Document:

ex4_3.htm

    
      

    

    Exhibit
      4.3

    

    INTERCREDITOR
      AGREEMENT

    

    dated
      as
      of

    

    November
      29, 2007

    

    among

    

    GASTAR
      EXPLORATION USA, INC.,

    as
      the
      Company

    

    GASTAR
      EXPLORATION LTD.,

    as
      the
      Parent

    

    certain
      Subsidiaries of the Parent party hereto

    

    AMEGY
      BANK NATIONAL ASSOCIATION,

    as
      First
      Priority Agent

    

    and

    

    WELLS
      FARGO BANK, NATIONAL ASSOCIATION,

    as
      Second
      Priority Agent

     

     

    
      
        

      

    

     

    THIS
      IS THE INTERCREDITOR AGREEMENT REFERRED TO IN (A) THE INDENTURE DATED AS OF
      NOVEMBER 29, 2007, AMONG GASTAR EXPLORATION USA, INC., CERTAIN OF ITS
      SUBSIDIARIES FROM TIME TO TIME PARTY THERETO, GASTAR EXPLORATION LTD. AND WELLS
      FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE AND COLLATERAL AGENT, (B) THE
      CREDIT AGREEMENT DATED AS OF NOVEMBER 29, 2007, AS AMENDED, SUPPLEMENTED,
      RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME, AMONG GASTAR EXPLORATION
      USA,
      INC., CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO, GASTAR
      EXPLORATION LTD., THE LENDERS FROM TIME TO TIME PARTY THERETO AND AMEGY BANK
      NATIONAL ASSOCIATION, AS AGENT, (C) THE OTHER LOAN DOCUMENTS REFERRED TO IN
      SUCH
      CREDIT AGREEMENT AND (D) THE OTHER COLLATERAL AGREEMENTS REFERRED TO IN SUCH
      INDENTURE.

     

    
      
        

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

     

    Page

     

    ARTICLE
      I

    

    DEFINITIONS

    

    
      	
              SECTION
                1.01.

            	
              Certain
                Defined Terms

            	
              2

            
	
              SECTION
                1.02.

            	
              Other
                Defined Terms

            	
              2

            
	
              SECTION
                1.03.

            	
              Terms
                Generally

            	
              7

            

    

    

    ARTICLE
      II

    

    LIEN
      PRIORITIES

    

    
      	
              SECTION
                2.01.

            	
              Relative
                Priorities

            	
              8

            
	
              SECTION
                2.02.

            	
              Prohibition
                on Contesting Liens

            	
              8

            
	
              SECTION
                2.03.

            	
              No
                New Liens

            	
              8

            
	
              SECTION
                2.04.

            	
              Similar
                Collateral

            	
              9

            

    

    

    ARTICLE
      III

    

    ENFORCEMENT
      OF RIGHTS; MATTERS RELATING TO COLLATERAL

    

    
      	
              SECTION
                3.01.

            	
              Exercise
                of Rights and Remedies; Option to Purchase

            	
              9

            
	
              SECTION
                3.02.

            	
              No
                Interference

            	
              11

            
	
              SECTION
                3.03.

            	
              Rights
                as Unsecured Creditors

            	
              13

            
	
              SECTION
                3.04.

            	
              Automatic
                Release of Second Priority Liens.

            	
              13

            
	
              SECTION
                3.05.

            	
              Automatic
                Release of First Priority Liens

            	
              14

            
	
              SECTION
                3.06.

            	
              Insurance
                and Condemnation Awards

            	
              14

            
	
              SECTION
                3.07.

            	
              Notification
                of Release of Collateral

            	
              15

            

    

    

    ARTICLE
      IV

    

    PAYMENTS

    

    
      	
              SECTION
                4.01.

            	Application
              of Proceeds	 
	
              SECTION
                4.02.

            	
              Payment
                Over

            	
              15

            
	
              SECTION
                4.03.

            	
              Certain
                Agreements with Respect to Unenforceable Liens

            	
              16

            

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

    

    ARTICLE
      V

    

    BAILMENT
      FOR PERFECTION OF CERTAIN SECURITY INTERESTS

    

    ARTICLE
      VI

    

    INSOLVENCY
      OR LIQUIDATION PROCEEDINGS

    

    
      	
              SECTION
                6.01.

            	
              Finance
                and Sale Matters

            	
              17

            
	
              SECTION
                6.02.

            	
              Relief
                from the Automatic Stay

            	
              19

            
	
              SECTION
                6.03.

            	
              Reorganization
                Securities

            	
              19

            
	
              SECTION
                6.04.

            	
              Post-Petition
                Interest

            	
              19

            
	
              SECTION
                6.05.

            	
              Certain
                Waivers by the Second Priority Secured Parties

            	
              20

            
	
              SECTION
                6.06.

            	
              Certain
                Voting Matters

            	
              20

            

    

    

    ARTICLE
      VII

    

    OTHER
      AGREEMENTS

    

    
      	
              SECTION
                7.01.

            	
              Matters
                Relating to Debt Documents

            	
              20

            
	
              SECTION
                7.02.

            	
              Effect
                of Refinancing of Indebtedness under First Priority Debt
                Documents

            	
              20

            
	
              SECTION
                7.03.

            	
              No
                Waiver by First Priority Secured Parties

            	
              21

            
	
              SECTION
                7.04.

            	
              Reinstatement

            	
              21

            
	
              SECTION
                7.05.

            	
              Authorization
                of Collateral Agents

            	
              21

            
	
              SECTION
                7.06.

            	
              Further
                Assurances

            	
              22

            

    

    

    ARTICLE
      VIII

    

    REPRESENTATIONS
      AND WARRANTIES

    

    
      	
              SECTION
                8.01.

            	
              Representations
                and Warranties of Each Party

            	
              22

            
	
              SECTION
                8.02.

            	
              Representations
                and Warranties of Each Collateral Agent

            	
              22

            

    

    

    ARTICLE
      IX

    

    NO
      RELIANCE; NO LIABILITY; OBLIGATIONS ABSOLUTE

    

    
      	
              SECTION
                9.01.

            	
              No
                Reliance; Information

            	
              22

            
	
              SECTION
                9.02.

            	
              No
                Warranties or Liability

            	
              23

            
	
              SECTION
                9.03.

            	
              Obligations
                Absolute

            	
              23

            

    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

    ARTICLE
      X

    

    MISCELLANEOUS

    

    
      	
              SECTION
                10.01.

            	
              Notices

            	
              24

            
	
              SECTION
                10.02.

            	
              Conflicts

            	
              25

            
	
              SECTION
                10.03.

            	
              Effectiveness;
                Survival; Termination

            	
              25

            
	
              SECTION
                10.04.

            	
              Severability

            	
              25

            
	
              SECTION
                10.05.

            	
              Amendments;
                Waivers

            	
              26

            
	
              SECTION
                10.06.

            	
              Postponement
                of Subrogation

            	
              26

            
	
              SECTION
                10.07.

            	
              Applicable
                Law; Jurisdiction; Consent to Service of Process

            	
              26

            
	
              SECTION
                10.08.

            	
              Waiver
                of Jury Trial

            	
              27

            
	
              SECTION
                10.09.

            	
              Parties
                in Interest

            	
              27

            
	
              SECTION
                10.10.

            	
              Specific
                Performance

            	
              27

            
	
              SECTION
                10.11.

            	
              Headings

            	
              27

            
	
              SECTION
                10.12.

            	
              Counterparts

            	
              27

            
	
              SECTION
                10.13.

            	
              Provisions
                Solely to Define Relative Rights

            	
              28

            

    

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

    INTERCREDITOR
      AGREEMENT dated as of November 29, 2007 (this
“Agreement”) among GASTAR EXPLORATION USA, INC., a
      Michigan corporation (the “Company”), GASTAR
      EXPLORATION LTD., an Alberta, Canada corporation (the
“Parent”), the Subsidiaries of the Parent party
      hereto, AMEGY BANK NATIONAL ASSOCIATION, as agent for the First Priority Secured
      Parties (as defined below) (in such capacity, the “First Priority
      Agent”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as collateral
      agent for the Second Priority Secured Parties (as defined below) (in such
      capacity, the “Second Priority Agent”).

     

    PRELIMINARY
      STATEMENT

     

    Reference
      is made to (a) the Credit Agreement dated as of November 29, 2007 (as amended,
      supplemented, restated or otherwise modified from time to time in accordance
      with the terms hereof, the “First Priority Debt
      Agreement”) among the Company, the Parent, certain of the
      Company’s subsidiaries, the lenders from time to time party thereto (the
“First Priority Creditors”) and the First Priority
      Agent, (b) the Indenture dated as of November 29, 2007 (as amended,
      supplemented, restated or otherwise modified from time to time in accordance
      with the terms hereof, the “Second Priority Debt
      Agreement” and, together with the First Priority Debt Agreement,
      the “Debt Agreements”) among the Company, the Parent,
      certain of the Company’s subsidiaries, Wells Fargo Bank, National Association,
      as Trustee (in such capacity, the “Second Priority
      Trustee”) and the Second Priority Agent, (c) the First Lien
      Security Agreement dated as of November 29, 2007 (as amended, supplemented,
      restated or otherwise modified from time to time in accordance with the terms
      hereof, the “First Priority Security Agreement”) among
      the Company, certain of the Company’s subsidiaries and the First Priority Agent,
      (d) the Second Lien Security Agreement dated as of November 29, 2007 (as
      amended, supplemented, restated or otherwise modified from time to time in
      accordance with the terms hereof, the “Second Priority Security
      Agreement”) among the Company, certain of the Company’s
      subsidiaries and the Second Priority Agent, (e) the other Loan Documents as
      defined, and referred to, in the First Priority Debt Agreement and (f) the
      other
      Collateral Agreements as defined, and referred to, in the Second Priority Debt
      Agreement.

     

    RECITALS

     

    A.           The
      First Priority Creditors have agreed to make loans and other extensions of
      credit to the Company pursuant to the First Priority Debt Agreement on the
      condition, among others, that the First Priority Claims (such term and each
      other capitalized term used but not defined in the preliminary statement or
      these recitals having the meaning given it in Article I) shall be secured by
      first priority Liens on, and security interests in, the Collateral and the
      Excluded Collateral.

     

    B.           The
      Second Priority Creditors have agreed to purchase and/or hold the Notes issued
      by the Company from time to time pursuant to the Second Priority Debt Agreement
      on the condition, among others, that the Second Priority Claims shall be secured
      by second priority Liens on, and security interests in, the
      Collateral.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    C.           The
      Debt Agreements require, among other things, that the parties thereto set forth
      in this Agreement, among other things, their respective rights, obligations
      and
      remedies with respect to the Collateral.

     

    Accordingly,
      the parties hereto agree as follows:

     

    ARTICLE
      I

     

    Definitions

     

    SECTION
      1.01.  Certain Defined
      Terms.  Capitalized terms used in this Agreement and not
      otherwise defined herein shall, except to the extent the context otherwise
      requires, have the meanings set forth in the Second Priority Debt Agreement
      (as
      in effect on the date hereof) or the Second Priority Security Agreement (as
      in
      effect on the date hereof), as applicable.

     

    SECTION
      1.02.  Other Defined
      Terms.  As used in the Agreement, the following terms
      shall have the meanings specified below:

     

    “Bankruptcy
      Code” shall mean Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereinafter in effect, or any successor
      statute.

     

    “Bankruptcy
      Law” shall mean the Bankruptcy Code and any other Federal, state
      or foreign bankruptcy, insolvency, receivership or similar law.

     

    “Capital
      Stock” shall mean:

     

    (1)           in
      the case of a corporation, corporate stock;

     

    (2)           in
      the case of an association or business entity, any and all shares, interests,
      participations, rights or other equivalents (however designated) of corporate
      stock;

     

    (3)           in
      the case of a partnership or limited liability company, partnership or
      membership interests (whether general or limited); and

     

    (4)           any
      other interest or participation that confers on a person or entity the right
      to
      receive a share of the profits and losses of, or distributions of assets of,
      another person or entity that has issued such interest or
      participation.

     

    “Collateral”
      shall mean, collectively, all “Collateral”, as defined in each of the First
      Priority Debt Agreement or any other First Priority Debt Document and the Second
      Priority Debt Agreement or any other Second Priority Debt Document.

     

    “Collateral
      Agents” shall mean the First Priority Agent and the Second
      Priority Agent.

     

    “Company”
      shall have the meaning assigned to such term in the preliminary statement to
      this Agreement.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    “Debt
      Agreements” shall have the meaning assigned to such term in the
      preliminary statement of this Agreement.

     

    “Debt
      Documents” shall mean the First Priority Debt Documents and the
      Second Priority Debt Documents.

     

    “DIP
      Financing” shall have the meaning assigned to such term in Section
      6.01(a).

     

    “DIP
      Financing Liens” shall have the meaning assigned to such term in
      Section 6.01(a).

     

    “Discharge
      of First Priority Claims” shall mean, subject to Sections 7.02 and
      7.04(a), (a) payment in full in cash of the principal of and interest (including
      interest accruing during the pendency of any Insolvency or Liquidation
      Proceeding, regardless of whether allowed or allowable in such Insolvency or
      Liquidation Proceeding) and premium, if any, on all Indebtedness outstanding
      under the First Priority Debt Documents to the extent constituting First
      Priority Claims, (b) cancellation of or the entry into arrangements satisfactory
      to the First Priority Agent and the Issuing Bank with respect to all Letters
      of
      Credit issued and outstanding under the First Priority Debt Agreement and (c)
      termination or expiration of all commitments to lend and all obligations to
      issue or extend Letters of Credit under the First Priority Debt
      Agreement.

     

    “Discharge
      of Second Priority Claims” shall mean, subject to Section 7.04(b),
      (a) payment in full in cash of the principal of and interest (including interest
      accruing during the pendency of any Insolvency or Liquidation Proceeding,
      regardless of whether allowed or allowable in such Insolvency or Liquidation
      Proceeding) and premium, if any, on all Indebtedness outstanding under the
      Second Priority Debt Documents to the extent constituting Second Priority Claims
      and (b) payment in full of all First Priority Claims acquired by the Second
      Priority Agent and/or any of the Second Priority Secured Parties as contemplated
      by Section 10.06 hereof.

     

    “Disposition”
      shall mean any sale, lease, exchange, transfer or other
      disposition.  “Dispose” shall have a
      correlative meaning.

     

    “Excluded
      Collateral” shall mean any Capital Stock of Subsidiaries, whether
      or not such Capital Stock is pledged to secure any First Priority
      Claims.

     

    “First
      Priority Agent” shall have the meaning assigned to such term in
      the preamble to this Agreement.

     

    “First
      Priority Claims” shall mean, at any time, (i) all Indebtedness
      under the First Priority Debt Agreement permitted pursuant to clause (1) of
      the
      definition of “Permitted Debt” in Section 4.09(b) of the Second Priority Debt
      Agreement, and all Obligations (other than principal) related to such
      Indebtedness and owing under the documents relating to such Indebtedness and
      (ii) all Hedging Obligations permitted under such First Priority Debt Agreement
      and secured by the First Priority Liens.

     

    “First
      Priority Collateral” shall mean all “Collateral”, as defined in
      the First Priority Debt Agreement or any other First Priority Debt Document,
      and
      any other assets of any Grantor now or at any time hereafter subject to Liens
      which secure, but only to the extent securing, any First Priority
      Claims.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    “First
      Priority Creditors” shall have the meaning assigned to such term
      in the preliminary statement of this Agreement.

     

    “First
      Priority Debt Agreement” shall have the meaning assigned to such
      term in the preliminary statement of this Agreement.

     

    “First
      Priority Debt Documents” shall mean the “Loan Documents”, as
      defined in the First Priority Debt Agreement.

     

    “First
      Priority Liens” shall mean all Liens on the First Priority
      Collateral to the extent such Liens secure the First Priority Claims, whether
      created under the First Priority Security Documents or acquired by possession,
      statute (including any judgment lien), operation of law, subrogation or
      otherwise.

     

    “First
      Priority Mortgages” shall mean, collectively, each mortgage, deed
      of trust, leasehold mortgage, assignment of leases and rents, modifications
      and
      any other agreement, document or instrument pursuant to which a Lien on real
      property is granted by any Grantor to secure any First Priority Claims or under
      which rights or remedies with respect to any such Lien are
      governed.

     

    “First
      Priority Secured Parties” shall mean, at any time, (a) the First
      Priority Creditors, (b) the First Priority Agent, (c) each other Person to
      whom
      any of the First Priority Claims is owed (including any Affiliate of a First
      Priority Creditor to whom any First Priority Claims of the type described in
      clause (ii) of the definition thereof is owed) and (d) the successors and
      assigns of each of the foregoing.

     

    “First
      Priority Security Agreement” shall have the meaning assigned to
      such term in the preliminary statement of this Agreement.

     

    “First
      Priority Security Documents” shall mean the First Priority Debt
      Agreement, the First Priority Mortgages, the First Priority Security Agreement
      and any other agreement, document or instrument pursuant to which a Lien is
      granted by any Grantor to secure any First Priority Claims or under which rights
      or remedies with respect to any such Lien are governed.

     

    “Grantors”
      shall mean the Company, the Parent and each Subsidiary that shall have created
      or purported to create any First Priority Lien or Second Priority Lien on all
      or
      any part of its assets to secure any First Priority Claims or any Second
      Priority Claims.

     

    “Guarantors”
      shall mean, collectively, the Parent and each Subsidiary that shall have
      guaranteed any First Priority Claims or any Second Priority Claims, whether
      by
      executing and delivering the applicable Debt Agreement, or a separate guaranty
      thereof, or a supplement thereto, or otherwise.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    “Indebtedness”
      shall mean and includes all obligations that constitute “Indebtedness”, as
      defined in the First Priority Debt Agreement or the Second Priority Debt
      Agreement, as applicable.

     

    “Insolvency
      or Liquidation Proceeding” shall mean (a) any voluntary or
      involuntary proceeding under the Bankruptcy Code or any other Bankruptcy Law
      with respect to any Grantor, (b) any voluntary or involuntary appointment of
      a
      receiver, trustee, custodian, sequestrator, conservator or similar official
      for
      any Grantor or for a substantial part of the property or assets of any Grantor,
      (c) any voluntary or involuntary winding-up or liquidation of any Grantor,
      or
      (d) a general assignment for the benefit of creditors by any
      Grantor.

     

    “Inventory”
      means, with respect to any Grantor, all of such Grantor’s now owned or hereafter
      acquired right, title, and interest with respect to inventory, including goods
      held for sale or lease or to be furnished under a contract of service, goods
      that are leased by such Grantor as lessor, goods that are furnished by such
      Grantor under a contract of service, and raw materials, work in process, or
      materials used or consumed in such Grantor’s business.

     

    “Letter
      of Credit” shall have the meaning assigned to such term in the
      First Priority Debt Agreement.

     

    “Lien”
      shall mean, with respect to any asset, any mortgage, lien, pledge, charge,
      security interest or encumbrance of any kind in respect of such asset, whether
      or not filed, recorded or otherwise perfected under applicable law, including
      any conditional sale or other title retention agreement, any lease in the nature
      thereof, any option or other agreement to sell or give a security interest
      in
      and any filing of or agreement to give any financing statement under the Uniform
      Commercial Code (or equivalent statutes) of any jurisdiction other than a
      precautionary financing statement not intended as a security
      agreement.

     

    “Liquidation
      Sale” shall mean a so-called bulk sale, liquidation sale or “going
      out of business sale” conducted either by any Secured Party or a Grantor in
      respect to all or a substantial portion of such Grantor’s Collateral following
      the occurrence and during the continuance of an Event of Default under, and
      as
      defined in, either the First Priority Debt Documents or Second Priority Debt
      Documents.

     

    “New
      First Priority Agent” shall have the meaning assigned to such term
      in Section 7.02.

     

    “New
      First Priority Claims” shall have the meaning assigned to such
      term in Section 7.02.

     

    “New
      First Priority Debt Documents” shall have the meaning assigned to
      such term in Section 7.02.

     

    “Pledged
      or Controlled Collateral” shall have the meaning assigned to such
      term in Article V.

     

    “Refinance”
      shall mean, in respect of any Indebtedness, to refinance, extend, renew,
      restructure (including by the amendment and restatement of any instrument or
      agreement evidencing such Indebtedness) or replace or to issue other
      Indebtedness in exchange or replacement for, such Indebtedness, in whole or
      in
      part.  “Refinanced” and
“Refinancing” shall have correlative
      meanings.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    “Refinancing
      Notice” shall have the meaning assigned to such term in Section
      7.02.

     

    “Release”
      shall have the meaning assigned to such term in Section 3.04.

     

    “Second
      Priority Agent” shall have the meaning assigned to such term in
      the preamble to this Agreement.

     

    “Second
      Priority Claims” shall mean the obligations of the Company and the
      Guarantors under or with respect to (i) the Second Priority Debt Agreement,
      (ii)
      the promissory notes from time to time issued under the Second Priority Debt
      Agreement, (iii) any guaranty by a Guarantor of the Second Priority Debt
      Agreement or such promissory notes, or (iv) any other Second Priority Debt
      Document.

     

    “Second
      Priority Collateral” shall mean all “Collateral”, as defined in
      any Second Priority Debt Document, and any other assets of any Grantor now
      or at
      any time hereafter subject to Liens which secure, but only to the extent
      securing, any Second Priority Claims.

     

    “Second
      Priority Creditors” shall mean the “Holders”, as defined in the
      Second Priority Debt Agreement.

     

    “Second
      Priority Debt Agreement” shall have the meaning assigned to such
      term in the preliminary statement of this Agreement.

     

    “Second
      Priority Debt Documents” shall mean the “Indenture Documents”, as
      defined in the Second Priority Debt Agreement.

     

    “Second
      Priority Liens” shall mean all Liens on the Second Priority
      Collateral securing the Second Priority Claims, whether created under the Second
      Priority Security Documents or acquired by possession, statute (including any
      judgment lien), operation of law, subrogation or otherwise.

     

    “Second
      Priority Mortgages” shall mean, collectively, each mortgage, deed
      of trust, leasehold mortgage, assignment of leases and rents, modifications
      and
      any other agreement, document or instrument pursuant to which any Lien on real
      property is granted by any Grantor to secure any Second Priority Claims or
      under
      which rights or remedies with respect to any such Lien are
      governed.

     

    “Second
      Priority Permitted Actions” shall have the meaning assigned to
      such term in Section 3.01(a).

     

    “Second
      Priority Secured Parties” shall mean, at any time, (a) the Second
      Priority Creditors, (b) the Second Priority Trustee, (c) the Second Priority
      Agent, (d) each other Person to whom any of the Second Priority Claims
      (including indemnification obligations) is owed and (e) the successors and
      assigns of each of the foregoing.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    “Second
      Priority Security Agreement” shall have the meaning assigned to
      such term in the preliminary statement of this Agreement.

     

    “Second
      Priority Security Documents” shall mean the “Collateral
      Agreements”, as defined in the Second Priority Debt Agreement, including the
      Second Priority Mortgages and the Second Priority Security Agreement, and any
      other agreement, document or instrument pursuant to which a Lien is granted
      by
      any Grantor to secure any Second Priority Claims or under which rights or
      remedies with respect to any such Lien are governed.

     

    “Secured
      Parties” shall mean, as the context may require, the First
      Priority Secured Parties and/or the Second Priority Secured
      Parties.

     

    “Security
      Documents” shall mean the First Priority Security Documents and
      the Second Priority Security Documents.

     

    “Standstill
      Period” shall have the meaning assigned to such term in Section
      3.02(a).

     

    “Subsidiary”
      means:

     

    (1)           any
      corporation, association or other business entity (other than a partnership)
      of
      which more than 50% of the total voting power (without regard to the occurrence
      of any contingency) of Capital Stock is at the time owned or controlled,
      directly or through another Subsidiary, by Parent or one or more of the other
      Subsidiaries of Parent (or a combination thereof); and

     

    (2)           any
      partnership (a) the sole general partner or the managing general partner of
      which is Parent or a Subsidiary of Parent, (b) the only general partners of
      which are Parent or one or more Subsidiaries of Parent (or any combination
      thereof), or (c) as to which Parent and its Subsidiaries are entitled to receive
      more than 50% of the assets of such partnership upon its
      dissolution.

     

    “Uniform
      Commercial Code” or “UCC” shall mean the
      Uniform Commercial Code (or any similar or equivalent legislation) as in effect
      from time to time in any applicable jurisdiction.

     

    SECTION
      1.03.  Terms
      Generally.  The definitions of terms herein shall apply
      equally to the singular and plural forms of the terms
      defined.  Whenever the context may require, any pronoun shall include
      the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
      phrase “without limitation.”  The word “will” shall be construed to
      have the same meaning and effect as the word “shall”.  Unless the
      context requires otherwise (a) any definition of or reference to any agreement,
      instrument or other document herein shall be construed as referring to such
      agreement, instrument or other document as from time to time amended, restated,
      supplemented or otherwise modified, (b) any reference herein (i) to any Person
      shall be construed to include such Person’s successors and assigns and (ii) to
      the Company or any other Grantor shall be construed to include the Company
      or
      such Grantor as debtor and debtor-in-possession and any receiver or trustee
      for
      the Company or any other Grantor, as the case may be, in any Insolvency or
      Liquidation Proceeding or Liquidation Sale, (c) 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, (d) all
      references herein to Articles or Sections shall be construed to refer to
      Articles or Sections of this Agreement and (e) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any
      and
      all tangible and intangible assets and properties, including cash, securities,
      accounts and contract rights.

     

    
      
        
        

      

      
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    ARTICLE
      II

     

    Lien
      Priorities

     

    SECTION
      2.01.  Relative
      Priorities.  Notwithstanding the date, manner or order
      of grant, attachment or perfection of any Second Priority Lien or any First
      Priority Lien, and notwithstanding any provision of the UCC or any other
      applicable law or the provisions of any Security Document or any other Debt
      Document or any other circumstance whatsoever, each Collateral Agent, for itself
      and on behalf of the Secured Parties on whose behalf it acts in such capacity
      therefor, hereby agrees that so long as the Discharge of First Priority Claims
      has not occurred, (i) any First Priority Lien on any Collateral now or hereafter
      held by or for the benefit of any First Priority Secured Party shall be senior
      in right, priority, operation, effect and all other respects to any and all
      Second Priority Liens on any Collateral and (ii) any Second Priority Lien on
      any
      Collateral now or hereafter held by or for the benefit of any Second Priority
      Secured Party shall be junior and subordinate in right, priority, operation,
      effect and all other respects to any and all First Priority Liens on any
      Collateral.

     

    SECTION
      2.02.  Prohibition on Contesting
      Liens.  Each Collateral Agent, for itself and on behalf
      of the other Secured Parties on whose behalf it acts in such capacity therefor,
      agrees that it will not, and hereby waives any right to, contest or support
      any
      other Person in contesting, in any proceeding (including any Insolvency or
      Liquidation Proceeding), the priority, validity or enforceability of any Second
      Priority Lien or any First Priority Lien, as the case may be; provided that
      nothing in this Agreement shall be construed to prevent or impair the rights
      of
      any Collateral Agent or any other Secured Party to enforce this Agreement to
      the
      extent provided hereby.

     

    SECTION
      2.03.  No New Liens.  The
      parties hereto agree that, so long as the Discharge of First Priority Claims
      has
      not occurred, none of the Grantors shall, nor shall any Grantor permit any
      of
      its subsidiaries to, (i) grant or permit any additional Liens on any asset
      of a
      Grantor to secure any Second Priority Claim unless it has granted, or
      substantially concurrently therewith grants, a Lien on such asset of such
      Grantor to secure the First Priority Claims or (ii) grant or permit any
      additional Liens on any asset of a Grantor (other than Excluded Collateral)
      to
      secure any First Priority Claims unless it has granted, or substantially
      concurrently therewith grants, a Lien on such asset of a Grantor to secure
      the
      Second Priority Claims, with each such Lien to be subject to the provisions
      of
      this Agreement.  To the extent that the provisions of the immediately
      preceding sentence are not complied with for any reason, without limiting any
      other right or remedy available to the First Priority Agent or the other First
      Priority Secured Parties, the Second Priority Agent agrees, for itself and
      on
      behalf of the other Second Priority Secured Parties, that any amounts received
      by or distributed to any Second Priority Secured Party pursuant to or as a
      result of any Lien granted in contravention of this Section 2.03 shall be
      subject to Section 4.02.

     

    
      
        
        

      

      
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    SECTION
      2.04.  Similar
      Collateral.  The parties hereto acknowledge and agree
      that it is their intention that the First Priority Collateral and the Second
      Priority Collateral be identical, except that only the First Priority Collateral
      will include the Excluded Collateral.  In furtherance of the
      foregoing, the parties hereto agree to cooperate in good faith in order to
      determine, upon any reasonable request by the First Priority Agent or the Second
      Priority Agent, the specific assets included in the First Priority Collateral
      and the Second Priority Collateral, the steps taken to perfect the First
      Priority Liens and the Second Priority Liens thereon and the identity of the
      respective parties obligated under the First Priority Debt Documents and the
      Second Priority Debt Documents in respect of the First Priority Claims and
      the
      Second Priority Claims, respectively.

     

    ARTICLE
      III

     

    Enforcement
      of Rights; Matters Relating to Collateral

     

    SECTION
      3.01.  Exercise of Rights and Remedies; Option to
      Purchase.  (a) So long as the Discharge of First
      Priority Claims has not occurred, whether or not any Insolvency or Liquidation
      Proceeding or Liquidation Sale has been commenced, the First Priority Agent
      and
      the other First Priority Secured Parties shall have the exclusive right to
      enforce rights and exercise remedies (including any right of setoff) with
      respect to the Collateral (including making determinations regarding the
      release, Disposition or restrictions with respect to the Collateral), or to
      commence or seek to commence any action or proceeding with respect to such
      rights or remedies (including any foreclosure action or proceeding or any
      Insolvency or Liquidation Proceeding or Liquidation Sale), in each case, without
      any consultation with or the consent of the Second Priority Agent or any other
      Second Priority Secured Party; provided that, notwithstanding the
      foregoing, (i) in any Insolvency or Liquidation Proceeding, the Second Priority
      Agent may file a proof of claim or statement of interest with respect to the
      Second Priority Claims; (ii) the Second Priority Agent may take any action
      to
      preserve or protect the validity and enforceability of the Second Priority
      Liens, provided that no such action is (A) adverse to the First Priority Liens
      or the rights of the First Priority Agent or any other First Priority Secured
      Party to exercise remedies in respect thereof or (B) otherwise inconsistent
      with
      the terms of this Agreement, including the automatic release of Second Priority
      Liens provided in Section 3.04; (iii) the Second Priority Secured
      Parties may file any responsive or defensive pleadings in opposition to any
      motion, claim, adversary proceeding or other pleading made by any Person
      objecting to or otherwise seeking the disallowance of the claims of the Second
      Priority Secured Parties, including any claims secured by the Collateral or
      otherwise make any agreements or file any motions pertaining to the Second
      Priority Claims, in each case, to the extent not inconsistent with the terms
      of
      this Agreement; (iv) the Second Priority Secured Parties may exercise rights
      and
      remedies as unsecured creditors, as provided in Section 3.03(a); and (v) subject
      to Section 3.02, the Second Priority Agent and the other Second Priority Secured
      Parties may enforce any of their rights and exercise any of their remedies
      with
      respect to the Collateral after the termination of the Standstill Period (the
      actions described in this proviso being referred to herein as the
“Second Priority Permitted
      Actions”).  Except for the Second Priority Permitted
      Actions, unless and until the Discharge of First Priority Claims has occurred,
      the sole right of the Second Priority Agent and the other Second Priority
      Secured Parties with respect to the Collateral shall be to receive the proceeds
      of the Collateral, if any, remaining after the Discharge of First Priority
      Claims has occurred and in accordance with the Second Priority Debt Documents
      and applicable law.

     

    
      
        
        

      

      
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    (b)           In
      exercising rights and remedies with respect to the Collateral, the First
      Priority Agent and the other First Priority Secured Parties may enforce the
      provisions of the First Priority Debt Documents and exercise remedies
      thereunder, all in such order and in such manner as they may determine in their
      sole discretion.  Such exercise and enforcement shall include the
      rights of an agent appointed by them to Dispose of Collateral upon foreclosure,
      to incur expenses in connection with any such Disposition and to exercise all
      the rights and remedies of a secured creditor under the Uniform Commercial
      Code,
      the Bankruptcy Code or any other Bankruptcy Law.  The First Priority
      Agent agrees to provide at least ten Business Days’ prior written notice to the
      Second Priority Agent of its intention to foreclose upon or Dispose of any
      Collateral; provided, however, that the failure to give any such notice
      shall not in any way limit its ability to foreclose upon or Dispose of any
      Collateral.

     

    (c)           The
      Second Priority Agent, for itself and on behalf of the other Second Priority
      Secured Parties, hereby acknowledges and agrees that no covenant, agreement
      or
      restriction contained in any Second Priority Security Document or any other
      Second Priority Debt Document shall be deemed to restrict in any way the rights
      and remedies of the First Priority Agent or the other First Priority Secured
      Parties with respect to the Collateral as set forth in this Agreement and the
      other First Priority Debt Documents.

     

    (d)           Notwithstanding
      anything in this Agreement to the contrary, following the acceleration of the
      Indebtedness then outstanding under the First Priority Debt Agreement, the
      Second Priority Secured Parties may (but shall not be obligated to), at their
      sole expense and effort, upon notice to the Company and the First Priority
      Agent, require the First Priority Secured Parties to transfer and assign to
      the
      Second Priority Secured Parties, without warranty or representation or recourse,
      all (but not less than all) of the First Priority Claims; provided that
      (x) such assignment shall not conflict with any law, rule or regulation or
      order
      of any court or other Governmental Authority having jurisdiction, and (y) the
      Second Priority Secured Parties shall have paid to the First Priority Agent,
      for
      the account of the First Priority Secured Parties, in immediately available
      funds, an amount equal to 100% of the principal of such Indebtedness
plus all accrued and unpaid interest thereon plus all accrued
      and unpaid fees plus all the other First Priority Claims then
      outstanding (which shall include, with respect to (i) the aggregate face amount
      of the Letters of Credit outstanding under the First Priority Debt Documents,
      posting cash collateral in an amount equal to 105% thereof, and (ii) each
      commodity or interest rate hedging, cap, collar, swap or other similar agreement
      that evidences any Hedging Obligations included in such First Priority Claims,
      100% of the aggregate amount of such First Priority Claims, after giving effect
      to any netting arrangements, that the applicable Grantor would be required
      to
      pay if such commodity or interest rate hedging, cap, collar, swap or other
      similar agreements were terminated at such time, calculated using the market
      quotation method.  In order to effectuate the foregoing, the First
      Priority Agent shall calculate, upon the written request of the Second Priority
      Agent from time to time, the amount in cash that would be necessary so to
      purchase the First Priority Claims.  If the right set forth in this
      Section 3.01(d) is exercised, the parties shall endeavor to close promptly
      thereafter but in any event within ten Business Days of the request set forth
      in
      the first sentence of this Section 3.01(d).  If the Second Priority
      Secured Parties exercise the right set forth in this Section 3.01(d), it shall
      be exercised pursuant to documentation mutually acceptable to each of the First
      Priority Agent and the Second Priority Agent.

     

    
      
        
        

      

      
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    (e)           In
      exercising rights and remedies with respect to the Collateral, the Second
      Priority Agent may enforce the provisions of the Second Priority Debt Documents
      and exercise remedies thereunder, all in such order and in such manner as it
      may
      determine in its sole discretion, in each case, to the extent that such
      enforcement or exercise is not otherwise prohibited by clauses (a) through
      (d)
      of this Section 3.01.  Such exercise and enforcement shall, in each
      case, to the extent that such enforcement or exercise is not otherwise
      prohibited by clauses (a) through (d) of this Section 3.01, include the rights
      of an agent appointed by it to Dispose of Collateral upon foreclosure, to incur
      expenses in connection with any such Disposition and to exercise all the rights
      and remedies of a secured creditor under the Uniform Commercial Code, the
      Bankruptcy Code or any other Bankruptcy Law.  The Second Priority
      Agent agrees to provide at least ten Business Days’ prior written notice to the
      First Priority Agent of its intention to foreclose upon or Dispose of any
      Collateral; provided, however, that the failure to give any such notice shall
      not in any way limit its ability to foreclose upon or Dispose of any Collateral
      to the extent that such foreclosure is not otherwise prohibited by clauses
      (a)
      through (d) of this Section 3.01.

     

    SECTION
      3.02.  No
      Interference.  The Second Priority Agent, for itself and
      on behalf of the other Second Priority Secured Parties, agrees that, whether
      or
      not any Insolvency or Liquidation Proceeding or Liquidation Sale has been
      commenced, the Second Priority Secured Parties:

     

    (a)           except
      for Second Priority Permitted Actions, will not, so long as the Discharge of
      First Priority Claims has not occurred, (A) enforce or exercise, or seek to
      enforce or exercise, any rights or remedies (including any right of setoff)
      with
      respect to any Collateral (including the enforcement of any right under any
      account control agreement, landlord waiver or bailee’s letter or any similar
      agreement or arrangement to which the Second Priority Agent or any other Second
      Priority Secured Party is a party) or (B) commence or join with any Person
      (other than the First Priority Agent) in commencing, or petition for or vote
      in
      favor of any resolution for, any action or proceeding with respect to such
      rights or remedies (including any foreclosure action); provided,
      however, that the Second Priority Agent may enforce or exercise any or all
      such rights and remedies, or commence, join with any Person in commencing,
      or
      petition for or vote in favor of any resolution for, any such action or
      proceeding, after a period of 90 days has elapsed (which period shall be tolled
      during any period in which the First Priority Agent shall not be entitled to
      enforce or exercise any rights or remedies with respect to any Collateral as
      a
      result of (x) any injunction issued by a court of competent jurisdiction or
      (y)
      the automatic stay or any other stay in any Insolvency or Liquidation
      Proceeding) since the date on which the Second Priority Agent has delivered
      to
      the First Priority Agent written notice of the acceleration of the Indebtedness
      then outstanding under the Second Priority Debt Agreement (the
“Standstill Period”); provided further,
      however, that (1) notwithstanding the expiration of the Standstill Period
      or anything herein to the contrary, in no event shall the Second Priority Agent
      or any other Second Priority Secured Party enforce or exercise any rights or
      remedies with respect to any Collateral, or commence, join with any Person
      at
      any time in commencing, or petition for or vote in favor of any resolution
      for,
      any such action or proceeding, if the First Priority Agent or any other First
      Priority Secured Party shall have commenced, and shall be diligently pursuing
      (or shall have sought or requested relief from or modification of the automatic
      stay or any other stay in any Insolvency or Liquidation Proceeding to enable
      the
      commencement and pursuit thereof), the enforcement or exercise of any rights
      or
      remedies with respect to any material portion of the Collateral or any such
      action or proceeding (prompt written notice thereof to be given to the Second
      Priority Agent by the First Priority Agent) and (2) after the expiration of
      the
      Standstill Period, so long as neither the First Priority Agent nor the First
      Priority Secured Parties have commenced any action to enforce their Lien on
      any
      material portion of the Collateral, in the event that and for so long as the
      Second Priority Secured Parties (or the Second Priority Agent on their behalf)
      have commenced any actions to enforce their Liens with respect to any material
      portion of the Collateral to the extent permitted hereunder and are diligently
      pursuing such actions, neither the First Priority Secured Parties nor the First
      Priority Agent shall take any action of a similar nature with respect to such
      Collateral; provided that all other provisions of this Intercreditor
      Agreement (including the turnover provisions of Article IV) are complied
      with;

     

    
      
        
        

      

      
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    (b)           will
      not contest, protest or object to any foreclosure action or proceeding brought
      by the First Priority Agent or any other First Priority Secured Party, or any
      other enforcement or exercise by any First Priority Secured Party of any rights
      or remedies relating to the Collateral under the First Priority Debt Documents
      or an Insolvency or Liquidation Proceeding or in connection with a Liquidation
      Sale or otherwise, so long as Second Priority Liens attach to the proceeds
      thereof subject to the relative priorities set forth in Section
      2.01(a);

     

    (c)           subject
      to the rights of the Second Priority Secured Parties under clause (i) above,
      will not object to the forbearance by the First Priority Agent or any other
      First Priority Secured Party from commencing or pursuing any foreclosure action
      or proceeding or any other enforcement or exercise of any rights or remedies
      with respect to the Collateral;

     

    (d)           will
      not, so long as the Discharge of First Priority Claims has not occurred and
      except for Second Priority Permitted Actions, take or receive any Collateral,
      or
      any proceeds thereof or payment with respect thereto, in connection with the
      exercise of any right or enforcement of any remedy (including any right of
      setoff) with respect to any Collateral or in connection with any insurance
      policy award under a policy of insurance relating to any Collateral or any
      condemnation award (or deed in lieu of condemnation) relating to any
      Collateral;

     

    (e)           will
      not, except for Second Priority Permitted Actions, take any action that would,
      or could reasonably be expected to, hinder, in any manner, any exercise of
      remedies under the First Priority Debt Documents, including any Disposition
      of
      any Collateral, whether by foreclosure or otherwise;

     

    (f)           will
      not, except for Second Priority Permitted Actions, object to the manner in
      which
      the First Priority Agent or any other First Priority Secured Party may seek
      to
      enforce or collect the First Priority Claims or the First Priority Liens,
      regardless of whether any action or failure to act by or on behalf of the First
      Priority Agent or any other First Priority Secured Party is, or could be,
      adverse to the interests of the Second Priority Secured Parties, and will not
      assert, and hereby waive, to the fullest extent permitted by law, any right
      to
      demand, request, plead or otherwise assert or claim the benefit of any
      marshalling, appraisal, valuation or other similar right that may be available
      under applicable law with respect to the Collateral or any similar rights a
      junior secured creditor may have under applicable law; and

     

    
      
        
        

      

      
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    (g)           will
      not attempt, directly or indirectly, whether by judicial proceeding or
      otherwise, to challenge or question the validity or enforceability of any First
      Priority Claim or any First Priority Security Document, including this
      Agreement, or the validity or enforceability of the priorities, rights or
      obligations established by this Agreement.

     

    SECTION
      3.03.  Rights as Unsecured
      Creditors.  The Second Priority Agent and the other
      Second Priority Secured Parties may, in accordance with the terms of the Second
      Priority Debt Documents and applicable law, enforce rights and exercise remedies
      against any Grantor as unsecured creditors; provided that no such
      action is otherwise inconsistent with the terms of this
      Agreement.  Without limiting the generality of the foregoing sentence,
      the Second Priority Secured Parties shall be entitled to prosecute litigation
      against any Grantor or any other Person liable in respect of the Second Priority
      Claims, notwithstanding whether any Standstill Period is then in effect, but
      shall be prohibited from taking any action to enforce any judgment until the
      lapse of any applicable Standstill Period.  Nothing in this Agreement
      shall prohibit the receipt by the Second Priority Agent or any other Second
      Priority Secured Party of the required payments of principal, premium, interest,
      fees and other amounts due under the Second Priority Debt Documents so long
      as
      such receipt is not the direct or indirect result of the enforcement or exercise
      by the Second Priority Agent or any other Second Priority Secured Party of
      rights or remedies in contravention of this Agreement as a secured creditor
      (including any right of setoff) against Collateral or enforcement in
      contravention of this Agreement of any Second Priority Lien against Collateral
      (including any judgment lien resulting from the exercise of remedies available
      to an unsecured creditor).

     

    SECTION
      3.04.  Automatic Release of Second Priority
      Liens.

     

    (a)           
      If, in connection with (i) any Disposition of any Collateral permitted under
      the
      terms of the First Priority Debt Documents or (ii) the enforcement or exercise
      of any rights or remedies with respect to the Collateral, including any
      Disposition of Collateral, the First Priority Agent, for itself and on behalf
      of
      the other First Priority Secured Parties, (x) releases any of the First Priority
      Liens, or (y) releases any Guarantor (other than the Parent) from its
      obligations under its guarantee of the First Priority Claims (in each case,
      a
“Release”), other than any such Release granted
      following (and not as a condition to) the Discharge of First Priority Claims,
      then the Second Priority Liens on such Collateral, and the obligations of such
      Guarantor under its guarantee of the Second Priority Claims, shall be
      automatically, unconditionally and simultaneously released, and the Second
      Priority Agent shall, for itself and on behalf of the other Second Priority
      Secured Parties, promptly execute and deliver to the First Priority Agent,
      the
      relevant Grantor or such Guarantor such termination statements, releases and
      other documents as the First Priority Agent or the relevant Grantor or Guarantor
      may reasonably request to effectively confirm such Release.

     

    (b)           Until
      the Discharge of First Priority Claims occurs, the Second Priority Agent, for
      itself and on behalf of each other Second Priority Secured Party, hereby
      appoints the First Priority Agent, and any officer or agent of the First
      Priority Agent, with full power of substitution, as the attorney-in-fact of
      each
      Second Priority Secured Party for the purpose of carrying out the provisions
      of
      this Section 3.04 and taking any action and executing any instrument that the
      First Priority Agent may deem necessary or advisable to accomplish the purposes
      of this Section 3.04 (including any endorsements or other instruments of
      transfer or release), which appointment is irrevocable and coupled with an
      interest but may only be exercised if the First Priority Agent requests that
      the
      Second Priority Agent (or applicable Second Priority Secured Party) execute
      such
      instrument and such request is declined.

     

    
      
        
        

      

      
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    SECTION
      3.05.  Automatic Release of First Priority
      Liens.  If, in connection with the enforcement or
      exercise of any rights or remedies with respect to the Collateral after the
      expiration of the Standstill Period that is permitted in accordance with clause
      (2) of the second proviso to Section 3.02(a), including any Disposition of
      Collateral, the Second Priority Agent, for itself and on behalf of the other
      Second Priority Secured Parties, (x) releases any of the Second Priority Liens,
      or (y) releases any Guarantor from its obligations under its guarantee of the
      Second Priority Claims (in each case, a “Second Priority
      Release”), then the First Priority Liens on such Collateral, and
      the obligations of such Guarantor under its guarantee of the First Priority
      Claims, shall be automatically, unconditionally and simultaneously released,
      and
      the First Priority Agent shall, for itself and on behalf of the other First
      Priority Secured Parties, promptly execute and deliver to the Second Priority
      Agent, the relevant Grantor or such Guarantor such termination statements,
      releases and other documents as the Second Priority Agent or the relevant
      Grantor or Guarantor may reasonably request to effectively confirm such release;
      provided that so long as the Discharge of First Priority Claims has not
      occurred, the proceeds of, or payments with respect to, any Second Priority
      Release that are received by the Second Priority Agent or any other Second
      Priority Secured Party, shall be segregated and held in trust and forthwith
      transferred or paid over to the First Priority Agent for the benefit of the
      First Priority Secured Parties in accordance with Section 4.02; provided
      further, however, that the First Priority Lender shall not be obligated to
      release the First Priority Liens on any Collateral in connection with any sale
      or other Disposition of Collateral to a Second Priority Secured Party or an
      affiliate thereof or any other transaction other than a sale of such Collateral
      to a third Person with respect to which at least 75% of the consideration
      therefor consists of cash and cash equivalents.

     

    SECTION
      3.06.  Insurance and Condemnation
      Awards.  So long as the Discharge of First Priority
      Claims has not occurred, the First Priority Agent and the other First Priority
      Secured Parties shall have the exclusive right, subject to the rights of the
      Grantors under the First Priority Debt Documents, to settle and adjust claims
      in
      respect of Collateral under policies of insurance covering Collateral and to
      approve any award granted in any condemnation or similar proceeding, or any
      deed
      in lieu of condemnation, in respect of the Collateral.  All proceeds
      of any such policy and any such award, or any payments with respect to a deed
      in
      lieu of condemnation, shall (a) first, prior to the Discharge of First Priority
      Claims and subject to the rights of the Grantors under the First Priority Debt
      Documents, be paid to the First Priority Agent for the benefit of First Priority
      Secured Parties pursuant to the terms of the First Priority Debt Documents,
      (b)
      second, after the Discharge of First Priority Claims and subject to the rights
      of the Grantors under the Second Priority Debt Documents, be paid to the Second
      Priority Agent for the benefit of the Second Priority Secured Parties pursuant
      to the terms of the Second Priority Debt Documents, and (c) third, be paid
      to
      the owner of the subject property or as a court of competent jurisdiction may
      otherwise direct.  Until the Discharge of First Priority Claims has
      occurred, if the Second Priority Agent or any other Second Priority Secured
      Party shall, at any time, receive any proceeds of any such insurance policy
      or
      any such award or payment, it shall transfer and pay over such proceeds to
      the
      First Priority Agent in accordance with Section 4.02.

     

    
      
        
        

      

      
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    SECTION
      3.07.  Notification of Release of
      Collateral.  Each of the First Priority Agent and the
      Second Priority Agent shall give the other prompt written notice of the
      Disposition by it of, and Release by it of the Lien on, any
      Collateral.  Such notice shall describe in reasonable detail the
      subject Collateral, the parties involved in such Disposition or Release, the
      place, time manner and method thereof, and the consideration, if any, received
      therefor; provided, however, that the failure to give any such notice
      shall not in and of itself in any way impair the effectiveness of any such
      Disposition or Release.

     

    ARTICLE
      IV

     

    Payments

     

    SECTION
      4.01.  Application of
      Proceeds.  Any Collateral or proceeds thereof received
      by any Secured Party in connection with any Disposition of, or collection on,
      such Collateral upon the enforcement or exercise of any right or remedy
      (including any right of setoff) will be applied as follows:

     

    first,
      to
      the payment of costs and expenses of the applicable Secured Party in connection
      with such enforcement or exercise;

     

    second,
      after all such costs and expenses have been paid in full in cash, to the payment
      of the First Priority Claims in accordance with the First Priority Debt
      Documents;

     

    third,
      after all such costs and expenses have been paid in full in cash and the
      Discharge of First Priority Claims has occurred, to the payment of the Second
      Priority Claims, and

     

    fourth,
      after all such costs and expenses have been paid in full in cash, the Discharge
      of First Priority Claims has occurred, and the Discharge of Second Priority
      Claims has occurred, any surplus Collateral or proceeds then remaining will
      be
      returned to the Company, the applicable Guarantor or to whosoever may be
      lawfully entitled to receive the same or as a court of competent jurisdiction
      may direct.

     

    SECTION
      4.02.  Payment Over.  So
      long as the Discharge of First Priority Claims has not occurred, any Collateral
      or any proceeds thereof (together with assets or proceeds subject to Liens
      referred to in the final sentence of Section 2.03) received by the Second
      Priority Agent or any other Second Priority Secured Party in connection with
      any
      Disposition of, or collection on, such Collateral upon the enforcement or the
      exercise of any right or remedy (including any right of setoff) with respect
      to
      the Collateral, or in connection with any insurance policy claim or any
      condemnation award (or deed in lieu of condemnation) with respect to the
      Collateral, shall be segregated and held in trust and forthwith transferred
      or
      paid over to the First Priority Agent for the benefit of the First Priority
      Secured Parties in the same form as received, together with any necessary
      endorsements, or as a court of competent jurisdiction may otherwise
      direct.  Until the Discharge of First Priority Claims occurs, the
      Second Priority Agent, for itself and on behalf of each other Second Priority
      Secured Party, hereby appoints the First Priority Agent, and any officer or
      agent of the First Priority Agent, with full power of substitution, the
      attorney-in-fact of each Second Priority Secured Party for the purpose of
      carrying out the provisions of this Section 4.02 and taking any action and
      executing any instrument that the First Priority Agent may deem necessary or
      advisable to accomplish the purposes of this Section 4.02, which appointment
      is
      irrevocable and coupled with an interest.

     

    
      
        
        

      

      
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    SECTION
      4.03.  Certain Agreements with Respect to
      Unenforceable Liens.  Notwithstanding anything to the
      contrary contained herein, if in any Insolvency or Liquidation Proceeding a
      determination is made that any Lien encumbering any Collateral is not
      enforceable for any reason, then the Second Priority Agent and the Second
      Priority Secured Parties agree that, any distribution or recovery they may
      receive with respect to, or allocable to, the value of the assets constituting
      Collateral subject to an enforceable Lien in favor of the Second Priority
      Secured Parties or any proceeds thereof shall (for so long as the Discharge
      of
      First Priority Claims has not occurred) be segregated and held in trust and
      forthwith paid over to the First Priority Agent for the benefit of the First
      Priority Secured Parties in the same form as received without recourse,
      representation or warranty (other than a representation of the Second Priority
      Agent that it has not otherwise sold, assigned, transferred or pledged any
      right, title or interest in and to such distribution or recovery) but with
      any
      necessary endorsements or as a court of competent jurisdiction may otherwise
      direct.  Until the Discharge of First Priority Claims occurs, the
      Second Priority Agent, for itself and on behalf of each other Second Priority
      Secured Party, hereby appoints the First Priority Agent, and any officer or
      agent of the First Priority Agent, with full power of substitution, the
      attorney-in-fact of each Second Priority Secured Party for the limited purpose
      of carrying out the provisions of this Section 4.03 and taking any action and
      executing any instrument that the First Priority Agent may deem necessary or
      advisable to accomplish the purposes of this Section 4.03, which appointment
      is
      irrevocable and coupled with an interest.

     

    ARTICLE
      V

     

    Bailment
      for Perfection of Certain Security Interests

     

    (a)           The
      parties agree that if the First Priority Agent shall at any time hold a First
      Priority Lien on any Collateral that can be perfected or the priority of which
      can be enhanced by the possession or control of such Collateral or of any
      account in which such Collateral is held, and if such Collateral or any such
      account is in fact in the possession or under the control of the First Priority
      Agent, or of agents or bailees of the First Priority Agent (such Collateral
      being referred to herein as the “Pledged or Controlled
      Collateral”), the First Priority Agent shall, solely for the
      purpose of perfecting the Second Priority Liens granted under the Second
      Priority Debt Documents and subject to the terms and conditions of this Article
      V, also (i) hold and/or maintain control of such Pledged or Controlled
      Collateral as gratuitous bailee for and representative (as defined in Section
      1-201(35) of the Uniform Commercial Code as in effect in the State of New York)
      of, or as agent for, the Second Priority Agent, (ii) with respect to any
      securities accounts included in the Collateral, have “control” (within the
      meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf
      of the Second Priority Agent and (iii) with respect to any deposit accounts
      included in the Collateral, act as agent for the Second Priority Agent and
      any
      assignee.

     

    
      
        
        

      

      
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    (b)           So
      long as the Discharge of First Priority Claims has not occurred, the First
      Priority Agent shall be entitled to deal with the Pledged or Controlled
      Collateral in accordance with the terms of this Agreement and the other First
      Priority Debt Documents as if the Second Priority Liens did not
      exist.  The obligations and responsibilities of the First Priority
      Agent to the Second Priority Agent and the other Second Priority Secured Parties
      under this Article V shall be limited solely to holding or controlling the
      Pledged or Controlled Collateral as gratuitous bailee and representative (as
      defined in Section 1 201(35) of the Uniform Commercial Code as in effect in
      the
      State of New York)  in accordance with this Article
      V.  Without limiting the foregoing, the First Priority Agent shall
      have no obligation or responsibility to ensure that any Pledged or Controlled
      Collateral is genuine or owned by any of the Grantors.  The First
      Priority Agent acting pursuant to this Article V shall not, by reason of this
      Agreement, any other Security Document or any other document, have a fiduciary
      relationship in respect of any other First Priority Secured Party, the Second
      Priority Agent or any other Second Priority Secured Party.

     

    (c)           Upon
      the Discharge of First Priority Claims, the First Priority Agent shall transfer
      the possession and control of the Pledged or Controlled Collateral, together
      with any necessary endorsements but without recourse or warranty, to the Second
      Priority Agent, and if no Second Priority Claims are outstanding at such time,
      to the applicable Grantor, in each case so as to allow such Person to obtain
      possession and control of such Pledged or Controlled Collateral.  In
      connection with any transfer under the immediately preceding sentence, the
      First
      Priority Agent agrees, at the expense of the Grantors, to take all actions
      in
      its power as shall be reasonably requested by the Second Priority Agent to
      permit the Second Priority Agent to obtain, for the benefit of the Second
      Priority Secured Parties, a first priority security interest in the Pledged
      or
      Controlled Collateral.

     

    (d)           After
      the Discharge of First Priority Claims and upon the Discharge of Second Priority
      Claims, the Second Priority Agent shall transfer the possession and control
      of
      the Pledged or Controlled Collateral, together with any necessary endorsements
      but without recourse or warranty, to the applicable Grantor, in each case so
      as
      to allow such Person to obtain possession and control of such Pledged or
      Controlled Collateral.

     

    ARTICLE
      VI

     

    Insolvency
      or Liquidation Proceedings

     

    SECTION
      6.01.  Finance and Sale
      Matters.  (a) Until the Discharge of First Priority
      Claims has occurred, the Second Priority Agent, for itself and on behalf of
      the
      other Second Priority Secured Parties, and subject to the provisions of Section
      6.01(c), agrees that, in the event of any Insolvency or Liquidation Proceeding,
      the Second Priority Secured Parties:

     

    (i)           will
      not oppose or object to the use of any Collateral constituting cash collateral
      under Section 363 of the Bankruptcy Code, or any comparable provision of any
      other Bankruptcy Law, unless the First Priority Secured Parties, or a
      representative authorized by the First Priority Secured Parties, shall oppose
      or
      object to such use of cash collateral;

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    (ii)           will
      not oppose or object to any post-petition financing provided to any Grantor,
      whether provided by the First Priority Secured Parties or any other Person,
      under Section 364 of the Bankruptcy Code, or any comparable provision of any
      other Bankruptcy Law (a “DIP Financing”), or the Liens
      securing any DIP Financing (“DIP Financing Liens”),
      unless the First Priority Secured Parties, or a representative authorized by
      the
      First Priority Secured Parties, shall then oppose or object to such DIP
      Financing or such DIP Financing Liens, and, to the extent that such DIP
      Financing Liens are senior to, or rank pari passu with, the First
      Priority Liens on the Collateral, the Second Priority Agent will, for itself
      and
      on behalf of the other Second Priority Secured Parties, subordinate the Second
      Priority Liens on the Collateral to the First Priority Liens on the Collateral,
      if applicable, and the DIP Financing Liens on the terms of this Agreement;
      provided that, notwithstanding anything herein to the contrary, the
      Second Priority Secured Parties retain their rights under the Bankruptcy Code
      to
      make post-petition financing proposals and such proposals shall not be deemed
      to
      be an objection to any other DIP Financing proposals so long as (x) any court
      order approving such post-petition financing requires that the First Priority
      Claims be paid in full in cash as a condition to such post-petition financing,
      and (y) the First Priority Claims are paid in full in cash on the date of such
      post-petition financing, which date shall be no later than 10 days after the
      date on which such post-petition financing is approved by the court in which
      such Insolvency or Liquidation Proceeding is pending;

     

    (iii)           except
      to the extent permitted by paragraph (b) of this Section 6.01, in connection
      with the use of cash collateral as described in clause (i) above or a DIP
      Financing, will not request adequate protection with respect to any Collateral
      or any other relief in connection with such use of cash collateral, DIP
      Financing or DIP Financing Liens; and

     

    (iv)           will
      not oppose or object to any Disposition of any Collateral free and clear of
      the
      Second Priority Liens or other claims under Section 363 of the Bankruptcy Code,
      or any comparable provision of any other Bankruptcy Law, if the First Priority
      Secured Parties, or a representative authorized by the First Priority Secured
      Parties, shall consent to such Disposition free and clear of First Priority
      Liens.

     

    (b)           The
      Second Priority Agent, for itself and on behalf of the other Second Priority
      Secured Parties, agrees that no Second Priority Secured Party shall contest,
      or
      support any other Person in contesting, (i) any request by the First Priority
      Agent or any other First Priority Secured Party for adequate protection in
      respect of any First Priority Claims or (ii) any objection, based on a claim
      of
      a lack of adequate protection with respect of any First Priority Claims, by
      the
      First Priority Agent or any other First Priority Secured Party to any motion,
      relief, action or proceeding.  Notwithstanding the immediately
      preceding sentence, if, in connection with any DIP Financing or use of cash
      collateral, (A) any First Priority Secured Party seeks or requests adequate
      protection in the form of a Lien on additional collateral, the Second Priority
      Agent may, for itself and on behalf of the other Second Priority Secured
      Parties, seek or request adequate protection in the form of a Lien on such
      additional collateral, which Lien will be subordinated to the First Priority
      Liens and DIP Financing Liens on the same basis as the other Second Priority
      Liens are subordinated to the First Priority Liens under this Agreement or
      (B)
      any Second Priority Secured Party is granted adequate protection in the form
      of
      a Lien on additional collateral, the First Priority Agent shall, for itself
      and
      on behalf of the other First Priority Secured Parties, be granted adequate
      protection in the form of a Lien on such additional collateral that is senior
      to
      such Second Priority Lien as security for the First Priority
      Claims.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    (c)           Notwithstanding
      the foregoing, the applicable provisions of Section 6.01(a) and (b) shall only
      be binding on the Second Priority Secured Parties with respect to any DIP
      Financing to the extent the principal amount of such DIP Financing, when taken
      together with the aggregate principal amount of the First Priority Claims
      (which, in each case, for the avoidance of doubt shall not include any First
      Priority Claims of the type described in clause (ii) of the definition thereof),
      does not exceed the sum of (i) the amount of Indebtedness at the time permitted
      to be outstanding pursuant to clause (1) of the definition of “Permitted Debt”
in Section 4.09(b) of the Second Priority Debt Document, and (ii)
      $5,000,000.

     

    SECTION
      6.02.  Relief from the Automatic
      Stay.  The Second Priority Agent, for itself and on
      behalf of the other Second Priority Secured Parties, agrees that, so long as
      the
      Discharge of First Priority Claims has not occurred, no Second Priority Secured
      Party shall, without the prior written consent of the First Priority Agent,
      seek
      or request relief from or modification of the automatic stay or any other stay
      in any Insolvency or Liquidation Proceeding in respect of any part of the
      Collateral, any proceeds thereof or any Second Priority Lien on the
      Collateral.

     

    SECTION
      6.03.  Reorganization
      Securities.  If, in any Insolvency or Liquidation
      Proceeding, debt obligations of the reorganized debtor secured by Liens upon
      any
      property of the reorganized debtor are distributed, pursuant to a plan of
      reorganization or similar dispositive restructuring plan, on account of the
      First Priority Claims and the Second Priority Claims, then, to the extent the
      debt obligations distributed on account of the First Priority Claims, on account
      of the Second Priority Claims are secured by Liens upon the same assets or
      property, the provisions of this Agreement will survive the distribution of
      such
      debt obligations pursuant to such plan and will apply with like effect to the
      Liens securing such debt obligations.

     

    SECTION
      6.04.  Post-Petition
      Interest.  (a) The Second Priority Agent, for itself and
      on behalf of the other Second Priority Secured Parties, agrees that no Second
      Priority Secured Party shall oppose or seek to challenge any claim by the First
      Priority Agent or any other First Priority Secured Party for allowance in any
      Insolvency or Liquidation Proceeding of First Priority Claims consisting of
      post-petition interest, fees or expenses to the extent of the value of the
      First
      Priority Liens (it being understood and agreed that such value shall be
      determined without regard to the existence of the Second Priority Liens on
      the
      Collateral).

     

    (b)           The
      First Priority Agent, for itself and on behalf of the other First Priority
      Secured Parties, agrees that the Second Priority Agent or any other Second
      Priority Secured Party may make a claim for allowance in any Insolvency or
      Liquidation Proceeding of Second Priority Claims consisting of post-petition
      interest, fees or expenses to the extent of the value of the Second Priority
      Liens; provided, however, that if the First Priority Secured Parties
      shall have made any such claim, such claim (A) shall have also have been
      approved or (B) shall have been approved prior to, or will be approved
      contemporaneous with, the approval of any such claim by any Second Priority
      Secured Party.

     

    
      
        
        

      

      
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    SECTION
      6.05.  Certain Waivers by the Second Priority
      Secured Parties.  The Second Priority Agent, for itself
      and on behalf of the other Second Priority Secured Parties, waives any claim
      any
      Second Priority Secured Party may hereafter have against any First Priority
      Secured Party arising out of (a) the election by any First Priority Secured
      Party of the application of Section 1111(b)(2) of the Bankruptcy Code, or any
      comparable provision of any other Bankruptcy Law, or (b) any use of cash
      collateral or financing arrangement, or any grant of a security interest in
      the
      Collateral, in any Insolvency or Liquidation Proceeding.

     

    SECTION
      6.06.  Certain Voting
      Matters.  Each of the First Priority Agent, on behalf of
      the First Priority Secured Parties and the Second Priority Agent on behalf
      of
      the Second Priority Secured Parties, agrees that, without the written consent
      of
      the other, it will not seek to vote with the other as a single class in
      connection with any plan of reorganization in any Insolvency or Liquidation
      Proceeding.  Except as provided in this Section 6.06, nothing in this
      Agreement is intended, or shall be construed, to limit the ability of the Second
      Priority Agent or the Second Priority Secured Parties to vote on any plan of
      reorganization that maintains the lien subordination provisions of this
      Agreement or of either the First Priority Secured Parties or Second Priority
      Secured Parties, to contest any plan of reorganization that does not maintain
      the lien subordination provisions of this Agreement.

     

    ARTICLE
      VII

     

    Other
      Agreements

     

    SECTION
      7.01.  Matters Relating to Debt
      Documents.  (a) Each of the Company and the Second
      Priority Agent agrees that the Second Priority Debt Agreement and each Second
      Priority Security Document shall contain the applicable provisions set forth
      on
      Annex I hereto, or similar provisions approved by the First Priority Agent,
      which approval shall not be unreasonably withheld or delayed.  Each of
      the Company and the Second Priority Agent further agrees that each Second
      Priority Mortgage covering any Collateral shall contain such other language
      as
      the First Priority Agent may reasonably request to reflect the subordination
      of
      such Second Priority Mortgage to the First Priority Security Document covering
      such Collateral pursuant to this Agreement.

     

    SECTION
      7.02.  Effect of Refinancing of Indebtedness under
      First Priority Debt Documents.  If, substantially
      contemporaneously with the Discharge of First Priority Claims, the Grantors
      Refinance Indebtedness outstanding under the First Priority Debt Documents
      and
      provided that (a) such Refinancing is permitted hereby and (b) the Company
      gives
      to the Second Priority Agent written notice (the “Refinancing
      Notice”) electing the application of the provisions of this
      Section 7.02 to such Refinancing Indebtedness, then (i) such Discharge of First
      Priority Claims shall automatically be deemed not to have occurred for all
      purposes of this Agreement, (ii) such Refinancing Indebtedness and all other
      obligations under the documents evidencing such Indebtedness (the
“New First Priority Claims”) shall automatically be
      treated as First Priority Claims for all purposes of this Agreement, including
      for purposes of the Lien priorities and rights in respect of Collateral set
      forth herein, (iii) the Debt Agreement and the other documents evidencing such
      Refinancing Indebtedness (the “New First Priority Debt
      Documents”) shall automatically be treated as the First Priority
      Debt Agreement and the First Priority Debt Documents and, in the case of New
      First Priority Debt Documents that are security documents pursuant to which
      any
      Grantor has granted a Lien to secure any New First Priority Claim, as the First
      Priority Security Documents for all purposes of this Agreement, (iv) the
      collateral agent under the New First Priority Debt Documents (the
“New First Priority Agent”) shall be deemed to be the
      First Priority Agent for all purposes of this Agreement and (v) the lenders
      under the New First Priority Debt Documents shall be deemed to be the First
      Priority Creditors for all purposes of this Agreement.  Upon receipt
      of a Refinancing Notice, which notice shall include the identity of the New
      First Priority Agent, the Second Priority Agent shall promptly enter into such
      documents and agreements (including amendments or supplements to this Agreement)
      as the Company or such New First Priority Agent may reasonably request in order
      to provide to the New First Priority Agent the rights and powers contemplated
      hereby, in each case consistent in all material respects with the terms of
      this
      Agreement.  The Company shall cause the agreement, document or
      instrument pursuant to which the New First Priority Agent is appointed to
      provide that the New First Priority Agent agrees to be bound by the terms of
      this Agreement.  In furtherance of Section 2.03, if the New First
      Priority Claims are secured by assets of the Grantors (other than Excluded
      Collateral) that do not also secure the Second Priority Claims, the applicable
      Grantors shall promptly grant a Second Priority Lien on such assets to secure
      the Second Priority Claims.

     

    
      
        
        

      

      
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    SECTION
      7.03.  No Waiver by First Priority Secured
      Parties.  Other than with respect to the Second Priority
      Permitted Actions, nothing contained herein shall prohibit or in any way limit
      the First Priority Agent or any other First Priority Secured Party from
      opposing, challenging or objecting to, in any Insolvency or Liquidation
      Proceeding or otherwise, any action taken, or any claim made, by the Second
      Priority Agent or any other Second Priority Secured Party, including any request
      by the Second Priority Agent or any other Second Priority Secured Party for
      adequate protection or any exercise by the Second Priority Agent or any other
      Second Priority Secured Party of any of its rights and remedies under the Second
      Priority Debt Documents or otherwise.

     

    SECTION
      7.04.  Reinstatement.  If,
      in any Insolvency or Liquidation Proceeding or otherwise, all or part of any
      payment with respect to the First Priority Claims previously made shall be
      rescinded for any reason whatsoever, then the First Priority Claims shall be
      reinstated to the extent of the amount so rescinded and, if theretofore
      terminated, this Agreement shall be reinstated in full force and effect and
      such
      prior termination shall not diminish, release, discharge, impair or otherwise
      affect the Lien priorities and the relative rights and obligations of the First
      Priority Secured Parties and the Second Priority Secured Parties provided for
      herein.

     

    SECTION
      7.05.  Authorization of Collateral
      Agents.  By accepting the benefits of this Agreement and
      the other First Priority Security Documents, each First Priority Secured Party
      hereby authorizes the First Priority Agent to enter into this Agreement and
      to
      act on its behalf as collateral agent hereunder and in connection
      herewith.  By accepting the benefits of this Agreement and the other
      Second Priority Security Documents, each Second Priority Secured Party hereby
      authorizes the Second Priority Agent to enter into this Agreement and to act
      on
      its behalf as collateral agent hereunder and in connection
      herewith.

     

    
      
        
        

      

      
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    SECTION
      7.06.  Further
      Assurances.  Each of the First Priority Agent, for
      itself and on behalf of the other First Priority Secured Parties, and the Second
      Priority Agent, for itself and on behalf of the other Second Priority Secured
      Parties, and each Grantor party hereto, for itself and on behalf of its
      subsidiaries, agrees that it will execute, or will cause to be executed, any
      and
      all further documents, agreements and instruments, and take all such further
      actions, as may be required under any applicable law, or which the First
      Priority Agent or the Second Priority Agent may reasonably request, to
      effectuate the terms of this Agreement, including the relative Lien priorities
      provided for herein.

     

    ARTICLE
      VIII

     

    Representations
      and Warranties

     

    SECTION
      8.01.  Representations and Warranties of Each
      Party.  Each party hereto represents and warrants to the
      other parties hereto as follows:

     

    (a)           Such
      party is duly organized, validly existing and in good standing under the laws
      of
      the jurisdiction of its organization and has all requisite power and authority
      to execute and deliver this Agreement and perform its obligations
      hereunder.

     

    (b)           This
      Agreement has been duly executed and delivered by such party and constitutes
      a
      legal, valid and binding obligation of such party, enforceable in accordance
      with its terms.

     

    (c)           The
      execution, delivery and performance by such party of this Agreement (i) do
      not
      require any consent or approval of, registration or filing with or any other
      action by any governmental authority (except as contemplated hereby) and (ii)
      will not violate any provision of law, statute, rule or regulation, or of the
      certificate or articles of incorporation or other constitutive documents or
      by-laws of such party or any order of any governmental authority or any
      provision of any indenture, agreement or other instrument applicable to or
      binding upon such party.

     

    SECTION
      8.02.  Representations and Warranties of Each
      Collateral Agent.  Each Collateral Agent represents and
      warrants to the other parties hereto that it has been authorized by the Secured
      Parties under and as defined in the First Priority Debt Agreement or the Second
      Priority Security Agreement, as applicable, to enter into this
      Agreement.

     

    ARTICLE
      IX

     

    No
      Reliance; No Liability; Obligations Absolute

     

    SECTION
      9.01.  No Reliance;
      Information.  The First Priority Secured Parties and the
      Second Priority Secured Parties shall have no duty to disclose to any Second
      Priority Secured Party or to any First Priority Secured Party, respectively,
      any
      information relating to the Company or any of the Grantors, or any other
      circumstance bearing upon the risk of nonpayment of any of the First Priority
      Claims or the Second Priority Claims, as the case may be, that is known or
      becomes known to any of them or any of their Affiliates.  In the event
      any First Priority Secured Party or any Second Priority Secured Party, in its
      sole discretion, undertakes at any time or from time to time to provide any
      such
      information to, respectively, any Second Priority Secured Party or any First
      Priority Secured Party, it shall be under no obligation (i) to make, and shall
      not make or be deemed to have made, any express or implied representation or
      warranty, including with respect to the accuracy, completeness, truthfulness
      or
      validity of the information so provided, (ii) to provide any additional
      information or to provide any such information on any subsequent occasion or
      (iii) to undertake any investigation.

     

    
      
        
        

      

      
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    SECTION
      9.02.  No Warranties or
      Liability. (a) The First Priority Agent, for itself and on
      behalf of the other First Priority Secured Parties, acknowledges and agrees
      that, except for the representations and warranties set forth in Article VIII,
      neither the Second Priority Agent nor any other Second Priority Secured Party
      has made any express or implied representation or warranty, including with
      respect to the execution, validity, legality, completeness, collectibility
      or
      enforceability of any of the Second Priority Debt Documents, the ownership
      of
      any Collateral or the perfection or priority of any Liens
      thereon.  The Second Priority Agent, for itself and on behalf of the
      other Second Priority Secured Parties, acknowledges and agrees that, except
      for
      the representations and warranties set forth in Article VIII, neither the First
      Priority Agent nor any other First Priority Secured Party has made any express
      or implied representation or warranty, including with respect to the execution,
      validity, legality, completeness, collectibility or enforceability of any of
      the
      First Priority Debt Documents, the ownership of any Collateral or the perfection
      or priority of any Liens thereon.

     

    (b)           The
      Second Priority Agent and the other Second Priority Secured Parties shall have
      no express or implied duty to the First Priority Agent or any other First
      Priority Secured Party, and the First Priority Agent and the other First
      Priority Secured Parties shall have no express or implied duty to the Second
      Priority Agent or any other Second Priority Secured Party, to act or refrain
      from acting in a manner which allows, or results in, the occurrence or
      continuance of a default or an event of default under any First Priority Debt
      Document and any Second Priority Debt Document (other than, in each case, this
      Agreement), regardless of any knowledge thereof which they may have or be
      charged with.

     

    (c)           The
      Second Priority Agent, for itself and on behalf of the other Second Priority
      Secured Parties, agrees no First Priority Secured Party shall have any liability
      to the Second Priority Agent or any other Second Priority Secured Party, and
      hereby waives any claim against any First Priority Secured Party, arising out
      of
      any and all actions which the First Priority Agent or the other First Priority
      Secured Parties may take or permit or omit to take with respect to (i) the
      First
      Priority Debt Documents (other than this Agreement), (ii) the collection of
      the
      First Priority Claims or (iii) the maintenance of, the preservation of, the
      foreclosure upon or the Disposition of any Collateral.

     

    SECTION
      9.03.  Obligations
      Absolute.  The Lien priorities provided for herein and
      the respective rights, interests, agreements and obligations hereunder of the
      First Priority Agent and the other First Priority Secured Parties and the Second
      Priority Agent and the other Second Priority Secured Parties shall remain in
      full force and effect irrespective of:

     

    (a)           any
      lack of validity or enforceability of any Debt Document;

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    (b)           any
      change in the time, place or manner of payment of, or in any other term of
      (including, subject to the limitations set forth in Section 7.01(a), the
      Refinancing of), all or any portion of the First Priority Claims, it being
      specifically acknowledged that a portion of the First Priority Claims consists
      or may consist of Indebtedness that is revolving in nature, and the amount
      thereof that may be outstanding at any time or from time to time may be
      increased or reduced and subsequently reborrowed;

     

    (c)           any
      change in the time, place or manner of payment of, or, subject to the
      limitations set forth in Section 7.01(a), in any other term of, all or any
      portion of the First Priority Claims;

     

    (d)           any
      amendment, waiver or other modification, whether by course of conduct or
      otherwise, of any Debt Document;

     

    (e)           the
      securing of any First Priority Claims or Second Priority Claims with any
      additional collateral or guarantees, or any exchange, release, voiding,
      avoidance or non perfection of any security interest in any Collateral or any
      other collateral or any release of any guarantee securing any First Priority
      Claims or Second Priority Claims;

     

    (f)           the
      commencement of any Insolvency or Liquidation Proceeding or Liquidation Sale
      in
      respect of the Company or any other Grantor; or

     

    (g)           any
      other circumstances that otherwise might constitute a defense available to,
      or a
      discharge of, the Company or any other Grantor in respect of the First Priority
      Claims or this Agreement, or any of the Second Priority Secured Parties in
      respect of this Agreement.

     

    ARTICLE
      X

     

    Miscellaneous

     

    SECTION
      10.01.  Notices.  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 fax, as follows:

     

    (a)           if
      to the Company or any other Grantor, to it, at Gastar Exploration USA, Inc.,
      1331 Lamar Street, Suite 1080, Houston, Texas  77010,
      Attention:  Treasurer, (Fax No. (713) 739-0458);

     

    (b)           if
      to the First Priority Agent, to Amegy Bank National Association, as Agent,
      4400
      Post Oak Parkway, 4th Floor,
      Houston,
      Texas 77027, Attention: Energy Lending Dept. (Fax No. (713) 651-0345);
      and

     

    (c)           if
      to the Second Priority Agent, to Wells Fargo Bank, National Association, as
      Agent, 1445 Ross Avenue, 2nd Floor,
      Dallas,
      Texas 75202-2812, Attention:  Corporate Trust Services (Fax No. (214)
      777-4086).

     

    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 if delivered by hand or overnight courier service or sent by fax
      or
      on the date five Business Days after dispatch by certified or registered mail
      if
      mailed, in each case delivered, sent or mailed (properly addressed) to such
      party as provided in this Section 10.01 or in accordance with the latest
      unrevoked direction from such party given in accordance with this Section
      10.01.  As agreed to between the Company and any Collateral Agent from
      time to time, notices and other communications may also be delivered by e-mail
      to the e-mail address of a representative of the applicable Person provided
      from
      time to time by such Person.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    The
      First
      Priority Lender and the Second Priority Agent agree to use diligent efforts
      to
      provide each other with copies of any notices of default or acceleration or
      similar notices which they give to the Borrower under the First Priority Debt
      Documents and Second Priority Debt Documents respectively; provided, however,
      that in the event that either of such parties fails to provide the other with
      such notice, such failure shall not affect their respective obligations
      hereunder or the effectiveness of any such notice.

     

    SECTION
      10.02.  Conflicts.  IN
      THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THIS
      AGREEMENT AND THE PROVISIONS OF THE OTHER DEBT DOCUMENTS, THE PROVISIONS OF
      THIS
      AGREEMENT SHALL CONTROL.

     

    SECTION
      10.03.  Effectiveness; Survival;
      Termination.  This Agreement shall become effective when
      executed and delivered by the parties hereto.  All covenants,
      agreements, representations and warranties made by any party in this Agreement
      shall be considered to have been relied upon by the other parties hereto and
      shall survive the execution and delivery of this Agreement.  The terms
      of this Agreement shall survive, and shall continue in full force and effect,
      in
      any Insolvency or Liquidation Proceeding.  The Second Priority Agent,
      for itself and on behalf of the other Second Priority Secured Parties, hereby
      waives any and all rights the Second Priority Secured Parties may now or
      hereafter have under applicable law to revoke this Agreement or any of the
      provisions of this Agreement.  This Agreement shall terminate and be
      of no further force and effect, (i) subject to compliance with its obligations
      to take certain actions upon Discharge of the Second Priority Claims pursuant
      to
      Article V and Section 3.01(d), with respect to the Second Priority Agent, the
      Second Priority Secured Parties and the Second Priority Claims, upon the later
      of (1) the date upon which the obligations under the Second Priority Debt
      Agreement terminate if there are no other Second Priority Claims outstanding
      on
      such date and (2) if there are other Second Priority Claims outstanding on
      such
      date, the date upon which such Second Priority Claims terminate and (ii) subject
      to Section 7.02 and compliance with its obligations to take certain actions
      upon
      Discharge of the First Priority Claims pursuant to Article V, with respect
      to
      the First Priority Agent, the First Priority Secured Parties and the First
      Priority Claims, the date of Discharge of First Priority Claims, subject to
      the
      rights of the First Priority Secured Parties under Section 7.04.

     

    SECTION
      10.04.  Severability.  In
      the event any one or more of the provisions contained in this Agreement should
      be held invalid, illegal or unenforceable in any respect, the validity, legality
      and enforceability of the remaining provisions contained herein shall not in
      any
      way be affected or impaired thereby (it being understood that the invalidity
      of
      a particular provision in a particular jurisdiction shall not in and of itself
      affect the validity of such provision in any other jurisdiction).  The
      parties shall endeavor in good-faith negotiations to replace the invalid,
      illegal or unenforceable provisions with valid provisions the economic effect
      of
      which comes as close as possible to that of the invalid, illegal or
      unenforceable provisions.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    SECTION
      10.05.  Amendments;
      Waivers.  (a) No failure or delay on the part of any
      party hereto in exercising any power or right hereunder shall operate as a
      waiver thereof, nor shall any single or partial exercise of any such right
      or
      power, or any abandonment or discontinuance of steps to enforce such a right
      or
      power, preclude any other or further exercise thereof or the exercise of any
      other right or power.  The rights and remedies of the parties hereto
      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
      consent to any departure by any party therefrom shall in any event be effective
      unless the same shall be permitted by paragraph (b) of this Section 10.05,
      and
      then such waiver or consent shall be effective only in the specific instance
      and
      for the purpose for which given.

     

    (b)           Neither
      this Agreement nor any provision hereof may be waived, amended or modified
      except pursuant to an agreement or agreements in writing entered into by the
      First Priority Agent and the Second Priority Agent; provided that no such
      agreement shall amend, modify or otherwise affect the rights or obligations
      of
      any Grantor without such Person’s prior written consent.

     

    SECTION
      10.06.  Postponement of
      Subrogation.  The Second Priority Agent agrees that no
      payment or distribution to any First Priority Secured Party pursuant to the
      provisions of this Agreement shall entitle any Second Priority Secured Party
      to
      exercise any rights of subrogation in respect thereof until the Discharge of
      First Priority Claims shall have occurred.  Following the Discharge of
      First Priority Claims, each First Priority Secured Party agrees to execute
      such
      documents, agreements, and instruments as any Second Priority Secured Party
      may
      reasonably request to evidence the transfer by subrogation to any such Person
      of
      an interest in the First Priority Claims resulting from payments or
      distributions to such First Priority Secured Party by such Person, so long
      as
      all costs and expenses (including all reasonable legal fees and disbursements)
      incurred in connection therewith by such First Priority Secured Party are paid
      by such Person upon request for payment thereof.

     

    SECTION
      10.07.  Applicable Law; Jurisdiction; Consent to
      Service of Process.  (a) THIS AGREEMENT SHALL BE
      CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
      WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION
      OF THE LAWS OF ANOTHER JURISDICTION.

     

    (b)           Each
      party hereto hereby irrevocably and unconditionally submits, for itself and
      its
      property, to the non-exclusive jurisdiction of any Supreme Court for New York
      County, New York or in The United States District Court for the Southern
      District of New York, and any appellate court from any thereof, in any action
      or
      proceeding arising out of or relating to this Agreement, or for recognition
      or
      enforcement of any judgment, and each of the parties hereto hereby irrevocably
      and unconditionally agrees that all claims in respect of any such action or
      proceeding may be heard and determined only in such New York court or, to the
      extent permitted by law, in such Federal court.  Each party hereto
      agrees that a final judgment in any such action or proceeding shall be
      conclusive and may be enforced in other jurisdictions by suit on the judgment
      or
      in any other manner provided by law.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

    (c)           Each
      party hereto hereby irrevocably and unconditionally waives, to the fullest
      extent it may legally and effectively do so, any objection which it may now
      or
      hereafter have to the laying of venue of any suit, action or proceeding arising
      out of or relating to this Agreement in any New York court or in any such
      Federal court.  Each party hereto hereby irrevocably waives, to the
      fullest extent permitted by law, the defense of an inconvenient forum to the
      maintenance of such action or proceeding in any such court.

     

    (d)           Each
      party to this Agreement irrevocably consents to service of process in the manner
      provided for notices in Section 10.01.  Nothing in this Agreement will
      affect the right of any party to this Agreement to serve process in any other
      manner permitted by law.

     

    SECTION
      10.08.  Waiver of Jury
      Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
      EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
      IN
      RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
      CONNECTION WITH THIS AGREEMENT.  EACH PARTY HERETO (A) CERTIFIES THAT
      NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
      EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
      LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
      IT
      AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT,
      BY,
      AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
      10.08.

     

    SECTION
      10.09.  Parties in
      Interest.  The provisions of this Agreement shall be
      binding upon and inure to the benefit of the parties hereto and their respective
      successors and assigns, as well as the other First Priority Secured Parties
      and
      Second Priority Secured Parties, all of whom are intended to be bound by, and
      to
      be third party beneficiaries of, this Agreement.  No other Person
      shall have or be entitled to assert rights or benefits hereunder.

     

    SECTION
      10.10.  Specific
      Performance.  Each Collateral Agent may demand specific
      performance of this Agreement and, on behalf of itself and the respective other
      Secured Parties, hereby irrevocably waives any defense based on the adequacy
      of
      a remedy at law and any other defense that might be asserted to bar the remedy
      of specific performance in any action which may be brought by the respective
      Secured Parties.

     

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

     

    SECTION
      10.12.  Counterparts.  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, and shall become
      effective as provided in Section 10.03.  Delivery of an executed
      signature page to this Agreement by facsimile transmission shall be as effective
      as delivery of a manually signed counterpart of this Agreement.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    SECTION
      10.13.  Provisions Solely to Define Relative
      Rights.  The provisions of this Agreement are and are
      intended solely for the purpose of defining the relative rights of the First
      Priority Secured Parties, on the one hand, and the Second Priority Secured
      Parties, on the other hand.  None of the Company, any other Grantor,
      any Guarantor or any other creditor thereof shall have any rights or
      obligations, except as expressly provided in this Agreement hereunder and none
      of the Company, any other Grantor or any Guarantor may rely on the terms
      hereof.  Nothing in this Agreement is intended to or shall impair the
      obligations of the Company or any other Grantor or any Guarantor, which are
      absolute and unconditional, to pay the First Priority Claims and the Second
      Priority Claims as and when the same shall become due and payable in accordance
      with their terms.

     

    (Signatures
      appear on following pages)

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed by their respective authorized officers or other representatives as
      of
      the day and year first above written.

     

    
      	 	
              COMPANY: 

            
	 	 	 
	 	 GASTAR
              EXPLORATION USA, INC., a Michigan corporation
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	GUARANTORS:
	 	 	 
	 	GASTAR
              EXPLORATION LTD., an Alberta, Canada corporation
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Vice
                President and

            
	 	 	
              Chief
                Financial Officer

            
	 	 	 
	 	 	 
	 	GASTAR
              EXPLORATION NEW SOUTH WALES, INC. a Michigan corporation
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	GASTAR
              EXPLORATION VICTORIA, INC. a Michigan corporation
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            

    

     

    (Signatures
      continue on following pages)

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

    

    
      	 	GASTAR
              EXPLORATION TEXAS, INC., a Michigan corporation
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	GASTAR
              EXPLORATION TEXAS, LLC, a Delaware limited liability company
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	GASTAR
              EXPLORATION TEXAS, LP,
	 	 	 
	 	
              By:

            	
              GASTAR
                EXPLORATION TEXAS LLC, its General Partner

            
	 	 	 
	 	 	 
	 	
               

            	
              By:

            	/s/
              MICHAEL A. GERLICH
	 	 	
               

            	Michael
              A. Gerlich
	 	 	
               

            	Secretary
              and Treasurer

    

     

    (Signatures
      continue on following pages)

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    

    
      	 	FIRST
              PRIORITY AGENT:
	 	 	 
	 	AMEGY
              BANK NATIONAL ASSOCIATION, as First Priority Agent
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                W. BRYAN CHAPMAN

            
	 	 	
              W.
                Bryan Chapman

            
	 	 	
              Senior
                Vice President

            

    

     

    (Signature
      continues on following page)

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    

    
      	 	SECOND
              PRIORITY AGENT
	 	 	 
	 	WELLS
              FARGO BANK, NATIONAL ASSOCIATION, as Second Priority Agent
	 	 	 
	 	
              By:

            	
              /s/
                PATRICK GIORDANO

            
	 	 	
              Patrick
                Giordano

            
	 	 	
              Vice
                President

            

    

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

    Provision
      for the Second Priority Debt Agreement

     

    THIS
      INDENTURE AND THE COLLATERAL AGREEMENTS ARE SUBJECT TO THE TERMS, LIMITATIONS
      AND CONDITIONS SET FORTH IN THE INTERCREDITOR AGREEMENT.  THE TRUSTEE,
      THE COMPANY AND EACH HOLDER OF A NOTE, BY ITS ACCPETANCE THEREOF, IS DEEMED
      TO
      HAVE AUTHORIZED AND INSTRUCTED THE COLLATERAL AGENT TO ENTER INTO THE
      INTERCREDITOR AGREEMENT ON ITS BEHALF.

     

    Provision
      for the Second Priority Security Documents

     

    “REFERENCE
      IS MADE TO THE INTERCREDITOR AGREEMENT DATED AS OF NOVEMBER 29, 2007 (AS
      AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
      “INTERCREDITOR AGREEMENT”), AMONG THE COMPANY, THE SUBSIDIARIES OF THE
      COMPANY FROM TIME TO TIME PARTY THERETO, AMEGY BANK NATIONAL ASSOCIATION, AS
      FIRST PRIORITY AGENT (AS DEFINED THEREIN), AND WELLS FARGO BANK, NATIONAL
      ASSOCIATION, AS SECOND PRIORITY AGENT (AS DEFINED
      THEREIN).  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE LIEN
      AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT, FOR THE BENEFIT OF THE
      SECURED PARTIES, PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY RIGHT OR
      REMEDY BY THE COLLATERAL AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE
      SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT.  IN THE
      EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE
      INTERCREDITOR AGREEMENT AND THE PROVISIONS OF THIS AGREEMENT OR THE OTHER
      INDENTURE DOCUMENTS, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL
      CONTROL.”

     

     

     -33-ex4_4.htm

    
      

    

    Exhibit
      4.4

     

    
      

    

    

    CREDIT
      AGREEMENT

     

    AMONG

     

    GASTAR
      EXPLORATION USA, INC.

     

    THE
      GUARANTORS SIGNATORY HERETO

     

    AMEGY
      BANK NATIONAL ASSOCIATION,

    AS
      ADMINISTRATIVE AGENT

    AND
      LETTER OF CREDIT ISSUER

     

    AND

     

    THE
      LENDERS SIGNATORY HERETO

     

     

    November
      29, 2007

     
      
        

      

    

     

    REVOLVING
      LINE OF CREDIT AND LETTER OF CREDIT FACILITY OF UP TO $250,000,000

     
      
        

      

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    TABLE
      OF CONTENTS

     

    
      	 	 	
              Page

            
	
               

            	 	 
	
              ARTICLE
                I

            	
              DEFINITIONS
                AND INTERPRETATION

            	
              1

            
	
              1.1

            	
              Terms
                Defined Above

            	
              1

            
	
              1.2

            	
              Additional
                Defined Terms

            	
              1

            
	
              1.3

            	
              Undefined
                Financial Accounting Terms

            	
              21

            
	
              1.4

            	
              References

            	
              21

            
	
              1.5

            	
              Articles
                and Sections

            	
              22

            
	
              1.6

            	
              Number
                and Gender

            	
              22

            
	
              1.7

            	
              Incorporation
                of Schedules and Exhibits

            	
              22

            
	
              1.8

            	
              Negotiated
                Transaction

            	
              22

            
	
               

            	 	 
	
              ARTICLE
                II

            	
              TERMS
                OF FACILITY

            	
              22

            
	
              2.1

            	
              Revolving
                Line of Credit and Letter of Credit Facility

            	
              22

            
	
              2.2

            	
              Limitations
                on Interest Periods

            	
              25

            
	
              2.3

            	
              Limitation
                on Types of Loans

            	
              26

            
	
              2.4

            	
              Use
                of Loan Proceeds and Letters of Credit

            	
              26

            
	
              2.5

            	
              Interest

            	
              27

            
	
              2.6

            	
              Repayment
                of Loans and Interest

            	
              27

            
	
              2.7

            	
              Outstanding
                Amounts

            	
              28

            
	
              2.8

            	
              Taxes
                and Time, Place, and Method of Payments

            	
              28

            
	
              2.9

            	
              Pro
                Rata Treatment; Adjustments

            	
              31

            
	
              2.10

            	
              Borrowing
                Base and Monthly Reduction Amount

            	
              32

            
	
              2.11

            	
              Mandatory
                Prepayments

            	
              33

            
	
              2.12

            	
              Voluntary
                Prepayments and Conversions of Loans

            	
              34

            
	
              2.13

            	
              Commitment
                Fees

            	
              34

            
	
              2.14

            	
              Engineering
                Fees

            	
              35

            
	
              2.15

            	
              Additional
                Fees

            	
              35

            
	
              2.16

            	
              Loans
                to Satisfy Obligations

            	
              35

            
	
              2.17

            	
              General
                Provisions Relating to Interest

            	
              35

            
	
              2.18

            	
              Yield
                Protection

            	
              36

            
	
              2.19

            	
              Illegality

            	
              38

            
	
              2.20

            	
              Replacement
                Lenders

            	
              38

            
	
              2.21

            	
              Regulatory
                Change

            	
              39

            
	
              2.22

            	
              Letters
                in Lieu of Transfer Orders or Division Orders

            	
              39

            
	
              2.23

            	
              Power
                of Attorney

            	
              40

            
	
              2.24

            	
              Security
                Interest in Accounts; Right of Offset

            	
              40

            
	 	 	 
	
              ARTICLE
                III

            	
              CONDITIONS

            	
              41

            
	
              3.1

            	
              Receipt
                of Loan Documents and Other Items

            	
              41

            
	
              3.2

            	
              Each
                Loan

            	
              44

            
	
              3.3

            	
              Issuance
                of Letters of Credit

            	
              45

            

    

     

    
      
        
        

      

      
        -
          i-

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE IV

            	
              REPRESENTATIONS
                AND WARRANTIES

            	
              46

            
	
              4.1

            	
              Due
                Authorization

            	
              47

            
	
              4.2

            	
              Existence

            	
              47

            
	
              4.3

            	
              Valid
                and Binding Obligations

            	
              47

            
	
              4.4

            	
              Security
                Documents

            	
              47

            
	
              4.5

            	
              Title
                to Oil and Gas Properties

            	
              47

            
	
              4.6

            	
              Scope
                and Accuracy of Financial Statements

            	
              47

            
	
              4.7

            	
              No
                Material Misstatements

            	
              48

            
	
              4.8

            	
              Liabilities
                and Litigation

            	
              48

            
	
              4.9

            	
              Authorizations;
                Consents

            	
              48

            
	
              4.10

            	
              Compliance
                with Laws

            	
              48

            
	
              4.11

            	
              ERISA

            	
              48

            
	
              4.12

            	
              Environmental
                Laws

            	
              48

            
	
              4.13

            	
              Compliance
                with Federal Reserve Regulations

            	
              49

            
	
              4.14

            	
              Investment
                Company Act Compliance

            	
              49

            
	
              4.15

            	
              Proper
                Filing of Tax Returns; Payment of Taxes Due

            	
              49

            
	
              4.16

            	
              Refunds

            	
              49

            
	
              4.17

            	
              Gas
                Contracts

            	
              49

            
	
              4.18

            	
              Intellectual
                Property

            	
              50

            
	
              4.19

            	
              Casualties
                or Taking of Property

            	
              50

            
	
              4.20

            	
              Principal
                Location

            	
              50

            
	
              4.21

            	
              Subsidiaries

            	
              50

            
	
              4.22

            	
              Compliance
                with Anti-Terrorism Laws

            	
              50

            
	
              4.23

            	
              Identification
                Numbers

            	
              51

            
	
              4.24

            	
              Solvency

            	
              51

            
	
               

            	 	 
	
              ARTICLE
                V

            	
              AFFIRMATIVE
                COVENANTS

            	
              52

            
	
              5.1

            	
              Maintenance
                and Access to Records

            	
              52

            
	
              5.2

            	
              Quarterly
                Financial Statements and Compliance Certificates

            	
              52

            
	
              5.3

            	
              Annual
                Financial Statements and Compliance Certificate

            	
              52

            
	
              5.4

            	
              Oil
                and Gas Reserve Reports and Production Reports

            	
              52

            
	
              5.5

            	
              Title
                Opinions; Title Defects; Mortgaged Properties

            	
              53

            
	
              5.6

            	
              Notices
                of Certain Events

            	
              54

            
	
              5.7

            	
              Letters
                in Lieu of Transfer Orders or Division Orders

            	
              55

            
	
              5.8

            	
              Commodity
                Hedging

            	
              55

            
	
              5.9

            	
              Additional
                Guaranties and Security Documents

            	
              55

            
	
              5.10

            	
              Additional
                Information

            	
              55

            
	
              5.11

            	
              Compliance
                with Laws

            	
              55

            
	
              5.12

            	
              Payment
                of Assessments and Charges

            	
              56

            
	
              5.13

            	
              Maintenance
                of Existence or Qualification and Good Standing

            	
              56

            
	
              5.14

            	
              Payment
                of Notes; Performance of Obligations

            	
              56

            
	
              5.15

            	
              Further
                Assurances

            	
              56

            
	
              5.16

            	
              Initial
                Expenses of Agent

            	
              56

            
	
              5.17

            	
              Subsequent
                Expenses of Agent and Lenders

            	
              56

            
	
              5.18

            	
              Operation
                of Oil and Gas Properties

            	
              57

            
	
              5.19

            	
              Maintenance
                and Inspection of Properties

            	
              57

            

    

     

    
      
        
        

      

      
        -
          ii
          -

        
          

        

      

      
        
        

      

    

     

    
      	
              5.20

            	
              Maintenance
                of Insurance

            	
              57

            
	
              5.21

            	
              ENVIRONMENTAL
                INDEMNIFICATION

            	
              58

            
	
              5.22

            	
              GENERAL
                INDEMNIFICATION

            	
              58

            
	
              5.23

            	
              Evidence
                of Compliance with Anti-Terrorism Laws

            	
              59

            
	
              5.24

            	
              GeoStar
                Rescission Amount

            	
              59

            
	
               

            	 	 
	
              ARTICLE
                VI

            	
              NEGATIVE
                COVENANTS

            	
              59

            
	
              6.1

            	
              Indebtedness

            	
              59

            
	
              6.2

            	
              Contingent
                Obligations

            	
              60

            
	
              6.3

            	
              Liens

            	
              60

            
	
              6.4

            	
              Sales
                of Assets

            	
              60

            
	
              6.5

            	
              Leasebacks

            	
              61

            
	
              6.6

            	
              Sale
                or Discount of Receivables

            	
              61

            
	
              6.7

            	
              Loans
                or Advances

            	
              61

            
	
              6.8

            	
              Investments

            	
              61

            
	
              6.9

            	
              Dividends,
                Distributions and Certain Payments

            	
              62

            
	
              6.10

            	
              Issuance
                of Equity; Changes in Corporate Structure

            	
              62

            
	
              6.11

            	
              Transactions
                with Affiliates

            	
              63

            
	
              6.12

            	
              Lines
                of Business

            	
              63

            
	
              6.13

            	
              Plan
                Obligation

            	
              63

            
	
              6.14

            	
              Current
                Ratio

            	
              63

            
	
              6.15

            	
              Total
                Net Indebtedness to EBITDA Ratio

            	
              63

            
	
              6.16

            	
              General
                and Administrative Expenses

            	
              64

            
	
              6.17

            	
              Liquidity

            	
              64

            
	
              6.18

            	
              Anti-Terrorism
                Laws

            	
              64

            
	 	 	 
	
              ARTICLE
                VII

            	
              EVENTS
                OF DEFAULT

            	
              65

            
	
              7.1

            	
              Enumeration
                of Events of Default

            	
              65

            
	
              7.2

            	
              Remedies

            	
              67

            
	 	 	 
	
              ARTICLE VIII

            	
              THE
                AGENT

            	
              68

            
	
              8.1

            	
              Appointment

            	
              68

            
	
              8.2

            	
              Delegation
                of Duties

            	
              68

            
	
              8.3

            	
              Exculpatory
                Provisions

            	
              68

            
	
              8.4

            	
              Reliance
                by Agent

            	
              69

            
	
              8.5

            	
              Notice
                of Default

            	
              69

            
	
              8.6

            	
              Non-Reliance
                on Agent and Other Lenders

            	
              69

            
	
              8.7

            	
              Indemnification

            	
              70

            
	
              8.8

            	
              Restitution

            	
              70

            
	
              8.9

            	
              Agent
                in Its Individual Capacity

            	
              71

            
	
              8.10

            	
              Successor
                Agent

            	
              71

            
	
              8.11

            	
              Applicable
                Parties

            	
              72

            
	
              8.12

            	
              Intercreditor
                Agreement

            	
              72

            
	
              8.13

            	
              Releases

            	
              72

            

    

     

    
      
        
        

      

      
        -
          iii
          -

        
          

        

      

      
        
        

      

    

     

    
      	
              ARTICLE IX

            	
              MISCELLANEOUS

            	
              72

            
	
              9.1

            	
              Assignments;
                Participations

            	
              72

            
	
              9.2

            	
              Survival
                of Representations, Warranties, and Covenants

            	
              73

            
	
              9.3

            	
              Notices
                and Other Communications

            	
              74

            
	
              9.4

            	
              Parties
                in Interest

            	
              74

            
	
              9.5

            	
              Renewals;
                Extensions

            	
              74

            
	
              9.6

            	
              Rights
                of Third Parties

            	
              75

            
	
              9.7

            	
              No
                Waiver; Rights Cumulative

            	
              75

            
	
              9.8

            	
              Survival
                Upon Unenforceability

            	
              75

            
	
              9.9

            	
              Amendments;
                Waivers

            	
              75

            
	
              9.10

            	
              Controlling
                Agreement

            	
              76

            
	
              9.11

            	
              Disposition
                of Collateral

            	
              76

            
	
              9.12

            	
              Governing
                Law

            	
              76

            
	
              9.13

            	
              Arbitration

            	
              76

            
	
              9.14

            	
              Jurisdiction
                and Venue

            	
              77

            
	
              9.15

            	
              Integration

            	
              77

            
	
              9.16

            	
              Waiver
                of Punitive and Consequential Damages

            	
              77

            
	
              9.17

            	
              Counterparts

            	
              77

            
	
              9.18

            	
              USA
                Patriot Act Notice

            	
              78

            
	
              9.19

            	
              Tax
                Shelter Regulations

            	
              78

            
	
              9.20

            	
              Contribution
                and Indemnification

            	
              78

            
	
               

            	 	 

    

     

    LIST
      OF EXHIBITS

     

    
      	
              Exhibit
                I

            	 	
              -

            	 	
              Form
                of Note

            
	
              Exhibit
                II

            	 	
              -

            	 	
              Form
                of Borrowing Request

            
	
              Exhibit
                III

            	 	
              -

            	 	
              Form
                of Compliance Certificate

            
	
              Exhibit
                IV

            	 	
              -

            	 	
              Facility
                Amounts

            
	
              Exhibit
                V

            	 	
              -

            	 	
              Opinion
                of Warner Norcross & Judd LLP

            
	
              Exhibit
                VI

            	 	
              -

            	 	
              Opinion
                of Vinson & Elkins, LLP

            
	
              Exhibit
                VII

            	 	
              -

            	 	
              Opinion
                of Burnet, Duckworth & Palmer

            
	
              Exhibit
                VIII

            	 	
              -

            	 	
              Form
                of Assignment Agreement

            

    

    

    
      
        
          
          

        

        
          -
            iv
            -

          
            

          

        

        
          
          

        

      

    

    

    CREDIT
      AGREEMENT

     

    This
      CREDIT AGREEMENT is made and entered into this 29th day of
      November,
      2007, by and among GASTAR EXPLORATION USA, INC., a Michigan corporation (the
      “Borrower”), GASTAR EXPLORATION, LTD., an Alberta, Canada corporation
      (the “Parent”), GASTAR EXPLORATION NEW SOUTH WALES, INC., a Michigan
      corporation (“Gastar New South Wales”), GASTAR EXPLORATION VICTORIA,
      INC., a Michigan corporation (“Gastar Victoria”), GASTAR EXPLORATION
      TEXAS, INC., a Michigan corporation (“Gastar Texas Inc”), GASTAR
      EXPLORATION TEXAS, LP, a Delaware limited partnership (“Gastar Texas
      LP”), and GASTAR EXPLORATION TEXAS LLC, a Delaware limited liability company
      (“Gastar Texas LLC”, and the Parent, Gastar New South Wales, Gastar
      Victoria, Gastar Texas Inc., Gastar Texas LP and Gastar Texas LLC, collectively,
      the “Initial Guarantors”), each lender that is a signatory hereto or
      becomes a signatory hereto as provided in Section 9.1 (individually,
      together with its successors and assigns, a “Lender” and collectively,
      together with their respective successors and assigns, the “Lenders”),
      and AMEGY BANK NATIONAL ASSOCIATION, a national banking association
      (“Amegy”), as administrative agent for the Lenders, the issuing bank for
      letters of credit issued hereunder and as collateral agent for any Approved
      Hedge Counterparties (as defined hereinafter) under certain circumstances
      hereunder (in such capacities, together with its successors in such capacities
      pursuant to the terms hereof, the “Agent”).

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      the Borrower and each of the Initial Guarantors are affiliated entities;
      and

     

    WHEREAS,
      the directors, the partners, the managers or the members, as the case may be,
      of
      each of the Initial Guarantors have determined that the relevant Initial
      Guarantor will receive substantial direct and/or indirect benefits from
      extensions of credit to the Borrower hereunder;

     

    NOW
      THEREFORE, in consideration of the mutual covenants and agreements herein
      contained, the parties hereto hereby agree as follows:

     

    ARTICLE
      I

     

    DEFINITIONS
      AND INTERPRETATION

     

    1.1           Terms
      Defined Above.  As used in this Credit Agreement, each of the
      terms “Agent,” “Amegy,” “Borrower,” “Gastar New South
      Wales,” “Gastar Texas Inc,” “Gastar Texas LLC,” “Gastar
      Texas LP,” “Gastar Victoria,” “Initial Guarantors,”
Lenders” and “Parent” shall have the meaning assigned to such
      term
      hereinabove.

     

    1.2           Additional
      Defined Terms.  As used in this Credit Agreement, each of the
      following terms shall have the meaning assigned thereto in this Section
      1.2 or in Sections referred to in this Section 1.2, unless the
      context otherwise requires:

    

      “Additional
        Amount” shall have the meaning assigned to such term in Section
        2.8.

       

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    “Additional
      Costs” shall mean costs which are attributable to the obligation of the
      Agent or any Lender to make or its making or maintaining any Loan, or any
      reduction in any amount receivable by the Agent or such Lender in respect of
      any
      such obligation or any LIBO Rate Loan, resulting from any Regulatory Change
      which (a) changes the basis of taxation of any amounts payable to the Agent
      or
      such Lender under this Agreement or any Note in respect of any LIBO Rate Loan
      (other than taxes imposed on the overall net income of the Agent or such Lender
      or its Applicable Lending Office (including franchise or similar taxes) for
      any
      such LIBO Rate Loan), (b) imposes or modifies any reserve, special deposit,
      minimum capital, capital ratio, or similar requirements (other than the Reserve
      Requirement utilized in the determination of the Adjusted LIBO Rate for such
      Loan) relating to any extensions of credit or other assets of, or any deposits
      with or other liabilities of, the Agent or such Lender (including LIBO Rate
      Loans and Dollar deposits in the London interbank market in connection with
      LIBO
      Rate Loans), or the Commitment of the Agent or such Lender, or the London
      interbank market, or (c) imposes any other condition affecting this Agreement
      or
      any Note or any of such extensions of credit, liabilities, or
      Commitments.

     

    “Adjusted
      Base Rate” shall mean, for any Base Rate Loan, an interest rate per annum
      (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
      Agent to be the greater of (a) the Base Rate and (b) the sum of (i) the Federal
      Funds Rate plus one half of one percent (0.50%), such rate to be computed on
      the
      basis of a year of 365 or 366 days, as the case may be, and actual days elapsed
      (including the first day but excluding the last day) during the period for
      which
      payable, but in no event shall such rate exceed the Highest Lawful
      Rate.

     

    “Adjusted
      LIBO Rate” shall mean, for any Interest Period for any LIBO Rate Loan, an
      interest rate per annum (rounded upwards, if necessary, to the nearest 1/100
      of
      1%) determined by the Agent to be equal to the quotient of (a) the sum of the
      LIBO Rate for such Interest Period for such Loan divided by (b) the remainder
      of
      1.00 minus the Reserve Requirement for such Loan for such Interest Period,
      such
      rate to be computed on the basis of a year of 360 days and actual days elapsed
      (including the first day but excluding the last day) during the period for
      which
      payable, but in no event shall such rate exceed the Highest Lawful
      Rate.

     

    “Affiliate”
      shall mean, as to any Person, any other Person directly or indirectly,
      controlling, or under common control with, such Person, and includes any
“affiliate” of such Person within the meaning of Rule 12b-2 promulgated by the
      Securities and Exchange Commission pursuant to the Securities Exchange Act
      of
      1934, with “control,” as used in this definition, meaning possession, directly
      or indirectly, of the power to direct or cause the direction of management,
      policies or action through ownership of voting securities, contract, voting
      trust, or membership in management or in the group appointing or electing
      management or otherwise through formal or informal arrangements or business
      relationships.

    

    
      
        
          
          

        

        
          -
            2 -

          
            

          

        

        
          
          

        

      

    

    

    “Agreement”
      shall mean this Credit Agreement, as it may be amended, supplemented, restated,
      or otherwise modified from time to time.

     

    “Anti-Terrorism
      Laws” shall mean any laws relating to terrorism or money laundering,
      including Executive Order No. 13224 and the USA Patriot Act.

     

    “Applicable
      Commitment Fee Percentage” shall mean a per annum rate determined by
      reference to the following table:

     

    
      	
              Borrowing
                Base Utilization

            	
              Applicable
                Commitment Fee Percentage

            
	
              ≥66%

            	
              0.500%

            
	
              <
                66%

            	
              0.375%

            

    

    

     

    ;
      provided, however, such rate as to the portion of the Available
      Commitment allocable to Amegy on the basis of its Percentage Share as a Lender
      shall be reduced to the amount determined by reference to the following
      table:

     

    
      	
              CD
                Balance

            	
              Reduction
                Amount

            
	
              ≥$50,000,000

            	
              0.000%

            
	
              ≥$37,500,000,
                but <$50,000,000

            	
              0.125%

            
	
              ≥$25,000,000,
                but <$37,500,000

            	
              0.250%

            

    

    

     

    with
      the
      above CD Balance amounts being reduced, for purposes of this proviso, by
      multiplying each relevant amount by the Percentage Share of Amegy as a Lender
      in
      effect from time to time when such Percentage Share is less than one hundred
      percent (100%).

     

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

    

    
      
        
          
          

        

        
          -
            3 -

          
            

          

        

        
          
          

        

      

    

    

    “Applicable
      Margin” shall mean (a) on any day and as to each LIBO Rate Loan or Base Rate
      Loan under the Facility, as the case may be, outstanding on such day the amount
      determined by reference to the following table:

     

    
      	
              Borrowing
                Base Utilization

            	 	
              Applicable
                Margin

            	 
	 	 	
              LIBO
                Rate Loans

            	 	 	
              Base
                Rate Loans

            	 
	
              ≥90%

            	 	 	2.25	%	 	 	0.00	%
	
              ≥66%,
                but <90%

            	 	 	2.00	%	 	 	-0.25	%
	
              ≥33%,
                <66%

            	 	 	1.75	%	 	 	-0.50	%
	
              <33%

            	 	 	1.50	%	 	 	-0.75	%

    

    

     

    ;
      provided, however, during any period while there exists any
      Deficiency, the relevant amount above shall be increased by two percent
      (2.0%).

     

    “Approved
      Fund” shall mean any (a) investment company, fund, trust, securitization
      vehicle or conduit that is (or will be) engaged in making, purchasing, holding
      or otherwise investing in commercial loans and similar extensions of credit
      in
      the ordinary course of its business or (b) any Person (other than a natural
      person) which temporarily warehouses loans for any Lender or any entity
      described in the preceding clause (a) and that, with respect to each of the
      preceding clauses (a) and (b), is administered or managed by (i) a Lender,
      (ii)
      an Affiliate of a Lender or (iii) a Person (other than a natural person) or
      an
      Affiliate of a Person (other than a natural person) that administers or manages
      a Lender.

     

    “Approved
      Hedge Counterparty” shall mean any Lender or an Affiliate of any
      Lender.

     

    “Assignment
      Agreement” shall mean each Assignment Agreement, substantially in the form
      of Exhibit VII, with appropriate insertions.

     

    “Available
      Commitment” shall mean, at any time, an amount equal to the remainder, if
      any, of (a) the Commitment Amount in effect at such time minus (b) the
      sum of the Loan Balance at such time plus the L/C Exposure at such
      time.

     

    “Base
      Rate” shall mean the interest rate announced by Amegy
      from time to time as its prime rate or its general reference rate of interest,
      which Base Rate shall change upon any change in such announced or published
      general reference interest rate and which Base Rate may not be the lowest
      interest rate charged by Amegy.

    

    
      
        
          
          

        

        
          -
            4 -

          
            

          

        

        
          
          

        

      

    

    

    “Base
      Rate Loan” shall mean any Loan and any portion of the Loan Balance which the
      Borrower has requested, in the initial Borrowing Request for such Loan or a
      subsequent Borrowing Request for such portion of the Loan Balance, bear interest
      on the basis of the Adjusted Base Rate, or which pursuant to the terms hereof
      is
      otherwise required to bear interest on the basis of the Adjusted Base
      Rate.

     

    “Benefited
      Lender” shall have the meaning assigned to such term in Section
      2.9(c).

     

    “Blocked
      Person” shall have the meaning assigned to such term in Section
      4.22.

     

    “Borrowing
      Base” shall mean, at any time, the amount stated in Section 2.10(a) and each
      other amount established and in effect from time to time in accordance with
      the
      provisions of Section 2.10.

     

    “Borrowing
      Base Utilization” shall mean (a) the sum of (i) the Loan Balance plus (ii)
      the L/C Exposure divided by (b) the Borrowing Base then in effect.

     

    “Borrowing
      Request” shall mean each written request, substantially in the form attached
      hereto as Exhibit II, by the Borrower to the Agent for a borrowing or
      conversion pursuant to Section 2.1 or Section 2.12, each of which
      shall:

     

    (a)           be
      signed by a Responsible Officer of the Borrower;

     

    (b)           specify
      the amount and type of the Loan requested or to be converted and the date of
      the
      borrowing or conversion (which shall be a Business Day);

     

    (c)           when
      requesting a Base Rate Loan, be delivered to the Agent no later than 11:00
      a.m.,
      Central Standard or Central Daylight Savings Time, as the case may be, on the
      Business Day preceding the requested borrowing or conversion; and

     

    (d)           when
      requesting a LIBO Rate Loan, be delivered to the Agent no later than 11:00
      a.m.,
      Central Standard or Central Daylight Savings Time, as the case may be, the
      third
      Business Day preceding the requested borrowing or conversion and designate
      the
      Interest Period requested with respect to such Loan.

     

    “Business
      Day” shall mean a day other than a Saturday, Sunday, legal holiday for
      commercial banks under the laws of the State of Texas, or any other day when
      banking is suspended in the State of Texas and, with respect to all requests,
      notices, and determinations in connection with, and payments of principal and
      interest on, LIBO Rate Loans, which is also a day for trading by and between
      banks in Dollar deposits in the London interbank market.

    

    
      
        
          
          

        

        
          -
            5 -

          
            

          

        

        
          
          

        

      

    

    

    “Business
      Entity”  shall mean a corporation, partnership, joint venture,
      limited liability company, joint stock association, business trust, or other
      business entity.

     

    “CD
      Balance” shall mean the sum of (a) the aggregate balance of funds of the
      Borrower on deposit with Amegy in certificates of deposit issued by Amegy and
      (b) without duplication, the amount of funds of the Borrower on deposit with
      Amegy pursuant to the provisions of Section 6.17.

     

    “Closing”
      shall mean the establishment of the financing which is the subject of this
      Agreement.

     

    “Closing
      Date” shall mean the date of this Agreement.

     

    “Collateral”
      shall mean the Mortgaged Properties and any other Property now or at any time
      used or intended as security for the payment or performance of all or any
      portion of the Obligations, including any Property that was considered in
      determining or redetermining the Borrowing Base and expressly including “as
      extracted collateral” as defined in the UCC or the Uniform Commercial Code of
      any other applicable state.

     

    “Commitment
      Amount” shall mean, subject to the applicable provisions of this Agreement
      and the right of the Borrower to reduce such amount on an irrevocable basis
      by
      written notice to the Agent, at any time, the lesser of (a) the sum of the
      Facility Amounts of the Lenders or (b) the Borrowing Base in effect at such
      time.

     

    “Commitment
      Fees” shall mean the fees payable to the Agent by the Borrower pursuant to
      the provisions of Section 2.13.

     

    “Commitment
      Letter” shall mean that certain letter agreement dated November 8, 2007
      between Amegy and the Borrower.

     

    “Commitment
      Period” shall mean the period from and including the Closing Date to, but
      not including, the Commitment Termination Date.

     

    “Commitments”
      shall mean the several obligations of the Lenders to make Loans to or for the
      benefit of the Borrower and the obligation of the Agent to issue and the Lenders
      to participate in Letters of Credit, all pursuant to Section
      2.1.

     

    “Commitment
      Termination Date” shall mean the earlier of (a) subject to any extension of
      such date pursuant to the provisions of Section 2.6, October 15, 2009 and
      (b) the date the Commitments are terminated pursuant to the provisions of
Section 2.11(b) or Section 7.2.

     

    “Commodity
      Hedge Agreements” shall mean crude oil, natural gas or other hydrocarbon
      floor, collar, cap, price protection or hedge agreements.

    

    
      
        
          
          

        

        
          -
            6 -

          
            

          

        

        
          
          

        

      

    

    

    “Commonly
      Controlled Entity” shall mean any Person which is under common control with
      the Borrower or any of the Guarantors within the meaning of Section 4001 of
      ERISA.

     

    “Compliance
      Certificate” shall mean each certificate, substantially in the form attached
      hereto as Exhibit III, executed by a Responsible Officer of the Parent
      and furnished to the Agent from time to time in accordance with the provisions
      of Section 5.2 or Section 5.3, as the case may be.

     

    “Contingent
      Obligation” shall mean, as to any Person, any obligation of such Person
      guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends,
      or
      other obligations of any other Person (for purposes of this definition, a
“primary obligation”) in any manner, whether directly or indirectly,
      including any obligation of such Person, regardless of whether such obligation
      is contingent, (a) to purchase any primary obligation or any Property
      constituting direct or indirect security therefor, (b) to advance or supply
      funds (i) for the purchase or payment of any primary obligation, or (ii) to
      maintain working or equity capital of any other Person in respect of any primary
      obligation, or otherwise to maintain the net worth or solvency of any other
      Person, (c) to purchase Property, securities or services primarily for the
      purpose of assuring the owner of any primary obligation of the ability of the
      Person primarily liable for such primary obligation to make payment thereof,
      or
      (d) otherwise to assure or hold harmless the owner of any such primary
      obligation against loss in respect thereof, with the amount of any Contingent
      Obligation being deemed to be equal to the stated or determinable amount of
      the
      primary obligation in respect of which such Contingent Obligation is made or,
      if
      not stated or determinable, the maximum reasonably anticipated liability in
      respect thereof as determined by such Person in good faith.

     

    “Contribution
      Percentage” shall mean, for each party obligated to make a payment due
      pursuant to the provisions of Section 9.20, the percentage obtained by
      dividing such party’s Obtained Benefit by the aggregate Obtained Benefits of all
      of the Guarantors.

     

    “Current
      Assets” shall mean all assets which would, in accordance with GAAP, be
      included as current assets on a consolidated balance sheet of the Parent and
      its
      consolidated Subsidiaries as of the date of calculation, after deducting
      adequate reserves in each case in which a reserve is proper in accordance with
      GAAP, plus the then current Available Commitment and, if not already included,
      the amount of any cash on deposit with Amegy in accordance with the provisions
      of Section 6.17, but excluding non-cash derivative current assets arising
      from Commodity Hedge Agreements.

     

    “Current
      Liabilities” shall mean all liabilities which would, in accordance with
      GAAP, be included as current liabilities on a consolidated balance sheet of
      the
      Parent and its consolidated Subsidiaries, but excluding current maturities
      in
      respect of the Obligations, both principal and interest, and non-cash derivative
      current liabilities arising from Commodity Hedge Agreements and current
      maturities of the Indebtedness of the Parent listed on Schedule 6.1 to
      the extent any such Indebtedness matures after October 15, 2009.

    

    
      
        
          
          

        

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

     

    “Default
      Rate” shall mean a daily interest rate equal to the per annum interest rate
      equal to the Adjusted Base Rate for each relevant day plus two percent (2%)
      converted to a daily rate on the basis of a year of 365 or 366 days, as the
      case
      may be, and the rate so determined for each relevant day being applied on the
      basis of actual days elapsed (including the first day, but excluding the last
      day) during the period for which interest is payable at the Default Rate, but
      in
      no event shall the Default Rate exceed the Highest Lawful Rate.

     

    “Deficiency”
      shall have the meaning assigned to such term in Section
      2.11(a).

     

    “Dollars”
      and “$” shall mean dollars in lawful currency of the United States of
      America.

     

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

     

    “EBITDA”
      shall mean, for any period for which the amount thereof is to be determined
      and
      on a consolidated basis for the Parent and its consolidated Subsidiaries, Net
      Income for such period (but excluding (i) unrealized gains or losses or charges
      in respect of Commodity Hedge Agreements (including those under GAAP arising
      from the application of FAS 133), (ii) and extraordinary or non-recurring income
      items and, to the extent reasonably acceptable to the Agent, expense items
      and
      (iii) deferred financing costs written off, including equity discounts, and
      premiums paid in connection with any early extinguishment of Indebtedness
      permitted pursuant to this Agreement, including the retirement of the senior
      secured Indebtedness of the Parent outstanding prior to the Closing Date),
      plus,
      in each case to the extent deducted in the determination of Net Income for
      such
      period and without duplication of any item in more than one category, each
      of
      the following for such period:  (a) Interest Expense, (b) Taxes, (c)
      depreciation and amortization expenses and (d) other non-cash expenses,
      including write-downs of non-current assets and unrealized non-cash losses
      resulting from foreign currency balance sheet adjustments required under GAAP,
      and minus, to the extent credited in the determination of Net Income for such
      period, non-cash credits for such period.

     

    “Environmental
      Complaint” shall mean any written or oral complaint, order, directive,
      claim, citation, notice of environmental report or investigation, or other
      notice by any Governmental Authority or any other Person with respect to (a)
      air
      emissions, (b) spills, releases, or discharges to soils, any improvements
      located thereon, surface water, groundwater, or the sewer, septic, waste
      treatment, storage, or disposal systems servicing any Property of the Borrower
      or any of the Guarantors, (c) solid or liquid waste disposal, (d) the use,
      generation, storage, transportation, or disposal of any Hazardous Substance,
      or
      (e) other environmental, health or safety matters affecting any Property of
      the
      Borrower or any of the Guarantors or the business conducted
      thereon.

    

    
      
        
          
          

        

        
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    “Environmental
      Laws” shall mean (a) the following federal laws as they may be cited,
      referenced, and amended from time to time:  the Clean Air Act, the
      Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
      Response, Compensation and Liability Act, the Endangered Species Act, the
      Resource Conservation and Recovery Act, the Hazardous Materials Transportation
      Act, the Occupational Safety and Health Act, the Oil Pollution Act, the Resource
      Conservation and Recovery Act, the Superfund Amendments and Reauthorization
      Act,
      and the Toxic Substances Control Act; (b) any and all equivalent environmental
      statutes of any state in which Property of the Borrower or any of the Guarantors
      is situated, as they may be cited, referenced and amended from time to time;
      (c)
      any rules or regulations promulgated under or adopted pursuant to the above
      federal and state laws; and (d) any other equivalent federal, state, or local
      statute or any requirement, rule, regulation, code, ordinance, or order adopted
      pursuant thereto, including those relating to the generation, transportation,
      treatment, storage, recycling, disposal, handling, or release of Hazardous
      Substances.

     

    “ERISA”
      shall mean the Employee Retirement Income Security Act of 1974, and the
      regulations thereunder and interpretations thereof.

     

    “Event
      of Default” shall mean any of the events specified in Section
      7.1.

     

    “Excess
      Payments” shall have the meaning assigned to such term in Section
      9.20.

     

    “Excluded
      Taxes” shall mean, with respect to any and all payments to the Agent, any
      Lender or any other recipient of any payment to be made by or on account of
      any
      Obligation, net income taxes, branch profits taxes, franchise and excise taxes
      (to the extent imposed in lieu of net income taxes), and all interest, penalties
      and liabilities with respect thereto, imposed on the Agent or any
      Lender.

     

    “Executive
      Order No. 13224” shall mean Executive Order No. 13224 on Terrorist
      Financing, effective September 24, 2001, as the same has been, or shall
      hereafter be, renewed, extended, amended or replaced.

     

    “Facility”
      shall mean the credit facility extended to the Borrower pursuant to this
      Agreement.

    

    
      
        
          
          

        

        
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    “Facility
      Amount” shall mean, for each Lender and at any point in time, the amount set
      forth opposite the name of such Lender on Exhibit IV under the caption
“Facility Amounts,” as modified from time to time to reflect assignments
      permitted by Section 9.1 or otherwise pursuant to the terms hereof and to
      give effect to any written request of the Borrower (any such request being
      irrevocable) to a reduction in the sum of the then existing Facility Amounts
      of
      the Lenders.

     

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

     

    “Fee
      Letter” shall mean that certain letter agreement dated the Closing Date
      between Amegy and the Borrower relating to certain fees to be paid by the
      Borrower to Amegy in connection with the Facility.

     

    “Financial
      Statements” shall mean consolidated and consolidating financial statements
      of the Parent and its consolidated Subsidiaries as at the point in time and
      for
      the period indicated, including all notes thereto, and consisting of at least
      a
      balance sheet and related statements of operations, shareholders’ equity, and
      cash flows and, when required by applicable provisions of this Agreement to
      be
      audited, accompanied by the unqualified certification of BDO Seidman LLC or
      another nationally-recognized or regionally-recognized firm of independent
      certified public accountants or other independent certified public accountants
      acceptable to the Agent and footnotes to any of the foregoing, all of which,
      unless otherwise indicated, shall be prepared in accordance with GAAP
      consistently applied and in comparative form with respect to the corresponding
      period of the preceding fiscal year.

     

    “Foreign
      Lender” shall have the meaning assigned to such term in Section
      2.8.

     

    “GAAP”
      shall mean generally accepted accounting principles established by the Financial
      Accounting Standards Board or the American Institute of Certified Public
      Accountants and in effect in the United States from time to time.

     

    “GeoStar”
      shall mean GeoStar Corporation, a Delaware corporation.

     

    “GeoStar
      Demand Letter” shall mean that certain letter dated November 13, 2007 from
      counsel to GeoStar to the Board of Directors of the Parent.

    

    
      
        
          
          

        

        
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    “GeoStar
      Dispute” shall mean the dispute between the Parent or Gastar Texas LP, as
      the case may be, and GeoStar with respect to the matters which are the subject
      of the GeoStar Demand Letter.

     

    “GeoStar
      Purchase and Sale Agreements” shall mean (i) that certain Purchase and Sale
      Agreement and Assignment of Interests – Texas Producing Properties and (ii) that
      certain Purchase and Sale Agreement and Assignment of Interests – Texas Non
      Producing Properties, each executed June 16, 2005, to be effective January
      1,
      2005.

     

    “GeoStar
      Rescission Amount” shall mean, at any time, the amount most recently
      calculated by the Parent and certified to the Agent, pursuant to the provisions
      of Section 5.24, as the amount of cash which the Parent or Gastar Texas
      LP, as the case may be, would be entitled to receive from GeoStar were the
      GeoStar Purchase and Sale Agreements and the transactions contemplated thereby
      to be rescinded.

     

    “Governmental
      Authority” shall mean any nation, country, commonwealth, territory,
      government, state, county, parish, municipality, or other political subdivision
      and any entity exercising executive, legislative, judicial, regulatory, or
      administrative functions of or pertaining to government.

     

    “Guaranties”
      shall mean, collectively, the Guaranty dated the Closing Date by the Initial
      Guarantors in favor of the Agent, and those certain agreements, each styled
      “Guaranty”, entered into after the Closing Date by newly formed Domestic
      Subsidiaries of the Parent or any of its Subsidiaries in favor of the Agent
      for
      the benefit of the Lenders in substantially the form of the Guaranty executed
      by
      the Initial Guarantors or in such other form as shall be reasonably satisfactory
      to the Agent.

     

    “Guarantors”
      shall mean the Initial Guarantors and any and all current or future Domestic
      Subsidiaries of the Parent or any of its Subsidiaries.

     

    “Hazardous
      Substances” shall mean flammables, explosives, radioactive materials,
      hazardous wastes, asbestos, or any material containing asbestos, polychlorinated
      biphenyls (PCBs), toxic substances or related materials, petroleum, petroleum
      products, associated oil or natural gas exploration, production, and development
      wastes, or any substances defined as “hazardous substances,” “hazardous
      materials,” “hazardous wastes,” or “toxic substances” under the Comprehensive
      Environmental Response, Compensation and Liability Act, the Superfund Amendments
      and Reauthorization Act, the Hazardous Materials Transportation Act, the
      Resource Conservation and Recovery Act, the Toxic Substances Control Act, or
      any
      other Requirement of Law.

     

    “Highest
      Lawful Rate” shall mean, as to any Lender, the maximum non-usurious interest
      rate, if any (or, if the context so requires, an amount calculated at such
      rate), that at any time or from time to time may be contracted for, taken,
      reserved, charged, or received under laws applicable to such Lender, as such
      laws are presently in effect or, to the extent allowed by applicable law, as
      such laws may hereafter be in effect and which allow a higher maximum
      non-usurious interest rate than such laws now allow.

    

    
      
        
          
          

        

        
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    “Indebtedness”
      shall mean, as to any Person, without duplication, (a) all liabilities
      (excluding capital, surplus, reserves for deferred income taxes, deferred
      compensation liabilities, other deferred liabilities and credits and asset
      retirement obligations) which in accordance with GAAP would be included in
      determining total liabilities as shown on the liability side of a balance sheet,
      (b) all obligations of such Person evidenced by bonds, debentures, promissory
      notes, or similar evidences of indebtedness, (c) all other indebtedness of
      such
      Person for borrowed money, and (d) all obligations of others, to the extent
      any
      such obligation is secured by a Lien on the assets of such Person (whether
      or
      not such Person has assumed or become liable for the obligation secured by
      such
      Lien), (e) all direct or contingent obligations of such Person under letters
      of
      credit, banker’s acceptances and similar instruments and (f) net obligations of
      such Person under any Commodity Hedge Agreements or Interest Rate Hedge
      Agreements.

     

    “Indemnified
      Taxes” shall mean Taxes other than Excluded Taxes.

     

    “Indemnitee”
      shall have the meaning assigned to such term in Section
      5.21.

     

    “Insolvency
      Proceeding” shall mean application (whether voluntary or instituted by
      another Person) for or the consent to the appointment of a receiver, trustee,
      conservator, custodian, or liquidator of any Person or of all or a substantial
      part of the Property of such Person, or the filing of a petition (whether
      voluntary or instituted by another Person) commencing a case under Title 11
      of
      the United States Code, seeking liquidation, reorganization, or rearrangement
      or
      taking advantage of any bankruptcy, insolvency, debtor’s relief, or other
      similar law of the United States, the State of Texas, or any other
      jurisdiction.

     

    “Intellectual
      Property” shall mean patents, patent applications, trademarks, tradenames,
      copyrights, technology, know-how, and processes.

     

    “Intercreditor
      Agreement” shall mean the Intercreditor Agreement dated the Closing Date by
      and among the Agent, the Second Lien Facility Agent, the Borrower and the
      Initial Guarantors containing terms acceptable to the Agent.

     

    “Interest
      Expense” shall mean, for any period for which the amount thereof is to be
      determined, any and all expenses relating to the accrual of interest on
      Indebtedness of the Parent on a consolidated basis with its consolidated
      Subsidiaries and including interest expense attributable to capitalized
      leases.

     

    “Interest
      Period” shall mean, subject to the limitations set forth in Section
      2.2, with respect to any LIBO Rate Loan, a period commencing on the date
      such Loan is made or converted from a Loan of another type pursuant to this
      Agreement or the last day of the next preceding Interest Period with respect
      to
      such Loan and ending on the numerically corresponding day in the calendar month
      that is one, two, three or six months thereafter, as the Borrower may request
      in
      the Borrowing Request for such Loan.

    

    
      
        
          
          

        

        
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    “Interest
      Rate Hedge Agreements” shall mean interest rate floor, collar, cap, rate
      protection or hedge agreements.

     

    “Investment”
      in any Person shall mean any stock, bond, note, or other evidence of
      Indebtedness, or any other security (other than current trade and customer
      accounts) of, investment or partnership interest in or loan to, such
      Person.

     

    “Joinder
      Agreement” shall mean each agreement, in form and substance reasonably
      acceptable to the Agent, pursuant to which a Domestic Subsidiary of the Parent
      makes certain representations and warranties to the Agent and the Lenders and
      agrees to be bound by the covenants in Article V and Article VI as
      if such were stated to be applicable to it and which agreement shall constitute
      a Loan Document.

     

    “L/C
      Exposure” shall mean, at any time, the then aggregate maximum amount
      available to be drawn under outstanding Letters of Credit plus, prior to the
      making of any related Letter of Credit Payments in respect of Letters of Credit,
      the aggregate of all unpaid reimbursement obligations in respect of Letters
      of
      Credit.

     

    “Letter
      of Credit” shall mean any standby letter of credit issued for the account of
      the Borrower pursuant to Section 2.1(e).

     

    “Letter
      of Credit Application” shall mean the standard letter of credit application
      employed by Amegy, as the issuer of the Letters of Credit, from time to time
      in
      connection with its issuance of letters of credit.

     

    “Letter
      of Credit Payment” shall mean any payment made by the Agent on behalf of the
      Lenders under a Letter of Credit, to the extent that such payment has not been
      repaid by the Borrower.

     

    “LIBO
      Rate” shall mean, with respect to any Interest Period for any LIBO Rate
      Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/100
      of
      1%) that appears on Reuters Reference LIBOR01 (or any successor thereto) for
      Interest Periods of one month, two months, three months or six months,
      respectively (or if such shall not be available, any successor or similar
      service selected by the Agent and the Borrower) as of approximately 11:00 a.m.,
      Central Standard or Central Daylight Savings Time, as the case may be, on the
      day two Business Days prior to the first day of such Interest Period for Dollar
      deposits in an amount comparable to the principal amount of such LIBO Rate
      Loan
      and having a term comparable to the Interest Period for such LIBO Rate
      Loan.  If neither Reuters nor any successor or similar service is
      available, the term “LIBO Rate” shall mean, with respect to any Interest Period
      for any LIBO Rate Loan, the rate per annum (rounded upwards if necessary, to
      the
      nearest 1/16 of 1%) quoted by the Agent at approximately 11:00 a.m., London
      time
      (or as soon thereafter as practicable) two Business Days prior to the first
      day
      of the Interest Period for such LIBO Rate Loan for the offering to Amegy by
      leading banks in the London interbank market of Dollar deposits in an amount
      comparable to the principal amount of such LIBO Rate Loan and having a term
      comparable to the Interest Period for such LIBO Rate Loan.

    

    
      
        
          
          

        

        
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    “LIBO
      Rate Loan” shall mean any Loan and any portion of the Loan Balance which the
      Borrower has requested, in the initial Borrowing Request for such Loan or a
      subsequent Borrowing Request for such portion of the Loan Balance, bear interest
      on the basis of the Adjusted LIBO Rate and which are permitted by the terms
      hereof to bear interest on the basis of the Adjusted LIBO Rate.

     

    “Lien”
      shall mean any interest in Property securing an obligation owed to, or a claim
      by, a Person other than the owner of such Property, whether such interest is
      based on common law, statute, or contract, and including, but not limited to,
      the lien or security interest arising from a mortgage, ship mortgage,
      encumbrance, pledge, security agreement, conditional sale or trust receipt,
      or a
      lease, consignment, or bailment for security purposes (other than true leases
      or
      true consignments), liens of mechanics, materialmen, and artisans, maritime
      liens and reservations, exceptions, encroachments, easements, rights of way,
      covenants, conditions, restrictions, leases, and other title exceptions and
      encumbrances affecting Property which secure an obligation owed to, or a claim
      by, a Person other than the owner of such Property (for the purpose of this
      Agreement, the Borrower and each of the Guarantors shall be deemed to be the
      owner of any Property which it has acquired or holds subject to a conditional
      sale agreement, financing lease, or other arrangement pursuant to which title
      to
      the Property has been retained by or vested in some other Person for security
      purposes).

     

    “Limitation
      Period” shall mean, with respect to any Lender, any period while any amount
      remains owing on the Note payable to such Lender and interest on such amount,
      calculated at the applicable interest rate, plus any fees or other sums payable
      to such Lender under any Loan Document and deemed to be interest under
      applicable law, would exceed the amount of interest which would accrue at the
      Highest Lawful Rate.

     

    “Loan”
      shall mean any loan made by any Lender to or for the benefit of the Borrower
      pursuant to this Agreement and any payment made by the Agent, on behalf of
      any
      Lender, under a Letter of Credit.

     

    “Loan
      Balance” shall mean, at any point in time, the aggregate outstanding
      principal balance of the Notes at such time.

    

    
      
        
          
          

        

        
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    “Loan
      Documents” shall mean this Agreement, the Notes, the Letter of Credit
      Applications, the Letters of Credit, the Security Documents, any Joinder
      Agreements, the Guaranties, the Commitment Letter (other than the Summary of
      Terms and Conditions attached thereto, which is superseded by the provisions
      of
      this Agreement), the Fee Letter, the Intercreditor Agreement and all other
      documents and instruments now or hereafter delivered pursuant to the terms
      of or
      in connection with this Agreement, the Notes, the Letter of Credit Applications,
      the Letters of Credit or the Security Documents, and all renewals and extensions
      of, amendments and supplements to, and restatements of, any or all of the
      foregoing from time to time in effect.

     

    “Material
      Adverse Effect” shall mean (a) any adverse effect on the business,
      operations, assets, properties, liabilities (actual or contingent) or financial
      condition of the Parent on a consolidated basis with its consolidated
      Subsidiaries which increases, in any material respect, the risk that any of
      the
      Obligations will not be repaid as and when due, (b) any material and adverse
      effect upon the Collateral, (c) any material adverse effect on the validity
      or
      enforceability of any Loan Document or (d) any material adverse effect on the
      rights or remedies of the Agent, the Lenders or any Approved Hedge Counterparty
      under any Loan Document.

     

    “Monthly
      Reduction Amount” shall mean, at any time, the amount determined as such by
      the Agent (with the approval of the Lenders or any Approved Hedge Counterparty
      as required by the provisions of Section 9.9) and then in effect in
      accordance with the provisions of Section 2.10.

     

    “Mortgaged
      Properties” shall mean all Oil and Gas Properties of the Borrower and other
      Domestic Subsidiaries of the Parent subject to a perfected first priority Lien
      (subject only to Permitted Liens) in favor of the Agent, as security for the
      Obligations.

     

    “Net
      Income” shall mean, for any relevant period, the net income of the Parent,
      on a consolidated basis with its consolidated Subsidiaries, during such period,
      determined in accordance with GAAP.

     

    “Notes”
      shall mean, collectively, the promissory notes of the Borrower each payable
      to a
      Lender and in the form attached hereto as Exhibit I with all blanks
      completed appropriately, together with all renewals, extensions for any period,
      increases, and rearrangements thereof.

     

    “Notice
      of Termination” shall have the meaning assigned to such term in Section
      2.20.

     

    “Obligations”
      shall mean, without duplication of the same amount in more than one category,
      (a) all Indebtedness of the Borrower evidenced by the Notes, (b) the obligation
      of the Borrower to provide to or reimburse the Agent, as the issuer of the
      Letters of Credit, as the case may be, for amounts payable, paid or incurred
      with respect to Letters of Credit, (c) the undrawn, unexpired amount of all
      outstanding Letters of Credit, (d) Indebtedness of the Borrower in respect
      of
      Commodity Hedge Agreements or Interest Rate Hedge Agreements with Approved
      Hedge
      Counterparties, so long as in compliance with the provisions of Section
      6.1, (which it is agreed shall rank paripassu with all
      other items listed in this definition), (e) the obligation of the Borrower
      for
      the payment of Commitment Fees and other fees pursuant to the provisions of
      this
      Agreement or the Fee Letter, and (f) all other obligations and liabilities
      of
      the Borrower to the Agent or the Lenders, now existing or hereafter incurred,
      under, arising out of or in connection with any Loan Document or any Commodity
      Hedge Agreement or Interest Rate Hedge Agreement with an Approved Hedge
      Counterparty and in compliance with the provisions of Section 6.1, and to
      the extent that any of the foregoing includes or refers to the payment of
      amounts deemed or constituting interest, only so much thereof as shall have
      accrued, been earned and which remains unpaid at each relevant time of
      determination.

    

    
      
        
          
          

        

        
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    “Obtained
      Benefit” shall mean the aggregate amount of benefits, both direct and
      indirect, obtained by any of the Borrower, and the Guarantors from the extension
      of credit to the Borrower under this Agreement and not repaid by the Borrower
      or
      one of the Guarantors.

     

    “OFAC”
      shall mean the Office of Foreign Assets Control of the United States Department
      of the Treasury or any successor Governmental Authority.

     

    “Oil
      and Gas Properties” shall mean fee, leasehold, or other interests in or
      under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon
      leases, including undivided interests in any such property rights owned jointly
      with others, with respect to Properties situated in the United States or
      offshore from any State of the United States, including overriding royalty
      and
      royalty interests, leasehold estate interests, net profits interests, production
      payment interests, and mineral fee interests, together with contracts executed
      in connection therewith and all tenements, hereditaments, appurtenances, and
      Properties appertaining, belonging, affixed, or incidental thereto.

     

    “Other
      Taxes” shall mean 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 under any Loan Document or from the execution, delivery or
      enforcement of, or otherwise with respect to, any Loan Document.

     

    “Percentage
      Share” shall mean, as to each Lender, the percentage which such Lender’s
      Facility Amount constitutes of the sum of the Facility Amounts of all
      Lenders.

     

    
      
        
        

      

      
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    “Permitted
      Liens” shall mean (a) Liens for taxes, assessments, or other governmental
      charges or levies not yet due or which (if foreclosure, distraint, sale, or
      other similar proceedings shall not have been initiated) are being contested
      in
      good faith by appropriate proceedings, and such reserve as may be required
      by
      GAAP shall have been made therefor, (b) Liens in connection with workers’
compensation, unemployment insurance or other social security (other than Liens
      created by Section 4068 of ERISA), old age pension, employee benefits, or public
      liability obligations which are not yet due or which are being contested in
      good
      faith by appropriate proceedings, if such reserve as may be required by GAAP
      shall have been made therefor, (c) Liens in favor of vendors, carriers,
      warehousemen, repairmen, mechanics, workmen, materialmen, constructors,
      laborers, landlords or similar Liens arising by operation of law in the ordinary
      course of business in respect of obligations that are not yet due or which
      are
      being contested in good faith by appropriate proceedings, if such reserve as
      may
      be required by GAAP shall have been made therefor, (d) Liens in favor of
      operators and non-operators under joint operating agreements or similar
      contractual arrangements arising in the ordinary course of the business of
      the
      Borrower to secure amounts owing, which amounts are not yet due or are being
      contested in good faith by appropriate proceedings, if such reserve as may
      be
      required by GAAP shall have been made therefor, (e) Liens under production
      sales
      agreements, division orders, operating agreements, and other agreements
      customary in the oil and gas business for processing, producing, and selling
      hydrocarbons securing obligations not constituting Indebtedness and provided
      that such Liens do not secure obligations to deliver hydrocarbons at some future
      date without receiving full payment therefor within 90 days of delivery, (f)
      covenants, liens, rights, easements, rights of way, restrictions, and other
      similar encumbrances, and minor defects in the chain of title which are
      customarily accepted in the oil and gas financing industry, none of which
      interfere with the ordinary conduct of the business of the Borrower or
      materially detract from the value or use of the Property to which they apply,
      (g) Liens securing the purchase price of Property, including vehicles and
      equipment, acquired by the Borrower in the ordinary course of business
      (including Liens existing under conditional sale or title retention contracts),
      provided that such Liens cover only the acquired Property and the
      aggregate unpaid purchase price secured by such Liens does not exceed $500,000,
      (h) Liens securing leases of equipment, provided that, as to any
      particular lease, the Lien covers only the relevant leased equipment and secures
      only amounts which are not yet due and payable under the relevant lease or
      are
      being contested in good faith by appropriate proceedings and such reserve as
      required by GAAP shall have been made therefor, (i) Liens in favor or for the
      benefit of providers of such Commodity Hedge Agreements and Interest Rate Hedge
      Agreements approved by the Agent securing Indebtedness of the Borrower in
      respect of Commodity Hedge Agreements and Interest Rate Hedge Agreements (other
      than such as constitute a portion of the Obligations) permitted pursuant to
      the
      provisions of Section 6.1, (j) Liens securing the Second Lien
      Indebtedness, so long as subject to the terms of the Intercreditor Agreement,
      (k) Liens in favor of the Agent and other Liens expressly permitted hereunder
      or
      in the Security Documents and (l) Liens securing Indebtedness of the Parent
      to
      be paid in full with a portion of the proceeds of the incurrence by the Borrower
      of the Second Lien Indebtedness on the Closing Date, but only to the extent
      such
      Indebtedness is in fact paid on the Closing Date and releases of such Liens
      have
      been delivered to the Agent on or before the Closing Date.

    

    
      
        
          
          

        

        
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    “Person”
      shall mean an individual, corporation, partnership, limited liability company,
      trust, unincorporated organization, government, any agency or political
      subdivision of any government, or any other form of entity.

     

    “Plan”
      shall mean, at any time, any employee benefit plan which is covered by Title
      IV
      of ERISA and in respect of which the Borrower, any of the Guarantors or any
      Commonly Controlled Entity of any is (or, if such plan were terminated at such
      time, would under Section 4069 of ERISA be deemed to be) an “employer” as
      defined in Section 3(5) of ERISA.

     

    “Principal
      Office” shall mean the office of the Agent in Houston, Texas located at 4400
      Post Oak Parkway, 4th Floor,
      Houston,
      Texas 77027 or such other office as the Agent may designate in writing to the
      Borrower and/or the Lenders from time to time, the wiring instructions to such
      currently designated office being as follows:

     

    Amegy
      Bank National Association

    ABA
      No.
      113011258

    Account
      No. 696600-5771

    Reference:  Gastar
      Exploration USA, Inc.

     

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

     

    “Regulation
      D” shall mean Regulation D of the Board of Governors of the Federal Reserve
      System (or any successor).

     

    “Regulatory
      Change” shall mean, with respect to any Lender, the passage, adoption,
      institution, or amendment of any federal, state, local, or foreign Requirement
      of Law (including Regulation D), or any interpretation, directive, or request
      (whether or not having the force of law) of any Governmental Authority or
      monetary authority charged with the enforcement, interpretation, or
      administration thereof, occurring after the Closing Date and applying to a
      class
      of lenders including such Lender or its Applicable Lending Office.

     

    “Release
      of Hazardous Substances” shall mean any emission, spill, release, disposal,
      or discharge, except in accordance with a valid permit, license, certificate,
      or
      approval of the relevant Governmental Authority, of any Hazardous Substance into
      or upon (a) the air, (b) soils or any improvements located thereon, (c) surface
      water or groundwater, or (d) the sewer or septic system, or the waste treatment,
      storage, or disposal system servicing any Property of the Borrower or any of
      the
      Guarantors.

    

    
      
        
          
          

        

        
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    “Replacement
      Lenders” shall have the meaning assigned to such term in Section
      2.20.

     

    “Required
      Lenders” shall mean, at any time when no Loans or Letters of Credit are
      outstanding, two or more Lenders holding in the aggregate Percentage Shares
      greater than sixty six and sixty seven one hundredths percent (66.67%) of the
      Commitment Amount, and at any time when any Loans or Letters of Credit are
      outstanding, two or more Lenders which in the aggregate hold more than sixty
      six
      and sixty seven one hundredths percent (66.67%) of the sum of the Loan Balance
      (without regard to any sale of a participation in any Loan) and the L/C
      Exposure.

     

    “Required
      Payment” shall have the meaning assigned to such term in Section
      2.7.

     

    “Requirement
      of Law” shall mean, as to any Person, the certificate or articles of
      incorporation and by-laws, the certificate or articles of organization and
      regulations, operating agreement or limited liability company agreement, the
      agreement of limited partnership or other organizational or governing documents
      of such Person, and any applicable law, treaty, ordinance, order, judgment,
      rule, decree, regulation, or determination of an arbitrator, court, or other
      Governmental Authority, including rules, regulations, orders, and requirements
      for permits, licenses, registrations, approvals, or authorizations, in each
      case
      as such now exist or may be hereafter amended and are applicable to or binding
      upon such Person or any of its Property or to which such Person or any of its
      Property is subject.

     

    “Reserve
      Report” shall mean each report delivered to the Agent pursuant to the
      provisions of Section 5.4.

     

    “Reserve
      Requirement” shall mean, for any Interest Period for any LIBO Rate Loan, the
      average maximum rate at which reserves (including any marginal, supplemental,
      or
      emergency reserves) are required to be maintained during such Interest Period
      under Regulation D by member banks of the Federal Reserve System in Dallas,
      Texas, with deposits exceeding one billion Dollars against “Eurocurrency
      liabilities” (as such term is used in Regulation D) and any other reserves
      required by reason of any Regulatory Change to be maintained by such member
      banks against (a) any category of liabilities which includes deposits by
      reference to which the LIBO Rate is to be determined as provided herein in
      the
      definition of the term “LIBO Rate” or (b) any category of extensions of credit
      or other assets which include a LIBO Rate Loan.

     

    “Responsible
      Officer” shall mean, as to any Business Entity, its President, any Vice
      President or any other Person duly authorized in accordance with the applicable
      organizational documents, bylaws, regulations or resolutions to act on behalf
      of
      such Business Entity.

    

    
      
        
          
          

        

        
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    “Second
      Lien Credit Agreement” shall mean the Indenture dated as of the Closing Date
      entered into by and among the Borrower, the Initial Guarantors and the Second
      Lien Facility Agent, as the same may be amended, supplemented, restated or
      otherwise modified from time to time in compliance with applicable provisions
      of
      the Intercreditor Agreement.

     

    “Second
      Lien Facility Agent” shall mean Wells Fargo Bank, National Association, as
      indenture trustee for the holders of the evidences of the Second Lien
      Indebtedness, and its successors in such capacity.

     

    “Second
      Lien Indebtedness” shall mean Indebtedness of the Borrower under the Second
      Lien Credit Agreement which is subject to the provisions of the Intercreditor
      Agreement.

     

    “Secured
      Creditors” shall mean the Lenders, any other Approved Hedge Counterparties
      and any Secured Third Party Hedge Counterparties.

     

    “Secured
      Third Party Hedge Counterparty” shall mean any counterparty of the Parent,
      the Borrower or any Domestic Subsidiary of the Parent to a Commodity Hedge
      Agreement or Interest Rate Hedge Agreement that is party to an intercreditor
      agreement with the Agent, in form and substance reasonably satisfactory to
      the
      Agent and such counterparty.

     

    “Security
      Documents” shall mean the security documents executed and delivered in
      satisfaction of the condition set forth in Section 3.1(f), any existing
      security document assigned or amended by any of such documents set forth in
      Section 3.1(f), and all other documents and instruments at any time
      executed as security for all or any portion of the Obligations, as such
      instruments may be amended, supplemented, restated, or otherwise modified from
      time to time.

     

    “Subsidiary”
      shall mean, as to any Person, any Business Entity of which shares of stock
      or
      other equity interests having ordinary voting power (other than stock or other
      equity interests having such power only by reason of the happening of a
      contingency) to elect a majority of the board of directors or other governing
      body or other managers of such Business Entity are at the time owned, or the
      management of which is otherwise controlled, directly or indirectly through
      one
      or more intermediaries, or both, by such Person.

     

    “Subsidiary
      Guarantors” shall mean Domestic Subsidiaries of the Parent which are
      Guarantors.

     

    “Superfund
      Site” shall mean those sites listed on the Environmental Protection Agency
      National Priority List and eligible for remedial action or any comparable state
      registries or list in any state of the United States.

    

    
      
        
          
          

        

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

     

    “Terminated
      Lender” shall have the meaning assigned to such term in Section
      2.20.

     

    “Termination
      Date” shall have the meaning assigned to such term in Section
      2.20.

     

    “Transferee”
      shall mean any Person to which any Lender has sold, assigned, transferred,
      or
      granted a participation in any of the Obligations, as authorized pursuant to
      the
      provisions of Section 9.1, and any Person acquiring, by purchase,
      assignment, transfer, or participation, from any such purchaser, assignee,
      transferee, or participant, any part of such Obligations.

     

    “UCC”
      shall mean the Uniform Commercial Code as from time to time in effect in the
      State of Texas.

     

    “USA
      Patriot Act” shall mean the Uniting and Strengthening America by Providing
      Appropriate Tools required to Intercept and Obstruct Terrorism Act of 2001,
      Pub.
      L. No. 107-56, 115 Stat. 272 (2001), as the same has been, or shall hereafter
      be, renewed, extended, amended or replaced.

     

    1.3           Undefined
      Financial Accounting Terms.  Financial accounting terms used in
      this Agreement without definition are used herein with the respective meanings
      assigned thereto in accordance with GAAP at the time in effect.

     

    1.4           References.  References
      in this Agreement to Schedules, Exhibits, Articles or Section numbers shall
      be
      to Schedules, Exhibits, Articles or Sections of this Agreement, unless expressly
      stated to the contrary.  References in this Agreement to “hereby,”
“herein,” “hereinafter,” “hereinabove,” “hereinbelow,” “hereof,” “hereunder” and
      words of similar import shall be to this Agreement in its entirety and not
      only
      to the particular Schedule, Exhibit, Article, or Section in which such reference
      appears.  Specific enumeration herein shall not exclude the general
      and, in such regard, the terms “includes” and “including” used herein shall mean
“includes, without limitation,” or “including, without limitation,” as the case
      may be, where appropriate.  Except as otherwise indicated, references
      in this Agreement to statutes, sections, or regulations are to be construed
      as
      including all statutory or regulatory provisions consolidating, amending,
      replacing, succeeding, or supplementing the statute, section, or regulation
      referred to.  References in this Agreement to “writing” include
      printing, typing, lithography, facsimile reproduction, and other means of
      reproducing words in a tangible visible form.  References in this
      Agreement to agreements and other contractual instruments shall be deemed to
      include all exhibits and appendices attached thereto and all subsequent
      amendments and other modifications to such instruments, but only to the extent
      such amendments and other modifications are not prohibited by the terms of
      this
      Agreement.  References in this Agreement to Persons include their
      respective successors and permitted assigns.

    

    
      
        
          
          

        

        
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    1.5           Articles
      and Sections.  This Agreement, for convenience only, has been
      divided into Articles and Sections; and it is understood that the rights and
      other legal relations of the parties hereto shall be determined from this
      instrument as an entirety and without regard to the aforesaid division into
      Articles and Sections and without regard to headings prefixed to such Articles
      or Sections.

     

    1.6           Number
      and Gender.  Whenever the context requires, reference herein made
      to the single number shall be understood to include the plural; and likewise,
      the plural shall be understood to include the singular.  Definitions
      of terms defined in the singular or plural shall be equally applicable to the
      plural or singular, as the case may be, unless otherwise
      indicated.  Words denoting sex shall be construed to include the
      masculine, feminine and neuter, when such construction is appropriate; and
      specific enumeration shall not exclude the general but shall be construed as
      cumulative.

     

    1.7           Incorporation
      of Schedules and Exhibits.  The Schedules and Exhibits attached to
      this Agreement are incorporated herein and shall be considered a part of this
      Agreement for all purposes.

     

    1.8           Negotiated
      Transaction.  Each party to this Agreement affirms to the others
      that it has had the opportunity to consult, and discuss the provisions of this
      Agreement with, independent counsel and fully understands the legal effect
      of
      each provision.

     

    ARTICLE
      II

     

    TERMS
      OF FACILITY

     

    2.1           Revolving
      Line of Credit and Letter of Credit Facility.  a)  Upon
      the terms and conditions (including the right of the Lenders to decline to
      make
      any Loan, other than a Letter of Credit Payment, so long as any condition to
      the
      making of such Loan set forth in Section 3.2 has not been satisfied) and
      relying on the representations and warranties contained in this Agreement,
      each
      Lender severally agrees to make Loans during the Commitment Period to or for
      the
      benefit of the Borrower in an aggregate outstanding principal amount not to
      exceed at any time the lesser of the Facility Amount of such Lender or the
      Percentage Share of such Lender of the Borrowing Base then in effect and, in
      either case, minus the Percentage Share of such Lender of the then existing
      L/C
      Exposure.  Loans shall be made from time to time on any Business Day
      designated in a Borrowing Request.

     

    (b)           Subject
      to the provisions of this Agreement, during the Commitment Period, the Borrower
      may borrow, repay, and reborrow and convert Loans of one type or with one
      Interest Period into Loans of another type or with a different Interest
      Period.  Each borrowing or conversion of principal of (i) Base Rate
      Loans shall be in an amount at least equal to $100,000 and a whole multiple
      of
      $100,000 and (ii) LIBO Rate Loans shall be in an amount at least equal to
      $100,000 and a whole multiple of $100,000 and, if any LIBO Rate Loan would
      otherwise be in a lesser principal amount for any period, such Loan shall be
      a
      Base Rate Loan during such period.  Except for prepayments made
      pursuant to the provisions of Section 2.11, each prepayment of principal
      shall be in an amount at least equal to $10,000 and a whole multiple of
      $10,000.  Each borrowing, prepayment, or conversion of or into a Loan
      of a different type or, in the case of a LIBO Rate Loan, having a different
      Interest Period, shall be deemed a separate borrowing, conversion, and
      prepayment for purposes of the foregoing, one for each type of Loan or Interest
      Period.

    

    
      
        
          
          

        

        
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    (c)           The
      Agent shall notify each Lender of its receipt of a Borrowing Request as soon
      as
      practicable following its receipt thereof, including in such notice the amount
      of the requested Loan and the requested date for the making of the requested
      Loan.  Not later than 11:00 a.m., Central Standard or Central Daylight
      Savings Time, as the case may be, on the date specified for each borrowing,
      each
      Lender shall make available to the Agent, at an account designated by the Agent,
      an amount equal to the Percentage Share of such Lender of the borrowing to
      be
      made on such date.  The amount so received by the Agent shall, subject
      to the terms and conditions hereof, be made available to the Borrower in
      immediately available funds at the Principal Office.  All Loans by
      each Lender shall be maintained at the Applicable Lending Office of such Lender
      and shall be evidenced by the Note of such Lender.

     

    (d)           The
      failure of any Lender to make any Loan required to be made by it hereunder
      shall
      not relieve any other Lender of its obligation to make any Loan required to
      be
      made by it, and no Lender shall be responsible for the failure of any other
      Lender to make any Loan.

     

    (e)           Upon
      the terms and conditions (including the right of the Agent to decline to issue
      renew or extend any Letter of Credit so long as any condition to the issuance,
      renewal or extension of such Letter of Credit set forth in Section 3.3
      has not been satisfied) and relying on the representations and warranties
      contained in this Agreement, the Agent, as issuing bank for the Lenders, agrees,
      from the date of this Agreement until the date which is 30 days prior to the
      Commitment Termination Date, to issue, on behalf of the Lenders in their
      respective Percentage Shares, Letters of Credit for the account of the Borrower
      and to renew and extend such Letters of Credit.  Letters of Credit
      shall be issued, renewed, or extended from time to time on any Business Day
      designated by the Borrower following the receipt in accordance with the terms
      hereof by the Agent of the written (or oral, confirmed promptly in writing)
      request by a Responsible Officer of the Borrower therefor and a Letter of Credit
      Application.  Letters of Credit shall be issued in such amounts as the
      Borrower may request; provided, however, that (i) no Letter of
      Credit shall have an expiration date which is less than 30 days prior to the
      Commitment Termination Date, (ii) the Loan Balance plus the L/C Exposure,
      including that under any then requested Letter of Credit, shall not exceed
      at
      any time the Commitment Amount, (iii) the L/C Exposure,  including
      that under any then requested Letter of Credit, shall not exceed at any time
      $5,000,000 and (iv) no Letter of Credit shall be issued in and amount less
      than
      $10,000.

     

    (f)           In
      connection with the issuance, renewal or extension by the Agent of any Letter
      of
      Credit pursuant to Section 2.1(e), (i) the Borrower shall pay to the
      Agent, for the account of the Lenders, a per annum letter of credit fee
      calculated on the basis of a year of 360 days, and actual days elapsed
      (including the first day but excluding the last day), in an amount equal to
      the
      greater of (i) the face amount of such Letter of Credit multiplied by the
      Applicable Margin for LIBO Rate Loans in effect at the date of issuance, renewal
      or extension of the relevant Letter of Credit, such fee to be payable in
      substantially equal quarterly installments in arrears on the last Business
      Day
      of each calendar quarter and at the expiry date of the relevant Letter of
      Credit, and (ii) $300 payable at the time of issuance, renewal or extension
      of
      the relevant Letter of Credit.  Neither the Agent nor any Lender shall
      have any obligation to refund any portion of any such fee upon early
      cancellation of the relevant Letter of Credit.  The Borrower also
      agrees to pay on demand to the Agent, solely for its account as issuer of the
      relevant Letter of Credit, its customary letter of credit transaction fees
      and
      expenses, including amendment fees, payable with respect to each Letter of
      Credit.

    

    
      
        
          
          

        

        
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    (g)           The
      Borrower agrees that neither the Agent nor any Lender shall be responsible
      for,
      nor shall the Obligations be affected by, among other things, (i) the validity
      or genuineness of documents or any endorsements thereon presented in connection
      with any Letter of Credit, even if such documents shall in fact prove to be
      in
      any and all respects invalid, fraudulent or forged, so long as the Agent, as
      the
      issuer of such Letter of Credit, has no actual knowledge of any such invalidity,
      lack of genuineness, fraud, or forgery prior to the presentment for payment
      of a
      corresponding Letter of Credit or any draft thereunder or (ii) any dispute
      between or among the Borrower and any beneficiary of any Letter of Credit or
      any
      other Person to which any Letter of Credit may be transferred, or any claims
      whatsoever of the Borrower against any beneficiary of any Letter of Credit
      or
      any such transferee.  The Borrower further acknowledges and agrees
      that the Agent, as the issuer of Letters of Credit, shall be liable to the
      Borrower to the extent, but only to the extent, of any direct, as opposed to
      consequential or punitive, damages suffered by the Borrower as a result of
      the
      willful misconduct or gross negligence of the Agent as the issuer of Letters
      of
      Credit in determining whether documents presented under a Letter of Credit
      complied with the terms of such Letter of Credit that resulted in either a
      wrongful payment under such Letter of Credit or a wrongful dishonor of a claim
      or draft properly presented under such Letter of Credit.  In the
      absence of gross negligence or willful misconduct by the Agent as the issuer
      of
      Letters of Credit, the Agent shall not be liable for any error, omission,
      interruption or delay in transmission, dispatch or delivery of any message
      or
      advice, however transmitted, in connection with any Letter of
      Credit.  The Agent, the Lenders, and the Borrower agree that any
      action taken or omitted by the Agent, as issuer of any Letter of Credit, under
      or in connection with any Letter of Credit or the related drafts or documents,
      if done in the absence of gross negligence or willful misconduct, shall be
      binding as among the Agent, as issuer of such Letter of Credit or otherwise,
      the
      Lenders, and the Borrower shall not put the Agent, as issuer of such Letter
      of
      Credit or otherwise, or any Lender under any liability to the
      Borrower.

     

    (h)           Unless
      the Borrower provides to the Agent funds sufficient to allow the Agent to pay
      any drawing by a beneficiary under a Letter of Credit prior to the Agent being
      obligated to pay the relevant drawing under a Letter of Credit, the Agent shall
      make a Letter of Credit Payment in payment of such drawing.  Prior to
      any Letter of Credit Payment in respect of any Letter of Credit, each Lender
      shall be deemed to be a participant, through the Agent with respect to the
      relevant Letter of Credit, in the obligation of the Agent, as the issuer of
      such
      Letter of Credit, in an amount equal to the Percentage Share of such Lender
      of
      the maximum amount which is or at any time may become available to be drawn
      thereunder.  Upon delivery by such Lender of funds requested pursuant
      to Section 2.1(i), such Lender shall be treated as having purchased a
      participating interest in an amount equal to such funds delivered by such Lender
      to the Agent in the obligation of the Borrower to reimburse the Agent, as the
      issuer of such Letter of Credit, for any amounts payable, paid, or incurred
      by
      the Agent, as the issuer of such Letter of Credit, with respect to such Letter
      of Credit.

    

    
      
        
          
          

        

        
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    (i)           Each
      Lender shall be unconditionally and irrevocably liable, without regard to the
      occurrence of any Default or Event of Default, to the extent of the Percentage
      Share of such Lender at the time of issuance of each Letter of Credit, to
      reimburse, on demand, the Agent, as the issuer of such Letter of Credit, for
      the
      amount of each Letter of Credit Payment under such Letter of
      Credit.  Each Letter of Credit Payment shall be deemed to be a Loan by
      each Lender to the extent of funds delivered by such Lender to the Agent with
      respect to such Letter of Credit Payment and shall to such extent be deemed
      a
      Loan under and shall be evidenced by the Note of such Lender and shall be
      payable by the Borrower upon demand by the Agent.

     

    (j)           EACH
      LENDER AGREES TO INDEMNIFY THE AGENT, AS THE ISSUER OF EACH LETTER OF CREDIT,
      AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS IN FACT AND AFFILIATES
      OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING
      THE OBLIGATION OF THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE
      SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE OF SUCH LETTER OF CREDIT, FROM
      AND
      AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES,
      PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF
      ANY
      KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE PAYMENT
      AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE
      IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH
      LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS
      IN FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT
      OR
      SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER
      OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
      ATTORNEYS IN FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
      FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES,
      PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED,
      INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
      OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
      DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED
      THAT NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL
      BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS,
      LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR
      DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
      THE
      AGENT AS THE ISSUER OF A LETTER OF CREDIT.  THE AGREEMENTS IN THIS
SECTION 2.1(J) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
      OBLIGATIONS AND THE TERMINATION OF THIS
      AGREEMENT.

     

    2.2           Limitations
      on Interest Periods.  Each Interest Period selected by the
      Borrower  (a) which commences on the last Business Day of a calendar
      month (or any day for which there is no numerically corresponding day in the
      appropriate subsequent calendar month) shall end on the last Business Day of
      the
      appropriate subsequent calendar month, (b) which would otherwise end on a day
      which is not a Business Day shall end on the next succeeding Business Day (or,
      if such next succeeding Business Day falls in the next succeeding calendar
      month, on the next preceding Business Day), (c) which would otherwise end after
      the Commitment Termination Date shall end on the Commitment Termination Date,
      and (d) shall have a duration of not less than one month and, if any Interest
      Period would otherwise be a shorter period, the relevant Loan shall be a Base
      Rate Loan during such period.

    

    
      
        
          
          

        

        
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    2.3           Limitation
      on Types of Loans.  Anything herein to the contrary
      notwithstanding, no more than seven separate Loans shall be outstanding at
      any
      one time, with, for purposes of this Section, all Base Rate Loans constituting
      one Loan, and all LIBO Rate Loans for the same Interest Period constituting
      one
      Loan.  Anything herein to the contrary notwithstanding, if, on or
      prior to the determination of any interest rate for any LIBO Rate Loan for
      any
      Interest Period therefor:

     

    (a)           the
      Agent determines (which determination shall be conclusive, absent manifest
      error) that quotations of interest rates for the deposits referred to in the
      definition of “LIBO Rate” in Section 1.2 are not being provided in the relevant
      amounts or for the relevant maturities for purposes of determining the rate
      of
      interest for such Loan as provided in this Agreement; or

     

    (b)           the
      Agent determines (which determination shall be conclusive, absent manifest
      error) that the rates of interest referred to in the definition of “LIBO Rate”
in Section 1.2 upon the basis of which the rate of interest for such Loan
      for such Interest Period is to be determined do not adequately cover the cost
      to
      the Lenders of making or maintaining such Loan for such Interest Period, then
      the Agent shall give the Borrower and the Lenders prompt notice thereof; and
      so
      long as such condition remains in effect, the Lenders shall be under no
      obligation to make LIBO Rate Loans or to convert Base Rate Loans into LIBO
      Rate
      Loans, and the Borrower shall, on the last day of the then current Interest
      Period for each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan
      or
      convert such Loan into a LIBO Rate Loan with amounts and maturities for which
      quotations are provided, or convert such Loan into a Base Rate Loan in
      accordance with the provisions of Section 2.12.

     

    2.4           Use
      of Loan Proceeds and Letters of Credit.  b) Proceeds of all Loans
      shall be used solely by the Borrower (i) to acquire and develop Oil and Gas
      Properties, (ii) to advance funds to the Subsidiary Guarantors for working
      capital and general business purposes and capital expenditures not prohibited
      under the provisions of this Agreement or to acquire and develop Oil and Gas
      Properties, (iii) to advance funds to the Parent needed by the Parent for
      payment of its cash operating expenses, including general and administrative
      expenses, Taxes and scheduled debt service on the Indebtedness of the Parent
      listed on Schedule 6.1 (provided that scheduled debt service shall not
      include payment at maturity when such maturity arises by way of acceleration
      following a default), (iv) for the Borrower’s working capital and general
      business purposes and capital expenditures not otherwise prohibited under
      applicable provisions of this Agreement and (v) to pay fees and expenses
      incurred in connection with this Agreement and for other general business
      purposes of the Borrower.

     

    (b)           Letters
      of Credit shall be issued solely for the account of the Borrower for general
      business purposes of the Borrower and the Subsidiary Guarantors not otherwise
      prohibited under applicable provisions of this Agreement.

    

    
      
        
          
          

        

        
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    2.5           Interest.  Subject
      to applicable provisions of this Agreement (including those of Section
      2.17), interest on Base Rate Loans shall accrue and be payable at a rate per
      annum equal to the Adjusted Base Rate plus the relevant Applicable Margin and
      interest on LIBO Rate Loans shall accrue and be payable at the relevant adjusted
      LIBO Rate plus the relevant Applicable Margin.  Notwithstanding the
      foregoing, interest on past due principal and, to the extent permitted by
      applicable law, past due interest and fees, shall accrue at the Default Rate
      and
      shall be payable upon demand by the Agent at any time as to all or any portion
      of such interest.  In the event that the Borrower fails to select the
      duration of any Interest Period for any LIBO Rate Loan within the time period
      and otherwise as provided herein, such Loan (if outstanding as a LIBO Rate
      Loan)
      shall be automatically converted into a Base Rate Loan on the last day of the
      then current Interest Period for such Loan or (if outstanding as a Base Rate
      Loan) shall remain as, or (if not then outstanding) shall be made as, a Base
      Rate Loan.  Interest provided for herein shall be calculated on unpaid
      sums actually advanced and outstanding pursuant to the terms of this Agreement
      and only for the period from the date or dates of such advances to, but not
      including, the date or dates of repayment.

     

    2.6           Repayment
      of Loans and Interest.  Accrued and unpaid interest on each
      outstanding Base Rate Loan shall be due and payable monthly commencing on the
      first day of January, 2008 and continuing on the first day of each calendar
      month thereafter while any Base Rate Loan remains outstanding, the payment
      in
      each instance to be the amount of interest which has accrued and remains unpaid
      in respect of the relevant Loan.  Accrued and unpaid interest on each
      outstanding LIBO Rate Loan shall be due and payable on the earlier of (a) the
      last day of the Interest Period for such LIBO Rate Loan, or (b) if any Interest
      Period is of a duration longer than three months, on the day of the third month
      of the relevant Interest Period corresponding to the day preceding the initial
      day of such Interest Period and on the last day of the relevant Interest Period,
      the payment in each instance to be the amount of interest which has accrued
      and
      remains unpaid in respect of the relevant Loan.  The Loan Balance,
      together with all accrued and unpaid interest thereon, shall be due and payable
      on the Commitment Termination Date.  Notwithstanding the foregoing in
      this Section 2.6, the Commitment Termination Date in effect as of the
      Closing Date will be extended by 364 days if requested by the Borrower in
      writing no less than 30 days prior to such Commitment Termination Date
and (a) there exists, both at the time of such request and at the time
      of
      execution of the amendment to this Agreement which is the subject of clause
      (d)
      of this sentence, no Default or Event of Default, (b) such requested extension
      has been approved by all of the Lenders in their sole discretion, (c) the
      Borrower shall have paid a fee to the Agent for the account of the Agent and,
      as
      agreed among the Agent and the Lenders, the Lenders in the amount of one quarter
      of one percent (0.25%) of  the Borrowing Base to be in
      effect as of the effectiveness of such extension and (d) the Borrower, the
      Agent
      and the Lenders have joined in an amendment to this Agreement amending the
      definition of Commitment Termination Date to reflect such
      extension.  At the time of making each payment hereunder or under the
      Notes, the Borrower shall specify to the Agent the Loans or other amounts
      payable by the Borrower hereunder to which such payment is to be
      applied.  In the event the Borrower fails to so specify, or if an
      Event of Default has occurred and is continuing, the Agent may apply such
      payment as it may elect in its discretion and in accordance with the terms
      hereof.

    

    
      
        
          
          

        

        
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    2.7           Outstanding
      Amounts.  c) The outstanding principal balance of the Note of each
      Lender reflected by the notations of such Lender on its records shall be deemed
      rebuttably presumptive evidence of the principal amount owing on such
      Note.  The liability for payment of principal and interest evidenced
      by each Note shall be limited to principal amounts actually advanced and
      outstanding pursuant to this Agreement and interest on such amounts calculated
      in accordance with this Agreement.

     

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

     

    2.8           Taxes
      and Time, Place, and Method of Payments.  d) All payments required
      pursuant to this Agreement or the Notes shall be made without set-off or
      counterclaim in Dollars and in immediately available funds free and clear of,
      and without deduction for, any Indemnified Taxes or Other Taxes;
provided, however that if the Borrower shall be required to deduct
      any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
      payable shall be increased by the amount (the “Additional Amount”)
      necessary so that after making all required deductions (including deductions
      applicable to additional sums described in this paragraph) the Agent or any
      Lender, as the case may be, receives an amount equal to the sum it would have
      received had no such deductions been made, (ii) the Borrower shall make such
      deductions and (iii) the Borrower shall pay the full amount deducted to the
      relevant Governmental Authority in accordance with applicable law.  In
      addition, to the extent not paid in accordance with the preceding sentence,
      the
      Borrower shall pay any Other Taxes to the relevant Governmental Authority in
      accordance with applicable law.

     

    (b)           SUBJECT
      TO THE PROVISIONS OF SECTION 2.20, THE BORROWER SHALL INDEMNIFY THE AGENT
      AND EACH LENDER FOR INDEMNIFIED TAXES AND OTHER TAXES PAID BY SUCH PERSON,
      INCLUDING ANY INDEMNIFIED TAXES OR OTHER TAXES ARISING FROM THE NEGLIGENCE,
      WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY LENDER; PROVIDED,
HOWEVER, THAT THE BORROWER SHALL NOT BE OBLIGATED TO MAKE PAYMENT
      TO THE
      AGENT OR ANY LENDER IN RESPECT OF PENALTIES, INTEREST AND OTHER SIMILAR
      LIABILITIES ATTRIBUTABLE TO SUCH INDEMNIFIED TAXES OR OTHER TAXES IF SUCH
      PENALTIES, INTEREST OR OTHER SIMILAR LIABILITIES ARE ATTRIBUTABLE TO THE GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON SEEKING
      INDEMNIFICATION.

    

      
        
          
          

        

        
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    (c)           If
      a Lender or the Agent shall become aware that it is entitled to claim a refund
      from a Governmental Authority in respect of Indemnified Taxes or Other Taxes
      paid by the Borrower pursuant to this Section 2.8, including Indemnified
      Taxes or Other Taxes as to which it has been indemnified by the Borrower, or
      with respect to which the Borrower has paid Additional Amounts pursuant to
      the
      Loan Documents, it shall promptly notify the Borrower of the availability of
      such refund claim and, if the Lender or the Agent, as the case may be,
      determines in good faith that making a claim for refund will not have an adverse
      effect to its taxes or business operations, shall, within 10 days after receipt
      of a request by the Borrower, make a claim to such Governmental Authority for
      such refund at the expense of the Borrower.  If a Lender or the Agent
      receives a refund in respect of any Indemnified Taxes or Other Taxes paid by
      the
      Borrower pursuant to the Loan Documents, it shall within 30 days from the date
      of such receipt pay over such refund to the Borrower (but only to the extent
      of
      Indemnified Taxes or Other Taxes paid pursuant to the Loan Documents, including
      indemnity payments made or Additional Amounts paid, by the Borrower under this
      Section 2.8 with respect to the Indemnified Taxes or Other Taxes giving
      rise to such refund), net of all reasonable out of pocket expenses of such
      Lender or the Agent, as the case may be, and without interest (other than
      interest paid by the relevant Governmental Authority with respect to such
      refund).

     

    (d)           If
      any Lender or the Agent is or becomes eligible under any applicable law,
      regulation, treaty or other rule to a reduced rate of taxation, or a complete
      exemption from withholding, with respect to Indemnified Taxes or Other Taxes
      on
      payments made to it or for its benefit by the Borrower, such Lender or the
      Agent, as the case may be, shall, upon the request, and at the cost and expense,
      of the Borrower, complete and deliver from time to time any certificate, form
      or
      other document requested by the Borrower, the completion and delivery of which
      are a precondition to obtaining the benefit of such reduced rate or exemption,
      provided that the taking of such action by such Lender or the Agent, as the
      case
      may be, would not, in the reasonable judgment of such Lender or the Agent,
      as
      the case may be, be disadvantageous or prejudicial to such Lender or the Agent,
      as the case may be, or inconsistent with its internal policies or legal or
      regulatory restrictions.  For any period with respect to which a
      Lender or the Agent, as the case may be, has failed to provide any such
      certificate, form or other document requested by the Borrower, such Lender
      or
      the Agent, as the case may be, shall not be entitled to any payment under this
      Section 2.8 in respect of any Indemnified Taxes or Other Taxes that would
      not have been imposed but for such failure.

     

    (e)           Each
      Lender organized under the laws of the United States, any State thereof or
      the
      District of Columbia (other than Lenders that are corporations or otherwise
      exempt from United States backup withholding Tax) shall (i) deliver to the
      Borrower and the Agent, when such Lender first becomes a Lender, upon the
      written request of the Borrower or the Agent, two original copies of United
      States Internal Revenue Form W-9 or any successor form, properly completed
      and
      duly executed by such Lender, certifying that such Lender is exempt from United
      States backup withholding Tax on payments of interest made under the Loan
      Documents and (ii) thereafter at each time it is so reasonably requested in
      writing by the Borrower or the Agent, deliver within a reasonable time two
      original copies of an updated United States Internal Revenue Service Form W-9
      or
      any successor form thereto.

    

    
      
        
          
          

        

        
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    (f)           Each
      Lender that is organized under the laws of a jurisdiction other than the United
      States, any State thereof or the District of Columbia (each such Lender, a
      “Foreign Lender”) that is entitled to an exemption from or reduction of
      withholding Tax under the laws of the jurisdiction in which the Borrower is
      located, or any treaty to which such jurisdiction is a party, with respect
      to
      payments under the Loan Documents shall deliver to the Borrower and the Agent,
      but only at the written request of the Borrower or the Agent, such properly
      completed and duly executed documentation prescribed by applicable law or
      reasonably requested by the Borrower or the Agent as will permit such payments
      to be made without withholding or at a reduced rate, unless in the good faith
      opinion of the Foreign Lender such documentation would expose the Foreign Lender
      to any material adverse consequence or risk.  Such documentation shall
      be delivered by each Foreign Lender on or before the date it becomes a Lender
      and, if required by law, on or before the date, if any, such Foreign Lender
      changes its Applicable Lending Office by designating a different lending office
      with respect to its Loans.  In addition, each Foreign Lender shall
      deliver such forms promptly upon the obsolescence or invalidity of any form
      previously delivered by such Foreign Lender.  Each Lender (and, in the
      case of a Foreign Lender its lending office), represents that on the Closing
      Date, payments made hereunder by the Borrower or the Agent to it would not
      be
      subject to United States Federal withholding tax.

     

    (g)           Notwithstanding
      the provisions of subsection (a) above, the Borrower shall not be required
      to
      indemnify any Foreign Lender or to pay any Additional Amounts to any Foreign
      Lender, in respect of United States federal withholding Tax pursuant to
      subsection (a) above, (i) to the extent that the obligation to withhold amounts
      with respect to United States federal withholding tax existed on the date such
      Foreign Lender became a Lender; (ii) with respect to payments to a new
      Applicable Lending Office with respect to a Loan, but only to the extent that
      such withholding tax exceeds any withholding tax that would have been imposed
      on
      such Lender had it not designated such new Applicable Lending Office; (iii)
      with
      respect to a change by such Foreign Lender of the jurisdiction in which it
      is
      organized, incorporated, controlled or managed, or in which it is doing
      business, from the date such Foreign Lender changed such jurisdiction, but
      only
      to the extent that such withholding tax exceeds any withholding tax that would
      have been imposed on such Lender had it not changed the jurisdiction in which
      it
      is organized, incorporated, controlled or managed, or in which it is doing
      business; or (iv) to the extent that the obligation to indemnify any Foreign
      Lender or to pay such Additional Amounts would not have arisen but for a failure
      by such Foreign Lender to comply with the provisions of Section
      2.8(f).

     

    (h)           All
      payments by the Borrower shall be deemed received on (i) receipt or (ii) the
      next Business Day following receipt if such receipt is after 3:00 p.m., Central
      Standard or Central Daylight Savings Time, as the case may be, on any Business
      Day, and shall be made to the Agent at the Principal Office.  Except
      as provided to the contrary herein, if the due date of any payment hereunder
      or
      under any Note would otherwise fall on a day which is not a Business Day, such
      date shall be extended to the next succeeding Business Day, and interest shall
      be payable for any principal so extended for the period of such extension;
      provided, however, that in the case of any LIBO Rate Loan, if the
      result of such extension would be to extend such payment into another calendar
      month, then the relevant payment shall be due on the immediately preceding
      Business Day.

    

    
      
        
          
          

        

        
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    2.9           Pro
      Rata Treatment; Adjustments.  e) Except to the extent otherwise
      expressly provided herein, (i) each borrowing pursuant to this Agreement shall
      be made from the Lenders pro rata in accordance with their respective Percentage
      Shares, (ii) each reduction of the sum of the Facility Amounts of the Lenders
      at
      the request of the Borrower, as well as any subsequent increase in the sum
      of
      the Facility Amounts of the Lenders at the request of the Borrower and with
      written agreement of the Agent and all the Lenders, shall serve to adjust the
      Facility Amounts of the Lenders pro rata in accordance with the Facility Amounts
      of the Lenders in effect immediately prior to any such adjustment, (iii) each
      payment of Commitment Fees shall be made to the Agent for the account of the
      Lenders pro rata in accordance with their respective Percentage Shares, (iv)
      each payment by the Borrower of fees pursuant to the Fee Letter shall be made
      to
      Amegy solely for its account, except as agreed otherwise by Amegy and any other
      Lender, (v) each payment of principal of Loans shall be made to the Agent for
      the account of the Lenders pro rata in accordance with their respective shares
      of the Loan Balance, (vi) each payment of interest on Loans shall be made to
      the
      Agent for the account of the Lenders pro rata in accordance with their
      respective shares of the aggregate amount of interest due and payable to the
      Lenders, and (vii) each payment by the Borrower under Commodity Hedge Agreements
      and Interest Rate Hedge Agreements with Approved Hedge Counterparties shall
      be
      made only to the Person or Persons entitled thereto.

     

    (b)           The
      Agent shall distribute all payments with respect to the Obligations under the
      Loan Documents promptly upon receipt in like funds as received to the Lenders
      and any Approved Hedge Counterparties entitled to participate in any relevant
      payment.  In the event that any payments made hereunder by the
      Borrower on the Obligations under the Loan Documents at any particular time
      are
      insufficient to satisfy in full the Obligations under the Loan Documents due
      and
      payable at such time, such payments shall be applied (i) first, to fees and
      expenses due pursuant to the terms of this Agreement or any other Loan Document,
      (ii) second, to accrued interest, (iii) third, to the Loan Balance and any
      other
      Obligations under the Loan Documents pro rata on the basis of the ratio of
      the
      amount of all such Obligations under the Loan Documents owing to the Agent
      or
      the relevant Lender, as the case may be, to the total amount of the Obligations
      under the Loan Documents then owing and (iv) fourth to cash collateralize the
      L/C Exposure in the manner provided in Section 2.11(a).

     

    (c)           If
      any Lender (for purposes of this Section, a “Benefited Lender”) shall at
      any time receive any payment of all or part of its portion of the Obligations
      under the Loan Documents, or receive any Collateral in respect thereof (whether
      voluntarily or involuntarily, by set-off, pursuant to events or proceedings
      of
      the nature referred to in Section 7.1(f) or Section 7.1(g), or
      otherwise) in an amount greater than such Lender was entitled to receive
      pursuant to the terms hereof, such Benefited Lender shall purchase for cash
      from
      the other Lenders such portion of the Obligations under the Loan Documents
      of
      such other Lenders, or shall provide such other Lenders with the benefits of
      any
      such Collateral or the proceeds thereof, as shall be necessary to cause such
      Benefited Lender to share the excess payment or benefits of such Collateral
      or
      proceeds with each of the Lenders according to the terms hereof.  If
      all or any portion of such excess payment or benefits is thereafter recovered
      from such Benefited Lender, such purchase shall be rescinded and the purchase
      price and benefits returned by such Lender, to the extent of such recovery,
      but
      without interest.  The Borrower agrees that each such Lender so
      purchasing a portion of the Obligations under the Loan Documents of another
      Lender may exercise all rights of payment (including rights of set-off) with
      respect to such portion as fully as if such Lender were the direct holder of
      such portion.  If any Lender ever receives, by voluntary payment,
      exercise of rights of set-off or banker’s lien, counterclaim, cross-action or
      otherwise, any funds of the Borrower to be applied to the Obligations under
      the
      Loan Documents, or receives any proceeds by realization on or with respect
      to
      any Collateral, all such funds and proceeds shall be forwarded immediately
      to
      the Agent for distribution in accordance with the terms of this
      Agreement.

    

    
      
        
          
          

        

        
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    2.10           Borrowing
      Base and Monthly Reduction Amount.  f) The Borrowing Base as of
      the Closing Date is acknowledged by the Borrower, the Agent and the Lenders
      to
      be $19,375,000.  Commencing on the first day of January, 2008 and
      continuing thereafter on the first day of each calendar month, the amount of
      the
      Borrowing Base then in effect shall be reduced by the Monthly Reduction Amount,
      which Monthly Reduction Amount  as of the Closing Date is acknowledged
      to be $0.00.

     

    (b)           The
      Borrowing Base and the Monthly Reduction Amount shall be redetermined, by the
      Agent, with the approval of the Lenders as required pursuant to the provisions
      of Section 9.9, semi-annually (on each May 1 and November 1 prior to the
      Commitment Termination Date, commencing on May 1, 2008) on the basis of
      information supplied by the Borrower in compliance with the provisions of this
      Agreement, including Reserve Reports, and all other information available to
      the
      Agent and the Lenders.  In addition, the Agent, with the approval of
      the Lenders as required pursuant to the provisions of Section 9.9, shall,
      in the normal course of business following a request of the Borrower,
      redetermine the Borrowing Base and the Monthly Reduction Amount;
provided, however, the Agent and the Lenders shall not be
      obligated to respond to more than one such request during the period between
      the
      scheduled semi-annual redeterminations provided for
      above.  Notwithstanding the foregoing, the Borrowing Base in effect at
      any time shall be subject to reduction in accordance with applicable provisions
      of Section 6.4 and the Agent, with the approval of the Lenders as
      required pursuant to the provisions of Section 9.9, may at its discretion
      and shall, upon request by the Required Lenders and with the approval of the
      Lenders as required pursuant to the provisions of Section 9.9,
      redetermine the Borrowing Base and the Monthly Reduction Amount at any time;
      provided, however, the Agent and the Lenders shall not be entitled
      to more than one such unscheduled redetermination between the scheduled
      redeterminations provided for above.

     

    (c)           Upon
      each determination of the Borrowing Base and the Monthly Reduction Amount,
      the
      Agent shall notify the Borrower orally (confirming such notice promptly in
      writing) of such determination, and, subject to the operation of the Monthly
      Reduction Amount, the Borrowing Base and the Monthly Reduction Amount so
      communicated to the Borrower shall become effective upon such oral notification
      and shall remain in effect until the next subsequent determination of the
      Borrowing Base and the Monthly Reduction Amount.

     

    (d)           The
      Borrowing Base shall represent the determination by the Agent and the Lenders,
      in accordance with the applicable definitions and provisions herein contained
      and the customary lending practices of the Agent and the Lenders for loans
      of
      this nature (but taking into account floor and cap prices or other price
      protection under Commodity Hedge Agreements), of the value, for loan purposes,
      of the Mortgaged Properties and any other Oil and Gas Properties of the Borrower
      and its Domestic Subsidiaries acceptable to the Agent and the Lenders, subject,
      in the case of any increase in the Borrowing Base, to the credit approval
      processes of the Agent and each of the Lenders; provided, however,
      in no event will the Borrowing Base, at any time prior to final resolution,
      by
      way of agreed settlement or a final non-appealable judgment of a court of
      competent jurisdiction, of the GeoStar Dispute, exceed the GeoStar Rescission
      Amount most recently certified to the Agent by the Borrower pursuant to the
      provisions of Section 5.24.  Furthermore, the Borrower and the
      Initial Guarantors acknowledge that the determination of the Borrowing Base
      contains an equity cushion (market value in excess of loan value), which is
      acknowledged by the Borrower and the Initial Guarantors to be essential for
      the
      adequate protection of the Agent and the Lenders.

    

    
      
        
          
          

        

        
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    2.11           Mandatory
      Prepayments.  i) If at any time, as a result of the second
      sentence of subsection (a) of Section 2.10, the sum of the Loan Balance
      and the L/C Exposure exceeds the Commitment Amount then in effect, the Borrower
      shall, within three Business Days of receipt of notice from the Agent of such
      occurrence, prepay such portion of the Loan Balance and/or, as provided below
      in
      this subsection (a), provide cash as Collateral so that the sum of the Loan
      Balance and the L/C Exposure does not exceed the Commitment Amount then in
      effect.  If at any time, other than as a result of the second sentence
      of subsection (a) of Section 2.10, the sum of the Loan Balance and the
      L/C Exposure exceeds the Commitment Amount then in effect (such excess, a
“Deficiency”), the Borrower shall, at the option of the Borrower
      communicated to the Agent within 10 days of receipt of notice from the Agent
      of
      such occurrence, (i) prepay the amount of the Deficiency in three substantially
      equal installment payments, each for application on the Loan Balance and then
      to
      provide cash as Collateral for the L/C Exposure in the manner provided below
      in
      this Section 2.11(a), the first of which being due on the thirtieth day
      following receipt by the Borrower of the relevant notice from the Agent and
      the
      second and third of which being due on the sixtieth and ninetieth day,
      respectively, following receipt by the Borrower of the relevant notice from
      the
      Agent, (ii) provide, within 30 days of such election by the Borrower, additional
      Collateral, of character and value satisfactory to the Required Lenders in
      their
      sole discretion, and/or cash as Collateral to secure the Obligations, by way
      of
      the execution and delivery to the Agent of Security Documents in form and
      substance reasonably satisfactory to the Agent or (iii) affect any combination
      of the alternatives described in clauses (i) and (ii) of this sentence and
      acceptable to the Required Lenders in their sole discretion.  Any
      prepayment pursuant to the provisions of this Section 2.11(a) shall be
      without premium or penalty, except as provided in Section 2.18, and the
      amount of any such prepayment may be reborrowed if otherwise available to the
      Borrower pursuant to the terms of this Agreement.  In the event that a
      mandatory prepayment is to be made under this Section 2.11(a) or under
Section 6.4 and the Loan Balance is less than the amount required to be
      prepaid, the Borrower shall repay the entire Loan Balance and, in accordance
      with the provisions of the relevant Letter of Credit Applications executed
      by
      the Borrower or otherwise to the satisfaction of the Agent, deposit with the
      Agent, as additional collateral securing the Obligations, an amount of cash,
      in
      immediately available funds, equal to the L/C Exposure minus the Commitment
      Amount.  The cash deposited with the Agent in satisfaction of the
      requirement provided in this Section 2.11(a) shall be invested, at the
      express direction of the Borrower as to investment vehicle and maturity (which
      shall be no later than the latest expiry date of any then outstanding Letter
      of
      Credit), for the account of the Borrower in cash or cash equivalent investments
      offered by or through Amegy.

    

    
      
        
          
          

        

        
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    (b)           Should
      there occur a Change of Control (as such term is defined in the Second Lien
      Credit Agreement), then, five days after such occurrence, immediately and
      without notice, (i) all Obligations under the Loan Documents shall automatically
      become immediately due and payable, without presentment, demand, protest, notice
      of protest, default, or dishonor, notice of intent to accelerate maturity,
      notice of acceleration of maturity, or other notice of any kind, except as
      may
      be provided to the contrary elsewhere herein, all of which are hereby expressly
      waived by the Borrower and the Guarantors and (ii) the Commitments shall
      immediately cease and terminate unless and until reinstated by the Agent and
      the
      Lenders in writing.  Should the Obligations under the Loan Documents
      become immediately due and payable in accordance with the immediately preceding
      sentence, the obligation of the Borrower with respect to the L/C Exposure shall
      be to provide cash as Collateral therefor, to be held and administered by the
      Agent as provided in Section 2.11(a) and, failing receipt by the Agent of
      immediate payment in full of the Loan Balance and all accrued and unpaid
      interest and such cash to serve as Collateral for the L/C Exposure, the Agent
      shall be entitled to proceed against the Collateral, and proceeds from any
      realization against any such Collateral, other than cash, in excess of the
      sum
      of the costs of such realization, the Loan Balance and accrued and unpaid
      interest and fees shall constitute cash Collateral for the remaining L/C
      Exposure, if any, to be held and administered by the Agent as provided in
Section 2.11(a).

     

    2.12           Voluntary
      Prepayments and Conversions of Loans.  Subject to applicable
      provisions of this Agreement, the Borrower shall have the right at any time
      or
      from time to time to prepay Loans without prepayment penalty and to convert
      Loans of one type or with one Interest Period into Loans of another type or
      with
      a different Interest Period; provided, however, that (a) the
      Borrower shall give the Agent notice of each such prepayment or conversion
      of
      (i) all or any portion of a LIBO Rate Loan no less than three Business Days
      prior to prepayment or conversion and (ii) all or any portion of a Base Rate
      Loan no less than one (1) Business Day prior to prepayment or conversion, (b)
      any prepayment of any LIBO Rate Loan shall be in an amount of at least equal
      to
      $10,000 and a whole multiple of $10,000, (c) the Borrower shall pay all accrued
      and unpaid interest on the amounts prepaid or converted, (d) no such prepayment
      or conversion shall serve to postpone the repayment when due of any Obligation
      or any installments thereof and (e) the Borrower shall reimburse each Lender
      for
      any losses, expenses or costs incurred by such Lender pursuant to prepayment
      or
      conversion of a Loan, or the failure of the Borrower to make such prepayment
      or
      conversion as provided in Section 2.18.  Except as provided in
      the immediately preceding sentence, any prepayment pursuant to the provisions
      of
      this Section 2.12 shall be without premium or penalty and the amount of
      any such prepayment may be reborrowed if otherwise available to the Borrower
      pursuant to the terms of this Agreement.

     

    2.13           Commitment
      Fees.  In addition to interest on the Notes as provided herein,
      and to compensate  the Lenders for maintaining funds available, the
      Borrower shall pay to the Agent, for the account of the Lenders, in immediately
      available funds, for the calendar quarter ending on the last day of December,
      2007 and for each calendar quarter thereafter during the Commitment Period
      and
      on the Commitment Termination Date, a fee equal to the Applicable Commitment
      Fee
      Percentage, determined on the first day of the relevant quarterly or shorter
      period, for the period of calculation, calculated on the basis of a year of
      365
      or 366 days, as the case may be, and actual days elapsed (including the first
      day, but excluding the last day), multiplied by the average daily amount of
      the
      Available Commitment during the relevant quarterly or shorter period, as the
      case may be.  Commitment Fees shall be payable by the Borrower upon
      receipt of an invoice therefor or statement thereof delivered by the Agent and
      shall be past due if not paid within ten days of receipt of each such invoice
      or
      statement.

    

    
      
        
          
          

        

        
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    2.14           Engineering
      Fees.  The Borrower shall pay Amegy, solely for its account, the
      engineering fees, if any, provided in the Fee Letter.

     

    2.15           Additional
      Fees.  Without duplication of any fees payable pursuant to
Section 2.14, the Borrower shall pay to Amegy the fees provided in the
      Fee Letter.

     

    2.16           Loans
      to Satisfy Obligations.  Upon a Default, the Lenders may, but
      shall not be obligated to, make Loans for the benefit of the Borrower and apply
      proceeds thereof to the satisfaction of any condition, warranty, representation
      or covenant of the Borrower or any of the Guarantors contained in this Agreement
      or any other Loan Document.  Such Loans shall be evidenced by the
      Notes and shall bear interest at the Adjusted Base Rate plus the relevant
      Applicable Margin, subject, however, to the provisions of
Section 2.5 regarding the accrual of interest at the Default Rate
      in
      certain circumstances.

     

    2.17           General
      Provisions Relating to Interest.  g) It is the intention of the
      parties hereto to comply strictly with the usury laws of the State of Texas
      and
      the United States of America.  In this connection, there shall never
      be collected, charged, or received on the sums advanced hereunder interest
      in
      excess of that which would accrue at the Highest Lawful Rate.  The
      Borrower agrees that, to the extent the Highest Lawful Rate is determined with
      reference to the laws of the State to Texas, the Highest Lawful Rate shall
      be
      the “weekly” rate as defined in Chapter 303 of the Texas Finance Code,
provided that the Agent or any Lender may, at its election, substitute
      for the “weekly” rate the “annualized” or “quarterly” rate, as such terms are
      defined in the aforesaid statute, upon the giving of notices provided for in
      such statute and effective upon the giving of such notices.  The Agent
      and each Lender may also rely, to the extent permitted by applicable laws of
      the
      State of Texas or the United States of America, on alternative maximum rates
      of
      interest under other laws of the State of Texas or the United States of America
      applicable to the Agent or the relevant Lender, if greater.

     

    (b)           Notwithstanding
      anything herein or in the Notes to the contrary, during any Limitation Period,
      the interest rate to be charged on amounts evidenced by the Notes held by any
      affected Lenders shall be the Highest Lawful Rate, and the obligation, if any,
      of the Borrower for the payment of fees or other charges deemed to be interest
      under applicable law shall be suspended.  During any period or periods
      of time following a Limitation Period, to the extent permitted by applicable
      laws of the State of Texas or the United States of America, the interest rate
      to
      be charged hereunder on amounts evidenced by the Notes held by any affected
      Lenders shall remain at the Highest Lawful Rate until such time as there has
      been paid to each applicable Lender (i) the amount of interest in excess of
      that
      accruing at the Highest Lawful Rate that such Lender would have received during
      the Limitation Period had the interest rate remained at the otherwise applicable
      rate, and (ii) all interest and fees otherwise payable to such Lender but for
      the effect of such Limitation Period.

    

    
      
        
          
          

        

        
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    (c)           If,
      under any circumstances, the aggregate amounts paid on the Notes or under this
      Agreement or any other Loan Document include amounts which by law are deemed
      interest and which would exceed the amount permitted if the Highest Lawful
      Rate
      were in effect, the Borrower stipulates that such payment and collection will
      have been and will be deemed to have been, to the extent permitted by applicable
      laws of the State of Texas or the United States of America, the result of
      mathematical error on the part of the Borrower, the Agent, and the Lenders;
      and
      the party receiving such excess shall promptly refund the amount of such excess
      (to the extent only of such interest payments in excess of that which would
      have
      accrued and been payable on the basis of the Highest Lawful Rate) upon discovery
      of such error by such party or notice thereof from the Borrower.  In
      the event that the maturity of any Obligation is accelerated, by reason of
      an
      election by the Lenders or otherwise, or in the event of any required or
      permitted prepayment, then the consideration constituting interest under
      applicable laws may never exceed that payable on the basis of the Highest Lawful
      Rate, and excess amounts paid which by law are deemed interest, if any, shall
      be
      credited by the Agent and the Lenders on the principal amount of the
      Obligations, or if the principal amount of the Obligations shall have been
      paid
      in full, refunded to the Borrower.

     

    (d)           All
      sums paid, or agreed to be paid, to the Agent and the Lenders for the use,
      forbearance and detention of the proceeds of any advance hereunder shall, to
      the
      extent permitted by applicable law, be amortized, prorated, allocated, and
      spread throughout the full term hereof until paid in full so that the actual
      rate of interest is uniform but does not exceed the Highest Lawful Rate
      throughout the full term hereof.

     

    2.18           Yield
      Protection.  h) Without limiting the effect of the other
      provisions of this Section 2.18 (but without duplication), the Borrower
      shall pay to the Agent and each Lender from time to time such amounts as are
      necessary to compensate it for any actual and reasonable Additional Costs
      incurred by the Agent or such Lender.

     

    (b)           Without
      limiting the effect of the other provisions of this Section 2.18 (but
      without duplication), the Borrower shall pay to each Lender from time to time
      on
      request such amounts as are necessary to compensate such Lender or such Lender’s
      holding company for any costs attributable to the maintenance by such Lender
      (or
      any Applicable Lending Office), pursuant to any Regulatory Change, of capital
      in
      respect of its Commitment, such compensation to include an amount equal to
      any
      reduction of the rate of return on assets or equity of such Lender or such
      Lender’s holding company (or any Applicable Lending Office) to a level below
      that which such Lender or such Lender’s holding company (or any Applicable
      Lending Office) could have achieved but for such Regulatory Change.

     

    (c)           Without
      limiting the effect of the other provisions of this Section 2.18 (but
      without duplication), in the event that any Requirement of Law or Regulatory
      Change or the compliance by the Agent or any Lender therewith shall (i) impose,
      modify, or hold applicable any reserve, special deposit, or similar requirement
      against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
      impose upon the Agent or such Lender any other condition regarding any Letter
      of
      Credit or obligation to issue Letters of Credit, and the result of any such
      event shall be to increase the cost to the Agent or such Lender of issuing
      or
      maintaining any Letter of Credit or obligation to issue Letters of Credit or
      any
      liability with respect to Letter of Credit Payments, or to reduce any amount
      receivable in connection therewith, then upon demand by the Agent or such
      Lender, as the case may be, the Borrower shall pay to the Agent or such Lender,
      from time to time as specified by the Agent or such Lender, additional amounts
      which shall be sufficient to compensate the Agent or such Lender for such
      increased cost or reduced amount receivable.

    

    
      
        
          
          

        

        
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    (d)           Without
      limiting the effect of the other provisions of this Section 2.18 (but
      without duplication), the Borrower shall pay to the Agent and each Lender such
      amounts as shall be sufficient in the reasonable opinion of the Agent and such
      Lender to compensate them for any actual and reasonable loss, cost, or expense
      incurred by and as a result of:

     

    
      	
               

            	
              (i)

            	
              any
                payment, prepayment, or conversion by the Borrower of a LIBO Rate
                Loan on
                a date other than the last day of an Interest Period for such Loan;
                or

            

    

     

    
      	
               

            	
              (ii)

            	
              any
                failure by the Borrower to borrow a LIBO Rate Loan or to convert
                a Base
                Rate Loan into a LIBO Rate Loan on the date for such borrowing or
                conversion specified in the relevant Borrowing
                Request,

            

    

     

    such
      compensation to include with respect to any LIBO Rate Loan, an amount equal
      to
      the excess, if any, of (A) the amount of interest which would have accrued
      on
      the principal amount so paid, prepaid, converted, or not borrowed or converted
      for the period from the date of such payment, prepayment, conversion, or failure
      to borrow or convert to the last day of the then current Interest Period for
      such Loan (or, in the case of a failure to borrow or convert, the Interest
      Period for such Loan which would have commenced on the date of such failure
      to
      borrow or convert) at the applicable rate of interest for such Loan provided
      for
      herein over (B) the interest component of the amount the Agent or such Lender
      would bid were it to bid at the commencement of such period in the London
      interbank market for Dollar deposits of amounts comparable to such principal
      amount and maturities comparable to such period, as reasonably determined by
      the
      Agent or such Lender.

     

    (e)           Determinations
      by the Agent or any Lender for purposes of this Section 2.18 of the
      effect of any Regulatory Change on capital maintained, its costs or rate of
      return, its obligation to make and maintain Loans, issuing or participating
      in
      Letters of Credit, or on amounts receivable by it in respect of Loans, Letters
      of Credit or such other obligations, and the additional amounts required to
      compensate the Agent and such Lender under this Section 2.18 shall be
      conclusive, absent manifest error, provided that such determinations are
      made on a reasonable basis.  The Agent or the relevant Lender shall
      furnish the Borrower with a certificate setting forth in reasonable detail
      the
      basis and amount of Additional Costs or any other loss, cost or expense incurred
      as a result of any such event, and the statements set forth therein shall be
      conclusive, absent manifest error, provided that such determinations are
      made on a reasonable basis.  The Agent or the relevant Lender shall
      (i) notify the Borrower, as promptly as practicable after the Agent or such
      Lender obtains knowledge of any Additional Costs or other sums payable pursuant
      to this Section and determines to request compensation therefor, of any event
      occurring after the Closing Date which will entitle the Agent or such Lender
      to
      compensation pursuant to this Section 2.18; and (ii) designate a
      different Applicable Lending Office for the Loans affected by such event if
      such
      designation will avoid the need for or reduce the amount of such compensation
      and will not, in the sole opinion of the Agent or such Lender, be
      disadvantageous to the Agent or such Lender.  If any Lender requests
      compensation from the Borrower under this Section 2.18, the Borrower may,
      after payment of all compensation then accrued and by notice to the Agent and
      such Lender, require that the Loans by such Lender of the type with respect
      to
      which such compensation is requested be converted into Base Rate Loans in
      accordance with Section 2.12.  Any compensation requested by
      the Agent or any Lender pursuant to this Section 2.18 shall be due and
      payable within 30 days of receipt by the Borrower of any such
      notice.

    

    
      
        
          
          

        

        
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    (f)           The
      Agent and the Lenders agree not to request, and the Borrower shall not be
      obligated to pay, any Additional Costs or other sums payable pursuant to this
      Section unless similar Additional Costs and other sums payable are also
      generally assessed by the Agent or such Lender against other customers similarly
      situated where such customers are subject to documents providing for such
      assessment.

     

    2.19           Illegality.  Notwithstanding
      any other provision of this Agreement, in the event that it becomes unlawful
      for
      any Lender or its Applicable Lending Office to (a) honor its obligation to
      make
      LIBO Rate Loans, or (b) maintain LIBO Rate Loans, then such Lender shall
      promptly notify the Agent and the Borrower thereof.  The obligation of
      such Lender to make LIBO Rate Loans and convert Base Rate Loans into LIBO Rate
      Loans shall then be suspended until such time as such Lender may again make
      and
      maintain LIBO Rate Loans, and the outstanding LIBO Rate Loans of such Lender
      shall be converted into Base Rate Loans.

     

    2.20           Replacement
      Lenders.  i) If any Lender has notified the Borrower of its
      incurring Additional Costs or any other loss, cost or expense under Section
      2.18 or has invoked the indemnification as to certain Taxes set forth in
Section 2.8, the Borrower may, unless such Lender has notified the
      Borrower that the circumstances giving rise to such notice no longer apply,
      terminate, in whole but not in part, the Commitment of such Lender (other than
      the Agent) (the “Terminated Lender”) at any time upon five Business Days’
prior written notice to the Terminated Lender and the Agent (a “Notice of
      Termination”).

     

    (b)           In
      order to effect the termination of the Commitment of the Terminated Lender,
      the
      Borrower shall (i) obtain an agreement with one or more Lenders to increase
      their Commitments and/or (ii) request any one or more other banking institutions
      to become a “Lender” in place and instead of such Terminated Lender and agree to
      accept a Commitment; provided, however, that such one or more
      other banking institutions are reasonably acceptable to the Agent and become
      parties hereto by executing an Assignment Agreement (the Lenders or other
      banking institutions that agree to accept in whole or in part the Commitment
      of
      the Terminated Lender being referred to herein as the “Replacement
      Lenders”), such that the aggregate increased and/or accepted Facility
      Amounts of the Replacement Lenders under clauses (i) and (ii) above equal the
      Facility Amount of the Terminated Lender.

     

    (c)           The
      Notice of Termination shall include the name of the Terminated Lender, the
      date
      the termination will occur (the “Termination Date”), the Replacement
      Lender or Replacement Lenders to which the Terminated Lender will assign its
      Commitment, and, if there will be more than one Replacement Lender, the portion
      of the Terminated Lender’s Commitment to be assigned to each Replacement
      Lender.

    

    
      
        
          
          

        

        
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    (d)           On
      the Termination Date, (i) the Terminated Lender shall by execution and delivery
      of an Assignment Agreement assign its Commitment to the Replacement Lender
      or
      Replacement Lenders (pro rata, if there is more than one Replacement Lender,
      in
      proportion to the portion of the Terminated Lender’s Commitment to be assigned
      to each Replacement Lender) indicated in the Notice of Termination and shall
      assign to the Replacement Lender or Replacement Lenders its Loans (if any)
      then
      outstanding pro rata as aforesaid), (ii) the Terminated Lender shall endorse
      its
      Note, payable without recourse, representation or warranty to the order of
      the
      Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iii) the
      Replacement Lender or Replacement Lenders shall purchase the Note held by the
      Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid
      principal amount thereof plus interest and fees accrued and unpaid to the
      Termination Date, (iv) the Replacement Lender or Replacement Lenders will
      thereupon (pro rata as aforesaid) succeed to and be substituted in all respects
      for the Terminated Lender with like effect as if becoming a Lender pursuant
      to
      the terms of Section 9.1(b) and the Terminated Lender will have the
      rights and benefits of an assignor under Section 9.1(b) and (v) the
      Terminated Lender shall have received payment of an amount equal to its
      Percentage Share of the Loan Balance and accrued interest thereon, accrued
      fees
      owed to it and all other amounts due and owing to it hereunder and under the
      other Loan Documents (including any loss, cost or expense under Section
      2.18 incurred up to, but not including, the Termination Date).  To
      the extent not in conflict, the terms of Section 9.1(b) shall supplement
      the provisions of this Section 2.20

     

    (e)           Any
      Terminated Lender (including the Agent in its capacity as a Lender and as Agent)
      shall reimburse the Borrower for all reasonable and necessary fees and expenses
      of counsel to the Borrower and, if required by the Replacement Lender or
      Replacement Lenders, of counsel to the Replacement Lender or Replacement Lenders
      in connection with replacing such Terminated Lender with a Replacement Lender
      or
      Replacement Lenders.

     

    2.21           Regulatory
      Change.  In the event that by reason of any Regulatory Change or
      any other circumstance arising after the Closing Date affecting any Lender,
      such
      Lender (a) incurs Additional Costs based on or measured by the excess above
      a
      level, as prescribed from time to time by any Governmental Authority with
      jurisdiction, of the amount of a category of deposits or other liabilities
      of
      such Lender which includes deposits by reference to which the interest rate
      on
      any LIBO Rate Loan is determined as provided in this Agreement or a category
      of
      extensions of credit or other assets of such Lender which includes any LIBO
      Rate
      Loan, or (b) becomes subject to restrictions on the amount of such a category
      of
      liabilities or assets which it may hold, then, at the election of such Lender
      with notice to the Agent and the Borrower, the obligation of such Lender to
      make
      LIBO Rate Loans and to convert Base Rate Loans into LIBO Rate Loans shall be
      suspended until such time as such Regulatory Change or other circumstance ceases
      to be in effect, and all such outstanding LIBO Rate Loans shall be converted
      into Base Rate Loans.

     

    2.22           Letters
      in Lieu of Transfer Orders or Division Orders.  The Agent agrees
      that none of the letters in lieu of transfer or division orders provided
      pursuant to the provisions of Section 3.1(f) or Section 5.7 will
      be sent to the addressees thereof unless an Event of Default has occurred and
      is
      continuing, at which time the Agent may, at its option and in addition to the
      exercise of any of its other rights and remedies, send any or all of such
      letters.

    

    
      
        
          
          

        

        
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    2.23           Power
      of Attorney.  The Borrower hereby designates the Agent as its
      agent and attorney-in-fact, to act in its name, place, and stead solely for
      the
      purpose of completing and, upon the occurrence and the continuance of an Event
      of Default, delivering any and all of the letters in lieu of transfer or
      division orders delivered by the Borrower pursuant to the provisions of
Section 3.1(f) or Section 5.7, including completing any blanks
      contained in such letters and attaching exhibits thereto describing the relevant
      Collateral.  The Borrower hereby ratifies and confirms all that the
      Agent shall lawfully do or cause to be done by virtue of this power of attorney
      and the rights granted with respect to such power of attorney.  This
      power of attorney is coupled with the interests of the Agent in the Collateral,
      shall commence and be in full force and effect as of the Closing Date and shall
      remain in full force and effect and shall be irrevocable so long as any
      Obligation remains outstanding or unpaid or any Commitment
      exists.  The powers conferred on the Agent by this appointment are
      solely to protect the interests of the Agent, the Lenders and any other Approved
      Hedge Counterparties under the Loan Documents with respect to the assignment
      of
      production proceeds under certain of the Security Documents and shall not impose
      any duty upon the Agent to exercise any such powers.  The power of
      attorney under this Section 2.23 is expressly limited to the rights and
      powers set forth herein and no additional rights or powers are herein created
      or
      implied.  The Agent shall be accountable only for amounts that it
      actually receives as a result of the exercise of such powers and shall not
      be
      responsible to the Borrower or any other Person for any act or failure to act
      with respect to such powers, except for gross negligence or willful
      misconduct.

     

    2.24           Security
      Interest in Accounts; Right of Offset.  As security for the
      payment and performance of the Obligations, the Borrower hereby transfers,
      assigns, and pledges to the Agent each Lender and each other Approved Hedge
      Counterparty (for the pro rata benefit of such Persons) and grants to the Agent,
      each Lender and each other Approved Hedge Counterparty (for the pro rata benefit
      of such Persons) a security interest in all of its funds now or hereafter or
      from time to time on deposit with the Agent, such Lender or such other Approved
      Hedge Counterparty, with such interest of the Agent, the Lenders and the other
      Approved Hedge Counterparties to be retransferred, reassigned, and/or released
      at the expense of the Borrower upon payment in full and complete performance
      of
      all Obligations.  All remedies as secured party or assignee of such
      funds shall be exercisable upon the occurrence of any Event of Default,
      regardless of whether the exercise of any such remedy would result in any
      penalty or loss of interest or profit with respect to any withdrawal of funds
      deposited in a time deposit account prior to the maturity
      thereof.  Furthermore, the Borrower hereby grants to the Agent, each
      Lender and each other Approved Hedge Counterparty (for the pro rata benefit
      of
      such Persons) the right, exercisable at such time as any Obligation shall
      mature, whether by acceleration of maturity or otherwise, of offset or banker’s
      lien against all of its funds now or hereafter or from time to time on deposit
      with the Agent, such Lender or such other Approved Hedge Counterparty,
      regardless of whether the exercise of any such remedy would result in any
      penalty or loss of interest or profit with respect to any withdrawal of funds
      deposited in a time deposit account prior to the maturity thereof.

    

    
      
        
          
          

        

        
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    ARTICLE
      III

     

    CONDITIONS

     

    The
      obligations of the Agent and the Lenders to enter into this Agreement and to
      make Loans or issue or participate in, as the case may be, Letters of Credit
      are
      subject to the satisfaction of the following conditions precedent:

     

    3.1           Receipt
      of Loan Documents and Other Items.  Neither the Lenders nor the
      Agent shall have any obligation under this Agreement unless and until all
      matters incident to the consummation of the transactions contemplated herein
      shall be satisfactory to the Agent and the Lenders, and the Agent and, upon
      request, any Lender shall have received, reviewed and approved the following
      documents and other items, appropriately executed when necessary and, where
      applicable, acknowledged by one or more Responsible Officers of the Borrower
      or
      other Persons, as the case may be, all in form and substance reasonably
      satisfactory to the Agent and dated, where applicable, of even date herewith
      or
      a date prior thereto and reasonably acceptable to the Agent:

     

    (a)           multiple
      counterparts of this Agreement as requested by the Agent;

     

    (b)           the
      Notes to be in place on the Closing Date;

     

    (c)           copies
      of the organizational documents of the Borrower and each of the Initial
      Guarantors and all amendments to either, accompanied by a certificate dated
      the
      Closing Date issued by the secretary or an assistant secretary or another
      authorized representative of the Borrower and each of the Initial Guarantors
      to
      the effect that each such copy is correct and complete;

     

    (d)           a
      certificate of incumbency dated the Closing Date, including specimen signatures
      of all officers or other representatives of the Borrower and each of the Initial
      Guarantors who are authorized to execute Loan Documents on behalf of the
      Borrower and each of the Initial Guarantors, respectively, each such certificate
      being executed by the secretary or an assistant secretary or another authorized
      representative of the Borrower or the relevant Initial Guarantor, as the case
      may be;

     

    (e)           copies
      of resolutions adopted by the governing body of the Borrower and each of the
      Initial Guarantors approving the Loan Documents to which the relevant Person
      is
      a party and authorizing the transactions contemplated herein and therein,
      accompanied by a certificate dated the Closing Date issued by the secretary
      or
      an assistant secretary or another authorized representative of the Borrower
      or
      the relevant Initial Guarantor, as the case may be, to the effect that such
      copies are true and correct copies of resolutions duly adopted and that such
      resolutions constitute all the resolutions adopted with respect to such
      transactions, have not been amended, modified or rescinded in any respect and
      are in full force and effect as of the date of such certificate;

     

    (f)           the
      following documents continuing in effect or establishing Liens in favor or
      for
      the benefit of the Agent, for the benefit of the Secured Creditors, in and
      to
      the Collateral, including Mortgaged Properties constituting at least eighty
      five
      percent (85%) of the discounted present value, determined by the Agent in its
      discretion, of the proved reserves attributable to the Oil and Gas Properties
      of
      the Borrower and its Domestic Subsidiaries:

    

    
      
        
          
          

        

        
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              (i)

            	
              security
                documents covering Oil and Gas Properties of the Borrower and its
                Domestic
                Subsidiaries sufficient for the Borrower and the
                Initial Guarantors to be in compliance with the provisions of Section
                5.5;

            

    

     

    
      	
               

            	
              (ii)

            	
              security
                documents covering the equity ownership by the Parent in the Borrower
                and
                assets of the Borrower and its Subsidiaries as to which a security
                interest against such assets may be created and perfected under the
                provisions of the UCC or the Uniform Commercial Code as adopted and
                in
                effect in states of the United States of America other than the State
                of
                Texas, including the entire equity ownership by the Borrower or any
                of its
                Domestic Subsidiaries in the Subsidiary Guarantors which are Initial
                Guarantors and sixty five percent (65%) of the equity ownership by
                the
                Borrower in any of its Subsidiaries which are not Domestic
                Subsidiaries;

            

    

     

    
      	
               

            	
              (iii)

            	
              a
                security document covering the equity ownership by the Parent of
                the
                Borrower;

            

    

     

    
      	
               

            	
              (iv)

            	
              certificates,
                if any, evidencing the equity ownership interests referred to in
                clause
                (ii) above in this Section 3.1(f) duly endorsed in blank or to each
                of which a stock, partnership interest or membership interest, as
                the case
                may be, power executed in blank has been
                attached;

            

    

     

    
      	
               

            	
              (v)

            	
              financing
                statement assignments and financing statements constituent to the
                documents described in (i) through (iii) above in this Section
                3.1(f); and

            

    

     

    
      	
               

            	
              (vi)

            	
              undated
                letters, in form and substance reasonably satisfactory to the Agent,
                from
                the Borrower and/or the relevant Domestic Subsidiary or Domestic
                Subsidiaries of the Borrower to each purchaser of production and
                disburser
                of the proceeds of production from or attributable to the Mortgaged
                Properties, with the addressees left blank, authorizing and directing
                the
                addressees to make future payments attributable to production from
                the
                Mortgaged Properties directly to the
                Agent;

            

    

     

    (g)           a
      Guaranty by the Initial Guarantors in favor of the Agent for the benefit of
      the
      Lenders and the other Secured Creditors;

    

    
      
        
          
          

        

        
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    (h)           audited
      consolidated Financial Statements of the Parent and its consolidated
      Subsidiaries as of December 31, 2006 and unaudited consolidated Financial
      Statements of the Parent and its consolidated Subsidiaries, in each case
      certified by a Responsible Officer of the Parent as having been prepared in
      accordance with GAAP consistently applied and as a fair presentation of the
      condition of the Parent on a consolidated basis with its consolidated
      Subsidiaries, subject, as to such unaudited Financial Statements, to changes
      resulting from normal year-end audit adjustments;

     

    (i)           certificates
      dated as of a recent date from the Secretary of State or other appropriate
      Governmental Authority evidencing the existence or qualification and, if
      applicable, good standing of the Borrower and each of the Initial Guarantors
      in
      its jurisdiction of organization and in any other jurisdictions where it owns
      property or does business;

     

    (j)           results
      of a search of the uniform commercial code records of the Secretary of State
      of
      the States of Michigan and Delaware, respectively in the names of the Borrower
      and each of the Initial Guarantors organized under the laws of the relevant
      state, respectively, such search reports to be from a source or sources
      reasonably acceptable to the Agent and reflecting no Liens, other than Permitted
      Liens, against any of the Collateral as to which perfection of a Lien is
      accomplished by the filing of a financing statement;

     

    (k)           confirmation,
      reasonably acceptable to the Agent, of the title of the Borrower and its
      Domestic Subsidiaries, free and clear of Liens other than Permitted Liens,
      to
      Mortgaged Properties constituting at least eighty five percent (85%) of the
      discounted present value, as determined by the Agent in its discretion, of
      the
      proved reserves attributable to such Mortgaged Properties;

     

    (l)           confirmation
      reasonably acceptable to the Agent, that the Oil and Gas Properties of the
      Borrower and its Subsidiaries are in compliance, in all material respects,
      with
      applicable Environmental Laws;

     

    (m)           copies
      of executed counterparts of all operating, lease, sublease, royalty, sales,
      exchange, processing, farmout, bidding, pooling, unitization, communitization
      and other agreements relating to the Mortgaged Properties, as reasonably
      requested by the Agent or any Lender;

     

    (n)           engineering
      information regarding the Mortgaged Properties, as reasonably requested by
      the
      Agent;

     

    (o)           the
      opinion of Warner Norcross & Judd, LLP, as counsel to the Borrower and each
      of the Initial Guarantors organized under the laws of the State of Michigan,
      in
      connection with this Agreement and the other Loan Documents to which any of
      such
      Persons is a party, substantially in the form attached hereto as Exhibit
      V;

     

    (p)           the
      opinion of Vinson & Elkins LLP, as counsel to each of the Initial Guarantors
      organized under the laws of the State of Delaware and special Texas and New
      York
      counsel to the Borrower and each of the Initial Guarantors in connection with
      this Agreement and the other Loan Documents to which any of such Persons
      organized under the laws of the State of Delaware and each of the Loan Documents
      governed by the laws of the State of Texas substantially in the form attached
      hereto as Exhibit VI.

    

    
      
        
          
          

        

        
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    (q)           the
      opinion of Burnet, Duckworth & Palmer, Alberta, Canada counsel to the Parent
      in connection with this Agreement and each of the other Loan Documents to which
      the Parent is a party, substantially in the form attached hereto as Exhibit
      VII;

     

    (r)           certificates
      evidencing the insurance coverage required by the provisions of Section
      5.20;

     

    (s)           payment
      to Amegy of any fees due as of the Closing Date pursuant to the Fee
      Letter;

     

    (t)           payment
      from the Borrower for estimated fees charged by filing officers and other public
      officials incurred or to be incurred in connection with the filing and
      recordation of any Security Documents and for which invoices have been presented
      as of the Closing Date;

     

    (u)           copies
      of all Commodity Hedge Agreements, in form and substance and with counterparties
      reasonably acceptable to the Agent, for purposes of determining the Borrowing
      Base as of the Closing Date;

     

    (v)           certificates
      of Responsible Officers of the Borrower and the Initial Guarantors,
      respectively, to the effect that all representations and warranties made by
      the
      Borrower or the relevant Initial Guarantor, as the case may be, in this
      Agreement or any other Loan Document in place on the Closing Date are true
      and
      correct as of the Closing Date;

     

    (w)           such
      other agreements, documents, instruments, opinions, certificates, waivers,
      consents and evidence as the Agent or any Lender may reasonably
      request;

     

    (x)           confirmation
      reasonably acceptable to the Agent that no event or circumstance shall have
      occurred which could reasonably be expected to have a Material Adverse
      Effect;

     

    (y)           confirmation
      reasonably acceptable to the Agent of the closing of the transactions which
      are
      the subject of the Second Lien Credit Agreement, the use by the Borrower of
      a
      portion of the proceeds of the Second Lien Indebtedness to provide funds to
      the
      Parent to retire the senior secured Indebtedness of the Parent outstanding
      prior
      to the Closing Date and the use of such funds by the Parent for such purpose,
      together with release documents releasing any (i) Liens against Property of
      the
      Parent, the Borrower or any Subsidiary of the Borrower securing payment of
      such
      Indebtedness of the Parent and (ii) guarantees of payment of such Indebtedness
      of the Parent by the Borrower and any Subsidiaries of the Borrower;
      and

     

    (z)           multiple
      counterparts of the Intercreditor Agreement, as requested by the
      Agent.

     

    3.2           Each
      Loan.  In addition to the conditions precedent stated elsewhere
      herein, the Lenders shall not be obligated to make any Loan, other than in
      connection with a Letter of Credit Payment, unless:

    

    
      
        
          
          

        

        
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    (a)           at
      least the requisite time prior to the requested date for the relevant Loan,
      the
      Borrower shall have delivered to the Agent a Borrowing Request and a funding
      direction advising the Agent whether the requested Loan should be funded to
      an
      account of the Borrower at Amegy or should be funded by wire transfer to an
      account of another Person (in which case wire transfer instructions shall be
      included) and each statement or certification made in such Borrowing Request
      shall be true and correct in all material respects on the requested date for
      such Loan;

     

    (b)           no
      Event of Default, Default or Deficiency shall exist or will occur as a result
      of
      the making of the requested Loan;

     

    (c)           if
      requested by the Agent or any Lender, the Borrower shall have delivered evidence
      satisfactory to the Agent or such Lender substantiating any of the matters
      contained in this Agreement which are necessary to enable the Borrower to
      qualify for such Loan;

     

    (d)           the
      Agent shall have received, reviewed and approved such additional documents
      and
      items as described in Section 3.1 as may be reasonably requested by the
      Agent with respect to such Loan;

     

    (e)           no
      event shall have occurred which, in the reasonable opinion of the Agent or
      any
      of the Lenders, could reasonably be expected to have a Material Adverse
      Effect;

     

    (f)           each
      of the representations and warranties of the Borrower or any of the Guarantors
      contained in this Agreement and the other Loan Documents shall be true and
      correct in all material respects and shall be deemed to be repeated by the
      relevant entity as if made on the requested date for such Loan;

     

    (g)           all
      of the Security Documents shall be in full force and effect;

     

    (h)           neither
      the consummation of the transactions contemplated hereby nor the making of
      such
      Loan shall contravene, violate or conflict with any Requirement of Law;
      and

     

    (i)           if
      the Parent or any of its Subsidiaries has formed, after the Closing Date, any
      Subsidiary, such Subsidiary, if a Domestic Subsidiary, shall have executed
      and
      delivered a Joinder Agreement and a Guaranty and, if requested by the Agent,
      Security Documents covering the assets of such Domestic Subsidiary and the
      Parent, the Borrower or the relevant Subsidiary of the Parent holding the equity
      ownership shall have executed and delivered Security Documents covering all
      of
      such equity ownership as to such newly formed Domestic Subsidiaries or sixty
      five percent (65%) of such equity ownership as to such newly formed Subsidiaries
      which are not Domestic Subsidiaries and taken all other action requested by
      the
      Agent or any Lender to perfect the Lien of all such Security
      Documents.

     

    3.3           Issuance
      of Letters of Credit.  The obligation of the Agent, as the issuer
      of the Letters of Credit, to issue, renew, or extend any Letter of Credit is
      subject to the satisfaction of the following additional conditions
      precedent:

    

    
      
        
          
          

        

        
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            45 -

          
            

          

        

        
          
          

        

      

    

    

    (a)           the
      Borrower shall have delivered to the Agent a written (or oral, confirmed
      promptly in writing) request for the issuance, renewal or extension of a Letter
      of Credit at least three Business Days prior to the requested issuance, renewal
      or extension date and a Letter of Credit Application at least one Business
      Day
      prior to the requested issuance date; and each statement or certification made
      in such Letter of Credit Application shall be true and correct in all material
      respects on the requested date for the issuance of such Letter of
      Credit;

     

    (b)           no
      Event of Default, Default or Deficiency shall exist or will occur as a result
      of
      the issuance, renewal, or extension of such Letter of Credit;

     

    (c)           if
      requested by the Agent or any Lender, the Borrower shall have delivered evidence
      reasonably satisfactory to the Agent or such Lender substantiating any of the
      matters contained in this Agreement which are necessary to enable the Borrower
      to qualify for such Letter of Credit;

     

    (d)           the
      Agent shall have received, reviewed, and approved such additional documents
      and
      items as described in Section 3.1 as may be reasonably requested by the
      Agent with respect to such Letter of Credit;

     

    (e)           no
      event shall have occurred which, in the reasonable opinion of the Agent or
      any
      of the Lenders, could reasonably be expected to have a Material Adverse
      Effect;

     

    (f)           each
      of the representations and warranties of the Borrower contained in this
      Agreement and the other Loan Documents shall be true and correct in all material
      respects and shall be deemed to be repeated by the Borrower as if made on the
      requested date for issuance, renewal or extension of such Letter of
      Credit;

     

    (g)           all
      of the Security Documents shall be in full force and effect;

     

    (h)           neither
      the consummation of the transactions contemplated hereby nor the issuance,
      renewal or extension of such Letter of Credit shall contravene, violate or
      conflict with any Requirement of Law; and

     

    (i)           the
      terms, provisions and beneficiary of the Letter of Credit or such renewal or
      extension shall be satisfactory to the Agent, as the issuer of the Letters
      of
      Credit, in its reasonable discretion.

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES

     

    To
      induce
      the Agent and the Lenders to enter into this Agreement, to induce the Agent
      to
      issue and renew Letters of Credit, and to induce the Lenders to make the Loans
      and to participate in Letters of Credit, the Borrower and each of the Guarantors
      represents and warrants to the Agent and each Lender (which representations
      and
      warranties shall survive the delivery of the Notes) that:

    

    
      
        
          
          

        

        
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    4.1           Due
      Authorization.  The execution and delivery by it of this Agreement
      and the borrowings by the Borrower hereunder, the execution and delivery by
      the
      Borrower of the Notes, the repayment by the Borrower of the Notes and interest
      and fees provided for in the Notes, this Agreement and the Fee Letter, the
      execution and delivery of the Security Documents to which it is a party and
      the
      performance by it of its obligations under the Loan Documents to which it is
      a
      party are within the power of the Borrower or such Person as the case may be,
      have been duly authorized by all necessary action by the Borrower or such
      Person, as the case may be, and do not and will not (a) require the consent
      of
      any Governmental Authority, (b) contravene or conflict with any Requirement
      of
      Law, (c) contravene or conflict with any indenture, instrument or other
      agreement to which it is a party or by which any of its Property may be
      presently bound or encumbered or (d) result in or require the creation or
      imposition of any Lien in, upon or on any of its Property under any such
      indenture, instrument, or other agreement, other than under any of the Loan
      Documents.

     

    4.2           Existence.  Each
      of the Borrower and the Guarantors is a corporation, a limited partnership,
      a
      limited liability company or other entity, as the case may be, duly organized,
      legally existing and, if applicable, in good standing under the laws of the
      state of its organization or formation and is duly qualified as a foreign
      limited partnership or limited liability company and, if applicable, in good
      standing in all jurisdictions wherein the ownership of its Property or the
      operation of its business necessitates same, other than those jurisdictions
      wherein the failure to so qualify would not have a Material Adverse
      Effect.

     

    4.3           Valid
      and Binding Obligations.  Each Loan Document to which it is a
      party, when duly executed and delivered by it, constitutes its legal, valid
      and
      binding obligation enforceable against it 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.

     

    4.4           Security
      Documents.  The provisions of each Security Document executed by
      it are effective to create, in favor of the Agent, a legal, valid and
      enforceable Lien in all of its right, title and interest in the Collateral
      described therein, which Lien, assuming the accomplishment of recording and
      filing in accordance with applicable laws prior to the intervention of rights
      of
      other Persons, constitutes a fully perfected first-priority Lien (except as
      to
      Permitted Liens) on all of its right, title and interest in the Collateral
      described therein.

     

    4.5           Title
      to Oil and Gas Properties.  Except as set forth in Schedule
      4.5, it has good and defensible title to all of its Oil and Gas Properties
      referenced in the most recent Reserve Report, free and clear of all Liens except
      Permitted Liens.  Except as set forth in Schedule 4.5, no
      Person other than it has any ownership interest, whether legal or beneficial,
      in
      its interest in any of its Oil and Gas Properties referenced in the most recent
      Reserve Report which could reasonably be expected to have a Material Adverse
      Effect.

     

    4.6           Scope
      and Accuracy of Financial Statements.  The consolidated Financial
      Statements of the Parent and its consolidated Subsidiaries provided to the
      Agent
      in satisfaction of the condition set forth in Section 3.1(h) present
      fairly the financial position and results of operations and cash flows of the
      Parent and its consolidated Subsidiaries in accordance with GAAP as at the
      relevant point in time or for the period indicated, as applicable.  No
      event or circumstance has occurred since September 30, 2007, which could
      reasonably be expected to have a Material Adverse Effect.

    

    
      
        
          
          

        

        
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    4.7           No
      Material Misstatements.  No information, exhibit, statement or
      report furnished to the Agent or any Lender by it or at its direction in
      connection with this Agreement or any other Loan Document contains any material
      misstatement of fact or omits to state a material fact or  any fact
      necessary to make the statements contained therein not misleading as of the
      date
      made or deemed made; provided that, with respect to projected financial
      information, it represents only that such information was prepared in good
      faith
      based upon assumptions believed to be reasonable at the time; and provided,
      further, 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 none of the Parent, the Borrower and the Subsidiary Guarantors represents
      or warrant that such opinions, estimates and projections will ultimately prove
      to have been accurate.

     

    4.8           Liabilities
      and Litigation.  Other than as reflected in the Financial
      Statements provided to the Agent in satisfaction of the condition set forth
      in
Section 3.1(h) or listed on Schedule 4.8 under the heading
“Liabilities”, neither the Borrower nor any of the Guarantors has any
      liabilities, direct or contingent, which may materially and adversely affect
      its
      business or operations or its ownership of the Collateral.  Except as
      set forth under the heading “Litigation” on Schedule 4.8, no litigation
      or other action of any nature affecting the Borrower or any of the Guarantors
      is
      pending before any Governmental Authority or, to the best of its knowledge,
      threatened against or affecting it or any of its Subsidiaries which might
      reasonably be expected to result in any impairment of its ownership of any
      Collateral or have a Material Adverse Effect.

     

    4.9           Authorizations;
      Consents.  Except as expressly contemplated by this Agreement, no
      authorization, consent, approval, exemption, franchise, permit or license of,
      or
      filing with, any Governmental Authority or any other Person is required to
      authorize, or is otherwise required in connection with, the valid execution
      and
      delivery by it of the Loan Documents to which it is a party or any instrument
      contemplated hereby, the repayment by the Borrower of the Notes and interest
      and
      fees provided in the Notes, this Agreement and the Fee Letter, or the
      performance by the Borrower of the Obligations.

     

    4.10           Compliance
      with Laws.  It and its Properties, including any Mortgaged
      Properties and Oil and Gas Properties owned by it, are in compliance in all
      material respects with all applicable Requirements of Law, including
      Environmental Laws, except in each case as could not reasonably be expected
      to
      have a Material Adverse Effect.

     

    4.11           ERISA.  It
      does not maintain, nor has it maintained, any Plan.  It does not
      currently contribute to or have any obligation to contribute to or otherwise
      have any liability with respect to any Plan and ERISA.

     

    4.12           Environmental
      Laws.  Except as would not have a Material Adverse Effect or as
      described on Schedule 4.12:

    

    
      
        
          
          

        

        
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    (a)           no
      Property owned by it, or, to its knowledge, Property of others adjacent to
      Property owned by it, is currently on or has ever been on any federal or state
      list of Superfund Sites;

     

    (b)           no
      Hazardous Substances have been generated, transported, and/or disposed of by
      it
      at a site which was, at the time of such generation, transportation, and/or
      disposal, or has since become, a Superfund Site;

     

    (c)           except
      in accordance with applicable Requirements of Law or the terms of a valid
      permit, license, certificate, or approval of the relevant Governmental
      Authority, no Release of Hazardous Substances by it or from, affecting or
      related to any Property owned by it has occurred; and

     

    (d)           no
      Environmental Complaint has been received by it.

     

    4.13           Compliance
      with Federal Reserve Regulations.  It has not taken any action
      that would result in any transaction contemplated by the Loan Documents, being
      in violation of any regulations promulgated by the Board of Governors of the
      Federal Reserve System, including Regulations T, U or X.

     

    4.14           Investment
      Company Act Compliance.  It is not an “investment company” or
      subject to regulation as an “investment company” within the meaning of the
      Investment Company Act of 1940.

     

    4.15           Proper
      Filing of Tax Returns; Payment of Taxes Due.  It has duly and
      properly filed its United States income tax returns and all other tax returns
      which are required to be filed and has paid all taxes shown as due from it
      thereon, except such as are being contested in good faith and as to which
      adequate provisions and disclosures have been made or as could not reasonably
      be
      expected to have a Material Adverse Effect.  The respective charges
      and reserves on its books with respect to taxes and other governmental charges
      are adequate, except as could not reasonably be expected to have a Material
      Adverse Effect.

     

    4.16           Refunds.  Except
      as described on Schedule 4.16 , no orders of, proceedings pending before,
      or other requirements of, the Federal Energy Regulatory Commission, the Texas
      Railroad Commission, or any other Governmental Authority exist which could
      result in it being required to refund any portion of the proceeds received
      or to
      be received from the sale of hydrocarbons constituting part of the Mortgaged
      Property or other Oil and Gas Properties owned by it, except as could not
      reasonably be expected to have a Material Adverse Effect.

     

    4.17           Gas
      Contracts.  Except as described on Schedule 4.17, (a) it is
      not obligated in any material respect by virtue of any prepayment made under
      any
      contract containing a “take-or-pay” or “prepayment” provision or under any
      similar agreement to deliver hydrocarbons produced from or allocated to any
      of
      the Mortgaged Property or other Oil and Gas Properties owned by it at some
      future date without receiving full payment therefor within 90 days of delivery,
      and (b) it has not produced gas, in any material amount, subject to, and neither
      it nor any of the Mortgaged Properties  or other Oil and Gas
      Properties owned by it is subject to, balancing rights of third parties or
      subject to balancing duties under Requirements of Law, except as to such matters
      for which it has established monetary reserves adequate in amount to satisfy
      such obligations and has segregated such reserves from other accounts or as
      could not reasonably be expected to have a Material Adverse Effect.

    

    
      
        
          
          

        

        
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    4.18           Intellectual
      Property.  Except as could not reasonably be expected to have a
      Material Adverse Effect, it owns or is licensed to use all Intellectual Property
      necessary to conduct its business as currently conducted.  Except as
      could not reasonably be expected to have a Material Adverse Effect, no claim
      has
      been asserted or is pending by any Person with respect to the use of any such
      Intellectual Property or challenging or questioning the validity or
      effectiveness of any such Intellectual Property; and it knows of no valid basis
      for any such claim.  Except as could not reasonably be expected to
      have a Material Adverse Effect, the use of such Intellectual Property by it
      does
      not infringe on the rights of any Person, except for such claims and
      infringements as do not, in the aggregate, give rise to any material liability
      on its part.

     

    4.19           Casualties
      or Taking of Property.  Except as disclosed on Schedule
      4.19, since the later of (a) September 30, 2007, or (b) the date of the
      most recent Financial Statements furnished to the Agent pursuant to either
      Section 5.2 or Section 5.3, neither its business nor any of its
      Property has been affected as a result of any fire, explosion, earthquake,
      flood, drought, windstorm, accident, strike or other labor disturbance, embargo,
      requisition or taking of Property, or cancellation of contracts, permits or
      concessions by any Governmental Authority, riot, activities of armed forces
      or
      acts of God, except as could not reasonably be expected to have a Material
      Adverse Effect.

     

    4.20           Principal
      Location.  Its principal place of business and chief executive
      office is located at its address set forth in Section 9.3 or at such
      other location as it may have, by proper written notice hereunder, advised
      the
      Agent.

     

    4.21           Subsidiaries.  Except
      as set forth on Schedule 4.21, neither the Borrower nor any of the
      Guarantors has any Subsidiaries.

     

    4.22           Compliance
      with Anti-Terrorism Laws.  j) Neither the Borrower, any of the
      Guarantors nor any Affiliate of any of them is in violation of any
      Anti-Terrorism Law or knowingly engages in or conspires to engage in any
      transaction that evades or avoids, or has the purpose of evading or avoiding,
      or
      attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
      Law.

     

    (b)           Neither
      the Borrower, any of the Guarantors nor any Affiliate of any of them is any
      of
      the following (each a “Blocked Person”):

     

    
      	
               

            	
              (i)

            	
              a
                Person that is listed in the annex, to, or is otherwise subject to
                the
                provisions of, Executive Order No.
                13224;

            

    

     

    
      	
               

            	
              (ii)

            	
              a
                Person owned or controlled by, or acting for or on behalf of, any
                Person
                that is listed in the annex to, or is otherwise subject to the provisions
                of, Executive Order No. 13224;

            

    

     

    
      
        
          
          

        

        
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              (iii)

            	
              a
                Person or entity with which any bank or other financial institution
                is
                prohibited from dealing or otherwise engaging in any transaction
                by any
                Anti-Terrorism Law;

            

    

     

    
      	
               

            	
              (iv)

            	
              a
                Person or entity that commits, threatens or conspires to commit or
                supports “terrorism” as defined in Executive Order No.
                13224;

            

    

     

    
      	
               

            	
              (v)

            	
              a
                Person or entity that is named as a “specially designated national” on the
                most current list published by OFAC at its official website or any
                replacement website or other replacement official publication of
                such
                list; or

            

    

     

    
      	
               

            	
              (vi)

            	
              a
                Person or entity who is affiliated with a Person or entity listed
                above.

            

    

     

    (c)           Neither
      the Borrower, any of the Guarantors nor any Affiliate of any of them (i)
      conducts any business or engages in making or receiving any contribution of
      funds, goods or services to or for the benefit of any Blocked Person or (ii)
      deals in, or otherwise engages in any transaction relating to, any property
      or
      interests in property blocked pursuant to Executive Order No.
      13224.

     

    (d)           Neither
      the Borrower, any of the Guarantors nor any Affiliate of any of them is in
      violation of any rules or regulations promulgated by OFAC or of any economic
      or
      trade sanctions administered and enforced by OFAC or conspires to engage in
      any
      transaction that evades or avoids, or has the purpose of evading or avoiding,
      or
      attempts to violate, any of the prohibitions set forth in any rules or
      regulations promulgated by OFAC.

     

    4.23           Identification
      Numbers.  The federal taxpayer identification number and the
      organizational number with the Secretary of State of the state of its
      organization or formation are as set out on Schedule
      4.23.

     

    4.24           Solvency.  Immediately
      after the Closing and immediately following the making of each Loan made on
      the
      Closing Date and following the making of any Loan made after the Closing Date,
      after giving effect to the application of the proceeds of each such Loan, (a)
      the fair value of the assets of each of the Borrower, and the Guarantors, at
      a
      fair valuation, will exceed its debts and liabilities, subordinated, contingent
      or otherwise, at a fair valuation; (b) the present fair saleable value of the
      property of each of the Borrower, and the Guarantors will be greater than the
      amount that will be required to pay the probable liability of its debts and
      other liabilities, subordinated, contingent or otherwise, as such debts and
      other liabilities become absolute and matured; (c) each of the Borrower and
      the
      Guarantors will be able to pay its debts and liabilities, subordinated,
      contingent or otherwise, as such debts and liabilities become absolute and
      matured; and (d) neither the Borrower, nor any of the Guarantors will have
      unreasonably small capital with which to conduct the business in which it is
      engaged as such businesses are now conducted and are proposed to be conducted
      following the Closing Date.

    

    
      
        
          
          

        

        
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    ARTICLE
      V

     

    AFFIRMATIVE
      COVENANTS

     

    So
      long
      as any Obligation remains outstanding or unpaid or any Commitment exists, each
      of the Borrower and the other Guarantors shall (provided that Section
      5.14 shall apply only to the Borrower):

     

    5.1           Maintenance
      and Access to Records.  Keep adequate records, in accordance with
      GAAP, of all its transactions so that at any time, and from time to time, its
      true and complete financial condition may be readily determined, and promptly
      following the reasonable request of the Agent or any Lender, make such records
      available for inspection by the Agent or any Lender and, at its expense, allow
      the Agent or any Lender to make and take away copies thereof.

     

    5.2           Quarterly
      Financial Statements and Compliance Certificates.  Deliver to the
      Agent and, upon request, any Lender, on or before the 90th day after the close
      of each quarterly period of each fiscal year of the Parent, (a) a copy of the
      unaudited consolidated and consolidating Financial Statements of the Parent
      and
      its consolidated Subsidiaries as at the close of such quarterly period and
      from
      the beginning of such fiscal year to the end of such period, such Financial
      Statements to be certified by a Responsible Officer of the Parent as having
      been
      prepared in accordance with GAAP consistently applied and as a fair presentation
      of the financial condition of the Parent on a consolidated basis with its
      consolidated Subsidiaries, subject to changes resulting from normal year end
      audit adjustments, and (b) a Compliance Certificate prepared, as to Section
      2
      thereof, as of the close of such quarterly period.

     

    5.3           Annual
      Financial Statements and Compliance Certificate.  Deliver to the
      Agent and, upon request, any Lender, on or before the 150th day after the close
      of each fiscal year of the Parent, commencing with that ending on
      December 31, 2007, (a) a copy of the annual audited consolidated Financial
      Statements of the Parent and its consolidated Subsidiaries and the unaudited
      consolidating Financial Statements of the Parent and its consolidated
      Subsidiaries, such Financial Statements to be certified by a Responsible Officer
      of the Parent as having been prepared in accordance with GAAP consistently
      applied and as a fair presentation of the financial condition of the Parent
      on a
      consolidated basis with its consolidated Subsidiaries, with such audited
      Financial Statements accompanied by an unqualified opinion from BDO Seidman
      LLP
      or another nationally recognized or regionally-recognized firm of independent
      certified public accountants or other independent certified public accountants
      acceptable to the Agent, and (b) a Compliance Certificate prepared, as to
      Section 2 thereof, as of the close of the relevant fiscal year.

     

    5.4           Oil
      and Gas Reserve Reports and Production Reports.  k) Deliver to the
      Agent and, upon request, any Lender, no later than each February 28 during
      the
      term of this Agreement, an engineering report, in form and substance reasonably
      satisfactory to the Agent, prepared as of the preceding December 31 and
      certified by Netherland Sewell & Associates, Inc., or another nationally or
      regionally recognized firm of independent consulting petroleum engineers
      acceptable to the Agent as fairly and accurately setting forth (i) the proved
      developed producing and non-producing and proved undeveloped oil and gas
      reserves (separately classified as such) attributable to the Mortgaged
      Properties and other Oil and Gas Properties of the Borrower and its
      Subsidiaries, (ii) the aggregate present value of the future net income with
      respect to proved and producing reserves attributable to the Mortgaged
      Properties and other Oil and Gas Properties of the Borrower and its
      Subsidiaries, discounted at a stated per annum discount rate, (iii) projections
      of the annual rate of production, gross income, and net income with respect
      to
      such proved and producing reserves, (iv) information with respect to the
“take-or-pay,” “prepayment,” and gas-balancing liabilities of the Borrower or
      the relevant Subsidiary of the Borrower with respect to
      such reserves and (v) general economic assumptions.

    

    
      
        
          
          

        

        
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    (b)           Deliver
      to the Agent and, upon request, any Lender, no later than each August 31 during
      the term of this Agreement, an engineering report, in substantially the format
      of and providing the information provided in the engineering reports provided
      pursuant to Section 5.4(a), prepared as of the preceding June 30 and
      certified, at the election of the Borrower, by either the chief operating
      officer or senior reserve engineer of the Parent or Netherland Sewell &
Associates, Inc., or another nationally or regionally recognized firm of
      independent consulting petroleum engineers acceptable to the Agent as fairly
      and
      accurately setting forth the information provided therein.

     

    (c)           Deliver
      to the Agent and, upon request, any Lender, in connection with each unscheduled
      redetermination of the Borrowing Base, an engineering report, in substantially
      the format of and providing the information provided in the engineering report
      provided pursuant to Section 5.4(a), prepared as of a date no more than
      60 days prior to such redetermination date (an in the case of an unscheduled
      redetermination requested by the Agent and the Lenders, within 60 days of such
      request) and certified, at the election of the Borrower, by either the chief
      operating officer or senior reserve engineer of the Parent or Netherland Sewell
      & Associates, Inc., or another nationally or regionally recognized firm of
      independent consulting petroleum engineers acceptable to the Agent as fairly
      and
      accurately setting forth the information provided therein.

     

    (d)           Deliver
      to the Agent no later than 90 days following the end of each calendar quarter,
      a
      report, in form reasonably satisfactory to the Agent, setting forth information
      as to quantities of production from the Mortgaged Properties and other Oil
      and
      Gas Properties of the Borrower and its Subsidiaries, volumes of production
      sold,
      pricing, gross revenues, lease operating expenses and such other information
      as
      the Agent may reasonably request with respect to the relevant quarterly
      period.

     

    5.5           Title
      Opinions; Title Defects; Mortgaged Properties.  Promptly upon the
      request of the Agent, (a) furnish to the Agent title opinions, in form and
      substance and by counsel reasonably satisfactory to the Agent, or other
      confirmation of title reasonably acceptable to the Agent, covering Oil and
      Gas
      Properties of the Borrower and its Subsidiaries the
      discounted present value of the proved reserves attributable to which, in the
      aggregate, equals no less than eighty five percent (85%) of the aggregate
      discounted present value of the proved reserves attributable to the combined
      Oil
      and Gas Properties of the Borrower and other Domestic
      Subsidiaries of the Parent used in the most recent
      redetermination of the Borrowing Base as provided in Section 2.10;
      promptly, but in any event within 60 days after notice by the Agent of any
      defect having a material effect on the value of any material Oil and Gas
      Property and resulting in the Borrower or the relevant Domestic Subsidiary
      not
      having defensible title to its interest in such Oil and Gas Property, clear
      such
      title defects; and promptly upon request of the Agent, execute and deliver
      to
      the Agent additional Security Documents as necessary to maintain, as Mortgaged
      Properties, Oil and Gas Properties of the Borrower and other Domestic
      Subsidiaries of the Parent constituting no less than
      eighty five percent (85%) of the aggregate discounted present value of the
      proved reserves attributable to the combined Oil and Gas Properties of the
      Borrower and its Subsidiaries used in the most recent redetermination of the
      Borrowing Base as provided in Section 2.10.

    

    
      
        
          
          

        

        
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    5.6           Notices
      of Certain Events.  Deliver to the Agent, promptly, but in no
      event later than the fifth Business Day after having knowledge of the occurrence
      of any of the following events or circumstances, a written statement with
      respect thereto, signed by a Responsible Officer of the relevant Business Entity
      or its general partner and setting forth the relevant event or circumstance
      and
      the steps being taken by the relevant Business Entity with respect to such
      event
      or circumstance:

     

    (a)           any
      Default or Event of Default;

     

    (b)           any
      default by it under any contractual obligation or any litigation, investigation,
      or proceeding between it and any Governmental Authority which, in either case,
      if not cured or if adversely determined, as the case may be, could reasonably
      be
      expected to have a Material Adverse Effect;

     

    (c)           any
      litigation or proceeding involving it as a defendant or in which any of its
      Property is subject to a claim and in which the amount involved is $1,000,000
      or
      more and which is not covered by insurance or in which injunctive or similar
      relief is sought which injunctive or similar relief, if granted, could
      reasonably be expected to have a Material Adverse Effect;

     

    (d)           the
      receipt by it of any Environmental Complaint, which if adversely determined
      could reasonably be expected to have a Material Adverse Effect;

     

    (e)           any
      actual, proposed, or threatened testing or other investigation by any
      Governmental Authority or other Person concerning the environmental condition
      of, or relating to, any of its Property following any allegation of a violation
      of any Requirement of Law which if adversely determined could reasonably be
      expected to have a Material Adverse Effect;

     

    (f)           any
      Release of Hazardous Substances by it or from, affecting, or related to any
      of
      its Property or Property of others adjacent to any of its Property which could
      reasonably be expected to have a Material Adverse Effect, except in accordance
      with applicable Requirements of Law or the terms of a valid permit, license,
      certificate, or approval of the relevant Governmental Authority, or the
      violation of any Environmental Law, or the revocation, suspension, or forfeiture
      of or failure to renew, any permit, license, registration, approval, or
      authorization which could reasonably be expected to have a Material Adverse
      Effect;

     

    (g)           except
      as to the Parent, any change in its ownership; and

     

    (h)           any
      other event or condition which could reasonably be expected to have a Material
      Adverse Effect.

    

    
      
        
          
          

        

        
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    5.7           Letters
      in Lieu of Transfer Orders or Division Orders.  Promptly upon
      request by the Agent at any time and from time to time, and without limitation
      on the rights of the Agent pursuant to the provisions of Section 2.22 and
Section 2.23, execute such letters in lieu of transfer or division
      orders, in addition to the letters delivered to the Agent in satisfaction of
      the
      condition set forth in Section 3.1(f), as are necessary or appropriate to
      transfer and deliver to the Agent proceeds from or attributable to any Mortgaged
      Property.

     

    5.8           Commodity
      Hedging.  Except as could not reasonably be expected to have a
      Material Adverse Effect, comply in all material respects with any Commodity
      Hedge Agreements entered into by the Borrower or any Subsidiary of the Borrower
      subsequent to the Closing Date and not in violation of the provisions of
Section 6.1.

     

    5.9           Additional
      Guaranties and Security Documents.  Execute and deliver Security
      Documents covering all of its equity ownership in each Domestic Subsidiary
      of
      the Parent formed after the Closing Date or sixty five percent of the equity
      ownership in any Subsidiary of the Parent formed after the Closing Date which
      is
      not a Domestic Subsidiary of the Parent and take all other action requested
      by
      the Agent or any Lender to perfect the Lien of all such Security Documents
      and
      cause each Domestic Subsidiary of the Parent formed after the Closing Date
      to
      execute and deliver a Joinder Agreement, a Guaranty in favor of the Agent,
      for
      the benefit of the Lenders and the other Secured Creditors, and Security
      Documents, as requested by the Agent, in favor or for the benefit of the Agent,
      for the benefit of the Lenders and the other Secured Creditors, covering assets
      of such Domestic Subsidiary and take all such other action requested by the
      Agent or any Lender to perfect the Lien of such Security Documents.

     

    5.10           Additional
      Information.  Furnish to the Agent and any Lender, promptly upon
      the request of the Agent or any Lender, such additional financial or other
      information concerning its assets, liabilities, operations and transactions
      as
      the Agent or any Lender may from time to time reasonably request; and notify
      the
      Agent not less than ten Business Days prior to the occurrence of any condition
      or event that may change the proper location for the filing of any financing
      statement or other public notice or recording for the purpose of perfecting
      a
      Lien in any Collateral, including any change in its name or jurisdiction of
      organization; and upon the request of the Agent, execute such additional
      Security Documents as may be necessary or appropriate in connection
      therewith.

     

    5.11           Compliance
      with Laws.  Comply with all applicable Requirements of Law,
      including (a) ERISA, (b) Environmental Laws and (c) all permits, licenses,
      registrations, approvals, and authorizations (i) related to any natural or
      environmental resource or media located on, above, within, related to or
      affected by any of its Property, (ii) required for the performance of its
      operations, or (iii) applicable to the use, generation, handling, storage,
      treatment, transport or disposal of any Hazardous Substances, except for any
      noncompliance which could not reasonably be expected to have a Material Adverse
      Effect; and use commercially reasonable efforts to cause all of its employees,
      crew members, agents, contractors, subcontractors and future lessees (pursuant
      to appropriate lease provisions), while such Persons are acting within the
      scope
      of their relationship with it, to comply with all such Requirements of Law
      as
      may be necessary or appropriate to enable it to so comply.

    

    
      
        
          
          

        

        
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    5.12           Payment
      of Assessments and Charges.  Pay all taxes, assessments,
      governmental charges, rent and other Indebtedness which, if unpaid, might become
      a Lien against any of its Property, except any of the foregoing being contested
      in good faith and as to which an adequate reserve in accordance with GAAP has
      been established or unless failure to pay would not have a Material Adverse
      Effect.

     

    5.13           Maintenance
      of Existence or Qualification and Good Standing.  Maintain its
      separate corporate, limited partnership or limited liability company existence
      and identity, as the case may be, and, if applicable, good standing in its
      jurisdiction of organization and in all jurisdictions wherein the Property
      now
      owned or hereafter acquired or business now or hereafter conducted by it
      necessitates same.

     

    5.14           Payment
      of Notes; Performance of Obligations.  Pay the Notes according to
      the reading, tenor and effect thereof, as modified hereby, and do and perform
      every act and discharge all of the other Obligations of the
      Borrower.

     

    5.15           Further
      Assurances.  Promptly upon written request of the Agent cure any
      defects in the execution and delivery of any of the Loan Documents to which
      it
      is a party and all agreements contemplated thereby, and execute, acknowledge
      and
      deliver to the Agent or any Lender such other assurances and instruments as
      shall, in the reasonable opinion of the Agent or any Lender, be necessary to
      fulfill the terms of the Loan Documents to which it is a party.

     

    5.16           Initial
      Expenses of Agent.  Upon request by the Agent, promptly reimburse
      the Agent for, or pay directly to such special counsel, all reasonable fees
      and
      expenses of Jackson Walker L.L.P., special counsel to the Agent, in connection
      with the preparation of this Agreement and all documentation contemplated
      hereby, the satisfaction of the conditions precedent set forth herein, the
      filing and recordation of Security Documents and the consummation of the
      transactions contemplated in this Agreement.

     

    5.17           Subsequent
      Expenses of Agent and Lenders.  Upon request by the Agent,
      promptly reimburse the Agent (to the fullest extent permitted by law) for all
      third party, out of pocket amounts reasonably expended, advanced or incurred
      by
      or on behalf of the Agent or any Lender to satisfy any of its obligations under
      any of the Loan Documents; to collect the Obligations; to ratify, amend, restate
      or prepare additional Loan Documents, as the case may be; for the filing and
      recordation of Security Documents; to enforce the rights of the Agent or any
      of
      the Lenders under any of the Loan Documents; and to protect its Properties
      or
      business, including the Collateral, which amounts shall be deemed compensatory
      in nature and liquidated as to amount upon notice to the relevant Person by
      the
      Agent and which amounts shall include (a) all court costs, (b) reasonable
      attorneys’ fees, (c) reasonable fees and expenses of auditors, accountants, and
      independent petroleum engineers as provided in the Fee Letter or incurred to
      protect the interests of the Agent, the Lenders and any other Approved Hedge
      Counterparties, (d) fees and expenses incurred in connection with the
      participation by the Agent and the Lenders as members of the creditors’
committee in any Insolvency Proceeding, (e) fees and expenses incurred in
      connection with lifting the automatic stay prescribed in §362 Title 11 of the
      United States Code, and (f) fees and expenses incurred in connection with any
      action pursuant to §1129 Title 11 of the United States Code all reasonably
      incurred by the Agent and the Lenders in connection with the collection of
      any
      sums due under the Loan Documents, together with interest at the per annum
      interest rate equal to the Adjusted Base Rate plus the relevant Applicable
      Margin on each such amount from the date of notification that the same was
      expended, advanced, or incurred by the Agent or any Lender until the date it
      is
      repaid to the Agent or such Lender, with the obligations under this Section
      5.17 surviving the non-assumption of this Agreement in any Insolvency
      Proceeding and being binding upon it and/or a trustee, receiver, custodian,
      or
      liquidator of it  appointed in any such case.

    

    
      
        
          
          

        

        
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    5.18           Operation
      of Oil and Gas Properties.  Develop, maintain and operate or, to
      the extent that the right or obligation to do so rests with another Person,
      exercise commercially reasonable efforts to cause such other Person to develop,
      maintain and operate its Oil and Gas Properties in a manner reasonably
      determined by it to be prudent and workmanlike and in accordance with customary
      industry standards.

     

    5.19           Maintenance
      and Inspection of Properties.  Maintain or, to the extent that the
      right or obligation to do so rests with another Person, exercise commercially
      reasonable efforts to cause such other Person to maintain all of its material
      tangible Properties in good repair and condition, ordinary wear and tear
      excepted; make or, to the extent that the right or obligation to do so rests
      with another Person, exercise commercially reasonable efforts to cause such
      other Person to make all necessary replacements thereof and operate such
      Properties in a manner reasonably determined by it to be good and workmanlike;
      and permit any authorized representative of the Agent or any Lender, upon prior
      notice to visit and inspect, at reasonable times, any of its tangible
      Property.

     

    5.20           Maintenance
      of Insurance.  Maintain insurance with respect to its Properties
      and businesses against such liabilities, casualties, risks, and contingencies
      as
      is customary in the relevant industry and sufficient to prevent a Material
      Adverse Effect, all such insurance to be in amounts and from insurers reasonably
      acceptable to the Agent, name the Agent as an additional insured (in the case
      of
      liability insurance) and co-loss payee (in the case of physical damage
      insurance), and, upon any renewal of any such insurance and at other times
      upon
      request by the Agent, furnish to the Agent evidence, reasonably satisfactory
      to
      the Agent, of the maintenance of such insurance.  The Agent shall have
      the right to collect, and each of the Borrower and the Guarantors hereby assigns
      to the Agent, any and all monies that may become payable under any policies
      of
      insurance relating to business interruption or by reason of damage, loss or
      destruction of any of the Collateral.  In the event of any damage,
      loss or destruction for which insurance proceeds relating to business
      interruption or Collateral exceed $1,000,000, the Agent may, at its option,
      apply all such sums or any part thereof received by it toward the payment of
      the
      Obligations, whether matured or unmatured, application to be made first to
      interest and then to principal, and shall deliver to the Borrower or the
      relevant Guarantor, as the case may be, the balance, if any, after such
      application has been made.  In the event of any such damage, loss or
      destruction for which insurance proceeds are $1,000,000 or less, provided
      that no Default or Event of Default has occurred and is continuing, the Agent
      shall deliver any such proceeds received by it to the Borrower or the relevant
      Guarantor, as the case may be, for use to repair or replace the damaged,
      destroyed or lost property.  In the event the Agent receives insurance
      proceeds not attributable to Collateral or business interruption, the Agent
      shall deliver any such proceeds to the Borrower or the relevant Guarantor,
      as
      the case may be.

    

    
      
        
          
          

        

        
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    5.21           ENVIRONMENTAL
      INDEMNIFICATION.  INDEMNIFY
      AND HOLD THE AGENT AND EACH OF THE LENDERS AND THEIR RESPECTIVE SHAREHOLDERS,
      OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES AND
      EACH TRUSTEE FOR THE BENEFIT OF THE AGENT OR THE LENDERS UNDER ANY SECURITY
      DOCUMENT (EACH OF THE FOREGOING AN “INDEMNITEE”) HARMLESS FROM AND
      AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES,
      CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL
      ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL REASONABLE
      COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING ATTORNEYS’ FEES
      AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A)
      THE
      PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY OF ITS PROPERTY,
      WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR
      UNDERTAKEN ON ANY OF ITS PROPERTY, WHETHER PRIOR TO OR DURING THE TERM HEREOF,
      AND WHETHER BY IT OR ANY OF ITS PREDECESSORS IN TITLE, EMPLOYEES, AGENTS,
      CONTRACTORS OR SUBCONTRACTORS OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR
      PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL,
      STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS
      SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY
      RESIDUAL CONTAMINATION ON OR UNDER ANY OF ITS PROPERTY, (D) ANY CONTAMINATION
      OF
      ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION,
      USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES
      BY IT OR ANY OF ITS EMPLOYEES, AGENTS, CONTRACTORS, OR SUBCONTRACTORS WHILE
      SUCH
      PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH IT, IRRESPECTIVE
      OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE
      WITH
      APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
      LOAN DOCUMENT OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO
      ANY
      LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING ANY SUCH
      CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, ADMINISTRATIVE OR
      JUDICIAL PROCEEDING, ORDER, JUDGMENT, REMEDIAL ACTION, REQUIREMENT, ENFORCEMENT
      ACTION, COST OR EXPENSE, ARISING FROM THE NEGLIGENCE (BUT NOT THE GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER SOLE OR CONCURRENT, OF ANY
      INDEMNITEE; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
      OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH OBLIGATIONS
      HAVE BEEN SATISFIED WHOLLY IN CASH AND NOT BY WAY OF REALIZATION AGAINST ANY
      COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED THAT
      SUCH
      INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE AGENT OR ANY LENDER
      WITH RESPECT TO ANY PROPERTY SUBSEQUENT TO THE AGENT OR ANY LENDER BECOMING
      THE
      OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS,
      DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION
      OR
      REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO BY THE AGENT
      OR ANY LENDER. ALL AMOUNTS DUE UNDER THIS SECTION 5.21 SHALL BE
      PAYABLE ON WRITTEN DEMAND THEREFOR.

     

    5.22           GENERAL
      INDEMNIFICATION.  INDEMNIFY
      AND HOLD EACH INDEMNITEE HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS,
      DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING REASONABLE COUNSEL FEES
      AND
      EXPENSES (INCLUDING THE ALLOCATED COST OF INTERNAL COUNSEL), INCURRED BY OR
      ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN ANY WAY CONNECTED WITH,
      OR AS
      A RESULT OF (A) THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER
      LOAN
      DOCUMENTS, THE PERFORMANCE BY THE PARTIES HERETO AND THERETO OF THEIR RESPECTIVE
      OBLIGATIONS HEREUNDER AND THEREUNDER AND CONSUMMATION OF THE TRANSACTIONS
      CONTEMPLATED HEREBY AND THEREBY, (B) THE USE OF PROCEEDS OF THE LOANS OR LETTERS
      OF CREDIT, OR (C) ANY CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING
      TO
      ANY OF THE FOREGOING, WHETHER OR NOT ANY INDEMNITEE IS A PARTY THERETO,
      INCLUDING ANY SUCH LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE ARISING FROM THE
      NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER SOLE
      OR
      CONCURRENT, OF ANY INDEMNITEE; WITH THE FOREGOING INDEMNITY SURVIVING
      SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT. ALL
      AMOUNTS DUE UNDER THIS SECTION 5.22 SHALL BE PAYABLE ON WRITTEN DEMAND
      THEREFOR.

    

      
        
          
          

        

        
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    5.23           Evidence
      of Compliance with Anti-Terrorism Laws.  Deliver to the Agent and
      any Lender any certification or other evidence requested from time to time
      by
      the Agent or such Lender, in their reasonable discretion, confirming its
      compliance with the provisions of Section 6.18.

     

    5.24           GeoStar
      Rescission Amount.  Within 90 days of the close of each quarter of
      each fiscal year of the Parent, deliver to the Agent a certificate signed by
      a
      Responsible Officer of the Parent setting forth the GeoStar Rescission Amount
      as
      of the close of the quarter just ended and including detail as to the
      calculation of such GeoStar Rescission Amount reasonably satisfactory to the
      Agent.

     

    ARTICLE
      VI

     

    NEGATIVE
      COVENANTS

     

    So
      long
      as any Obligation remains outstanding or unpaid or any Commitment exists,
      neither the Borrower nor any of the Guarantors will:

     

    6.1           Indebtedness.  Create,
      incur, assume or suffer to exist any Indebtedness, whether by way of loan or
      otherwise; provided, however, the foregoing restriction shall not
      apply to (a) the Obligations, (b) unsecured accounts payable, taxes and other
      assessments, in each case incurred in the ordinary course of business and which
      are not unpaid in excess of 90 days beyond invoice date or are being contested
      in good faith and as to which such reserve as is required by GAAP has been
      made,
      (c) Indebtedness under Commodity Hedge Agreements, including reimbursement
      obligations under letters of credit securing or supporting such Indebtedness,
      with any Approved Hedge Counterparty, Secured Third Party Hedge Counterparty
      or,
      so long as each such Person is acceptable to the Agent, other counterparties,
      provided that (i) such agreements shall not be for a term in excess of
      three years and shall not be entered into with respect to more than seventy
      five
      percent (75%), of the projected production of proved developed producing volumes
      of each commodity category, as reflected in each Reserve Report provided
      pursuant to the provisions of Section 5.4 during the term of the relevant
      agreement, and (ii) the floor prices in such agreements are not less than the
      prices used by the Agent in its most recent Borrowing Base determination as
      of
      the time the relevant agreement is entered into, (d) Indebtedness under Interest
      Rate Hedge Agreements with any Approved Hedge Counterparty, Secured Third Party
      Hedge Counterparty or, so long as each such Person is acceptable to the Agent,
      other counterparties, provided that such agreements shall not be entered
      into with respect to notional principal amounts in excess of seventy five
      percent (75%) of the Loan Balance, (e) Indebtedness incurred
      with respect to all or a portion of the purchase price of Property acquired
      in
      the ordinary course of business not exceeding $500,000 in the aggregate for the
      Parent on a consolidated basis with its Subsidiaries, (f) the Second Lien
      Indebtedness, (g) the Indebtedness listed on Schedule 6.1, (h)
      Indebtedness from time to time owing by any Subsidiary of the Parent to the
      Parent, the Borrower or any other Subsidiary Guarantor, and (i) other unsecured
      Indebtedness or Indebtedness secured by a Permitted Lien not exceeding, in
      the
      aggregate at any time, $100,000 for the Parent on a consolidated basis with
      its
      consolidated Subsidiaries.

    

    
      
        
          
          

        

        
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    6.2           Contingent
      Obligations.  Create, incur, assume, or suffer to exist any
      Contingent Obligation; provided, however, the foregoing
      restriction shall not apply to (a) performance guarantees, performance surety
      or
      other bonds or endorsements of items deposited for collection, in each case
      provided in the ordinary course of business, (b) trade credit incurred or
      operating leases entered into in the ordinary course of business, (c) the
      Guaranties or (d) guaranties provided pursuant to the Second Lien Credit
      Agreement.

     

    6.3           Liens.  Create,
      incur, assume or suffer to exist any Lien on any of its Oil and Gas Properties
      or any other Property, whether now owned or hereafter acquired; provided,
however, the foregoing restriction shall not apply to Permitted
      Liens.

     

    6.4           Sales
      of Assets.  Sell, transfer or otherwise dispose of, in one or any
      series of transactions, any of its Property, whether now owned or hereafter
      acquired, or enter into any agreement to do so; provided, however,
      the foregoing restriction shall not apply to (a) the sale of hydrocarbons or
      inventory in the ordinary course of business, provided that no contract
      for the sale of hydrocarbons shall obligate the relevant Person to deliver
      hydrocarbons produced from any of its Oil and Gas Properties at some future
      date
      without receiving full payment therefor within 60 days of delivery, (b) the
      sale
      or other disposition of Property destroyed, lost, worn out, damaged or having
      only salvage value or no longer used or useful in the business in which it
      is
      used, (c) the sale, transfer or other disposition of Property from the Parent
      or
      the Borrower to the Borrower or the Domestic Subsidiaries of the Parent or
      from
      the Subsidiaries of the Parent to the Borrower, (d) so long as no Default or
      Event of Default exists, sales or other dispositions of Oil and Gas Properties
      or of Subsidiaries of the Parent holding Oil and Gas Properties between
      redeterminations of the Borrowing Base as provided in Section 2.10 the
      aggregate loan value of which, as assigned thereto by the Agent in the most
      recent setting of the Borrowing Base in accordance with the provisions of
Section 2.10, equals ten percent (10%) or less of the amount of the then
      existing Borrowing Base; provided, however, in connection with any
      such transaction, the then existing Borrowing Base shall be automatically
      reduced by an amount equal to such loan value of the relevant Mortgaged
      Properties and furtherprovided, however, that, upon
      consummation of any such transaction, if a Deficiency exists, the Borrower
      shall
      proceed to cure such Deficiency in accordance with the provisions of Section
      2.11(a) or (e) so long as no Default or Event of Default exists, sales or
      other dispositions of Oil and Gas Properties or Subsidiaries of the Parent
      holding Oil and Gas Properties between redeterminations of the Borrowing Base
      as
      provided in Section 2.10 the aggregate loan value of which, as assigned
      thereto by the Agent in the most recent setting of the Borrowing Base in
      accordance with the provisions of Section 2.10, exceeds ten percent (10%)
      of the amount of the then existing Borrowing Base with the consent of the Agent
      and the Required Lenders; provided, however, that the Borrowing
      Base to be in effect immediately upon consummation of any such transaction
      shall
      be established by the Agent, with the approval of the Lenders as required
      pursuant to the provisions of Section 9.9, prior to consummation of the
      transaction, and furtherprovided, however, that upon
      consummation of any such transaction, if a Deficiency exists, the Borrower
      shall
      proceed to cure any such Deficiency in accordance with the provisions of
Section 2.11(a).

    

    
      
        
          
          

        

        
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    6.5           Leasebacks.  Enter
      into any agreement to sell or transfer any Property and thereafter rent or
      lease
      as lessee such Property or other Property intended for the same use or purpose
      as the Property sold or transferred.

     

    6.6           Sale
      or Discount of Receivables.  Except to minimize losses on bona
      fide debts previously contracted, discount or sell with recourse, or sell for
      less than the greater of the face or market value thereof, any of its notes
      receivable or accounts receivable; provided, however, the
      foregoing restriction shall not apply to any forgiveness or other reduction
      of
      amounts receivable from GeoStar in connection with any settlement of any dispute
      between the Parent or any of its Subsidiaries and GeoStar.

     

    6.7           Loans
      or Advances.  Make or agree to make or allow to remain outstanding
      any loans or advances to any Person; provided, however, the
      foregoing restriction shall not apply to (a) advances or extensions of credit
      in
      the form of accounts receivable incurred in the ordinary course of business
      and
      upon terms common in the industry for such accounts receivable, (b) advances
      to
      employees for the payment of expenses in the ordinary course of business not
      exceeding $50,000 in the aggregate for the Parent on a consolidated basis with
      its consolidated Subsidiaries, (c) loans or advances by the Parent to the
      Borrower or by the Borrower or any Domestic Subsidiary of the Parent to a
      Subsidiary Guarantor or (d) loans or advances by the Parent, the Borrower or
      any
      Domestic Subsidiary of the Parent to any Subsidiary of the Parent which is
      not a
      Subsidiary Guarantor, so long as not exceeding, in the aggregate outstanding
      at
      any time, $10,000,000 when taken with Investments permitted by clauses (g)
      and
      (h) of the proviso in Section 6.8.

     

    6.8           Investments.  Make
      or acquire Investments in, or purchase or otherwise acquire all or substantially
      all of the assets of, any Person; provided, however, the foregoing
      restriction shall not apply to the purchase or acquisition of (a) Oil and Gas
      Properties, (b) Investments in the form of (i) debt securities issued or
      directly and fully guaranteed or insured by the United States Government or
      any
      agency or instrumentality thereof, with maturities of no more than one year,
      (ii) commercial paper of a domestic issuer rated at the date of acquisition
      at
      least P-2 by Moody’s Investor Service, Inc. or A-2 by Standard & Poor’s
      Corporation and with maturities of no more than one year from the date of
      acquisition or (iii) repurchase agreements covering debt securities or
      commercial paper of the type permitted in this Section, certificates of deposit,
      demand deposits, eurodollar time deposits, overnight bank deposits and bankers’
acceptances, with maturities of no more than one year from the date of
      acquisition, issued by or acquired from or through any Lender or any bank or
      trust company organized under the laws of the United States of America or any
      state thereof and having capital surplus and undivided profits aggregating
      at
      least $100,000,000, (c) other short-term Investments similar in nature and
      degree of risk to those described in clause (b) of this Section 6.8, (d)
      Investments in money-market funds sponsored or administered by Persons
      acceptable to the Agent and which funds invest in short-term Investments similar
      in nature and degree of risk to those described in clause (b) of this Section
      6.8, (e) evidences of loans or advances not prohibited by the provisions of
      Section 6.7, (f) Investments by the Parent in the Borrower or by the
      Borrower or any Domestic Subsidiary of the Parent in a Subsidiary Guarantor,
      (g)
      the acquisition by the Borrower of up to a thirty five percent (35%) equity
      interest in Narrabri Power Pty Ltd, an Australian proprietary limited company,
      for a purchase price not to exceed $4,000,000 and further Investments by the
      Borrower in such entity, so long as the aggregate Investments by the Borrower
      pursuant to this clause (g), including such initial purchase price, do not
      exceed $8,000,000 or (h) other Investments made by the Parent, the Borrower
      or
      any Domestic Subsidiary in any Subsidiary of the Parent which is not a
      Subsidiary Guarantor, so long as not exceeding, in the aggregate $10,000,000
      when taken together with (i) the aggregate Investments made pursuant to the
      immediately preceding clause (g) and (ii) the aggregate outstanding balance
      of
      loans and advances permitted by clause (d) of the proviso in Section
      6.7.

    

    
      
        
          
          

        

        
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    6.9           Dividends,
      Distributions and Certain Payments.  Declare, pay or make, whether
      in cash or Property, any dividend or distribution on, or purchase redeem or
      otherwise acquire for value, any of its equity interests; provided,
however, the foregoing restriction shall not apply to (a) dividends
      paid
      in equity interests, (b) dividends or distributions made to the Borrower or
      any
      of its Domestic Subsidiaries by any of their respective Domestic Subsidiaries
      or
      purchases or redemptions by the Borrower or any of its Domestic Subsidiaries
      of
      any equity interests of any of its Domestic Subsidiaries, (c) so long as no
      Default or Event of Default exists or would result therefrom, dividends and
      distributions made by the Borrower to the Parent or purchases or redemptions
      by
      the Parent of equity interests in the Borrower; provided, however,
      that such dividends, distributions, purchases or redemptions made by the
      Borrower to the Parent shall not exceed the amount necessary for (i) the
      repayment on the Closing Date, with proceeds of the Second Lien Indebtedness
      used to fund such dividends, distributions, purchases or redemptions, of the
      senior secured Indebtedness of the Parent outstanding prior to the Closing
      Date
      and (ii) the payment by the Parent of its cash operating expenses, including
      general and administrative expenses, Taxes and scheduled debt service on the
      Indebtedness of the Parent listed on Schedule 6.1 (provided that
      scheduled debt service shall not include payment at maturity when such maturity
      arises by way of acceleration following a default), (d) the purchase, redemption
      or other acquisition for value of any equity interests of the Parent held by
      any
      current or former director or employee of the Parent pursuant to any director
      or
      employee equity subscription agreement or plan, stock option agreement or
      similar agreement or plan, provided that the aggregate price paid for all such
      purchased, redeemed or acquired equity interests may not exceed $500,000 in
      any
      calendar year, plus the amount of any such allowance not used in any prior
      calendar year, or (e) the acquisition of equity interests in the Parent by
      the
      Parent in connection with the exercise of stock options or stock appreciation
      rights by way of cashless exercise; or make or agree to make any voluntary
      prepayment on the Second Lien Indebtedness.

     

    6.10           Issuance
      of Equity; Changes in Corporate Structure.  Except for issuances
      of common shares by the Parent, issue or agree to issue any equity interests
      constituting Indebtedness or any additional common equity interests to Persons
      other than its current equity owners; enter into any transaction of
      consolidation, merger or amalgamation; or liquidate, wind up or dissolve (or
      suffer any liquidation or dissolution); provided, however, that
      the foregoing shall not restrict transactions of merger, consolidation or
      amalgamation among any of the Domestic Subsidiaries of the Parent or, if the
      Borrower is the surviving entity, between the Borrower and any Domestic
      Subsidiary of the Parent, or any liquidation, winding up or dissolution of
      a
      Domestic Subsidiary of the Borrower other than Gastar Texas Inc., Gastar Texas
      LLC and Gastar Texas LP.

    

    
      
        
          
          

        

        
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    6.11           Transactions
      with Affiliates.  Directly or indirectly, enter into any
      transaction (including the sale, lease or exchange of Property or the rendering
      of service) with any of its Affiliates (other than transactions entered into
      in
      the normal course of business between the Parent and the Borrower or between
      the
      Parent, the Borrower or a Domestic Subsidiary of the Parent with another
      Domestic Subsidiary of the Parent not otherwise prohibited hereunder), other
      than upon fair and reasonable terms no less favorable than could be obtained
      in
      an arm’s length transaction with a Person which was not an
      Affiliate.

     

    6.12           Lines
      of Business.  Change its principal line of business from that in
      which it is engaged as of the date hereof.  For the avoidance of
      doubt, neither the acquisition of interests in power generation assets for
      the
      purpose of converting natural gas production to electricity to facilitate the
      sale of such natural gas nor the Investment permitted by clause (g) of the
      proviso in Section 6.8 shall be prohibited.

     

    6.13           Plan
      Obligation.  Assume or otherwise become subject to an obligation
      to contribute to or maintain any Plan or acquire any Person which has at any
      time had an obligation to contribute to or maintain any Plan.

     

    6.14           Current
      Ratio.  Permit the ratio of Current Assets to Current Liabilities
      to be less than 1.00 to 1.00 at any time..

     

    6.15           Total
      Net Indebtedness to EBITDA Ratio.  Permit the ratio, determined as
      of the end of each quarter of each fiscal year of the Parent, commencing with
      that ending on December 31, 2007, of (a) Indebtedness of the Parent, on a
      consolidated basis with its consolidated Subsidiaries, for borrowed money
      (exclusive, for the avoidance of doubt, of trade accounts payable and accrued
      liabilities, net unrealized losses or charges in respect of Commodity Hedge
      Agreements or Interest Rate Hedge Agreements and the undrawn, unexpired amount
      of all outstanding Letters of Credit, if such would otherwise be included)
      in
      excess of the amount of unrestricted (other than pursuant to applicable
      provisions of this Agreement or any other Loan Document or the Second Lien
      Credit Agreement or documents entered into pursuant thereto) cash or cash
      equivalents of the Parent on a consolidated basis with its consolidated
      Subsidiaries to (b) EBITDA for the preceding four quarterly periods (including
      that ended on the date of determination) to be more than the ratio indicated
      below for each relevant period indicated below:

     

    
      	
              Ratio

            	
              Period

            
	
              5.00:1.00

            	
              Quarters
                through that ending on June 30, 2008

            
	
              4.25:1.00

            	
              Quarters
                ending September 30, 2008 through December 31, 2008

            
	
              4.00:1.00

            	
              Quarters
                ending thereafter

            

    

     

    
      
        
          
          

        

        
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    ;
      provided, however, EBITDA as of the end of each quarterly period
      indicated below shall be determined as indicated below:

    

    
      	
              Quarterly
                Period

            	
              EBITDA

            
	
              Ending
                December 31, 2007

            	
              EBITDA
                for such quarterly period multiplied by four

            
	
              Ending
                March 31, 2008

            	
              EBITDA
                for the period October 1, 2007 through March 31, 2008 multiplied
                by
                two

            
	
              Ending
                June 30, 2008

            	
              EBITDA
                for the period October 1, 2007 through June 30, 2008 multiplied by
                one and
                one-third

            

    

    

    6.16           General
      and Administrative Expenses.  Permit, as of the close of each
      quarter of each fiscal year of the Parent, commencing with the quarter ending
      after the date of the initial Loan, general and administrative expenses of
      the
      Parent (determined in accordance with GAAP and on a consolidated basis for
      the
      Parent and its consolidated Subsidiaries, but excluding compensation in the
      form
      of shares of common stock of the Parent or rights to acquire shares of common
      stock of the Parent) for the relevant quarter to exceed twenty five percent
      (25%) of revenue of the Parent on a consolidated basis with its consolidated
      Subsidiaries from the sale of hydrocarbons for the relevant quarter less the
      sum
      of (a) lease operating expenses (other than non-recurring costs, such as
      workover costs otherwise constituting lease operating expenses) and (b) Taxes
      on
      hydrocarbon production for the relevant quarter.

     

    6.17           Liquidity.  Permit
      (a) at any time when the Borrowing Base is less than $40,000,000, unrestricted
      (other than pursuant to applicable provisions of this Agreement) cash of the
      Parent, on a consolidated basis with its consolidated Subsidiaries, on deposit
      with Amegy from each April 1 until the following June 1 and from each October
      1
      until the following December 1 to be less than an amount equal to the amount
      of
      the semi-annual interest payment coming due on the relevant June 1 or December
      1, as the case may be, which amount on deposit shall earn the amount of interest
      earned by customers of Amegy on deposits in such amount and of such type in
      accordance with Amegy’s standard terms and conditions for such accounts and may
      be used by the Borrower to pay all or a portion of the relevant semi-annual
      interest payment on the Second Lien Indebtedness; provided,
however, that the foregoing shall not apply at any time when Borrowing
      Base Utilization is zero, or (b) at any time from each June 1 until the
      following June 30 and from each December 1 until the following December 31,
      Borrowing Base Utilization to exceed ninety percent (90%).

     

    6.18           Anti-Terrorism
      Laws.  Conduct any business or engage in any transaction or
      dealing with any Blocked Person, including the making or receiving of any
      contribution of funds, goods or services to or for the benefit of any Blocked
      Person; deal in, or otherwise engage in any transaction relating to, any
      Property or interests in Property blocked pursuant to Executive Order No. 13224;
      or engage in on conspire to engage in any transaction that evades or avoids,
      or
      has the purpose of evading or avoiding, or attempts to violate, (i) any of
      the
      prohibitions set forth in Executive Order No. 13224 or the USA Patriot Act,
      or
      (ii) any prohibitions set forth in the rules or regulations issued by OFAC
      or
      any sanctions against targeted foreign countries, terrorism sponsoring
      organizations, and international narcotics traffickers based on United States
      foreign policy.

    

    
      
        
          
          

        

        
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    ARTICLE
      VII

     

    EVENTS
      OF DEFAULT

     

    7.1           Enumeration
      of Events of Default.  Any of the following events shall
      constitute an Event of Default:

     

    (a)           default
      shall be made in the payment when due of any installment of principal or
      interest under this Agreement or the Notes or in the payment when due of any
      fee
      or other sum payable under any Loan Document;

     

    (b)           default
      shall be made by the Borrower or any of the Guarantors in the due observance
      or
      performance of any of its obligations, covenants or agreements under the Loan
      Documents, and, as to compliance with the obligations, covenants or agreements
      under Article V (other than Section 5.14), such default shall
      continue for 30 days after the earlier of notice thereof by the Agent or
      knowledge thereof by the Borrower or the relevant Guarantors, as the case may
      be;

     

    (c)           any
      representation or warranty made by or on behalf of the Borrower or any of the
      Guarantors in any of the Loan Documents proves to have been untrue in any
      material respect or any representation, statement (including Financial
      Statements), certificate or data furnished or made to the Agent or any Lender
      in
      connection herewith proves to have been untrue in any material respect as of
      the
      date the facts therein set forth were stated or certified;

     

    (d)           default
      shall be made by the Borrower or any of the Guarantors (as principal or
      guarantor or other surety) in the payment or performance of any bond, debenture,
      note, or other Indebtedness in excess of $500,000 in the aggregate or under
      any
      credit agreement, loan agreement, indenture, promissory note or similar
      agreement or instrument executed in connection with any of the foregoing, and
      such default shall remain unremedied for in excess of the period of grace,
      if
      any, with respect thereto or there shall occur any event or condition in respect
      of any such Indebtedness which would allow the holders thereof to require such
      Indebtedness to be repaid, repurchased or redeemed;

     

    (e)           the
      levy against any significant portion of the Property of the Borrower or any
      of
      the Guarantors of any execution, garnishment, attachment, sequestration or
      other
      writ or similar proceeding in an amount in excess of $1,000,000 which is not
      permanently dismissed or discharged within 60 days after the levy;

     

    (f)           the
      Borrower or any of the Guarantors shall (i) apply for or consent to the
      appointment of a receiver, trustee, or liquidator of it or all or a substantial
      part of its assets, (ii) file a voluntary petition commencing an Insolvency
      Proceeding, (iii) make a general assignment for the benefit of creditors of
      all
      or substantially all of its assets, (iv) be unable, or admit in writing its
      inability, to pay its debts generally as they become due, or (v) file an answer
      admitting the material allegations of a petition filed against it in any
      Insolvency Proceeding;

    

    
      
        
          
          

        

        
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    (g)           an
      order, judgment or decree shall be entered against the Borrower or any of the
      Guarantors by any court of competent jurisdiction or by any other duly
      authorized authority, on the petition of a creditor or otherwise, granting
      relief in any Insolvency Proceeding or approving a petition seeking
      reorganization or an arrangement of its debts or appointing a receiver, trustee,
      conservator, custodian, or liquidator of it or all or any substantial part
      of
      its assets, and such order, judgment, or decree shall not be dismissed or stayed
      within 60 days;

     

    (h)           a
      final and non-appealable order, judgment or decree shall be entered against
      the
      Borrower or any of the Guarantors for money damages and/or Indebtedness due
      in
      an amount in excess of $1,000,000, and such order, judgment or decree shall
      not
      be dismissed or stayed within 60 days or is not fully covered by
      insurance;

     

    (i)           any
      charges are filed or any other action or proceeding is instituted by any
      Governmental Authority against the Borrower or any of the Guarantors under
      the
      Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. §1961
etseq.), the result of which could be the forfeiture or transfer
      of any material Property of the Borrower or any of the Guarantors subject to
      a
      Lien in favor of the Agent without (i) satisfaction or provision for
      satisfaction of such Lien or (ii) such forfeiture or transfer of such Property
      being expressly made subject to such Lien;

     

    (j)           the
      Borrower or any of the Guarantors shall have (i) concealed, removed or diverted,
      or permitted to be concealed, removed or diverted, any part of its Property,
      with intent to hinder, delay or defraud its creditors or any of them, (ii)
      made
      or suffered a transfer of any of its Property which is fraudulent under any
      bankruptcy, fraudulent conveyance, or similar law with intent to hinder, delay
      or defraud its creditors, (iii) made any transfer of its Property to or for
      the
      benefit of a creditor at a time when other creditors similarly situated have
      not
      been paid with intent to hinder, delay or defraud its creditors, or (iv) shall
      have suffered or permitted, while insolvent, any creditor to obtain a Lien
      upon
      any of its Property through legal proceedings or distraint which is not vacated
      within 60 days from the date thereof;

     

    (k)           any
      Security Document shall for any reason not, or cease to, create valid and
      perfected first priority Liens (subject only to Permitted Liens) against the
      Collateral purportedly covered thereby, except to the extent permitted by this
      Agreement or cured or corrected on or before the tenth day after notice thereof
      to the Borrower or the Borrower otherwise becoming aware thereof;

     

    (l)           the
      Parent shall cease to be the sole shareholder of the Borrower or the Borrower
      or
      one of the Subsidiary Guarantors shall cease to be the sole shareholder or
      member or the sole general partner of any Subsidiary Guarantor;

     

    (m)           the
      Borrower or any of the Guarantors contests in any manner the validity or
      enforceability of any provision of any Loan Document, or denies that it has
      any
      liability under any Loan Document; or

    

    
      
        
          
          

        

        
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    (n)           the
      Borrower or any of the Guarantors purports to revoke, terminate or rescind
      any
      Loan Document or any provision of any Loan Document.

     

    7.2           Remedies.  l)
      Upon the occurrence of an Event of Default specified in Section 7.1(f) or
Section 7.1(g), immediately and without notice, (i) all Obligations under
      the Loan Documents shall automatically become immediately due and payable,
      without presentment, demand, protest, notice of protest, default, or dishonor,
      notice of intent to accelerate maturity, notice of acceleration of maturity,
      or
      other notice of any kind, except as may be provided to the contrary elsewhere
      herein, all of which are hereby expressly waived by the Borrower and the
      Guarantors and (ii) the Commitments shall immediately cease and terminate unless
      and until reinstated by the Agent and the Lenders in writing.

     

    (b)           Upon
      the occurrence of any Event of Default other than those specified in Section
      7.1(f) or Section 7.1(g), (i) the Agent may and, upon the request of
      the Required Lenders, shall, by notice in writing to the Borrower, declare
      all
      Obligations under the Loan Documents immediately due and payable, without
      presentment, demand, protest, notice of protest, default, or dishonor, notice
      of
      intent to accelerate maturity, notice of acceleration of maturity, or other
      notice of any kind, except as may be provided to the contrary elsewhere herein,
      all of which are hereby expressly waived by the Borrower and the Guarantors
      and
      (ii) the Agent may and, upon the request of the Required Lenders, shall declare
      the Commitments terminated, whereupon the Commitments shall immediately cease
      and terminate unless and until reinstated by the Agent and the Lenders in
      writing.

     

    (c)           Upon
      the occurrence of any Event of Default, the Agent may, in addition to the
      foregoing in this Section 7.2, exercise any or all of the rights and
      remedies provided by law or pursuant to the Loan Documents.

     

    (d)           Should
      the Obligations under the Loan Documents become immediately due and payable
      in
      accordance with any of the preceding subsections of this Section 7.2, the
      obligation of the Borrower with respect to the L/C Exposure shall be to provide
      cash as Collateral therefor, to be held and administered by the Agent as
      provided in Section 2.11(a) with respect to mandatory prepayments and,
      failing receipt by the Agent of immediate payment in full of the Loan Balance
      and all accrued and unpaid interest and such cash to serve as Collateral for
      the
      L/C Exposure, the Agent shall be entitled to proceed against the Collateral,
      and
      proceeds from any realization against any such Collateral, other than cash,
      in
      excess of the sum of the costs of such realization, the Loan Balance and accrued
      and unpaid interest and fees shall constitute cash Collateral for the remaining
      L/C Exposure, if any, to be held and administered by the Agent as provided
      in
Section 2.11(a).

     

    (e)           Proceeds
      from realization against the Collateral and any other funds received by the
      Agent from the Borrower or any of the Guarantors when an Event of Default has
      occurred and is continuing shall be applied (i) first, to fees and expenses
      due
      pursuant to the terms of this Agreement, any other Loan Document or any
      Commodity Hedge Agreement or Interest Rate Hedge Agreement with an Approved
      Hedge Counterparty, (ii) second, to accrued interest on the Obligations under
      the Loan Documents or any Commodity Hedge Agreement or Interest Rate Hedge
      Agreement with an Approved Hedge Counterparty, (iii) third, to the Loan Balance,
      in any manner elected by the Agent (with the consent of the Required Lenders),
      and any other Obligations then due and payable, pro rata in accordance with
      the
      ratio of the Loan Balance or such other Obligations, as the case may be, to
      the
      sum of the Loan Balance and such other Obligations and (iv) as provided in
      subsection (d) immediately above, if applicable

    

    
      
        
          
          

        

        
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    ARTICLE
      VIII

     

    THE
      AGENT

     

    8.1           Appointment.  Each
      Lender hereby designates and appoints the Agent as the agent of such Lender
      under this Agreement and the other Loan Documents.  The Agent shall
      also act hereunder as agent for all Approved Hedge
      Counterparties.  Each Lender authorizes the Agent, as the agent for
      such Lender, to take such action on behalf of such Lender under the provisions
      of this Agreement and the other Loan Documents and to exercise such powers
      and
      perform such duties as are expressly delegated to the Agent by the terms of
      this
      Agreement and the other Loan Documents, together with such other powers as
      are
      reasonably incidental thereto.  Notwithstanding any provision to the
      contrary elsewhere in this Agreement or in any other Loan Document, the Agent
      shall not have any duties or responsibilities except those expressly set forth
      herein or in any other Loan Document or any fiduciary relationship with any
      Lender; and no implied covenants, functions, responsibilities, duties,
      obligations, or liabilities on the part of the Agent shall be read into this
      Agreement or any other Loan Document or otherwise exist against the
      Agent.

     

    8.2           Delegation
      of Duties.  The Agent may execute any of its duties under this
      Agreement and the other Loan Documents by or through agents or attorneys-in-fact
      and shall be entitled to advice of counsel concerning all matters pertaining
      to
      such duties.  The Agent shall not be responsible to any Lender for the
      negligence or misconduct of any agents or attorneys-in-fact selected by it
      with
      reasonable care.

     

    8.3           Exculpatory
      Provisions.  Neither the Agent nor any of its officers, directors,
      employees, agents, attorneys-in-fact or affiliates shall be (a) required to
      initiate or conduct any litigation or collection proceedings hereunder, except
      with the contribution by each Lender of its Percentage Share of costs reasonably
      expected by the Agent to be incurred in connection therewith, (b) liable for
      any
      action lawfully taken or omitted to be taken by it or such Person under or
      in
      connection with this Agreement or any other Loan Document (except for gross
      negligence or willful misconduct of the Agent or such Person) or (c) responsible
      in any manner to any Lender or any other Approved Hedge Counterparty for any
      recitals, statements, representations or warranties made by the Borrower or
      any
      of the Guarantors or any officer or representative thereof contained in this
      Agreement or any other Loan Document or in any certificate, report, statement
      or
      other document referred to or provided for in, or received by the Agent under
      or
      in connection with, this Agreement or any other Loan Document, or for the value,
      validity, effectiveness, genuineness, enforceability or sufficiency of this
      Agreement or any other Loan Document or for any failure of the Borrower or
      any
      of the Guarantors to perform its obligations hereunder or
      thereunder.  The Agent shall not be under any obligation to any Lender
      or any other Approved Hedge Counterparty to ascertain or to inquire as to the
      observance or performance of any of the agreements contained in, or conditions
      of, this Agreement or any other Loan Document, or to inspect the properties,
      books or records of the Borrower or any of the Guarantors.

    

    
      
        
          
          

        

        
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    8.4           Reliance
      by Agent.  The Agent shall be entitled to rely, and shall be fully
      protected in relying, upon any Note, writing, resolution, notice, consent,
      certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
      message, statement, order or other document or conversation believed by it
      to be
      genuine and correct and to have been signed, sent or made by the proper Person
      or Persons and upon advice and statements of legal counsel (including counsel
      to
      the Borrower or any of the Guarantors), independent accountants and other
      experts selected by the Agent.  The Agent may deem and treat the payee
      of any Note as the owner thereof for all purposes unless and until a written
      notice of assignment, negotiation, or transfer thereof shall have been received
      by the Agent.  The Agent shall be fully justified in failing or
      refusing to take any action under this Agreement or any other Loan Document
      unless it shall first receive such advice or concurrence of the Required Lenders
      as it deems appropriate and contribution by each Lender of its Percentage Share
      of costs reasonably expected by the Agent to be incurred in connection
      therewith.  The Agent shall in all cases be fully protected in acting,
      or in refraining from acting, under this Agreement and the other Loan Documents
      in accordance with a request of the Required Lenders.  Such request
      and any action taken or failure to act pursuant thereto shall be binding upon
      the Lenders and all future holders of the Notes.  In no event shall
      the Agent be required to take any action that exposes the Agent to personal
      liability or that is contrary to any Loan Document or applicable Requirement
      of
      Law.

     

    8.5           Notice
      of Default.  The Agent shall not be deemed to have knowledge or
      notice of the occurrence of any Default or Event of Default unless the Agent
      has
      received notice from a Lender, the Borrower or any of the Guarantors referring
      to this Agreement, describing such Default or Event of Default and stating
      that
      such notice is a “notice of default.”  In the event that the Agent
      receives such a notice, the Agent shall promptly give notice thereof to the
      Lenders.  The Agent shall take such action with respect to such
      Default or Event of Default as shall be reasonably directed by the Required
      Lenders; provided that unless and until the Agent shall have received such
      directions, subject to the provisions of Section 7.2, the Agent may (but shall
      not be obligated to) take such action, or refrain from taking such action,
      with
      respect to such Default or Event of Default as it shall deem advisable in the
      best interests of the Lenders.  In the event that the officer of the
      Agent primarily responsible for the lending relationship with the Borrower
      or
      the officer of any Lender primarily responsible for the lending relationship
      with the Borrower becomes aware that a Default or Event of Default has occurred
      and is continuing, the Agent or such Lender, as the case may be, shall use
      its
      good faith efforts to inform the other Lenders and/or the Agent, as the case
      may
      be, promptly of such occurrence.  Notwithstanding the preceding
      sentence, failure to comply with the preceding sentence shall not result in
      any
      liability to the Agent or any Lender.

     

    8.6           Non-Reliance
      on Agent and Other Lenders.  Each Lender expressly acknowledges
      that neither the Agent nor any other Lender nor any of their respective
      officers, directors, employees, agents, attorneys-in-fact or affiliates has
      made
      any representation or warranty to such Lender and that no act by the Agent
      or
      any other Lender hereafter taken, including any review of the affairs of the
      Borrower or any of the Guarantors, shall be deemed to constitute any
      representation or warranty by the Agent or any Lender to any other
      Lender.  Each Lender represents to the Agent that it has,
      independently and without reliance upon the Agent or any other Lender, and
      based
      on such documents and information as it has deemed appropriate, made its own
      appraisal of and investigation into the business, operations, property,
      condition (financial and otherwise) and creditworthiness of the Borrower and
      the
      value of the Collateral and other Properties of the Borrower or any other Person
      and has made its own decision to enter into this Agreement.  Each
      Lender also represents that it will, independently and without reliance upon
      the
      Agent or any other Lender and based on such documents and information as it
      shall deem appropriate at the time, continue to make its own credit analysis,
      appraisals and decisions in taking or not taking action under this Agreement
      and
      the other Loan Documents, and to make such investigation as it deems necessary
      to inform itself as to the business, operations, property, condition (financial
      and otherwise) and creditworthiness of the Borrower and the value of the
      Collateral and other Properties of the Borrower or any other
      Person.  Except for notices, reports and other documents expressly
      required to be furnished to the Lenders by the Agent hereunder, the Agent shall
      not have any duty or responsibility to provide any Lender with any credit or
      other information concerning the business, operations, property, condition
      (financial and otherwise), or creditworthiness of the Borrower or the value
      of
      the Collateral or other Properties of the Borrower or any other Person which
      may
      come into the possession of the Agent or any of its officers, directors,
      employees, agents, attorneys-in-fact or affiliates.

    

    
      
        
          
          

        

        
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    8.7           Indemnification.  EACH
      LENDER AGREES TO INDEMNIFY THE AGENT AND ITS OFFICERS, DIRECTORS, EMPLOYEES,
      AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO THE EXTENT NOT REIMBURSED BY THE
      BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), RATABLY
      ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER, FROM AND AGAINST ANY AND
      ALL
      LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
      JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
      WHICH
      MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE OF
      ALL
      OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED
      BY OR
      ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
      ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS
      AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER DOCUMENT CONTEMPLATED OR
      REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION TAKEN
      OR OMITTED BY THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
      ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
      FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES,
      PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED,
      INCURRED OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
      OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
      ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER SHALL BE LIABLE
      FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES,
      DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
      RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT
      OR
      ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
      AFFILIATES. THE AGREEMENTS IN THIS SECTION 8.7 SHALL SURVIVE THE
      PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
      AGREEMENT.

     

    8.8           Restitution.  Should
      the right of the Agent or any Lender to realize funds with respect to the
      Obligations be challenged and any application of such funds to the Obligations
      be reversed, whether by Governmental Authority or otherwise, or should the
      Borrower otherwise be entitled to a refund or return of funds distributed to
      the
      Lenders in connection with the Obligations, the Agent or such Lender, as the
      case may be, shall promptly notify the Lenders of such fact.  Not
      later than noon, Central Standard or Central Daylight Savings Time, as the
      case
      may be, of the Business Day following such notice, each Lender shall pay to
      the
      Agent an amount equal to the ratable share of such Lender of the funds required
      to be returned to the Borrower.  The ratable share of each Lender
      shall be determined on the basis of the percentage of the payment all or a
      portion of which is required to be refunded originally distributed to such
      Lender, if such percentage can be determined, or, if such percentage cannot
      be
      determined, on the basis of the Percentage Share of such Lender.  The
      Agent shall forward such funds to the Borrower or to the Lender required to
      return such funds.  If any such amount due to the Agent is made
      available by any Lender after Noon, Central Standard or Central Daylight Savings
      Time, as the case may be, of the Business Day following such notice, such Lender
      shall pay to the Agent (or the Lender required to return funds to the Borrower,
      as the case may be) for its own account interest on such amount at a rate equal
      to the Federal Funds Rate for the period from and including the date on which
      restitution to the Borrower is made by the Agent (or the Lender required to
      return funds to the Borrower, as the case may be,) to, but not including, the
      date on which such Lender failing to timely forward its share of funds required
      to be returned to the Borrower shall have made its ratable share of such funds
      available.

    

    
      
        
          
          

        

        
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    8.9           Agent
      in Its Individual Capacity.  The Agent and its Affiliates may make
      loans to, accept deposits from, and generally engage in any kind of business
      with the Borrower as though the Agent were not the agent
      hereunder.  With respect to any Note issued to the Lender serving as
      the Agent, the Agent shall have the same rights and powers under this Agreement
      as a Lender and may exercise such rights and powers as though it were not the
      Agent.  The terms “Lender” and “Lenders” shall include the Agent in
      its individual capacity.

     

    8.10           Successor
      Agent.  The Agent may resign as Agent upon ten days’ notice to the
      Lenders, all Approved Hedge Counterparties under then existing Commodity Hedge
      Agreements or Interest Rate Hedge Agreements and the Borrower.  If the
      Agent shall resign as Agent under this Agreement and the other Loan Documents,
      Lenders (other than the Agent in its capacity as a Lender) for which the
      Percentage Shares aggregate at least fifty-one percent (51%) of the Percentage
      Shares of all Lenders (other than the Agent in its capacity as a Lender) shall
      appoint from among the Lenders a successor agent for the Lenders and the
      Approved Hedge Counterparties, whereupon such successor agent shall succeed
      to
      the rights, powers and duties of the Agent; provided, however,
      should the Agent resign at a point when all Loans, accrued interest and fees
      hereunder have been paid in full and the Commitments have terminated, resulting
      in the only then existing Obligations being the liability of the Borrower under
      Commodity Hedge Agreements and/or Interest Rate Hedge Agreements with Approved
      Hedge Counterparties, the successor agent shall be selected from among such
      Approved Hedge Counterparties by majority vote of such Approved Hedge
      Counterparties.  The term “Agent” shall mean such successor agent
      effective upon its appointment.  The rights, powers, and duties of the
      former Agent as Agent shall be terminated, without any other or further act
      or
      deed on the part of such former Agent or any of the parties to this Agreement
      or
      any holders of the Notes.  After the removal or resignation of any
      Agent hereunder as Agent, the provisions of this Article VIII and those
      of any Section hereof relating to the Agent, including Section 5.16,
Section 5.17, Section 5.21 and Section 5.22 shall inure to
      its benefit as to any actions taken or omitted to be taken by it while it was
      Agent under this Agreement and the other Loan Documents.

    

    
      
        
          
          

        

        
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    8.11           Applicable
      Parties.  The provisions of this Article are solely for the
      benefit of the Agent and the Lenders, and neither the Borrower nor any Guarantor
      shall have any rights as a third party beneficiary or otherwise under any of
      the
      provisions of this Article.  In performing functions and duties
      hereunder and under the other Loan Documents, the Agent shall act solely as
      the
      agent of the Lenders and any other Approved Hedge Counterparties and does not
      assume, nor shall it be deemed to have assumed, any obligation or relationship
      of trust or agency with or for the Borrower or any of the Guarantors or any
      legal representative, successor or assign of any such Person.

     

    8.12           Intercreditor
      Agreement.  In furtherance of the authority granted to the Agent
      in Section 8.1 and elsewhere in this Agreement, each of the Lenders
      authorizes the Agent to execute and, by such execution, to bind such Lender
      to
      the terms of the Intercreditor Agreement and agrees to be bound by the terms
      of
      the Intercreditor Agreement as fully as if a signatory thereto.

     

    8.13           Releases.  Each
      Lender hereby authorizes the 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 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 or any Domestic Subsidiary of the Parent to the extent
      such sale or other disposition is permitted by the terms of the Loan
      Documents.

     

    ARTICLE
      IX

     

    MISCELLANEOUS

     

    9.1           Assignments;
      Participations.  m) Neither the Borrower nor any of the Guarantors
      may assign any of its rights or delegate any of its obligations under any Loan
      Document without the prior consent of the Agent and the Lenders.

     

    (b)           With
      the consent of the Agent and, except when a Default or an Event of Default
      shall
      have occurred and is continuing, the Borrower (which shall not be unreasonably
      withheld or delayed in either case), any Lender may assign to one or more
      assignees all or a portion of its rights and obligations under this Agreement
      pursuant to an Assignment Agreement; provided, however, (i) such
      consents shall not be required with respect to an assignment from one Lender
      to
      one or more other Lenders or Affiliates of Lenders, (ii) the consents of the
      Borrower shall not be required with respect to an assignment from a Lender
      to
      one or more Approved Funds or Affiliates of Approved Funds and (iii) any such
      assignment shall be in the amount of at least $5,000,000 (or any whole multiple
      of $100,000 in excess thereof), unless the relevant assignment is to an
      Affiliate of the assigning Lender or is an assignment of the entire Commitment
      of the assigning Lender.  The assignee shall pay to the Agent a
      transfer fee in the amount of $3,500 for each such assignment.  Any
      such assignment shall become effective upon the execution and delivery to the
      Agent of an Assignment Agreement and, if required, the consent of the Agent
      and
      the Borrower.  Promptly following receipt of an executed Assignment
      Agreement, the Agent shall send to the Borrower a copy of such executed
      Assignment Agreement.  Promptly following receipt of such executed
      Assignment Agreement, the Borrower shall execute and deliver, at its own
      expense, a new Note to the assignee, if such assignee is not then a
      Lender.  Upon the effectiveness of any assignment pursuant to this
Section 9.1(b), the assignee will become a “Lender,” if not already a
“Lender,” for all purposes of the Loan Documents, and the assignor shall be
      relieved of its obligations hereunder to the extent of such
      assignment.  If the assignor no longer holds any rights or obligations
      under this Agreement, such assignor shall cease to be a “Lender” hereunder,
      except that its rights under Section 5.17, Section 5.21 and
Section 5.22, shall not be affected.  On the last Business
      Day of each month during which an assignment has become effective pursuant
      to
      this Section 9.1(b) or sooner following an assignment, the Agent shall
      prepare a new Exhibit IV giving effect to all such assignments effected
      during such month or any relevant assignment, as the case may be, and will
      promptly provide a copy thereof to the Borrower and each Lender.

    

    
      
        
          
          

        

        
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    (c)           Each
      Lender may transfer, grant, or assign participations in all or any portion
      of
      its interests hereunder to any Person pursuant to this Section 9.1(c),
provided that such Lender shall remain a “Lender” for all purposes of
      this Agreement and the transferee of such participation shall not constitute
      a
“Lender” hereunder.  In the case of any such participation, the
      participant shall not have any rights under any Loan Document, the rights of
      the
      participant in respect of such participation to be against the granting Lender
      as set forth in the agreement with such Lender creating such participation,
      and
      all amounts payable by the Borrower hereunder shall be determined as if such
      Lender had not sold such participation.  Each agreement creating a
      participation must include an agreement by the participant to be bound by the
      provisions of Section 8.3, Section 8.6 and Section
      8.7.

     

    (d)           The
      Lenders may furnish any information concerning the Borrower or any of the
      Guarantors in the possession of the Lenders from time to time to assignees
      and
      participants and prospective assignees and participants.

     

    (e)           Notwithstanding
      anything in this Section 9.1 to the contrary, any Lender may assign and
      pledge all or any of its Notes or any interest therein to any Federal Reserve
      Bank or the United States Treasury as collateral security pursuant to Regulation
      A of the Board of Governors of the Federal Reserve System and any operating
      circular issued by such Federal Reserve System and/or such Federal Reserve
      Bank.  No such assignment or pledge shall release the assigning or
      pledging Lender from its obligations hereunder.

     

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

     

    9.2           Survival
      of Representations, Warranties, and Covenants.  All
      representations and warranties of the Borrower and the Guarantors and all
      covenants and agreements of the Borrower and the Guarantors herein made shall
      survive the execution and delivery of the Notes and the Security Documents
      and
      shall remain in force and effect so long as any Obligation is outstanding or
      any
      Commitment exists.

    

    
      
        
          
          

        

        
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            73 -

          
            

          

        

        
          
          

        

      

    

    

    9.3           Notices
      and Other Communications.  Except as to oral notices expressly
      authorized herein, which oral notices shall be confirmed in writing, all
      notices, requests, and communications hereunder shall be in writing (including
      by facsimile, electronic mail or other electronic form).  Unless
      otherwise expressly provided herein, any such notice, request, demand, or other
      communication shall be deemed to have been duly given or made when delivered
      by
      hand, or, in the case of delivery by mail, five days after being deposited
      in
      the mail, certified mail, return receipt requested, postage prepaid, or, in
      the
      case of facsimile notice, when receipt thereof is acknowledged orally or by
      written confirmation report, addressed as follows:

     

    (a)           if
      to the Agent, to:

    Amegy
      Bank National Association

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas  77027

    Attention:  W.
      Bryan Chapman

    Facsimile:  (713)
      651-0345

     

    or
      for
      notice by mail:

     

    Amegy
      Bank National Association

    P.O.
      Box
      27459

    Houston,
      Texas  77227-7459

    Attention:  W.
      Bryan Chapman

     

    (b)           if
      to any Lender, to the address, including facsimile number, of such Lender
      reflected on Exhibit IV or any replacement thereof.

     

    (c)           if
      to the Borrower or any of the Guarantors, to:

     

    1331
      Lamar Street, Suite 1080

    Houston,
      Texas  77010

    Attention:  Chief
      Financial Officer

    Facsimile:  (713)
      739-0458

     

    Any
      party
      may, by proper written notice hereunder to the others, change the individuals
      or
      addresses to which such notices to it shall thereafter be sent.

     

    9.4           Parties
      in Interest.  Subject to the restrictions on changes in structure
      set forth in Section 6.10 and other applicable restrictions contained
      herein, all covenants and agreements herein contained by or on behalf of the
      Borrower, any of the other Guarantors, the Agent or the Lenders shall be binding
      upon and inure to the benefit of the Borrower, any of the other Guarantors,
      the
      Agent or the Lenders, as the case may be, and their respective legal
      representatives, successors, and assigns.

     

    9.5           Renewals;
      Extensions.  All provisions of this Agreement relating to the
      Notes shall apply with equal force and effect to each promissory note hereafter
      executed which in whole or in part represents a renewal or extension of any
      part
      of the Indebtedness of the Borrower under this Agreement, the Notes, or any
      other Loan Document.

    

    
      
        
          
          

        

        
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    9.6           Rights
      of Third Parties.  All provisions herein are imposed solely and
      exclusively for the benefit of the Agent, the Lenders, any other Approved Hedge
      Counterparties, the Borrower and the Guarantors.  No other Person
      shall have any right, benefit, priority, or interest hereunder or as a result
      hereof or have standing to require satisfaction of provisions hereof in
      accordance with their terms.

     

    9.7           No
      Waiver; Rights Cumulative.  No course of dealing on the part of
      the Agent or the Lenders or their officers or employees, nor any failure or
      delay by the Agent or the Lenders with respect to exercising any of their rights
      under any Loan Document shall operate as a waiver thereof.  The rights
      of the Agent and the Lenders under the Loan Documents shall be cumulative and
      the exercise or partial exercise of any such right shall not preclude the
      exercise of any other right.  Neither the making of any Loan nor the
      issuance of any Letter of Credit shall constitute a waiver of any of the
      covenants, warranties, or conditions of the Borrower contained
      herein.  In the event the Borrower is unable to satisfy any such
      covenant, warranty, or condition, neither the making of any Loan nor the
      issuance of any Letter of Credit shall have the effect of precluding the Agent
      or the Lenders from thereafter declaring such inability to be an Event of
      Default as hereinabove provided.

     

    9.8           Survival
      Upon Unenforceability.  In the event any one or more of the
      provisions contained in any of the Loan Documents or in any other instrument
      referred to herein or executed in connection with the Obligations shall, for
      any
      reason, be held to be invalid, illegal, or unenforceable in any respect, such
      invalidity, illegality, or unenforceability shall not affect any other provision
      of any Loan Document or of any other instrument referred to herein or executed
      in connection with such Obligations.

     

    9.9           Amendments;
      Waivers.  Neither this Agreement nor any provision hereof may be
      amended, waived, discharged or terminated orally, but only by an instrument
      in
      writing signed by the party against whom enforcement of the amendment, waiver,
      discharge or termination is sought.  Subject to the preceding
      sentence, any provision of this Agreement or any other Loan Document may be
      amended, modified or waived by the Borrower, the Guarantors and the Required
      Lenders; provided that, notwithstanding any provision of this Agreement
      to the contrary, (a) no amendment, modification or waiver which extends the
      final maturity of the Loans, increases the Commitment Amount, increases the
      Borrowing Base or reduces the Monthly Reduction Amount, forgives the principal
      amount of any Indebtedness of the Borrower outstanding under this Agreement
      or
      interest thereon or fees owing under this Agreement or the Fee Letter, releases
      any guarantor of such Indebtedness, releases all or substantially all of the
      Collateral, reduces the interest rate applicable to the Loans or the fees
      payable to the Lenders generally, affects Section 2.1,
Section 2.2, Section 7.2(c) or this
Section 9.9, modifies the definition of “Required Lenders” or
      postpones the date of payment of any amount due as a result of the Monthly
      Reduction Amount or any fee payable hereunder or under the Fee Letter shall
      be
      effective without the consent of each Lender effected thereby; (b) no amendment,
      modification or waiver which increases the Facility Amount of any Lender shall
      be effective without the consent of such Lender; and (c) no amendment,
      modification or waiver which modifies the rights, duties or obligations of
      the
      Agent shall be effective without the consent of the Agent.

    

    
      
        
          
          

        

        
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    9.10           Controlling
      Agreement.  In the event of a conflict between the provisions of
      this Agreement and those of any other Loan Document, the provisions of this
      Agreement shall control.

     

    9.11           Disposition
      of Collateral.  Notwithstanding any term or provision, express or
      implied, in any of the Security Documents, but subject to applicable provisions
      of this Agreement, the realization, liquidation, foreclosure or any other
      disposition on or of any or all of the Collateral shall be in the order and
      manner and determined in the sole discretion of the Agent; provided,
however, that in no event shall the Agent violate applicable law or
      exercise rights and remedies other than those provided in such Security
      Documents or otherwise existing at law or in equity.

     

    
      9.12           Governing
        Law.  THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE
        CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
        BY
        THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
        RELATING TO CONFLICTS OF LAW.

       

      9.13           Arbitration. THE
        BORROWER, THE GUARANTORS, THE AGENT AND THE LENDERS AGREE THAT ALL DISPUTES,
        CLAIMS AND CONTROVERSIES BETWEEN THE BORROWER OR ANY GUARANTOR AND THE AGENT
        OR
        ANY LENDER OR BETWEEN THE BORROWER OR ANY GUARANTOR AND ANY SUCCESSOR TO
        OR
        ASSIGNEE OF ANY LENDER, WHETHER INDIVIDUAL, JOINT OR CLASS IN NATURE, ARISING
        FROM THIS AGREEMENT, ANY OTHER LOAN DOCUMENT TO WHICH THE BORROWER OR ANY
        GUARANTOR IS A PARTY OR OTHERWISE, INCLUDING CONTRACT AND TORT DISPUTES,
        SHALL
        BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION,
        UPON REQUEST OF ANY PARTY.  NO ACT TO TAKE OR DISPOSE OF ANY
        COLLATERAL SECURING THE OBLIGATIONS SHALL CONSTITUTE A WAIVER OF THIS
        ARBITRATION PROVISION OR BE PROHIBITED BY THIS ARBITRATION
        PROVISION.  THE FOREGOING INCLUDES OBTAINING INJUNCTIVE RELIEF OR A
        TEMPORARY RESTRAINING ORDER; INVOKING A POWER OF SALE UNDER ANY DEED OF TRUST
        OR
        MORTGAGE; OBTAINING A WRIT OF ATTACHMENT OR IMPOSITION OF A RECEIVER; OR
        EXERCISING ANY RIGHTS RELATING TO PERSONAL PROPERTY, INCLUDING TAKING OR
        DISPOSING OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS.  ANY
        DISPUTES, CLAIMS OR CONTROVERSIES CONCERNING THE LAWFULNESS OR REASONABLENESS
        OF
        ANY ACT OR EXERCISE OF ANY RIGHT RELATING TO THE COLLATERAL SECURING THE
        OBLIGATIONS, INCLUDING ANY CLAIM TO RESCIND, REFORM OR OTHERWISE MODIFY ANY
        AGREEMENT RELATING TO THE COLLATERAL SECURING THE OBLIGATIONS, SHALL ALSO
        BE
        ARBITRATED; PROVIDED,
HOWEVER,
        THAT NO ARBITRATOR SHALL HAVE
        THE RIGHT OR THE POWER TO ENJOIN OR RESTRAIN ANY ACT OF ANY
        PARTY.  JUDGMENT UPON ANY AWARD RENDERED BY ANY ARBITRATOR MAY BE
        ENTERED IN ANY COURT HAVING JURISDICTION;
PROVIDED,
HOWEVER,
        THAT NOTHING CONTAINED HEREIN
        SHALL BE DEEMED TO BE A WAIVER BY THE AGENT OR ANY LENDER OF THE PROTECTIONS
        AFFORDED TO THE AGENT OR SUCH LENDER UNDER 12 USC SECTION 91, TEXAS BANKING
        CODE
        ART. 342-609 OR 342-705 OR THE LAWS OF ANY OTHER STATE, TO THE EXTENT APPLICABLE
        TO THE AGENT OR SUCH LENDER, OR ANY OTHER PROTECTION PROVIDED THE AGENT OR
        ANY
        LENDER BY THE LAWS OF THE STATE OF TEXAS, ANY OTHER STATE OR THE UNITED STATES
        OF AMERICA, TO THE EXTENT APPLICABLE TO THE AGENT OR SUCH LENDER.  THE
        STATUTE OF LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH
        WOULD OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE
        APPLICABLE IN ANY ARBITRATION PROCEEDING AND THE COMMENCEMENT OF AN ARBITRATION
        PROCEEDING SHALL BE DEEMED THE COMMENCEMENT OF AN ACTION FOR THESE
        PURPOSES.  THE FEDERAL ARBITRATION ACT SHALL APPLY TO THE
        CONSTRUCTION, INTERPRETATION AND ENFORCEMENT OF THIS ARBITRATION
        PROVISION.  IF THE FEDERAL ARBITRATION ACT IS INAPPLICABLE TO ANY SUCH
        CLAIM OR CONTROVERSY FOR ANY REASON, SUCH ARBITRATION SHALL BE CONDUCTED
        PURSUANT TO THE TEXAS GENERAL ARBITRATION ACT AND IN ACCORDANCE WITH THIS
        ARBITRATION PROVISION AND THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
        ARBITRATION ASSOCIATION. 

       

    

    
      
        
          
          

        

        
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      9.14           Jurisdiction
        and Venue.  SUBJECT TO THE PROVISIONS OF
SECTION 9.13, ALL ACTIONS OR
        PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION
        WITH,
        OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY
        BE
        LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING
        SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. IN SUCH REGARD, THE BORROWER AND
        EACH OF THE GUARANTORS HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE
        OR
        FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES
        ANY
        RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY
        LITIGATION BROUGHT AGAINST IT BY THE AGENT OR ANY LENDER IN ACCORDANCE WITH
        THIS
SECTION 9.14.

       

      9.15           Integration.  THIS
        AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT AMONG
        THE
        PARTIES HERETO AND THERETO WITH RESPECT TO THE SUBJECT HEREOF AND THEREOF
        AND
        SHALL SUPERSEDE ANY PRIOR AGREEMENT AMONG THE PARTIES HERETO AND THERETO,
        WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF AND THEREOF, INCLUDING
        ANY TERM SHEET PROVIDED TO THE BORROWER BY THE AGENT OR ANY
        LENDER.  FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER
        WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG
        THE
        PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
        CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES.  THERE
        ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

       

      9.16           Waiver
        of Punitive and Consequential Damages.  EACH OF THE
        BORROWER, THE GUARANTORS, THE AGENT AND THE LENDERS HEREBY KNOWINGLY,
        VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT
        IT
        MAY LAWFULLY AND EFFECTIVELY DO SO, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
        IN ANY DISPUTE BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING
        OUT
        OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION
        CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY, ANY
        SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR
        IN ADDITION TO, ACTUAL DAMAGES AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED
        TO
        ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
        CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
        AND
        CERTIFICATIONS CONTAINED IN THIS SECTION
        9.16.

    

     

    9.17           Counterparts.  For
      the convenience of the parties, this Agreement may be executed in multiple
      counterparts and by different parties hereto in separate counterparts, each
      of
      which for all purposes shall be deemed to be an original, and all such
      counterparts shall together constitute but one and the same Agreement and shall
      be enforceable as of the date hereof upon the execution of one or more
      counterparts hereof by each of the parties hereto.  In this regard,
      each of the parties hereto acknowledges that a counterpart of this Agreement
      containing a set of counterpart execution pages reflecting the execution of
      each
      party hereto shall be sufficient to reflect the execution of this Agreement
      by
      each party hereto and shall constitute one instrument.

    

    
      
        
          
          

        

        
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    9.18           USA
      Patriot Act Notice.  Each Lender and the Agent (for itself and not
      on behalf of any Lender) hereby notifies the Borrower that, pursuant to the
      requirements of the USA 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
      or
      the Agent, as applicable, to identify the Borrower in accordance with the USA
      Patriot Act.

     

    9.19           Tax
      Shelter Regulations.  The Borrower does not intend to treat the
      Loans and related transactions hereunder and under the other Loan Documents
      as a
“reportable transaction” (within the meanings under current Treasury Regulation
      Section 1.6011-4 and Proposed Treasury Regulation Section 1.6011-4, promulgated
      on November 1, 2006).  In the event the Borrower determines to take
      any action inconsistent with the foregoing statement, it will promptly notify
      the Agent thereof.  If the Borrower so notifies the Agent, the
      Borrower acknowledges that one or more of the Lenders may treat its Loans and
      related transactions hereunder and under the other Loan Documents as part of
      a
      transaction that is subject to current Treasury Regulation Section 301.6112-1
      or
      Proposed Treasury Regulation Section 301.6112-1, promulgated on November 1,
      2006, and, in such case, such Lender or Lenders, as applicable, will maintain
      the lists and other records required, if any, by such Treasury
      Regulations.

     

    9.20           Contribution
      and Indemnification.  In the event that any  Guarantor
      pays (whether through direct payments or as a result of providing Collateral
      for
      the Obligations) any amounts on the Obligations in excess of such Guarantor’s
      Obtained Benefit (the “Excess Payments”), such Guarantor shall be
      entitled to make demand on the Borrower for such Excess Payments, and, to the
      extent not recovered from the Borrower, to receive from each other Guarantor
      that received an Obtained Benefit, such Guarantor’s Contribution Percentage of
      the Excess Payment.  If any party obligated to make such a payment is
      unable to pay the Contribution Percentage of the Excess Payment, each Guarantor
      agrees to make a contribution to the party entitled to such payment to the
      extent necessary so that each Guarantor shares equally the liability for such
      Excess Payment in relation to the relative Obtained Benefit received by such
      Guarantor. IN
      SUCH REGARD, TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH GUARANTOR SHALL
      INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER GUARANTORS FROM AND AGAINST ANY
      AND ALL LIABILITY, CLAIMS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’
FEES AND EXPENSES) ARISING WITH RESPECT TO THE OBLIGATIONS AND EXCEEDING SUCH
      OTHER GUARANTOR’S OBTAINED BENEFIT OR CONTRIBUTION PERCENTAGE THEREOF AS
      PROVIDED HEREIN. Any
      amount due under this Section 9.20 shall be due and payable within ten
      days of demand therefor by the party entitled to payment and shall be made
      to
      the party entitled thereto at the Borrower’s address for notices under this
      Agreement, in immediately available funds, not later than 2:00 p.m., Central
      Standard or Daylight Time, on the date on which such payment shall come
      due.  The remedies available to any Guarantor pursuant to the
      provisions of this Section 9.20 are not exclusive.  All rights
      and claims of contribution, indemnification and reimbursement under this
Section 9.20 shall be subordinate in right of payment to the prior
      payment in full of the Obligations.  The provisions of this Section
      9.20 shall, to the extent expressly inconsistent with any provision in any
      Loan Document, supersede such inconsistent provision.

    

    
      
        
          
          

        

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

     

    
      	 	
              BORROWER:

            
	 	 	 
	 	
              GASTAR
                EXPLORATION USA, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	
              INITIAL
                GUARANTORS:

            
	 	 	 
	 	
              GASTAR
                EXPLORATION LTD.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Vice
                Presidend and

            
	 	 	
              Chief
                Financial Officer

            
	 	 	 
	 	 	 
	 	
              GASTAR
                EXPLORATION NEW SOUTH WALES, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            

    

    

     

    (Signatures
      continue on following pages)

    

    
      
        
          
          

        

        
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              GASTAR
                EXPLORATION VICTORIA, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	
              GASTAR
                EXPLORATION TEXAS, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	
              GASTAR
                EXPLORATION TEXAS, LP

            
	 	 
	 	 	 
	 	
              By:

            	
              Gastar
                Exploration Texas LLC,

            
	 	 	
              its
                General Partner

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            
	 	 	 
	 	 	 
	 	
              GASTAR
                EXPLORATION TEXAS LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  MICHAEL
                A. GERLICH

            
	 	 	
              Michael
                A. Gerlich

            
	 	 	
              Secretary
                and Treasurer

            

    

     

     

    (Signatures
      continue on following page)

    

    
      
        
          
          

        

        
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              AGENT:

            
	 	 
	 	
              AMEGY
                BANK NATIONAL ASSOCIATION, as Agent

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  W
                BRYAN CHAPMAN

            
	 	 	
              W.
                Bryan Chapman

            
	 	 	
              Senior
                Vice President

            
	 	 	 
	 	 	 
	 	
              LENDER:

            
	 	 	 
	 	
              AMEGY
                BANK NATIONAL ASSOCIATION

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/  W
                BRYAN CHAPMAN

            
	 	 	
              W.
                Bryan Chapman

            
	 	 	
              Senior
                Vice President

            
	 	 	 
	 	
              Applicable
                Lending Office for

            
	 	
              Base
                Rate Loans and LIBO

            
	 	
              Rate
                Loans:

            
	 	 	 
	 	
              4400
                Post Oak Parkway, 4th
                Floor

            
	 	
              Houston,
                Texas  77207

            

    

     

    
      
        
          
          

        

        
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    EXHIBIT
      I

    

    [FORM
      OF
      NOTE]

    

    PROMISSORY
      NOTE

    (this
      “Note”)

     

    
      	
              $___________________

            	
              Houston,
                Texas

            	
              ____________,
                20__

            

    

    

    FOR
      VALUE
      RECEIVED and WITHOUT GRACE (except to the extent, if any, provided in the Credit
      Agreement referred to hereinafter), the undersigned (“Maker”, whether one
      or more, and if more than one, with liability hereunder being joint and several)
      promises to pay to the order of _________________________ (“Payee”), at
      the Principal Office (as such term is defined in the Credit Agreement referred
      to hereinafter) of Amegy Bank National Association (in its capacity as agent
      for
      the lenders party to the Credit Agreement referred to hereinafter and, under
      certain circumstances, certain other parties, the “Agent”),
      ___________________ AND NO/100 DOLLARS ($___________) or so much thereof as
      may
      be advanced against this Note and remains unpaid pursuant to the Credit
      Agreement dated ____________, 2007 by and among Maker, the parties identified
      therein as the “Initial Guarantors”, the Agent and the lenders signatory thereto
      or bound thereby from time to time, including, without limitation, Payee (as
      amended, supplemented, restated or otherwise modified from time to time, the
      “Credit Agreement”), together with interest at the rates and calculated
      as provided in the Credit Agreement.

    

    Reference
      is hereby made to the Credit Agreement for matters governed thereby, including,
      without limitation, certain events which will entitle the holder hereof to
      accelerate the maturity of all amounts due hereunder.  Capitalized
      terms used but not defined in this Note shall have the respective meanings
      assigned to such terms in the Credit Agreement.

    

    This
      Note
      is issued pursuant to, is a “Note” under, and is payable as provided in the
      Credit Agreement.  Subject to compliance with applicable provisions of
      the Credit Agreement, Maker may at any time pay the full amount or any part
      of
      this Note without the payment of any premium or fee, but such payment shall
      not,
      until this Note is fully paid and satisfied, excuse the payment as it becomes
      due of any payment on this Note provided for in the Credit
      Agreement.

    

    Without
      being limited thereto or thereby, this Note is secured by the Security
      Documents.

    

    
      
        
          
          

        

        
          Page
            1 of 2

          
            

          

        

        
          
          

        

      

    

     

    THIS
      NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT
      GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF
      LAW.

    

    

    
      	 	
              GASTAR
                EXPLORATION USA, INC.  

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 

    

    

    
      
        
          
          

        

        
          Page
            2 of 2

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      II

    

    [FORM
      OF
      BORROWING REQUEST]

    

    [Date]

    

    Amegy
      Bank National

    Association,
      as Agent

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas  77027

    Attention:  Energy
      Lending Dept.

    

    
      	
              Re:

            	
              Credit
                Agreement dated as of _________, 2007 by and among Gastar Exploration
                USA,
                Inc., certain other parties, Amegy Bank National Association, a national
                banking association, as Agent, and the lenders signatory thereto
                or bound
                thereby from time to time (as amended, supplemented, restated or
                otherwise
                modified from time to time, the “Credit
                Agreement”)

            

    

    

    Ladies
      and Gentlemen:

    

    Pursuant
      to the Credit Agreement, the undersigned hereby makes the requests indicated
      below:

    

    1.           Loans

    

    
      	
               

            	
              (a)

            	
              Amount
                of new Loan:  $__________

            

    

    

    
      	
               

            	
              (b)

            	
              Requested
                funding date:  ______________,
                20__

            

    

    

    
      	
               

            	
              (c)

            	
              $______________
                such Loan is to be a Base Rate Loan;
                and

            

    

    

    $______________
      of such Loan is to be a LIBO Rate Loan.

    

    
      	
               

            	
              (d)

            	
              Requested
                Interest Period for LIBO Rate Loan: ____
                months.

            

    

    

    2.           Continuation
      or conversion of LIBO Rate Loan maturing on ___________:

    

    
      	
               

            	
              (a)

            	
              Amount
                to be continued as a LIBO Rate Loan is $______________, with an Interest
                Period of ______________ months;
                and

            

    

    

    
      	
               

            	
              (b)

            	
              Amount
                to be converted to a Base Rate Loan is
                $______________.

            

    

    

    3.           Conversion
      of Base Rate Loan:

    

    
      	
               

            	
              (a)

            	
              Requested
                conversion date: ____________,
                20___.

            

    

    

    
      	
               

            	
              (b)

            	
              Amount
                to be converted to a LIBO Rate Loan is $___________, with an Interest
                Period of _____ months.

            

    

    

    
      
        
          
          

        

        
          Exhibit
            II-i

          
            

          

        

        
          
          

        

      

    

    

    The
      undersigned individual certifies that [s]he is the ___________ of the Borrower,
      has obtained all consents necessary, and as such [s]he is authorized to execute
      this request on behalf of the Borrower.  The undersigned individual
      further certifies, represents, and warrants on behalf of the Borrower, that
      the
      Borrower is entitled to receive the requested borrowing, continuation, or
      conversion under the terms and conditions of the Credit Agreement and that,
      to
      the best knowledge of such undersigned individual, there exists as of the date
      hereof neither a Default nor an Event of Default under the Credit
      Agreement.

    

    Each
      capitalized term used but not defined herein shall have the meaning assigned
      to
      such term in the Credit Agreement.

     

     

    
      	 	Very
              truly yours, 
	 	 	 
	 	 	 
	 	 	 
	 	
              ________________
                of 

            
	 	
              Gastar
                Exploration USA, Inc. 

            

    

    

      
        
          
          

        

        
          Exhibit
            II-ii

          
            

          

        

        
          
          

        

      

    

     

    EXHIBIT
      III

    

    [FORM
      OF
      COMPLIANCE CERTIFICATE]

    [Date]

    

    Amegy
      Bank National

    Association,
      as Agent

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas  77027

    Attention:  Energy
      Lending Dept.

    

    
      	
              Re:

            	
              Credit
                Agreement dated as of _________, 2007 by and among Gastar Exploration
                USA,
                Inc., certain other parties, Amegy Bank National Association, a national
                banking association, as Agent, and the lenders signatory thereto
                or bound
                thereby from time to time (as amended, supplemented, restated or
                otherwise
                modified from time to time, the “Credit
                Agreement”)

            

    

    

    Ladies
      and Gentlemen:

    

    Pursuant
      to applicable requirements of the Credit Agreement, the undersigned individual,
      as a Responsible Officer of the Parent, hereby certifies to you the following
      information as true and correct as of the date hereof or for the period
      indicated, as the case may be:

    

    1.           [To
      the best of the knowledge of the undersigned, no Default or Event of Default
      exists as of the date hereof or has occurred since the date of our previous
      certification to you, if any.]

    

    [1.           To
      the best of the knowledge of the undersigned, the following Defaults or Events
      of Default exist as of the date hereof or have occurred since the date of our
      previous certification to you, if any, and the actions set forth below are
      being
      taken to remedy such circumstances:]

    

    2.           The
      compliance of the Parent, on a consolidated basis with its consolidated
      Subsidiaries, with the financial covenants of the Credit Agreement, as of the
      close of business on ____________, is evidenced by the following:

    

    
      	
               

            	
              (a)

            	
              Section
                6.14:  Current Ratio

            

    

     

    
      	
              Required

            	
              Actual

            
	 	 
	
              Not
                less than 1.00 to 1.00

            	
              ___
                to 1.00

            

    

    

    
      	
               

            	
              (b)

            	
              Section
                6.15:  Total Net Indebtedness to EBITDA
                Ratio

            

    

     

    
      	
              Required

            	
              Actual

            
	 	 
	
              Not
                more than _____ to 1.0

            	
              ___
                to 1.0

            

    

    

    
      
        
          
          

        

        
          Exhibit
            III-i

          
            

          

        

        
          
          

        

      

    

    

    
      	
               

            	
              (c)

            	
              Section
                6.16:  General and Administrative
                Expense

            

    

    
    

    
      	
              Required

            	
              Actual

            
	 	 
	
              No
                more than $__________

            	
              $________________

            

    

    

    
      	
               

            	
              (d)

            	
              Section
                6.17:  Liquidity

            

    

     

    
      	
              Required

            	
              Actual

            
	 	 
	
              Not
                less than $__________

            	
              $________________

            

    

    

    3.           The
      Parent, the Borrower and the Guarantors [are] [are not] in compliance with
      the
      provisions of Section 6.1 of the Credit Agreement relating to Commodity Hedge
      Agreements.

    

    4.           No
      Material Adverse Effect has occurred since the date of the combined consolidated
      Financial Statements of the Parent as of [_____________] and
      for the period then ended.

    

    Each
      capitalized term used but not defined herein shall have the meaning assigned
      to
      such term in the Credit Agreement.

    
 

    
      	 	Very
              truly yours, 
	 	 	 
	 	 	 
	 	 	 
	 	
              ________________
                of

            	 
	 	
              Gastar
                Exploration Ltd.

            	 

    

    

    
      
        
          
          

        

        
          Exhibit
            III-ii

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      IV

    

    FACILITY
      AMOUNTS

    

    

    

    
      	
              Name/Address
                of Lender

            	
              Percentage
                Share

            	
              Facility
                Amount

            
	 	 	 
	 	 	 
	 	 	 
	
              Amegy
                Bank National Association

            	
              100%

            	
              $250,000,000

            
	
              4400
                Post Oak Parkway

            	 	 
	
              4th
                Floor

            	 	 
	
              Houston,
                Texas  77027

            	 	 
	
              Attn:  W.
                Bryan Chapman

            	 	 
	
              Facsimile:  (713)
                651-0345

            	 	 

    

    

      
        
          
          

        

        
          Exhibit
            IV-i

          
            

          

        

        
          
          

        

      

    

     

    EXHIBIT
      V

    

    [Form
      of
      Opinion of Michigan Counsel]

    

    [Closing
      Date]

    

    

    

    Amegy
      Bank, National Association, as Agent

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas 77027

    Attention:
      Energy Lending Dept.

    

    
      	
               

            	
              Re:

            	
              Credit
                Agreement dated as of November 29, 2007 by and among Gastar Exploration
                USA, Inc., a Michigan corporation, certain of its subsidiaries and
                affiliates, Amegy Bank National Association, as Agent, and the lenders
                signatory thereto or bound thereby from time to time (the “Credit
                Agreement”)

            

    

    

    Ladies
      and Gentlemen:

    

    [We][I]
      have acted as special counsel in the State of Michigan to Gastar Exploration
      USA, Inc., a Michigan corporation (the “Borrower”), Gastar Exploration
      New South Wales, Inc., a Michigan corporation (“Gastar New South Wales”),
      Gastar Exploration Victoria, Inc., a Michigan corporation (“Gastar
      Victoria”), and Gastar Exploration Texas, Inc., a Michigan corporation
      (“Gastar Texas Inc.” and Gastar New South Wales, Gastar Victoria and
      Gastar Texas Inc., collectively, the “Michigan Guarantors”), in
      connection with the transactions contemplated in the Credit
      Agreement.  This opinion is delivered pursuant to Section 3.1(__) of
      the Credit Agreement, and the Agent and the Lenders are hereby authorized to
      rely upon this opinion in connection with the transactions contemplated in
      the
      Credit Agreement.  For convenience, each capitalized term used but not
      defined herein shall have the meaning assigned to such term in the Credit
      Agreement, unless expressly provided to the contrary herein.

    

    In
      [our][my] representation of the Borrower, [we][I] have examined an executed
      counterpart or a copy of an executed counterpart of each of the following
      (collectively, the “Loan Documents”), each of which is dated of even date
      herewith:

    

    (a)           the
      Credit Agreement;

    

    (b)           the
      Notes existing as of the Closing Date;

    

    (c)           Security
      Agreement from the Borrower, the Michigan Guarantors and others, as Debtors,
      in
      favor of the Agent, as Secured Party, covering certain Property of the
      Borrower;

    

    (d)           Security
      Agreement (Pledge) from the Borrower, as Debtor, in favor of the Agent, as
      Secured Party, covering the stock of the Michigan Guarantors owned by the
      Borrower;

    

    
      
        
          
          

        

        
          Exhibit
            V-i

          
            

          

        

        
          
          

        

      

    

    

    (e)           Collateral
      Assignment of Membership Interest and Partnership Interest (Security Agreement)
      from Gastar Texas Inc. in favor of the Agent covering the membership interest
      in
      Gastar Texas LLC and the partnership interest in Gastar Texas LP owned by Gastar
      Texas Inc.;

    

    (f)           Guaranty
      from the Michigan Guarantors and others in favor of the Agent; and

    

    (g)           Intercreditor
      Agreement among the Borrower, the Michigan Guarantors, other Guarantors, the
      Agent and the Second Lien Collateral Agent (as such term is defined
      therein).

    

    [We][I]
      have also examined a copies of UCC Financing Statements reflecting the Borrower
      and the Michigan Guarantors, respectively, as the Debtor and the Agent as the
      Secured Party (the “Financing Statements”).

    

    In
      making
      such examinations, [we][I] have, with your permission, assumed:

    

    (i)           the
      genuineness of all signatures to the Loan Documents;

    

    (ii)          the
      authenticity of all documents submitted to [us][me] as originals and the
      conformity with the originals of all documents submitted to [us] [me] as
      copies;

    

    (iii)         that
      the Agent and each Lender is authorized and has the power to enter into and
      perform its obligations under the Credit Agreement; and

    

    (iv)         the
      due authorization, execution and delivery of all Loan Documents by each party
      thereto other than the Borrower and the Michigan Guarantors.

    

    Based
      upon the foregoing and subject to the qualifications set forth herein, [we
      are][I am] of the opinion that:

    

    1.           The
      Borrower and each of the Michigan Guarantors is a corporation duly incorporated,
      legally existing and in good standing under the laws of the State of
      Michigan.

    

    2.           The
      execution and delivery by the Borrower of the Credit Agreement and the
      borrowings and obtaining of Letters of Credit by the Borrower thereunder, the
      execution and delivery by the Borrower of the other Loan Documents to which
      the
      Borrower is a party, the payment and performance by the Borrower of all
      Obligations under the Credit Agreement and the other Loan Documents to which
      the
      Borrower is a party, the execution and delivery by each of the Michigan
      Guarantors of each of the Loan Documents to which such Michigan Guarantor is
      a
      party and the performance by each of the Michigan Guarantors of each of the
      Loan
      Documents to which such Michigan Guarantor is a party are within the power
      of
      the Borrower or such Michigan Guarantor, as the case may be, have been duly
      authorized by all necessary action by the Borrower or such Michigan Guarantor,
      as the case may be, and do not (a) require the consent of any Michigan
      Governmental Authority or (b) contravene or conflict with any Requirement of
      Law
      under the laws of the State of Michigan.

    

    
      
        
          
          

        

        
          Exhibit
            V-ii

          
            

          

        

        
          
          

        

      

    

    

    3.           No
      authorization, consent, approval, exemption, franchise or permit from, or
      license of or filing (other than filings of Security Documents in appropriate
      filing offices) with, any Michigan Governmental Authority is required to
      authorize or is otherwise required in connection with the valid execution and
      delivery by the Borrower and the Michigan Guarantors, respectively, of the
      Loan
      Documents to which the Borrower or any of the Michigan Guarantors, as the case
      may be, is a party or any instrument contemplated thereby, or the payment or
      performance by the Borrower of the Obligations.

    

    4.           The
      Financing Statements are in satisfactory form for filing with the Michigan
      Secretary of State, being the central filing office for the State of
      Michigan  under the Uniform Commercial Code as adopted and in effect
      in the State of Michigan.

    

    The
      opinions expressed herein are subject to the qualification and limitation that
      [we are][I am] licensed to practice law only in the State of Michigan [and
      other
      jurisdictions whose laws are not applicable to the opinions expressed herein];
      accordingly, the foregoing opinions are limited solely to the laws of the State
      of Michigan and applicable United States federal law.

    

    This
      opinion is furnished solely for the benefit of the Agent, any successor to
      the
      Agent in the capacity as agent for the lenders and, under certain circumstances,
      certain other parties under the Credit Agreement, such lenders and any
      Transferee in connection with the transactions contemplated by the Loan
      Documents and is not to be quoted in whole or in part or otherwise referred
      to
      or disclosed to any other Person or in any other transaction.

     

    
      	 	 Very
              truly yours,

    

     

    
      
        
          
          

        

        
          Exhibit
            V-iii

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      VI

    

    [Form
      of
      Opinion of Delaware and Texas Counsel]

    

    [Closing
      Date]

    

    Amegy
      Bank National Association, as Agent

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas 77027

    Attention:
      Energy Lending Dept.

    

    
      	
               

            	
              Re:

            	
              Credit
                Agreement dated as of November 29, 2007 by and among Gastar Exploration
                USA, Inc., a Michigan corporation, certain of its subsidiaries and
                affiliates, Amegy Bank National Association, as Agent, and the lenders
                signatory thereto or bound thereby from time to time (the “Credit
                Agreement”)

            

    

    

    Ladies
      and Gentlemen:

    

    [We][I]
      have acted as special counsel in the State of Delaware, the State of Texas
      and
      the State of New York to Gastar Exploration USA, Inc., a Michigan corporation
      (the “Borrower”), Gastar Exploration Ltd., an Alberta, Canada corporation
      (the “Parent”), Gastar Exploration New South Wales, Inc., a Michigan
      corporation (“Gastar New South Wales”), Gastar Exploration Victoria,
      Inc., a Michigan corporation (“Gastar Victoria”), Gastar Exploration
      Texas, Inc., a Michigan corporation (“Gastar Texas Inc.”), Gastar
      Exploration Texas LLC, a Delaware limited liability company (“Gastar Texas
      LLC”), and Gastar Exploration Texas, LP, a Delaware limited partnership
      (“Gastar Texas LP”, and Gastar Texas LLC and Gastar Texas LP,
      collectively, the “Delaware Guarantors”, and the Parent, Gastar New South
      Wales, Gastar Victoria, Gastar Texas Inc. and the Delaware Guarantors,
      collectively, the “Initial Guarantors”), in connection with the
      transactions contemplated in the Credit Agreement.  This opinion is
      delivered pursuant to Section 3.1(__) of the Credit Agreement, and the Agent
      and
      the Lenders are hereby authorized to rely upon this opinion in connection with
      the transactions contemplated in the Credit Agreement.  For
      convenience, each capitalized term used but not defined herein shall have the
      meaning assigned to such term in the Credit Agreement, unless expressly provided
      to the contrary herein.

    

    In
      such
      representation, [we][I] have examined [copies of] [executed] [unexecuted
      execution] counterparts of each of the following (collectively, the “Loan
      Documents”, and those of the Loan Documents listed as (c) through (h),
      collectively, the “Texas Security Documents”), each of which is dated of
      even date herewith:

    

    (a)           the
      Credit Agreement;

    

    (b)           the
      Notes existing as of the Closing Date;

    

    (c)           Deed
      of Trust, Security Agreement, Financing Statement and Assignment of Production
      from Gastar Texas LP to W. Bryan Chapman, Trustee for the benefit of the Agent
      (the “Deed of Trust”);

    

    
      
        
          
          

        

        
          Exhibit
            VI-i

          
            

          

        

        
          
          

        

      

    

    

    (d)           Security
      Agreement from the Borrower and each of the Initial Guarantors other than the
      Parent, as Debtors, in favor of the Agent, as Secured Party;

    

    (e)           Security
      Agreement (Pledge) from the Parent, as Debtor, in favor of the Agent, as Secured
      Party, covering the stock of the Borrower owned by the Parent;

    

    (f)           Security
      Agreement (Pledge) from the Borrower, as Debtor, in favor of the Agent, as
      Secured Party, covering the stock of Gastar New South Wales, Gastar Victoria
      and
      Gastar Texas Inc. owned by the Borrower;

    

    (g)           Collateral
      Assignment of Membership Interest and Partnership Interest (Security Agreement)
      from Gastar Texas Inc. in favor of the Agent covering the membership interest
      in
      Gastar Texas LLC and the partnership interest in Gastar Texas LP owned by Gastar
      Texas Inc.;

    

    (h)           Collateral
      Assignment of Partnership Interest (Security Agreement) from Gastar Texas LLC
      in
      favor of the Agent covering the partnership interest in Gastar Texas LP owned
      by
      Gastar Texas LLC;

    

    (i)           Guaranty
      from the Initial Guarantors in favor of the Agent; and

    

    (j)           Intercreditor
      Agreement among the Borrower, the Initial Guarantors, the Agent and the Second
      Lien Collateral Agent (as such term is defined therein).

    

    [We][I]
      have also examined UCC Financing Statements with the Delaware Guarantors,
      respectively, as Debtor and the Agent as Secured Party (the “Financing
      Statements”).

    

    In
      making
      such examinations, [we][I] have, with your permission, assumed:

    

    (i)           the
      genuineness of all signatures to the Loan Documents other than those of officers
      of the Borrower and the Initial Guarantors;

    

    (ii)          the
      authenticity of all documents submitted to [us][me] as originals and the
      conformity with the originals of all documents submitted to [us][me] as
      copies;

    

    (iii)         that
      each party to the Loan Documents, other than the Delaware Guarantors, is duly
      organized, legally existing and in good standing under the laws of its
      jurisdiction of organization;

    

    (iv)         that
      each party to the Loan Documents, other than the Delaware Guarantors, is
      authorized and has the power to enter into and perform its obligations
      thereunder;

    

    (v)          the
      due authorization, execution and delivery of the Loan Documents by each party
      thereto other than the Delaware Guarantors; and

    

    (vi)         that
      the Borrower and each of the Initial Guarantors has good and defensible title
      to
      all Collateral covered by the Texas Security Documents.

    

    
      
        
          
          

        

        
          Exhibit
            VI-ii

          
            

          

        

        
          
          

        

      

    

    

    Based
      upon the foregoing and subject to the qualifications set forth herein, [we
      are]
      [I am] of the opinion that:

    

    1.           Each
      of the Delaware Guarantors is a corporation duly incorporated, legally existing
      and in good standing under the laws of the State of Delaware.

    

    2.           The
      execution and delivery by each of the Delaware Guarantors of each of the Loan
      Documents to which such Delaware Guarantor is a party and the performance by
      each of the Delaware Guarantors of each of the Loan Documents to which such
      Delaware Guarantor is a party are within the power of such Delaware Guarantor,
      have been duly authorized by all necessary action by such Delaware Guarantor,
      and do not (a) require the consent of any Delaware Governmental Authority or
      (b)
      contravene or conflict with any Requirement of Law under the laws of the State
      of Delaware.

    

    3.           No
      authorization, consent, approval, exemption, franchise or permit from or license
      of or filing (other than as set forth hereinafter) with, any court, governmental
      agency, commission or other authority of the State of Delaware, the State of
      Texas, the State of New York or any subdivision of any of such states is
      required for the due execution and delivery of the Loan Documents or for the
      enforceability, performance or observance of the terms thereof.

    

    4.           The
      execution and delivery by the Borrower and the Initial Guarantors of the Loan
      Documents to which any of them is a party, compliance with the provisions
      thereof and the consummation of the transactions contemplated thereby will
      not
      (a) conflict with or result in a violation of any law or governmental rule
      or
      regulation of the State of Delaware, the State of Texas, the State of New York
      or any subdivision of any of such states, (b) to our knowledge, contravene
      or
      conflict with any indenture, instrument or other agreement to which the Borrower
      or any of the Initial Guarantors is a party or by which any Property of the
      Borrower or any of the Initial Guarantors may be presently bound or encumbered
      or (c) result in or require the creation or imposition of any Lien upon any
      Property of the Borrower or any of the Initial Guarantors other than as
      contemplated by the Loan Documents.

    

    5.           The
      Loan Documents to which any of them is a party constitute legal, valid and
      binding obligations of the Borrower or the relevant Initial Guarantor, as the
      case may be, enforceable against the Borrower or the relevant Initial Guarantor,
      as the case may be, in accordance with their respective terms.

    

    6.           The
      form of the Deed of Trust and the other Texas Security Documents and the
      descriptions therein of the Collateral covered thereby satisfy all applicable
      laws of the State of Texas and are legally sufficient under the laws of the
      State of Texas to enable the Agent to realize the practical benefits purported
      to be afforded thereby.

    

    
      
        
          
          

        

        
          Exhibit
            VI-iii

          
            

          

        

        
          
          

        

      

    

    

    7.           The
      Deed of Trust and the other Texas Security Documents (a) create liens upon
      and/or security interests in all Collateral covered thereby to secure the
      Obligations and, where applicable, the obligations of the relevant Initial
      Guarantor under the Guaranty and (b) provide for nonjudicial foreclosure
      remedies customarily used in the State of Texas.

    

    8.           The
      Deed of Trust and the Financing Statements are in satisfactory form for filing
      and recording in the offices described in paragraph 9 hereof.

    

    9.           The
      filing and/or recording, as the case may be, of a counterpart of the Deed of
      Trust in the office of the county clerk of each of Leon and Robertson Counties,
      Texas and the filing of a counterpart of each of the Financing Statements with
      the Secretary of State of the State of Delaware are the only recordings or
      filings in the State of Texas or the State of Delaware necessary to perfect
      the
      liens and security interests created by the Deed of Trust and the other Texas
      Security Documents or to permit the Agent to enforce its rights under the Deed
      of Trust and the other Texas Security Documents.  No subsequent
      filing, re-filing, recording or re-recording will be required in order to
      continue the perfection of the liens and security interests created by the
      Deed
      of Trust and the other Texas Security Documents except that
      __________________________.

    

    [Insert
      any required subsequent filing or recording]

    

    10.           No
      state or local mortgage registration tax, stamp tax or other similar fee, tax
      or
      governmental charge (other than statutory filing and recording fees to be paid
      upon filing) is required to be paid to the State of Texas or any subdivision
      thereof in connection with the execution, delivery, filing or recording of
      the
      Deed of Trust or the consummation of the transactions contemplated in the
      Mortgage.  [The foregoing statement will have to be revised if
      the State has any such tax.]

    

    11.           It
      is not necessary for the Agent or any Lender to qualify to do business in the
      State of Texas or file in the State of Texas any designation for service of
      process or reports solely by reason of the interests conveyed or assigned to
      it
      or for its benefit under the Deed of Trust, nor will such conveyances or
      assignments alone result in the imposition upon the Agent or any Lender of
      any
      taxes by the State of Texas or by any subdivision thereof, including, without
      limitation, franchise, license, tax on interest received or income taxes, other
      than recording and filing fees [and applicable mortgage registration
      tax] in connection with the filings referred to in paragraph 9 above
      and taxes which the Agent or any Lender may owe in the event it becomes the
      actual and record owner of any Mortgaged Property (as such term is defined
      in
      the Deed of Trust) situated in the State of Texas.

    

    12.           The
      foreclosure of the Deed of Trust will not in any manner restrict, affect or
      impair the liability of the Borrower or any of the Initial Guarantors with
      respect to the Obligations or the rights and remedies of the Agent or any Lender
      or other Secured Creditor with respect to the foreclosure or enforcement of
      any
      other security interests or liens securing the Obligations to the extent any
      deficiency remains unpaid after application to the Obligations of the proceeds
      of such foreclosure.

    

    
      
        
          
          

        

        
          Exhibit
            VI-iv

          
            

          

        

        
          
          

        

      

    

    

    13.           The
      priority of the liens and security interests created by the Deed of Trust with
      respect to Obligations incurred by the Borrower on or before the dates on which
      counterparts of the Deed of Trust are filed in the appropriate filing or
      recording offices referred to hereinabove will be determined by the dates of
      such filings.  The priority of the liens and security interests
      created by the Deed of Trust with respect to Obligations incurred by the
      Borrower after the date counterparts of the Deed of Trust are filed will be
      determined by the dates on which counterparts of the Deed of Trust are filed
      in
      the appropriate filing or recording offices referred to
      hereinabove.

    

    14.           The
      priority of the liens and security interests created by the Deed of Trust will
      not be affected by any prepayment of the Obligations, or any reduction or
      increase of the outstanding amount of the Obligations from time to
      time.

    

    15.           The
      limitations period for enforcement of the Mortgage in the State is [
      _________ ].

    

    16.           To
      [our][my] knowledge, except as disclosed under the heading “Litigation” on
Schedule 4.8 to the Credit Agreement, no litigation or other action of
      any nature affecting the Borrower or any of the Initial Guarantors is pending
      before any Governmental Authority or threatened against the Borrower or any
      of
      the Initial Guarantors.  To [our][my] knowledge, no unusual or unduly
      burdensome restriction or restraint exists by contract, Requirement of Law,
      or
      otherwise relative to the business or operations of the Borrower or any of
      the
      Initial Guarantors or the ownership and operation of any Properties of the
      Borrower or any of the Initial Guarantors other than such as relate generally
      to
      Persons engaged in business activities similar to those conducted by the
      Borrower or the relevant Initial Guarantor.

    

    17.           Neither
      the Borrower nor any of the Initial Guarantors is, or is directly or indirectly
      controlled by or acting on behalf of any Person which is, an “investment
      company” or an “affiliate person” of an “investment company” within the meaning
      of the Investment Company Act of 1940, as amended.

    

    The
      opinions expressed herein are subject to the following qualifications and
      limitations:

    

    A.           [We
      are][I am] licensed to practice law only in the State of Delaware, the State
      of
      Texas[,][and] the State of New York [and other jurisdictions whose laws are
      not
      applicable to the opinions expressed herein]; accordingly, the foregoing
      opinions are limited solely to the laws of the State of Delaware, the State
      of
      Texas, the State of New York and applicable United States federal
      law.

    

    
      
        
          
          

        

        
          Exhibit
            VI-v

          
            

          

        

        
          
          

        

      

    

    

    B.           The
      validity, binding effect and enforceability of the Loan Documents may be limited
      or affected by bankruptcy, insolvency, moratorium, reorganization or other
      similar laws affecting rights of creditors generally, including, without
      limitation, statutes or rules of law which limit the effect of waivers of rights
      by a debtor or grantor; provided,however, that the limitations and
      other effects of such statutes or rules of law upon the validity and binding
      effect of the Loan Documents should not differ materially from the limitations
      and other effects of such statutes or rules of law upon the validity and binding
      effect of assignments and security documents generally.

    

    C.           The
      enforceability of the obligations of the Borrower and the Initial Guarantors
      under the Loan Documents is subject to general principles of equity (whether
      such enforceability is considered in a suit in equity or at law).

    

    This
      opinion is furnished for the benefit of the Agent, any successor to the Agent
      in
      such capacity, each lender under the Credit Agreement and any transferee or
      assignee of any such lender in connection with the transactions contemplated
      by
      the Credit Agreement and the Texas Security Documents and is not to be quoted
      in
      whole or in part or otherwise referred to or disclosed to any other person
      or
      entity or in any other transaction.

     

    
      	 	 Very
              truly yours,

    

     

    
      
        
          
          

        

        
          Exhibit
            VI-vi

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      VII

    

    [Form
      of
      Opinion of Alberta, Canada Counsel]

    

    [Closing
      Date]

    

    Amegy
      Bank National Association, as Agent

    4400
      Post
      Oak Parkway, 4th Floor

    Houston,
      Texas 77027

    Attention:  Energy
      Lending Dept.

    

    
      	
              Re:

            	
              Credit
                Agreement dated as of November 29, 2007 by and among Gastar Exploration
                USA, Inc., a Michigan corporation, Gastar Exploration Ltd., an Alberta,
                Canada corporation, certain other parties, Amegy Bank National
                Association, as Agent, and the lenders signatory thereto or bound
                thereby
                from time to time (the “Credit
                Agreement”)

            

    

    

    Ladies
      and Gentlemen:

    

    [We][I]
      have acted as special counsel in the Province of Alberta to Gastar Exploration
      Ltd., an Alberta corporation (the “Parent”), in connection with the
      transactions contemplated in the Credit Agreement.  This opinion is
      delivered pursuant to Section 3.1(__) of the Credit Agreement, and the Agent
      and
      the Lenders are hereby authorized to rely upon this opinion in connection with
      the transactions contemplated in the Credit Agreement.  For
      convenience, each capitalized term used but not defined herein shall have the
      meaning assigned to such term in the Credit Agreement, unless expressly provided
      to the contrary herein.

    

    In
      [our][my] representation of the Parent, [we][I] have examined an executed
      counterpart of each of the following (collectively, the “Loan
      Documents”), each of which is dated of even date herewith:

    

    (a)           the
      Credit Agreement;

    

    (b)           Guaranty
      from the Parent in favor of the Agent;

    

    (c)           Security
      Agreement (Pledge) from the Parent in favor of the Agent covering the stock
      of
      Gastar Exploration USA, Inc. owned by the Parent; and

    

    (d)           Intercreditor
      Agreement among the Borrower, the Parent, other Guarantors, the Agent and the
      Second Lien Collateral Agent (as such term is defined therein).

    

    In
      making
      such examinations, [we][I] have, with your permission, assumed:

    

    (i)           the
      genuineness of all signatures to the Loan Documents;

    

    (ii)          the
      authenticity of all documents submitted to [us][me] as originals and the
      conformity with the originals of all documents submitted to [us] [me] as
      copies;

    

    
      
        
          
          

        

        
          Exhibit
            VII-i

          
            

          

        

        
          
          

        

      

    

    

    (iii)         that
      the Agent and each Lender is authorized and has the power to enter into and
      perform its obligations under the Credit Agreement; and

    

    (iv)         the
      due authorization, execution and delivery of all Loan Documents by each party
      thereto other than the Parent.

    

    Based
      upon the foregoing and subject to the qualifications set forth herein, [we
      are][I am] of the opinion that:

    

    1.           The
      Parent is a corporation duly incorporated, legally existing and in good standing
      under the laws of the Province of Alberta.

    

    2.           The
      execution and delivery by the Parent of the Loan Documents and the performance
      by the Parent of the Loan Documents are within the power of the Parent, have
      been duly authorized by all necessary action by the Parent, and do not (a)
      require the consent of any Alberta Governmental Authority or (b) contravene
      or
      conflict with any Requirement of Law under the laws of the Province of
      Alberta.

    

    3.           No
      authorization, consent, approval, exemption, franchise or permit from, or
      license of or filing with, any Alberta Governmental Authority is required to
      authorize or is otherwise required in connection with the valid execution and
      delivery by the Parent of the Loan Documents or any instrument contemplated
      thereby.

    

    The
      opinions expressed herein are subject to the qualification and limitation that
      [we are] [I am] licensed to practice law only in the Province of Alberta [and
      other jurisdictions whose laws are not applicable to the opinions expressed
      herein]; accordingly, the foregoing opinions are limited solely to the laws
      of
      the Province of Alberta and applicable Canadian __________ law.

    

    This
      opinion is furnished solely for the benefit of the Agent, any successor to
      the
      Agent in the capacity as agent for the lenders and, under certain circumstances,
      certain other parties under the Credit Agreement, such lenders and any
      Transferee in connection with the transactions contemplated by the Loan
      Documents and is not to be quoted in whole or in part or otherwise referred
      to
      or disclosed to any other Person or in any other transaction.

     

    
      	 	 Very
              truly yours,

    

     

    
      
        
          
          

        

        
          Exhibit
            VII-ii

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      VIII

    

    [Form
      of
      Assignment Agreement]

    

    This
      ASSIGNMENT AGREEMENT (as amended, supplemented, restated or otherwise modified
      from time to time, this “Agreement”) is dated as of ________________,
      ____ by and between _____________________ (the “Assignor”) and
      _________________ (the “Assignee”).

    

    RECITALS

    

    WHEREAS,
      the Assignor is a party to the Credit Agreement dated as of ___________, 2007
      (as amended, supplemented, restated or otherwise modified from time to time,
      the
“Credit Agreement”), by and among Gastar Exploration USA, Inc., certain
      other parties, each of the lenders that is or becomes a party thereto as
      provided in Section 9.1(b) of the Credit Agreement (individually, together
      with
      its successors and assigns, a “Lender”, and collectively, together with
      their successors and assigns, the “Lenders”), and Amegy Bank National
      Association, a national banking association, as agent for the Lenders and
      certain other parties under certain circumstances (in such capacity, together
      with its successors in such capacity, the “Agent”); and

    

    WHEREAS,
      the Assignor proposes to sell, assign and transfer to the Assignee, and the
      Assignee proposes to purchase and assume from the Assignor, [all][a
      portion] of the Assignor’s Facility Amount and its outstanding Loans,
      all on the terms and conditions of this Agreement;

    

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

    

    ARTICLE
      I

     

    DEFINITIONS
      AND INTERPRETATION

    

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

    

    1.2           Additional
      Defined Terms.  As used herein, the following terms have the
      following respective meanings:

    

    “Assigned
      Interest” shall mean all of Assignor’s (in its capacity as a “Lender”)
      rights and obligations (i) under the Credit Agreement and the other Loan
      Documents in respect of [all of] [the portion of] the Facility
      Amount of the Assignor in the principal amount equal to $____________, (ii)
      to
      make Loans and participate in Letter of Credit under its Commitment up to such
      amount referenced above and any right to receive payments for the Loans
      currently outstanding under its Commitment in the principal amount of
      $___________, plus the interest and fees which will accrue with respect thereto
      from and after the Assignment Date.

    

    
      
        
          
          

        

        
          Exhibit
            VIII-i

          
            

          

        

        
          
          

        

      

    

    

    “Assignment
      Date” shall mean _____________, ____.

    

    1.3           References.  References
      in this Agreement to Schedule, Exhibit, Article, or Section numbers shall be
      to
      Schedules, Exhibits, Articles, or Sections of this Agreement, unless expressly
      stated to the contrary.  References in this Agreement to “hereby,”
“herein,” “hereinafter,” “hereinabove,” “hereinbelow,” “hereof,” “hereunder” and
      words of similar import shall be to this Agreement in its entirety and not
      only
      to the particular Schedule, Exhibit, Article, or Section in which such reference
      appears.  Except as otherwise indicated, references in this Agreement
      to statutes, sections, or regulations are to be construed as including all
      statutory or regulatory provisions consolidating, amending, replacing,
      succeeding, or supplementing the statute, section, or regulation referred
      to.  References in this Agreement to “writing” include printing,
      typing, lithography, facsimile reproduction, and other means of reproducing
      words in a tangible visible form.  References in this Agreement to
      agreements and other contractual instruments shall be deemed to include all
      exhibits and appendices attached thereto and all subsequent amendments and
      other
      modifications to such instruments, but only to the extent such amendments and
      other modifications are not prohibited by the terms of this
      Agreement.  References in this Agreement to Persons include their
      respective successors and permitted assigns.

    

    1.4           Articles
      and Sections.  This Agreement, for convenience only, has been
      divided into Articles and Sections; and it is understood that the rights and
      other legal relations of the parties hereto shall be determined from this
      instrument as an entirety and without regard to the aforesaid division into
      Articles and Sections and without regard to headings prefixed to such Articles
      or Sections.

    

    1.5           Number
      and Gender.  Whenever the context requires, reference herein made
      to the single number shall be understood to include the plural; and likewise,
      the plural shall be understood to include the singular.  Definitions
      of terms defined in the singular or plural shall be equally applicable to the
      plural or singular, as the case may be, unless otherwise
      indicated.  Words denoting sex shall be construed to include the
      masculine, feminine and neuter, when such construction is appropriate; and
      specific enumeration shall not exclude the general but shall be construed as
      cumulative.

    

    1.6           Negotiated
      Transaction.  Each party to this Agreement affirms to the other
      that it has had the opportunity to consult, and discuss the provisions of this
      Agreement with, independent counsel and fully understands the legal effect
      of
      each provision.

    

    ARTICLE
      II

    

    SALE
      AND ASSIGNMENT

    

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

    

    
      
        
          
          

        

        
          Exhibit
            VIII-ii

          
            

          

        

        
          
          

        

      

    

    

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

    

    2.3           Consent
      by Agent.  By executing this Agreement as provided below, in
      accordance with Section 9.1(b) of the Credit Agreement, the Agent hereby
      acknowledges notice of the transactions contemplated by this Agreement and
      consents to such transactions.

    

    ARTICLE
      III

    

    PAYMENTS

    

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

    

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

    

    3.3           Delivery
      of Note.  In the event the Assignee is not already a Lender under
      the Credit Agreement, promptly following the receipt by the Assignor of the
      consideration required to be paid under Section 3.1 hereof, the Assignor
      shall notify the Agent to request that the Borrower execute and deliver a new
      Note to the Assignee dated the Assignment Date.

    

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

    

    
      
        
          
          

        

        
          Exhibit
            VIII-iii

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      IV

    

    CONDITIONS
      PRECEDENT

    

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

    

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

    

    (b)           the
      receipt by the Assignor of the payments required to be made under Section
      3.1; and

    

    (c)           the
      acknowledgment and consent by the Agent contemplated by Section
      2.3.

    

    ARTICLE
      V

    

    REPRESENTATIONS
      AND WARRANTIES

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
          
          

        

        
          Exhibit
            VIII-iv

          
            

          

        

        
          
          

        

      

    

    

    5.2           Disclaimer.  Except
      as expressly provided in Section 5.1 hereof, the Assignor does not make
      any representation or warranty, nor shall it have any responsibility to the
      Assignee, with respect to the accuracy of any recitals, statements,
      representations or warranties contained in the Credit Agreement or in any other
      Loan Document or for the value, validity, effectiveness, genuineness, execution,
      legality, enforceability or sufficiency of the Credit Agreement, the Notes
      or
      any other Loan Document or for any failure by the Borrower or any other Person
      (other than Assignor) to perform any of its obligations thereunder or for the
      existence, value, perfection or priority of any collateral security or the
      financial or other condition of the Borrower or any other Person, or any other
      matter relating to the Credit Agreement or any other Loan Document or any
      extension of credit thereunder.

    

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

    

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

    

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

    

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

    

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

    

    (n)           the
      Assignee has received copies of the Credit Agreement and the other Loan
      Documents, as well as copies of all Financial Statements previously provided
      by
      the Borrower in satisfaction of obligations under the Credit
      Agreement.

    

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

    

    (p)           if
      the Assignee is not incorporated under the laws of the United Sates of America
      or a state thereof, the Assignee has contemporaneously herewith delivered to
      the
      Agent and the Borrower such documents as are required by the Credit Agreement;
      and

    

    
      
        
          
          

        

        
          Exhibit
            VIII-v

          
            

          

        

        
          
          

        

      

    

    

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

    

    ARTICLE
      VI

    

    MISCELLANEOUS

    

    6.1           Notices.  All
      notices and other communications provided for herein (including any
      modifications of, or waivers, requests or consents under, this Agreement) shall
      be given or made in writing (including by telecopy) to the intended recipient
      at
      its “Address for Notices” specified below its name on the signature pages hereof
      or, as to either party, at such other address as shall be designated by such
      party in a notice to the other party.

    

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

    

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

    

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

    

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

     

    
      6.6           Governing
        Law.  THIS AGREEMENT (INCLUDING THE VALIDITY AND
        ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
        WITH,
        THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES
        THEREOF.

      

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

      

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

    

     

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

     

    
      
        
        

      

      
        Exhibit
          VIII-vi

        
          

        

      

      
        
        

      

    

    

    
      	 	
              ASSIGNOR: 

            	 
	 	 	 
	 	 	 	 
	 	  	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 

    

    

    
      	 	
              Address
                for Notices 

            	 
	 	 	 	 
	 	  	 
	 	  	 
	 	  	 
	 	  	 
	 	 	 	 
	 	
              Facsimile
                No.:

            	 	 
	 	
              Telephone
                No.:

            	 	 
	 	
              Attention:

            	 	 

    

    

    
      
        
          
          

        

        
          Exhibit
            VIII-vii

          
            

          

        

        
          
          

        

      

    

     

    
      	 	
              ASSIGNEE: 

            	 
	 	 	 	 
	 	 	 	 
	 	  	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:

            	 	 
	 	
              Title:

            	 	 
	 	 	 	 
	 	
              Applicable
                Lending Office 

            	 
	 	
              For
                Base Rate Loans and 

            	 
	 	
              LIBO
                Rate Loans: 

            	 
	 	 	 	 
	 	 	 	 
	 	  	 
	 	  	 
	 	  	 

    

    

    
      	 	
              Address
                for Notices: 

            	 
	 	 	 	 
	 	 	 	 
	 	  	 
	 	  	 
	 	  	 
	 	 	 	 
	 	
              Facsimile
                No.:

            	 	 
	 	
              Telephone
                No.:

            	 	 
	 	
              Attention:

            	 	 

    

    

    
      
        
          
          

        

        
          Exhibit
            VIII-viii

          
            

          

        

        
          
          

        

      

    

    

    ACKNOWLEDGED
      AND CONSENTED TO:

    

    
      	
              AMEGY
                BANK NATIONAL  

            
	
              ASSOCIATION,
                as Agent  

            
	 	 	 
	 	 	 
	 	 	 
	
              By:

            	 	 
	
              Name:

            	 	 
	
              Title:

            	 	 
	 	 	 
	 	 	 
	
              GASTAR
                EXPLORATION USA, INC.  

            
	 	 	 
	 	 	 
	 	 	 
	
              By:

            	 	 
	
              Name:

            	 	 
	
              Title:

            	 	 

    

     

     

    Exhibit
      VII-ix

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