or where any Property of the
Borrower or any Subsidiary is located, including without limitation, the Oil
Pollution Act of 1990 (“OPA”), as amended,
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 (“CERCLA”), as amended,
the Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 (“RCRA”),
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Law, as amended, and
other environmental conservation or protection Governmental Requirements. The
term “oil” shall have the meaning specified in OPA, the terms “hazardous substance”
and “release”
(or “threatened
release”) have the meanings specified in CERCLA, the terms “solid waste” and
“disposal” (or
“disposed”)
have the meanings specified in RCRA and the term “oil and gas waste”
shall have the meaning specified in Section 91.1011 of the Texas Natural
Resources Code (“Section 91.1011”);
provided,
however, that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (b)
to the extent the laws of the state or other jurisdiction in which any Property
of the Borrower or any Subsidiary is located establish a meaning for “oil,” “hazardous substance,”
“release,”
“solid waste,”
“disposal” or
“oil and gas
waste” which is broader than that specified in either OPA, CERCLA, RCRA
or Section 91.1011, such broader meaning shall apply.

     

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

     

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

     

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

     

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

     

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

     

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

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Excepted Liens”
means:  (a) Liens for Taxes, assessments or other governmental charges
or levies which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, 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 each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and which in the aggregate do not materially impair the
use of such Property for the purposes of which such Property is held by the
Borrower or any Subsidiary or materially impair the value of such Property
subject thereto; (g) Liens on cash or securities pledged to secure performance
of tenders, surety and appeal bonds, government contracts, performance and
return of money bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature incurred in the
ordinary course of business and (h) judgment and attachment Liens not giving
rise to an Event of Default, provided that any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceeding may be
initiated shall not have expired and no action to enforce such Lien has been
commenced; provided, further that Liens described in clauses (a) through (e)
shall remain “Excepted Liens” only for so long as no action to enforce such Lien
has been commenced and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted
Liens.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

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

     

    “Existing Credit
Agreement” means that certain Credit Agreement, dated as of February
16, 2007, among PRC Williston LLC, D.B. Zwirn Special Opportunities Fund, L.P.,
and the lenders party thereto.

     

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

     

    “Fee Letter” means
that certain Fee letter dated as of September 9, 2008, by and between the
Borrower and the Administrative Agent.

     

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

     

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

     

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

     

    
      
        
        

      

      
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    “Foreign Subsidiary”
means any Subsidiary that is not organized under the laws of the United States
of America or any state thereof or the District of Columbia.

     

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

     

    “General and Administrative
Costs” means reasonable, normal and customary expenses and costs paid or
payable that are classified as general and administrative costs, including
salaries and all other compensation to the management of the Borrower,
consulting fees, salary, rent, supplies, travel and entertainment, insurance,
accounting, legal, engineering and broker related fees, required to manage the
affairs of the Borrower.

     

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

     

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

     

    “Guarantors” means PRC
Williston LLC and each other Subsidiary of the Borrower that guarantees the
Indebtedness pursuant to Section 8.13(c).

    

    “Guaranty Agreement”
means that certain Second Lien Guaranty and Collateral Agreement executed by the
Borrower and the Guarantors in form and substance reasonably acceptable to the
Administrative Agent unconditionally guarantying on a joint and several basis,
payment of the Indebtedness, as the same may be amended, modified or
supplemented from time to time.

     

    “Hall Houston Minority
Investment” means the Borrower’s Equity Interest in Hall Houston
Exploration II L.P., a Delaware limited partnership.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    “Indebtedness” means
any and all amounts owing or to be owing by the Borrower, any Subsidiary or any
Guarantor (whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter
arising): (a) to the Administrative Agent or any Lender under any Loan Document
and (b) all renewals, extensions and/or rearrangements of any of the
above.

     

    “Indemnified Taxes”
means Taxes other than Excluded Taxes.

     

    “Initial Reserve
Report” means the reports prepared on behalf of the Borrower by Cawley,
Gillespie & Associates, Inc. and DeGolyer and MacNaughton dated as of July 17, 2008 and July 23,
2008, respectively, with respect to certain Oil and Gas Properties of the
Borrower and its Subsidiaries as of July 1,
2008.

    

    “Intercreditor
Agreement” means that certain Intercreditor Agreement by and among the
Borrower, the Administrative Agent and the administrative agent to the Senior
Revolving Credit Agreement, dated as of the date hereof, as the same may from
time to time be amended, modified, supplemented or restated in accordance with
the provisions thereof.

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

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

     

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

     

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

     

    “LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page
of such service, or any successor to or substitute for such service, providing
rate quotations comparable to those currently provided on such page of such
service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest
Period.  In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate at which dollar deposits of an amount
comparable to such Eurodollar Borrowing and for a maturity comparable to such
Interest Period are offered by the principal London office of a banking
institution selected by the Administrative Agent in immediately available funds
in the London interbank market at approximately 11:00 a.m., London time, two (2)
Business Days prior to the commencement of such Interest Period.

     

    
      
        
        

      

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

     

    “Loan Documents” means
this Agreement, the Notes, the Fee Letter, the Intercreditor Agreement and the
Security Instruments.

     

    “Loan Notice” means a
request by the Borrower for the Loans in accordance with Section
2.03.

     

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

     

    “Majority Lenders”
means, Lenders holding more than fifty percent (50%) of the aggregate amount of
the outstanding Loans at such time; provided, that if there are only two
Lenders, both Lenders shall be required to constitute the “Majority
Lenders”.

     

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

     

    “Material Agreements”
has the meaning assigned such term in Section 7.24.

     

    “Material
Indebtedness” means Debt (other than the Loans), or obligations in
respect of one or more Swap Agreements, of any one or more of the Borrower and
its Subsidiaries in an aggregate principal amount exceeding $500,000.  For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of the Borrower or any Subsidiary in respect of any Swap Agreement
at any time shall be the Swap Termination Value.

     

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

     

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

     

    “Multiemployer Plan”
means a Plan which is a multiemployer plan as defined in section 3(37) or 4001
(a)(3) of ERISA.

     

    
      
        
        

      

      
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    “Net Cash Proceeds”
means:

     

    (a)           with
respect to any disposition by the Borrower or any of its Subsidiaries, the
excess, if any, of (i) the sum of cash and cash equivalents received in
connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the sum of
(A) the principal amount of any Indebtedness that is secured by the applicable
asset and that is required to be repaid in connection with such transaction, (B)
the reasonable and customary out-of-pocket expenses incurred by the Borrower or
such Subsidiary in connection with such transaction and (C) income taxes
reasonably estimated to be actually payable within two years of the date of the
relevant transaction as a result of any gain recognized in connection therewith;
provided that, if the amount of any estimated taxes pursuant to subclause (C)
exceeds the amount of taxes actually required to be paid in cash in respect of
such disposition, the aggregate amount of such excess shall constitute Net Cash
Proceeds; and

     

    (b)           with
respect to a Casualty Event, the sum of the cash and cash equivalents received
in connection with such Casualty Event shall constitute Net Cash
Proceeds.

     

    “Net Debt” means, at
any date, all Debt of the Borrower and the Consolidated Subsidiaries on a
consolidated basis, excluding cash on the balance sheet of the Borrower and the
Consolidated Subsidiaries.

     

    “Nexen Contract”
means, collectively, those certain Crude Oil Purchase Contracts, dated as of
March 8, 2007, by and between PRC Williston, LLC and Nexen Marketing U.S.A. Inc.
bearing the Nexen Contract Numbers: P07030486L, P07030487L and
P07030488L.

     

    “Notes” means the
promissory notes of the Borrower described in Section 2.02(d) and being
substantially in the form of Exhibit A, together with all amendments,
modifications, replacements, extensions and rearrangements thereof.

     

    “Oil and Gas
Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and
Properties in any manner appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use
or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

     

     

    
      
        
        

      

      
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    “Operating Account”
means the deposit account #0750275588 maintained at the Borrower’s expense with
the Operating Account Bank.

    

    “Operating Account
Bank” means Whitney National Bank or such other financial institution
selected by the Borrower and notified to the Administrative Agent in
writing.

     

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

     

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

     

    “Participant” has the
meaning assigned such term in Section 12.04(c)(i).

     

    “Patriot Act” has the
meaning assigned such term in Section 12.15.

     

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

     

    “PetroBridge Participation
Agreement” means, collectively, that certain Participation Agreement,
dated as of February 16, 2007, by and between PRC Williston LLC and Drawbridge
Special Opportunities Fund LP, that certain Participation Agreement, dated as of
February 16, 2007, by and between PRC Williston LLC and D.B. Zwirn Special
Opportunities Fund, L.P. and that certain Letter Agreement, dated as of February
16, 2007, by and among PRC Williston LLC, Drawbridge Special Opportunities Fund
LP and D.B. Zwirn Special Opportunities Fund, L.P.

     

    “Plan” means any
employee pension benefit plan, as defined in section 3(2) of ERISA, which (a) is
currently or hereafter sponsored, maintained or contributed to by the Borrower,
a Subsidiary or an ERISA Affiliate or (b) was at any time during the six
calendar years preceding the date hereof, sponsored, maintained or contributed
to by the Borrower or a Subsidiary or an ERISA Affiliate.

     

     

    
      
        
        

      

      
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    “Post Default Rate”
shall mean, in respect of the principal of any Loan or any other amount payable
by the 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 the applicable interest rate plus two percent 2% per annum, but
in no event to exceed the Highest Lawful Rate.

     

    “Prime Rate” means the
rate of interest per annum publicly announced from time to time by JPMorgan
Chase Bank, N.A. as its prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective from and including the
date such change is publicly announced as being effective.  Such rate
is set by the JPMorgan Chase Bank, N.A. as a general reference rate of interest,
taking into account such factors as the JPMorgan Chase Bank, N.A. may deem
appropriate; it being understood that many of the JPMorgan Chase Bank, N.A.’s
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer and that
the JPMorgan Chase Bank, N.A. may make various commercial or other loans at
rates of interest having no relationship to such rate.

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Release” means any
depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding,
abandoning, emptying, discharging, migrating, injecting, escaping, leaching,
dumping, or disposing.

     

    “Remedial Work” has
the meaning assigned such term in Section 8.09(a).

     

    
      
        
        

      

      
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    “Required Lenders”
means, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of
the aggregate amount of the outstanding Loans at such time; provided, that if
there are only two Lenders, both Lenders shall be required to constitute the
“Required Lenders”.

     

    “Reserve Report” means
a report, in form and substance reasonably satisfactory to the Administrative
Agent, setting forth, as of each January 1st or July 1st (or such other date in
the event of a redetermination pursuant to Section 2.06) the proved oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and the
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and Capital Expenditures with respect
thereto as of such date, based upon the economic assumptions consistent with the
Administrative Agent’s lending requirements at the time.

     

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

     

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

     

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

     

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

     

    “Senior Indebtedness”
means the “Indebtedness” as defined in the Senior Revolving Credit
Agreement.

     

    “Senior Revolving Credit
Agreement” means that certain Loan Agreement dated of even date herewith
among the Borrower, CIT, as the administrative agent, and the other agents and
lenders from time to time party thereto, together with all other amendments,
modifications and supplements thereto permitted by the Intercreditor
Agreement.

     

    
      
        
        

      

      
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    “Senior Revolving Credit
Documents” means the Senior Revolving Credit Agreement, the Senior
Revolving Credit Notes and any “Loan Documents” (as defined therein), in each
case, together with all amendments, modifications and supplements
thereto.

     

    “Senior Revolving Credit
Notes” means the promissory notes from time to time issued pursuant to
the Senior Revolving Credit Agreement.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    “Termination Date”
means four years from the Effective Date.

     

    “Total Reserve Value”
means, with respect to any Proved Reserves expected to be produced from any Oil
and Gas Properties, the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to the Borrower’s and its Subsidiaries’
collective interests in such reserves during the remaining expected economic
lives of such reserves.  Each calculation of such expected future net
revenues shall be made in accordance with the then existing standards of the
Society of Petroleum Engineers, provided that in any event (a) appropriate
deductions shall be made for severance and ad valorem taxes, and for operating,
gathering, transportation and marketing costs required for the production and
sale of such reserves, (b) the pricing assumptions used in determining Total
Reserve Value for any particular reserves shall be based upon (i) annual
quotations on the New York Mercantile Exchange for Henry Hub (natural gas) or
Cushing, Oklahoma (oil) futures on the date of the relevant Reserve Report for
each calendar year to the extent such quotations are available for future
periods, provided that with respect to quotations for calendar years after the
fifth calendar year, the quotation for the fifth calendar year shall be applied,
(ii) with respect to future periods for which quotations are not available on
the New York Mercantile Exchange, constant pricing for such periods based on the
quotation for the last period for which a quotation is available on the New York
Mercantile Exchange for Henry Hub (natural gas) or Cushing, Oklahoma (oil), (c)
operating expenses shall be held constant, (d) future Capital Expenditures shall
be expressed in current year dollars (i.e., inflation shall not be assumed), and
(e) to the extent basis Swap Agreements are not in place, the cash-flows derived
from the pricing assumptions set forth in clause (b) above shall be further
adjusted to account for the historical basis differentials for each month during
the preceding 12-month period calculated by comparing realized crude oil and
natural gas prices to Cushing, Oklahoma and Henry Hub NYMEX prices for each
month during such period.

     

    “Touradji Preferred
Equity” means the shares of Series A Convertible Preferred Stock of the
Borrower issued or issuable in the aggregate to Touradji DeepRock Master Fund,
Ltd. and Touradji Global Resources Master Fund, Ltd. pursuant to that certain
Securities Purchase Agreement, dated as of April 2, 2007, by and among the
Borrower, Touradji DeepRock Master Fund, Ltd. and Touradji Global Resources
Master Fund, Ltd.

     

    
      
        
        

      

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

     

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

     

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

     

    Section
1.04 Terms Generally; Rules of
Construction.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word “will” shall be construed to
have the same meaning and effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth in the Loan Documents), (b)
any reference herein to any law shall be construed as referring to such law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement.  No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any Person solely because
such Person or its legal representative drafted such provision.

     

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

     

    
      
        
        

      

      
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    ARTICLE
II

    The
Credits

     

    Section
2.01 Term
Loans.  Subject to the terms and conditions set forth herein,
each Lender agrees to make a term Loan (its “Loan”) to the
Borrower in the amount of its Applicable Percentage of the amount requested by
the Borrower as provided in Section 2.03, not to exceed such Lender’s
Commitment.  The Borrower may not request additional Loans after, and
the Commitment of each Lender shall terminate on the Effective
Date.  The Loans are not revolving and any portion of the Loans that
is prepaid prior to the Termination Date may not be reborrowed
hereunder.

     

    Section
2.02 Loans and
Borrowings.

     

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

     

    (b) Types of
Loans.  Subject to Section 3.03, the Borrower may request a
Borrowing hereunder comprised entirely of ABR Loans or Eurodollar Loans, as the
Borrower may request in accordance herewith.  Each Lender at its
option may fund any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to fund such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.

     

    (c) Minimum
Amounts.  At the commencement of each Interest Period for any
Eurodollar Loan, such Loan shall be in an aggregate amount that is an integral
multiple of $500,000 and not
less than $500,000.  At
the time that each ABR Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $500,000 and not less
than $500,000.  Borrowings
of more than one Type may be outstanding at the same time, provided that there
shall not at any time be more than a total of one (1) Eurodollar
Borrowing outstanding.  Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Termination Date.

     

    
      
        
        

      

      
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    (d) Notes.  The
Loans made by each Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A, dated, in the case of (i) any
Lender party hereto as of the date of this Agreement, as of the date of this
Agreement or (ii) any Lender that becomes a party hereto pursuant to an
Assignment and Assumption, as of the effective date of the Assignment and
Assumption payable to the order of such Lender in a principal amount equal to
such Lender’s funded Loans as in effect on such date, and otherwise duly
completed.  The date, amount, Type, interest rate and, if applicable,
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Note, and, prior to any transfer, may be endorsed by such Lender on a
schedule attached to such Note or any continuation thereof or on any separate
record maintained by such Lender.  Failure to make any such notation
or to attach a schedule shall not affect any Lender’s or the Borrower’s rights
or obligations in respect of such Loans or affect the validity of such transfer
by any Lender of its Note.  

     

    Section
2.03 Requests for
Loans.  The Borrower shall request the Loans by notifying the
Administrative Agent by telephone (a) in the case of a Eurodollar Borrowing, not
later than 12:00 noon, New York City time, three Business Days before the
Effective Date or (b) in the case of an ABR Borrowing, not later than 12:00
noon, New York City time, one Business Day before the Effective
Date.  Each such telephonic Loan Notice shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Loan Notice in substantially the form of Exhibit B and signed by
the Borrower.  Each such telephonic and written Loan Notice shall
specify the following information in compliance with Section 2.02::

     

    (i) the
aggregate amount of the requested Loans;

     

    (ii) the date
of proposed funding, which shall be the Effective Date and which shall be a
Business Day;

     

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

     

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

     

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

     

    If no
election as to the Type of Borrowing is specified, then the requested Borrowing
shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.

     

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

     

    Section
2.04 Interest
Elections;
Conversions.

     

    (a) Conversion and
Continuance.  Each Borrowing initially shall be of the Type
specified in the applicable Loan Notice and, in the case of a Eurodollar
Borrowing, shall

     

    
      
        
        

      

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

     

    (b) Interest Election Requests;
Conversion Requests.  To make an election or conversion, as the
case maybe, pursuant to this Section 2.04, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Loan
Notice would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election.  Each such telephonic Interest Election Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in
substantially the form of Exhibit C and signed by the Borrower.

     

    (c) Information in Interest
Election Requests.  Each telephonic and written Interest
Election Request shall specify the following information in compliance with
Section 2.02:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    Section
2.05 Funding of Loans.

     

    (a) Funding by
Lenders.  Each Lender shall make its Loan on the Effective Date
by wire transfer of immediately available funds by 1:00 p.m., New York City
time, to the account of the Administrative Agent most recently designated by it
for such purpose by notice to the Lenders.  The Administrative Agent
will make such Loans available to the Borrower by promptly crediting the amounts
so received, in like funds, to an account designated by the Borrower in the
applicable Loan Notice.  Nothing herein shall be deemed to obligate
any Lender to obtain the funds for its Loan in any particular place or manner or
to constitute a representation by any Lender that it has obtained or will obtain
the funds for its Loan in any particular place or manner.

     

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

     

    Section
2.06 Total Reserve
Value.  The initial Total Reserve Value shall be $93,722,000
for Oil and Gas Properties located in the State of North Dakota and $36,710,000
for Oil and Gas Properties located in the State of Texas.  In
connection with each semi-annual redetermination, the Borrower shall deliver to
the Administrative Agent a certificate, in form reasonably satisfactory to the
Administrative Agent, no later than April 1st and October 1st of each year,
setting forth in sufficient detail the Borrower’s calculation of Total Reserve
Value as of the immediately preceding January 1st and July 1st, commencing April
1, 2009.  In addition, the Borrower may, by notifying the
Administrative Agent thereof, and the Administrative Agent may, at the direction
of the Required Lenders, by notifying the Borrower thereof, each elect to
require the Total Reserve Value to be determined one additional time on a
specified “as of” date between such regular determinations (which shall be the
first day of a calendar month following the date of such notice), in which event
the Borrower shall deliver to the Administrative Agent a certificate, in form
reasonably satisfactory to the Administrative Agent, no later than three months
after such specified date reflecting the Total Reserve Value as of such
specified date.  The Borrower shall calculate the Total Reserve Value
based upon the applicable definitions of this Agreement, and provide with each
such certificate the Reserve Report and other information used by the Borrower
in calculating the Total Reserve Value.  In addition to the foregoing,
the Total Reserve Value shall be subject to further adjustment from time to time
in accordance with Section 8.13 and Section 9.12.

     

    
      
        
        

      

      
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    Section
2.07 Termination.  The
Commitments shall terminate at 4:00 p.m. New York City time on the Effective
Date.

     

    Section
2.08 Intercreditor
Agreement.  Each Lender hereunder (a) acknowledges that it has
received a copy of the Intercreditor Agreement, (b) consents to the
subordination of Liens provided for in the Intercreditor Agreement, (c) agrees
that it will be bound by and will take no actions contrary to the provisions of
the Intercreditor Agreement and (d) authorizes and instructs the Administrative
Agent to enter into the Intercreditor Agreement as Second Lien Collateral Agent
(as defined therein) and on behalf of such Lender.  The foregoing
provisions are intended as an inducement to the lenders under the Senior
Revolving Credit Agreement to permit the incurrence of Indebtedness under this
Agreement and to extend credit to the Borrower and such lenders are intended
third party beneficiaries of such provisions.

     

    ARTICLE
III

    Payments
of Principal and Interest; Prepayments; Fees

     

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

     

    Section
3.02 Interest.

     

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

     

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

     

    (c) Post-Default
Rate.  Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing, or if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower or any Guarantor hereunder or
under any other Loan Document is not paid when due, whether at stated maturity,
upon acceleration or otherwise, then all Loans outstanding, in the case of an
Event of Default, and such overdue amount, in the case of a failure to pay
amounts when due, shall bear interest, after as well as before judgment, at the
Post Default Rate, but in no event to exceed the Highest Lawful
Rate.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    Section
3.04 Prepayments.

     

    (a) Optional
Prepayments.  Subject to any break funding costs payable
pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b),
the Borrower shall have the right, at any time and from time to time, to prepay
the Loans, in whole or in part, subject to the following:

     

    (i) if such
prepayment is made on a date on or prior to the first anniversary of the
Effective Date, with a premium equal to 2% of such amount prepaid;

     

    
      
        
        

      

      
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    (ii) if such
prepayment is made on a date after the first anniversary of the Effective Date,
but prior to and including the second anniversary of the Effective Date, with a
premium equal to 1% of such amount prepaid;

     

    (iii) if such
prepayment is made on a date after the second anniversary of the Effective Date,
without premium or penalty;

     

    (iv) provided
that, each prepayment is in an amount that is an integral multiple of $1,000,000
and not less than $1,000,000, or if such amount is less than $1,000,000, the
outstanding principal amount of the Loans.

     

    (b) Notice and Terms of
Prepayment.  The Borrower shall notify the Administrative Agent
by telephone (confirmed by telecopy) of any optional or mandatory prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, New York City time, one Business Day before the date of
prepayment.  Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Borrowing or portion
thereof to be prepaid.  Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders of
the contents thereof.  Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing.  Prepayments
shall be accompanied by accrued interest to the extent required by Section
3.02.

     

    (c) Mandatory
Prepayments.

     

    (i) The
Borrower shall prepay the Loans in amounts equal to, if required pursuant to
Section 9.12, 100% of the Net Cash Proceeds of any sale of any Oil and Gas
Property of the Borrower.  Such prepayment shall be made no later than
the next Business Day after the receipt of such proceeds.

     

    (ii) The
Borrower shall prepay the Loans in amounts equal to 100% of the Net Cash
Proceeds of any Casualty Event related to the Borrower or any of its
Subsidiaries.  Such prepayment shall be made no later than 20 Business
Days after the receipt of such proceeds; provided if any of the Net Cash
Proceeds of any Casualty Event will otherwise be reinvested (including without
limitation, acquiring Property, plant and equipment, or any business entity used
or useful in carrying on the business of the Borrower and its Subsidiaries and
having a fair market value at least equal to the fair market value of the
Properties sold, leased or otherwise disposed of, or to improve or replace any
existing Property of the Borrower and its subsidiaries, or for actual repair and
replacement following a Casualty Event) in assets used or useful in carrying on
the business of the Borrower and its Subsidiaries within 90 days after the
receipt thereof, then prepayment shall only be required to the extent any excess
Net Cash Proceeds remain after making such reinvestment during such 90-day
period.  If the Borrower plans such reinvestment with the Net Cash
Proceeds of any Casualty Event, then it shall deliver and certify such intention
in a certificate from a Responsible Officer of the Borrower to the
Administrative Agent no later than 20 Business Days after the receipt of such
Net Cash Proceeds under this Section 3.04(c)(ii).  Any of the Net Cash
Proceeds remaining after such 90-day period, the completion of such repair or
replacement or after the Borrower has discontinued its good faith pursuit of
such repairs or replacement will be promptly applied as a prepayment of the
Loan.

     

    
      
        
        

      

      
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    (iii) Notwithstanding
anything herein to the contrary and subject to the Intercreditor Agreement, if
the amount of any Net Cash Proceeds referred to in Section 3.04(c)(i) or Section
3.04(c)(ii) would otherwise be a required prepayment under the terms of the
Senior Revolving Credit Agreement, then prepayment shall only be required to the
extent any excess Net Cash Proceeds remain after making such
prepayment.

     

    Section
3.05 Administrative Agent
Fees.  The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent as outlined in the
Fee Letter.

     

    ARTICLE
IV

    Payments;
Pro Rata Treatment; Sharing of Set-offs

     

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

     

    (a) Payments by the
Borrower.  The Borrower shall make each payment required to be
made by it hereunder (whether of principal, interest, or fees, or of amounts
payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to
1:00 p.m., New York City time, on the date when due, in immediately available
funds, without defense, deduction, recoupment, set-off or
counterclaim.  Fees, once paid, shall be fully earned and shall not be
refundable under any circumstances.  Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, and except that
payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03
shall be made directly to the Persons entitled thereto.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in
dollars.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    Section
4.04 Disposition of
Proceeds.  The Security Instruments contain an assignment by
the Borrower and/or the Guarantors unto and in favor of the Administrative Agent
for the benefit of the Lenders of all of the Borrower’s or each Guarantor’s
interest in and to production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged Property.  The Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Subsidiaries.

     

    
      
        
        

      

      
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    ARTICLE
V

    Increased
Costs; Break Funding Payments; Taxes

     

    Section
5.01 Increased
Costs.

     

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

     

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

     

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

     

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

     

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

     

    (c) Certificates.  A
certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in Section 5.01(a) or (b) shall be delivered to the Borrower and shall be
conclusive absent manifest error.  The Borrower shall pay such Lender
the amount shown as due on any such certificate within 10 days after
receipt thereof.

     

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

     

    
      
        
        

      

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

     

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

     

    Section
5.03 Taxes.

     

    (a) Payments Free of
Taxes.  Any and all payments by or on account of any obligation
of the Borrower or any Guarantor under any Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower or any Guarantor shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent or the Lender, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

     

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

     

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

     

    
      
        
        

      

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

     

    (e) Foreign
Lenders.  Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

     

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

     

    ARTICLE
VI

    Conditions
Precedent

     

    Section
6.01 Effective
Date.  The obligations of each Lender to fund its Loan
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section
12.02):

     

    (a) The
Administrative Agent, the Arranger and the Lenders shall have received all
facility and agency fees, including those set forth in the Fee Letter, and all
other fees and amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder (including,
without limitation, the reasonable fees and expenses of Vinson & Elkins
L.L.P., counsel to the administrative agent under the Senior Revolving Credit
Agreement).

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    (g) The
Administrative Agent shall have received from each party thereto duly executed
counterparts (in such number as may be requested by the Administrative Agent) of
the Security Instruments, including the Guaranty Agreement and the other
Security Instruments described on Exhibit F, except for such documents to be
delivered after the Effective Date pursuant to Section 8.18.  In
connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall:

     

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

     

    (ii) be
reasonably satisfied that the administrative agent under the Senior Revolving
Credit Agreement has received certificates, together with undated, blank stock
powers for each such certificate, representing all of the issued and outstanding
Equity Interests of each of the Guarantors, which is directly owned by either
the Borrower or a Subsidiary and is holding such pursuant to the Intercreditor
Agreement as bailee for the Administrative Agent; and

     

    
      
        
        

      

      
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    (iii) be
reasonably satisfied that all Property constituting security for the Senior
Revolving Credit Agreement is subject to a first priority, perfected Lien
(subject to Liens created under the Senior Revolving Credit Agreement) in favor
of the Administrative Agent under the Security Instruments.

     

    (h) The
Administrative Agent shall have received an opinion of Bracewell & Giuliani
LLP, special counsel to the Borrower, in form and substance satisfactory to the
Administrative Agent.

     

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

     

    (j) The
Administrative Agent shall have received title information as the Administrative
Agent may reasonably require satisfactory to the Administrative Agent setting
forth the status of title to at least 80% of the Total Reserve Value of the Oil
and Gas Properties evaluated in the Initial Reserve Report.

     

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

     

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

     

    (m) The
Administrative Agent shall have received the financial statements referred to in
Section 7.04(a) and the Initial Reserve Report accompanied by a certificate
covering the matters described in Section 8.11(c).

     

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

     

    (o) The
Borrower and the Lenders shall have agreed upon the Development Plan, which
shall be reasonably satisfactory to the Lenders.

     

    (p) The
Administrative Agent shall be satisfied with the terms of the payoff letter from
D.B. Zwirn Special Opportunities Fund, L.P., evidencing payment in full of the
loans under the Existing Credit Agreement, and have received executed copies of
the same.

     

    (q) The
Administrative Agent shall have received evidence that the Borrower is using the
proceeds from the Loans to repay all Debt under the Existing Credit Agreement
and the Liens associated with such Debt, if any, are being released
contemporaneously with the funding under this Agreement.

     

    
      
        
        

      

      
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    (r) The
Administrative Agent shall be satisfied that there is no litigation seeking to
enjoin or prevent the financing contemplated hereby or by the Senior Revolving
Credit Agreement.

     

    (s) The
Senior Revolving Credit Documents and the Intercreditor Agreement shall have
been duly executed and delivered.

     

    (t) The
Administrative Agent shall be reasonably satisfied that there is unused
availability under the Senior Revolving Credit Agreement of at least $10,000,000
as of the Effective Date after giving effect to the loans made
thereunder.

     

    (u) The
Administrative Agent shall have received a duly executed account control
agreement between Operating Account Bank, Borrower and the Administrative Agent,
the terms and conditions for which shall be satisfactory to the Administrative
Agent.

     

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

     

    The
Administrative Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the
Lenders to fund its Loans hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to Section 12.02) at
or prior to 2:00 p.m., New York City time, on September 30, 2008
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

     

    Section
6.02 Additional
Conditions.  The obligation of each Lender to fund its Loan on
the Effective Date is subject to the satisfaction of the following
conditions:

     

    (a) At the
time of and immediately after giving effect to the funding of such Loans, no
Default shall have occurred and be continuing.

     

    (b) The
representations and warranties of the Borrower and the Guarantors set forth in
this Agreement and in the other Loan Documents shall be true and correct on and
as of the Effective Date, except to the extent any such representations and
warranties are expressly limited to an earlier date, in which case, on and as of
the Effective Date, such representations and warranties shall continue to be
true and correct as of such specified earlier date.

     

    (c) The
receipt by the Administrative Agent of a Loan Notice in accordance with Section
2.03.

     

    ARTICLE
VII

    Representations
and Warranties

     

    The
Borrower represents and warrants to the Lenders that:

     

    
      
        
        

      

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

     

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

     

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

     

    Section
7.04 Financial Condition; No
Material Adverse Change.

     

    (a) The
Borrower has heretofore furnished to the Lenders its audited or unaudited, as
applicable, consolidated balance sheet and statements of income, stockholders
equity and cash flows (i) as of and for the fiscal year ended December 31, 2007,
reported on by Malone & Bailey
PC, independent public accountants, and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended March 31, 2008, certified by a
Financial Officer.  Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the unaudited quarterly financial
statements.

     

    
      
        
        

      

      
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    (b) Since
December 31, 2007, (i) there has been no event, development or circumstance that
has had or could reasonably be expected to have a Material Adverse Effect and
(ii) the business of the Borrower and its Subsidiaries has been conducted only
in the ordinary course consistent with past business practices.

     

    (c) Except as
set forth in Schedule 7.04, neither the Borrower nor any Subsidiary has on the
date hereof any material Debt (including Disqualified Capital Stock) or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements.

     

    Section
7.05 Litigation.

     

    (a) Except as
set forth on Schedule 7.05, there are no actions, suits, investigations or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary (i) as to which there is a reasonable possibility
of an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve any Loan Document or the Transactions.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (f) neither
the Borrower nor any Subsidiary has received any written notice asserting an
alleged liability or obligation under any applicable Environmental Laws with
respect to the investigation, remediation, abatement, removal, or monitoring of
any Hazardous Materials at, under, or Released or threatened to be Released from
any real properties offsite the Borrower’s or any Subsidiary’s Properties and,
to the Borrower’s knowledge, there are no conditions or circumstances that could
reasonably be expected to result in the receipt of such written
notice.

     

    (g) there has
been no exposure of any Person or Property to any Hazardous Materials as a
result of or in connection with the operations and businesses of any of the
Borrower’s or the Subsidiaries’ Properties that could reasonably be expected to
form the basis for a claim for damages or compensation.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    (c) No
Default has occurred and is continuing.

     

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

     

    Section
7.09 Taxes.  Each
of the Borrower and its Subsidiaries has timely filed or caused to be filed all
Tax returns and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower or
such Subsidiary, as applicable, has set aside on its books adequate reserves in
accordance with GAAP or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.  The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of Taxes and other governmental charges are, in the reasonable
opinion of the Borrower, adequate.  No Tax Lien has been filed and, to
the knowledge of the Borrower, no claim is being asserted with respect to any
such Tax or other such governmental charge.

     

    Section
7.10 ERISA.

     

    (a) The
Borrower, the Subsidiaries 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, established and maintained in substantial compliance with its
terms, ERISA and, where applicable, the Code.

     

    (c) No act,
omission or transaction has occurred which could result in imposition on the
Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly)
of (i) either a civil penalty assessed pursuant to subsections (c), (i), (l) or
(m) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code or (ii) breach of fiduciary duty liability damages
under section 409 of ERISA.

     

    (d) Full
payment when due has been made of all amounts which the Borrower, the
Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or
applicable law to have paid as contributions to such Plan as of the date
hereof.

     

    (e) Neither
the Borrower, the Subsidiaries nor 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 the
Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any material liability.

     

    
      
        
        

      

      
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    (f) Neither
the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors, maintains or
contributes to, or has at any time in the six-year period preceding the date
hereof sponsored, maintained or contributed to, any employee pension benefit
plan, as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA,
section 302 of ERISA or section 412 of the Code.

     

    Section
7.11 Disclosure; No Material
Misstatements.  The Borrower has disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other restrictions to which it or any of its Subsidiaries is subject, and all
other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  None
of the other reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower or any Subsidiary to the
Administrative Agent or any Lender or any of their Affiliates in connection with
the negotiation of this Agreement or any other Loan Document or delivered
hereunder or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.  There is no fact peculiar to the
Borrower or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect or in the future is reasonably likely to have a Material Adverse
Effect and which has not been set forth in this Agreement or the Loan Documents
or the other documents, certificates and statements furnished to the
Administrative Agent or the Lenders by or on behalf of the Borrower or any
Subsidiary prior to, or on, the date hereof in connection with the transactions
contemplated hereby.  There are no statements or conclusions in any
Reserve Report which are based upon or include misleading information or fail to
take into account material information regarding the matters reported
therein.

     

    Section
7.12 Insurance.  The
Borrower has, and has caused all of its Subsidiaries to have, (a) all insurance
policies sufficient for the compliance by each of them with all material
Governmental Requirements and all material agreements and (b) insurance coverage
in at least amounts and against such risk (including, without limitation, public
liability) that are usually insured against by companies similarly situated and
engaged in the same or a similar business for the assets and operations of the
Borrower and its Subsidiaries.  The Administrative Agent and the
Lenders have been named as additional insureds in respect of such liability
insurance policies and the Administrative Agent has been named as loss payee
with respect to Property loss insurance.

     

    Section
7.13 Restriction on
Liens.  Neither the Borrower nor any of the Subsidiaries is a
party to any material agreement or arrangement (other than Capital Leases and
other agreements creating Liens permitted by Section 9.03(c) and (d), but then
only on the Property subject of such Capital Lease or agreement), or subject to
any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to the Administrative Agent and the Lenders
on or in respect of their Properties to secure the Indebtedness and the Loan
Documents.

     

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

     

    
      
        
        

      

      
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    Section
7.15 Location of Business and
Offices.  The Borrower’s jurisdiction of organization is Delaware; the name
of the Borrower as listed in the public records of its jurisdiction of
organization is Petro Resources
Corporation; and the organizational identification number of the Borrower
in its jurisdiction of organization is 2758331 (or, in each case,
as set forth in a notice delivered to the Administrative Agent pursuant to
Section
8.01(k) in
accordance with Section 12.01).  The
Borrower’s principal place of business and chief executive offices are located
at the address specified in Section 12.01 (or as set forth in a notice delivered
pursuant to Section 8.01(k) and Section 12.01(c)).  Each Subsidiary’s
jurisdiction of organization, name as listed in the public records of its
jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.15 (or as set forth
in a notice delivered pursuant to Section 8.01(k)).

     

    Section
7.16 Properties; Titles,
Etc.

     

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

     

    (b) All
material leases and agreements necessary for the conduct of the business of the
Borrower and 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 could reasonably be expected to have a
Material Adverse Effect.

     

    (c) The
rights and Properties presently owned, leased or licensed by the Borrower and
the Subsidiaries including, without limitation, all easements and rights of way,
include all rights and Properties necessary to permit the Borrower and the
Subsidiaries to conduct their business in all material respects in the same
manner as its business has been conducted prior to the date hereof.

     

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

     

    
      
        
        

      

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

     

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

     

    Section
7.18 Gas Imbalances,
Prepayments.  Except as set forth on Schedule 7.18 or on the
most recent certificate delivered pursuant to Section 8.11(c), on a net basis
there are no gas imbalances, take or pay or other prepayments which would
require the Borrower or any of its Subsidiaries to deliver Hydrocarbons produced
from the Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor exceeding two percent (2%) of the Borrower’s and
its Subsidiaries’ Proved Reserves of natural gas (on an mcf equivalent basis) in
the aggregate.

     

    
      
        
        

      

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

     

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

     

    Section
7.21 Use of
Loans.  The proceeds of the Loans shall be used to provide
working capital for exploration and production operations as set forth in the
Development Plan, to refinance Debt under the Existing Credit Agreement, and for
general corporate purposes, including, without limitation, to redeem the
Touradji Preferred Equity.  The Borrower and its Subsidiaries are not
engaged principally, or as one of its or their important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board).  No part of the proceeds of any Loan will be
used for any purpose which violates the provisions of Regulations T, U or X of
the Board.

     

    Section
7.22 Solvency.  After
giving effect to the transactions contemplated hereby, (a) the aggregate assets
(after giving effect to amounts that could reasonably be received by reason of
indemnity, offset, insurance or any similar arrangement), at a fair valuation,
of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate
Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt
becomes absolute and matures, (b) each of the Borrower and the Guarantors has
not incurred and does not intend to incur, and does not believe that it will
incur, Debt beyond its ability to pay such Debt (after taking into account the
timing and amounts of cash to be received by each of the Borrower and the
Guarantors and the amounts to be payable on or in respect of its liabilities,
and giving effect to amounts that could reasonably be received by reason of
indemnity, offset, insurance or any similar arrangement) as such Debt becomes
absolute and matures and (c) each of the Borrower and the Guarantors will not
have (and will have no reason to believe that it will have thereafter)
unreasonably small capital for the conduct of its business.

     

    Section
7.23 Casualty
Events.  Since December 31, 2007, neither the business nor any
Properties of the Borrower 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 domestic or foreign
Governmental Authority, riot, activities or armed forces or acts of God or of
any public enemy.

     

    
      
        
        

      

      
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    Section
7.24 Material
Agreements.  Set forth on Schedule 7.24 hereto is a complete
and correct list of all material agreements and other instruments currently
maintained by the Borrower setting forth each counterparty thereto (other than
the Loan Documents) relating to the purchase, transportation by pipeline, gas
processing, marketing, development, sale and supply of Hydrocarbons, farmout
arrangements, joint operating agreements, contract operating agreements or other
material contracts (excluding oil and gas leases of the Borrower) to which the
Borrower is a party on or after the Effective Date or by which its Properties is
bound on or after the Effective Date (collectively “Material Agreements”)
and copies of such documents have been provided to the Administrative
Agent.  All such agreements are in full force and effect and the
Borrower is not in default thereunder, nor is there any uncured default by any
Affiliate predecessor in interest to the Borrower or, to the Borrower’s
knowledge, by any predecessor in interest to the Borrower (other than an
Affiliate predecessor) or counterparty thereto, except, in each case, defaults
which could not reasonably be expected to cause a Material Adverse Effect, nor
has the Borrower altered any material item of such agreements since the
Effective Date without the prior written consent of the Lenders

     

    Section
7.25 No
Brokers.  No Person, other than Canaccord Adams Inc., is
entitled to any brokerage fee or finders fee or similar fee or commission in
connection with arranging the Loans contemplated by this Agreement.

     

    Section
7.26 Reliance.  In
connection with the negotiation of and the entering into this Agreement, the
Borrower acknowledges and represents that none of the Lenders, the
Administrative Agent, the Arranger, or any representative of any of the
foregoing is acting as a fiduciary or financial or investment advisor for it; it
is not relying upon any representations (whether written or oral) of such
Persons; it has consulted with its own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and it has made its own investment, hedging, and trading decisions
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent, the Arranger, or any representative of any of the
foregoing; it has not been given by any Lender, the Administrative Agent, the
Arranger, or any representative of any of the foregoing (directly or indirectly
through any other Person) any advice, counsel, assurance, guarantee, or
representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence, or benefit
(either legal, regulatory, tax, financial, accounting, or otherwise) of this
Agreement or the transactions contemplated hereby; and it is entering into this
Agreement and the other Loan Documents with a full understanding of all of the
risks hereof and thereof (economic and otherwise), and it is capable of assuming
and willing to assume (financially and otherwise) those risks.

     

    Section
7.27 Payments by Purchasers of
Production.  All proceeds from the sale of the Borrower’s
interests in Hydrocarbons from its Oil and Gas Properties are currently being
paid in full to the Borrower by the purchaser thereof on a timely basis and at
prices and terms comparable to market prices and terms generally available at
the time such prices and terms were negotiated for oil and gas production from
producing areas situated near such Oil and Gas Properties, and none of such
proceeds are currently being held in suspense by such purchaser or any other
Person.

     

    
      
        
        

      

      
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    Section
7.28 Existing Accounts
Payable.  Set forth on Schedule 7.28 hereto is a complete and
correct list of all existing accounts payable of the Borrower that are more than
90 days past due as of the Effective Date.

     

    Section
7.29 Development
Plan.

     

    (a) The
Administrative Agent has been provided with a true and correct copy of the
initial Development Plan, which is attached hereto as Exhibit
E.

     

    (b) The
Borrower has obtained all consents from Governmental Authorities necessary to
implement and complete in all material respects the Development Plan as in
effect on the Effective Date.

     

    (c) The
Development Plan covers all work reasonably necessary (i) to drill and complete
all wells scheduled to be drilled thereunder, (ii) to construct, install and
commence operations of the production facilities related thereto and (iii) to
complete and operate all injection wells as contemplated in connection
therewith.  The budget (including the budget for capital costs
described therein) for the Development Plan has been prepared by the Borrower in
good faith and represents the total costs and expenses anticipated by the
Borrower.  The development schedule in the Development Plan is
realistic and feasible.

     

    ARTICLE
VIII

    Affirmative
Covenants

     

    Until the
principal of and interest on each Loan and all fees payable hereunder and all
other amounts payable under the Loan Documents shall have been paid in full, the
Borrower covenants and agrees with the Lenders that:

     

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

     

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

     

    
      
        
        

      

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

     

    (c) Certificate of Financial
Officer -- Compliance.  Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of
a Financial Officer in substantially the form of Exhibit D hereto (i) certifying
as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 8.12(b) and Section 9.01, (iii) stating whether any
change in GAAP or in the application thereof has occurred since the date of the
audited financial statements referred to in Section 7.04 and, if any such change
has occurred, specifying the effect of such change on the financial statements
accompanying such certificate, and (iv) if, at any time, all the Consolidated
Subsidiaries of the Borrower are not Consolidated Subsidiaries, setting forth
consolidating spreadsheets that show all Consolidated Subsidiaries and the
eliminating entries, in such form as would be presentable to the auditors of the
Borrower.

     

    (d) Certificate of Financial
Officer – Swap Agreements.  Concurrently with any delivery of
financial statements under Section 8.01(a) and Section 8.01(b), a certificate of
a Financial Officer, in form and substance satisfactory to the Administrative
Agent, setting forth as of the last Business Day of such fiscal quarter or
fiscal year, a true and complete list of all Swap Agreements of the Borrower and
each Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market
value therefor, any new credit support agreements relating thereto not listed on
Schedule 7.20, any margin required or supplied under any credit support
document, and the counterparty to each such agreement.

     

    (e) Certificate of Insurer --
Insurance Coverage.  Upon change or renewal, a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.06, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

     

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

     

    
      
        
        

      

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

     

    (h) Lists of
Purchasers.  Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.11, a list of all
Persons purchasing Hydrocarbons from the Borrower or any
Subsidiary.

     

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

     

    (j) Notice of
Litigation/Casualty Events.  Prompt written notice, and in any
event within three Business Days, of the delivery of any demand letter, or the
filing of any lawsuit or arbitration proceeding or the occurrence of any
Casualty Event or the commencement of any action or proceeding that could
reasonably be expected to result in a demand notice, lawsuit, arbitration
proceeding or Casualty Event.

     

    (k) Information Regarding
Borrower and Guarantors.  Prompt written notice (and in any
event within fifteen (15) days prior thereto) of any change (i) in the
Borrower or any Guarantor’s corporate name or in any trade name used to identify
such Person in the conduct of its business or in the ownership of its
Properties, (ii) in the location of the Borrower or any Guarantor’s chief
executive office or principal place of business, (iii) in the Borrower or
any Guarantor’s identity or corporate structure or in the jurisdiction in which
such Person is incorporated or formed, (iv) in the Borrower or any Guarantor’s
jurisdiction of organization or such Person’s organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor’s federal taxpayer identification number.

     

    (l) Other
Reports.  The Borrower shall prepare and provide the Lenders
and Administrative Agent the following reports:

     

    (i) on a
monthly basis by the 30th of each
month after the end of each calendar month, a report setting forth, for the
immediately preceding calendar month, the volume of production and sales
attributable to production (and the prices at which such sales were made and the
revenues derived from such sales) for each such calendar month from the Oil and
Gas Properties described in the most recent Reserve Report, and setting forth
the related ad valorem, severance and production taxes and lease operating
expenses attributable thereto and incurred for each such calendar
month;

     

    (ii) on a
quarterly basis by the 30th of each
month after the end of each calendar quarter, an updated report setting forth
the Borrower’s forecasted Development Plan for the following twelve (12) month
period; and

     

    
      
        
        

      

      
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    (iii) such
other information as the Administrative Agent may reasonably
request.

     

    (m) Notices of Certain
Changes.  Promptly, but in any event within ten (10) Business
Days after the execution thereof, copies of any amendment, modification or
supplement to the Organizational Documents, any preferred stock designation or
any other organic document of the Borrower or any Subsidiary.

     

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

     

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

     

    (a) the
occurrence of any Default;

     

    (b) the
filing or commencement of, or the threat in writing of, any action, suit,
proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof not previously disclosed in writing to the Lenders or any material
adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    Section
8.05 Operation and Maintenance of
Properties.  The Borrower, at its own expense, will, and will
cause each Subsidiary to:

     

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

     

    (b) keep,
preserve and maintain all Property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and preserve,
maintain and keep in good repair, working order and efficiency (ordinary wear
and tear excepted) all of its material Oil and Gas Properties and other material
Properties, including, without limitation, all equipment, machinery and
facilities, except where the failure to do so could not be reasonably be
expected to have a Material Adverse Effect;

     

    (c) promptly
pay and discharge, or make reasonable and customary efforts to cause to be paid
and discharged, all delay rentals, royalties, expenses and indebtedness accruing
under the leases or other agreements affecting or pertaining to its Oil and Gas
Properties and will do all other things necessary to keep unimpaired their
rights with respect thereto and prevent any forfeiture thereof or default
thereunder, provided that, the Borrower and its Subsidiaries may pay any such
items into suspense if such action is taken in good faith in the ordinary course
of business;

     

    (d) promptly
perform or make reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each and all of
the assignments, deeds, leases, sub-leases, contracts and agreements affecting
its interests in its Oil and Gas Properties and other material Properties,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; and

     

    (e) to the
extent the Borrower is not the operator of any Property, the Borrower shall use
reasonable efforts to cause the operator to comply with this Section
8.05.

     

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

     

    
      
        
        

      

      
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    Section
8.07 Books and Records;
Inspection Rights.  The Borrower will, and will cause each
Subsidiary to, keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities.  The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, undertake
appraisals of such Properties and to discuss its affairs, finances and condition
with its officers and independent accountants, all at such reasonable times and
as often as reasonably requested.

     

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

     

    Section
8.09 Environmental
Matters.

     

    (a) The
Borrower shall at its sole expense: (i) comply, and shall cause its Properties
and operations and each Subsidiary and each Subsidiary’s Properties and
operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
Release or threaten to Release, and shall cause each Subsidiary not to Release
or threaten to Release, any Hazardous Material on, under, about or from any of
the Borrower’s or its Subsidiaries’ Properties or any other property offsite the
Property to the extent caused by the Borrower’s or any of its Subsidiaries’
operations except in compliance with applicable Environmental Laws, the Release
or threatened Release of which could reasonably be expected to have a Material
Adverse Effect; (iii) timely obtain or file, and shall cause each Subsidiary to
timely obtain or file, all Environmental Permits, if any, required under
applicable Environmental Laws to be obtained or filed in connection with the
operation or use of the Borrower’s or its Subsidiaries’ Properties, which
failure to obtain or file could reasonably be expected to have a Material
Adverse Effect; (iv) promptly commence and diligently prosecute to completion,
and shall cause each Subsidiary to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring, containment,
cleanup, removal, repair, restoration, remediation or other remedial obligations
(collectively, the “Remedial Work”) in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future Release or threatened Release of any Hazardous Material
on, under, about or from any of the Borrower’s or its Subsidiaries’ Properties,
which failure to commence and diligently prosecute to completion could
reasonably be expected to have a Material Adverse Effect; (v) conduct, and cause
its Subsidiaries to conduct, their respective operations and businesses in a
manner that will not expose any Property or Person to Hazardous Materials that
could reasonably be expected to form the basis for a claim for damages or
compensation; and (vi) establish and implement, and shall cause each
Subsidiary to establish and implement, such procedures as may be necessary to
continuously determine and assure that the Borrower’s and its Subsidiaries’
obligations under this Section 8.09(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.

     

    
      
        
        

      

      
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    (b) The
Borrower will promptly, but in no event later than five days of the occurrence
of a triggering event, notify the Administrative Agent and the Lenders in
writing of any threatened action, investigation or inquiry by any Governmental
Authority or any threatened demand or lawsuit by any Person against the Borrower
or its Subsidiaries or their Properties of which the Borrower has knowledge in
connection with any Environmental Laws if the Borrower could reasonably
anticipate that such action will result in liability (whether individually or in
the aggregate) in excess of $250,000, not fully covered by insurance, subject to
normal deductibles.

     

    Section
8.10 Further
Assurances.

     

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

     

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

     

    Section
8.11 Reserve
Reports.

     

    (a) On or
before April 1st and October 1st of each year, commencing April 1, 2009, the
Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report evaluating the Oil and Gas Properties of the Borrower and its
Subsidiaries as of the immediately preceding January 1st and July
1st.  The Reserve Report as of January 1 of each year shall be
prepared by one or more Approved Petroleum Engineers, and the July 1 Reserve
Report of each year shall be prepared by or under the supervision of the chief
reserve engineer of the 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 January 1 Reserve Report.  The
Administrative Agent shall provide the Borrower economic assumptions consistent
with its lending requirements 30 days prior to the date such Reserve Report is
due.

     

    
      
        
        

      

      
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    (b) In the
event any party elects a Total Reserve Value redetermination pursuant to Section
2.06, the Borrower shall (i) furnish to the Administrative Agent and the Lenders
a Reserve Report prepared by or under the supervision of the chief reserve
engineer of the 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 January 1 Reserve Report and (ii) provide such Reserve
Report with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than thirty (30) days following the receipt
of such request.

     

    (c) With the
delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct, provided, however, that the Borrower does not warrant to such
projections concerning volumes, production and cost estimates contained in each
Reserve Report by any Approved Petroleum Engineer that are necessarily based
upon such Approved Petroleum Engineer’s professional opinions, estimates and
projections, (ii) the Borrower or its Subsidiaries owns good and defensible
title to the Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section 9.03,
(iii) except as set forth on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments in excess of the volume
specified in Section 7.18 with respect to its Oil and Gas Properties evaluated
in such Reserve Report which would require the Borrower or any Subsidiary to
deliver Hydrocarbons either generally or produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor, (iv) none of their Oil and Gas Properties have been sold since the
date of the last Total Reserve Value determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the Administrative
Agent, (v) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the date hereof or the most recently
delivered Reserve Report which the Borrower could reasonably be expected to have
been obligated to list on Schedule 7.19 had such agreement been in effect on the
date hereof and (vi) attached thereto is a schedule of the Oil and Gas
Properties evaluated by such Reserve Report that are Mortgaged Properties and
demonstrating the percentage of the Total Reserve Value of the Oil and Gas
Properties that the value of such Mortgaged Properties represent in compliance
with Section 8.13(a).

     

    Section
8.12 Title
Information.

     

    (a) On or
before the delivery to the Administrative Agent and the Lenders of each Reserve
Report required by Section 8.11(a), the Borrower will deliver title information
in form and substance acceptable to the Administrative Agent covering enough of
the Oil and Gas Properties evaluated by such Reserve Report that were not
included in the immediately preceding Reserve Report, so that the Administrative
Agent shall have received together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 80% of
the Total Reserve Value of the Oil and Gas
Properties evaluated by such Reserve Report.

     

    
      
        
        

      

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

     

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

     

    Section
8.13 Additional Collateral;
Additional Guarantors.

     

    (a) Within
three (3) Business Days of the Effective Date, the Borrower shall deliver to the
Administrative Agent an opinion by its local counsel in the State of North
Dakota, in form and substance reasonably satisfactory to the Administrative
Agent.

     

    (b) In
connection with each redetermination of the Total Reserve Value, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.11(c)) to ascertain whether the Mortgaged Properties
represent at least 80% of the Total Reserve Value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the Mortgaged Properties do not
represent at least 80% of such Total Reserve Value, then the Borrower shall, and
shall cause its Subsidiaries to, grant, within thirty (30) days of delivery of
the certificate required under Section 8.11(c), to the Administrative Agent as
security for the Indebtedness a first-priority Lien interest (provided that (i)
Liens under the Senior Revolving Credit Documents, (ii) Excepted Liens of the
type described in clauses (a) to (d) and (f) of the definition thereof may
exist, but subject to the provisos at the end of such definition and (iii) Liens
permitted by Section 9.03 may exist) on additional Oil and Gas Properties not
already subject to a Lien of the Security Instruments such that after giving
effect thereto, the Mortgaged Properties will represent at least 80% of such
Total Reserve Value.  All such Liens will be created and perfected by
and in accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes.  

     

    
      
        
        

      

      
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    (c) In the
event that the Borrower forms or acquires any Subsidiary, the Borrower shall
promptly cause such Subsidiary to guarantee the Indebtedness pursuant to the
Guaranty Agreement.  In connection with any such guaranty, the
Borrower shall, or shall cause such Subsidiary to, (i) execute and deliver a
supplement to the Guaranty Agreement executed by such Subsidiary, (ii) pledge
all of the Equity Interests of such new Subsidiary (including, without
limitation, delivery of original stock certificates evidencing the Equity
Interests of such Subsidiary, together with an appropriate undated stock powers
for each certificate duly executed in blank by the registered owner thereof) and
(iii) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative
Agent.

     

    (d) The
Borrower agrees that it will not, and will not permit any Subsidiary to, grant a
Lien on any Property to secure the Senior Revolving Notes without first (i)
giving ten (10) days’ prior written notice to the Administrative Agent thereof
and (ii) granting to the Administrative Agent to secure the Indebtedness a
first-priority, perfected Lien (subject only to a Lien under the Senior
Revolving Credit Documents) on this same Property pursuant to Security
Instruments in form and substance satisfactory to the Administrative
Agent.  In connection therewith, the Borrower shall, or shall cause
its Subsidiaries to, execute and deliver such other additional closing
documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.

     

    Section
8.14 ERISA
Compliance.  The Borrower will promptly furnish and will cause
the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor or the Internal Revenue Service, copies of each annual
and other report with respect to each Plan or any trust created thereunder, and
(ii) immediately upon becoming aware of the occurrence of any “prohibited
transaction,” as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by the President or the principal Financial Officer, the
Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service or the Department of Labor
with respect thereto.

     

    Section
8.15 Swap
Agreements.  The Borrower shall from time to time enter into
Swap Agreements in respect of commodities so that the notional volumes of all
Swap Agreements, in the aggregate, are more than 50% of the reasonably
anticipated projected production from the Borrower’s Proved Developed Producing
Reserves for each month until December 31, 2012.  Notwithstanding
anything to the contrary in this Agreement, the Borrower shall not assign,
terminate or unwind any Swap Agreement entered into on or before the Effective
Date.

     

    
      
        
        

      

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

     

    Section
8.17 Modifications to Development
Plan.  Promptly following any modification of the Development
Plan which is permitted by the terms of Section 9.19, the Borrower shall provide
the Administrative Agent a true and correct copy of such
modification.

     

    Section
8.18 Operating
Account,
Deposit Accounts and Securities Accounts.

     

    (a) The
Borrower agrees to deliver, and cause its Subsidiaries to deliver, within 60
days of the Effective Date, duly executed account control agreements, in form
and substance satisfactory to the Administrative Agent, from the Operating
Account Bank holding the Operating Account and each institution holding any
other deposit accounts or securities accounts of the Borrower or its
Subsidiaries, including without limitation, the accounts listed on
Schedule 8 of the Guaranty Agreement, pursuant to which each of the
Operating Account Bank and such other institution recognizes the Administrative
Agent’s Lien in the Operating Account and such other accounts and, upon the
occurrence and during the continuance of an Event of Default, agrees to transfer
collected balances in the Operating Account and such other accounts to the
Administrative Agent pursuant to its instructions from time to
time.

     

    (b) All Cash
Receipts to be received by the Borrower shall be deposited, and the Borrower
shall direct (and hereby agrees to direct) each payor of any Cash Receipts
existing now and in the future to make payment to the Operating
Account.  Following the occurrence of any Event of Default, the
Administrative Agent shall send notice to the Borrower that the Administrative
Agent is sending or has sent a notice to the Operating Account Bank that the
Administrative Agent is exercising its right to take control of the Operating
Account.  With respect to the Operating Account, the Administrative
Agent shall receive copies of the Borrower’s bank account statements, statement
of expenses for the preceding month and such other supporting information as
shall from time to time be requested by the Administrative Agent.

     

    (c) Upon the
request of the Administrative Agent, the Borrower shall (i) close the Operating
Account and (ii) establish and maintain, at the Borrower’s expense, a new
operating account with a bank reasonably acceptable to the Administrative
Agent.

     

    
      
        
        

      

      
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    (d)  Upon
the payment in full in cash of all Indebtedness under this Agreement and
termination of all of the Commitments hereunder, the Administrative Agent shall
notify the Operating Account Bank to terminate the account control agreement.
Otherwise, the account control agreement shall remain and continue in full force
and effect.

     

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

     

    ARTICLE
IX

    Negative
Covenants

     

    Until the
principal of and interest on each Loan and all fees payable hereunder and all
other amounts payable under the Loan Documents have been paid in full, the
Borrower covenants and agrees with the Lenders that:

     

    Section
9.01 Financial
Covenants.

     

    (a) Total Reserve Value to Debt
ratio.  The Borrower will not, as of any date of determination,
at any time, permit its ratio of (i) Total Reserve Value as in effect on such
date of determination to (ii) Debt as of such date of determination to be less
than 1.75 to 1.0.

     

    (b) Ratio of Net Debt to
EBITDAX.  Commencing December 31, 2008, the Borrower will not,
at any time, permit its ratio of Net Debt as of such time to EBITDAX to be
greater than (i) 4.5 to 1.0 the fiscal quarters ending December 31, 2008, March
31, 2009, June 30, 2009 and September 30, 2009, and (ii) 4.0 to 1.0 for all
fiscal quarters ending thereafter.

     

    (c) Capital
Expenditures.  The Borrower will not and will not permit its
Subsidiaries to either make or commit or agree to make any Capital Expenditure
(by purchase or Capital Lease or incur costs associated with the exploration and
development of Borrower’s or its Subsidiaries’ Oil and Gas Properties) except
(i) Capital Expenditures made in compliance with the Development Plan and (ii)
additional Capital Expenditures made outside the Development Plan, after the
Effective Date, in an aggregate amount not to exceed $500,000 during any fiscal
year.  Notwithstanding the foregoing, to the extent any Capital
Expenditures described in clause (ii) are subsequently approved as part of the
Development Plan, such Capital Expenditures shall be deemed to constitute
Capital Expenditures under clause (i) and shall not be included for purposes of
calculating Capital Expenditures under clause (ii).

     

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

     

    (a) the Notes
or other Indebtedness arising under the Loan Documents or any guaranty of or
suretyship arrangement for the Notes or other Indebtedness arising under the
Loan Documents;

     

    
      
        
        

      

      
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    (b) accounts
payable and accrued expenses, liabilities or other obligations to pay the
deferred purchase price of Property or services, from time to time incurred in
the ordinary course of business which are not greater than ninety (90) days past
the date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP;

     

    (c) Debt
secured by the Liens permitted under subsection (c) or (d) of Section 9.03 in an
aggregate principal amount not to exceed $250,000 at any one time
outstanding;

     

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

     

    (e) intercompany
Debt between the Borrower and any Subsidiary or between Subsidiaries to the
extent permitted by Section 9.05(f); provided that such Debt is not held,
assigned, transferred, negotiated or pledged to any Person other than the
Borrower or one of its Subsidiaries, and, provided further, that any such Debt
owed by either the Borrower or a Guarantor shall be subordinated to the
Indebtedness on terms set forth in the Guaranty Agreement;

     

    (f) Debt
under the Senior Revolving Credit Notes; and

     

    (g) other
Debt not to exceed $250,000 in the aggregate at any one time
outstanding.

     

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

     

    (a) Liens
securing the payment of any Indebtedness;

     

    (b) Excepted
Liens;

     

    (c) Liens
securing Capital Leases; provided such Liens secure Debt that (i) is secured
only by the Property leased under such Capital Leases and not any other
Properties of the Borrower or any of its Subsidiaries and (ii) is not increased
in amount;

     

    (d) purchase
money Liens or purchase money security interests upon or in any equipment
acquired or held by the Borrower or any of its Subsidiaries in the ordinary
course of business created prior to or at the time of the Borrower's or such
Subsidiary's acquisition of such equipment; provided that such Liens secure Debt
that (i) was incurred solely for the purpose of financing the acquisition of
such equipment, and does not exceed the aggregate purchase price of such
equipment, (ii) is secured only by such equipment and not by any other
Properties of the Borrower or its Subsidiaries, and (iii) is not increased in
amount;

     

    (e) Liens on
Property securing the Senior Revolving Credit Notes and any guaranties thereof
as permitted by Section 9.02(f); provided, however, that such Property is
subject to a Lien in favor of the Administrative Agent which secures the
Indebtedness, this Agreement, the other Loan Documents pursuant to the
Intercreditor Agreement and Security Instruments satisfactory to the
Administrative Agent;

     

    
      
        
        

      

      
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    (f) Obligations
of PRC Williston LLC under the PetroBridge Participation Agreement;
and

     

    (g) other
Liens securing Debt permitted under Section 6.02 in an aggregate principal
amount not to exceed $250,000 at any one time outstanding.

     

    Section
9.04 Dividends, Distributions and
Redemptions.  The Borrower will not, and will not permit any of
its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except (a)
the Borrower may declare and pay dividends with respect to its Equity Interests
payable solely in additional shares of its Equity Interests (other than
Disqualified Capital Stock), (b) Subsidiaries may declare and pay dividends to
the Borrower ratably with respect to their Equity Interests, (c) PRC Williston
LLC may make any distributions pursuant to the requirements of the PetroBridge
Participation Agreement, (d) the Borrower may make Restricted Payments pursuant
to and in accordance with stock option plans or other benefit plans for
management or employees of the Borrower and its Subsidiaries, (e) so long as no
Default or Event of Default or Borrowing Base Deficiency shall have occurred or
would occur after giving effect thereto, the Borrower may redeem the Touradji
Preferred Equity, and (f) PRC Williston LLC may redeem any Working Interest
Election (as such term is defined in the PetroBridge Participation Agreement) so
long as (1) no Default has occurred and is continuing or would result therefrom
and (2) after giving effect thereto, the Borrower possesses at least $3,000,000
of cash, cash equivalents or availability under a credit facility.

     

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

     

    (a) accounts
receivable arising in the ordinary course of business;

     

    (b) 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;

     

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

     

    (d) 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 $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively;

     

    
      
        
        

      

      
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    (e) deposits
in money market funds investing exclusively in Investments described in Section
9.05(b), Section 9.05(c) or Section 9.05(d);

     

    (f) Investments
(i) made by the Borrower in or to the Guarantors, (ii) made by any Subsidiary in
or to the Borrower or any Guarantor;

     

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

     

    (h) Investments
in stock, obligations or securities received in settlement of debts arising from
Investments permitted under this Section 9.05 owing to the Borrower or any
Subsidiary as a result of a bankruptcy or other insolvency proceeding of the
obligor in respect of such debts or upon the enforcement of any Lien in favor of
the Borrower or any of its Subsidiaries; provided that the Borrower shall give
the Administrative Agent prompt written notice in the event that the aggregate
amount of all Investments held at any one time under this Section 9.05(h)
exceeds $100,000;

     

    (i) The
creation of any additional Subsidiaries in compliance with Section
9.15;

     

    (j) Swap
Agreements entered into in compliance with Section 9.18;

     

    (k) other
Investments in an aggregate amount not to exceed $200,000 at any time;
and

     

    (l) Hall
Houston Minority Investment made by the Borrower (i) existing on the Effective
Date of Hall Houston and (ii) in an amount not to exceed $1,000,000 after the
Effective Date;

     

    Section
9.06 Nature of
Business.  The Borrower will not, and will not permit any
Subsidiary to, allow any material change to be made in the character of its
business as an independent oil and gas exploration and production
company.  From and after the date hereof, the Borrower and its
Subsidiaries will not acquire or make any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties not located within the geographical boundaries of the United
States of America and Canada.

     

    Section
9.07 Limitation on
Leases.  The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal but
excluding Capital Leases and leases of Hydrocarbon Interests), under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Borrower and the Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $150,000 in any period
of twelve consecutive calendar months during the life of such leases without the
approval of the Lenders.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    (c) contribute
to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to (i) 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 (ii) any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

     

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

     

    Section
9.11 Mergers,
Etc.  The Borrower will not, and will not permit any Subsidiary
to, merge into or with or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person (whether now owned
or hereafter acquired) (any such transaction, a “consolidation”), or liquidate
or dissolve; provided that any Subsidiary may participate in a consolidation
with the Borrower (provided that the Borrower shall be the continuing or
surviving entity) or any other Subsidiary provided that if one of such
Subsidiaries is a wholly-owned Subsidiary, then the surviving Person shall be a
wholly-owned Subsidiary.

     

    
      
        
        

      

      
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    Section
9.12 Sale of
Properties.  Subject to the Intercreditor Agreement, the
Borrower will not, and will not permit any Subsidiary to, sell, assign,
farm-out, convey or otherwise transfer (including through the sale of a
production payment or overriding royalty interest) any Property except for (a)
the sale of Hydrocarbons in the ordinary course of business; (b) farmouts of
undeveloped acreage and assignments in connection with such farmouts with such
Persons who are not Related Parties of the Borrower or its Affiliates, or
relatives of such Related Parties; (c) the sale or transfer of equipment that is
no longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use; (d) the sale or
other disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Subsidiary owning Oil and Gas Properties; provided that
(i) 100% of the consideration received in respect of such sale or other
disposition shall be cash, (ii) the consideration received in respect of such
sale or other disposition shall be equal to or greater than the fair market
value of the Oil and Gas Property, interest therein or the Subsidiary subject of
such sale or other disposition (as reasonably determined by the board of
directors of the Borrower and, if requested by the Administrative Agent, the
Borrower shall deliver a certificate of a Responsible Officer of the Borrower
certifying to that effect), (iii) if such sale or other disposition of Oil and
Gas Property or Subsidiary owning Oil and Gas Properties included in the most
recently delivered Reserve Report during any period has a fair market value in
excess of $250,000 (as determined by the Majority Lenders, individually or in
the aggregate, the Total Reserve Value shall be reduced, effective immediately
upon such sale or disposition, by an amount equal to the value, if any, assigned
such Property in the most recently delivered Reserve Report used in the most
recent determination of Total Reserve Value, (iv) an amount equal to 100%
of the Net Cash Proceeds received from such sale, lease or other disposition
shall be used to (1) reinvest in Property, plant and equipment, or any business
entity, (2) repay Debt under the Senior Revolving Credit Agreement or (3)
prepay the Loans in accordance with Section 3.04(c) and (v) if any such sale or
other disposition is of a Subsidiary owning Oil and Gas Properties, such sale or
other disposition shall include all the Equity Interests of such Subsidiary; (e)
the sale of the Hall Houston Minority Investment for a purchase price paid in
cash in an amount at least equal to the fair market value thereof; (f) any
Working Interest Election (as defined in the PetroBridge Participation
Agreement) pursuant to the PetroBridge Participation Agreement; (g) the
assignment of overriding royalty interest in and to the Oil & Gas Properties
identified on Schedule 9.12 pursuant to the Existing Credit Agreement and
(h) sales and other dispositions of Properties not regulated by Section
9.12(a) to (d) having a fair market value not to exceed $250,000 during any
12-month period.

     

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

     

    
      
        
        

      

      
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    Section
9.14 Transactions with
Affiliates.  The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate (other than the Guarantors and wholly-owned Subsidiaries of
the Borrower) unless such transactions are otherwise permitted under this
Agreement 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.

     

    Section
9.15 Subsidiaries.  The
Borrower will not, and will not permit any Subsidiary to, create or acquire any
additional Subsidiary unless the Borrower gives written notice to the
Administrative Agent of such creation or acquisition and complies with Section
8.13(c).  The Borrower shall not, and shall not permit any Subsidiary
to, sell, assign or otherwise dispose of any Equity Interests in any Subsidiary
except (a) pursuant to a transaction permitted by Section 9.11 or Section 9.12
or (b) the dissolution of Subsidiaries that the Borrower determines in good
faith are no longer necessary to the operations of the Borrower’s business and
such dissolution could not reasonably be expected to have a Material Adverse
Effect.  The Borrower or any Subsidiary shall only have Subsidiaries
organized in a jurisdiction within the United States of America or
Canada.

     

    Section
9.16 Negative Pledge Agreements;
Dividend Restrictions.  The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any contract,
agreement or understanding (other than this Agreement, the Senior Revolving
Credit Agreement, the Security Instruments or Capital Leases or agreements
creating Liens permitted by Section 9.03(c) and Section 9.03(d)) which in any
way prohibits or restricts the granting, conveying, creation or imposition of
any Lien on any of its Property in favor of the Administrative Agent and the
Lenders or restricts any Subsidiary from paying dividends or making
distributions to the Borrower or any Guarantor, or which requires the consent of
or notice to other Persons in connection therewith.

     

    Section
9.17 Gas Imbalances, Take-or-Pay
or Other Prepayments.  The Borrower will not, and will not
permit any Subsidiary to, allow gas imbalances, take-or-pay or other prepayments
with respect to the Oil and Gas Properties of the Borrower or any Subsidiary
that would require the Borrower or such Subsidiary to deliver Hydrocarbons at
some future time without then or thereafter receiving full payment therefor to
exceed two percent (2%) of Borrower’s and its Subsidiaries’ Proved Reserves of
natural gas (on an mcf equivalent basis) in the aggregate.

     

    Section
9.18 Swap
Agreements.  The Borrower will not, and will not permit any
Subsidiary to, enter into any Swap Agreements with any Person other than (a)
Swap Agreements in respect of commodities (i) with an Approved Counterparty and
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 85% of the reasonably anticipated projected
production from Proved Developed Producing Reserves for each month during the
period during which such Swap Agreement is in effect for each of crude oil and
natural gas, calculated separately, (b) Swap Agreements in respect of interest
rates with an Approved Counterparty, as follows:  (i) Swap Agreements
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Swap Agreements of the Borrower
and its Subsidiaries then in effect effectively converting interest rates from
fixed to floating) do not exceed 50% of the then outstanding principal amount of
the Borrower’s Debt for borrowed money which bears interest at a fixed rate and
(ii) Swap Agreements effectively converting interest rates from floating to
fixed, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Subsidiaries then in effect effectively
converting interest rates from floating to fixed) do not exceed 75% of the then
outstanding principal amount of the Borrower’s Debt for borrowed money which
bears interest at a floating rate.  In no event shall any Swap
Agreement contain any requirement, agreement or covenant for the Borrower or any
Subsidiary to post collateral or margin to secure their obligations under such
Swap Agreement or to cover market exposures.

     

    
      
        
        

      

      
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    Section
9.19 Development
Plan.  Without the prior written consent of the Majority
Lenders, the Borrower shall not (i) amend, modify or supplement any term of the
Development Plan if the effect of such amendment, modification, supplement or
waiver would be to materially and adversely affect the commercial terms of the
Development Plan or the schedule of the Development Plan and (ii) cancel,
terminate or abandon the Development Plan.

     

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

     

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

     

    (c) any
representation or warranty made or deemed made by or on behalf of the Borrower
or any Subsidiary in or in connection with any Loan Document or any amendment or
modification of any Loan Document or waiver under such Loan Document, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with any Loan Document or any amendment or modification thereof
or waiver thereunder, shall prove to have been incorrect when made or deemed
made.

     

    (d) the
Borrower or any Subsidiary shall fail to observe or perform any covenant,
condition or agreement contained in Section 8.01(g), Section 8.01(k), Section
8.02, Section 8.03, Section 8.13, Section 8.14 or in Article IX.

     

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

     

    
      
        
        

      

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

     

    (g) any event
or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity. 

     

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

     

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

     

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

     

    (k) (i) one
or more judgments for the payment of money in an aggregate amount in excess of
$250,000 (to
the extent not covered by independent third party insurance provided by insurers
of the highest claims paying rating or financial strength as to which the
insurer does not dispute coverage and is not subject to an insolvency
proceeding) or (ii) any one or more non-monetary judgments that have, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, shall be rendered against the Borrower, any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
assets of the Borrower or any Subsidiary to enforce any such
judgment.

     

    
      
        
        

      

      
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    (l) 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 against the Borrower or a
Guarantor party thereto or shall be repudiated by any of them, or cease to
create a valid and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, except to the extent permitted by
the terms of this Agreement, or the Borrower or any Subsidiary or any of their
Affiliates shall so state in writing.

     

    (m) a Change
in Control shall occur.

     

    (n) an event,
development or circumstance shall have occurred or shall exist that has resulted
in a Material Adverse Effect.

     

    (o) the
Intercreditor Agreement, 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 its terms against the
Borrower or any party thereto or holder of the Lien subordinated thereby or
shall be repudiated by any of them.

     

    Section
10.02 Remedies.

     

    (a) In the
case of an Event of Default other than one described in Section 10.01(h),
Section 10.01(i), or Section 10.01(j), at any time thereafter during the
continuance of such Event of Default, the Administrative Agent may, and at the
request of the Majority Lenders, shall, by notice to the Borrower declare the
Notes and the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower and the Guarantors accrued hereunder
and under the Notes and the other Loan Documents, shall become due and payable
immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i), or Section 10.01(j),
the Notes and the principal of such Loans then outstanding, together with
accrued interest thereon and all fees and the other obligations of the Borrower
and the Guarantors accrued hereunder and under such Notes and the other Loan
Documents, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (iv) fourth, pro rata to payment
of principal outstanding on the Loans owing to a Lender or an Affiliate of a
Lender;

     

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

     

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

     

    

     

    ARTICLE
XI

    The
Administrative Agent

     

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

     

    Section
11.02 Duties and Obligations of
Administrative Agent.  The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan
Documents.  Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (the use
of the term “agent” herein and in the other Loan Documents with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law;
rather, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties), (b) the Administrative Agent shall have no duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document 

     

    
      
        
        

      

      
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    delivered
hereunder or under any other Loan Document or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in Article VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower and its Subsidiaries or any other
obligor or guarantor, or (vii) any failure by the Borrower or any other Person
(other than itself) to perform any of its obligations hereunder or under any
other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or
therein.  For purposes of determining compliance with the conditions
specified in Article VI, each Lender shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed Effective Date specifying
its objection thereto.

     

    Section
11.03 Action by Administrative
Agent.  The Administrative Agent shall have no duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the other Loan Documents
that the Administrative Agent is required to exercise in writing as directed by
the Majority Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 12.02) and in all
cases the Administrative Agent shall be fully justified in failing or refusing
to act hereunder or under any other Loan Documents unless it shall (a) receive
written instructions from the Majority Lenders or the Lenders, as applicable,
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 12.02) specifying the action to be
taken and (b) be indemnified to its satisfaction by the Lenders against any and
all liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action.  The instructions as aforesaid and
any action taken or failure to act pursuant thereto by the Administrative Agent
shall be binding on all of the Lenders.  If a Default has occurred and
is continuing, then the Administrative Agent shall take such action with respect
to such Default as shall be directed by the requisite Lenders in the written
instructions (with indemnities) described in this Section 11.03, provided that,
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders.  In no event,
however, shall the Administrative Agent be required to take any action which
exposes the Administrative Agent to personal liability or which is contrary to
this Agreement, the Loan Documents or applicable law.  The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Majority Lenders or the Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or
under any other Loan Document or under any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith
INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.

     

     

    
      
        
        

      

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

     

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

     

    Section
11.06 Resignation or Removal of
Administrative Agent.  Subject to the appointment and
acceptance of a successor Administrative Agent as provided in this Section
11.06, the Administrative Agent may resign at any time by notifying the Lenders
and the Borrower, and the Administrative Agent may be removed at any time with
or without cause by the Majority Lenders.  Upon any such resignation
or removal, the Majority Lenders shall have the right, in consultation with the
Borrower, to appoint a successor.  If no successor shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation or removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank.  Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations
hereunder.  The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such
successor.  After the Administrative Agent’s resignation hereunder,
the provisions of this Article XI and Section 12.03 shall continue in effect for
the benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

     

     

    
      
        
        

      

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

     

    Section
11.08 No
Reliance.

     

    (a) Each
Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and each other Loan Document to which it
is a party.  Each Lender also acknowledges that it will, independently
and without reliance upon the Administrative Agent, any other Agent or any other
Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.  The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries.  Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, neither the Administrative Agent nor the
Arranger shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Borrower (or any of its Affiliates) which may come into the
possession of such Agent or any of its Affiliates.  In this regard,
each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this
transaction as special counsel to the administrative agent under the Senior
Revolving Credit Documents only, except to the extent otherwise expressly stated
in any legal opinion or any Loan Document.  Each other party hereto
will consult with its own legal counsel to the extent that it deems necessary in
connection with the Loan Documents and the matters contemplated
therein.

     

    (b) The
Lenders acknowledge that the Administrative Agent and the Arranger are acting
solely in administrative capacities with respect to the structuring and
syndication of this facility and have no duties, responsibilities or liabilities
under this Agreement and the other Loan Documents other than their
administrative duties, responsibilities and liabilities specifically as set
forth in the Loan Documents and in their capacity as Lenders
hereunder.  In structuring, arranging or syndicating this facility,
each Lender acknowledges that the Administrative Agent and/or Arranger may be an
agent or lender under these Notes, the Senior Revolving Credit Notes, other
loans or other securities and waives any existing or future conflicts of
interest associated with the their role in such other debt
instruments.  If in its administration of this facility or any other
debt instrument, the Administrative Agent determines (or is given written notice
by any Lender that a conflict exists), then it shall eliminate such conflict
within ninety (90) days or resign pursuant to Section 11.06 and shall have no
liability for action taken or not taken while such conflict
existed.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    Section
11.10 Authority of Administrative
Agent to Release Collateral and Liens.  Each Lender hereby
authorizes the Administrative Agent to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan
Documents.  Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower’s sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents.

     

    Section
11.11 The
Arranger.  The Arranger shall have no duties, responsibilities
or liabilities under this Agreement and the other Loan Documents other than its
duties, responsibilities and liabilities in its capacity as a Lender
hereunder.

     

    ARTICLE
XII

    Miscellaneous

     

    
      
        
        

      

      
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    Section
12.01 Notices.

     

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

     

    (i) if to the
Borrower, to it at 777 Post Oak Blvd., Suite
910, Houston, TX 77056, Attention of Harry Stout
(Telecopy No. (832) 369-6992);

     

    (ii) if to the
Administrative Agent and related to amendments, consents, waivers, financial
statements, operating reports, reserve reports, etc, to it at 505 Fifth Avenue,
10th Floor, New York, NY 10017, attention of Marc Theisinger (Telecopy No. (212)
771-9675) with a copy to 700 Louisiana Street, Suite 5200, Houston, TX 77002,
attention of David Bornstein (Telecopy No. (713) 237-8156); and

     

    (iii) if to the
Administrative Agent and related to rate sets, drawdown requests, paydowns,
interest, fees, etc., to it at 11 West 42nd Street, New York, NY 10036,
attention of Maria McClung (Telecopy No. (212) 461-5344) with a copy to 700
Louisiana Street, Suite 5200, Houston, TX 77002, attention of David Bornstein
(Telecopy No. (713) 237-8156).

     

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

     

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

     

    Section
12.02 Waivers;
Amendments.

     

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

     

    
      
        
        

      

      
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    (b) Neither
this Agreement nor any provision hereof nor any Security Instrument nor any
provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and the Majority
Lenders or by the Borrower and the Administrative Agent with the consent of the
Majority Lenders; provided that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii) reduce
the principal amount of any Loan or reduce the rate of interest thereon, or
reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or
under any other Loan Document, without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment or prepayment of
the principal amount of any Loan, or any interest thereon, or any fees payable
hereunder, or any other Indebtedness hereunder or under any other Loan Document,
or reduce the amount of, waive or excuse any such payment, or postpone or extend
the Termination Date without the written consent of each Lender affected
thereby, (iv) change Section 4.01(b) or Section 4.01(c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) waive or amend Section 3.04(c), Section 6.01,
Section 8.13, or Section 10.02(c) or change the definition of the terms “Foreign
Subsidiary” or “Subsidiary”, without the written consent of each Lender, (vi)
release any Guarantor (except as set forth in the Guaranty Agreement), release
any of the collateral (other than as provided in Section 11.10), or reduce the
percentage set forth in Section 8.13(a) to less than 80%, without the written
consent of each Lender, or (vii) change any of the provisions of this Section
12.02(b) or the definitions of “Majority Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent.  Notwithstanding
the foregoing, any supplement to Schedule 7.14 (Subsidiaries) shall be effective
simply by delivering to the Administrative Agent a supplemental schedule clearly
marked as such and, upon receipt, the Administrative Agent will promptly deliver
a copy thereof to the Lenders.

     

    Section
12.03 Expenses, Indemnity; Damage
Waiver.

     

    (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and 

     

    
      
        
        

      

      
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    the
Lenders with respect thereto) of this Agreement and the other Loan Documents and
any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable costs, expenses,
Taxes, assessments and other charges incurred by the Administrative Agent or any
Lender in connection with any filing, registration, recording or perfection of
any security interest contemplated by this Agreement or any Security Instrument
or any other document referred to therein, (iii) all out of pocket expenses
incurred by any Administrative Agent, the Issuing Bank or any Lender, including
the fees, charges and disbursements of any counsel for the Administrative Agent
or any Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Loan Document, including its rights
under this Section 12.03, or in connection with the Loans made hereunder,
including, without limitation, all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such
Loans.

     

    (b) THE
BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER,
AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING
CALLED AN “INDEMNITEE”) AGAINST,
AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS
OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, (v) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE
LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,
DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS MATERIALS ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE
BORROWER 

     

    
      
        
        

      

      
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    OR ANY
SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT
IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT,
DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT
OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR
HAZARDOUS MATERIALS ON ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER
OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF
ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE
BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH
OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL
OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

     

    (c) To the
extent that the Borrower fails to pay any amount required to be paid by it to
the Administrative Agent or the Arranger under Section 12.03(a) or (b), each
Lender severally agrees to pay to the Administrative Agent or the Arranger, as
the case may be, such Lender’s Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent or the Arranger in its capacity as
such.

     

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

     

    (e) All
amounts due under this Section 12.03 shall be payable promptly after written
demand therefor.

     

    
      
        
        

      

      
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    Section
12.04 Successors and
Assigns.

     

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

     

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

     

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

     

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

     

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

     

    (A) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender’s Commitment
or Loans, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $1,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, provided that no such consent of the Borrower shall be
required if an Event of Default has occurred and is continuing;

     

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

     

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

     

    (D) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
any information reasonably requested by the Administrative Agent.

     

    
      
        
        

      

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

     

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

     

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

     

    (c) 

     

    (i) Any
Lender may, without the consent of the Borrower or the Administrative Agent,
sell participations to one or more banks or other entities (a “Participant”) in all
or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (A) such Lender’s obligations under this Agreement shall
remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (C) the
Borrower, the Administrative Agent 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 this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not, without
the consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such
Participant.  In addition such agreement must provide that the
Participant be bound by the provisions of Section 12.03.  Subject to
Section 12.04(c)(ii), the Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to Section 12.04.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 12.08 as though it
were a Lender, provided such Participant agrees to be subject to Section 4.01(c)
as though it were a Lender.

     

    
      
        
        

      

      
        76

        
          

        

      

      
        
        

      

    

     

     

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

     

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

     

    (e) Notwithstanding
any other provisions of this Section 12.04, no transfer or assignment of the
interests or obligations of any Lender or any grant of participations therein
shall be permitted if such transfer, assignment or grant would require the
Borrower and the Guarantors to file a registration statement with the SEC or to
qualify the Loans under the “Blue Sky” laws of any state.

     

    Section
12.05 Survival; Revival;
Reinstatement.

     

    (a) All
covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent or any Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any Loan is made hereunder, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any fee or any other
amount payable under this Agreement is outstanding and unpaid.  The
provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and
Article XI shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.

     

    
      
        
        

      

      
        77

        
          

        

      

      
        
        

      

    

     

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

     

    Section
12.06 Counterparts; Integration;
Effectiveness.

     

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

     

    (b) This
Agreement, the other Loan Documents and any separate letter agreements with
respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof.  THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     

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

     

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

     

    Section
12.08 Right of
Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time

     

    
      
        
        

      

      
        78

        
          

        

      

      
        
        

      

    

     

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

     

    Section
12.09 GOVERNING LAW;
JURISDICTION;
CONSENT TO SERVICE OF PROCESS.

     

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

     

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

     

    (c) EACH
PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

     

    
      
        
        

      

      
        79

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        80

        
          

        

      

      
        
        

      

    

     

    Section
12.12 Interest Rate
Limitation.  It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to
it.  Accordingly, if the transactions contemplated hereby would be
usurious as to any Lender under laws applicable to it (including the laws of the
United States of America and the State of Texas or any other jurisdiction whose
laws may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as
follows:  (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Indebtedness (or, to the extent
that the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by such Lender to the Borrower); and (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower).  All sums paid or agreed to
be paid to any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to such Lender, be
amortized, prorated, allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law.  If at any time and from time to time
(i) the amount of interest payable to any Lender on any date shall be computed
at the Highest Lawful Rate applicable to such Lender pursuant to this Section
12.12 and (ii) in respect of any subsequent interest computation period the
amount of interest otherwise payable to such Lender would be less than the
amount of interest payable to such Lender computed at the Highest Lawful Rate
applicable to such Lender, then the amount of interest payable to such Lender in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate applicable to such Lender until the total
amount of interest payable to such Lender shall equal the total amount of
interest which would have been payable to such Lender if the total amount of
interest had been computed without giving effect to this Section
12.12.  To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a
Lender, such Lender elects to determine the applicable rate ceiling under such
Chapter by the weekly ceiling from time to time in effect.  Chapter
346 of the Texas Finance Code does not apply to the Borrower’s obligations
hereunder.

     

    
      
        
        

      

      
        81

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    [SIGNATURES
BEGIN NEXT PAGE]

     

    
      
        
        

      

      
        82

        
          

        

      

      
        
        

      

    

     

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

     

     

    
      
        	BORROWER:	Petro Resources Corporation	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Wayne
      Hall	 
	 	 	Name:
      Wayne Hall 	 
	 	 	Title:
      CEO 	 
	 	 	 	 

      

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    
       

       

      
        	ADMINISTRATIVE
      AGENT:	
                CIT Capital USA Inc.

                as Administrative Agent

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ George
      McKean	 
	 	 	Name:
      George McKean	 
	 	 	Title:
      Vice President	 
	 	 	 	 

      

    

     

     

    
      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

     

    
      
         

         

        
          
            	LENDERS:	
                    CIT Capital USA Inc.

                  	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/ George
      McKean	 
	 	 	Name:
      George McKean	 
	 	 	Title:
      Vice President	 
	 	 	 	 

          

         

         

         

         

        3petro_8k-ex1003.htm

    Exhibit
10.3

    

    
 

    

    

    

    
      

      

    

    

    

    

     

    GUARANTY
AND COLLATERAL AGREEMENT

    

    dated
as of September 9, 2008

    

    made
by

    

    PETRO
RESOURCES CORPORATION

    

    and

    

    EACH
OF THE OTHER GRANTORS (AS DEFINED HEREIN)

    

    in
favor of

    

    CIT
CAPITAL USA INC.,

    as
Administrative Agent

    

    

     

    

     

    
      

      

    

     

    
      
         

      

      
         

        
        

      

      
         

      

    

    TABLE
OF CONTENTS

     

    
      	 
      	 
      	
              Page

            
	 
      	
              ARTICLE
      I

            	 
      
	 
      	
              DEFINITIONS

            	 
      
	
              Section
      1.01

            	
              Definitions.

            	
              1

            
	
              Section
      1.02

            	
              Other
      Definitional Provisions

            	
              5

            
	
              Section
      1.03

            	
              Rules
      of Interpretation

            	
              5

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      II

            	 
      
	 
      	
              GUARANTEE

            	 
      
	 
      	 
      	 
      
	
              Section
      2.01

            	
              Guarantee.

            	
              6

            
	
              Section
      2.02

            	
              Right
      of Contribution

            	
              6

            
	
              Section
      2.03

            	
              No
      Subrogation

            	
              7

            
	
              Section
      2.04

            	
              Guaranty
      Amendments, Etc. with respect to the Borrower Obligations

            	
              7

            
	
              Section
      2.05

            	
              Waivers

            	
              8

            
	
              Section
      2.06

            	
              Guaranty
      Absolute and Unconditional.

            	
              8

            
	
              Section
      2.07

            	
              Reinstatement

            	
              9

            
	
              Section
      2.08

            	
              Payments

            	
              10

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      III

            	 
      
	 
      	
              GRANT
      OF SECURITY INTEREST

            	 
      
	 
      	 
      	 
      
	
              Section
      3.01

            	
              Grant
      of Security Interest

            	
              10

            
	
              Section
      3.02

            	
              Transfer
      of Pledged Securities

            	
              11

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      IV

            	 
      
	 
      	
              REPRESENTATIONS
      AND WARRANTIES

            	 
      
	 
      	 
      	 
      
	
              Section
      4.01

            	
              Representations
      in Credit Agreement

            	
              12

            
	
              Section
      4.02

            	
              Title;
      No Other Liens

            	
              12

            
	
              Section
      4.03

            	
              Perfected
      First Priority Liens

            	
              12

            
	
              Section
      4.04

            	
              Grantor
      Information

            	
              12

            
	
              Section
      4.05

            	
              Inventory
      and Equipment

            	
              13

            
	
              Section
      4.06

            	
              Deposit
      Accounts and Securities Accounts

            	
              13

            
	
              Section
      4.07

            	
              Farm
      Products

            	
              13

            
	
              Section
      4.08

            	
              Investment
      Property

            	
              13

            
	
              Section
      4.09

            	
              Receivables

            	
              14

            
	
              Section
      4.10

            	
              Contracts

            	
              14

            
	
              Section
      4.11

            	
              Intellectual
      Property

            	
              14

            
	
              Section
      4.12

            	
              Commercial
      Tort Claims

            	
              15

            
	
              Section
      4.13

            	
              Benefit
      to the Guarantors

            	
              15

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              ARTICLE
      V

            	 
      
	 
      	
              COVENANTS

            	 
      
	 
      	 
      	 
      
	
              Section
      5.01

            	
              Covenants
      and Events of Default in Credit Agreement

            	
              15

            
	
              Section
      5.02

            	
              Delivery
      of Instruments, Certificated Securities and Chattel Paper

            	
              16

            
	
              Section
      5.03

            	
              Maintenance
      of Perfected Security Interest; Further Documentation

            	
              16

            

    

    
      	
              Section
      5.04

            	
              Changes
      in Locations, Name, Etc.

            	
              16

            
	
              Section
      5.05

            	
              Notices

            	
              17

            
	
              Section
      5.06

            	
              Investment
      Property

            	
              17

            
	
              Section
      5.07

            	
              Intellectual
      Property

            	
              19

            
	
              Section
      5.08

            	
              Commercial
      Tort Claims

            	
              20

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      VI

            	 
      
	 
      	
              REMEDIAL
      PROVISIONS

            	 
      
	 
      	 
      	 
      
	
              Section
      6.01

            	
              Certain
      Matters Relating to Receivables

            	
              20

            
	
              Section
      6.02

            	
              Communications
      with Obligors; Grantors Remain Liable

            	
              21

            
	
              Section
      6.03

            	
              Pledged
      Securities.

            	
              22

            
	
              Section
      6.04

            	
              Proceeds
      to be Turned Over to Administrative Agent

            	
              23

            
	
              Section
      6.05

            	
              Application
      of Proceeds

            	
              23

            
	
              Section
      6.06

            	
              Code
      and Other Remedies

            	
              23

            
	
              Section
      6.07

            	
              Registration
      Rights

            	
              24

            
	
              Section
      6.08

            	
              Waiver;
      Deficiency

            	
              25

            
	
              Section
      6.09

            	
              Non-Judicial
      Enforcement

            	
              25

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      VII

            	 
      
	 
      	
              THE
      ADMINISTRATIVE AGENT

            	 
      
	 
      	 
      	 
      
	
              Section
      7.01

            	
              Administrative
      Agent’s Appointment as Attorney-in-Fact, Etc.

            	
              25

            
	
              Section
      7.02

            	
              Duty
      of Administrative Agent

            	
              27

            
	
              Section
      7.03

            	
              Execution
      of Financing Statements

            	
              28

            
	
              Section
      7.04

            	
              Authority
      of Administrative Agent

            	
              28

            
	 
      	 
      	 
      
	 
      	
              ARTICLE
      VIII

            	 
      
	 
      	
              SUBORDINATION
      OF INDEBTEDNESS

            	 
      
	 
      	 
      	 
      
	
              Section
      8.01

            	
              Subordination
      of All Grantor Claims

            	
              29

            
	
              Section
      8.02

            	
              Claims
      in Bankruptcy

            	
              29

            
	
              Section
      8.03

            	
              Payments
      Held in Trust

            	
              29

            
	
              Section
      8.04

            	
              Liens
      Subordinate

            	
              30

            
	
              Section
      8.05

            	
              Notation
      of Records

            	
              30

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 
      	
              ARTICLE
      IX

            	 
      
	 
      	
              MISCELLANEOUS

            	 
      
	 
      	 
      	 
      
	
              Section
      9.01

            	
              No
      Waiver by Course of Conduct; Cumulative Remedies

            	
              30

            
	
              Section
      9.02

            	
              Notices

            	
              30

            
	
              Section
      9.03

            	
              Enforcement
      Expenses; Indemnities

            	
              30

            
	
              Section
      9.04

            	
              Amendments
      in Writing

            	
              31

            
	
              Section
      9.05

            	
              Successors
      and Assigns

            	
              31

            
	
              Section
      9.06

            	
              Survival;
      Revival; Reinstatement.

            	
              31

            
	
              Section
      9.07

            	
              Counterparts;
      Integration; Effectiveness.

            	
              32

            
	
              Section
      9.08

            	
              Severability

            	
              32

            
	
              Section
      9.09

            	
              Set-Off

            	
              33

            
	
              Section
      9.10

            	
              Governing
      Law; Submission to Jurisdiction; Waiver of Jury Trial

            	
              33

            
	
              Section
      9.11

            	
              Headings

            	
              34

            
	
              Section
      9.12

            	
              Acknowledgments

            	
              34

            
	
              Section
      9.13

            	
              Additional
      Grantors and Additional Pledged Securities

            	
              35

            
	
              Section
      9.14

            	
              Releases

            	
              35

            
	
              Section
      9.15

            	
              Acceptance

            	
              36

            
	
              Section
      9.16

            	
              Intercreditor
      Agreement

            	
              36

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULES:

    1           Notice
Addresses

    2           Investment
Property

    3           Perfection
Matters

    4           Location
of Jurisdiction of Organization and Chief Executive Office

    5           Inventory
and Equipment Locations

    6           Intellectual
Property

    7           Existing
Permitted Financing Statements

    8           Deposit
Accounts and Securities Accounts

    

    ANNEXES:

    I           Form
of Acknowledgment and Consent

    II         
Form of Assumption Agreement

    III        
Form of Supplement

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    This
GUARANTY AND COLLATERAL
AGREEMENT, dated as of September 9, 2008,
is made by Petro Resources Corporation, a Delaware corporation (the
“Borrower”) and
each of the signatories hereto (the Borrower and each of the signatories hereto,
together with any Subsidiary of the Borrower that becomes a party hereto from
time to time after the date hereof, the “Grantors”) in favor
of CIT Capital USA
Inc., as administrative agent (in such capacity, together with its
successors in such capacity, the “Administrative
Agent”) for the banks and other financial institutions (the “Lenders”) from time
to time parties to the Credit Agreement, dated as of September 9, 2008 (as
amended, supplemented or otherwise modified from time to time, the “Credit Agreement”),
among the Borrower, the Administrative Agent and the Lenders.

     

    R
E C I T A L S

     

    A.           It
is a condition precedent to the obligation of the Lenders to make their
respective loans to and extensions of credit on behalf of the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the
Lenders.

     

    B.           Now,
therefore, in consideration of the premises herein and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective loans to and extensions of credit on
behalf of the Borrower thereunder, each Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as
follows:

     

    ARTICLE
I

    Definitions

     

    Section
1.01 Definitions.

     

    (a) Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
have the meanings given to them in the Credit Agreement, and all uncapitalized
terms which are defined in the UCC (as defined herein) on the date hereof are
used herein as so defined.

     

    (b) The
following terms are used herein as defined in the UCC on the date
hereof:  Accounts, Certificated Security, Chattel Paper, Commercial
Tort Claims, Contracts, Documents, Electronic Chattel Paper, Equipment, Farm
Products, Fixtures, General Intangibles,  Instruments, Inventory,
Letter-of-Credit Rights, Proceeds, Securities Accounts, Supporting Obligations,
and Tangible Chattel Paper.

     

    (c) The
following terms have the following meanings:

     

    “Acknowledgment and
Consent” means an Acknowledgement and Consent substantially in the form
attached hereto as Annex I.

     

    “Administrative Agent”
has the meaning assigned such term in the Preamble.

     

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

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    “Assumption Agreement”
means an Assumption Agreement substantially in the form attached hereto as Annex
II.

     

    “Bankruptcy Code”
means Title 11 of the United States Code, as amended from time to
time.

     

    “Borrower” has the
meaning assigned such term in the Preamble.

     

    “Borrower Obligations”
means the collective reference to the unpaid principal of and interest on the
Loans and reimbursement obligations in respect of Letters of Credit, the
Indebtedness, and all other obligations and liabilities of the Borrower and the
other Grantors (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and LC Exposure and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) to the Secured Parties, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Secured Documents, in each case, whether on account of principal, interest,
reimbursement obligations, payments in respect of an early termination date,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Secured Parties that are required
to be paid by the Borrower pursuant to the terms of any of the Secured
Documents).

     

    “Collateral” has the
meaning assigned such term in Section
3.01.

     

    “Collateral Account”
means any collateral account established by the Administrative Agent as provided
in Section 6.01 or Section 6.04.

     

    “Copyrights” means the
collective reference to (a) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including those
listed in Schedule 6), all registrations and recordings thereof, and all
applications in connection therewith, including all registrations, recordings
and applications in the United States Copyright Office and (b) the right to
obtain all renewals thereof.

     

    “Copyright Licenses”
means any written agreement naming any Grantor as licensor or licensee, granting
any right under any Copyright, including the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.

     

    “Credit Agreement” has
the meaning assigned such term in the Preamble.

     

    “Deposit Account” has
the meaning given such term in the Uniform Commercial Code of any applicable
jurisdiction and, in any event, including any demand, time, savings, passbook or
like account maintained with a depositary institution.

     

    “Grantors” has the
meaning assigned such term in the Preamble.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    “Grantor Claims” has
the meaning assigned to such term in Section
8.01.

     

    “Guarantor
Obligations” means with respect to any Guarantor, the collective
reference to (a) the Borrower Obligations and (b) all obligations and
liabilities of such Guarantor which may arise under or in connection with any
Secured Document to which such Guarantor is a party (including, without
limitation, Article
II of this Agreement), in
each case, whether on account of principal, interest, guarantee obligations,
reimbursement obligations, payments in respect of an early termination date,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to any Secured Party under any Secured
Document).

     

    “Guarantors” means the
collective reference to all Grantors other than the Borrower.

     

    “Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including the Copyrights,
the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.

     

    “Intercompany Note”
means any promissory note evidencing loans made by any Grantor to the Borrower
or any of its Subsidiaries.

     

    “Investment Property”
means the collective reference to (a) all “investment property” as such term is
defined in Section 9.102(a)(49) of the UCC and (b) whether or not constituting
“investment property” as so defined, all Pledged Notes and all Pledged
Securities.

     

    “Issuers” means the
collective reference to each issuer of any Investment Property.

     

    “Lenders” has the
meaning assigned such term in the Preamble.

     

    “LLC” means, with
respect to any Grantor, each limited liability company described or referred to
in Schedule 2 in which such Grantor has an interest.

     

    “LLC Agreement” means
each operating agreement relating to an LLC, as each agreement has heretofore
been, and may hereafter be, amended, restated, supplemented or otherwise
modified from time to time.

     

    “Obligations”
means:  (a) in the case of the Borrower, the Borrower Obligations and
(b) in the case of each Guarantor, its Guarantor Obligations.

     

    “Partnership” means,
with respect to any Grantor, each partnership described or referred to in
Schedule 2 in which such Grantor has an interest.

     

    “Partnership
Agreement” means each partnership agreement governing a Partnership, as
each such agreement has heretofore been, and may hereafter be, amended,
restated, supplemented or otherwise modified.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    “Patent License” means
all agreements, whether written or oral, providing for the grant by or to any
Grantor of any right to manufacture, use or sell any invention covered in whole
or in part by a Patent, including, without limitation, any thereof referred to
in Schedule 6.

     

    “Patents” means the
collective reference to (a) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including any of the foregoing
referred to in Schedule 6, (b) all applications for letters patent of the United
States or any other country and all divisions, continuations and
continuations-in-part thereof, including any of the foregoing referred to in
Schedule 6 and (c) all rights to obtain any reissues or extensions of the
foregoing.

     

    “Pledged LLC
Interests” means, with respect to any Grantor, all right, title and
interest of such Grantor as a member of all LLCs and all right, title and
interest of such Grantor in, to and under the LLC Agreements.

     

    “Pledged Notes” means
all promissory notes listed on Schedule 2, all Intercompany Notes at any time
issued to any Grantor and all other promissory notes issued to or held by any
Grantor (other than promissory notes issued in connection with extensions of
trade credit by any Grantor in the ordinary course of business).

     

    “Pledged Partnership
Interests” means, with respect to any Grantor, all right, title and
interest of such Grantor as a limited or general partner in all Partnerships and
all right, title and interest of such Grantor in, to and under the Partnership
Agreements.

     

    “Pledged Securities”
means: (a) the Equity Interests described or referred to in Schedule 2 (as
the same may be supplemented from time to time pursuant to a Supplement),
together with any other Equity Interests of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect;
including, but not limited to, all Pledged LLC Interests and Pledged Partnership
Interests related thereto; and (b) the certificates or instruments, if any,
representing such Equity Interests, (c) all dividends (cash, Equity Interests or
otherwise), cash, instruments, rights to subscribe, purchase or sell and all
other rights and Property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such securities, (d)
all replacements, additions to and substitutions for any of the Property
referred to in this definition, including, without limitation, claims against
third parties, (e) the proceeds, interest, profits and other income of or on any
of the Property referred to in this definition, (f) all security entitlements in
respect of any of the foregoing, if any, and (g) all books and records relating
to any of the Property referred to in this definition.

     

    “Proceeds” means all
“proceeds” as such term is defined in the UCC on the date hereof and, in any
event, shall include, without limitation, all dividends or other income from the
Pledged Securities, collections thereon or distributions or payments with
respect thereto.

     

    “Receivable” means any
right to payment for goods sold or leased or for services rendered, whether or
not such right is evidenced by an Instrument or Chattel Paper and whether or not
it has been earned by performance (including any Account).

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    “Secured Documents”
means the collective reference to the Credit Agreement, the other Loan
Documents, each Secured Swap Agreement and any other document made, delivered or
given in connection with any of the foregoing.

     

    “Secured Parties”
means the collective reference to the Administrative Agent, the Lenders, and the
Approved Counterparties that are parties to Secured Swap
Agreements.

     

    “Secured Swap
Agreement” means any Swap Agreement between the Borrower or any of its
Subsidiaries and any Approved Counterparty in effect while such Person is an
Approved Counterparty regardless of when such Swap Agreement was entered
into.  For the avoidance of doubt, a Swap Agreement ceases to be a
Secured Swap Agreement if the Person that is the counterparty to the Borrower or
one of its Subsidiaries under a Swap Agreement ceases to be an Approved
Counterparty under the Credit Agreement.

     

    “Securities Act” means
the Securities Act of 1933, as amended.

     

    “Trademark License”
means any agreement, whether written or oral, providing for the grant by or to
any Grantor of any right to use any Trademark.

     

    “Trademarks” means (a)
all trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including any of the
foregoing referred to in Schedule 6 and (b) the right to obtain all renewals
thereof.

     

    “Supplement” means a
Supplement substantially in the form attached hereto as
Annex III.

     

    “UCC” means the
Uniform Commercial Code as from time to time in effect in the State of Texas;
provided, however, that, in the event that, by reason of mandatory provisions of
law, any of the attachment, perfection or priority of the Administrative Agent’s
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of Texas, the term “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection,
the effect thereof or priority and for purposes of definitions related to such
provisions.

     

    Section
1.02 Other Definitional
Provisions.  Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, refer to
such Grantor’s Collateral or the relevant part thereof.

     

    Section
1.03 Rules of
Interpretation.  Section 1.04 and Section 1.05 of the
Credit Agreement are hereby incorporated herein by reference and shall apply to
this Agreement, mutatis mutandis.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    ARTICLE
II

    Guarantee

     

    Section
2.01 Guarantee.

     

    (a) Each of
the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Secured Parties and each of their respective successors,
indorsees, transferees and assigns, the prompt and complete payment in cash and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.  This is a
guarantee of payment and not collection and the liability of each Guarantor is
primary and not secondary.

     

    (b) Anything
herein or in any other Loan Document to the contrary notwithstanding, the
maximum liability of each Guarantor hereunder and under the other Loan Documents
shall in no event exceed the amount which can be guaranteed by such Guarantor
under applicable federal and state laws relating to the insolvency of debtors
(after giving effect to the right of contribution established in Section
2.02).

     

    (c) Each
Guarantor agrees that the Borrower Obligations may at any time and from time to
time exceed the amount of the liability of such Guarantor hereunder without
impairing the guarantee contained in this Article II or affecting the
rights and remedies of any Secured Party hereunder.

     

    (d) Each
Guarantor agrees that if the maturity of the Borrower Obligations is accelerated
by bankruptcy or otherwise, such maturity shall also be deemed accelerated for
the purpose of this guarantee without demand or notice to such
Guarantor.  The guarantee contained in this Article II shall
remain in full force and effect until all the Borrower Obligations shall have
been irrevocably and indefeasibly satisfied by payment in full in cash, no
Letter of Credit shall be outstanding and all of the Commitments are terminated,
notwithstanding that from time to time during the term of the Credit Agreement,
no Borrower Obligations may be outstanding.

     

    (e) No
payment made by any Grantor, any other guarantor or any other Person or received
or collected by any Secured Party from the Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are
irrevocably and indefeasibly paid in full in cash, no Letter of Credit shall be
outstanding and all of the Commitments are terminated.

     

    Section
2.02 Right of
Contribution.  Each Guarantor hereby agrees that to the extent
that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment.  Each Guarantor’s right of
contribution shall be subject to the terms and conditions of Section
2.03.  The provisions of this Section 2.02 shall in no respect
limit the obligations and liabilities of any Guarantor to the Secured Parties,
and each Guarantor shall remain liable to the Secured Parties for the full
amount guaranteed by such Guarantor hereunder.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    Section
2.03 No
Subrogation.  Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by any Secured
Party, no Guarantor shall be entitled to be subrogated to any of the rights of
any Secured Party against the Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by any Secured Party for the
payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled
to seek any indemnity, exoneration, participation, contribution or reimbursement
from the Borrower or any other Guarantor in respect of payments made by such
Guarantor hereunder, until all amounts owing to the Secured Parties on account
of the Borrower Obligations are irrevocably and indefeasibly paid in full in
cash, no Letter of Credit shall be outstanding and all of the Commitments are
terminated.  If any amount shall be paid to any Guarantor on account
of such subrogation rights at any time when all of the Borrower Obligations
shall not have been irrevocably and indefeasibly paid in full in cash, any
Letter of Credit shall be outstanding or any of the Commitments are in effect,
such amount shall be held by such Guarantor in trust for the Secured Parties,
and shall, forthwith upon receipt by such Guarantor, be turned over to the
Administrative Agent in the exact form received by such Guarantor (duly indorsed
by such Guarantor to the Administrative Agent, if required), to be applied
against the Borrower Obligations, whether matured or unmatured, in accordance
with Section 10.02(c) of the Credit Agreement.

     

    Section
2.04 Guaranty Amendments, Etc.
with respect to the Borrower Obligations.  Each Guarantor shall
remain obligated hereunder, and such Guarantor’s obligations hereunder shall not
be released, discharged or otherwise affected, notwithstanding that, without any
reservation of rights against any Guarantor and without notice to, demand upon
or further assent by any Guarantor (which notice, demand and assent requirements
are hereby expressly waived by such Guarantor):  (a) any demand for
payment of any of the Borrower Obligations made by any Secured Party may be
rescinded by such Secured Party or otherwise and any of the Borrower Obligations
continued; (b)
the Borrower Obligations, the liability of any other Person upon or for any part
thereof or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by, or any indulgence or forbearance in respect thereof granted by, any
Secured Party; (c) any Secured
Document may be amended, modified, supplemented or terminated, in whole or in
part, as the Secured Parties may deem advisable from time to time; (d) any collateral
security, guarantee or right of offset at any time held by any Secured Party for
the payment of the Borrower Obligations may be sold, exchanged, waived,
surrendered or released; (e) any additional
guarantors, makers or endorsers of the Borrower Obligations may from time to
time be obligated on the Borrower Obligations or any additional security or
collateral for the payment and performance of the Borrower Obligations may from
time to time secure the Borrower Obligations; or (f) any other event
shall occur which constitutes a defense or release of sureties
generally.  No Secured Party shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Article II or
any Property subject thereto.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    Section
2.05 Waivers.  Each
Guarantor hereby waives any and all notice of the creation, renewal, extension
or accrual of any of the Borrower Obligations and notice of or proof of reliance
by any Secured Party upon the guarantee contained in this Article II or
acceptance of the guarantee contained in this Article II; the Borrower
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Article II and no notice of creation
of the Borrower Obligations or any extension of credit already or hereafter
contracted by or extended to the Borrower need be given to any Guarantor; and
all dealings between the Borrower and any of the Guarantors, on the one hand,
and the Secured Parties, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Article II.  Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or any of the Guarantors with respect to the Borrower
Obligations.

     

    Section
2.06 Guaranty Absolute and
Unconditional.

     

    (a) Each
Guarantor understands and agrees that the guarantee contained in this
Article II is, and shall be construed as, a continuing, completed, absolute
and unconditional guarantee of payment, and each Guarantor hereby waives any
defense of a surety or guarantor or any other obligor on any obligations arising
in connection with or in respect of any of the following and hereby agrees that
its obligations hereunder shall not be discharged or otherwise affected as a
result of any of the following:

     

    (i) the
invalidity or unenforceability of any Secured Document, any of the Borrower
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by any Secured
Party;

     

    (ii) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against any Secured Party;

     

    (iii) the
insolvency, bankruptcy arrangement, reorganization, adjustment, composition,
liquidation, disability, dissolution or lack of power of the Borrower or any
other Guarantor or any other Person at any time liable for the payment of all or
part of the Obligations, including any discharge of, or bar or stay against
collecting, any Obligation (or any part of them or interest therein) in or as a
result of such proceeding;

     

    (iv) any sale,
lease or transfer of any or all of the assets of the Borrower or any other
Guarantor, or any changes in the shareholders of the Borrower or any other
Guarantor;

     

    (v) any
change in the corporate existence (including its constitution, laws, rules,
regulations or power), structure or ownership of any Grantor or in the
relationship between the Borrower and any Grantor;

     

    (vi) the fact
that any Collateral or Lien contemplated or intended to be given, created or
granted as security for the repayment of the Obligations shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other Lien, it being recognized and agreed by each of the Guarantors that it is
not entering into this Agreement in reliance on, or in contemplation of the
benefits of, the validity, enforceability, collectability or value of any of the
Collateral for the Obligations;

     

    
      
        
        

      

      
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    (vii) the
absence of any attempt to collect the Obligations or any part of them from any
Grantor;

     

    (viii) (A) any
Secured Party’s election, in any proceeding instituted under Chapter 11 of the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code; (B) any borrowing or grant of a Lien by the Borrower, as
debtor-in-possession, or extension of credit, under Section 364 of the
Bankruptcy Code; (C) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of any Secured Party’s claim (or claims) for
repayment of the Obligations; (D) any use of cash collateral under
Section 363 of the Bankruptcy Code; (E) any agreement or stipulation as to
the provision of adequate protection in any bankruptcy proceeding; (F) the
avoidance of any Lien in favor of the Secured Parties or any of them for any
reason; or (G) failure by any Secured Party to file or enforce a claim against
the Borrower or its estate in any bankruptcy or insolvency case or proceeding;
or

     

    (ix) any other
circumstance or act whatsoever, including any action or omission of the type
described in Section 2.04 (with or without notice to or knowledge of the
Borrower or such Guarantor), which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this
Article II, in bankruptcy or in any other instance.

     

    (b) When
making any demand hereunder or otherwise pursuing its rights and remedies
hereunder against any Guarantor, any Secured Party may, but shall be under no
obligation to, join or make a similar demand on or otherwise pursue or exhaust
such rights and remedies as it may have against the Borrower, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Borrower Obligations or any right of offset with respect thereto, and
any failure by any Secured Party to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Borrower, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of any
Secured Party against any Guarantor.  For the purposes hereof “demand”
shall include the commencement and continuance of any legal
proceedings.

     

    Section
2.07 Reinstatement.  The
guarantee contained in this Article II shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Borrower Obligations is rescinded or must otherwise be restored or
returned by any Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its Property, or otherwise, all as though such payments had not been
made.

     

    
      
        
        

      

      
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    Section
2.08 Payments.  Each
Guarantor hereby guarantees that payments hereunder will be paid to the
Administrative Agent, for the ratable benefit of the Secured Parties, without
set-off, deduction or counterclaim, in U.S. dollars, in immediately available
funds, at the offices of the Administrative Agent specified in
Section 12.01 of the Credit Agreement (or from time to time designated in
accordance with the terms thereof).

     

    ARTICLE
III

    Grant
of Security Interest

     

    Section
3.01 Grant of Security
Interest.  Each Grantor hereby pledges, assigns and transfers
to the Administrative Agent, and hereby grants to the Administrative Agent, for
the ratable benefit of the Secured Parties, a first priority continuing security
interest in, lien on and right of setoff against, all of the following Property
now owned or at any time hereafter acquired by such Grantor or in which such
Grantor now has or at any time in the future may acquire any right, title or
interest and whether now existing or hereafter coming into existence
(collectively, the “Collateral”), as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of such Grantor’s
Obligations:

     

    (a) all
Accounts;

     

    (b) all
Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel
Paper);

     

    (c) all
Commercial Tort Claims (including, without limitation, with respect to the
matters set forth on Schedule 3);

     

    (d) all
Contracts (except for any Contract that will terminate automatically upon the
grant of security interests hereunder, provided, however, that any such Contract
shall automatically cease to be excluded from the Collateral at such time as (i)
the prohibition of the creation of a Lien in such Contract is no longer in
effect or is rendered ineffective as a matter of law, (ii) the Grantors have
obtained the consent of the other parties to such Contract to the creation of a
Lien in such Contract (which consent, upon the request of the Administrative
Agent, Grantors will obtain), or (iii) the breach, default, event of default or
any other conditions otherwise giving rise to the exclusion of such Contract
from Collateral under this clause (d) shall cease to exist);

     

    (e) all
Deposit Accounts other than payroll, withholding tax and other fiduciary Deposit
Accounts;

     

    (f) all
Documents;

     

    (g) all
Equipment;

     

    (h) all
Fixtures;

     

    (i) all
General Intangibles (including, without limitation, all rights in and under Swap
Agreements);

     

    
      
        
        

      

      
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    (j) all
Instruments;

     

    (k) all
Intellectual Property;

     

    (l) all
Inventory;

     

    (m) all
Securities Accounts and Investment Property;

     

    (n) all
Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a
writing);

     

    (o) all other
Property not otherwise described above (except for any Property specifically
excluded from any defined term used in any clause of this section
above);

     

    (p) all books
and records pertaining to the Collateral; and

     

    (q) to the
extent not otherwise included, all Proceeds, Supporting Obligations and products
of any and all of the foregoing and all collateral security and guarantees given
by any Person with respect to any of the foregoing.

     

    Section
3.02 Transfer of Pledged
Securities.  All certificates or instruments representing or
evidencing the Pledged Securities shall be delivered to and held pursuant hereto
by the Administrative Agent or a Person designated by the Administrative Agent
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, and accompanied
by any required transfer tax stamps to effect the pledge of the Pledged
Securities to the Administrative Agent.  Notwithstanding the preceding
sentence, at the Administrative Agent’s discretion, all Pledged Securities must
be delivered or transferred in such manner as to permit the Administrative Agent
to be a “protected purchaser” to the extent of its security interest as provided
in Section 8.303 of the UCC (if the Administrative Agent otherwise
qualifies as a protected purchaser).  During the continuance of an
Event of Default, the Administrative Agent shall have the right, at any time in
its discretion and without notice, to transfer to or to register in the name of
the Administrative Agent or any of its nominees any or all of the Pledged
Securities, subject only to the revocable rights of the relevant Grantor
specified in Section 6.03.  In addition, during the continuance of an
Event of Default, the Administrative Agent shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Securities for certificates or instruments of smaller or larger
denominations.

     

    ARTICLE
IV

    Representations
and Warranties

     

    To induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective loans to and extensions of credit
to the Borrower thereunder and to induce the Lenders (and their Affiliates) to
enter into Swap Agreements with the Borrower and its Subsidiaries, each Grantor
hereby represents and warrants to the Administrative Agent and each Lender
that:

     

    
      
        
        

      

      
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    Section
4.01 Representations in Credit
Agreement.  In the case of each Guarantor, the representations
and warranties set forth in Article VII of the Credit Agreement as they
relate to such Guarantor or to the Loan Documents to which such Guarantor is a
party, each of which is hereby incorporated by reference, are true and correct,
and the Administrative Agent and the Lenders shall be entitled to rely on each
of them, provided that each reference in each such representation and warranty
to the Borrower’s knowledge shall, for the purposes of this Section 4.01,
be deemed to be a reference to such Guarantor’s knowledge.

     

    Section
4.02 Title; No Other
Liens.  Except for the security interest granted to the
Administrative Agent for the ratable benefit of the Secured Parties pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others.  No financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any public office, except such as have been filed in favor of
the Administrative Agent, for the ratable benefit of the Secured Parties,
pursuant to this Agreement or as are permitted by the Credit
Agreement.  Schedule 7 is a complete list of any existing permitted
financing statements or other public notice with respect to all or any part of
the Collateral on the date hereof.  For the avoidance of doubt, it is
understood and agreed that any Grantor may, as part of its business, grant
licenses to third parties to use Intellectual Property owned or developed by a
Grantor.  For purposes of this Agreement and the other Loan Documents,
such licensing activity shall not constitute a “Lien” on such Intellectual
Property.  Each of the Administrative Agent and each Lender
understands that any such licenses may be exclusive to the applicable licensees,
and such exclusivity provisions may limit the ability of the Administrative
Agent to utilize, sell, lease or transfer the related Intellectual Property or
otherwise realize value from such Intellectual Property pursuant
hereto.

     

    Section
4.03 Perfected First Priority
Liens.  The security interests granted pursuant to this
Agreement (a)
upon completion of the filings and other actions specified on Schedule 3 (which,
in the case of all filings and other documents referred to on said Schedule,
have been delivered to the Administrative Agent in completed and duly executed
form, except for such filings and other documents to be delivered after the date
hereof pursuant to the Credit Agreement) will constitute  valid
perfected security interests in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, as collateral security for such
Grantor’s Obligations, in all of the Collateral, enforceable in accordance with
the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior to all
other Liens on the Collateral in existence on the date hereof subject only to
Liens permitted by Section 9.03 of the Credit Agreement.

     

    Section
4.04 Grantor
Information.  On the date hereof, the correct legal name of
such Grantor, all names and trade names that such Grantor has used in the last
five years, such Grantor’s jurisdiction of organization and each jurisdiction of
organization of such Grantor over the last five years, such Grantor’s
organizational number (if any), taxpayor identification number, and the
location(s) of such Grantor’s chief executive office or sole place of business
or principal residence, as the case may be, over the last five years are
specified on Schedule 4.  The Administrative Agent has received a
certified charter, certificate of incorporation or other organization document
and good standing certificate as of a date which is recent to the date
hereof.

     

    
      
        
        

      

      
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    Section
4.05 Inventory and
Equipment.  On the date hereof, any Inventory and the Equipment
(other than mobile goods) are kept at the locations listed on Schedule
5.

     

    Section
4.06 Deposit Accounts and
Securities Accounts.  Schedule 8 correctly identifies all
Deposit Accounts and Securities Accounts owned by each Grantor and institutions
holding such Deposit Accounts or Securities Accounts on the date
hereof.

     

    Section
4.07 Farm
Products.  None of the Collateral constitutes, or is the
Proceeds of, Farm Products.

     

    Section
4.08 Investment
Property.

     

    (a) The
Pledged Securities required to be pledged hereunder and under the Credit
Agreement by such Grantor on the date hereof are listed in Schedule
2.  The shares of Pledged Securities pledged by such Grantor hereunder
constitute all the issued and outstanding shares of all classes of the Equity
Interests of each Issuer owned by such Grantor.  All the shares of the
Pledged Securities have been duly and validly issued and are fully paid and
nonassessable; and such Grantor is the record and beneficial owner of, and has
good and marketable title to, the Investment Property pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and any Liens
permitted by Section 9.03 of the Credit Agreement, and has rights in or the
power to transfer the Investment Property in which a Lien is granted by it
hereunder, free and clear of any Lien other than Liens permitted by Section 9.03
of the Credit Agreement.

     

    (b) There are
no restrictions on transfer (that have not been waived or otherwise consented
to) in the LLC Agreement governing any Pledged LLC Interest or the Partnership
Agreement governing any Pledged Partnership Interest or any other agreement
relating thereto which would limit or restrict:  (i) the grant of a
security interest in the Pledged LLC Interests or the Pledged Partnership
Interests, (ii) the perfection of such security interest or (iii) the exercise
of remedies in respect of such perfected security interest in the Pledged LLC
Interests or the Pledged Partnership Interests, in each case, as contemplated by
this Agreement.  Upon the exercise of remedies in respect of the
Pledged LLC Interests or the Pledged Partnership Interests, a transferee or
assignee of a membership interest or a partnership interest, as the case may be,
of such LLC or Partnership, as the case may be, shall become a member or
partner, as the case may be, of such LLC or Partnership, as the case may be,
entitled to participate in the management thereof and, upon the transfer of the
entire interest of such Grantor, such Grantor shall cease to be a member or
partner, as the case may be.

     

    (c) Each of
the Pledged Notes constitutes the legal, valid and binding obligation of the
obligor with respect thereto, enforceable in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair
dealing.

     

    
      
        
        

      

      
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    Section
4.09 Receivables.

     

    (a) No amount
payable to such Grantor under or in connection with any Receivable is evidenced
by any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent.

     

    (b) None of
the obligors on any Receivables is a Governmental Authority.

     

    (c) The
amounts represented by such Grantor to the Lenders from time to time as owing to
such Grantor in respect of the Receivables will at such times be
accurate.

     

    Section
4.10 Contracts.

     

    (a) No
consent of any party (other than such Grantor) to any Contract is required, or
purports to be required, in connection with the execution, delivery and
performance of this Agreement, except as has been obtained.

     

    (b) No
consent or authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the execution, delivery,
performance, validity or enforceability of any of the Contracts by any party
thereto other than those which have been duly obtained, made or performed, are
in full force and effect and do not subject the scope of any such Contract to
any material adverse limitation, either specific or general in
nature.

     

    (c) Neither
such Grantor nor (to the best of such Grantor’s knowledge) any of the other
parties to the Contracts is in default in the performance or observance of any
of the terms thereof.

     

    (d) The
right, title and interest of such Grantor in, to and under the Contracts are not
subject to any defenses, offsets, counterclaims or claims.

     

    (e) Such
Grantor has delivered to the Administrative Agent a complete and correct copy of
each material Contract, including all amendments, supplements and other
modifications thereto.

     

    (f) No amount
payable to such Grantor under or in connection with any Contract is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent.

     

    (g) None of
the parties to any Contract is a Governmental Authority.

     

    Section
4.11 Intellectual
Property.

     

    (a) Schedule
6 lists all Intellectual Property owned by such Grantor in its own name on the
date hereof.

     

    (b) On the
date hereof, all material Intellectual Property is valid, subsisting, unexpired
and enforceable, has not been abandoned and does not infringe the intellectual
property rights of any other Person.

     

    
      
        
        

      

      
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    (c) Except as
set forth in Schedule 6, on the date hereof, none of the Intellectual Property
is the subject of any licensing or franchise agreement pursuant to which such
Grantor is the licensor or franchisor.

     

    (d) No
holding, decision or judgment has been rendered by any Governmental Authority
which would limit, cancel or question the validity of, or such Grantor’s rights
in, any Intellectual Property in any respect that could reasonably be expected
to have a Material Adverse Effect.

     

    (e) No action
or proceeding is pending, or, to the knowledge of such Grantor, threatened, on
the date hereof (i) seeking to limit, cancel or question the validity of any
Intellectual Property or such Grantor’s ownership interest therein, or (ii)
which, if adversely determined, would have a material adverse effect on the
value of any Intellectual Property.

     

    Section
4.12 Commercial Tort
Claims.

     

    (a) On the
date hereof, except to the extent listed in Schedule 3, no Grantor has rights in
any Commercial Tort Claim with potential value in excess of
$100,000.

     

    (b) Upon the
filing of a financing statement covering any Commercial Tort Claim referred to
in Section 5.08 against such Grantor in the jurisdiction specified in Schedule
3, the security interest granted in such Commercial Tort Claim will constitute a
valid perfected security interest in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, as collateral security for such
Grantor’s Obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor and any Persons purporting to purchase such
Collateral from such Grantor, which security interest shall be prior to all
other Liens on such Collateral except for unrecorded liens permitted by the
Credit Agreement which have priority over the Liens on such Collateral by
operation of law.

     

    Section
4.13 Benefit to the
Guarantors.  The Borrower is a member of an affiliated group of
companies that includes such Grantor, and the Borrower and the other Grantors
are engaged in related businesses.  Such Grantor may reasonably be
expected to benefit, directly or indirectly, from the Transactions; and such
Grantor has determined that this Agreement is convenient to the conduct,
promotion and attainment of the business of such Grantor.

     

    ARTICLE
V

    Covenants

     

    Each
Grantor covenants and agrees with the Administrative Agent and the Lenders that,
from and after the date of this Agreement until the Borrower Obligations shall
have been irrevocably and indefeasibly paid in full in cash, no Letter of Credit
shall be outstanding and all of the Commitments shall have
terminated:

     

    Section
5.01 Covenants and Events of
Default in Credit Agreement.  Such Grantor shall take, or shall
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, by it so that no Default or Event of
Default is caused by the failure to take such action or to refrain from taking
such action by such Grantor.

     

    
      
        
        

      

      
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    Section
5.02 Delivery of Instruments,
Certificated Securities and Chattel Paper.  If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly indorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this
Agreement.

     

    Section
5.03 Maintenance of Perfected
Security Interest; Further Documentation.

     

    (a) Such
Grantor shall maintain the security interest created by this Agreement as a
perfected security interest having at least the priority described in Section
4.03 and shall defend such security interest against the claims and demands of
all Persons whomsoever (other than holders of Liens permitted by Section 9.03 of
the Credit Agreement), subject to the rights of such Grantor under the Loan
Documents to dispose of the Collateral.

     

    (b) Such
Grantor will furnish to the Administrative Agent and the Lenders from time to
time statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Administrative Agent may reasonably request, all in reasonable
detail.

     

    (c) At any
time and from time to time, upon the written request of the Administrative
Agent, and at the sole expense of such Grantor, such Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, (i) delivering certificated securities, (ii) filing any
financing or continuation statements under the UCC (or other similar laws) in
effect in any jurisdiction with respect to the security interests created hereby
and (iii) in the case of Investment Property, Securities Accounts, Deposit
Accounts, Letter-of-Credit Rights and any other relevant Collateral, taking any
actions reasonably necessary to enable the Administrative Agent to obtain
“control” (within the meaning of the applicable Uniform Commercial Code) with
respect thereto.

     

    Section
5.04 Changes in Locations, Name,
Etc.  Such Grantor recognizes that financing statements
pertaining to the Collateral have been or may be filed where such Grantor
maintains any Collateral or is organized.  Without limitation of
Section 8.01(k) of the Credit Agreement or any other covenant herein, such
Grantor will not cause or permit any change in (a) its corporate
name or in any trade name used to identify it in the conduct of its business or
in the ownership of its Properties, (b) the location of
its chief executive office or principal place of business, (c) its identity or
corporate structure or its jurisdiction of organization or its organizational
identification number in such jurisdiction of organization or (d) its federal
taxpayer identification number, unless, in each case, such Grantor shall have
first (i)
notified the Administrative Agent of such change at least thirty (30) days prior
the effective date of such change and (ii) taken all action
reasonably requested by the Administrative Agent for the purpose of maintaining
the perfection and priority of the Administrative Agent’s security interest
under this Agreement.  In any notice furnished pursuant to this
Section 5.04, such Grantor will expressly state in a conspicuous manner that the
notice is required by this Agreement and contains facts that may require
additional filings of financing statements or other notices for the purposes of
continuing perfection of the Administrative Agent’s security interest in the
Collateral.  At the request of the Administrative Agent, on or prior
to the occurrence of such event, the Borrower will provide to the Administrative
Agent and the Lenders an opinion of counsel, in form and substance reasonably
satisfactory to the Administrative Agent, to the effect that such event will not
impair the validity of the security interest hereunder, the perfection and
priority thereof, the enforceability of the Loan Documents, and such other
matters as may be requested by the Administrative Agent.

     

    
      
        
        

      

      
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    Section
5.05 Notices.  Such
Grantor will advise the Administrative Agent and the Lenders promptly, in
reasonable detail, of:

     

    (a) any Lien
(other than security interests created hereby or Liens permitted under the
Credit Agreement) on any of the Collateral which would adversely affect the
ability of the Administrative Agent to exercise any of its remedies hereunder;
and

     

    (b) of the
occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby.

     

    Section
5.06 Investment
Property.

     

    (a) If such
Grantor shall receive any certificate (including, without limitation, any
certificate representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Equity
Interests of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of the Pledged Securities, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Secured Parties, hold the same in trust for the Secured Parties, segregated
from other Property of such Grantor, and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations.  Any sums paid upon or in respect of the
Investment Property upon the liquidation or dissolution of any Issuer shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Investment Property or any property shall
be distributed upon or with respect to the Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations.  If any sums of
money or property so paid or distributed in respect of the Investment Property
shall be received by such Grantor, such Grantor shall, until such money or
property is paid or delivered to the Administrative Agent, hold such money or
property in trust for the Administrative Agent and the Lenders, segregated from
other funds of such Grantor, as additional collateral security for the
Obligations.

     

    
      
        
        

      

      
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    (b) Without
the prior written consent of the Administrative Agent, such Grantor will not (i)
unless otherwise expressly permitted hereby or under the other Loan Documents,
vote to enable, or take any other action to permit, any Issuer to issue any
Equity Interests of any nature or to issue any other securities convertible into
or granting the right to purchase or exchange for any Equity Interests of any
nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Investment Property or
Proceeds thereof (except pursuant to a transaction expressly permitted by the
Credit Agreement), (iii) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of the Investment
Property or Proceeds thereof, or any interest therein, except for Liens
permitted by Section 9.03 of the Credit Agreement and the security interests
created by this Agreement or (iv) enter into any agreement or undertaking
restricting the right or ability of such Grantor or the Administrative Agent to
sell, assign or transfer any of the Investment Property or Proceeds
thereof.

     

    (c) In the
case of each Grantor that is an Issuer, such Issuer agrees that (i) it will be
bound by the terms of this Agreement relating to the Investment Property issued
by it and will comply with such terms insofar as such terms are applicable to
it, (ii) it will notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5.06(a) with
respect to the Investment Property issued by it and (iii) the terms of
Section
6.03(c) and Section 6.07 shall apply to it, mutatis
mutandis,
with respect to all actions that may be required of it pursuant to Section 6.03(c) or
Section
6.07 with respect to the
Investment Property issued by it.  In the case of any Issuer that is
not a Grantor hereunder, such Grantor shall promptly cause such Issuer to
execute and deliver to the Administrative Agent an Acknowledgment and
Consent.

     

    (d) In the
case of each Grantor that is a partner in a Partnership, such Grantor hereby
consents to the extent required by the applicable Partnership Agreement to the
pledge by each other Grantor, pursuant to the terms hereof, of the Pledged
Partnership Interests in such Partnership and to the transfer of such Pledged
Partnership Interests to the Administrative Agent or its nominee and to the
substitution of the Administrative Agent or its nominee as a substituted partner
in such Partnership with all the rights, powers and duties of a general partner
or a limited partner, as the case may be.  In the case of each Grantor
that is a member of an LLC, such Grantor hereby consents to the extent required
by the applicable LLC Agreement to the pledge by each other Grantor, pursuant to
the terms hereof, of the Pledged LLC Interests in such LLC and to the transfer
of such Pledged LLC Interests to the Administrative Agent or its nominee and to
the substitution of the Administrative Agent or its nominee as a substituted
member of the LLC with all the rights, powers and duties of a member of such
LLC.

     

    (e) Such
Grantor shall not agree to any amendment of a Partnership Agreement or an LLC
Agreement that (i) in any way adversely affects the perfection of the security
interest of the Administrative Agent in the Pledged Partnership Interests or
Pledged LLC Interests pledged by such Grantor hereunder or (ii) causes any
Partnership Agreement or LLC Agreement to include an election to treat the
membership interests or partnership interests of such Grantor as a security
under Section 8.103 of the UCC.

     

    (f) Such
Grantor shall furnish to the Administrative Agent such stock or equity powers
and other instruments as may be required by the Administrative Agent to assure
the transferability of the Investment Property when and as often as may be
reasonably requested by the Administrative Agent.

     

    
      
        
        

      

      
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    (g) The
Pledged Securities set forth on Schedule 2 will at all times constitute not less
than 100% of the Equity Interests of the Issuer thereof owned by such
Grantor.  Such Grantor will not permit any Issuer of any of the
Pledged Securities set forth on Schedule 2 to issue any new shares of any class
of Equity Interests of such Issuer without the prior written consent of the
Administrative Agent.

     

    Section
5.07 Intellectual
Property.

     

    (a) Such
Grantor (either itself or through licensees) will (i) continue to use each
material Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) use such Trademark with the
appropriate notice of registration and all other notices and legends required by
applicable Governmental Requirements, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement and
(v) not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become invalidated or
impaired in any way.

     

    (b) Such
Grantor (either itself or through licensees) will not do any act, or omit to do
any act, whereby any material Patent may become forfeited, abandoned or
dedicated to the public.

     

    (c) Such
Grantor (either itself or through licensees) (i) will employ each material
Copyright and (ii) will not (and will not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any material
portion of the Copyrights may become invalidated or otherwise
impaired.  Such Grantor will not (either itself or through licensees)
do any act whereby any material portion of the Copyrights may fall into the
public domain.

     

    (d) Such
Grantor (either itself or through licensees) will not do any act that knowingly
uses any material Intellectual Property to infringe the intellectual property
rights of any other Person.

     

    (e) Such
Grantor will notify the Administrative Agent and the Lenders immediately if it
knows, or has reason to know, that any application or registration relating to
any material Intellectual Property may become forfeited, abandoned or dedicated
to the public, or of any adverse determination or development (including,
without limitation, the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any court or tribunal in any country) regarding such
Grantor’s ownership of, or the validity of, any material Intellectual Property
or such Grantor’s right to register the same or to own and maintain the
same.

     

    
      
        
        

      

      
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    (f) Whenever
such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs.  Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent’s and the Lenders’
security interest in any Copyright, Patent or Trademark and the goodwill and
General Intangibles of such Grantor relating thereto or represented
thereby.

     

    (g) Such
Grantor will take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.

     

    (h) In the
event that any material Intellectual Property is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Intellectual Property and (ii) if such Intellectual Property is of material
economic value, promptly notify the Administrative Agent after it learns thereof
and sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.

     

    Section
5.08 Commercial Tort
Claims.  If such Grantor shall obtain an interest in any
Commercial Tort Claim with a potential value in excess of $100,000, such Grantor
shall, within 30 days of obtaining such interest, sign and deliver documentation
acceptable to the Administrative Agent granting a security interest under the
terms and provisions of this Agreement in and to such Commercial Tort
Claim.

     

    ARTICLE
VI

    Remedial
Provisions

     

    Section
6.01 Certain Matters Relating to
Receivables. 

     

    (a) The
Administrative Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information as
the Administrative Agent may require in connection with such test
verifications.  At any time and from time to time, upon the
Administrative Agent’s request and at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others satisfactory to the
Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Receivables.

     

    
      
        
        

      

      
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    (b) The
Administrative Agent hereby authorizes each Grantor to collect such Grantor’s
Receivables and the Administrative Agent may curtail or terminate said authority
at any time after the occurrence and during the continuance of an Event of
Default.  If required by the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, any payments
of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in
any event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 6.05 and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor.  Each such
deposit of Proceeds of Receivables shall be accompanied by a report identifying
in reasonable detail the nature and source of the payments included in the
deposit.

     

    (c) At the
Administrative Agent’s request, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping
receipts.

     

    Section
6.02 Communications with
Obligors; Grantors Remain Liable.

     

    (a) The
Administrative Agent in its own name or in the name of others may at any time
communicate with obligors under the Receivables and parties to the Contracts to
verify with them to the Administrative Agent’s satisfaction the existence,
amount and terms of any Receivables.

     

    (b) Upon the
request of the Administrative Agent at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall notify obligors on
the Receivables that the Receivables have been assigned to the Administrative
Agent for the ratable benefit of the Secured Parties and that payments in
respect thereof shall be made directly to the Administrative Agent.

     

    (c) Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Receivables to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto.  Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent or any Lender
of any payment relating thereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

     

    
      
        
        

      

      
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    Section
6.03 Pledged Securities.

     

    (a) Unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the relevant Grantor of the Administrative
Agent’s intent to exercise its corresponding rights pursuant to Section
6.03(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged
Securities and all payments made in respect of the Pledged Notes, in each case
paid in the normal course of business of the relevant Issuer and consistent with
past practice, to the extent permitted in the Credit Agreement, and to exercise
all voting and corporate or other organizational rights with respect to the
Investment Property; provided, however, that no vote shall be cast or corporate
or other organizational right exercised or other action taken which would impair
the Collateral or which would be inconsistent with or result in any violation of
any provision of the Credit Agreement, this Agreement or any other Loan
Document.

     

    (b) If an
Event of Default shall occur and be continuing and the Administrative Agent
shall give notice of its intent to exercise such rights to the relevant Grantor
or Grantors, (i) the Administrative Agent shall have the right to receive any
and all cash dividends, payments or other Proceeds paid in respect of the
Investment Property and make application thereof to the Obligations in such
order as the Administrative Agent may determine, and (ii) any or all of the
Investment Property shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to such
Investment Property at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (B) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Investment Property as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or other
organizational structure of any Issuer, or upon the exercise by any Grantor or
the Administrative Agent of any right, privilege or option pertaining to such
Investment Property, and in connection therewith, the right to deposit and
deliver any and all of the Investment Property with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.

     

    (c) Each
Grantor hereby authorizes and instructs each Issuer of any Investment Property
pledged by such Grantor hereunder to (i) comply with any instruction received by
it from the Administrative Agent in writing that (A) states that an Event of
Default has occurred and is continuing and (B) is otherwise in accordance with
the terms of this Agreement, without any other or further instructions from such
Grantor, and each Grantor agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to the Investment Property directly to
the Administrative Agent.

     

    
      
        
        

      

      
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    Section
6.04 Proceeds to be Turned Over
to Administrative Agent.  In addition to the rights of the
Administrative Agent and the Lenders specified in Section 6.01 with respect to
payments of Receivables, if an Event of Default shall occur and be continuing,
all Proceeds received by any Grantor consisting of cash, checks and other
near-cash items shall be held by such Grantor in trust for the Administrative
Agent and the Lenders, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Administrative
Agent in the exact form received by such Grantor (duly indorsed by such Grantor
to the Administrative Agent, if required).  All Proceeds received by
the Administrative Agent hereunder shall be held by the Administrative Agent in
a Collateral Account maintained under its sole dominion and
control.  All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Grantor in trust for the Administrative Agent and
the Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.05.

     

    Section
6.05 Application of
Proceeds.  At such intervals as may be agreed upon by the
Borrower and the Administrative Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Administrative Agent’s election,
the Administrative Agent may apply all or any part of Proceeds constituting
Collateral, whether or not held in any Collateral Account, and any proceeds of
the guarantee set forth in Article II, in payment of the Obligations in
accordance with Section 10.02(c) of the Credit
Agreement.    

     

    Section
6.06 Code and Other
Remedies.

     

    (a) If an
Event of Default shall occur and be continuing, the Administrative Agent, on
behalf of the Secured Parties, may exercise, in addition to all other rights and
remedies granted to them in this Agreement, the other Loan Documents and in any
other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law or otherwise available at law or equity.  Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker’s board or office of
any Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk.  Any Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and
released.  Each Grantor further agrees, at the Administrative Agent’s
request, to assemble the Collateral and make it available to the Administrative
Agent at places which the Administrative Agent shall reasonably select, whether
at such Grantor’s premises or elsewhere.  Any such sale or transfer by
the Administrative Agent either to itself or to any other Person shall be
absolutely free from any claim of right by any Grantor, including any equity or
right of redemption, stay or appraisal which any Grantor has or may have under
any rule of law, regulation or statute now existing or hereafter adopted (and
each Grantor hereby waives any rights it may have in respect
thereof).  

     

    
      
        
        

      

      
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    Upon any
such sale or transfer, the Administrative Agent shall have the right to deliver,
assign and transfer to the purchaser or transferee thereof the Collateral so
sold or transferred.  The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this Section 6.06, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Administrative Agent
and the Secured Parties hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, in accordance with Section 10.02(c) of the Credit Agreement,
and only after such application and after the payment by the Administrative
Agent of any other amount required by any provision of law, including, without
limitation, Section 9.615(a)(3) of the UCC, need the Administrative Agent
account for the surplus, if any, to any Grantor.  To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands
it may acquire against the Administrative Agent or any Secured Party arising out
of the exercise by them of any rights hereunder except to the extent caused by
the gross negligence or willful misconduct of the Administrative Agent or such
Secured Party or their respective agents.  If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.

     

    (b) In the
event that the Administrative Agent elects not to sell the Collateral, the
Administrative Agent retains its rights to dispose of or utilize the Collateral
or any part or parts thereof in any manner authorized or permitted by law or in
equity, and to apply the proceeds of the same towards payment of the
Obligations.  Each and every method of disposition of the Collateral
described in this Agreement shall constitute disposition in a commercially
reasonable manner.  Without limitation of the foregoing, any
disposition involving three (3) or more bidders that are “accredited investors”
(within the meaning of the Securities Act) shall constitute disposition in a
commercially reasonable manner.

     

    (c) The
Administrative Agent may appoint any Person as agent to perform any act or acts
necessary or incident to any sale or transfer of the Collateral.

     

    Section
6.07 Registration
Rights.

     

    (a) If the
Administrative Agent shall determine to exercise its right to sell any or all of
the Pledged Securities pursuant to Section 6.06, and if in the opinion of the
Administrative Agent it is necessary or advisable to have the Pledged
Securities, or that portion thereof to be sold, registered under the provisions
of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i)
execute and deliver, and cause the directors and officers of such Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Securities, or that portion
thereof to be sold, under the provisions of the Securities Act, (ii) use its
best efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Pledged Securities, or that portion thereof to be
sold and (iii) make all amendments thereto and/or to the related prospectus
which are reasonably necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto.  Each Grantor
agrees to cause such Issuer to comply with the provisions of the securities or
“Blue Sky” laws of any and all jurisdictions which the Administrative Agent
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.

     

    
      
        
        

      

      
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    (b) Each
Grantor recognizes that the Administrative Agent may be unable to effect a
public sale of any or all the Pledged Securities, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, or  may determine that a public sale is
impracticable or not commercially reasonable, and, accordingly, may resort to
one or more private sales thereof to a restricted group of purchasers which will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof.  Each Grantor acknowledges and agrees that any such private
sale may result in prices and other terms less favorable than if such sale were
a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner.  The Administrative Agent shall be under no obligation to
delay a sale of any of the Pledged Securities for the period of time necessary
to permit the Issuer thereof to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if such
Issuer would agree to do so.

     

    (c) Each
Grantor agrees to use its best efforts to do or cause to be done all such other
acts as may be necessary to make such sale or sales of all or any portion of the
Pledged Securities pursuant to this Section 6.07 valid and binding and in
compliance with any and all other applicable Governmental
Requirements.  Each Grantor further agrees that a breach of any of the
covenants contained in this Section 6.07 will cause irreparable injury to the
Secured Parties, that the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.07 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit
Agreement.

     

    Section
6.08 Waiver;
Deficiency.  Each Grantor waives and agrees not to assert any
rights or privileges which it may acquire under the UCC.  Each Grantor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay its Obligations and the
reasonable fees and disbursements of any attorneys employed by the
Administrative Agent or any Secured Party to collect such
deficiency.

     

    Section
6.09 Non-Judicial
Enforcement.  The Administrative Agent may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by law, each Grantor expressly waives any and all legal rights which
might otherwise require the Administrative Agent to enforce its rights by
judicial process.

     

    
      
        
        

      

      
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    ARTICLE
VII

    The
Administrative Agent

     

    Section
7.01 Administrative Agent’s
Appointment as Attorney-in-Fact, Etc.

     

    (a) Each
Grantor hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the
following:

     

    (i) in the
name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Receivable or with respect to any other
Collateral and file any claim or take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under any
Receivable or with respect to any other Collateral whenever
payable;

     

    (ii) in the
case of any Intellectual Property, execute and deliver, and have recorded, any
and all agreements, instruments, documents and papers as the Administrative
Agent may request to evidence the Administrative Agent’s and the Secured
Parties’ security interest in such Intellectual Property and the goodwill and
general intangibles of such Grantor relating thereto or represented
thereby;

     

    (iii) pay or
discharge Taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this
Agreement or any other Loan Document and pay all or any part of the premiums
therefor and the costs thereof;

     

    (iv) execute,
in connection with any sale provided for in Section 6.06 or Section 6.07, any
indorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

     

    (v) (A)
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (B) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (D) in the name of such Grantor, or in its own name,
or otherwise, commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral;

     

    
      
        
        

      

      
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    (E)
defend any suit, action or proceeding brought against such Grantor with respect
to any Collateral; (F) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (G) assign any Copyright, Patent or
Trademark (along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or terms, on
such conditions, and in such manner, as the Administrative Agent shall in its
sole discretion determine; and (H) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent’s and the Secured Parties’ security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.

     

    Anything
in this Section 7.01(a) to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.01(a) unless an Event of Default shall have
occurred and be continuing.

     

    (b) If any
Grantor fails to perform or comply with any of its agreements contained herein,
the Administrative Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement.

     

    (c) The
expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 7.01, together with interest thereon at
the post-default rate specified in Section 3.02(c) of the Credit Agreement, but
in no event to exceed the Highest Lawful Rate, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.

     

    (d) Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof.  All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

     

    Section
7.02 Duty of Administrative
Agent.  The Administrative Agent’s sole duty with respect to
the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9.207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar Property
for its own account, and the Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which comparable secured parties accord comparable
collateral.  Neither the Administrative Agent, any Secured Party nor
any of their Related Parties shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. 

     

    
      
        
        

      

      
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    The
powers conferred on the Administrative Agent and the Secured Parties hereunder
are solely to protect the Administrative Agent’s and the Secured Parties’
interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any Secured Party to exercise any such
powers.  The Administrative Agent and the Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their Related Parties shall
be responsible to any Grantor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.  To the fullest
extent permitted by applicable law, the Administrative Agent shall be under no
duty whatsoever to make or give any presentment, notice of dishonor, protest,
demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection with
any Collateral or the Obligations, or to take any steps necessary to preserve
any rights against any Grantor or other Person or ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not it has or is deemed to have
knowledge of such matters.  Each Grantor, to the extent permitted by
applicable law, waives any right of marshaling in respect of any and all
Collateral, and waives any right to require the Administrative Agent or any
Secured Party to proceed against any Grantor or other Person, exhaust any
Collateral or enforce any other remedy which the Administrative Agent or any
Secured Party now has or may hereafter have against any Grantor or other
Person.

     

    Section
7.03 Execution of Financing
Statements.  Pursuant to the UCC and any other applicable law,
each Grantor authorizes the Administrative Agent to file or record financing
statements and other filing or recording documents or instruments with respect
to the Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent determines appropriate to perfect the
security interests of the Administrative Agent under this
Agreement.  A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any
jurisdiction.  Each Grantor authorizes the Administrative Agent to use
the collateral description “all personal property” or “all assets” in any such
financing statements.  Each Grantor hereby ratifies and authorizes the
filing by the Administrative Agent of any financing statement with respect to
the Collateral made prior to the date hereof.

     

    Section
7.04 Authority of Administrative
Agent.  Each Grantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Agreement with respect
to any action taken by the Administrative Agent or the exercise or non-exercise
by the Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Administrative Agent and the Secured Parties, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.

     

    
      
        
        

      

      
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    ARTICLE
VIII

    Subordination
of Indebtedness

     

    Section
8.01 Subordination of All Grantor
Claims.  As used herein, the term “Grantor Claims” shall
mean all debts and obligations of the Borrower or any other Grantor to any other
Grantor, whether such debts and obligations now exist or are hereafter incurred
or arise, or whether the obligation of the debtor thereon be direct, contingent,
primary, secondary, several, joint and several, or otherwise, and irrespective
of whether such debts or obligations be evidenced by note, contract, open
account, or otherwise, and irrespective of the Person or Persons in whose favor
such debts or obligations may, at their inception, have been, or may hereafter
be created, or the manner in which they have been or may hereafter be acquired
by.  After and during the continuation of an Event of Default, no
Grantor shall receive or collect, directly or indirectly, from any obligor in
respect thereof any amount upon the Grantor Claims.

     

    Section
8.02 Claims in
Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief, or other insolvency proceedings
involving any Grantor, the Administrative Agent on behalf of the Administrative
Agent and the Secured Parties shall have the right to prove their claim in any
proceeding, so as to establish their rights hereunder and receive directly from
the receiver, trustee or other court custodian, dividends and payments which
would otherwise be payable upon Grantor Claims.  Each Grantor hereby
assigns such dividends and payments to the Administrative Agent for the benefit
of the Administrative Agent and the Secured Parties for application against the
Borrower Obligations as provided under Section 10.02(c) of the Credit
Agreement.  Should the Administrative Agent or any Secured Party
receive, for application upon the Obligations, any such dividend or payment
which is otherwise payable to any Grantor, and which, as between such Grantors,
shall constitute a credit upon the Grantor Claims, then upon irrevocable and
indefeasible payment in full in cash of the Borrower Obligations, the expiration
of all Letters of Credit outstanding under the Credit Agreement and the
termination of all of the Commitments, the intended recipient shall become
subrogated to the rights of the Administrative Agent and the Secured Parties to
the extent that such payments to the Administrative Agent and the Secured
Parties on the Grantor Claims have contributed toward the liquidation of the
Obligations, and such subrogation shall be with respect to that proportion of
the Obligations which would have been unpaid if the Administrative Agent and the
Secured Parties had not received dividends or payments upon the Grantor
Claims.

     

    Section
8.03 Payments Held in
Trust.  In the event that, notwithstanding Section 8.01 and
Section 8.02, any Grantor should receive any fund, payment, claim or
distribution which is prohibited by such Sections, then it agrees: (a) to hold in trust
for the Administrative Agent and the Secured Parties an amount equal to the
amount of all funds, payments, claims or distributions so received and (b) that it shall
have absolutely no dominion over the amount of such funds, payments, claims or
distributions except to pay them promptly to the Administrative Agent, for the
benefit of the Secured Parties; and each Grantor covenants promptly to pay the
same to the Administrative Agent.

     

    
      
        
        

      

      
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    Section
8.04 Liens
Subordinate.  Each Grantor agrees that, until the Borrower
Obligations are irrevocably and indefeasibly paid in full in cash, no Letter of
Credit shall be outstanding and the termination of all of the Commitments, any
Liens securing payment of the Grantor Claims shall be and remain inferior and
subordinate to any Liens securing payment of the Obligations, regardless of
whether such encumbrances in favor of such Grantor, the Administrative Agent or
any Secured Party presently exist or are hereafter created or
attach.  Without the prior written consent of the Administrative
Agent, no Grantor, during the period in which any of the Borrower Obligations
are outstanding or the Commitments are in effect, shall (a) exercise or
enforce any creditor’s right it may have against any debtor in respect of the
Grantor Claims or (b) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceeding (judicial or otherwise, including without limitation the commencement
of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or
insolvency proceeding) to enforce any Lien held by it.

     

    Section
8.05 Notation of
Records.  Upon the request of the Administrative Agent, all
promissory notes and all accounts receivable ledgers or other evidence of the
Grantor Claims accepted by or held by any Grantor shall contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
under the terms of this Agreement.

     

    ARTICLE
IX

     

    Miscellaneous

     

    Section
9.01 No Waiver by Course of
Conduct; Cumulative Remedies.  Neither the Administrative Agent
nor any Secured Party shall by any act (except by a written instrument pursuant
to Section 9.04), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default.  No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Secured Party, and no
course of dealing with respect to, any right, power or privilege hereunder, or
any abandonment or discontinuance of steps to enforce such right, power or
privilege, shall operate as a waiver thereof.  No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  A waiver by the Administrative Agent or any Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Administrative Agent or such Secured Party
would otherwise have on any future occasion.  The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law or
equity.

     

    Section
9.02 Notices.  All
notices and other communications provided for herein shall be given in the
manner and subject to the terms of Section 12.01 of the Credit Agreement;
provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule
1.

     

    Section
9.03 Enforcement Expenses;
Indemnities.

     

    (a) Each
Guarantor agrees to pay or reimburse each Secured Party and the Administrative
Agent for all its costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Article II or otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents to which
such Guarantor is a party, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and expenses of in-house
counsel) to each Secured Party and of counsel to the Administrative
Agent.

     

    
      
        
        

      

      
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    (b) Each
Guarantor agrees to pay, and to save the Administrative Agent and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all Other Taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.

     

    (c) Each
Guarantor agrees to pay, and to save the Administrative Agent and the Secured
Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 12.03 of the Credit
Agreement.

     

    (d) The
agreements in this Section 9.03 shall survive repayment of the Obligations
and all other amounts payable under the Credit Agreement and the other Loan
Documents.

     

    Section
9.04 Amendments in
Writing.  None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except in accordance with
Section 12.02 of the Credit Agreement.

     

    Section
9.05 Successors and
Assigns.  The provisions of this Agreement shall be binding
upon the Grantors and their successors and assigns and shall inure to the
benefit of the Administrative Agent and the Secured Parties and their respective
successors and assigns; provided that no Grantor may assign, transfer or
delegate any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent, and any such purported assignment,
transfer or delegation shall be null and void.

     

    Section
9.06 Survival; Revival;
Reinstatement.

     

    (a) All
covenants, agreements, representations and warranties made by any Grantor herein
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document to which it is a party
shall be considered to have been relied upon by the Administrative Agent and the
Lenders and shall survive the execution and delivery of this Agreement and the
making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the other agents, the Issuing Bank or any Lender
may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under the Credit Agreement is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the
Commitments have not expired or terminated.  The provisions of
Section 9.03 shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of
the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.

     

    
      
        
        

      

      
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    (b) 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 the Administrative Agent’s and the
Secured Parties’ Liens, security interests, rights, powers and remedies under
this Agreement and each other Loan Document shall continue in full force and
effect.  In such event, each Loan Document shall be automatically
reinstated and the Borrower shall take such action as may be reasonably
requested by the Administrative Agent and the Secured Parties to effect such
reinstatement.

     

    Section
9.07 Counterparts; Integration;
Effectiveness.

     

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

     

    (b) This
Agreement, the other Loan Documents and any separate letter agreements with
respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof.  THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN THE LETTERS OF CREDIT AND THE LETTER OF CREDIT AGREEMENTS)
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

     

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

     

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

     

    
      
        
        

      

      
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    Section
9.09 Set-Off.  If
an Event of Default shall have occurred and be continuing, each Lender and each
of its Affiliates is hereby authorized at any time and from time to time,
without notice to such Person or any other Grantor, any such notice being
expressly waived by each Grantor, to the fullest extent permitted by law, to set
off and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness, claims or obligations (of whatsoever kind, including, without
limitations obligations under Swap Agreements), in any currency, whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or Affiliate to or for the credit or the account of any
Grantor against any of and all the obligations and liabilities of the Grantor
owed to such Lender now or hereafter existing under this Agreement or any other
Loan Document, irrespective of whether or not such Lender shall have made any
demand under this Agreement or any other Loan Document and although such
obligations may be unmatured.  The rights of each Lender under this
Section 9.09 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.

     

    Section
9.10 Governing Law; Submission to
Jurisdiction;
Waiver of Jury Trial.

     

    (a) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

     

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

     

    (c) EACH
PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OF THE CREDIT AGREEMENT (OR SUCH OTHER ADDRESS
AS IS SPECIFIED PURSUANT TO SECTION 12.01 OF THE CREDIT AGREEMENT) OR
SCHEDULE 1 HERETO, AS APPLICABLE, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30)
DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF A
PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY
IN ANY OTHER JURISDICTION.

     

    
      
        
        

      

      
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    (d) EACH
PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii)
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS AND (IV) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 9.10.

     

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

     

    Section
9.12 Acknowledgments.  Each
Grantor hereby acknowledges that:

     

    (a) it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents to which it is a party;

     

    (b) neither
the Administrative Agent nor any Secured Party has any fiduciary relationship
with or duty to any Grantor arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between the Grantors,
on the one hand, and the Administrative Agent and Secured Parties, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor;
and

     

    (c) no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Secured Parties or
among the Grantors and the Secured Parties.

     

    (d) Each of
the parties hereto specifically agrees that it has a duty to read this
Agreement, the Security Instruments and the other Loan Documents and agrees that
it is charged with notice and knowledge of the terms of this Agreement, the
Security Instruments and the other Loan Documents; that it has in fact read this
Agreement, the Security Instruments and the other Loan Documents and is fully
informed and has full notice and knowledge of the terms, conditions and effects
thereof; that it has been represented by independent legal counsel of its choice
throughout the negotiations preceding its execution of this Agreement and the
Security Instruments; and has received the advice of its attorney in entering
into this Agreement and the Security Instruments; and that it recognizes that
certain of the terms of this Agreement and the Security Instruments 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 SECURITY
INSTRUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

     

    
      
        
        

      

      
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    Section
9.13 Additional Grantors and
Additional Pledged
Securities.  Each Subsidiary of the Borrower that is required
to become a party to this Agreement pursuant to Section 8.13 of the Credit
Agreement shall become a party hereto as a Grantor for all
purposes of this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement and shall thereafter have the same rights, benefits and
obligations as a Grantor party hereto on the date hereof.  Each
Grantor that is required to pledge additional Equity Interests pursuant to the
Credit Agreement shall execute and deliver a Supplement.

     

    Section
9.14 Releases.

     

    (a) Release Upon Payment in
Full.  Upon the indefeasible payment in full in cash of the
Borrower Obligations, the termination or expiration of all Letters of Credit,
the termination or expiration of all Secured Swap Agreements and the termination
of all of the Commitments, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to the applicable Grantor to the
extent such Collateral shall not have been sold or otherwise applied pursuant to
the terms hereof.  Upon any such termination, the Administrative Agent
will, at the Grantors’ expense, execute and deliver to the applicable Grantor
such documents (including, without limitation, UCC-3 termination statements) as
such Grantor shall reasonably request to evidence such termination.

     

    (b) Partial
Releases.  If any of the Collateral shall be sold, transferred
or otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall promptly execute and deliver to such Grantor all releases or
other documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral.  At the request and sole expense of
the Borrower, a Guarantor shall be released from its obligations hereunder in
the event that all the Equity Interests of such Guarantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Credit
Agreement; provided that the Borrower shall have delivered to the Administrative
Agent, at least fifteen Business Days prior to the date of the proposed release,
a written request of a Responsible Officer for release identifying the relevant
Guarantor and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Borrower stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.

     

    (c) Retention in
Satisfaction.  Except as may be expressly applicable pursuant
to Section 9.620 of the UCC, no action taken or omission to act by the
Administrative Agent or the Secured Parties hereunder, including, without
limitation, any exercise of voting or consensual rights or any other action
taken or inaction, shall be deemed to constitute a retention of the Collateral
in satisfaction of the Obligations or otherwise to be in full satisfaction of
the Obligations, and the Obligations shall remain in full force and effect,
until the Administrative Agent and the Secured Parties shall have applied
payments (including, without limitation, collections from Collateral) towards
the Obligations in the full amount then outstanding or until such subsequent
time as is provided in Section 9.14(a).

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    Section
9.15 Acceptance.  Each
Grantor hereby expressly waives notice of acceptance of this Agreement,
acceptance on the part of the Administrative Agent and the Secured Parties being
conclusively presumed by their request for this Agreement and delivery of the
same to the Administrative Agent.

     

    Section
9.16 Intercreditor
Agreement.  Each party hereunder agrees that it will be bound
by and will take no actions contrary to the provisions of the Intercreditor
Agreement.

     

     

     

    [Remainder
of page intentionally left blank; signature page follows]

     

    
      
         

      

      
        -36-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, each of the undersigned has caused this Guaranty and Collateral
Agreement to be duly executed and delivered as of the date first above
written.

     

     

    
      
        	
                BORROWER:

              	
                Petro
      Resources Corporation

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:  /s/ Wayne
      Hall                                                          
      

              
	 
      	
                Name:  Wayne
      Hall

              
	 
      	
                Title:    CEO

              
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
                GUARANTORS:

              	
                PRC
      Williston, LLC

              
	 
      	 
      
	 
      	
                By:  Petro
      Resources Corporation,

              
	 
      	
                        its
      sole member

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:  /s/ Wayne
      Hall                                                           
      

              
	 
      	
                Name:  Wayne
      Hall

              
	 
      	
                Title:    CEO

              

      

     

    
      
         

      

      
        
          Signature
Page 1 –
Guaranty and Collateral Agreement

        

        
          

        

      

      
         

      

    

    Acknowledged
and Agreed to as

    of the
date hereof by:

     

     

    
      
        	
                ADMINISTRATIVE
      AGENT:

              	
                CIT CAPITAL USA
      INC.,

              
	 
      	
                as
      Administrative Agent

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:  /s/ George
      McKean                                                   
      

              
	 
      	
                Name:
      George McKean

              
	 
      	
                Title:
      Vice President

              

      

    

     

     

     

     

     

     

    
      Signature Page
2 – Guaranty and
Collateral Agreement

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