Document:

exhibit101_03022009.htm

    Exhibit
10.1

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    CREDIT
AGREEMENT

     

    dated
as of February 27, 2009

     

    among

     

    Northern
Oil and Gas, Inc.,

    as
Borrower,

     

    CIT
Capital USA Inc.,

    as
Administrative Agent,

     

    and

     

    The
Lenders Party Hereto

     

    

     

    CIT
Capital Securities LLC

    Sole
Lead Arranger and Sole Bookrunner

     

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
OF CONTENTS

     

    Page

     

     

    ARTICLE
I

     

     

    DEFINITIONS
AND ACCOUNTING MATTERS

     

    
      	
               
      

            	
              Section
      1.01Terms Defined Above                                                                                                         

            

    

    
      	
               
      

            	
              Section
      1.02Certain Defined Terms                                                                                                        

            

    

    
      	
               
      

            	
              Section
      1.03Types of Loans and Borrowings

            

    

    
      	
               
      

            	
              Section
      1.04Terms Generally; Rules of
Construction

            

    

    
      	
               
      

            	
              Section
      1.05Accounting Terms and Determinations;
GAAP

            

    

     

    ARTICLE
II

     

     

    THE
CREDITS

     

    
      	
               
      

            	
              Section
      2.01Commitments

            

    

    
      	
               
      

            	
              Section
      2.02Loans and Borrowings

            

    

    
      	
               
      

            	
              Section
      2.03Requests for Borrowings

            

    

    
      	
               
      

            	
              Section
      2.04Interest Elections; Conversions

            

    

    
      	
               
      

            	
              Section
      2.05Funding of Borrowings

            

    

    
      	
               
      

            	
              Section
      2.06Termination and Reduction of Aggregate Maximum Credit
      Amounts

            

    

    
      	
               
      

            	
              Section
      2.07Borrowing Base

            

    

    
      	
               
      

            	
              Section
      2.08Letters of Credit

            

    

     

    ARTICLE
III

     

     

    PAYMENTS
OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

     

    
      	
               
      

            	
              Section
      3.01Repayment of Loans

            

    

    
      	
               
      

            	
              Section
      3.02Interest

            

    

    
      	
               
      

            	
              Section
      3.03Alternate Rate of Interest

            

    

    
      	
               
      

            	
              Section
      3.04Prepayments

            

    

    
      	
               
      

            	
              Section
      3.05Fees

            

    

     

    ARTICLE
IV

     

     

    PAYMENTS;
PRO RATA TREATMENT; SHARING OF SET-OFFS

     

    
      	
               
      

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

            

    

    
      	
               
      

            	
              Section
      4.02Presumption of Payment by the
Borrower

            

    

    
      	
               
      

            	
              Section
      4.03Certain Deductions by the Administrative
  Agent

            

    

    
      	
               
      

            	
              Section
      4.04Disposition of Proceeds

            

    

     

    ARTICLE
V

     

     

    INCREASED
COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

     

    
      	
               
      

            	
              Section
      5.01Increased Costs

            

    

    
      	
               
      

            	
              Section
      5.02Break Funding Payments

            

    

    
      	
               
      

            	
              Section
      5.03Taxes

            

    

    
      	
               
      

            	
              Section
      5.04Designation of Different Lending
Office

            

    

    
      	
               
      

            	
              Section
      5.05Illegality

            

    

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              ARTICLE
      VI

            

    

    
      	
               
      

            	
              Conditions
      Precedent

            

    

    
      	
               
      

            	
              Section
      6.01Effective Date

            

    

    
      	
               
      

            	
              Section
      6.02Each Credit Event

            

    

     

    ARTICLE
VII

     

     

    REPRESENTATIONS
AND WARRANTIES

     

    
      	
               
      

            	
              Section
      7.01Organization; Powers

            

    

    
      	
               
      

            	
              Section
      7.02Authority; Enforceability

            

    

    
      	
               
      

            	
              Section
      7.03Approvals; No Conflicts

            

    

    
      	
               
      

            	
              Section
      7.04Financial Condition; No Material Adverse
  Change

            

    

    
      	
               
      

            	
              Section
      7.05Litigation

            

    

    
      	
               
      

            	
              Section
      7.06Environmental Matters

            

    

    
      	
               
      

            	
              Section
      7.07Compliance with the Laws and Agreements; No
  Defaults

            

    

    
      	
               
      

            	
              Section
      7.08Investment Company Act

            

    

    
      	
               
      

            	
              Section
      7.09Taxes

            

    

    
      	
               
      

            	
              Section
      7.10ERISA

            

    

    
      	
               
      

            	
              Section
      7.11Disclosure; No Material
Misstatements

            

    

    
      	
               
      

            	
              Section
      7.12Insurance

            

    

    
      	
               
      

            	
              Section
      7.13Restriction on Liens

            

    

    
      	
               
      

            	
              Section
      7.14Subsidiaries

            

    

    
      	
               
      

            	
              Section
      7.15Location of Business and
Offices

            

    

    
      	
               
      

            	
              Section
      7.16Properties; Titles, Etc

            

    

    
      	
               
      

            	
              Section
      7.17Maintenance of Properties

            

    

    
      	
               
      

            	
              Section
      7.18Gas Imbalances, Prepayments

            

    

    
      	
               
      

            	
              Section
      7.19Marketing of Production

            

    

    
      	
               
      

            	
              Section
      7.20Swap Agreements

            

    

    
      	
               
      

            	
              Section
      7.21Use of Loans and Letters of
Credit

            

    

    
      	
               
      

            	
              Section
      7.22Solvency

            

    

    
      	
               
      

            	
              Section
      7.23Casualty Events

            

    

    
      	
               
      

            	
              Section
      7.24Material Agreements

            

    

    
      	
               
      

            	
              Section
      7.25No Brokers

            

    

    
      	
               
      

            	
              Section
      7.26Reliance

            

    

    
      	
               
      

            	
              Section
      7.27Payments by Purchasers of
Production

            

    

    
      	
               
      

            	
              Section
      7.28Existing Accounts Payable

            

    

    
      	
               
      

            	
              Section
      7.29Development Plan

            

    

     

    ARTICLE
VIII

     

     

    AFFIRMATIVE
COVENANTS

     

    
      	
               
      

            	
              Section
      8.01Financial Statements; Ratings Change; Other
  Information

            

    

    
      	
               
      

            	
              Section
      8.02Notices of Material Events

            

    

    
      	
               
      

            	
              Section
      8.03Existence; Conduct of Business

            

    

    
      	
               
      

            	
              Section
      8.04Payment of Obligations

            

    

    
      	
               
      

            	
              Section
      8.05Performance of Obligations under Loan
  Documents

            

    

    
      	
               
      

            	
              Section
      8.06Operation and Maintenance of
Properties

            

    

    
      	
               
      

            	
              Section
      8.07Insurance

            

    

    
      	
               
      

            	
              Section
      8.08Books and Records; Inspection
Rights

            

    

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              Section
      8.09Compliance with Laws

            

    

    
      	
               
      

            	
              Section
      8.10Environmental Matters

            

    

    
      	
               
      

            	
              Section
      8.11Further Assurances 

            

    

    
      	
               
      

            	
              Section
      8.12Reserve Reports 

            

    

    
      	
               
      

            	
              Section
      8.13Title Information 

            

    

    
      	
               
      

            	
              Section
      8.14Additional Collateral; Additional Guarantors
  

            

    

    
      	
               
      

            	
              Section
      8.15ERISA Compliance 

            

    

    
      	
               
      

            	
              Section
      8.16Swap Agreements

            

    

    
      	
               
      

            	
              Section
      8.17Marketing Activities

            

    

    
      	
               
      

            	
              Section
      8.18Development Plan 

            

    

    
      	
               
      

            	
              Section
      8.19Operating Account 

            

    

     

    ARTICLE
IX

     

     

    NEGATIVE
COVENANTS

     

    
      	
               
      

            	
              Section
      9.01Financial Covenants 

            

    

    
      	
               
      

            	
              Section
      9.02Debt

            

    

    
      	
               
      

            	
              Section
      9.03Liens

            

    

    
      	
               
      

            	
              Section
      9.04Dividends, Distributions and Repayment of Officer Notes
    

            

    

    
      	
               
      

            	
              Section
      9.05Investments, Loans and Advances

            

    

    
      	
               
      

            	
              Section
      9.06Nature of Business

            

    

    
      	
               
      

            	
              Section
      9.07Limitation on Leases

            

    

    
      	
               
      

            	
              Section
      9.08Proceeds of Notes

            

    

    
      	
               
      

            	
              Section
      9.09ERISA Compliance

            

    

    
      	
               
      

            	
              Section
      9.10Sale or Discount of Receivables

            

    

    
      	
               
      

            	
              Section
      9.11Mergers, Etc

            

    

    
      	
               
      

            	
              Section
      9.12Sale of Properties

            

    

    
      	
               
      

            	
              Section
      9.13Environmental Matters

            

    

    
      	
               
      

            	
              Section
      9.14Material Agreements

            

    

    
      	
               
      

            	
              Section
      9.15Transactions with Affiliates

            

    

    
      	
               
      

            	
              Section
      9.16Subsidiaries

            

    

    
      	
               
      

            	
              Section
      9.17Negative Pledge Agreements; Dividend
  Restrictions

            

    

    
      	
               
      

            	
              Section
      9.18Gas Imbalances, Take-or-Pay or Other
  Prepayments

            

    

    
      	
               
      

            	
              Section
      9.19Swap Agreements

            

    

    
      	
               
      

            	
              Section
      9.20Development Plan

            

    

    
      	
               
      

            	
              Section
      9.21Limitation on Capital
Expenditures

            

    

    
      	
               
      

            	
              Section
      9.22Auction-Rate Securities

            

    

     

    ARTICLE
X

     

     

    EVENTS OF
DEFAULT; REMEDIES

     

    
      	
               
      

            	
              Section
      10.01Events of Default

            

    

    
      	
               
      

            	
              Section
      10.02Remedies 

            

    

     

    ARTICLE
XI

     

     

    THE
ADMINISTRATIVE AGENT

     

    
      	
               
      

            	
              Section
      11.01Appointment; Powers

            

    

    
      	
               
      

            	
              Section
      11.02Duties and Obligations of Administrative
  Agent

            

    

    
      	
               
      

            	
              Section
      11.03Action by Administrative
Agent

            

    

    
      
         

      

      
        iii

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              Section
      11.04Reliance by Administrative
Agent

            

    

    
      	
               
      

            	
              Section
      11.05Subagents

            

    

    
      	
               
      

            	
              Section
      11.06Resignation or Removal of Administrative
  Agent

            

    

    
      	
               
      

            	
              Section
      11.07Administrative Agent as Lender

            

    

    
      	
               
      

            	
              Section
      11.08No Reliance 

            

    

    
      	
               
      

            	
              Section
      11.09Administrative Agent May File Proofs of
  Claim

            

    

    
      	
               
      

            	
              Section
      11.10Authority of Administrative Agent to Release Collateral and
      Liens

            

    

    
      	
               
      

            	
              Section
      11.11The Arranger

            

    

     

    ARTICLE
XII

     

     

    MISCELLANEOUS

     

    
      	
               
      

            	
              Section
      12.01Notices 

            

    

    
      	
               
      

            	
              Section
      12.02Waivers; Amendments 

            

    

    
      	
               
      

            	
              Section
      12.03Expenses, Indemnity; Damage Waiver

            

    

    
      	
               
      

            	
              Section
      12.04Successors and Assigns 

            

    

    
      	
               
      

            	
              Section
      12.05Survival; Revival; Reinstatement

            

    

    
      	
               
      

            	
              Section
      12.06Counterparts; Integration; Effectiveness

            

    

    
      	
               
      

            	
              Section
      12.07Severability

            

    

    
      	
               
      

            	
              Section
      12.08Right of Setoff

            

    

    
      	
               
      

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

            

    

    
      	
               
      

            	
              Section
      12.10Headings

            

    

    
      	
               
      

            	
              Section
      12.11Confidentiality

            

    

    
      	
               
      

            	
              Section
      12.12Interest Rate Limitation

            

    

    
      	
               
      

            	
              Section
      12.13EXCULPATION PROVISIONS

            

    

    
      	
               
      

            	
              Section
      12.14Collateral Matters; Swap
Agreements

            

    

    
      	
               
      

            	
              Section
      12.15No Third Party Beneficiaries

            

    

    
      	
               
      

            	
              Section
      12.16USA Patriot Act Notice

            

    

     

    

     

    
      
         

      

      
        iv

        
          

        

      

      
         

      

    

     

    ANNEXES,
EXHIBITS AND SCHEDULES

     

     

    

     

    Annex
I                                List
of Maximum Credit Amounts

    

    Exhibit
A                               Form
of Note

    Exhibit
B                                Form
of Borrowing Request

    Exhibit
C                                Form
of Interest Election Request

    Exhibit
D                                Form
of Compliance Certificate

    
      	
               
      

            	
              Exhibit
      E

            	
              Development
      Plan

            

    

    Exhibit
F                                Security
Instruments

    Exhibit
G                                Form
of Assignment and Assumption

    Exhibit
H                                Form
of Swap Agreement Certificate

    Exhibit
I                                 
Form of Reserve Report Certificate

    Exhibit
J                                
List of Unmortgaged Properties

    

    Schedule
1.02                      Approved
Counterparties

    Schedule
6.01(p)                 Hedging
Program

    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
8.14                      Additional
Oil and Gas Properties

    

    

    

     

    
      
         

      

      
        v

        
          

        

      

      
         

      

    

    THIS CREDIT AGREEMENT dated as
of February 27, 2009, is among: Northern Oil and Gas, Inc., a corporation duly
formed and existing under the laws of the State of Nevada (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 loans to and extensions
of credit on behalf of the Borrower.

     

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

     

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

     

    ARTICLE
I

     

    Definitions
and Accounting Matters

     

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

     

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

     

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

     

    “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; provided that the Adjusted LIBO Rate applicable for any
Eurodollar Loans shall be no less than 2.5% at any time.

     

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

     

    “Affected Loans” has
the meaning assigned such term in Section
5.05.

     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    “Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the sum of the Federal Funds Effective Rate
in effect on such day plus one-half of one percent (0.5%) and (c) the
Adjusted LIBO Rate for a three (3) month Interest Period on such day (or if such
day is not a Business Day, the immediately preceding Business Day) plus 1.0%,
provided that,
for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on
the rate appearing on the Bloomberg BBAM Screen (or on any successor or
substitute thereto or therefor selected by the Administrative Agent in
accordance with the definition of LIBO Rate herein) at approximately 11:00 a.m.
London time on such day.  Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted
LIBO Rate shall be effective from and including the effective date of such
change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO
Rate, respectively.

     

    “Applicable Margin”
means, for any day, (a) with respect to any Eurodollar Loan, a rate per annum
equal to 5.50% and (b) with respect to any ABR Loan, a rate per annum equal to
4.50%.

    

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

     

    “Approved
Counterparty” means (a) any Lender or any Affiliate of a Lender, (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 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) that is engaged in making,
purchasing, holding, or investing in commercial loans and similar extensions of
credit and that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers, 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) Ryder Scott Company Petroleum Consultants, L.P. and
(b) any other independent petroleum engineers reasonably acceptable to the
Administrative Agent.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Arranger” means CIT
Capital Securities LLC, in its capacities as the sole lead arranger and sole
bookrunner with respect to the transactions contemplated hereby.

     

    “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.

     

    “Auction-Rate
Securities” means those certain UBS auction rate securities in an
aggregate principal amount up to $2,825,143 held in Borrower’s investment
account Number RP 08144 at UBS Financial Services, Inc. or Borrower’s investment
account Number RP 21955 at UBS Financial Services, Inc., including, but not
limited to, those identified as follows:

     

    (a)           NICHOLAS
APPLEGATE CONY & INCOME FUND SER A M-7 AUCT PFD 3.28% identified by CUSIP
Number 65370F200;

     

    (b)           SCUDDER
PREEF REAL ESTATE FUND II INC (M) SER A AUCT PFD 4.691% identified by CUSIP
Number 81119R207;

     

    (c)           ILLINOIS
STUD ASST VIII-7 28DAY ARC TX RV BE/R/ VARIABLE RATE RATE 04.251% MATURES
03/01/45 identified by CUSIP Number 452281HW1;

     

    (d)           SLMA
TAXABLE B/E /R/ VARIABLE RATE RATE 03.987% MATURES 03/15/28 identified by CUSIP
Number 78442GET9;

     

    (e)           INDIANA
SECNDRY MRKT EDU SER 05-3 RV TAXBLE BE/R/VARIABLE RATE RATE 03.844% MATURES
12/01/45 identified by CUSIP Number 455900AW0;

     

    (f)           SLMA
TAXABLE B/E /R/ VARIABLE RATE RATE 03.988% MATURES 09/15/28 identified by CUSIP
Number 78442GFV3;

     

    (g)           KENTUCKY
HGHR ED STUD LN SER A-4 REV TXBLE BE/R/VARIABLE RATE RATE 03.920% MATURES
06/11/35 identified by CUSIP Number 49130NBE8; and

     

    (h)           SLMA
TAXABLE /R/ VARIABLE RATE RATE 03.988% MATURES 06/17/30 identified by CUSIP
Number 78442GGT7.

     

    “Auction-Rate Securities
Documents” means the “Acceptance of UBS’s offer relating to auction rate
securities” relating to Borrower’s investment account Number RP 08144 at UBS
Financial Services, Inc., the “Acceptance of UBS’s offer relating to auction
rate securities: relating to Borrower’s investment account Number RP 21955 at
UBS Financial Services, Inc., the Prospectus of UBS AG dated October 7, 2008
relating to the Auction-Rate Securities and all other documents related to an
offer by UBS AG to liquidate the Borrower’s Auction Rate
Securities.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

    “Borrowing Base
Deficiency” occurs if at any time the total Revolving Credit Exposures
exceed the Borrowing Base then in effect.

     

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

     

    “Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks in
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”.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    “Casualty Event” means
any loss, casualty or other insured damage to any Property of the Borrower or
any of its Subsidiaries in an amount greater than $250,000, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $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 (within the meaning of the Securities Exchange Act of 1934 and the rules
of the SEC thereunder as in effect on the date hereof) other than Michael Reger
or Ryan Gilbertson of Equity Interests so that such Person or group owns 30% or
more 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 or (c) Michael Reger or Ryan
Gilbertson shall cease to devote a substantial amount of their time,
respectively, to the day-to-day management of the Credit Parties.

     

    “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 the Issuing Bank
(or, for purposes of Section 5.01(b)), by
any lending office of such Lender or by such Lender’s or the Issuing Bank’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.

     

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

     

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

     

    “Commitment Fee Rate”
means, on any day, a rate per annum equal to 0.625%.

     

    “Commodity Hedging
Cap” has the meaning specified in Section 9.19.

     

    “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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    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) any extraordinary gains or losses during
such period and (d) any gains or losses attributable to writeups or writedowns
of assets, including ceiling test writedowns; and provided further that if the
Borrower or any Consolidated Subsidiary shall acquire or dispose of any Property
during such period, then Consolidated Net Income shall be calculated after
giving pro forma effect
to such acquisition or disposition, as if such acquisition or disposition had
occurred on the first day of such period.

     

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

     

    “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management 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.

     

    “Credit Parties”
means, collectively, the Borrower and Guarantors, if any.

     

    “Debt” means, for any
Person, 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 that are more than sixty (60) days past
the due date other than those which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (d) all obligations of such Person under Capital Leases;
(e) all obligations of such Person under Synthetic Leases; (f) all Debt (as
defined in the other clauses of this definition) of others secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) a Lien on any Property of such Person, whether or not such Debt
is assumed by such Person; (g) all Debt (as defined in the other clauses of this
definition) of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of 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

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    covenants
of others or to purchase the Debt or Property of others; (i) all
obligations of such Person to deliver commodities, goods or services, including,
without limitation, Hydrocarbons, in consideration of one or more advance
payments, other than gas balancing arrangements in the ordinary course of
business; (j) all obligations of such Person to pay for goods or services
whether or not such goods or services are 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) any Disqualified Capital Stock issued by such
Person; and (m) the undischarged balance of any production payment created by
such Person or for the creation of which such Person 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.

     

    “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.

     

    “Defaulting Lender”
means a Lender (a) that fails to fund a requested Loan required to be funded by
such Lender and such default continues for one (1) Business Day, (b) that fails
to reimburse the Administrative Agent for an LC Disbursement required to be
reimbursed by such Lender and such default continues for one (1) Business Day or
(c) who (or whose bank holding company) is placed into receivership,
conservatorship or bankruptcy.

     

    “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 as Exhibit E
as the same may be amended from time to time pursuant to Section 9.20.

     

    “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 the earlier of (a) the Termination Date
and (b) the date on which there are no Loans, LC Exposure or other obligations
hereunder outstanding and all of the Commitments are terminated.

     

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

     

    “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, one-time fees paid in connection with capital-raising
transactions, acquisitions and other one-time corporate transactions, the fair
market value of capital stock issued for consideration, exploration expenditures
and costs and other similar noncash charges, minus all noncash income added
to

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Consolidated
Net Income; provided that EBITDAX for the fiscal quarters ending March 31, 2009,
June 30, 2009 and September 30, 2009 shall be calculated as
follows:

     

    (a)           for
the fiscal quarter ending March 31, 2009, EBITDAX shall be EBITDAX for such
quarter multiplied by four.

     

    (b)           for
the fiscal quarter ending June 30, 2009, EBITDAX shall be EBITDAX for the
six-month period ending on such date multiplied by two.

     

    (c)           for
the fiscal quarter ending September 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).

     

    “Eligible Obligor”
means that on any date of determination, such obligor is (i) an entity duly
organized and validly existing under the laws of, and has its chief executive
offices in, the United States or any political subdivision thereof, and has a
billing address within the United States, (ii) a legal operating entity or
holding company, and not a natural person, (iii) not a governmental authority,
and (iv) not subject to insolvency proceedings.

     

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

     

    “Environmental Laws”
means any and all Governmental Requirements pertaining in any way to health,
safety, the environment, 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, 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.

     

    “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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    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.

     

    “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, royalty 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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    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, and Liens related
to surface leases and surface operations, 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.

     

    “Excess Cash Flow” for
any period shall mean EBITDAX for such period less cash payments for (a) taxes
during such period, (b) any changes in working capital from the preceding period
(as determined in accordance with GAAP) made during such period and (c) Capital
Expenditures made during such period that are approved by the Majority Lenders
or are otherwise permitted under this Agreement.

     

    “Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, the Issuing Bank or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower or any Guarantor hereunder or under any other Loan Document, (a)
income or franchise taxes imposed on (or measured by) its net income by the
United States of America or such other jurisdiction (or any political
subdivision) 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(b).

     

    “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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

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

     

    “Fee Letter” means,
collectively, (a) that certain Proposal Letter dated as of December 29, 2008, by
and between the Borrower and the Administrative Agent and (b) that certain Fee
Letter dated as of February 27,
2009 by and between the Borrower and the Administrative
Agent.

     

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

     

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

     

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

     

    “Foreign Subsidiary”
means any Subsidiary that is not 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.

     

    “Governmental
Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    “Guarantors” means any
Subsidiary of the Borrower that guarantees the Indebtedness pursuant to Section
8.14(b).

     

    “Guaranty Agreement”
means that certain Guaranty and Collateral Agreement executed by the Borrower
and the Guarantors, if any, 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.

     

    “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.

     

    “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 of the Credit Parties’ 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, the Issuing Bank or any Lender under
any Loan Document; (b) to any Approved Counterparty under any Swap Agreement
between the Borrower or any Subsidiary and such Approved Counterparty and (c)
all renewals, extensions and/or rearrangements of any of the above.

     

    “Indemnified Taxes”
means Taxes other than Excluded Taxes.

     

    “Indemnitee” has the
meaning set forth in Section
12.03.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    “Initial Reserve
Report” means the report dated as of December 31, 2008 prepared by Ryder
Scott Company Petroleum Consultants, L.P., with respect to certain Oil and Gas
Properties of the Borrower.

     

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

     

    “Interest Expense”
means, for any period, the sum (determined without duplication) of the aggregate
gross interest expense of the Borrower and the Consolidated Subsidiaries for
such period, including to the extent included in interest expense under
GAAP:  (a) amortization of debt discount, (b) capitalized interest and
(c) the portion of any payments or accruals under Capital Leases allocable to
interest expense, plus the portion of any payments or accruals under Synthetic
Leases allocable to interest expense whether or not the same constitutes
interest expense under GAAP; provided that Interest Expense for the fiscal
quarters ending March 31, 2009, June 30, 2009 and September 30, 2009 shall be
calculated as follows:

     

    (a)           for
the fiscal quarter ending March 31, 2009, Interest Expense shall be Interest
Expense for such quarter multiplied by four;

     

    (b)           for
the fiscal quarter ending June 30, 2009, Interest Expense shall be Interest
Expense for the six-month period ending on such date multiplied by
two.

     

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

     

    Thereafter,
Interest Expense shall be calculated using Interest Expense 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.

     

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

     

    “Interest Period”
means with respect to any Eurodollar Borrowing, the period commencing on the
date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, 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

     

    
      
         

      

      
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    made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

     

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

     

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

     

    “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, assumption of Debt of,
purchase or other acquisition of any other 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,
supplies sold by such Person in the ordinary course of business); (c) the
purchase or acquisition (in one or a series of transactions) of Property of
another Person that constitutes a business unit or (d) the entering into of any
guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

     

    “Issuing Bank” means
JPMorgan Chase Bank, N.A., in its capacity as the issuer of Letters of Credit,
any Lender or any other Person named as an Issuing Bank by the Administrative
Agent and reasonably acceptable to the Borrower.

     

    “LC Commitment” at any
time means five hundred thousand dollars ($500,000).

     

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

     

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

     

    “Lender Parties” has
the meaning set forth in Section
12.04.

     

    “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.

     

    
      
         

      

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

     

    “LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Bloomberg BBAM Screen (or on any successor or substitute thereto or
therefor or any successor or substitute service, providing rate quotations
comparable to those currently provided on Bloomberg BBAM Screen, 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
determined by Administrative Agent by reference to such other comparable
publicly available service for displaying the offered rate for dollar deposits
in the London interbank market as may be selected by the Administrative Agent
and, in the absence of availability, such other method to determine such
Eurodollar rate as may be selected by the Administrative Agent in its sole
discretion.

     

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

     

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

     

    “Macquarie Intercreditor
Agreement” means that certain Intercreditor and Collateral Agency
Agreement by and among the Borrower, Macquarie Bank Limited, the Administrative
Agent and the Administrative Agent, as collateral agent thereunder, 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.

     

    “Majority Lenders”
means, at any time while no Loans or LC Exposure is outstanding, Lenders having
more than fifty percent (50%) of the Aggregate Maximum Credit Amounts; and at
any time while any Loans or LC Exposure is outstanding, Lenders holding more
than fifty percent (50%) of the outstanding aggregate principal amount of the
Loans and participation

     

    
      
         

      

      
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    interests
in Letters of Credit (without regard to any sale by a Lender of a participation
in any Loan under Section 12.04(c));
provided, that if there are less than three Lenders, all Lenders shall be
required to constitute the “Majority Lenders”; provided further that the Maximum
Credit Amounts and the principal amount of the Loans and participation interests
in Letters of Credit of the Defaulting Lenders (if any) shall be excluded from
the determination of Majority Lenders.

     

    “Material Adverse
Effect” means a material adverse change in, or material adverse effect on
(a) the business, operations, Property or financial condition 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 to which it is a party, (c) the validity or enforceability of any Loan
Document or (d) the rights and remedies of or benefits available to the
Administrative Agent, the Issuing Bank 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 and Letters of Credit), 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
$250,000.  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.

     

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

     

    “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.

     

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

     

    “Notes” means, if
requested by any Lender, 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.

     

    “Officer Notes” means
(i) that certain Subordinated Promissory Note in favor of Michael
Reger dated February 27, 2009 in the principal amount of $250,000, as amended
and (ii) that certain Subordinated Promissory Note in favor of Ryan
Gilbertson dated February 27, 2009 in the principal amount of $250,000, as
amended, which are unsecured and subordinate to any and all Indebtedness in
favor of the Lenders hereunder.

     

    “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

     

    
      
         

      

      
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    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.

     

    “Operating Account”
means (a) the account #364-040573 maintained at the Borrower’s expense with
Morgan Stanley & Co. Incorporated, existing on the Effective Date or (b) if
the foregoing account is closed, a deposit account opened with a bank reasonably
acceptable to the Administrative Agent in accordance with Section 8.19(b) maintained at the
Borrower’s expense.

     

    “Operating Account
Bank” means the bank where Borrower maintains the Operating
Account.

     

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

     

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

     

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

     

    
      
         

      

      
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    “Patriot Act” has the
meaning assigned such term in Section
12.16.

     

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

     

    “Plan” means any
employee pension benefit plan, as defined in section 3(2) of ERISA which (a) is
currently or hereafter sponsored, maintained or contributed to by the Borrower,
a Subsidiary of 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.

     

    “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 and one-half percent
(2.5%) per annum, but in no event to exceed the Highest Lawful
Rate.

     

    “Prime Rate” means in
respect of ABR Loans, the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank, N.A. (or its successor) as its prime rate
in effect at its principal office in New York City (or if such rate is at any
time not available, the prime rate so quoted by any banking institution as
determined by the Administrative Agent in its reasonable discretion); each
change in the Prime Rate shall be effective on 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.

     

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

     

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

     

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

     

    
      
         

      

      
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    “Rating Agency” means
any nationally recognized investment rating agency that is rating the
obligations of the relevant Securitization.

     

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

     

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

     

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

     

    “Registrar” 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
8.10(a).

     

    “Required Lenders”
means, at any time while no Loans or LC Exposure is outstanding, Lenders having
at least sixty-six and two-thirds percent (66 2/3%) of the Aggregate Maximum
Credit Amounts; and at any time while any Loans or LC Exposure is outstanding,
Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding aggregate principal amount of the Loans and participation interests
in such Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section
12.04(c)) provided, that if there are less than three Lenders, all Lenders
shall be required to constitute the “Required Lenders”; provided further that
the Maximum Credit Amounts and the principal amount of the Loans and
participation interests in Letters of Credit of the Defaulting Lenders (if any)
shall be excluded from the determination of 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 an Interim Redetermination) the oil and gas reserves attributable
to the Oil and Gas Properties of the Borrower and the Subsidiaries, together
with a projection of the rate of production and future net income, taxes,
operating expenses and Capital Expenditures with respect thereto as of such
date, based upon the economic assumptions consistent with the Administrative
Agent’s lending requirements at the time.

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

    “Securitization” has
the meaning set forth in Section
12.04.

     

    “Securitization
Liabilities” has the meaning set forth in Section 12.04.

     

    “Securitization
Parties” has the meaning set forth in Section 12.04.

     

    “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, if
any, this Agreement, or reimbursement obligations under the Letters of Credit,
as such agreements may be amended, modified, supplemented or restated from time
to time.

     

    “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

     

    
      
         

      

      
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    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 or 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 rates, currencies, commodities, equity or debt instruments or securities,
or economic, financial or pricing indices or measures of economic, financial or
pricing risk or value or any similar transaction or any combination of these
transactions; provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors,
officers, employees or consultants of the Borrower or the Subsidiaries shall be
a Swap Agreement.

     

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

     

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

     

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

     

    
      
         

      

      
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    “Termination Date”
means the earlier to occur of (i) three (3) years from the Effective Date or
(ii) the date that the Aggregate Maximum Credit Amount is sooner terminated
pursuant to Section 2.06 or Section 10.02.

     

    “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), (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 and (f) to the extent that Swap Agreements are in place
the cash-flows derived from the pricing assumptions set forth in clause (b)
above shall be, (i) in the case of volumes subject to a swap or other fixed
priced hedge, at the applicable fixed price and (ii) in the case of volumes
subject to a floor or ceiling hedge (including a collar), at the price set out
in the preceding clause (b)(i), but not to exceed such ceiling or to be less
than such floor.

     

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

     

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

     

    
      
         

      

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

     

    ARTICLE
II

     

    The
Credits

     

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

     

    
      
         

      

      
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    Section
2.02 Commitments.  Within
the foregoing limits and subject to the terms and conditions set forth herein,
the Borrower may borrow, repay and reborrow the Loans.

     

    Section
2.03 Loans and
Borrowings.

     

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

     

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

     

    (c) Minimum Amounts; Limitation
on Number of Borrowings.  At the commencement of each Interest
Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $250,000 and not less than
$250,000.  At the time that each ABR Borrowing is made, such Borrowing
shall be in an aggregate amount that is an integral multiple of $250,000 and not
less than $250,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.08(e).  Borrowings
of more than one Type may be outstanding at the same time, provided that there
shall not at any time be more than a total of five (5) Eurodollar Borrowings
outstanding.  Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Termination Date.

     

    (d) Notes.  The
Loans made by each Lender shall be evidenced by a single promissory note of the
Borrower upon request by such Lender 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 such Lender or its registered
assigns in a principal amount equal to its Maximum Credit Amount as in effect on
such date, and otherwise duly completed.  In the event that any
Lender’s Maximum Credit Amount increases or decreases for any reason (whether
pursuant to Section 2.06, Section 12.04 or otherwise), the Borrower
shall deliver or cause to be delivered on the effective date of such increase or
decrease, a new Note payable to such Lender in a principal amount equal to its
Maximum Credit Amount after giving effect to such increase or decrease, 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

     

    
      
         

      

      
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    (e) the
principal thereof, shall be recorded by such Lender on its books for its
Note.  Failure to make any such notation shall not affect any Lender’s
or the Borrower’s rights or obligations in respect of such Loans. Upon surrender
of any Note at the principal office of Administrative Agent for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder or its attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), and an assignment agreement in form and substance acceptable to
Administrative Agent whereby the assignee holder agrees to be bound by the terms
hereof that are applicable to holders, shall execute and deliver, at Borrower’s
expense, a new Note in exchange therefor.

     

    Section
2.04 Requests for
Borrowings.  To request a Borrowing, the Borrower shall notify
the Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 12:00 noon, New York City time, three (3)
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 12:00 noon, New York City time, one (1) Business
Day before the date of the proposed Borrowing; provided that no such notice
shall be required for any deemed request of an ABR Borrowing to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e).  Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in substantially the form of Exhibit B and signed by the
Borrower.  Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.02:

     

    (i) the
aggregate amount of the requested Borrowing;

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    Commitments
(i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective
Borrowing Base).

     

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

     

    Section
2.05 Interest
Elections;
Conversions.

     

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

     

    (b) Interest Election Requests;
Conversion Requests.  To make an election or conversion, as the
case may be, pursuant to this Section
2.04, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower was 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”.

     

    
      
         

      

      
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    (v) 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 on Interest
Election.  If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing.  Notwithstanding any contrary provision
hereof, if an Event of Default 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.

     

    Section
2.06 Funding of
Borrowings.

     

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

     

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

     

    
      
         

      

      
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    (c) 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 included in such
Borrowing.

     

    Section
2.07 Termination and Reduction of
Aggregate Maximum Credit Amounts.

     

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

     

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

     

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

     

    (ii) The
Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three (3)
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof.  Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof.  Each notice delivered by the
Borrower pursuant to this Section
2.06(b)(ii) shall be irrevocable.  Any termination or reduction of
the Aggregate Maximum Credit Amounts shall be permanent and may not be
reinstated.  Each reduction of the Aggregate Maximum Credit Amounts
shall be made ratably among the Lenders in accordance with each Lender’s
Applicable Percentage.

     

    Section
2.08 Borrowing
Base.

     

    (a) Initial Borrowing
Base.  For the period from and including the Effective Date to
but excluding the first Redetermination Date, the amount of the Borrowing Base
shall be $11,000,000.  Notwithstanding the foregoing, the Borrowing
Base may be subject to further adjustments from time to time pursuant to Section 8.13(c) or Section 9.12.

     

    (b) Scheduled and Interim
Redeterminations.  The Borrowing Base shall be redetermined
semi-annually in accordance with this Section
2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Issuing Bank and
the Lenders

     

    
      
         

      

      
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    (c) on May
1st
and November 1st of each
year, commencing May 1, 2009.  In addition, one time during any
12-month period (i) the Borrower may, by notifying the Administrative Agent
thereof, (ii) the Administrative Agent may, by notifying the Borrower thereof
and (iii) the Required Lenders may, by directing the Administrative Agent to
notify the Borrower thereof, each elect to cause the
Borrowing Base to be redetermined between Scheduled Redeterminations (an “Interim
Redetermination”) in accordance with this Section 2.07.

     

    (d) Scheduled and Interim
Redetermination Procedure.

     

    (i) Each
Scheduled Redetermination and each Interim Redetermination shall be effectuated
as follows:  Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, (1) in the case of a Scheduled Redetermination,
pursuant to Section 8.12(a) and (c), and (2) in the case of an Interim
Redetermination, pursuant to Section
8.12(b) and (c), and (B) such other
reports, data and supplemental information, including, without limitation, the
information provided pursuant to Section
8.12(c), as may, from time to time, be reasonably requested by the Majority
Lenders (the Reserve Report, such certificate and such other reports, data and
supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information
contained in the Engineering Reports and shall, in its sole discretion,
propose a new Borrowing Base (the “Proposed Borrowing
Base”) based upon such information and such other information (including,
without limitation, the status of title information with respect to the Oil and
Gas Properties as described in the Engineering Reports and the existence of any
other Debt) as the Administrative Agent deems appropriate in its sole
discretion.  In no event shall the Proposed Borrowing Base exceed the
Aggregate Maximum Credit Amounts.

     

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

     

    (A) in the
case of a Scheduled Redetermination (1) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on
or before April 15th and
October 15th of such
year following the date of delivery or (2) if the Administrative Agent shall not
have received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.12(a) and (c) in a timely and complete manner, then
promptly after the Administrative Agent has received complete Engineering
Reports from the Borrower and has had a reasonable opportunity to determine the
Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

     

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

     

    (iii) Any
Proposed Borrowing Base that would increase the Borrowing Base then in effect
must be approved by all of the Lenders in their sole discretion as provided in
this Section 2.07(c)(iii); and any
Proposed Borrowing Base that would decrease or maintain the

     

    
      
         

      

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

     

    (v) In
connection with any Scheduled Redetermination or Interim Redetermination, the
Administrative Agent and the Majority Lenders may propose a new definition for
“Applicable Margin.”  If the Borrower agrees to such new definition,
such definition shall be in effect until the next Redetermination Date; provided
that no decrease in the Applicable Margin for Loans made by any Lender shall
apply to such Lender without its consent.

     

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

     

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

     

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

     

    Such
amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section
8.13(c) or Section 9.12, whichever
occurs first.  Notwithstanding the foregoing, no

     

    
      
         

      

      
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    Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.

     

    Section
2.09 Letters of
Credit.

     

    (a) General.  Subject
to the terms and conditions set forth herein, the Borrower may request the
issuance of dollar denominated Letters of Credit for its own account or for the
account of any of its Subsidiaries, in a form reasonably acceptable to the
Administrative Agent, at any time and from time to time during the Availability
Period; provided that the Borrower may not request the issuance, amendment,
renewal or extension of Letters of Credit hereunder if a Borrowing Base
Deficiency exists at such time or would exist as a result
thereof.  The Administrative Agent shall have the right to have the
Issuing Bank issue the Letter of Credit on its behalf.

     

    (b) Notice of Issuance,
Amendment, Renewal, Extension; Certain Conditions.  To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy to
the Administrative Agent (not less than seven (7) Business Days in advance of
the requested date of issuance, amendment, renewal or extension) a
notice:

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    The
Administrative Agent shall then arrange for the Letter of Credit to be issued on
the Borrower’s behalf.

     

    (c) Expiration
Date.  Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five (5) Business Days prior to the Termination Date.

     

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

     

    (e) Reimbursement.  If
the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse the Administrative Agent (for itself or any
of its Affiliates) such LC Disbursement by paying to the Administrative Agent an
amount equal to such LC Disbursement not later than 12:00 noon, New York City
time, on the date that such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 10:00 a.m., New York City time,
on such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 12:00 noon, New York City time, on
(i) the Business Day that the Borrower receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii)
the Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that any such LC Disbursement shall, subject to the conditions to
Borrowing set forth herein, be deemed to have requested, and the Borrower does
hereby request under such circumstances, that such payment be financed with an
ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Borrowing.  If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable

     

    
      
         

      

      
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    (f) LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender’s Applicable Percentage thereof.  Promptly following receipt of
such notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.05 with respect to
Loans made by such Lender (and Section
2.05 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the Lenders.  Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent
shall distribute such payment to any Lenders that have made payments pursuant to
this Section 2.08(e) to reimburse the
Administrative Agent.  Any payment made by a Lender pursuant to this
Section 2.08(e) to reimburse the
Administrative Agent for any LC Disbursement (other than the funding of ABR
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement.

     

    (g) Obligations
Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section
2.08(e) shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, or
(iv) any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or
equitable discharge of, or provide a right of setoff against, the Borrower’s
obligations hereunder.  Neither the Administrative Agent, the Lenders
nor the Issuing Bank, nor any of their Related Parties shall have any liability
or responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Issuing Bank or the Administrative
Agent.  In furtherance of the foregoing and without limiting the
generality thereof, the Borrower agrees that, with respect to documents
presented which appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.

     

    (h) Interim
Interest.  If the Issuing Bank shall make any LC Disbursement,
then, until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)), the

     

    
      
         

      

      
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    (i) unpaid
amount thereof shall bear interest, for each day from and including the date
such LC Disbursement is made to but excluding the date that the Borrower
reimburses such LC Disbursement, at the rate per annum then applicable to ABR
Loans.  Interest accrued pursuant to this Section 2.08(g) shall be for the account of
the Administrative Agent, except that interest accrued on and after the date of
payment by any Lender pursuant to Section
2.08(e) to reimburse the Administrative Agent shall be for the account of
such Lender to the extent of such payment.

     

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

     

    
      
         

      

      
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    (k) which it
has not been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy other obligations of the Borrower and the Guarantors under
this Agreement or the other Loan Documents.  If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, and the Borrower is not otherwise required to
pay to the Administrative Agent the excess attributable to an LC Exposure in
connection with any prepayment pursuant to Section 3.04(c), then such amount (to the
extent not applied as aforesaid) shall be returned to the Borrower within three
(3) Business Days after all Events of Default have been cured or
waived.

     

    ARTICLE
III

     

    Payments
of Principal and Interest; Prepayments; Fees

     

    Section
3.01 Repayment of
Loans.  The Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan in full in cash on the Termination Date. All
payments by the Borrower of principal, interest, fees and other obligations
shall be made in dollars in immediately available funds, and shall be absolute
and unconditional, without defense, rescission, recoupment, setoff or
counterclaim, free of any restriction or condition.

     

    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, and
including any payments in respect of a Borrowing Base Deficiency under Section 3.04(c), then all Loans
outstanding, in the case of an Event of Default, 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.

     

    (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

     

    
      
         

      

      
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    (e) 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.

     

    (f) 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) (i) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period or
(ii) deposits (whether in dollars or an alternative currency) are not being
offered to Lenders in the applicable offshore interbank market for such currency
for the applicable amount and Interest Period of such Eurodollar Borrowing;
or

     

    (b) the
Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO
Rate or the 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 Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made either as an ABR Borrowing or at an alternate rate of
interest determined by all Lenders, sufficient to cover each Lender’s cost of
funds.

     

    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 any Borrowing

     

    
      
         

      

      
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    (b) in whole
or in part, in minimum increments of $100,000 or if less than $100,000, the
remaining balance of the Loans.

     

    (c) Notice and Terms of Optional
Prepayment.  The Borrower shall notify the Administrative Agent
by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York
City time, three (3) 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 partial prepayment of any Borrowing shall be in an
amount that would be permitted in the case of an advance of a Borrowing of the
same Type as provided in Section
2.02.  Each prepayment of a Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 3.02.

     

    (d) Mandatory
Prepayments.

     

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

     

    (ii) Upon any
redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07, Section 8.13(c) or Section 9.12, if the total
Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base,
then the Borrower shall:

     

    (A) either:

     

    (1) prepay
the Borrowings in an aggregate principal amount equal to such excess;
or

     

    (2) pledge
additional collateral not included in the most recent Reserve Report to the
Administrative Agent having a fair market value equal to at least the amount of
the deficiency or otherwise satisfactory to the Administrative Agent such that
the total Revolving Credit Exposures are less than or equal to the Borrowing
Base  as redetermined or adjusted; and

     

    (B) cause,
for so long as any Borrowing Base Deficiency continues to exist, 100% of Excess
Cash Flow to be used to prepay the Borrowings in an amount not to exceed such
Borrowing Base Deficiency, such amounts to be paid to the Administrative Agent
within one (1) Business Day of each delivery of an Excess Cash Flow report
required by

     

    
      
         

      

      
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    (C) Section 8.01(n)(ii); provided that while
any such Borrowing Base Deficiency continues to exist, the Borrower may make
payments for General and Administrative Costs approved by the Majority Lenders
in their reasonable discretion.

     

    The
Borrower shall be obligated to make such prepayment, pledge of collateral and/or
deposit of cash collateral within forty-five (45) days following its receipt of
the New Borrowing Base Notice in accordance with Section 2.07(d) or the date the adjustment
occurs; provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made on or
prior to the Termination Date.

     

    (iii) If a
Borrowing Base Deficiency exists, or during an Event of Default, the Borrower
shall prepay the Borrowings with all net cash proceeds received from sales and
other dispositions of Properties.

     

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

     

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

     

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

     

    Section
3.05 Fees.

     

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

     

    (b) Letter of Credit
Fees.  The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender, a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin

     

    
      
         

      

      
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    (c) used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the date
of this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, (ii) to the Administrative Agent, a fronting fee, which shall accrue
at the rate of 0.325% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but excluding
the later of the date of termination of the Commitments and the date on which
there ceases to be any LC Exposure, provided that in no event shall such fee be
less than $500 during any quarter and (iii) to the Administrative Agent for its
own account, the standard fees charged to it by the Issuing Bank with respect to
the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder.  Participation fees and fronting
fees accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following such
last day, commencing on the first such date to occur after the date of this
Agreement; provided that all such fees shall be payable on the Termination Date
and any such fees accruing after the Termination Date shall be payable on
demand.  Any other fees payable pursuant to this Section 3.05(b) shall be payable within ten (10) days
after demand.  All participation fees and fronting fees shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

     

    (d) 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.

     

    (e) Defaulting Lender
Fees.  The Borrower shall not be obligated to pay the
Administrative Agent any Defaulting Lender's ratable share of the fees described
in Sections 3.05(a) and (b) for the period commencing on the day such Defaulting
Lender becomes a Defaulting Lender and continuing for so long as such Lender
continues to be a Defaulting Lender.

     

    ARTICLE
IV

     

    Payments;
Pro Rata Treatment; Sharing of Set-offs

     

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

     

    (a) Payments by the
Borrower.  The Borrower shall make each payment required to be
made by it hereunder (whether of principal, interest, fees or reimbursement of
LC Disbursements, or of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to 12:00
noon, New York City time, on the date when due, in immediately available funds,
without defense, deduction, recoupment, set

     

    
      
         

      

      
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    (b) off or
counterclaim.  Fees, once paid, shall be fully earned and shall not be
refundable under any circumstances.  Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments to be made
directly to the Issuing Bank as expressly provided herein and except that
payments pursuant to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto.  The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof.  If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension.  All payments hereunder shall be made in
dollars.

     

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

     

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

     

    
      
         

      

      
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    (e) rights of
set-off and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of the Borrower in the amount of such
participation.

     

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

     

    Section
4.03 Certain Deductions by the
Administrative Agent.  If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02 then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.  If at any time prior to
the acceleration or maturity of the Loans, the Administrative Agent shall
receive any payment in respect of principal of a Loan or a reimbursement of an
LC Disbursement while one or more Defaulting Lenders shall be party to this
Agreement, the Administrative Agent shall apply such payment first to the
Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its
pro rata share until such time as such Borrowing(s) are paid in full or each
Lender (including each Defaulting Lender) is owed its Applicable Percentage of
all Loans then outstanding.  After acceleration or maturity of the
Loans, all principal will be paid ratably as provided in Section
10.02(c).

     

    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 and each Approved Counterparty 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 has accrued that is continuing, (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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    Section
4.05 

     

    Increased
Costs; Break Funding Payments; Taxes; Illegality

     

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

     

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

     

    (d) Effect of Failure or Delay
in Requesting Compensation.  Failure or delay on the part of
any Lender or the Issuing Bank to demand compensation pursuant to this Section 5.01 shall not constitute a waiver of
such Lender’s or the Issuing Bank’s right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section 5.01 for any
increased costs or reductions incurred more than 180 days prior to the date that
such Lender or the

     

    
      
         

      

      
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    (e) Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender’s or the Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

     

    Section
4.07 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), minus (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 ten
(10) days after receipt thereof.

     

    Section
4.08 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, each Lender or the Issuing Bank, 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.

     

    
      
         

      

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

     

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

     

    (e) 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.  In
addition, any Lender, if requested by the Borrower or the Administrative Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender
is subject to backup withholding or information reporting
requirements.

     

    Without
limiting the generality of the foregoing, in the event that the Borrower is
resident for tax purposes in the United States of America, any Foreign Lender
shall deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of the Borrower or the Administrative Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

     

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

     

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

     

    
      
         

      

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

     

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

     

    (f) Notwithstanding
anything to the contrary herein, a Foreign Lender shall not be required to
provide any form or statement pursuant to this section that such Foreign Lender
is not legally able to deliver.  Borrower shall not be required to pay
any additional amount to any  Foreign Lender to the extent that
withholding or deduction from payments is the result of such Lender failing to
provide such forms, certificates or other evidence (collectively, “Exemption Forms”)
required by Section 5.03(e) above,
establishing that such Foreign Lender is exempt from United States federal
withholding tax, or to notify Borrower of its inability to provide such
Exemption Forms  as the case may be, provided that if such Foreign
Lender shall have satisfied the requirements to provide such Exemption Forms on
the Effective Date or upon such Foreign Lender becoming a Lender hereunder,
nothing in this last sentence of this Section 5.03(f) shall relieve
Borrower of its obligation to pay any additional amounts pursuant to this Section 5.03(f) in the event that, as a result of a
change in law, treaty, governmental rule, regulation or order (or the
interpretation, administration or application thereof), at a subsequent date
such Exemption Forms were no longer applicable to such Lender or such Lender was
no longer properly entitled to complete or deliver such Exemption
Forms.

     

    Section
4.09 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 Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would 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.

     

    Section
4.10 Illegality.  Notwithstanding
any other provision of this Agreement, in the event that it becomes unlawful for
any Lender or its applicable lending office to honor its obligation to make or
maintain Eurodollar Loans either generally or having a particular Interest
Period hereunder, then (a) such Lender shall promptly notify the Borrower and
the Administrative Agent thereof and such Lender’s obligation to make such
Eurodollar Loans shall

     

    
      
         

      

      
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    Section
4.11 be
suspended (the “Affected Loans”)
until such time as such Lender may again make and maintain such Eurodollar Loans
and (a) all Affected Loans which would otherwise be made by such Lender shall be
made instead as ABR Loans (and, if such Lender so requests by notice to the
Borrower and the Administrative Agent, all Affected Loans of such Lender then
outstanding shall be automatically converted into ABR Loans on the date
specified by such Lender in such notice) and, to the extent that Affected Loans
are so made as (or converted into) ABR Loans, all payments of principal which
would otherwise be applied to such Lender’s Affected Loans shall be applied
instead to its ABR Loans.

     

    ARTICLE
V

     

    Conditions
Precedent

     

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

     

    (a) The
Administrative Agent, the Arranger and the Lenders shall have received all
commitment, facility and agency fees, 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 fees and expenses of Vinson &
Elkins L.L.P., counsel to the Administrative Agent).

     

    (b) The
Administrative Agent shall have received a certificate of the Responsible
Officer of each Credit Party setting forth (i) resolutions of its board of
directors with respect to the authorization of such Credit Party 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 such Credit
Party (A) who are authorized to sign the Loan Documents to which such Credit
Party 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
such Credit Party, 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 any Credit Party
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 each
Credit Party.

     

    (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 of the Borrower and dated as of the Effective
Date.

     

    
      
         

      

      
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    (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 (if requested by
any Lender) payable to each such Lender in a principal amount equal to its
Maximum Credit Amount 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.  In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the
end of such definition) on at least 90% of the Total Reserve Value of the Oil
and Gas Properties evaluated in the Initial Reserve Report, 100% of the Proved
Developed Producing Reserves of the Borrower (other than any Proved Developed
Producing Reserves of the Borrower listed on Schedule 8.14 attached hereto) and
all other Oil and Gas Properties identified and requested by the Administrative
Agent.

     

    (h) The
Administrative Agent shall have received an opinion of Faegre & Benson
LLP, special counsel to
the Borrower and local counsel in each of the following states: Montana, North
Dakota, Nevada and any other jurisdictions requested substantially 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 85% 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 8.12(c).

     

    
      
         

      

      
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    (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:  Nevada,
Montana, North Dakota, New York 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 have received evidence that the Borrower has put in
place the hedging program described on Schedule 6.01(p).

     

    (q) 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.

     

    (r) The
Administrative Agent shall have received from the Borrower a list of all Oil and
Gas Properties of the Credit Parties not subject to a Lien of the Security
Instruments as of the Effective Date substantially in the form of Exhibit J
attached hereto.

     

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

     

    The
Administrative Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notice shall be conclusive and
binding.  Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Administrative Agent to procure Letters of
Credit hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m., New
York City time, on March 1, 2009 (and, in the event such conditions are not so
satisfied or waived, the Commitments shall terminate at such time).

     

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

     

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

     

    (b) At the
time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no
event, development or circumstance has occurred or shall then exist that has
resulted in, or could reasonably be expected to have, a Material Adverse
Effect.

     

    
      
         

      

      
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    (c) The
representations and warranties of the Credit Parties set forth in this Agreement
and in the other Loan Documents shall be true and correct on and as of the date
of such Borrowing or the date of issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, except to the extent any such
representations and warranties are expressly limited to an earlier date, in
which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such
representations and warranties shall continue to be true and correct as of such
specified earlier date.

     

    (d) The
making of such Loan or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable would not conflict with, or cause any Lender or
the Issuing Bank to violate or exceed, any applicable Governmental Requirement,
and no Change in Law shall have occurred, and no litigation shall be pending or
threatened, which does or, with respect to any threatened litigation, seeks to,
enjoin, prohibit or restrain, the making or repayment of any Loan, the issuance,
amendment, renewal, extension or repayment of any Letter of Credit or any
participations therein or the consummation of the transactions contemplated by
this Agreement or any other Loan Document.

     

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

     

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

     

    ARTICLE
VI

     

    Representations
and Warranties

     

    The
Borrower represents and warrants to the Lenders that:

     

    Section
6.01 Organization;
Powers.  Each Credit Party is an Eligible Obligor, 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
6.02 Authority;
Enforceability.  The Transactions are within each Credit
Party’s corporate, limited partnership or limited liability powers and have been
duly authorized by all necessary corporate, limited partnership, limited
liability company 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 Credit Parties are a party

     

    
      
         

      

      
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    Section
6.03 has been
duly executed and delivered by each Credit Party and constitutes a legal, valid
and binding obligation of each such Credit Party, 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
6.04 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, (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 and (iii) the filing by the Borrower of a current report on Form
8-K with the SEC disclosing this Agreement and the Transactions, (b) will not
violate any applicable law or regulation or any Organizational Document of any
Credit Party or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon any Credit Party or its Properties, or give rise to a right thereunder to
require any payment to be made by any Credit Party and (d) will not result in
the creation or imposition of any Lien on any Property of any Credit Party
(other than the Liens created by the Loan Documents).

     

    Section
6.05 Financial Condition; No
Material Adverse Change.

     

    (a) The
Borrower has heretofore furnished to the Lenders its 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 Mantyla McReynolds LLC,
independent public accountants, and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended September 30, 2008, certified by its chief
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.

     

    (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) 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 or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided

     

    
      
         

      

      
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    (d) for in
the financial statements described in Section 7.04(a) or in the most recent
financial statements delivered pursuant to Section 8.01(a) or
(b).

     

    Section
6.06 Litigation.

     

    (a) Except as
set forth on Schedule 7.05 on the Effective Date or as otherwise disclosed
in writing to the Administrative Agent and the Lenders after the Effective Date
(which shall supplement 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
6.07 Environmental
Matters.  Except for such matters that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
any Credit Party:

     

    (a) The
Credit Parties 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
Credit Parties 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 the Credit Parties
have 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 Credit Parties or any of their respective
Properties or as a result of any operations at such Properties.

     

    (d) None of
the Properties of the Credit Parties 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.

     

    
      
         

      

      
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    (e) There has
been no Release or, to any Credit Party’s knowledge, threatened Release, of
Hazardous Materials at, on, under or from any Credit Party’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 any Credit Party, 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) No Credit
Party 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 any Credit Party’s Properties and, to any Credit Party’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
Credit Parties’ Properties that could reasonably be expected to form the basis
for a claim for damages or compensation.

     

    (h) The
Credit Parties 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 Credit Parties’ possession or control and relating to their
respective Properties or operations thereon.

     

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

     

    (a) Each of
the Credit Parties 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.

     

    (b) No Credit
Party 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 a Credit Party 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 any
Credit Party or any of their Properties is bound.

     

    (c) No
Default has occurred and is continuing.

     

    
      
         

      

      
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    (d) Investment Company
Act.  No Credit Party 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
6.09 Taxes.  Each
Credit Party 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 such Credit Party, 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 each Credit Party in respect of Taxes and other governmental charges
are, in the reasonable opinion of such Credit Party, adequate.  No
Liens for Taxes have been filed and, to the knowledge of the Credit Parties, no
claim is being asserted with respect to any such Tax or other such governmental
charge.

     

    Section
6.10 ERISA.

     

    (a) Each
Credit Party and each ERISA Affiliate have complied in all material respects
with ERISA and, where applicable, the code regarding each Plan except to the
extent the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

     

    (b) Each Plan
is, and has been, established and maintained in substantial compliance with its
terms, ERISA and, where applicable, the Code except to the extent the failure to
do so could not reasonably be expected to result in a Material Adverse
Effect.

     

    (c) No act,
omission or transaction has occurred which could result in imposition on any
Credit Party 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 except to the extent such penalty or liability could not reasonably be
expected to result in a Material Adverse Effect.

     

    (d) Full
payment when due has been made of all amounts which a Credit Party 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 except to the extent
the failure to do so could not reasonably be expected to result in a Material
Adverse Effect.

     

    (e) No Credit
Party nor any ERISA Affiliate sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(1) or ERISA, including, without
limitation, any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by a Credit Party or any ERISA
Affiliate in its sole discretion at any time without any material
liability.

     

    
      
         

      

      
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    (f) No Credit
Party 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 it subject to Title IV of ERISA, section 302 of ERISA or section
412 of the Code.

     

    Section
6.11 Disclosure; No Material
Misstatements.  None of the other reports, financial
statements, certificates or other information furnished by or on behalf of any
Credit Party 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 Credit Parties represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.  None of the Credit Parties provided any statements or
conclusions in the preparation of any Reserve Report which were based upon or
include misleading information or failed to take into account material
information regarding the matters reported therein, it being understood that
projections concerning volumes attributable to the Oil and Gas Properties and
production and cost estimates contained in each Reserve Report are necessarily
based upon professional opinions, estimates and projections and that the Credit
Parties do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.

     

    Section
6.12 Insurance.  Each
Credit Party 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
6.13 Restriction on
Liens.  No Credit Party is a party to any material agreement or
arrangement (other than Capital Leases creating Liens permitted by Section 9.03(c), but only on the Property
subject of such Capital Lease), or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its 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
6.14 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.

     

    Section
6.15 Location of Business and
Offices.  The Borrower’s jurisdiction of organization is
Nevada; the name of the Borrower as listed in the public records of
its

     

    
      
         

      

      
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    Section
6.16 jurisdiction
of organization, as of the date hereof, is Northern Oil and Gas, Inc.; and the
organizational identification number of the Borrower in its jurisdiction of
organization is C876-1983 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(m) in accordance with Section 12.01).  The Borrower’s
principal place of business and chief executive office is located at the address
specified in Section 12.01 (or as set
forth in a notice delivered pursuant to Section 8.01(m) and Section 12.01(c)). Each Subsidiary’s
jurisdiction of organization, name as listed in the public records of its
jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section
8.01(m)).

     

    Section
6.17 Properties; Titles,
Etc.

     

    (a) Each
Credit Party has good and defensible title to the Hydrocarbon Interests in 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, each Credit
Party specified as the owner owns the net interests in production attributable
to the Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate such Credit Party 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 such Credit Party’s net revenue interest in such
Property.

     

    (b) All
material leases and agreements necessary for the conduct of the business of the
Credit Parties 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 Credit Parties
including, without limitation, all easements and rights of way, include all
rights and Properties necessary to permit the Credit Parties 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 Credit Parties which are reasonably necessary for the
operation of their businesses are in good working condition and are maintained
in accordance with prudent business standards.

     

    (e) Each
Credit Party owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual Property material to its business,
and the use thereof by such Credit Party 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 Credit

     

    
      
         

      

      
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    (f) Parties
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
6.18 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 Credit Parties 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 Credit Parties.  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 any
Credit Party 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 any Credit Party 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 such Credit
Party.  All pipelines, wells, gas processing plants, platforms and
other material improvements, fixtures and equipment owned in whole or in part by
any Credit Party 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 any Credit Party, in a manner
consistent with such Credit Party’s 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
6.19 Gas Imbalances,
Prepayments.  Except as set forth on Schedule 7.18 or on the
most recent certificate delivered pursuant to Section 8.12(c), on a net basis there are no
gas imbalances, take or pay or other prepayments which would require any Credit
Party 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 Credit Parties’ Proved Reserves of natural gas (on an
mcf equivalent basis) in the aggregate.

     

    Section
6.20 Marketing of
Production.  No Credit Party is a party to any material
agreements which is not cancelable on sixty (60) days notice or less without
penalty or detriment for the sale of production from the Credit Parties’
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.

     

    
      
         

      

      
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    Section
6.21 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(e), sets forth, a true and
complete list of all Swap Agreements of each Credit Party, 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
6.22 Use of Loans and Letters of
Credit.  The proceeds of the Loans and the Letters of Credit
shall be used to provide working capital for exploration and production
operations as set forth in the Development Plan, to pay the cash portion of
brokerage fees owed to Cynergy Advisor’s, LLC in an amount not to exceed
$500,000 and for general corporate purposes.  The Credit Parties are
not engaged principally, or as one of its or their important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board).  No part of the proceeds of any Loan or
Letter of Credit will be used for any purpose which violates the provisions of
Regulations T, U or X of the Board.

     

    Section
6.23 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 Credit Parties, taken as a whole, will exceed the aggregate Debt of the
Credit Parties on a consolidated basis, as the Debt becomes absolute and
matures, (b) no Credit Party has 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 Credit
Party 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) no Credit Party will have (and has no reason to
believe that it will have thereafter) unreasonably small capital for the conduct
of its business.

     

    Section
6.24 Casualty
Events.  Since December 31, 2007, neither the business nor any
Properties of any Credit Party 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.

     

    Section
6.25 Material
Agreements.  Set forth on Schedule 7.24 hereto is a complete
and correct list of all material agreements and other instruments maintained as
of the date of this Agreement by the Credit Parties setting forth each
counterparty thereto (other than the Loan Documents and joint operating
agreements to which any Credit Party is a party) relating to the purchase,
transportation by pipeline, gas processing, marketing, development, sale and
supply of Hydrocarbons, farmout arrangements, contract operating agreements or
other material contracts (excluding oil and gas leases of the Credit Parties and
joint operating agreements to which any Credit Party is a party) to which the
Credit Parties are a party on or after the Effective Date or by which its
Properties is bound on or after the Effective Date, in each case for which
breach, nonperformance, cancellation or failure to renew could reasonably be
expected to have a

     

    
      
         

      

      
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    Section
6.26 Material
Adverse Effect (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
Credit Parties are not in default thereunder, nor is there any uncured default
by any Affiliate predecessor in interest to any Credit Party or, to any Credit
Party’s knowledge, by any predecessor in interest to such Credit Party (other
than an Affiliate predecessor) or counterparty thereto, nor has any Credit Party
altered any material item of such agreements since the Effective Date without
the prior written consent of the Lenders.

     

    Section
6.27 No
Brokers.  No Person, other than Cynergy Advisors, LLC, is
entitled to any brokerage fee or finder’s fee or similar fee or commission in
connection with arranging the Loans contemplated by this Agreement and as of the
Effective Date, all cash amounts owed to Cynergy Advisors, LLC shall be paid on
the Effective Date.  Other than Equity Interests of the Borrower
having a fair market value of up to $500,000, Cynergy Advisors, LLC shall not
receive Equity Interests of the Borrower as compensation for any brokerage fee
or finder’s fee or similar fee or commission in connection with arranging the
Loans.

     

    Section
6.28 Reliance.  In
connection with the negotiation of and the entering into this Agreement, the
Credit Parties acknowledge and represent 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; they have consulted with their own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and they have made their own investment, hedging, and trading
decisions based upon their own judgment and upon any advice from such advisors
as they have deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent, the Arranger, or any representative of any of the
foregoing; they have 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 they are 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 they are capable of
assuming and willing to assume (financially and otherwise) those
risks.

     

    Section
6.29 Payments by Purchasers of
Production.  All proceeds from the sale of any Credit Party’s
interests in Hydrocarbons from its Oil and Gas Properties are currently being
paid in full 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.

     

    Section
6.30 Existing Accounts
Payable.  As of the Effective Date, 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 sixty (60) days past due.

     

    
      
         

      

      
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    Section
6.31 Development
Plan.  The Development Plan covers all work reasonably
necessary (a) to drill and complete all wells scheduled to be drilled
thereunder, (b) to construct, install and commence operations of the production
facilities related thereto and (c) 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 reasonably anticipated by the Borrower to complete the activities
described in the Development Plan.  The Borrower has a good faith
belief that the development schedule in the Development Plan is realistic and
feasible.

     

    ARTICLE
VII

     

    Affirmative
Covenants

     

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

     

    Section
7.01 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 (i) Mantyla
McReynolds, LLC, (ii) any independent public accountants of recognized national
standing or (iii) any other independent public accountant 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.

     

    (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 one of its Financial Officers as presenting fairly
in all material respects the financial condition and results of operations of
the Borrower and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes.

     

    
      
         

      

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

     

    (e) Certificate of Financial
Officer – 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 substantially the form of Exhibit H attached hereto,
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 each Credit Party, 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.

     

    (f) 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 8.07, 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.

     

    (g) Other Accounting
Reports.  Promptly upon receipt thereof, a copy of each other
report or letter submitted to any Credit Party 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 any Credit
Party, or the board of directors of any Credit Party, to such letter or
report.

     

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

     

    
      
         

      

      
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    (i) have
complied with the requirements of this Section 8.01(h) to the extent that such
reports, proxy statements and other materials are publicly available on the
SEC’s EDGAR filing system or any successor system and the Borrower has notified
the Administrative Agent that such materials are
available.  Notwithstanding the foregoing proviso, the Borrower shall
provide copies of any materials required under this Section 8.01(h) upon request
by the Administrative Agent.

     

    (j) 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.

     

    (k) Lists of
Purchasers.  Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of all Persons
purchasing Hydrocarbons from the Borrower to the extent that any Credit Party
controls the marketing and the sale of such Hydrocarbons.

     

    (l) Notice of Sales of Oil and
Gas Properties.  In the event any Credit Party intends to sell,
transfer, assign or otherwise dispose of any Oil or Gas Properties or any Equity
Interests in any other Credit Party 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.

     

    (m) Notice of Casualty
Events.  Prompt written notice, and in any event within three
(3) Business Days of the occurrence of any Casualty Event.

     

    (n) Information Regarding Credit
Parties.  Prompt written notice (and in any event within ten
Business Days prior thereto) of any change (i) in any Credit Party’s
organizational name, (ii) in the location of any Credit Party’s chief
executive office or principal place of business, (iii) in any Credit
Party’s identity or organizational structure or in the jurisdiction in which
such Person is organized or formed, (iv) in any Credit Party’s jurisdiction of
organization or such Person’s organizational identification number in such
jurisdiction of organization and (v) in any Credit Party’s federal taxpayer
identification number.

     

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

     

    (i) on a
monthly basis by the 60th day following each calendar month, a report setting
forth, for such 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 with Proved Developed Producing Reserves 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;

     

    
      
         

      

      
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    (ii) after the
occurrence and during the continuance of any Borrowing Base Deficiency, the
Borrower shall provide, on a monthly basis on the 15th day of each such month, a
report setting forth, for the immediately preceding calendar month, the Credit
Parties’ Excess Cash Flow;

     

    (iii) on a
quarterly basis by the 30th day after the end of each calendar quarter, an
updated report setting forth the Credit Parties’ forecasted Capital Expenditure
budget for the following twelve (12) month period; and

     

    (iv) such
other information as the Administrative Agent may reasonably request, including,
but not limited to, each of the following to the extent available: an unaudited
income statement, a consolidated balance sheet and a statement of cash flow
(with such statement to show any variations from the budget previously
delivered), copies of any Credit Party’s bank account statements, statement of
expenses for the preceding month, notice of any material changes with regard to
oil and gas prices received, contracts or production expenses or any material
litigation affecting the operation of the Oil and Gas Properties of any Credit
Party.

     

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

     

    (q) Notice of Purchase of Oil
and Gas Properties.  In the event a Credit Party acquires
additional Oil and Gas Properties, the Borrower shall deliver promptly, but in
any event within 30 days after the end of each calendar quarter in which such
acquisition occurred, to the Administrative Agent a list of all Oil and Gas
Properties of the Credit Parties (including each such newly acquired Oil and Gas
Property) not subject to a Lien of the Security Instruments at the time of
delivery of such list to the Administrative Agent, in substantially the form of
Exhibit J attached hereto.

     

    (r) Non-Consent
Election.  Promptly, but in any event within five (5) Business
Days after any Credit Party’s election thereof, to withhold consent to
participate in any wells located on Oil and Gas Properties described in the
Development Plan.

     

    (s) Other Requested
Information.  Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of any Credit Party, 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
7.02 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

     

    
      
         

      

      
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    (c) Governmental
Authority against or affecting a Credit Party 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

     

    (d) 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
7.03 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
7.04 Payment of
Obligations.  The Borrower will, and will cause each Subsidiary
to, pay its obligations, including Tax liabilities of each such Credit Party and
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) such Credit Party 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 any Credit Party.

     

    Section
7.05 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.

     

    Section
7.06 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

     

    
      
         

      

      
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    (b) 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;

     

    (c) 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;

     

    (d) 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, in accordance with customary
industry standards, to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder;

     

    (e) 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;

     

    (f) operate
its Oil and Gas Properties and other material Properties or cause or make
reasonable and customary efforts to cause such Oil and Gas Properties and other
material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental Requirements;
and

     

    (g) to the
extent a Credit Party is not the operator of any Property, the Credit Parties
shall use reasonable efforts to cause the operator to comply with this Section 8.06.

     

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

     

    Section
7.08 Books and Records;
Inspection Rights.  The Borrower will, and will cause each
Subsidiary to, keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities.  The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the

     

    
      
         

      

      
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    Section
7.09 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, 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
7.10 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 where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

     

    Section
7.11 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
such Credit Parties’ Properties or any other property offsite the Property to
the extent caused by a Credit Party’s 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 a Credit
Parties’ 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 Credit Parties’ 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 that could
reasonably be expected to have a Material Adverse Effect; 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 Credit Parties’ obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.

     

    (b) The
Borrower will promptly, but in no event later than five (5) 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

     

    
      
         

      

      
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    (c) Governmental
Authority or any threatened demand or lawsuit by any Person against any Credit
Party 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 $100,000, not fully covered by insurance, subject to normal
deductibles.

     

    (d) The
Borrower will, and will cause each Subsidiary to, provide environmental
assessments, audits and tests in accordance with the most current version of the
American Society of Testing Materials standards upon request by the
Administrative Agent and the Lenders if the Administrative Agent reasonably
believes (i) that there has been a Release of Hazardous Materials or (ii)
non-compliance with an Environmental Law has occurred, and that such an event
could reasonably be expected to cause a Material Adverse Effect (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any Oil and Gas Properties or other
Properties.

     

    Section
7.12 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 Credit Parties, as the case may be, in the Loan Documents,
including the Notes, if any, or to further evidence and more fully describe the
collateral intended as security for the Indebtedness, or to correct any defect,
error or inaccuracy 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 (or covering “all personal property” or “all
assets”) 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
7.13 Reserve
Reports.

     

    (a) Commencing
on April 1, 2009 and on or before each April 1 and October 1 of each year
thereafter, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report evaluating the Oil and Gas Properties of the Credit
Parties as of the immediately preceding January 1st and July 1st.  The
Reserve Reports as

     

    
      
         

      

      
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    (b) of
January 1 and July 1 of each year shall be prepared by one or more Approved
Petroleum Engineers; provided, however, in the event the Borrower employs a
chief reserve engineer, the July 1 Reserve Report of each year shall be prepared
by or under the supervision of such chief reserve engineer 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.

     

    (c) In the
event of an Interim Redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by one or more
Approved Petroleum Engineers; provided, however, in the event the Borrower
employs a chief reserve engineer, the Borrower may furnish 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.  For any Interim Redetermination
requested by the Administrative Agent or the Borrower pursuant to Section 2.07(b), the Borrower shall provide
such Reserve Report with an “as of” date as required by the Administrative Agent
as soon as possible, but in any event no later than thirty (30) days following
the receipt of such request.

     

    (d) With the
delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer,
in substantially the form of Exhibit I attached hereto, certifying that in all
material respects: (i) the data contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Credit Parties own good and defensible title to the Hydrocarbon Interests in 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 any Credit Party to deliver Hydrocarbons either generally or
produced from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor, (iv) none of their Oil and Gas
Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the Effective Date 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 Effective Date and (vi)
attached thereto is a schedule of the Oil and Gas Properties evaluated by such
Reserve Report that are Mortgaged Properties which demonstrates compliance with
Section 8.14(a).

     

    Section
7.14 Title
Information.

     

    (a) On or
before the delivery to the Administrative Agent and the Lenders of each Reserve
Report required by Section 8.12(a), the
Borrower will deliver title information in form and substance reasonably
acceptable to the Administrative

     

    
      
         

      

      
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    (b) 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, reasonably satisfactory title
information on at least 90% of the Total Reserve Value of the Oil and Gas
Properties evaluated by such Reserve Report.

     

    (c) If the
Borrower has provided title information for additional Properties under Section 8.13(a), the Borrower shall, within
forty-five (45) 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 90% of
the Total Reserve Value of the Oil and Gas Properties evaluated by such Reserve
Report.

     

    (d) If the
Borrower is unable to cure any title defect requested by the Administrative
Agent or the Lenders to be cured within the 45-day period or the Borrower does
not comply with the requirements to provide acceptable title information
covering 90% 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 45-day
period has elapsed, such unacceptable Mortgaged Property shall not count towards
the 90% requirement, and the Administrative Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by the Majority Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on 90% of the Total Reserve Value of the Oil and Gas Properties.  This
new Borrowing Base shall become effective immediately after receipt of such
notice.

     

    Section
7.15 Additional Collateral;
Additional Guarantors.

     

    (a) In
connection with each redetermination of the Borrowing Base, the Borrower shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to
ascertain whether the Mortgaged Properties represent at least 90% of the Total
Reserve Value of the Oil and Gas Properties and evaluated in the most recently
completed Reserve Report and 100% of the Proved Developed Producing Reserves of
the Borrower after giving effect to exploration and production activities,
acquisitions, dispositions and production.  In the event that
the

     

    
      
         

      

      
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    (b) Mortgaged
Properties do not represent at least 90% of such Total Reserve Value and 100% of
the Proved Developed Producing Reserves of the Borrower, then the Credit Parties
shall, and shall cause their Subsidiaries to, grant, within forty-five (45) days
of delivery of the certificate required under Section 8.12(c), to the Administrative Agent
as security for the Indebtedness a first-priority Lien interest (provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on additional Oil and Gas Properties not already subject to a Lien
of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 90% of such Total Reserve Value and 100% of
the Proved Developed Producing Reserves of the Borrower.  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. 

     

    (c) In the
event that a Credit Party forms or acquires any Subsidiary, the Credit Parties
shall promptly cause such Subsidiary to guarantee the Indebtedness pursuant to
the Guaranty Agreement.  In connection with any such guaranty, the
Credit Parties shall, or shall cause such Subsidiary to, (A) execute and deliver
a supplement to the Guaranty Agreement executed by such Subsidiary, (B) pledge
all of the Equity Interests of such new Subsidiary (including, without
limitation, delivery 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
(C) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative
Agent.

     

    (d) If
requested by the Administrative Agent, the Borrower shall, and shall cause its
Subsidiaries to, grant, within thirty (30) days of such request, to the
Administrative Agent as security for the Indebtedness a first-priority Lien
interest (provided that Excepted Liens of the type described in clauses (a) to
(d) and (f) of the definition thereof may exist, but subject to the provisos at
the end of such definition) on any Oil and Gas Properties of the Credit Parties
not already subject to a Lien of the Security Instruments.  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.

     

    (e) The
Borrower shall, and shall cause its Subsidiaries to, grant to the Administrative
Agent, as security for the Indebtedness, a first-priority Lien interest
(provided that Excepted Liens of the type described in clauses (a) to (d) and
(f) of the definition thereof may exist, but subject to the provisos at the end
of such definition) on additional Oil and Gas Properties identified on Schedule
8.14 within ninety (90) days of the Effective Date. If the Borrower is unable to
grant a first-priority Lien interest in such additional Oil and Gas Properties
identified on Schedule 8.14 within ninety (90) days of

     

    
      
         

      

      
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    (f) the
Effective Date, then the Administrative Agent may cause the Borrowing Base to be
redetermined at such time in accordance with this Section 2.07.  Notwithstanding the
foregoing, the Borrower shall have thirty (30) days from the date of final
non-appealable judgment to grant a first-priority Lien interest (provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on the Oil and Properties that are subject to litigation as
identified on Schedule 8.14.

     

    Section
7.16 ERISA
Compliance.  The Borrower will promptly furnish and will cause
the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent 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
immediately upon
becoming aware of the occurrence of an “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 such Credit Party, 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
7.17 Swap
Agreements.  The Borrower shall maintain the hedge position
established by the Swap Agreements required under Section 6.01(p) during the period specified
therein and shall neither assign, terminate or unwind any such Swap Agreements
nor sell any Swap Agreements if the effect of such action (when taken together
with any other Swap Agreements executed contemporaneously with the taking of
such action) would have the effect of canceling its positions under such Swap
Agreements required hereby.  The Borrower shall from time to time
enter into Swap Agreements in respect of commodities so that the notional
volumes of all Swap Agreements and additional fixed-price physical off-take
contracts, in the aggregate, are more than 50% of the reasonably anticipated
projected production from the Borrower’s Proved Developed Producing Reserves for
each month continuing through and including the date that is thirty-six (36)
months following the effective date of each such Swap Agreement.

     

    Section
7.18 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) 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, (ii) 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 Credit Parties that a
Credit Party 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 (iii) 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.

     

    
      
         

      

      
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    Section
7.19 Development
Plan.

     

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

     

    (b) The
Borrower shall comply with the Capital Expenditure limits set in Section 9.21, except for any modification
of the Development Plan which is permitted by the terms of Section 9.20.  Promptly following
such modification, the Borrower shall provide the Administrative Agent a true
and correct copy of such modification.

     

    (c) The
Borrower shall promptly provide any additional information or detail related to
the Development Plan that the Administrative Agent reasonably
requests.

     

    Section
7.20 Operating
Account.

     

    (a) All Cash
Receipts to be received by any Credit Party shall be deposited, and each Credit
Party 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.  The Administrative Agent shall send notice to the Borrower
if 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; provided that the Administrative Agent agrees
to only exercise any such control during the continuance of an Event of
Default.  With respect to the Operating Account, the Administrative
Agent shall receive copies of each Credit Party’s bank account statements as
shall from time to time be reasonably requested by the Administrative
Agent.

     

    (b) 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.

     

    (c) 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.

     

    ARTICLE
VIII

     

    Negative
Covenants

     

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

     

    Section
8.01 Financial
Covenants.

     

    
      
         

      

      
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    Section
8.02 Interest Coverage
Ratio.  The Borrower will not, as of the last day of any fiscal
quarter, permit its ratio of EBITDAX to Interest Expense to be less than 3.0 to
1.0.

     

    (a) Ratio of Debt to
EBITDAX.  The Borrower will not, at any time, permit its ratio
of Debt as of such time to EBITDAX to be greater than 3.5 to 1.0.

     

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

     

    (c) Asset Coverage
Ratio.                                                        The
Borrower will not as of any date of determination, permit its ratio of Total
Reserve Value to Debt as of such date to be less than 1.75 to 1.0.

     

    Section
8.03 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;

     

    (b) endorsements
of negotiable instruments for collection in the ordinary course of
business;

     

    (c) Debt
under Capital Leases not to exceed $200,000 in aggregate principal
amount at any time outstanding;

     

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

     

    (e) intercompany
Debt between any Credit Parties 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 one of the Credit Parties, and, provided
further, that any such Debt owed by any Credit Party shall be subordinated to
the Indebtedness on terms set forth in the Guaranty Agreement;

     

    (f) Debt owed
by the Borrower under the Officer Notes; and

     

    (g) Debt in a
principal amount not to exceed seventy-five percent (75%) of the
marked-to-market value of the Borrower’s Auction Rate Securities, secured solely
by the interests of the Borrower or any Subsidiary in such Auction-Rate
Securities which is non-recourse to the Borrower and otherwise on terms
reasonably satisfactory to the Administrative Agent.

     

    
      
         

      

      
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    (h) 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:

     

    (i) Liens
securing the payment of any Indebtedness;

     

    (j) Excepted
Liens;

     

    (k) Liens
securing Capital Leases permitted by Section 9.02(c) but only on the
Property under lease; and

     

    (l) Liens on
Auction-Rate Securities securing Debt permitted by Section 9.02(g).

     

    Section
8.04 Dividends, Distributions and
Repayment of Officer Notes.

     

    (a) 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 (i) 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), (ii)
Subsidiaries may declare and pay dividends and make distributions to the
Borrower with respect to their Equity Interests and (iii) 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 Credit
Parties.

     

    (b) The
Borrower will not, and will not permit any of its Subsidiaries to, prior to the
date that is ninety-one (91) days after the Termination Date: (i) call, make or
offer to make any optional or voluntary Redemption of or otherwise optionally or
voluntarily Redeem (whether in whole or in part) the Officer Notes, provided
that, upon Scheduled Redeterminations of the Borrowing Base, the Borrower may
optionally prepay the Officer Notes up to a principal amount not to exceed
$50,000 on each Officer Note and any accrued interest thereon, if (A) no Default
or Event of Default has occurred and is continuing or would exist after giving
effect to such prepayment, (B) the ratio of EBITDAX to Interest Expense is
greater than 3.5 to 1.0 as of the last day of the most recently ended quarter
and after giving pro forma effect to such prepayment and (C) the ratio
of  Total Reserve Value to Debt is greater than 2.75 to 1.0 after
giving pro forma effect to such prepayment or (ii) amend, modify, waive or
otherwise change, consent or agree to any amendment, modification, waiver or
other change to, any of the terms of the Officer Note Debt permitted under
Section 9.02(e), if (A) the effect thereof would be to shorten its maturity or
average life or increase the amount of any payment of principal thereof or
increase the rate or shorten any period for payment of interest thereon or
(B) such action requires the payment of a consent fee (howsoever
described).

     

    Section
8.05 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:

     

    
      
         

      

      
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    Section
8.06 accounts
receivable arising in the ordinary course of business;

     

    (a) 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 acquisition thereof;

     

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

     

    (c) deposit
accounts or deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any Lender or any other
Person at any office located in the United States 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;

     

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

     

    (e) Investments
(i) made by the Borrower in or to any Subsidiary which is a Guarantor and with
respect to which 100% of the issued and outstanding Equity Interests have been
pledged to Administrative Agent, and (ii) made by any Guarantor in or to any
other Credit Party;

     

    (f) 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;

     

    (g) Investments
in stock, obligations or securities received in settlement of debts arising from
Investments permitted under this Section
9.05 owing to any Credit Party 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 any Credit Party; 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 outstanding under this
Section 9.05(h) exceeds $100,000;

     

    (h) the
Auction-Rate Securities owned by the Borrower as of the Effective Date;
and

     

    (i) other
Investments not to exceed $200,000 in the aggregate at any time.

     

    Section
8.07 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

     

    
      
         

      

      
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    Section
8.08 independent
oil and gas exploration and production company.  From and after the
date hereof, the Credit Parties and their 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.

     

    Section
8.09 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 Credit Parties 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 $200,000 in any period of twelve consecutive calendar
months during the life of such leases.

     

    Section
8.10 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.  No Credit Party
nor any Person acting on behalf of a Credit Party 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
8.11 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 a Credit Party 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
if such penalty or liability could reasonably be expected to result in a
Material Adverse Effect.

     

    (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, a Credit Party or any ERISA Affiliate is required to pay as
contributions thereto if such failure could reasonably be expected to result in
a Material Adverse Effect.

     

    (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

     

    
      
         

      

      
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    (d) section
3(2) of ERISA, that is subject to Title IV of ERISA, section 302 of ERISA or
section 412 of the Code.

     

    Section
8.12 Sale or Discount of
Receivables.  Except for receivables obtained by a Credit Party
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
8.13 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 (a) the Borrower so long as the Borrower shall be the continuing or
surviving entity or (b) 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).

     

    Section
8.14 Sale of
Properties.  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, sales or other dispositions of undeveloped acreage and
assignments in connection with such farmouts with the approval of the
Administrative Agent; (c) the sale or transfer of equipment that is no longer
necessary for the business of a Credit Party 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 between two successive Scheduled
Redetermination Dates has a fair market value in excess of $250,000,
individually or in the aggregate, the Borrowing Base shall be reduced, effective
immediately upon such sale or disposition, by an amount equal to the value, if
any, assigned such Property in the most recently delivered Reserve Report and
(iv) if any such sale or other disposition is of a Subsidiary owning Oil and Gas
Properties, such sale or other disposition shall include all the Equity
Interests of such Subsidiary; and (e) 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 twelve (12) month period.

     

    
      
         

      

      
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    Section
8.15 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.

     

    Section
8.16 Material
Agreements.  The Borrower will not, and will not permit any
Subsidiary to, enter into or amend or otherwise modify any Material Agreement or
any other contract or agreement that involves an individual commitment from such
Person of more than $100,000 in the aggregate in any twelve (12) month period
(except for such contracts and agreements that relate to the projects
contemplated in the Development Plan, with all such new or modified Material
Agreements related to projects contemplated in the Development Plan to be in
form and substance reasonably satisfactory to the Majority
Lenders).

     

    Section
8.17 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
8.18 Subsidiaries.  The
Borrower will not, and will not permit any Subsidiary to, create any additional
Subsidiary unless the Borrower gives written notice to the Administrative Agent
of such creation and complies with Section
8.14(b).  The Borrower shall not, and shall not permit any
Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any
Subsidiary except in compliance with Section
9.12(d).  Neither the Borrower nor any Subsidiary shall have any
Foreign Subsidiaries.

     

    Section
8.19 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 Security Instruments,
Capital Leases creating Liens permitted by Section 9.03(c) and the Auction-Rate
Securities Documents) 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 any Credit Party, or which requires the
consent of or notice to other Persons in connection therewith.

     

    Section
8.20 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 any Credit Party that would
require a Credit Party to deliver Hydrocarbons at some future time without then
or thereafter receiving full payment therefor to exceed two percent (2%) of the
Credit Parties’ Proved Reserves of natural gas (on an mcf equivalent basis) in
the aggregate.

     

    
      
         

      

      
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    Section
8.21 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) for each month of the thirty-six (36) month period following the date on
which each such Swap Agreement is executed, the notional volumes for which (when
aggregated with other commodity Swap Agreements and additional fixed-price
physical off-take contracts then in effect other than basis differential swaps
on volumes already hedged pursuant to other Swap Agreements), as of the date
such Swap Agreement is executed, is not less than 50% of, nor exceeds 80% (the
“Commodity Hedging
Cap”) 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 and (b) Swap Agreements in respect of interest rates with an Approved
Counterparty, as follows:  (i) Swap Agreements effectively converting
interest rates from fixed to floating, the notional amounts of which (when
aggregated with all other Swap Agreements of the Credit Parties 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 Credit Parties 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 a
Credit Party to post collateral or margin to secure their obligations under such
Swap Agreement or to cover market exposures, other than a requirement that such
Swap Agreement be secured by the Security Interests.  Notwithstanding
anything to the contrary, if the Commodity Hedging Cap is exceeded as a result
of (x) the sale or other disposition of Oil and Gas Properties or (y) other
reductions in estimated volumes of the Credit Parties’ Proved Developed
Producing Reserves, the Credit Parties shall assign, terminate or unwind any
Swap Agreement in order to comply with the Commodity Hedging Cap upon request by
the Majority Lenders.

     

    Section
8.22 Development
Plan.  Without the prior written consent of the Majority
Lenders, the Borrower shall not (a) 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 or (b) terminate the
Development Plan.

     

    Section
8.23 Limitation on Capital
Expenditures.  The Borrower will not, and will not permit its
Subsidiaries, to 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 the Credit Parties’ Oil and Gas Properties) outside the
Development Plan that would cause the aggregate amount of all such Capital
Expenditures to exceed $250,000 in any twelve (12) month period.

     

    Section
8.24 Auction-Rate
Securities.  The Borrower will not, and will not permit its
Subsidiaries, to amend, modify or supplement any terms of the Auction-Rate
Securities Documents without the approval of the Administrative Agent, such
consent not to be unreasonably withheld.

     

    
      
         

      

      
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    Section
8.25 

     

    Events of
Default; Remedies

     

    Section
8.26 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 or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof, by acceleration or otherwise;

     

    (b) the
Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in Section 10.01(a)) payable under any Loan
Document, when and as the same shall become due and payable, and such failure
shall continue unremedied for a period of three (3) Business Days;

     

    (c) any
representation or warranty made or deemed made by or on behalf of a Credit Party
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 in any material respect
when made or deemed made;

     

    (d) a Credit
Party shall fail to observe or perform any covenant, condition or agreement
contained in Section 8.01(i), Section 8.01(m), Section 8.02, Section 8.03, Section 8.14 or in Article IX;

     

    (e) a Credit
Party 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 such Credit Party otherwise becoming aware of such default;

     

    (f) a Credit
Party shall fail to make any payment (whether of principal or interest and
regardless of amount) in respect of any Material Indebtedness, beyond any period
of grace provided with respect thereto;

     

    (g) any event
or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits the holder or holders of
any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due (after taking into account any
applicable period of grace with respect thereto), or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or an event or condition requires a Credit Party to make an
offer in respect thereof;

     

    
      
         

      

      
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    (h) an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of a
Credit Party 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 a Credit
Party or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for forty-five (45) days or an
order or decree approving or ordering any of the foregoing shall be
entered;

     

    (i) a Credit
Party 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 a Credit Party 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) a Credit
Party 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 a Credit Party or any
combination thereof and, in either such case, the same shall remain undischarged
for a period of forty-five (45) 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 a Credit Party to enforce any such
judgment;

     

    (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 a Credit Party or any of their Affiliates shall
so state in writing;

     

    (m) a Change
in Control shall occur; and

     

    
      
         

      

      
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    (n) a failure
to cure a Borrowing Base Deficiency as outlined in
Section 3.04(c)(ii).

     

    Section
8.27 Remedies.

     

    (a) In the
case of an Event of Default other than one described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Majority Lenders, shall, by notice to the Borrower,
take either or both of the following actions, at the same or different
times:  (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the 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 (including, without limitation, the payment
of cash collateral to secure the LC Exposure as provided in Section 2.08(h)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j),
the Commitments shall automatically terminate and such 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 (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided
in Section 2.08(h)), shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower and each
Guarantor.

     

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

     

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

     

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

     

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

     

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

     

    (iv) fourth, pro rata to payment
of all other Indebtedness; and

     

    
      
         

      

      
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    (v) fifth, 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
IX

     

    The
Administrative Agent

     

    Section
9.01 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
9.02 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 any Credit Party that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity.  The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, 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 any
Credit Party or any other obligor or guarantor, or (vii) any failure by a Credit
Party 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

     

    
      
         

      

      
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    Section
9.03 Administrative
Agent shall have received written notice from such Lender prior to the proposed
closing date specifying its objection thereto.

     

    Section
9.04 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.

     

    Section
9.05 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 waive 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.

     

    
      
         

      

      
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    Section
9.06 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
9.07 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 (provided no
Event of Default then exist), to appoint a successor.  If no successor
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within thirty (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.

     

    Section
9.08 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
9.09 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 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

     

    
      
         

      

      
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    (b) 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 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.

     

    (c) 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, 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.

     

    Section
9.10 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
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    (b) other
amounts due the Lenders and the Administrative Agent under Section 12.03) allowed in such judicial
proceeding;

     

    (c) 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
9.11 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
9.12 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
X

     

    Miscellaneous

     

    Section
10.01 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 315 Manitoba Avenue, Suite 200

     

    Wayzata,
MN 55391, Attention of Chief Financial Officer (Telecopy No. (952) 476-9801);

     

    (ii) if to the
Administrative Agent and related to amendments, consents, waivers, financial
statements, operating reports, reserve reports, etc, to it at 505
Fifth

     

    
      
         

      

      
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    (iii) 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

     

    (iv) 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
10.02 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.

     

    (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

     

    
      
         

      

      
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    (c) Required
Lenders or by the Borrower and the Administrative Agent with the consent of the
Required Lenders; provided that no such agreement shall (i) increase the
Commitment or the Maximum Credit Amount of any Lender without the written
consent of such Lender, (ii) increase the Borrowing Base without the written
consent of all of the Lenders, decrease or maintain the Borrowing Base without
the consent of the Majority Lenders, or modify Section 2.07 in any manner without the
consent of each Lender (other than any Defaulting Lender); provided that a
Scheduled Redetermination may be postponed by the Required Lenders, (iii) reduce
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, or reduce any other
Indebtedness hereunder or under any other Loan Document, without the written
consent of each Lender affected thereby, (iv) postpone the scheduled date of
payment or prepayment of the principal amount of any Loan or LC Disbursement, or
any interest thereon, or any fees payable hereunder, or any other Indebtedness
hereunder or under any other Loan Document, or reduce the amount of, waive or
excuse any such payment, or postpone or extend the Termination Date without the
written consent of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter
the pro rata sharing of payments required thereby, without the written consent
of each Lender, (vi) waive or amend Section
3.04(c), Section 6.01, Section 8.14, Section 10.02(c) or Section 12.14 or
change the definition of the terms “Foreign Subsidiary” or “Subsidiary”, without
the written consent of each Lender (other than any Defaulting Lender), (vii)
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 90%, without the written consent of
each Lender (other than any Defaulting Lender), or (viii) change any of the
provisions of this Section 12.02(b) or
the definitions of “Required Lenders” or “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 (other than any Defaulting
Lender); provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or the Issuing
Bank hereunder or under any other Loan Document without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may
be.  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
10.03 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

     

    
      
         

      

      
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    (b) the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (i) all 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, (ii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder, (iii) all reasonable 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, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section
12.03, or in connection with the Loans made or Letters of Credit issued
hereunder, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.

     

    (c) THE
BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER, THE ISSUING
BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS
(EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST,
AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS
OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR
PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH
SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE

     

    
      
         

      

      
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    (d) TERMS OF
SUCH LETTER OF CREDIT, OR (A) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF
CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER
PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (ii) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, (iii) THE OPERATIONS OF THE BUSINESS OF THE
BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (iv) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS, (v) ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR OPERATIONS,
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 OR
AT ANY OF THEIR PROPERTIES, (vi) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (vii) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY,
(viii) 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, (ix) ANY
ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (x) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xi) 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,

     

    
      
         

      

      
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    (e) 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.

     

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

     

    (g) 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.

     

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

     

    Section
10.04 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, the Issuing Bank and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

     

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

     

    
      
         

      

      
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    (c) 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

     

    (A) 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 except that this clause
(B) shall not prohibit any Lender from assigning all or a portion of its rights
and obligations among separate term and revolving facilities on a non-pro rata basis;

     

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

     

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

     

    (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 as Registrar (the “Registrar”), 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

     

    
      
         

      

      
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    (v) addresses
of the Lenders, and the Maximum Credit Amount of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”).  If
the Administrative Agent ever ceases to be a United States based entity, the
Administrative Agent must promptly designate a United States entity to act as
Registrar, acting solely for this purpose as an agent of the
Borrower.  The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary; provided that, failure to make any such recordation, or any
error in such recordation, shall not affect any Lender’s Commitments or
Borrower’s obligations in respect of any Loans or LC
Disbursements.  The Register shall be available for inspection by the
Borrower, the Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.  In connection with any changes
to the Register, if necessary, the Administrative Agent will reflect the
revisions on Annex I and forward a copy of such revised Annex I to the Borrower,
the Issuing Bank and each Lender.

     

    (vi) At the
request of the registered owner of the Loan or Note, the Registrar shall note a
collateral assignment of the Loan or Note on the Register and, provided that the
Registrar has been given the name and address of such collateral assignee, the
Registrar (i) shall not permit any further transfers of the Loan or Note on the
Register absent receipt of written consent to such transfers from such
collateral assignee and (ii) shall record the transfer of the Loan or Note on
the Register to such collateral assignee (or such collateral assignee's
designee, nominee or assignee) upon written request by such collateral
assignee.

     

    (vii) 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).

     

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

     

    
      
         

      

      
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    (e) 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.

     

    (i) 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.

     

    (f) Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement, including to a trustee or other
pledgee, 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.

     

    (g) 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.

     

    (h) 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 be to an Affiliate of the Borrower, provided
that an Approved Fund shall not be deemed an Affiliate of the
Borrower.

     

    (i) Securitization.  In
addition to any other assignment permitted pursuant to this Section, Borrowers
hereby acknowledge that (x) the Lenders, their Affiliates and Approved Funds
(“Lender
Parties”) may sell or securitize the Loans (a “Securitization”)
through the pledge of the Loans as collateral security for loans to a Lender
Party or the assignment or issuance of direct or indirect interests in the Loans
(such as, for instance, collateralized loan obligations), and (y) such
Securitization may be rated by a Rating
Agency.  The  Borrowers shall reasonably cooperate with the
Lender Parties to effect the Securitization including, without limitation, by
(a) amending this

     

    
      
         

      

      
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    (j) Agreement
and the other Loan Documents, and executing such additional documents, as
reasonably requested by the Lenders in connection with the Securitization;
provided that (i) any such amendment or additional documentation does not impose
material additional costs on Borrower and (ii) any such amendment or additional
documentation does not materially adversely affect the rights, or materially
increase the obligations, of Borrower under the Loan Documents or change or
affect in a manner adverse to Borrower the financial terms of the Loans, (b)
providing such information as may be reasonably requested by the Lenders or
Rating Agencies in connection with the rating of the Loans or the
Securitization, and (c) providing a certificate (i) agreeing to indemnify
the Lender Parties, or any party providing credit support or otherwise
participating in the Securitization, including any investors in a securitization
entity (collectively, the “Securitization
Parties”) for any losses, claims, damages or liabilities (the “Securitization
Liabilities”) to which the Lender Parties or such Securitization Parties
may become subject insofar as the Securitization Liabilities arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in any Loan Document or in any writing delivered by or on behalf of
any Borrower to the Lender Partiers in connection with any Loan Document or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and such indemnity shall survive any transfer by the Lenders or
their successors or assigns of the Loans, and (ii) agreeing to reimburse the
Lender Parties and the other Securitization Parties for any legal or other
expenses reasonably incurred by such Persons in connection with defending the
Securitization Liabilities.

     

    Section
10.05 Survival; Revival;
Reinstatement.

     

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

     

    (b) To the
extent that any payments on the Indebtedness or proceeds of any collateral are
subsequently invalidated, declared to be fraudulent or preferential,
set

     

    
      
         

      

      
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    (c) 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
10.06 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 or any other
Loan Document by telecopy or electronic transmission shall be effective as
delivery of a manually executed counterpart thereof.

     

    Section
10.07 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
10.08 Right of
Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of

     

    
      
         

      

      
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    Section
10.09 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
any Credit Party against any of and all the obligations of a Credit Party 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
10.10 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 NEW YORK 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.

     

    (b) ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, 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

     

    
      
         

      

      
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    (d) OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

     

    (e) 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
10.11 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
10.12 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 potential investors, rating agencies, and
secured parties, including Approved Funds and parties necessary to give effect
to Section 12.04(g), 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), (c) to the extent requested by any regulatory authority, (d) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (e) to any other party to this Agreement or any other
Loan Document, (f) 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, (g) 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 a Credit Party and its obligations, (h) with the consent of the
Borrower or (i) 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, the Issuing Bank or any Lender on a non-confidential
basis from a source other than a Credit Party.  For the
purposes

     

    
      
         

      

      
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    Section
10.13 of this
Section 12.11, “Information” means
all information received from any Credit Party relating to any Credit Party and
their businesses, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis
prior to disclosure by a Credit Party; provided that, in the case of information
received from a Credit Party after the date hereof, such information is clearly
identified at the time of delivery as confidential.  Any Person
required to maintain the confidentiality of Information as provided in this Section 12.11 shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

     

    Section
10.14 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 New York 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, to the
extent permitted by applicable law, 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

     

    
      
         

      

      
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    Section
10.15 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.

     

    Section
10.16 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
10.17 Collateral Matters; Swap
Agreements.  The benefit of the Security Instruments and of the
provisions of this Agreement relating to any collateral securing the
Indebtedness shall also extend to and be available to Approved Counterparties to
any Swap Agreement with any Credit Party on a pro rata basis in respect of
any obligations of the Credit Parties.  No Approved Counterparty shall
have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.

     

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

     

    Section
10.19 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.

     

    
      
         

      

      
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    Section
10.20                                [SIGNATURES
BEGIN NEXT PAGE]

     

    
      
         

      

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

     

    

     

    BORROWER:                                                                       NORTHERN OIL AND GAS,
INC.

     

    

    By:  /s/ Michael
Reger

    Name:  Michael
Reger

    Title:    Chief
Executive Officer

    

     

    
      
        
          Signature
Page to Credit Agreement

           

          

          

        

         

      

      
        S-1

        
          

        

      

      
         

      

    

    ADMINISTRATIVE
AGENT:                                            CIT CAPITAL USA
INC.

    as
Administrative Agent

    

    

    By:  /s/ Brian
Kerrigan

    Name:  Brian
Kerrigan

    Title:    Vice
President

    

    

    
      
        
          Signature
Page to Credit Agreement

           

          

          

        

         

      

      
        S-2

        
          

        

      

      
         

      

    

    

    LENDERS:                                                                            
CIT BANK

     

    By: /s/ George
Janes

    Name:  George
Janes

    Title:  Chief
Credit Officer

    

    

    

    

     

    
      
        
          Signature
Page to Credit Agreement

           

          

          

        

         

      

      
        S-3

        
          

        

      

      
         

      

    

    ANNEX
I

     

    LIST
OF MAXIMUM CREDIT AMOUNTS

     

    Aggregate
Maximum Credit Amounts

     

    
      	
              Name
      of Lender

            	
              Applicable
      Percentage

            	
              Initial
      Borrowing Base/Commitment

            	
              Maximum
      Credit Amount

            
	
              CIT
      Bank

            	
              100.00%

            	
              $11,000,000

            	
              $25,000,000

            
	
              TOTAL

            	
              100.00%

            	
              $11,000,000

            	
              $25,000,000

            

    

    

    
      
        
           

          

          

        

         

      

      
        Annex I -
1exhibit102_03022009.htm

    Exhibit
10.2

     

    

     

    FORM
OF NOTE

     

    $[          ]                                                                                                           [          ],
200[     ]

     

    FOR VALUE
RECEIVED, Northern Oil and Gas, Inc., a Nevada corporation (the “Borrower”) hereby
promises to pay to
[          ] (the “Lender”), or its
registered assigns, at the principal office of CIT Capital USA Inc. (the “Administrative
Agent”), at 505 Fifth Avenue, 10th Floor,
New York, NY 10017, the principal sum of [_______________] dollars
($[____________]) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit
Agreement.

     

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

     

    This Note
is one of the Notes referred to in the Credit Agreement dated as of February 27,
2009 among the Borrower, the Administrative Agent, and the other agents and
lenders signatory thereto (including the Lender), and evidences Loans made by
the Lender thereunder (such Credit Agreement as the same may be amended,
supplemented or restated from time to time, the “Credit
Agreement”).  Capitalized terms used in this Note have the
respective meanings assigned to them in the Credit Agreement.

     

    This Note
is a registered Note and, as provided in the Credit Agreement, upon surrender of
this Note for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of this
Note or such holder’s attorney duly authorized in writing), a new Note for a
like aggregate principal amount will be issued to, and registered in the name
of, the transferee.  Prior to the due presentment for registration and
transfer, the Borrower may treat the Person in whose name this Note is
registered as the holder and the owner of this Note for the purpose of receiving
payment and for all other purposes of this Note and the Credit
Agreement.  Notwithstanding anything to the contrary herein, the right
to receive payments of interest and principal under this Note shall be
transferable only upon surrender for cancellation of this Note, and the issuance
of a new Note registered in the name of the transferee.  In addition,
the Administrative Agent, acting as agent for the Borrower, shall maintain a
register in which it shall

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    record
the name of the holder or any transferee, and no transfer shall be valid unless
so registered.

     

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

     

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

     

    Northern
Oil and Gas, Inc.

     

    By:           

    Name:

    Title:

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